BRICS: let’s talk about labour

A conversation about what development means and how to improve transnational cooperation between countries in the South cannot build a serious platform without the participation of organised labour.

Musab Younis
14 May 2013

By the time the BRICS (Brazil, Russia, India, China, South Africa) heads of state met in Durban last month, this unlikely but durable association of emerging economies had already established a Think Tank Council, Business Council, and Academic Forum. New areas of cooperation were being promised on everything from public diplomacy and anti-corruption to tourism and sports. Wider civil society participation, for the first time officially sanctioned by the participating governments, is expected at the next BRICS Summit in Brazil. Yet in the twelve-page eThekwini Declaration produced at the Durban Summit and in virtually all of the dozens of articles on the topic which have been produced since, one word is conspicuous by its absence: labour.

We should be concerned not only because the working lives, conditions and wages of billions of people in the BRICS countries (40 percent of the world’s population) are important in themselves, but also because any analysis of the BRICS coalition is impoverished and even misleading if it does not include an analysis of labour. The BRICS countries, especially India and China, encompass crucial components of global manufacturing value chains. Their growing partnership suggests a number of questions. What industrial relations strategies have the BRICS adopted in their domestic development models? To what extent is ‘race to the bottom’ competition – a problem that has beset South-South cooperative efforts for many decades – able to be addressed through statist initiatives like the BRICS? How can the BRICS deal with persistent and growing global unemployment? And what can we learn through labour conditions and struggles in the BRICS countries about the prospects of the grouping as a whole?

India is now in the third decade of economic reforms that began in the early 1990s, which saw a number of changes in the domestic labour market, including some which are understood as typifying a ‘modernisation’ pathway (especially in light of the East Asian experience of the 1950s): growing levels of education and a move of ‘surplus’ labour from agriculture into industry. But, as many observers have noted, high levels of economic growth in India have not led to a commensurate rise in employment. The phrase “jobless growth” has become common in discussion of India’s low labour participation rates, a figure describing the proportion of a country’s population that is economically active. Since around 2004, employment growth in India has been described as “exceptionally slow”.[1] A think tank linked to the Indian government’s Planning Commission found in February 2013 that, despite high levels of GDP growth, “employment in total and in non-agricultural sectors has not been growing. This jobless growth in recent years has been accompanied by growth in casualization and informalization”. Economic and social indicators give some idea as to the distance between India and the country with which it is so often compared. China has achieved over double the per capita income of India. Literacy rates in China are above 90 percent; they are under 75 percent in India.

A problem in India, the lack of jobs is (or should be) a national emergency in South Africa, which registered an official unemployment rate of 24.9 percent in 2011, a figure which jumps ten percentage points if those no longer seeking work are also included and higher still for youth unemployment. These figures are higher than those for the Great Depression in the US, when unemployment reached its 25 percent peak only for a short period. South Africa’s reliance on extractive industries for economic growth, as well as poor working conditions in these industries, have generated a recent record of labour repression that is highly violent by international standards. The yearly revised Industrial Policy Action Plans devised by the South Africa Department of Trade and Industry have, to some extent, attempted to address this by developing plans for the growth of export manufacturing industries that generate significant employment. But internal political considerations in South Africa have slowed the pace of this strategy.

Unemployment is less of a drastic problem in Russia. But Russian trade unions have faced major difficulties developing a strong independent identity in the wake of the post-Soviet reforms. In the context of this struggle there have been some well-known cases of the imprisonment of trade union activists like Valentin Urusov, a diamond miner and activist (though such cases have not been reported widely outside Russia). In many ways a highly problematic set of policy prescriptions in the 1990s continues to work against Russia. According to OECD statistics labour productivity in Russia is much lower than any OECD member except Chile or Mexico, and about half of the average productivity of the OECD, given in terms of GDP per hours worked. Such low rates can be used as an argument to prevent an increase in labour standards or improvement in conditions. A McKinsey report on low productivity thus recommends ‘retraining’, ‘outsourcing and subcontracting’ in the Russian steel industry – all measures likely to harm unions.

