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noreply@blogger.com (Harald Kroeck) — Thu, 22 Feb 2018 14:55:00 +0000

From Financial Crisis to Stagnation: The Destruction of Shared Prosperity and the Role of Economics

noreply@blogger.com (Harald Kroeck) — Mon, 28 May 2012 07:00:00 +0000

Thomas L Palley

Marshall McLuhan, the famed philosopher of media, wrote “We shape our tools and they in turn shape us”. His insight also applies to the economy which is shaped by economic policy derived from economic ideas, and it is the theme of my recent book which argues the global economic crisis is the product of flawed policies derived from flawed ideas.

Broadly speaking, there exist three different perspectives on the crisis. Perspective 1 is the hard-core neoliberal position, which can be labelled the “government failure hypothesis”. In the U.S. it is identified with the Republican Party and the Chicago school of economics.

Perspective 2 is the soft-core neoliberal position, which can be labelled the “market failure hypothesis”. It is identified with the Obama administration, half of the Democratic Party, and the MIT economics departments. In Europe it is identified with Third Way politics. Perspective 3 is the progressive position which can be labelled the “destruction of shared prosperity hypothesis”. It is identified with the other half of the Democratic Party and the labour movement, but it has no standing within major economics departments owing to their suppression of alternatives to orthodox theory.

The government failure argument states that the crisis is rooted in the U.S. housing bubble and bust which was due to failure of monetary policy and government intervention in the housing market. With regard to monetary policy, the Federal Reserve pushed interest rates too low for too long in the prior recession. With regard to the housing market, government intervention drove up house prices by encouraging home-ownership beyond people’s means. The hard-core perspective therefore characterises the crisis as essentially a U.S. phenomenon.

The soft-core neoliberal market failure argument states that the crisis is due to inadequate financial regulation. First, regulators allowed excessive risk-taking by banks. Second, regulators allowed perverse incentive pay structures within banks that encouraged management to engage in “loan pushing” rather than “good lending.” Third, regulators pushed both deregulation and self-regulation too far. Together, these failures contributed to financial misallocation, including misallocation of foreign saving provided through the trade deficit. The soft-core perspective is therefore more global but it views the crisis as essentially a financial phenomenon.

The progressive “destruction of shared prosperity” argument states that the crisis is rooted in the neoliberal economic paradigm that has guided economic policy for the past thirty years. Though the U.S. is the epicentre of the crisis, all countries are implicated as they all adopted the paradigm. That paradigm infected finance via inadequate regulation and via faulty incentive pay arrangements, but financial market regulatory failure was just one element.

The neoliberal economic paradigm was adopted in the late 1970s and early 1980s. For the period 1945 - 1975 the U.S. economy was characterised by a “virtuous circle” Keynesian model built on full employment and wage growth tied to productivity growth. Productivity growth drove wage growth, which in turn fuelled demand growth and created full employment. That provided an incentive for investment, which drove further productivity growth and supported higher wages. This model held in the U.S. and, subject to local modifications, it also held throughout the global economy - in Western Europe, Canada, Japan, Mexico, Brazil and Argentina.

After 1980 the virtuous circle Keynesian model was replaced by a neoliberal growth model that severed the link between wages and productivity growth and created a new economic dynamic. Before 1980, wages were the engine of U.S. demand growth. After 1980, debt and asset price inflation became the engine.

The new model was rooted in neoliberal economics and can be described as a neoliberal policy box that fences workers in and pressures them from all sides. Corporate globalisation put workers in international competition via global production networks supported by free trade agreements and capital mobility. The “small” government agenda attacked the legitimacy of government and pushed for deregulation regardless of dangers. The labour market flexibility agenda attacked unions and labour market support structures such as the minimum wage, unemployment benefits, and employment protections. Finally, the abandonment of full employment created employment insecurity and weakened worker bargaining power.

This model was implemented on a global basis, in both North and South, which multiplied its impact. That explains the significance of the Washington Consensus which was enforced in Latin America, Africa and former communist countries by the International Monetary Fund and World Bank by making financial assistance conditional on adopting neoliberal policies.

