Betrayal of social contract

The foundation of the modern democratic state is the concept of social contract whereby individuals submit certain personal liberties to the cause of the greater common good. Free and equal citizens get together on the basis of an acceptable social contract that espouses the greatest common good.

This governing philosophy has run into rough weather in the times of the Covid-19 pandemic. In India, the onset of the pandemic has let loose the “animal instincts” of the market-aided, abetted by a pliant state at the cost of the working class. The emergency measures initiated under the garb of controlling the pandemic have morphed into an exercise to enrich a select few at the cost of the great multitudes.

Since the onset of the pandemic, the clear focus of the Central government has been to undermine the rights of the working class at the behest of large corporate houses. Never in the history of the working-class movement had there been as sustained and systematic assault on labour rights as seen during the recent past.

The Central government swung into action as early as May 5, 2020, with the Union labour secretary shooting off letters to all state governments pressurising them to undertake critical labour law amendments “to address Covid-19”. The wish list contained several anti-worker measures such as increase in working hours to 12 hours, the introduction of fixed-term employment and increase in the thresholds in Industrial disputes Act, Contract Labour Act and Factories Act to exclude the majority of workers and factories from the purview of labour-friendly legislations.

The main thrust of these amendments was to legalise a system of “hire and fire”. The BJP-ruled state governments in Gujarat, UP and MP followed suit by announcing a complete holiday from Labour laws for three-four years. The Karnataka government also announced increase in the thresholds in the Industrial Disputes, Factories and Contract Labour Acts along with the introduction of fixed-term employment.

It announced a freeze in the payment of dearness allowance (DA) to minimum wages for a year in July 2020. In a case that points to the deep nexus between the corporates and the state, employers in the garment sector suspended payment of DA to lakhs of workers much earlier, from April 2020. The order to freeze DA has been subsequently stayed by the high court as being prima facie illegal.

The stated purpose of these measures has been to encourage the ‘ease of doing business’. The ease of doing business is, at best, a hazy and imperfect parameter propounded by the World Bank. The parameters are collected only from Delhi and Mumbai. The data irregularities are so rampant that the World Bank has suspended the doing business report in August 2020.

There is a strong belief underlying such measures that the economy can only be restored to normalcy by aiding large corporate houses. However, evidence suggests that private investment had declined well before the onset of the pandemic despite the drastic measures to slash corporate tax by over 10% in 2019.

Private consumption

The economy has been running on only the engine of private consumption, which has now taken a hit due to the ham-handed policies of the state governments. The policies dictated by large corporate houses have single-mindedly focused on supply-side measures such as tax holidays, undermining worker rights and disinvestment of valuable public sector units and only served to cripple domestic private consumption of citizens.

Such policies have hurt both the working class and small and medium enterprises (SMEs). The International Labour Organisation (ILO) estimated that more than six million youth will lose jobs in India due to the pandemic.

There is not a whimper nowadays about the grandiose Rs 20 lakh crore package announced by the PM. Both the logic and the math behind the grand package were found wanting. The SMEs which generate 85% of all employment in the organised sector are struggling to raise credit from the troubled banking system due to the unprecedented rise in non-performing assets. Many SMEs say the package has been a grand failure. Not only has the government failed in protecting jobs but it has also failed miserably in protecting the SME sector.

Contrast this approach with the approach of a poor country like Pakistan, which launched an ambitious one-time direct cash transfer of $75 to over 12 million vulnerable families in order to provide them security.

The approach of the state governments runs in direct contradiction to the suffering and miseries of the working class and is aimed at enriching a select few large corporate houses. The social contract that binds state policy has been given up under the garb of combating the pandemic. The current direction of state policy will push millions into unemployment and shrink the share of organised employment. Given the unprecedented nature of the crisis, only time will tell if these wounds inflicted by the state will ever heal.

(The writer is Secretary, AITUC, Bengaluru)