TAKING STOCK: More capital, higher wages We forget that without capital, labour means nothing. If you doubt it, picture being alone, without implements, on a mountaintop. Imagine no water except from a stream, no shelter except what you can make with your hands, no vegetables or fruits except what you can grow without tools, no meat except what you can kill yourself and no cooking as there is no fire or utensils. Imagine all this and you will see the difficulty of survival without capital. As soon as one gets some capital — a spade, for example — life is easier as one can move earth for constructing a shelter and till the land for food. More capital — a bulldozer and tractor — will make life easier still, by giving the means to build a house and cultivate crops. Those who rail against technology or capital don’t know what they are talking about. They say they are for employment. In that, they are correct. Replace bulldozers by spades and a lot of people get employed, replace spades by spoons and we can employ millions, use your nails and fingers and the world can employ all its billions. Is that how we want to live? No, the answer is to make policies which allow capital to be formed and come into this country. Capital means more factories, hotels, hospitals, schools, roads, dams, tractors, offices and buildings. All this means more demand for workers. When all are employed, more demand will start to pull up wages sharply. Labour will move to the businesses where their productivity is the highest for only they can then pay the prevailing rate. What causes the wages of workers to go up? If you ask a labour union leader, he will say it is his negotiations with the employer. A government official will tell you, it’s the fixing of minimum wage laws. They are wrong. Labour unions can’t push up wages of workers in the whole economy. They use their muscle power to win concessions from some business owners, but that’s about all. If a business ends up paying more to its workers than the competition, then sooner or later it will become extinct. The car and airline industry union workers in America were able to get higher hourly wages; much higher than market rates. They also managed to get health care and pension benefits. Newer airlines and foreign car companies, not so burdened, have driven many of these older companies into bankruptcies. Thanks to low cost airlines like Southwest and Jet Blue, Delta and a whole lot of others are facing bankruptcy. Many fear that General Motors, US’s biggest car firm, is in serious danger of filing for bankruptcy, if it can’t scale down pension and health care benefits earlier granted to its workers under pressure from its union. In any event unions can only cause a change in wages of workers in the organised sector. Most people in our country are unorganised and earn their living in the informal sector comprising of farms, small retail shops, and street vending. Unions offer them nothing. Minimum wage laws apply only to the elite club of those who work for government or big companies. Ironically those who don’t need protection and do a minimum of hard labour, get the maximum of benefits. If unions and government were that adept at raising standards of living, they could and would have done so by decree. But they can’t. There is no way for workers here to earn what their counterparts in west ma-ke irrespective of what government and unions do. The only way to increase wages is by improving productivity. That requires machinery and technology, which in turn means more capital. When this capital combines with entrepreneurship the result is an explosion of productivity and a virtual cycle of wage and productivity increases.In our country capital formation is discouraged. We make laws which tax capital and prevent its deployment by tariffs and licensing requireme-nt. We keep out foreign capital and when it does come in it is tied with a plethora of red tape and bureaucratic rules. Should we frame policies to give people higher wages now? (The writer can be contacted at: everest@mos.com.np)