The new model created a growing “demand gap” by gradually undermining the income and demand generation process. The role of finance was to fill that gap. Within the U.S., deregulation, financial innovation, and speculation enabled finance to fill the demand gap by lending to consumers and spurring asset price inflation. U.S. consumers in turn filled the global demand gap.

These three different perspectives make clear what is at stake as each recommends its own different policy response. For hard-core neoliberal government failure proponents the recommended policy response is to double-down on neoliberal policies by further deregulating financial and labour markets; deepening central bank independence and the commitment to low inflation; and further limiting government via fiscal austerity.

For soft-core neoliberal market failure proponents the recommended policy response is to tighten financial regulation but continue with all other aspects of the existing neoliberal policy paradigm. That means continued support for corporate globalisation, so-called labour market flexibility, low inflation targeting, and fiscal austerity.

For proponents of the destruction of shared prosperity hypothesis the policy response is fundamentally different. The challenge is to overthrow the neoliberal paradigm and replace it with a “structural Keynesian” paradigm that re-packs the policy box and restores the link between wage and productivity growth. The goal is to take workers out of the box and put corporations and financial markets in so that they are made to serve the broader public interest. That requires replacing corporate globalisation with managed globalisation; restoring commitment to full employment; replacing the neoliberal anti-government agenda with a social democratic government agenda; and replacing the neoliberal labour market flexibility with a solidarity-based labour market agenda.

Managed globalisation means a world with labour standards, coordinated exchange rates, and managed capital flows. A social democratic agenda means government ensuring adequate provision of social safety nets, fundamental needs such as healthcare and education, and secure retirement incomes. A solidarity-based labour market means balanced bargaining power between workers and corporations which involves union representation, adequate minimum wages and unemployment insurance, and appropriate employee rights and protections. Lastly, since the neoliberal model was adopted globally, there is a need to recalibrate the global economy. This is where the issue of “global rebalancing” enters and emerging market economies need to shift away from export-led growth strategies to domestic demand-led strategies.

The critical insight is that each perspective carries its own policy prescriptions. Consequently, the explanation which prevails will strongly impact the course of economic policy. That places economics at the centre of the political struggle as it influences which explanation prevails.

As of now, the economics profession is split between the hard-core and soft-core neoliberal positions. However, that can change under the pressure of an ugly reality that produces mass political demand for change. The Great Depression of the 1930s forced economics to change and provided an opening for Keynesian economics. The Great Recession and the prospect of stagnation may also force economics to change.

The only certainty is change will be politically contested as powerful elites and orthodox economists have an interest in preserving the dominance of the existing paradigm by ensuring that their explanation of the Great Recession prevails. That makes it essential for unions to engage with the theoretical debate regarding the causes of the crisis and how economies work. Their political muscle is needed and the outcome of that debate is critical to their own existence and success.

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Dr. Thomas Palley is Senior Economic Adviser to the AFL-CIO and an Associate of the Economic Growth Program of the New America Foundation in Washington. D.C. His most recent book (on which this column is based) is From Financial Crisis to Stagnation: The Destruction of Shared Prosperity and the Role of Economics which was published by Cambridge University Press in February 2012. His numerous op-eds are posted on his website.

Please note: A 20% discount on the book is available at:

http://www.cambridge.org/us/knowledge/isbn/item6821687/?site_locale=en_US

[Select country location (top right hand corner) & enter code "palley2012" at checkout].

The King and Us - Why Thailand’s lèse majesté law matters to unions and the world

noreply@blogger.com (Harald Kroeck) — Mon, 16 Apr 2012 12:30:00 +0000

Ian Graham

Somyot Prueksakasemsuk

“Union rights are human rights.” That has been said loud and often. But it bears repeating. Labour rights are specialised extensions of the principles set out in the Universal Declaration of Human Rights. “Everyone has the right to form and to join trade unions for the protection of his interests,” the declaration insists. Nobody reading this column is likely to disagree (except, perhaps, with the “his”). Philosophically, core human rights such as freedom of association have always underpinned core labour rights.

We seldom hear the equation put the other way round: “Human rights are union rights”. And yet it is just as true. A place that disregards any of the basic human rights is a place that trade unions will find irksome.

