An unlucky time to be right

Paul Howes’ “Grand Compact” is a throwback to a bygone era that no one wants to revisit

By Gary Scarrabelotti

For Paul Howes the wheel of fortune has been unkind.  First, the labor movement rejected his February 5 address to the National Press Club.  Then Toyota’s announcement that it will quit manufacturing in Australia by 2017 cut the ground from under his feet. 

Howes’ key proposal of a “Grand Compact” between business, unions and government was dead on arrival.  It was a throwback to a bygone era that no one wants to revisit — not the unions, not the bosses and certainly not an Abbott government.  And why would it? Who would negotiate with a party whose bargaining power is being destroyed, in this case, by the creative destruction of capitalism? 

For all that, there were several punchy phrases and striking observations in Howes’ address: striking because they went beyond the usual debates about IR regimes to address the crippled mentality that Australian businesses and workers so often bring to the workplace.

Trashing social capital

The thought that really impressed me was that about the failure of “trust and good faith” in Australian industrial relations.  It’s well worth quoting:

“… our key problem is not a failure of structure – but a failure of social capital.

“The absence of social capital in our industrial relations system is something of an Australian anomaly – because strong social capital is actually what drives our success in most other areas.

“Our country is rightly perceived as a great place to live, to travel and to invest — not because our laws are that much better than anyone else’s – but because of the faith everyone has in them.

“When a customs officer stops you at Sydney Airport, it might be annoying – but you would always assume that officer is just doing [his] job and not seeking a bribe.

“When you stop at a red light on a traffic-free street – it is primarily out of respect for the fairness of the system it represents – not the fear of getting caught.

“Yet that social capital – that same trust and good faith, is completely missing from our industrial relations system.”

Now that, I think, goes to the heart of the matter.  

Why so? 

Well, here’s my penny’s worth. 

It is so because, on the whole and especially in large-scale businesses, Australian owners, shareholders, and executives, do not want an engaged and committed workforce so much as efficient agents of production. No amount of money expended upon “human resources” departments, chiefly in top end of town corporations, can disguise the reality.  

As for the workers themselves, especially unionized male workers — but not only them – they bring, all too often, to work a deeply embedded surliness and an instinctive and ill-defined hostility toward workplace hierarchies of any kind. 

Open parenthesis 

I was talking some months ago with a highly intelligent young management expert about the difficulties of introducing more efficient management practices into the workplace. What surprised me about the conversation was that my friend gave expression to an idea I had often pondered but had been reluctant to formulate. He remarked that one of the key obstacles to management reform and the re-organisation of work was “class”. 

(At this point, I can hear my army of Marxist readers groaning with pity over me and my friend.  But, anyway, on with the story!) 

An unrecognised “class consciousness” is what is killing the Australian workplace.

At this point in the conversation I am not sure who said what.  But we agreed that, while Britons understood that their society was class ridden and behaved accordingly, we did not.  In Australia we don’t face reality and, instead, we employ subterfuges to hide it from ourselves: like our Jack is as good as his master mentality; like our exaggerated informality in speech and dress codes; like our psychologically needy insistence on being on first name terms with everyone. 

As a result, we agreed, the Australian workplace was often more of a 19th Century artefact than we were prepared to admit.  In too many offices and factories disagreeable “proles” and authoritarian “suits” defined the culture. 

Close parenthesis 

I don’t know whether Paul Howes would agree, but it seems to me that Australia’s unresolved consciousness of “class” goes a long way toward explaining his astute observation about a lack of “social capital” in our workplace relations. 

Whatever of that, there is a point at which I would part company with Paul Howes.

For me the really doubtful claim in his speech was that the Fair Work Act was “a fine piece of legislation”.  Perhaps, in some abstract drafting sense, it might be so.  Should, however, this legislation endure as a living letter, it will surely reinforce the proletarian mentality in the workforce and class divisions on the shop floor. Is it not, in fact, already doing that? Has not Howes’ own taxonomy of IR pathologies already conceded the point?

And, no, I don’t think that a Grand Compact is of much value to us, even if any one wanted to negotiate it.  Government should not be focused on finding ways to keep the union dinosaur alive. 

Sure, the poor old creature should not be put down; and, as far as possible, we should try to stop the elderly monster from doing harm to others. The less contact it has with workplaces, the better for all. But with union coverage in the private sector down to 18% and falling, no finger need be lifted. Let nature take its course. 

Agenda Abbott 

Meanwhile, there is something the Abbott government could do. Employee share ownership is an indispensable element in any renewal of workplace culture and it ought to be high on the agenda of any Coalition government.  So far, unfortunately, it has not been so. 

True, with determined prodding by Small Business Minister, Bruce Billson, the government has begun a review of share ownership legislation and is exploring how to free it up to the advantage of start-up businesses. This is a good, if modest start. There are, however, a few obstacles that any such reform project will have to negotiate. 

The most powerful business constituency for share ownership reform – the publicly listed companies – will be indifferent at best to reform proposals that offer nothing for them. 

The rewards of capital go overwhelmingly to the owners of capital.

Treasury will resist doggedly any serious reform of employee share ownership.  Treasury will claim that the federal budget will suffer substantial “tax losses” as a result.  Also Treasury has been opposed philosophically to the central concept of employee share ownership: that employees can acquire shares, in the companies that employ them, with pre-tax dollars. Shock! Horror! Accordingly, no employee share ownership reform can succeed without the joint and unflinching support of the Treasurer and the Prime Minister.

Finally, any reform proposal could fall victim to the “End of the Age of Entitlement” as espoused by Treasurer, Joe Hockey.

It shouldn’t. 

Promoting widespread and deep employee ownership offers of way of financing the roll back of Welfare State “entitlements”.  As The Economist pointed out recently: 

“In the early part of the Industrial Revolution the rewards of increasing productivity went disproportionately to capital; later on, labour reaped most of the benefits. The pattern today is similar. The prosperity unleashed by the digital revolution has gone overwhelmingly to the owners of capital and the highest-skilled workers. Over the past three decades, labour’s share of output has shrunk globally from 64% to 59%. Meanwhile, the share of income going to the top 1% in America has risen from around 9% in the 1970s to 22% today.” 

Get that? The rewards of capital go overwhelmingly to the owners of capital.

Want to make a better workplace culture? Want to build a fairer, more secure society? Then cut the workers in on capital ownership. 

*This is an edited version of an article originally published on the Henry Thornton blog.

Leave a Reply