Part One: "Asia"Section 2 - "Three Highly Differentiated Trajectories"Table of Contents Henk Thomas The sheer size of Asia and the profound differences between its various regions undermine the accuracy of any aggregated study at the continental level. Therefore, the main trends that have an impact on labour, employment and earnings must be analysed separately for the major regions of the continent. This chapter will concentrate on the East, Southeast and South Asian regions. East Asia and the countries comprising the Association of Southeast Asian Nations (ASEAN) are characterized by impressive sustained economic performance and rapid industrialization; both regions, however, have characteristics of their own. South Asia, on the other hand, presents a contrast to these two regions in the political, economic and social fields. Labour conflicts are here at their most acute, and so the chapter will particularly emphasize the problems confronting labour and trade unions in South Asia. The first question to be analysed will be the political differences and their effect on developmental processes. The economic record will be presented only briefly since information about it is easily accessible. Subsequently, the labour-market situation will be introduced along with a number of key themes relevant to any analysis of the labour situation in these regions. Lastly, the characteristics of trade unions and their limited room for action will be spelt out. State Intervention East Asia The success of the Newly Industrializing Countries (NICs) was often credited in the 1980s to their export orientation and presented as proof of the soundness of a neo-liberal approach towards industrial development. A typical policy consequence of this view has been the pressure exerted by international institutions on governments in other parts of the world to end artificial pricing by similarly removing distortions in capital and labour markets. It was gradually recognized, however, that strong state involvement in almost all markets was one of the main factors underpinning the spectacular performance of the NICs. Comparative studies, particularly in Latin American countries, reveal the sophisticated nature of state involvement as an independent actor in the NICs, steering the economy into the required deep structural changes (see, for example, Jenkins 1991). Cultural factors may partly explain the NICs' special social and political fabric, but the key explanation probably lies in more mundane factors. Early land reforms, an initially weak industrial bourgeoisie and a controlled labour supply to the industrializing urban economy constitute elements that are often absent in other countries. International capital inflows and military alliances, closely associated with the communist threats of the 1960s and 1970s, have been additional factors. The critical element, however, is that the import-substitution industrialization (151) strategy during the initial stages of structural change was superseded in time by an orientation towards international markets. The successful implementation of this change can be traced back to coherent industrial and macro-economic policies that ensured the high levels of domestic savings needed for investment and a strong state, and to indicative planning methods that allocated investment among the different economic sectors. In the literature, one observes major shifts over time in the analysis of the 'East Asian Miracle' (World Bank 1993). In the wake of the early excessive focus on the opening up of economies to international markets, sometimes in combination with a touch of Confucianism to explain the hard-working labour force and national coherence, a political-economy approach has gradually won the day. Policy makers in the NICs have clearly not refrained from extensive interventions, but these were mostly implemented with great caution and a readiness immediately to change course when this was necessitated by unexpected external shocks or when the expected results did not emerge (Chowdury and Islam 1993). The autonomy of the state is particularly reflected in the identity of its bureaucracies. Compared to countries elsewhere, the bureaucracy is less politicized and the decision-making and steering mechanisms are highly centralized. The state has developed instruments to ensure adequate control over capital markets and financial flows as well as the functioning of labour markets. State controls have been equally important in ensuring that wage increases do not jeopardize the labour-intensive strategy of industrialization, which has constituted the core of a unique chapter in the history of global industrialization (Chowdury and Islam 1993; World Bank 1993). The results of these policies have been a record of sustained growth, with impressive gains in total factor productivity, as well as high levels of investment and an expansion of employment along with a gradual upgrading of workers' capabilities. The state has generally been authoritarian, ranging from the soft approach in Japan to the hard one in South Korea and Taiwan. In the Japanese model, maximum commitment and productivity are achieved through a labour-relations system characterized by tenured employment and wages linked to individual seniority. The mobilization of labour by means of trade unions is curtailed through sophisticated forms of social engineering, by forbidding strikes and by restricting labour organization to the firm through the concept of the 'enterprise union'. Another dimension of this soft-option model, as for instance found in Singapore, can be the state's willingness to allow trade