ABSTRACT
Not long ago the issue of labour standards in economic development was fairly straightforward: employers and right-of-centre social scientists, especially mainstream economists, tended to be against them; labour and its left-of-centre allies tended to be for them. The neoclassical mainstream economists used to suggest that government should leave the setting of labour standards to the free labour market; otherwise the standards would add to production costs by raising the level of wages above the market clearing rate, impede efficiency and restrict flexibility for adjustment, lead to suboptimal allocation of labour, waste resources through rent seeking, stifle competition, deter investments and constrain economic growth, and impair or slow down urgently required market adjustments to external shocks. As the twentieth century drew to a close the labour standards issue became murkier. Conservative views have taken two different lines, one for the domestic economy and another for the trading partner(s) – i.e. government ‘indifference’ in the home, and government ‘activism’ in the foreign labour market. Low wages and minimalist labour standards in late industrializing countries are regarded in the developed North as significant factors behind the deterioration of northern labour standards and the real wage growth. Therefore, a more militant posture towards late industrializing countries’ labour standards has emerged, and has automatically generated its counter-politics: the developing South considers the North’s posture a thin veil for protectionism.