China, the real economic force behind the BRICS, is one of the most interesting in this context. Its stellar GDP growth rate has famously relied on huge pools of internal migrant industrial labour to produce cheap commodities for Western markets, a model summarised by a research consultancy as “Third World wages with First World infrastructure”.  A number of well-known strikes at the Foxconn factory, which produces Apple products, represents just a tiny fraction of the growing labour unrest that this model has generated. In 2012, China’s working-age population fell last year for the first time according to the National Bureau of Statistics. The same year saw a spate of media stories about the growing cost of labour in China (‘The end of cheap China’, from the Economist, was a typical headline), as average wages in China have been increasing impressively after a long period of wage suppression – currently being offset, many commentators have added, by a sharp rise in productivity. In the wake of a new President and the launch, two months ago, of a 35-point income redistribution plan by the China State Council, a steady increase in wages and domestic consumption has formed a central part of government policy. This will have major ramifications.

We come finally to Brazil, often touted as the most successful of the BRICS across a range of indicators, the world’s sixth-largest economy and where, in the past decade, per capita income (in both nominal and PPP terms) surpassed the $10,000 mark. A complex picture emerges from Brazil’s economic and labour figures. Notwithstanding the success of social protection programmes like Bolsa Familia, serious domestic problems remain. Economic growth slowed to 2.7 percent in 2011 and President Dilma Rousseff took office the same year facing a labour shortage, an usual problem for a BRICS country. An enormous series of public sector strikes swept the country last August involving up to 400,000 federal officials. During the same year, despite weak economic growth, Brazil’s unemployment rate dropped to a record low of 5.5 percent. At over 60 percent, Brazil’s female labour market participation rate is three times higher than that of India; its infamous inequality rate has also begun to slowly narrow.                                                                                     

Though we can only draw tentative conclusions from this capsule summary, three initial points can be made. First, the ability of trade unions to organise their members in pursuit of improvements in wages and working conditions is very inconsistent across the BRICS, ranging from reasonably free (Brazil) to highly restricted (Russia). The labour movements across these countries will want to ensure that any “mutual learning” in this area – which, in theory, has great potential – takes place in the direction of more freedom for unions rather than the reverse. Second, the global unemployment crisis is seriously affecting the BRICS, especially India and South Africa. The other BRICS could learn from Brazil on lowering inequality and relatively progressive labour practices. Third, all these countries are grappling with industrial transitions and growing economies that are resulting in highly divergent outcomes. Much is made of the importance of GDP growth by the BRICS, but even where this has been achieved we have not necessarily seen a commensurate rise in employment. And growing inequality shows that such growth might escape workers almost entirely, leaving their incomes stagnant or even declining while ballooning the pockets of a tiny elite. Much more research needs to be focused on this area; the BRICS could finance it and take it seriously at high policy levels.

Research on its own would not be enough, of course, but it could help to bring about a dramatic change in the way states coordinate policy. One result could be some level of BRICS coordination on wage policies. As Patrick Belser points out in the Global Labour Column, “international coordination [on wage policies] is essential, because in a global economy the failure of any nation to let wages increase in line with productivity hurts the competitiveness and creates an obstacle in the way of other countries which desire to improve wages in line with productivity”.

In reality, such wage policy coordination has traditionally focused on anti-labour measures like reducing unit labour costs.  But there is no reason why it could not instead look at the more democratic alternative of ensuring an adequate and growing labour share of national incomes. This is a key area of potential for the BRICS. It may become more prominent as the next Summit in Brazil involves a wider range of civil society participation than has previously been permitted. Andreas Bieler has pointed out that in the context of global capitalism transnational alliances between trade unions are difficult to achieve but not impossible, as the NAFTA example shows.

Levels of intra-BRICS coordination on wage policies could bring about success where individual-level policies would fail. If this route is taken the BRICS (and the BRICS Development Bank in particular) could become a major force in reducing global income disparities. But this is dependent on the labour movements within the BRICS countries developing a strong voice at the summits and overcoming major internal difficulties. One thing is certain: a conversation about what development means and how to improve transnational cooperation between countries in the South, such as is taking place the BRICS Summits, cannot hope to build a serious platform without the participation of organised labour.



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