unions to play a role in the distribution of welfare-state benefits. The hard-option model forbids strikes and exercises strong control over the trade union movement, allowing no deviations from the free functioning of the labour. market. Typically one observes sweatshop working conditions in small-scale enterprises, which also co-determine the contractual outcomes in medium- and large-scale industry. Lifetime employment guarantees, which interfere with free-market forces, are not allowed (for example, Deyo 1987, 1989). Deyo has characterized the East Asian model as one of both labour exclusion and labour inclusion. Exclusion to t~ extent that labour is only allowed to play a passive role as an actor in the developmental process. Inclusion in the sense that a high degree of income equality ensures wide distribution of the benefits of development among the workforce through the authority of the state. Most recent evidence strongly supports the view that both favourable initial policies, such as land reform, as well as continued public attention to social questions, particularly access to primary and secondary education and the reduction of gender gaps, constitute strategic explanatory elements for the impressive East Asian developments over the past decades.1 Southeast Asia Indonesia, Thailand, the Philippines and Malaysia form a second tier of rapidly industrializing countries. They constitute a substantial region of Asia that has achieved sustained economic growth, but initially at rates lower than those of the NICs. Since the ASEAN countries are significantly better endowed with natural resources, there is an obvious need for comprehensive multi-disciplinary analysis to explain their relatively less impressive performance in comparison with the East Asian countries. Mackie (1988) lists five reasons: the ASEAN countries have much larger rural sectors, with lower growth rates than those of industry, as compared with the NICs; the removal of colonial legacies has been more costly; the ASEAN region displays a more amhivalent attitude towards foreign capital as compared with that of the NICs; this socio-psychological aspect is further complicated by ethnic factors, in which political measures against the dominant role of the Chinese segments of the population is a central issue; finally, the levels of domestic saving in the ASEAN countries compares unfavourably with that in the NICs. While governments in the ASEAN countries have played strong roles, they are less autonomous than in the NICs. Coalitions of interest groups have had a considerable impact on the entire political framework. In such a situation, the extent to which elite groups reach a consensus that places national interests above their own immediate class interests becomes important in determining development. The specific characteristics of the emerging middle classes will probably be important in ultimately understanding economic developments in these countries. It is remarkable, and in sharp contrast to the situation in South Asia, that the existing deep differences in ethnic, religious and cultural values and systems have not led to military confrontation and mutual alienation. Instead, one observes a determination to form regional linkages, which, at least in the economic domain, could give the region considerable clout internationally. It is interesting to note that, in spite of their differences, it was observed in the late 1 980s that these countries 'have established the most successful regional grouping in the entire Third World' (James, Naya and Meier 1989: 13). Labour relations in Southeast Asia range from the extreme form of dependence on the state in Indonesia to a relatively liberal attitude in the Philippines. Two key elements in this region's development have been wages lower than in the NICs, and quiet and docile labour, valued highly by foreign investors, which helps to guarantee stability. The widespread use of child labour, as in Thailand, for example, is only one articulation of the deep segmentations that are deliberately created in the labour market. The successful exploitation of ideological and ethnic dimensions is another illustration of the profound problems faced by the labour movement. Consequently, a wider socio-political analysis is necessary for a fuller understanding of the labour situation in these countries. Lastly, it should be noted that trends in income distribution as measured by Gini-coefficients in each of these countries have moved significantly towards less inequality (see Figure 3, World Bank 1993: 4). It appears that these countries, starting their development well after that of the NICs and from different initial conditions, nevertheless pursue a similar strategy. South Asia In contrast to the other regions, economic growth in South Asia has been insufficient to allow for significant increases in per capita incomes between 1965 and 1990. One main reason for this undoubtedly has been that the necessary switch from an inward-looking development model to an outside-oriented one has begun only recently. As a result, economies like those of Pakistan and India, which around the mid-1960s experienced the successes of the 'Green Revolution' and served as models for development, have lost their relatively advantageous position in less than a generation. The five factors that have been put forward as a partial explanation for the lower growth performance of the ASEAN countries in comparison to the NICs play an even more pronounced role in South Asia. This can be observed particularly in India, where the enormous size of the rural economy indicates that, more than