July 2014        

Bausch and Lomb: the sequel

Workers at Bausch and Lomb in Waterford voted last month to accept the deal proposed by Valeant Pharmaceuticals. The SIPTU vote was 563 to 107.
      Although the union made no recommendation, members were left in no doubt that a “no” vote would close the factory, with the loss of all 1,100 jobs. The same happened at the TEEU ballot, where the vote was 68 to 23 for acceptance. In effect there was no choice: you either accepted or lost your job.
      The deal means a cut in pay and the ending of bonus payments and shift allowances as well as two hundred redundancies. The redundancy package is restricted to a maximum of two years’ wages.
      Part of the deal is that there will be compensation for the pay cuts, spread over two years, after which the pay cuts will kick in. The Government, through the IDA, has pumped a few million into the company to upgrade the plant. This will inevitably lead to further job losses down the road. In effect, the whole thing has been a win-win situation for Valeant.
      The problem with the pay cuts, of course, is that although they are supposed to be 14 per cent, when we take into account the fact that there are many cases where both wage-earners in a family are working for the company, the household income will be cut by 28 per cent. Likewise, where workers took on borrowings on the understanding that the company was regarded as secure employment (even by banks), given the length of its establishment here, they are now caught in a situation of onerous debt, through no fault of their own.
      The capitalist system does not take into account the individual misery it causes: it functions in an inhuman manner and treats workers as no better than the capital assets of the company, such as the plant and machinery; instead of looking at workers as individuals it treats them as an amorphous group—a class.
      There have been numerous cases like Bausch and Lomb where there is a company takeover. It won’t be the last. In order to recoup their investment, companies like Valeant operate as vultures. Instead of trying to grow the company and find new markets, it will recoup the cost by savage cuts in the work force and stripping the value the workers put into the company. In this way it will improve the balance sheet and improve the profitability ratios for investors.
      “Cutting costs” is bookkeeper jargon for redundancies, pay cuts, and replacing a defined-benefit pension scheme with a defined-contribution scheme. The latter scheme has no implications for the balance sheet, as the liability is transferred to the worker. The character Gordon Gekko in the film Wall Street gave a fairly accurate portrayal of how the system operates. Profits and share price take precedence over individual workers, who are treated as assets or liabilities of the company.
      The bourgeois press constantly hammers home the message that the capitalist system creates wealth for everyone, and that there is no alternative. A new book, Capital in the Twenty-First Century, by Thomas Piketty, a French economist, has exposed this lie. Piketty is not a Marxist and in fact is a supporter of capitalism, but what he did was he took three hundred years of data from the main capitalist countries to see whether capitalism was working for everyone.
      What he found was that capitalism is enriching a minority and creating even greater disparities of wealth. In other words, Piketty’s data bears out Marx’s thesis in Capital (1867), with the benefit of an extra 150 years of data.
      Piketty’s solution is to tax wealth. In the Communist Manifesto, Marx and Engels had already attacked inherited wealth, but Piketty does not acknowledge this. Even capitalists like Warren Buffet are so embarrassed about how little tax they pay that they have resorted to giving money to charities. (This usually earns them tax relief.)
      Trying to tax wealth is hardly going to be a runner when the state acts to support the capitalist system through its laws, courts, and state institutions. Looking at Ireland, most of the taxes are from income tax or consumption taxes, such as VAT. There are no taxes on assets, only on the gains from the disposal of assets. A whole industry of tax planners exists to minimise the impact even these meagre taxes have on assets. Trying to reform capitalism through taxation will not be effective.
      One of the main pluses of Piketty’s book is that it brings economics back to questions about wealth and equality. Textbooks on economics had degenerated into obscurantist treatises on the technicalities of economics and had become disconnected from the reality of capitalism as experienced by workers in Bausch and Lomb, where pay is cut just to maximise a balance sheet.

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