Academic journal article Indian Journal of Industrial Relations

Labor Law Reform in India: Insights from Tangled Legacy of Sidney & Beatrice Webb

Academic journal article Indian Journal of Industrial Relations

Labor Law Reform in India: Insights from Tangled Legacy of Sidney & Beatrice Webb

Article excerpt


India posted an impressive growth record after economic liberalization in 1991. A slow-down during the world financial crisis of 2008-2010 was expected but so too was a rebound once the crisis passed. The crisis is now four years over but the growth recovery for India is disappointingly anemic. A number of analysts inside and outside the country conclude growth is obstructed by structural problems. Illustratively, IMF Report (2014:19) concludes, "There is consensus that structural reforms are going to be the lynchpin of an eventual rebound in growth". Five key areas of structural reform are listed: (1) power and natural resources, (2) agriculture, (3) health and education, (4) investment climate, and (5) labor regulation.

The IMF report is tactful and frames these structural problems, not as government failures of the past, but as agenda items for swift legislative action going forward.

Other analysts, however, are far more critical and say these problems have been allowed to fester and worsen because, rather than take liberalization the next step forward, Indian governments of the last decade have reverted to "the old recipe of social spending and industry mandates ... and granting massive new entitlements" associated with "Nehru's turn to Fabian Socialism" in India's post-Independence era (Dalmia, 2014: 1-2). In a similar vein, the press in India is starting to wonder if the economic miracle is returning to the more anemic 'Hindu rate of growth' which Das (2006:2) explains, "had nothing to do with Hinduism and everything to do with the Fabian socialist policies of Prime Minister Jawaharlal Nehru". A well-known America labor law professor, having recently returned from a trip to India, also puts the finger of blame for India's growth problems on failure to jettison the "hopeless forms of Fabian Socialism that Jawaharlal Nehru, India's first prime minister, brought into public life between 1950 and 1990" (Epstein, 2014: 2).

The failed policies associated with Nehru and Fabian Socialism provide a natural segue into the implications for labor law reform of the seminal writings of Sidney and Beatrice Webb, two of the founders of not only Fabian Socialism but also the field of industrial relations (Cole, 1943; Harrison, 2000; Kaufman, 2004).Many observers believe that Indian labor law is increasingly out of date, complex and burdensome and poses a structural impediment to sustained economic growth (VenkataRatnam, 2004; Hill, 2009; Saini, 2009; Krueger, 2013). But, as cited above, a number of analysts also believe that the policies and practices historically associated with the industrial relations field, particularly as it came from Britain and Fabian Socialist writers such as the Webbs, are part of the source of the labor regulation muddle.

This article tries to sort through parts of the Webbs' writings with enduring value as guides for industrial relations and labor law reform and parts of which have been shown incorrect or harmful by historical experience. Analogous to the idea of Freeman & Medoff (1984) that trade unions have two faces--a positive voice face and a negative monopoly face, it is argued that the theory of the Webbs also has two faces, a positive industrial relations face and a negative Fabian Socialism face. The paper briefly identifies and delineates these two faces and then applies them to working-out useful principles for Indian labor law reform. Since much of the existing IR and labor law literature in India is descriptive and empirical, introducing a stronger conceptual element may be helpful for both the endeavors.

American & British Influences

Industrial relations started in the late 19th and early 20th centuries as an Anglo-American project among reform-minded academics broadly linked to a social-institutional approach to economics, albeit with a clear link to Germany and that country's tradition of historical economics and active social policy (Kaufman, 2004). …

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