anything else, rural development is a precondition for wider economic development. India's colonial heritage is still an important factor in explaining the state's involvement in the economy and its impact on class formation. A strong state along with weak social classes has, for centuries, been the dominant political form in the sub-continent. Since Marx first wrote about the fate of artisanal industry in India, the phenomenon of de-industrialization during the nineteenth century as a result of colonialism has been well-documented. One effect of this was that no strong urban middle class had emerged by Independence in 1947. However, an urban proletariat had grown since the last century because of the establishment of large-scale textile and jute industries (Sen 1982). At Independence the state was suddenly charged with new developmental tasks. Its socialist ideology led to the pursuit of an ideal state model of long-term economic planning and development, but without fundamentally altering the underlying forces of the inherited state mechanisms. Thus, the bureaucracy, originally established to serve the colonial power, assumed a highly independent role but stifled the growth of private capitalist development. In contrast to East Asia, the Indian bureaucracy neither fostered private capitalist development nor could it design macro-economic policy frameworks that would be conducive to sustained structural transformation and industrialization. At the same time, the emergence of a strong middle class was hampered, while the labour force was encapsulated in some form of corporatism dominated by the state bureaucracies. The professed admiration for Russian achievements under a central command economy resulted in a capital-intensive industrialization strategy with heavy state involvement. Public ownership, or very extensive administrative regulation, of major enterprises as well as nationalization of banks consolidated thepower of the Indian state. Only recently have important steps been taken towards reorienting the economy to an outward-looking strategy. Privatization of public enterprises, involving workers being laid off on a massive scale, is presently on the political agenda, and the expanding middle class is starting to assert itself. In the absence of a broad consensus on these new developmental strategies, however (to which, for example, trade unions are totally opposed), and lacking clarity on the strength of the emerging class formations, it is difficult to predict whether the measures will endure. The differences between the various countries of South Asia are huge; yet, in terms of economic growth, social impact and political characteristics, their common heritage still makes itself felt in many spheres, such as the behaviour of key actors like state bureaucracies and the labour leadership. Economic Performance(top) Extensive analyses have been produced of the comparative economic performance of the regions as well as of individual countries, and these are readily accessible.2 The discussion here will, therefore, be brief. The starkly contrasting experiences in Asia are best illustrated by a comparison of some key indicators.3 Table 1 (A) of the Statistical Appendix (pp. 249-52) provides statistical information on some key trends in the three regions under examination. The differences in GNP per capita growth rates - around or less than three per cent for South Asian countries, roughly averaging four per cent for Southeast Asia and above five per cent for the NICs -underscore the arguments presented above. The outcome after 25 years is telling: none of the South Asian countries has a GNP per capita above US$540 in 1992, less than one-tenth of the minimum NIC figure of US$6,790. The implications of these figures and the challenges to be overcome are brought home vividly by the statistics on populations, their growth rates and the expected rates of urbanization (and, for many people, urban poverty) till the year 2000. More than a billion people live in theregion with the lowest per capita income, with every country except Sri Lanka facing the most rapid population growth rates as well. South Asian countries are all beginning to experience lower population growth, yet their urban growth rates for the coming decade will remain alarmingly high. The NICs, in contrast, have achieved a stage of increasing stability, and display even growing signs of tightness in labour markets, with modest rates of population and urban growth. The depth of the structural transformation that has occurred in the past decades is well illustrated by the data on sectoral composition in Table 1(B). Most significantly, in South Asia agriculture still accounts for about 30 per cent of Gross Domestic Product (GDP) compared to about 20 per cent in Southeast Asia, where industrialization rates already approximate the levels in East Asian countries. While the timely switch to an outward-looking strategy was a vitally important element in the success of East Asian economies, particularly given their limited natural resource base, the East Asian model does not equate with an exclusive reliance on market forces. The state, as stressed above, has played a key role, in close, collaboration and interaction with the existing entrepreneurial class. Similarly, qualitative dimensions such as the role of technological advance through learning-by-doing in production processes, human resource development and the high priority accorded to R&D are now recognized as indispensable components of this developmental model. The Southeast Asian countries occupy a middle position between East and South Asia. In