THE CHRONICLES OF A CAPITALIST LAWYER

RANDOM THOUGHTS OF A CAPITALIST LAWYER ON LAW, ECONOMICS, AND EVERYTHING ELSE

  • Can All Workers Unite Actually End Capitalism?


    I'm always interested with the claim that if all workers in the world cease to work, capitalism would crumble and there will be no more masters and servants afterward. I highly doubt that a labor strike in such supernatural level will ever occur considering the nature of men and their self interest.  Nevertheless, this could be an interesting thought experiment.

    So, for the argument's sake, let us just assume that all of the workers in this planet simultaneously stop their work. What would happen? If all productions stop, I assume that most businesses (especially those which use employee/employer system) will also stop save for businesses that are being run by individuals.  My assumption that individual businesses will still conduct their business activities is based on two further assumptions: (i) they are their own masters, and therefore, there is no need for them to follow the workers, and (ii)  they can run their businesses without significant dependance on other businesses or infrastructure support. In short, they would be most likely local businessmen who have the capacity to produce their own products by themselves.   

    Now, you can always stop working, but you can't stop living. You still need to obtain your basic needs right?  If you can gather everything by yourself from the nature, that would be fine. But if not, what would happen? You'll depend on other people, and in this case, you will depend on the above individual businesses during your strikes while waiting for the crumble of capitalism.

    In such case, the law of supply and demand will automatically work. With less supply and more demand, price will increase. Even worse, without any competitors, the local businesses will eventually have enough monopoly power to solely control the price of their goods and services. And trust me, that would be a very bad scenario.

    Let me give you an example: previously a local farmer sells an apple for US$2. In reality, he's almost out of the business since he can't compete with the local supermarkets which are far more efficient than him and can sell their apples for US$1 each. But, with the great labor strike, the supermarkets cease to operate and the farmer becomes the only apple seller in the community. Imagine his power now to determine the price of his apple without any competitors. Why bother charging US$2 if you can get a higher price? After all, people can only get apples from you.    

    How about the workers? Without a job, the only thing that they can do is to use their savings, or they can try to become businessmen on their own, selling their own services/products to other parties. If they can do it, that would be nice, if not, they will need to rely on the new capitalists, i.e. the individual businessmen as I described above and the cycle will begin again. The irony is: in order to survive, they need to become new capitalists.

    So in the end, at best, the strike will only produce new capitalists and a new cycle of capitalism. At worst, the workers lose their savings before the rich guys lose all of their money and therefore, the old capitalism prevails. In any case, it won't change the fact that servants and masters will always exist.

    The problem lies with human nature, namely: the basic needs for surviving in this world. In the past, in order to survive, men must have a lot of skills. In such case, only the true elites can survive while others perished. But humans are not stupid, there is an easier way to survive, and that is by interacting and cooperating with others.

    Unfortunately, by default, you can't get anything for free. Either you need to obtain your needs by self labor (producing everything by yourself) or you exchange something with others to obtain what you need from them. This process creates the market and within such process, the iron law of supply and demand will eventually lead some people to be on the top place while others will stay below depending on their skills and luck.

    The above analysis is made on the assumption that order and authority remain to exist. But how about in worst case scenario when there is a revolution? Suppose the workers are out of their savings and they decide that they will take control of the resources from the businessmen. Will that change the analysis?

    My answer is no. Once the workers gain control of the resources, similar issue will still exist. Even if you have all the money in the world, you can't do everything by yourself. Some will still be better at doing things than you and the process of exchange of products and services will start again. This will lead to another cycle of supply and demand, market, etc. And before you know it, capitalism will return swiftly. Of course, this is also assuming that those workers will distribute the resources evenly in the first place. If not, even from the very beginning, new masters will emerge without having to wait for another cycle of capitalism.    

    In the end, I don't think the slogan "All Workers Unite" will work to end capitalism. It will just produce another capitalism (but with different "capitalists"). It is still a nice slogan though, has a nice ring to it, and sounds powerful. Well, at least it is perfect for campaign and propaganda.         

  • Does Islamic Law Deal With Minimum Wage?


