Capitalism's astonishing victory hurts most of us

I'm not often astonished, but on Monday, Nigel Haworth, Professor of Human Resource Development at the University of Auckland, managed it.

Speaking to Radio New Zealand's Nine-to-Noon host Kathryn Ryan, he set in historical context the unrelenting downward pressure on wages and conditions that has made the last three decades such a struggle for ordinary working people.

"When China and Eastern Europe, and Russia and India, joined the global economy, basically from the 1970s onwards," he explained, "the global workforce doubled.

"It's the most astonishing figure. The global workforce doubled, and the per capita level of capitalisation of that workforce halved. In other words, we moved into a massive international process of cheaper labour, which is what has allowed contracting out and off-shoring to develop.

"We are now competing in a global market where cheaper labour is available, and it's increasingly skilled cheaper labour in places like China and India. And you're going to see that sort of pressure brought into our labour market. Which is why, I think, a country like New Zealand has to have a very clear strategy for high-performance, high-productivity workplaces, to counteract that tendency for lower and lower wages."

Viewed from this perspective, the "opening" to capitalism of the old Soviet empire, the People's Republic of China and Nehru's socialist India, has brought nothing but misfortune to the working classes of the West. While that vast swathe of humanity remained inaccessible to the Western capitalist powers, Western workers were able to take full advantage of a sellers' market in scarce human labour. But the moment the markets of the Soviet empire, China and India were declared open to the investors (ie, finance capitalists) of the West, not only were workers living under existing socialism doomed, but so were the prime beneficiaries of the post-war Keynesian settlement: the "free" workers of the West. Us.

What other outcome could there be when, as Professor Haworth points out, the size of the labour force available to Western capitalists was expanding exponentially? How could trade unions mount a credible defence of members' incomes when all an employer had to do was threaten to (or actually) shift his factory overseas to countries where labour could be hired, at a fraction of prevailing wage rates, to do the same job?

Western Leftists used to believe it was the Soviet Union's tanks and nuclear warheads that kept their capitalist masters in line. That any attempt to destroy the unions, dismantle the welfare state, and generally immiserate the working classes of the West would cause them to fling open the gates to the Reds. There was, of course, a grain of truth in this geopolitical speculation. What the Western Left failed to grasp, however, was that the cost of maintaining all those tanks and missiles was profoundly distorting the socialist economies.

When Soviet citizens looked to the West they saw blue jeans and stereos - consumer goods conspicuously absent from their own retail shelves. You can't wear a tank, or dance to a missile.

Keynesianism had made the West wealthy enough to provide its workers with guns and butter, and its capitalists with investment funds too tempting for the cash-strapped economies of Eastern Europe to ignore.

In the end, it wasn't the immiserated workers of the West who flung open the fortress gates, it was the impoverished governments of the East.

As the average living standards of the Third World have risen, those of the First and Second Worlds have fallen. If the dramatic increase in global wealth was being distributed equitably this would be a good thing. Unfortunately, it's not.

Look at Ports of Auckland, Affco's meat works, Oceania's rest homes - and remember Professor Haworth's remarkable facts and figures. This is what a buyers' labour market makes inevitable. It's what unfettered capitalism looks like. Those with readily marketable skills live inside it. Most of us live under it. A tiny number call it their own.