spite of their enormous differences, they share a number of similarities from a developmental perspective, particularly their abundant supply of raw materials and rapid incorporation into the global economic system through multinational capital. The region has been made attractive to foreign capital by 'authoritative, corporatist regimes and complex bureaucratic structures' (Dixon 1991: 4). Since the 1970s this has resulted in deep structural changes taking place within a process of rapid industrialization. The enormous potential of their internal markets and their plentiful natural resources hold a long-term promise of continued dynamic development. A heavy price is being paid by labour; for instance, low wages and docility of the workers are used to attract foreign direct investment. Southeast Asia's middle position probably will be sustained for two reasons. First, the existing internal coalitions of interest groups accept the exclusion of large segments of their societies. Second, given the strong impact of foreign capital, national interests are unlikely to be fully realized for a long time. Social Development(top) With the well-known exception of Sri Lanka, which for decades has made relatively high investments in its social development, the regional differences in life expectancy show some significant features. Table 1(C) summarizes the impact of poverty on men and women. In South Asia female mortality is close to or equal to male mortality because women are at a disadvantage in benefiting from the still modest advances in economic growth. Elsewhere, their relative position concurs with global trends at higher levels of development. The statistics on adult literacy - to the extent that literacy at different levels of development can be compared using current data collection methods - underscore even more the enormous achievements in East and Southeast Asia. Lastly, the Human Development Index (HDI), a composite of three basic components: longevity, knowledge and standard of living,4 indicates that major differences had emerged between countries and regions as early as 1960. Already at that time, Sri Lanka's egalitarian and social policies had resulted in a high level of human development considering its GNP per capita, whereas the Southeast Asian countries were lagging in human development despite their higher levels of GNP per capita. In 1992, substantial differences could still be noted even though the HDI had improved for all countries. For instance, the extent and depth of poverty in Bangladesh and India was reflected in the limited progress achieved there while substantial progress was made in Southeast Asia (with the exception of the Philippines). The same was true of East Asia where high levels were further consolidated, the South Korean performance being particularly impressive, surpassing that of Singapore which it had trailed in 1960. The foregoing comparative analysis of political, economic and social trends in East, Southeast and South Asia, succinct as it is, owes much to recent in-depth research on the unprecedented changes that have occurred in East Asia within only a few decades. The political-economy approach accords importance to the role played by labour, whether through labour-intensive production, enhanced skill formation or the acceptance of strict wage policies. It remains to he seen whether past formulas will be equally effective in the near future. Some analysts argue that signs of looming decay can already he discerned in countries like South Korea, Taiwan and Singapore (for example, BeIlo and Rosenfeld 1992). Others argue that this need not happen provi(led policy makers ensure a timely switch to innovative and capital-intensive production methods. This would call for deep institutional and political changes, implying democratization and labour participation (Chowdury and Islam 1993). While the latter consider such far-reaching adaptations a feasible proposition, the former point to policies and traditions of labour exclusion as well as rapidly growing trade union protest to support their case. Labour and Labour Markets(top) National labour markets - in a narrow sense, referring only to trends in employment, unemployment, wages and wage structures - show highly distinct regional patterns in Asia. In East Asia, and in parts of Southeast Asia, labour markets have lost their abundance and have gradually become tighter due to labour-intensive industrialization. This phenomenon is evidenced by the decline in unemployment and substantial increments in real wages. Above all, a reversal in migratory flows is observed. In countries such as Japan, Singapore and Hong Kong, which till recently exported workers because of insufficient domestic employment opportunities, immigrant labour is reducing labour-market pressures. The opposite is found in South Asia, particularly where import substitution industrialization strategies have been adopted. High population growth rates have ensured rapid expansion of the labour supply while employment elasticity, to the extent that industrialization has been achieved, has been very low. Rapidly growing urban labour markets are the most clearly visible symptom of this extremely unfavourable development for labour. Urgently needed modernization of large-scale (often public) enterprises may induce a further deterioration in the employment situation. Rural (circular) migration, temporary international migration and low-productivity off-farm employment are indicative of the poor outlook in rural labour markets. In South Asia one thus observes stagnation if not a decline in real wages as a visible sign of