An imperfect liberal democratic perspective

It is reported that an earlier suicide (July 2009) occurred after Foxconn’s security division searched a worker’s room and physically abused him after a fourth-generation iPhone prototype he was shipping went missing.

While Foxconn promised to hire psychologists to conduct check-ups on workers, and nets were hung around factory buildings to try to prevent further suicide jumps (how is that for innovation), its management also ordered all workers to sign letters saying that the company was not liable for suicide deaths. The company only backed down after further public anger before increasing the basic wage by 30 per cent rather than the previously announced 20 per cent.

Enough said about the can-do mentality of China.

The development of pluralist Western societies, made possible by the acceptance of certain ideas and various internal struggles, is hardly a backward development. Many democratic societies, aided by major centre-left and centre-right political parties, various interest groups and a free media, have evolved to adopt a reasonable balance between individual and collective impulses. They also provide examples of societies that reasonably balance national and international aspirations through greater support for freer trade after decades of blatant protectionism.  

This does not mean that Western societies can easily balance such considerations. While the US that has done most to support freer trade, including giving immense opportunities to East Asian societies to prosper, its own society has given less attention to it social welfare system when compared to other Western societies. It now faces enormous policy challenges as it deals with its large debt while trying to uphold its global leadership role.

But only the naive would suggest that government does not have an important role to play, notwithstanding the reality that many Western nations will have to reduce debt levels.

Take the extent of suffering in Britain during the 19th century, despite that industrial power upholding a greater commitment to freer trade. Even with progressive regulations and new technology in the late 19th century that improved building quality and delivered cheaper quality food, over 25 per cent of its population by 1900 was living at or below subsistence level. Surveys indicated that around 10 per cent could not afford even basic necessities such as enough nourishing food, and 15-20 per cent had just enough money to live on (provided they did not lose their job or have to take time off work through illness).

Such evidence indicates why the role of government does matter in terms of the balance between economic and social considerations.

It may also explain why the former prime minister John Howard celebrated ABS data which showed that low and middle-income households had seen their real disposable incomes grow by more than 23 per cent between 1995-96 and 2003-04, a greater increase than for high-income households. Howard also noted OECD research which confirmed that Australia has one of the most progressive tax-transfer systems in the developed world, with a higher share of benefits going to the poorest 20 per cent of households than any other developed country.

And with Kasper suggesting greater influence by the Austrian School on Western societies since the stagflation (double-digit inflation and unemployment) of the 1970s, the US provides a recent example of what can happen when government does get more out of the way. Between 1980 and 2008, the share of income earned by the bottom 90 per cent of Americans reduced from 65.37 to 51.77 per cent (64.44 per cent in 1950), with the top one per cent getting 11 of the extra 13.59 percentage points going to the top 10 per cent.

Kasper argues that, “in these times of global mobility, international competition and prevailing value relativism”, only universal institutions should prevail in order not to limit wealth creation and innovation. Kasper refers to individual property rights that “should not be restricted as long as this causes no harm to others”. He also criticises anyone that advocates ‘optimum tariffs’ (a limitation on the freedom to trade one’s property rights); foreign investment controls (violation of the freedom to use one’s capital wherever one sees fit); licensing and industry policies; the control of labour markets (abridging one’s right to use one’s own labour as one sees fit); and zoning regulations (which often violate individual rights to develop what is theirs without evidence of harm being done to others).

Again, unless supporters of the Austrian School can demonstrate why we have little to fear from such policies being implemented in their purest form, all we have is our ongoing struggle to find the most appropriate balance between markets forces and government intervention. In the real world, people and nations have real concerns from their economic interaction which have to be addressed, just as they always have and always will.