So what of the other rights in the Universal Declaration? This one, for instance: “Everyone has the right to freedom of opinion and expression; this right includes freedom to hold opinions without interference and to seek, receive and impart information and ideas through any media and regardless of frontiers” (Article 19). It is surely no less relevant to union organising. As the ILO’s Karen Curtis told the 4th Assembly for Human Rights in 2006, “the right to express opinions freely, to hold assemblies and public meetings, to exercise these rights in full freedom and security of person, are nothing less than the basic civil liberties, without which the exercise of trade union rights is rendered meaningless”.

And indeed, a current case in Thailand demonstrates the close links between labour rights, democracy and civil liberties. Supporters both inside the country and worldwide have been stepping up their action to free Somyot Pruksakasemsuk. The longtime campaigner for labour rights and democracy has been in jail since April 2011 on lèse majesté charges. He is being held purely on remand. To date, the charges against him have not been proven. In any case, he is not accused of writing the features concerned. He is charged only with the “publication and dissemination” of two articles in the journal Voice of Thaksin, of which he was the acting editor but not the legal publisher. The charge sheet alleges that he thereby “dared to defame, insult, or threaten His Majesty King Bhumipol Adulyadej of the Kingdom of Thailand”. The full texts of the two articles are included in the charge sheet, which is available both in the original Thai and in an unofficial English translation. Expert witnesses have testified that they do not refer to the King. Certainly, it would take quite some imagination to find any threats or insults to the monarchy in what was written.

So why has Somyot been in jail for almost a year? The plain truth is that he is rather well known to the Thai authorities. Now aged 50, he joined the Thai labour movement as a teenager. He and other students used the technique of taking jobs in the country’s burgeoning export industries. There, they could get to know the young workers who were moving in from the impoverished rural areas, listen to their concerns, talk to them about trade unionism, and gather information about pay, safety and discipline in the export plants. As part of the student movement, Somyot was also active in the 1976 democracy demonstrations in Thailand. And he set up a national campaign for maternity rights.

In the 1980s, his organising work took a significant new turn when he founded the Centre for Labor Information Service and Training (CLIST). This provided much-needed training and advice for local unions in the industrial zones of the Bangkok region. Its work benefited unions in sectors ranging from the auto industry to chemicals, garments, diamonds and energy. CLIST cooperated with both national and international labour confederations, building up a well-respected network of activists and campaigns. Somyot also put his organising experience at the service of unions in other newly industrialising countries.

In 2005, he fulfilled a lifelong ambition when he launched a left-wing publishing company. Among other things, it produced paperbacks about the Thai labour movement. As part of the company’s dissemination work, he also organised a series of public debates and seminars, as well as making use of online forums and blogs to engage people on issues of Thai politics, labour and social justice. On the political side, he has been active in the Thai Democratic Party.

Not surprisingly, his arrest sparked protests both in Thailand and abroad. Trade unions in a number of countries have held demonstrations and organised petitions. In November 2011, organisations including the Clean Clothes Campaign and the Southeast Asian Press Alliance wrote a joint letter to Thai Prime Minister Yingluck Shinnawatra, calling for the charges against Somyot to be dropped or bail to be granted. They also asked for the Thai lèse majesté law to be reviewed, so as to “ensure its conformity with Thailand’s international human rights obligations”.

The trial has put Somyot under great physical and psychological pressure. According to the Thailand Mirror, “he has suffered in prison, detained with other inmates in a narrow cell crowded with prisoners. The most comfortable position for him to sleep is to lay down on his side, but the reality is that the inmates are overlapping when they sleep.” Worse still, the court has insisted on moving him around from province to province for prosecution witness hearings, even though all the witnesses are in fact based in Bangkok. In all, he has been transported for more than 4,000 kilometres in cages, standing upright in the back of a truck. He is obliged to wear metal chains weighing more than 10kg. This despite his health problems, which include hypertension and gout.

So his release on bail has become a priority for his supporters, who have put up considerable sums as surety. But bail has so far been refused on eight separate occasions – one of them in February 2012, just after Somyot’s son Tai went on hunger strike for 112 hours to demand his father’s release. The length of the fast was a reference to Article 112 of Thailand’s Criminal Code, which prescribes severe punishment for acts of lèse majesté. If convicted, Somyot could face up to 15 years’ imprisonment for each of the two articles published.

