Although it may sometimes be demonised, a free market is the essence of what makes successful economies work. We might fear free-market competition from China for example, but history has taught us free markets expand the economic cake. Restricted market economies, such as that of North Korea, create unemployment, poverty and human misery.
But the mechanism that enables free markets to operate is under threat from an unexpected source, the International Labour Organisation, and the stakes are high.
The ILO is a division of the United Nations. It is the peak international labour regulation body, setting standards that countries usually use as the benchmark for domestic legislation and policies.
Over the past decade, the ILO has been engaged in its most protracted and difficult debate, one which effectively defines the reach of labour law and the influence of the ILO. The debate is expected to conclude next month, and if it goes where some proponents intend, labour law will be allowed to cross over into commercial law.
This is why the free market is under attack. In its legal construct, the free market is a product of commercial law. Commercial contract law, reinforced by legislation such as the Trade Practices Act, holds that price-fixing and collusive, monopoly activity are illegal.
By comparison, employment law, backed by ILO principles, sanctifies price-fixing of employment contracts and encourages employee collusion under collective bargaining. This is accepted on grounds of employee protection and social good.
The agreed, sharp legal distinction between commercial and employment contracts has maintained the policy separation between free-market processes and collective labour.
If, however, employment law gains jurisdictional reach over aspects of commercial law, collusion and price-fixing will become legal commercial activities, albeit under the guise of employment law. Law and policy designed to enforce and protect free markets would spiral into confusion should this occur. Free markets are therefore facing a cancerous threat.
The platform for this is the ILO's "Scope of Employment" debate. This first emerged in 1996 in response to the labour regulator's concerns that growing numbers of independent contractors were falling outside their regulation. Inconclusive debate occurred in 1998, proceeded again in 2003 and is listed, once again, for next month. The ILO intends to create a new international instrument on the issue.
What defines independent contractors is the fact that individuals earn their living by using the commercial contract as opposed to the employment contract. The ILO recognises and accepts this legal distinction. In effect, individuals can be a business, even if just a business of one. As commercial businesses, independent contractors are subject to commercial law requiring them to operate under free-market principles.
But labour regulators have difficulty conceiving of individuals as a business. It's an alien concept to their historical policy paradigm of dependent employees.
Yet, in Australia, 1.9 million people work this way, including some 28 per cent of the private-sector workforce. The ILO has surveyed the numbers of independent contractors internationally, identifying that they comprise from 5.3 per cent to 91.8 per cent of national workforces globally.
Next month, the ILO will debate the claim that people who are in "triangular" relationships are employees. The argument is that if there are two commercial contracts between three parties and one party is an individual, that employment exists. The ILO also proposes that employment law can intrude into commercial contracts to enable price-fixing. That turns commercial law and economic policy on its head. It's illogical -- but logic may not figure in the ILO's decision. Some countries ignore ILO decrees, saying they are illogical, but an unsavoury ILO policy result could seriously affect Australia.
Australia is a world leader in embracing independent contractors through appropriate regulation while maintaining their business status. Pay as you go taxation is just one example. It resolved problems over the Australian Tax Office's tax withholding powers. The impending Independent Contractors Act will secure independent contractor rights to be a business. Both are a world first. The ILO agenda runs counter to these policy initiatives.
Further, developing economies lean heavily on the ILO for advice in designing their labour regulations.
An ILO steering developing nations into labour regulation that sanctified price-fixing and collusion under commercial contracts, would wreak economic havoc. In Australia's Asia-Pacific region sphere of interest, undoing such policy damage would be a significant task.
The ILO is an important international body. It can help or hinder workers' rights and global economic advancement. The stakes are high. The outcome is uncertain.
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