the predicaments faced in national labour markets. Southeast Asia typically finds itself between these two extremes. Labour supply pressures, which make themselves strongly felt in the urban labour markets, are still high but are likely to lessen in the near future. On the one hand, wage structures are conditioned by international competitive forces, resulting in lower wages than in the NICs, in order to attract investment and strengthen new industrialization. On the other hand, the upward pressures cannot be withstood for too long as skill levels need to be improved if labour is to remain competitive in international markets. These differing macro-scenarios have deep impacts on the profiles of the labour markets. In East Asia, and to sonic extent Southeast Asia, rapid and labour-intensive growth in manufacturing has raised the earning potential of large numbers of workers. In South Asia, capital-intensive industrialization along with stagnating productivity has generated low earnings for a limited number of workers. Precise knowledge within a specific national context is required for in-depth understanding of a particular labour-market development. For instance, an impact on aggregate levels of employment, unemployment and wage trends can be achieved by completely different patterns of labour-market segmentation and thus alsG of policies, as in Latin America. East Asia A major transformation of employment structures in agriculture, industry and services has resulted from changes in East Asian economies. Due to the labour-intensive nature of the industrialization process, it was possible for much labour to move from low-productivity agriculture into high-productivity industry and services. Necessary changes in occupational structures and educational profiles rapidly followed (for example, Galenson 1992). The demand for labour was so high that by the end of the 1980s unemployment had declined to less than two per cent (Chowdury and Islam 1993). The degree of state involvement in steering labour markets can be seen clearly in the working week, which has been continuously long, with South Korea's 50.5 hours in 1989 and Taiwan's 47.2 hours in 1989 providing peaks (Chowdury and Islam 1993; Galenson 1992). The huge increases in labour productivity are reflected in major rises in real wages for several decades. South Korea and Taiwan stand out in this respect, whereas increments in Singapore and Hong Kong have been more modest (Deyo 1989). It should be noted that these increments have been monitored and controlled to ensure that the level of national savings, and thus the basis for accumulation, would never be jeopardized. With the increasing tightness in labour markets, new issues of labour policy, in addition to wage restraints and control of labour or~iizations, needed to be taken up. Policies to steer and monitor immigration were required to replace the stimulation of workers to take up temporary employment abroad. This issue is of particular relevance as industrial competitiveness calls for considerable enhancement in skill levels to allow for major shifts towards capital-intensive production systems. Athukorala argues that both Japan and Singapore used immigrant workers only at times of temporary shortage in the labour market and thus forced entrepreneurs to shift to robotized industrialization. Hong Kong, in contrast, freely allowed the inflow of foreign unskilled workers, which sustained its 'comparative advantage in labour-intensive products much longer than warranted by the size of its national workforce' (Athukorala 1993: 50). Two major views are presented in the analyses of labour in East Asia. One approach emphasizes the efficient adjustment of labour markets to the continuously changing demands of economic restructuring and export markets. This view typically stresses the flexibility of labour markets in response to competition (Galenson 1992; World Bank 1993). The other approach points at strong state interventions controlling labour organization, wage increases and wage structures in order to create a docile workforce prepared to accept long working hours, sweatshop conditions and an oppressive environment instead of struggling to obtain greater benefits from national development (for example, Deyo 1927, 1989). Chowdury and Islam provide an excellent synthesis of these polar positions on the basis of access to a range of indicators. In addition to the usual indicators of' employment, wages and educational level of workers, a set of data referring to 'human resource management' (for example, labour-management relations, strike-days lost and absenteeism) and to 'human resource development' (for example, training, skill levels and flexibility patterns) could be utilized. They tentatively conclude that there is insufficient evidence to show that labour is an oppressed victim of development. On the contrary, the trends in total factor productivity 'could have been and probably have been affected by the cumulative effects of human capital formation' (Chowdury and Islam 1993: 153). This, in turn, implies that efficient labour markets rather than oppressed labour are a key characteristic of the NIC model of development. The one major exception to this view is the well-documented and significant wage discrimination against women. As for gender relations, systematic labour-market segmentation has been noted for many years (Chowdury and Islam 1993; Galenson 1992). Southeast Asia In Southeast Asia, a second tier of rapidly industrializing countries has emerged with such force that in its widely publicized report, The East Asian Miracle, the World Bank has merged