“We are deeply concerned about the wellbeing of our colleague,” stated Jim Boumelha, President of the International Federation of Journalists (IFJ). “There is simply no reasonable basis to deny him bail so that he can seek treatment.” The conditions in which Somyot is being detained have, the IFJ says, added to the outrage at the continuing use of the lèse majesté law, which “lacks clarity and can be abused to suppress legitimate dissent in Thailand”. The journalists’ international federation backs the UN Special Rapporteur on freedom of expression, Frank La Rue, who in October 2011 called for a reform of this law. He noted that “the threat of a long prison sentence and vagueness of what kinds of expression constitute defamation, insult, or threat to the monarchy, encourage self-censorship and stifle important debates on matters of public interest, thus putting in jeopardy the right to freedom of opinion and expression”.

Indeed, both Thai and foreign journalists have fallen foul of this law. Last December, US blogger Joe Gordon was jailed for two and a half years on charges of using the Internet to disseminate information that insulted the Thai monarchy. In 2009, leading Bangkok-based foreign correspondents were among those investigated by the police after a lèse majesté complaint was lodged against the entire Board of the Foreign Correspondents Club of Thailand.

“We believe the case for the reform of this law is now unanswerable for the survival of press freedom and democratic pluralism in Thailand,” says Boumelha. “Somyot's detention has laid bare the blatant abuse of the legislation for political purposes and its repeal is overdue.”

Meanwhile, the campaign to free Somyot continues.

For over 30 years, Somyot Pruksakasemsuk has been a prominent campaigner for trade union rights and democracy in Thailand. Arrested on 30 April 2011, he has been held in prison ever since on lèse majesté charges that have not been proven and which he denies. On 5 April 2012, he stated that he will refuse to plead guilty in return for a royal pardon. The Free Somyot campaign is online at http://freesomyot.wordpress.com/ There is also a special Facebook page at http://www.facebook.com/pages/Free-Somyot/122999694453000?ref=ts

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Ian Graham is a writer, editor and translator specialising in labour, social and environmental issues. He was formerly in charge of press and publications work for the union internationals ICEM and ICFTU.

Lack of Rain in the Rainforest

noreply@blogger.com (Harald Kroeck) — Wed, 04 Apr 2012 12:30:00 +0000

Nora Rathzel

From work or nature to work and nature: another kind of unionism

On a one-week tour organised by João Paulo Cândia Veiga from the University of São Paulo and Manoel Edivaldo Santos Matos from the Union of Rural workers (Sindicato dos Trabalhadores y Trabalhadoras Rurais de Santarém, STTR) in Pará, a region of the Brazilian Amazonas, we visited eight communities along the Rivers Arapiuns, Maró and Amazonas. These are small communities of between 90 and 300 people. They are of mixed indigenous and Portuguese origin, some groups defining themselves as indigenous.

Traditionally, they lived from fishing, hunting, gathering fruit and planting manioc. But with the arrival of timber companies their lives have become unstable. In the eighties, but on a much larger scale in the nineties, timber companies entered more remote areas of the rainforests. Game, fruits and fibres on which people had lived began to decrease radically. In the middle of the nineties, supported and organised by the STTR, the communities living in the areas began a struggle for the ownership of the land they worked and lived on. They won this struggle but their battles have not ended. The timber companies remain, employing carrot and stick strategies to get at the wood: threatening activists on the one hand and promising to provide electricity and jobs on the other. The companies do not keep their promises, jobs are heavy and wages are low. But when survival is difficult, some people see no other choice than to work for them. Others are too concerned with the future of the forests to accept such an option, which creates tensions within communities.

Industrial unions often have a hard time finding solutions for the apparent contradiction between protecting jobs and protecting the environment. The most promising perspectives are developed by unionists who see labour and nature as inseparable and conceptualise them as allies: without nature there is no labour and without labour, nature cannot help to fulfil human needs. Nature’s rights need to be protected as well as workers’ rights. In the global South, especially in Latin America, the debate about the relationship between labour and nature has intensified since Ecuador (2008) and Bolivia (2011) included the “Right of nature” into their constitutions (Global Alliance for the Rights of Nature).

