Socialism, Capitalism or the European Union? Labour Code at Crossroads

At present the Lithuanian parliament is debating a project of a new Labour Code which should be adopted in April – May 2002, replacing the old Labour Code which has been in effect since 1972. The adoption of this document will be a very important event since it will determine future prospects and legal status of the larger part of population directly participating in labour relations. LFMI‘s policy analysts were actively involved in the debates of the new Labour Code: they took part in parliamentary sittings and submitted recommendations on how to improve this document, underlying the need for liberalisation of labour relations. They drew attention to the changing market conditions and overall global trends, as well as called for ensuring as much as possible freedom of contract between employers and employees. LFMI‘s policy analysts also discussed this topic on radio programmes, published articles and comments in the press. We offer one of the articles to the readers of The Free Market.

Not just fairytale characters come to the crossroads. Each of us makes lots of decisions every day on which our future depends. However, some people have the power and responsibility to decide not only for themselves, but also for others. By raising their hands, members of the parliament direct people in Lithuania onto the road chosen for them by the government. One of such crossroads is the new Labour Code which the parliament is to adopt this spring.
As it befits a crossroad, there are three optinions available for employment regulations. The first one is to claim that human labour should not be treated as goods, that’s why it may not be exposed to market laws. Hence, the parties should not be allowed to agree on labour independantly and instead, they must be instructed as to who, how and what needs to be done. This is the road of socialism. It may be luring, but whoever chooses it is doomed to disappointment.
All goals which make us violate the freedom of contract are doomed to failure. Should you choose to fix a minimum wage – you are bound to have unemployment; should you choose to limit the working hours – you are bound to infringe employement regulations; should you make agreements between trade unions and employers mandatory – and you are bound to witness their endless disagreements; should you try to protect one party to the employment contract – such protection is bound to be detrimental to both of them. This is the road which, depending on perseverance and patience to learn life lessons, can lead very far. Lithuanians have already shown that they lack such enduring patience as demonstrated by the people and leaders of the North Korea who even in sight of imminent hunger would not go astray off the socialist path.
The second option would be to recognise that labour is what every individual may offer in exchange for the resources needed to live on and to let the labour market prosper. Often this road is labelled as jungles of wild capitalism, where the strong are just waiting to hurt the weak. It is a fallacy to use such a metaphor, since market relations are based on negotiations and exchange rather than coercion.
History bears witness to the fact how capitalism abolished compulsory labour, whereas in socialism it returns, sooner or later, in the form of labour camps, collective assistance, mandatory placements, constructions by the Komsomol or other. We often forget that it was nothing else but the capitalist order which allowed for opportunities to ensure welfare in each society and to turn an ordinary individual into a key player of the society. All this happened only when human labour – the most scarce resource in economy and a tool for achieving any other goals – has become human property.
This order is disliked by a great many from Marx to contemporary street politicians, because they see employers as forcing employees to work overtime and to receive less than is due. Such approach is partially natural: everyone wants to buy at a low price and to sell at a high one (in this particular case – his own labour). We should not forget, though, that nobody else apart from an individual himself can assess how much is “too much”, and how much is “too little”. Disregard for this simple fact forces Lithuanian people to seek for new opportunities and well-being in those countries which enjoy greater freedom. Any attempt to make the so-called “jungles” of capitalism into a park tends to transform them into a dessert.
Many legislators are well aware that the socialist path leads astray. The capitalist road, on the other hand, seems rather obscure, especially since the electorate represented by trade unions always lobby in the government for better pay for their labour force. This is when a salutary alternative comes into play – a “third path”, which tries to combine the best from the previous two systems. There are no landmarks on this road, and so as not to get lost on this twisting road, one needs a beacon – the European Union. It is luring a lot to go in this direction, especially since all the previous travellers have secured themselves a good life, are inviting us to follow their lead and are ready to give advice.
Regrettably, beacons are often nothing but a mirage… At a closer look one can see that the welfare in the European Union is created on the surviving elements of capitalism, with all regulations being in its way. We notice quarrelling people – one group of them claim that the pursuit of the golden mean shall be continued further, others think it is high time we went back to the road of capitalism. An example to that could be the ongoing discussion on temporary employees. Upon the introduction of this more flexible form of employment, many undertakings were able to enhance their efficiency, new businesses have developed and jobs have been created. Against the background of proposals to regulate it as permanent employment, one can also hear dissenting voices that this would destroy jobs and totally disrupt the already shaky economy of Europe and Germany, in particular.
The opinion which is gaining more ground in the European Union is that strict employment regulations is the key reason for the backwardness of its member states. The liberal states of the EU, such as Great Britain and Ireland (the target countries for many Lithuanian people who emigrate there by various possible means and who in very rare cases settle down in France, a member of the same European Union) are becoming more adamant in their discussions on employment regulations with the remaining and less liberal EU member states. One can observe the EU’s attempts to catch up with and keep abreast of the US, while the latter continuously sneer at semi-socialist policy prevalent in EU employment regulations. Moreover, often an opinion can be heard in the EU that instead of forcing the candidate countries to repeat its mistakes the EU should learn from them instead. Such discussions are repeatedly voiced during all major European forums. The recent EU summit meeting in its conclusions also underlined the need to reform employment regulations.
Countries that have chosen the third path escape the repercussions of socialism, but in comparison with those on the capitalist path, create fewer values, receive lower salaries and face higher unmeployment. The conclusion Lithuania should draw is very simple: instead of cherishing illusions, policy makers should adopt decisions which would do make life better and not just sound nicely, and when solving the problems of capitalism, legislators should not destroy its magnificent achievements.