The second reaction of businesses is they will choose to move their operations, in effect a capital outflow. The countries without such laws, like the USA, Ireland and British, are always capital importing countries. On the flip side, Germany and Japan are capital exporting countries, both of which have experienced stagnating economies. But the economy of USA, Ireland and British have flourished.
EO: Are there some examples where the government protects laborers through legislation but still keeps the economy healthy?
Wang: The places with healthy economic development always follow two principles. One is that the responsibilities of businesses and government are clear. The second is that the government never interferes in businesses’ affairs directly, but instead works to improve efficiency in the labor market. For example, the US passed a law to protect the rights of labor unions in the 1930s. But the core of the law demands that employees and employers solve disputes though negotiation. That said, the government never gets involved in the process nor attempts to steer the results of the negotiation. As a result, for the past 70 years the US economy has been strong, and unemployment is among the lowest in the world.
Wang Yijiang earned a PhD in Economics from Harvard University and has taught at the Carlson School of Management at Minnesota University and the Tsinghua University School of Economics and Management.
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