Ernst Bloch suggested: “A Marxism of technology, once it is thought through, is not a philanthropy for abused metals, it is the end of a naive application of the point of view of the exploiter and circus trainer to nature” (Bloch 1959/1978, 813, translation by the author).[1] Our research on environmental policies of international unions and unions in Brazil, South Africa, Sweden and the UK found that some unionists in South African union NUMSA[2] and in some international confederations supported this view (Räthzel and Uzzell 2011a) and 2011 b).

For the STTR the protection of their livelihoods and the protection of nature are the same thing. These unionists risk their lives to protect the environment: “Fifty of our members are on death lists. The state should protect them, but instead, the hitmen go free while our members have to stay locked in their homes to avoid being killed”.[3]

Not only rising emissions, but also the destruction of the rain forests has an impact on climate change. The climate change is already felt by the communities and adds to the destabilisation of their lives: for example rising temperatures lead to declining fish populations and declining harvests. Rain has become scarce in the rainy season; instead, sudden heavy rains destroy small plants. Seasons are disappearing. We saw mango trees with small green fruits when they should have been ripe.

How does the trade union work?

The short journey changed my view about what unions can be. Hearing that trade unions are organising communities in the Amazonas, I imagined some avant-garde unionists from the cities venturing into rural communities to convince people that they should stand up against the timber companies. Instead, we experienced a dense network of union members in the communities, working closely together with the community associations. Unionists see to it that people get their pensions; mothers receive support and a share of the poverty alleviation programme. But they were also indispensable in supporting the communities politically in their fight for land rights and in creating structures of self-organisation such as community associations. Without union-organising, the communities would have been too scattered and disintegrated to win their rights. In helping to create the necessary community and producers’ associations, the union in this particular area can be seen to be a community organisation as well.

In the social sciences, unions have come to be perceived as inflexible, bureaucratic organisations – dinosaurs of an industrial age, not fit to face the challenges of a post-industrial “liquid modernity”. Hopes for change and research efforts have shifted to “new social movements”, more recently to “civil society” and its Non-Governmental Organisations (NGOs). In the Amazonian communities such perspectives were reversed. Here, the union is an important grassroots force, helping to develop alternative, resource-saving forms of production. The union also supported and co-created a local environmental organisation Saúde y Alegría to provide health, education, water, and energy on a long-term basis. All communities had stories of disappointment to tell about Western NGOs starting projects and then disappearing, leaving the communities without the promised water or energy supplies – and without any explanation. Solar panels were set up to provide energy for a school. But when the batteries needed to be replaced, the community could not afford them. The neoliberal ‘projectification’ of welfare systems in Europe is brought into an area where this approach is even more harmful. It is not established NGOs, but the union that is the flexible grassroots organisation working on a long-term basis. Their leaders are elected in the communities and thus accountable for what they do or don’t do. Thus, what trade unions and NGOs “are” has to be analysed in context.

Not a world outside our world

Most communities in the area we visited are dependent on manioc, not only as a staple, but as the main, often only, product they can sell in the city. The price producers get for the flour does not cover the amount of work they put into producing it and so they do not earn enough to buy the things they cannot produce – for example, sugar.

Some of our travel companions were disappointed with the expressed need for money, 24 hours electricity, running water, telephones and even television. They expected to find autonomous communities working cooperatively without private ownership. But even though some communities need 12 hours by boat to get into the next town, they are not out of touch with the world outside. They are no havens of goodness: there are conflicts over scarce resources, one community accusing another of overfishing, another not wanting to include artisans of a neighbouring community into their association. Some are divided over whether to work for timber companies or not, others over whether to define themselves as indigenous or not. Women’s groups falter for lack of resources, others flourish. These are ordinary people living ordinary conflicts under harsh conditions. But it is precisely because they are not heroic, but – like all of us - part of the world they live in, that their achievements are so admirable. Because increasing scarcity of natural resources due to logging and climate change produces conflict, the degree to which solidarity and communal practices prevail is impressive.

What do people need?