    There is a fundamental problem when I read this paper titled: Islamic Commercial Law and Social Justice: Shari'ah Compliant Companies, Worker's Rights and the Living Wage (written by Susan C. Hascall), namely, the fact that she argues that some of the Prophet's Hadiths can be used to support the existence of minimum wage for employees and the notion that a company cannot claim itself to be Shari'a compliant without complying with minimum wage requirement. 

    Why? Let us read first the Hadiths used by Ms. Hascall below:

    "Give a servant his fee before his sweat dries"

    "God Most High said: I shall be the opponent of three people on the day of judgment: the man to whom I gave generously but then he cheated; the man the man who sold a freeman into slavery and ate up its price, and the man who hired a worker and took his due measure from him but did not pay him for his (fair) wages"

    The word "fair" that I underline above is an additional language used by her. I have to disagree with Ms. Hascall because from the very beginning, these Hadiths do not deal with the fair amount of wages to be given to a worker. It is true that some Islamic scholars tried to argue in such a way, but I do no think that their interpretation is correct.

    In my view, these Hadiths deal with the obligation of an employer to honor his contract with his worker, i.e. to pay his employee's salary/fee for the work that has been done and that he should not postpone such payment without a valid reason. No words on fair amount. Therefore, this is about the sanctity of contract not minimum wages.

    As I have argued several times in my blog and in my paper here, Islamic Law (as a concept and not in the context of Legal Positivism) separates moral and legal issues and also puts efficiency and the general welfare maximization as the main principles in building its legal system. This is why Islamic Law does not prohibit or even condemn pre-existing slavery, condemns riba but does not provide any sanction even though God says that the sin of committing riba is equal to murdering a man or having an incestual relationship with our own mother. When dealing with economic/commercial issues, we have to admit that Islamic Law is very flexible, namely it does not criminalize the violation of provisions relating to commercial issues.

    This is also in line with the fact that God does not prescribe an absolute value of minimum wage and cannot be expected to do so. Once we deal with fairness issue, there is no single clear answer. Saying that Islamic Law compliance can only be done once you pay your worker with a fair amount of salary creates too much ambiguity. It also transforms a moral issue into a complicated legal issue.  As an example: if an employer pays his worker too small, does it mean that he violates the law? Would that mean that the contract is invalid? What would be the consequences?

    Of course you can always say that it would be good if employers pay attention to the overall well being of his employees and should pay good salaries to them. But that should stay as a moral issue rather than a legal issue with all of its consequences. Because payment of salary is also subject to many factors and the law of supply and demand. As there is a fairness aspect relating to the employee, there is also a fairness aspect relating to the employer.

    I think that is why Islamic Law focuses more on the enforcement of the contract to protect the rights of the worker and the Hadiths are more consistent with this approach. As I argued here, I believe that the best way of promoting the interest of the workers is by making policies that are correlating with the supply and demand of manpower.       

  • The Protection of Criminal Suspects in Law and Economics Perspective

    Forthcoming in Jurnal Teropong Edisi RUU KUHAP 2015 | 23 Pages | Posted: 10 May 2015 | Date Written: April 28, 2015

    Public Choice Theory and its Application in Indonesian Legislation System

    24 Pages | Posted: 8 Oct 2012 | Last revised: 8 Nov 2014 | Date Written: October 8, 2012

    Special Purpose Vehicle in Law and Economics Perspective

    Forthcoming in Journal of Indonesia Corruption Watch, 'Pemberantasan Kejahatan Korupsi dan Pencucian Uang yang Dilakukan Korporasi di Sektor Kehutanan', 2013 | 15 Pages | Posted: 22 Aug 2013 | Date Written: August 18, 2013

    Legal Positivism and Law and Economics -- A Defense

    Third Indonesian National Conference of Legal Philosophy, 27-28 August 2013 | 17 Pages | Posted: 22 Aug 2013 | Last revised: 3 Sep 2013 | Date Written: August 22, 2013

    Economic Analysis of Rape Crime: An Introduction

    Jurnal Hukum Jentera Vol 22, No 7 (2012) Januari-April | 14 Pages | Posted: 12 Nov 2011 | Last revised: 8 Oct 2012 | Date Written: May 7, 2012

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