Government’s role in business

The ongoing three-way contretemps between RUSAL, its workers and trade union, and the Government has once again brought to the fore the vexed question of the PNC-led Government’s position on the now dominant neo-liberal “night-watchman” state. This model did not just shrink the Government’s role in the economy, but rejected it taking any responsibility for alleviating the condition of the poorer elements of society. Unions were demobilized, and workers reverted to dealing directly with employers.
The PNC stuck doggedly to this position when it shut down four of the seven sugar estates and ignored its “social responsibility” to the 7000 workers that were fired and the over 100,000 affected in the rural communities that depended on the monies injected by those workers. This retreat from social responsibility was even more callous, since it was undertaken with an unabashed Marxist, Clive Thomas, at the head of GuySuCo, after he has spent his previous 50 years railing against the “capitalist” reliance on markets for making decisions.
Even in the US, the Government had rediscovered its “social responsibility” and intervened in the market to save General Motors, and indeed several banks, which were all declared as “too big to fail” in 2008; but not the PNC/APNU Government here with the sugar industry in 2016. Government insisted that the subsidies were too onerous, and even rejected its own CoI recommendation that the subsidies continue for another three years while the company be brought to a point of sale.
However, from its stance on RUSAL’s firing of 61 bauxite workers, the PNC/APNU Government appears to have rediscovered its “social responsibility” from its socialist days. It dragged the bauxite company to the table, and demanded that the fired workers be rehired forthwith, and presumably they be paid for the days they were on strike, as demanded.
RUSAL is yet to respond to this interjection of the state into its relations with its workers; but, for sure, the multinational corporations (MNCs) that are expected to flock to our shores after first oil will be looking on with great interest at the Government’s stance on its role in the economy.
The neo-liberal, hands-off ethos for the state was articulated a half-century ago by the influential thinker Ayn Rand, and summarised in her novel “Atlas Shrugged”, which still sells 150 thousand copies annually. Basically, Rand derided altruism (“breeds immorality and evil”) and trumpeted selfishness (“the highest virtue”). She lionised the human ego, rejected God as an artifice for the expiation of human failures, extolled the separation of state and the economy, and promoted governmental deregulation.
Basically, the flaw with this model goes to the very core of its central premise – the exaltation of selfishness. Its adherents miscalculated the power of its corollary, greed, which had been kept in check — however tenuously — by the old regulatory framework. In practical terms, the model raises what is known in economics and related fields as the issue of “moral hazard”. It identifies the ever-present dilemma posed when people who are “back-stopped” become more inclined to take risks. Where does one then draw the line?
Business and entrepreneurial behaviour is at the bottom, a matter of taking risks; and society is willing to have those who take risks receive the rewards – if, on the whole, the entire society benefits. And this last point was the motive behind governmental regulation. For instance, early on, when the corporation was invented as a “legal body” to encourage investments without threatening personal assets, there were laws enacted to ensure that the facility was not flagrantly abused. Closer home to the present crisis, banks should be heavily regulated to ensure that depositors’ money is secure, because the state had given them a virtual and literal power to create money. They were forced to be conservative but steady.
The state therefore has a responsibility to both workers and businesses, and it is hoped that this PNC-led Government would not just opportunistically intervene, but pronounce where it would draw the line.