To overcome the growing scarcity of the natural resources due to logging and climate change and the dependency on manioc, new activities have been developed that provide a living, such as artisan work and fish farming. These efforts are important but a more fundamental transformation was said to be needed: the diversification of agriculture. This is difficult, because there is no agricultural tradition in the communities. They have lived on hunting, fishing, gathering fruit, not on agriculture. Knowledge, techniques and technologies are needed. This is an opportunity for unions and other organisations/individuals to support the work of the STTR, to provide long-term support for the creation of a diversified agriculture that respects the natural resources.

Together with their union the communities have achieved a lot. They have won the rights to their land, created and established themselves as communities with structures allowing them to run their own affairs. Now is the time for consolidation and for this they need education, transportation, communication, health care and new forms of production. Otherwise, their existence is at risk and without them there is hardly anything or anybody able and willing to resist the pressure of timber companies longing for unlimited access to the rainforests.

Is it not ironic that in Europe we press governments to preserve their rainforests, reminding them of their responsibility towards humanity, while those who have the will and need to halt deforestation remain largely invisible and without support? Here is a possibility to act in accordance to our concern for the rain forests and at the same time practice international union solidarity.

Contact Manoel Edivaldo Santos Matos at the STTR: edivaldo42@yahoo.com.br or phone him at: 51-93- 91473704 to discuss forms of cooperation.

For further information see: http://www.sttrsantarem.org.br/; www.faor.org.br; ww.fundodema.org.br;

www.rbja.org.br

1. “Marxismus der Technik, wenn er einmal durchdacht sein wird, ist keine Philanthropie für misshandelte Metalle, wohl aber das Ende der naiven Übertragung des Ausbeuter- und Tierbändigerstandpunktes auf die Natur.“ (813)

2. NUMSA = National Union of Metalworkers South Africa

3. Personal conversation. For background information see: http://www.guardian.co.uk/environment/2011/aug/31/rainforest-activists-protection-death-threats accessed March 6, 2012)

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Nora Räthzel works at the department of sociology, University of Umea, Sweden. Her research areas include trade union policies on climate change, the globalisation of transnational corporations, workers' lives and work in transnational corporations. She has previously done research on everyday racism, ethnic and gender relations.

References:

Bloch, E. (1978) Das Prinzip Hoffnung. Frankfurt am Main: Suhrkamp.

Global Alliance for the Rights of Nature: http://therightsofnature.org/ , accessed 25 March, 2012

Räthzel, N., Uzzell, D. (2011a) Natur oder Arbeit? Dilemmatta und Perspektiven Gewerkschaftlicher Umweltpolitik. In: Das Argument 294. Pp. 734-744

Räthzel, N., Uzzell, D. (2011b) Trade Unions and climate Change: The jobs versus environment dilemma. In: Global Environmental Change, 21 (4), 1215-1223.

Trade Unions, Class Struggle and Development

noreply@blogger.com (Harald Kroeck) — Mon, 26 Mar 2012 12:30:00 +0000

Ben Selwyn

How do class relations contribute to processes of capitalist development? Can workers’ struggles generate more progressive forms of human development, in the form of improved working and non-working conditions, rising pay and active social movements that bring workers’ concerns to the fore? Within much thinking about development the principal debate over the past 30 years or so has been between advocates of state-led and market-led development. For these advocates either state allocation and generation of resources or market-efficiency generates a growing pot of social wealth which trickles down, at some indeterminate point in the future, to the labouring population.

Advocates of these approaches often support labour-repressive measures (ranging from opposition to minimum wages and worker welfare to support for dictatorial regimes that outlaw trade unions, raise the rate of exploitation and repress labour) as a means to kickstart the ‘development’ process of capital accumulation. From these perspectives capital and the state come first and receive political priority, and labour comes a distinct second, if at all.

Within development studies, such perspectives have become so normalised that there is rarely any comment on how they rest on a fundamental contradiction: Whilst development practitioners aim to improve the lot of the poor, such labour-repressing measures actually worsen their conditions for a considerable period of time and offer no guarantee when (or if) they will improve. In part such perspectives are supported by the assumption that labour represents just another interest group in society that, if enabled to impose demands on either states or private capital, will divert resources from the more important objectives of capital accumulation and the accumulation of productive power by the state. But what if it is the other way round? What if actions by workers contribute directly and positively to the development process? If this is the case then development studies would have to rethink its state and capital-centrism, and begin to consider ways in which workers can shape progressively the development process.

Trade Unions in the São Fransciso Valley

My research into capital-labour relations in north east Brazil suggests that organised labour in poor regions of the world constitutes a significant force in generating progressive developmental processes and outcomes. The São Fransciso valley in the interior of the Brazilian north east is home to a fast-expanding zone of export horticulture. Thousands of hectares of irrigated land enable the production of high quality grapes and mangoes for Northern markets. The valley is but one of many cases of export horticulture production that have emerged across the global South over the past three decades and that operate within tightly-coordinated retailer-dominated global value chains. There are numerous cases, for example in South Africa and Chile, where export horticulture is characterised by domineering farms and precarious conditions for labour – temporary contracts, low pay, limited union recognition or presence. Such conditions are mirrored elsewhere in the global economy, in China’s industrial zones in particular and in other regions of low-wage export manufacturing. These conditions are so widespread that it is common to hear the ‘race-to-the-bottom’ thesis (which argues that any regulation of capital by states or labour will push it elsewhere, thus forcing states into ‘light-touch’ or zero regulation of firms) repeated by friends and foes of labour alike.

In the São Fransciso valley, however, the local rural workers’ union, the Sindicato dos Trabalhadores Rurais (STR), has been able to mobilise the workforce in the export grape sector with impressive results.[2] As part of their competitive strategy Northern retailers have, since the 1990s, been ramping up supplier requirements as part of what is often referred to as the global retail revolution. Suppliers to Northern supermarkets need to produce grapes according to strict size, shape, colour, weight, sugar-level requirements, and must do so under increasingly regulated production process codes, for example covering the methods and timing of herbicide application. Meeting such standards requires farms to operate according to increasingly complicated production methods. For example, in the São Fransciso valley, export grape producers require over 30 operations per harvest cycle to meet retailer standards, while producers selling onto ‘traditional’ (street) markets within Brazil perform as few as 9 operations per harvest cycle. Operations include detailed pruning of bunches and berries, applications of herbicides at specified times, leaf and berry analysis, and the regulation of shoot and branch growth. Exporting farms need to perform these operations efficiently and on time otherwise they risk steep declines in fruit quality. For example, berries that are not pruned may begin to rub against each other, creating blemishes, becoming less attractive to customers and thus losing value. In order to carry out these operations exporting farms rely on an increasingly skilled and hard-working labour force. A large percentage of the valley’s workforce is female.

Initially, working conditions in the valley’s export grape sector were very poor, characterised by low, and often ad-hoc pay, lack of employment security, and even the use of child labour. However, in the mid-1990s, the STR began an ongoing campaign which has led to very significant improvements in workers’ pay and conditions. At the heart of STR’s strategy has been the threat, or actual use of strike action. As mentioned above, in order to meet retailer demands exporting farms must implement a strict and precise production calendar. Any delays reduce fruit quality. This implies a strong reliance on dedicated and skilled labour input. It also represents, for workers, a vital source of structural power, that is, the ability to disrupt production through suspensions of work. Short strikes by workers on exporting farms can have disastrous consequences for fruit quality and hence its sale price. This structural power, which has been augmented by rising retailer demands, has been realised through workers’ associational power – their ability to organise through the STR. Early gains made by the STR included commitments by farms to employ only registered workers, leading to pension and other social security contributions, such as the rights for women workers to take paid maternity leave, specified working hours, payment above the minimum wage, higher pay for overtime, the provision of protective clothing to workers, and the right for the STR to organise and visit workers on farms during the working day. Subsequent gains have included the provision of crèche care, safe transport to and from work, and the rights of workers to pursue an education outside work, implying the need for workers to be able to leave the farms on time.

Farms have not taken these victories by the STR lying down. On the one hand they have tried to reduce non-wage costs (such as their commitments to crèche care and maternity leave for women) by restructuring the rural labour force and reducing their reliance on women workers. On the other hand they have tried to reduce workers’ associational power (the influence of the STR) by providing benefits to workers directly, such as free or very cheap on-farm housing and some health care, as an attempt to substitute themselves for the STR as workers’ principal benefactor. Such counter moves by employers are to be expected and reflect an ongoing struggle by employers and workers to shift the balance of class forces in their favour respectively.

Trade Unions and the Struggle for Human Development

Are there any broader conclusions that can be drawn from this case study? Within development studies it is often considered that progressive ‘policy’ must come from above – either from states or from ‘socially responsible’ employers. Whilst such policies can, under certain circumstances, contribute to meaningful improvements in the livelihoods of workers in the global south, it is much rarer to hear development thinkers and practitioners proclaim the need for workers’ collective action as a means of achieving more equitable and meaningful human development. But in the case of workers in the São Fransciso valley, meaningful improvements in their livelihoods have been achieved through purposive collective action, spearheaded by a progressive rural trade union.

This example suggests that capital-labour relations and in particular the struggles by workers for better pay and conditions constitute a central driver of the development process. In countries such as South Africa and Chile employers across much of the export agriculture sector have been able to impose a domineering labour regime upon workers, with miserable consequences for the latters’ human development. In north east Brazil, workers have been able to transform their structural power into associational power and in doing so have achieved significant improvements in their livelihoods. These dynamics, where capital strives to minimise its costs through lowering labour costs, but where labour attempts to respond collectively, are being played out across the global south, from the Chinese industrial centres to the maquila zones of Mexico and beyond. The realisation of workers’ structural power through organised associational power is the struggle for human development.

1 Supporting evidence for the evidence and interpretations of this column can be found in Selwyn (2007, 2010 and 2012)

2 The STR’s (Portuguese language) website is http://strpetrolina.com.br/

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Ben Selwyn is a Senior Lecturer in International Relations and Development Studies at the University of Sussex in Brighton. He writes about labour and development, and is currently working on a book provisionally entitled ‘Capitalism vs Development: Critiques and Alternatives’.

References:

Selwyn, B. (2007) ‘Labour Process and Workers’ Bargaining Power in Export Grape Production, North East Brazil’ Journal of Agrarian Change, 7 (4)

Selwyn, B. (2010) ‘Gender, Wage Work and Development in North East Brazilian Export Horticulture’, Bulletin of Latin American Research, 29 (1)

Selwyn, B. (2012) Workers, State and Development in Brazil: Powers of Labour, Chains of Value. Manchester, Manchester University Press.

If readers cannot get access to the articles cited in this column, they can write to the author at b.selwyn@sussex.ac.uk

Renaissance of Pay Clauses in German Public Procurement and the Future of the ILO Convention 94 in Europe

noreply@blogger.com (Harald Kroeck) — Thu, 15 Mar 2012 12:30:00 +0000

Thorsten Schulten

Public procurement is of high economic importance. In many countries it covers up to one fifth of the annual national GDP. Public authorities have always used their market power as a contracting entity to promote certain social and labour standards. The ILO had even adopted a separate Convention on Labour Clauses in Public Contracts (Convention 94 from 1949). In order to promote fair competition and to avoid downward pressure on wage and working conditions in the tendering process, the ILO Convention 94 wants to ensure that workers hired in contracting companies do not receive less favourable conditions than those laid down in the appropriate collective agreements.
More recently, however, the European Court of Justice (ECJ) made a rather contested assessment which sets some serious limitations on the use of pay clauses in public procurement. According to the so-called Rueffert judgment (C-346/06) from April 2008, which dealt with the public procurement law of the German federal state of Lower-Saxony, public authorities are no longer allowed to oblige companies under public contract to pay their workers at least the rates set by collective agreements. The ECJ ruled that such a provision would be in breach of the freedom to provide cross-border services as laid down in the EU treaty. Following a rather narrow interpretation of the European Posted Workers Directive (96/71/EC) the court pointed out that public authorities can only impose labour provisions on foreign companies if they are based either on statutory regulation or on extended collective agreements. In the case of German public procurement laws, however, reference was made to collective agreements which were not generally applicable. Despite the ECJ ruling, in practice pay and other social clauses have nonetheless seen a broad renaissance in Germany in public procurement.

Pay and other social clauses in the public procurement law of German federal states

Since the late 1990s an increasing number of federal states in Germany had introduced so called Tariftreuegesetze (laws on 'loyalty to collectively agreed standards') according to which public contracts should be given only to those companies which apply to collective agreements. