India has long been expected to grow into something of a global economic powerhouse. It has a population of over 1.3 billion people, which makes it nearly as populous as China. Yet despite this advantage, it doesn’t wield anywhere near as much economic might.
Many would agree that the main reason for India’s relative malaise stems from the socialism that was inherent to its foundation. For the first 17 years of its life as an independent nation, India was led by Jawaharlal Nehru, a Marxist committed to the concept of centralised state planning. He instituted what has come to be derisively known as the “Licence Raj” whereby India had an eye-watering system of bureaucracy that deliberately stymied private business.
Everything required a licence. You couldn’t sell a kettle without it, and up to 80 different agencies had to be satisfied in order to obtain such a licence. The licence was necessary as the government would make it a condition of what price the goods or services could be sold for. The reason being that India wanted its people to believe that only the state knows what’s best for them. The hoi polloi couldn’t be trusted to act for themselves.
Whilst China began to throw off many of its communist economic strictures in the 1980s, India didn’t abolish its Planning Committee until 2014. India continues to suffer for the sins of its past.
It’s in this context then that it saddens me when I meet travellers to Australia from India who always say to me: “You guys have so many rules here! Everywhere I go, there’s signs warning me I’ll get a fine if I stand over here, or smoke over there.”
When you’re first alerted to it, it’s like a lightbulb goes on. Now I see it everywhere. Rules have built up on us like the proverbial frog in the boiling water that has no idea its being boiled alive. We’re regulated so heavily that even Indians who are used to ludicrous levels of bureaucracy find it remarkable.
Every regulation is an inherent denial of someone’s freedom. Now of course we willingly accept denials of our freedom, and many of these are for sound reasons. One cannot simply take someone else’s car without permission. This is because one’s right to property cannot be trumped by another’s freedom of movement. But the vast majority of Australian regulation exists, not to balance competing freedoms, but because the state thinks it knows better than you, how you should conduct yourself.
Consider our industrial relations laws. The Fair Work Act constitutes over 600 pages of legislation (and nearly the same volume of associated regulations) telling you how to employ someone. Central to these regulations are the concept of minimum wages, set by a government tribunal. Australia has the highest minimum wage in the world at the moment, despite having over 10% unemployment in a COVID-19 environment.
The existence of the minimum wage baffles logic. We don’t have chattel-slavery in Australia. No one is forced to go to work. Far from it actually. If an employer wishes to offer a particular wage rate and the employee is happy to work for it, why exactly does the government need to regulate this transaction?
When I was a very raw 19-year old law student, I managed to find a lawyer who was prepared to employ me as a paralegal. But, as he explained to me, I was effectively useless to him until I was trained to a level where I could handle files by myself. He offered me $5 an hour at a time when the minimum wage was about $15. I knew it was considerably below the minimum wage, and I knew I could have earned $20 pouring beers in a bar, but I made a bet that it would be better for me in the long-term to get some legal experience under my belt and so I agreed.
I worked there for a year before moving on; and in truth, he did me a massive career favour by taking me on at all. I remain very grateful for the opportunity and never complained about the wage, even though I was well-aware I had a slam dunk case for backpay if I ever wanted to pursue it.
Morally, what did my boss do wrong? Sure, he got some cheap labour out of me, but I learned from him too. It was a fair exchange. And he took a big risk in betting that I was a man of honour who wouldn’t put a knife in his back later. I’m not sure I’d take the same risk if I were in his shoes today.
We have huge underemployment in Australia, precisely because low-skilled employment is too expensive to take a risk on. Why do we do this to ourselves? It makes no sense.
Ever noticed how only very wealthy Australians can afford nannies or housekeepers? Nearly everyone in Hong Kong and Singapore has a Filipina housekeeper. They get paid $8 an hour, which is twice as much as they make in Manila, and because there’s no welfare available to them, they all go home once their employment is terminated. Sounds like a fair deal to all involved, if you ask me.
In a previous job, I managed an electrical contracting business. We had a guy in the workshop who was a bit older but had a brilliant work ethic. He had been in the Albanian Army when he was younger, and his English wasn’t good, so he just got the job done and didn’t interact very much with everyone else. He was so reliable that he never took leave and had built up such a large accrual that we had to start forcing him to take it. It peeved him to no end. He couldn’t understand why someone ready, willing and able to work was being forced to stay at home. But alas, that is what our “Fair Work” legislation requires because, apparently, people can’t make decisions about their lives for themselves.
The usual retort is that looser employment regulation will lead to exploitation. But this claim is a complete furphy. No one can force you to go work. If your employer tries to rip you off, you go elsewhere, or stay at home. This is how all markets work. Labour markets are no different.
The evidence for this is in our own labour market. Wages in the mining and construction industries, far outstrip their industry minimums. If minimum wage laws stop employees from being exploited, then why don’t we also implement maximum wage laws to stop employers being exploited? The very idea is as absurd as it sounds.
The lesson of India is that economic regulation impoverishes in the long-run. It may achieve short-term political benefits, but it only benefits a small number of insiders.
Kyle Kutasi is a solicitor with Solve Legal, www.solveonline.com.au.