Indonesia, Malaysia and Thailand with the NICs in one category of High-Performing Asian Economies (Amsden 1994; World Bank 1993). Given their competition against the NICs, it is no surprise that heavy burdens have fallen on the labour market in these countries. Unions are even more controlled than in the NICs with the labour market needing to be very flexible and wages having to adjust rapidly to falls in demand. Regrettably both the quality of data and the comparative research undertaken on labour-market performance in this second tier of rapidly industrializing countries lag far behind those for East Asia. Yet some important characteristics can be noted that are deeply rooted in these societies. We refer here to the segmentation in labour markets by ethnicity and the influence of the military on the functioning of the economy and labour markets. Gender segmentation and discrimination are also more deeply rooted than in the NICs where increasing efforts are made to overcome labour market shortages by paying more attention to the position of women through human-resource development policies. Again, migration flows are an important indicator of the state of labour markets. Huge flows of skilled and unskilled workers are observed both within this region and elsewhere, showing the weak position of labour. Whether the labour situation will move in the direction of that in the NICs or result in a further weakening of bargaining power along with deepening of segmentation is hard to predict. According to recent findings, the latter outcome cannot be ruled out (Muqtada and Hildeman 1993). In Thailand one now observes huge mismatches in demand and supply for young workers, reminiscent of the problems spotted by the well-known ILO mission to Sri Lanka in the early 1970s. The outlook in the Philippines is gloomy, with the labour market being characterized by a new 'general trend towards labour casualization via job subcontracting, service agency hiring and other casualization measures' (Ofreneo 1993: 266). South Asia In most of South Asia the labour situation offers a depressing picture. Inward-oriented industrialization strategies have mostly resulted in low employment creation, whereas the recent moves towards far-reaching structural adjustments have eroded earnings patterns. Deep-seated patterns of labour segmentation persist, demarcated along lines of gender, ethnic and communal identities. Furthermore, exceptionally exploitative conditions can be found in both rural and urban labour markets. Work on plantations and bonded labour form elements of rural markets.. In his case study on Bangladesh, for instance, Datta (1991) found that 76 per cent of workers were socio-politically dependent on their employers and had effectively lost their right to leave the job before completion of the contracted period, while from the employers' side a contract could be terminated immediately without compensation. For plantation workers, earlier forms of indentured labour with obligations to work (for example, five years for the same employer in the same line of work) have been abolished. Yet new systems of 'free' wage labour, recruited through intermediaries, retain almost as complete control over workers (for example, through different forms of indebtedness) as did earlier forms of bondage. Dire conditions prevail in much of the informal urban economy. Many people act as members of a household engaged in strategies of survival rather than as participants in the labour force attempting to gain access to decent income levels. In Jakarta, for instance, household strategies of creating multiple jobs through combinations of some wage work, informally earned incomes and subsistence labour are a key characteristic of the urban labour market (Evers 1989). The informalization of economic activities is taken up below (pp. 49-53) as an issue of special concern to the labour movement. All these varied aspects of the labour-market situation must be reflected in policies towards labour if these are to stand any chance of success. While human resource development aimed at enhancement of skills and training is important in East Asia, and policies in Southeast Asia are focused on special categories such as youth or migrants, improvements in monitoring labour-market trends are the best that can presently be expected in South Asian countries. For instance, recent case studies exploring policy options for employment planning and human resource development in India and Pakistan consider the worsening macro labour-market situation adequate justification for first improving labour-market monitoring before formulating any specific advice (Kemal 1993; Papola 1993). Prospects may improve considerably in the long run. In the near future, however, it can be expected that due to privatization of public enterprises and the need to introduce greater flexibility in labour markets, market forces will further worsen conditions of work. Symptoms of this trend are the high incidence of child labour in various sectors as well as the rapid casualization of work in even medium- and large-scale enterprises. It therefore comes as no surprise that in their assessment of policy options, Amjad and Edgren (1991) argue that the most fundamental aspects should be given priority: access to primary education and improvement of the quality of secondary education and vocational training. In short, there appears to be no substitute for a re-orientation of national development strategies towards human capital formation as a precondition for a turn for the better. Part One - Section 2A
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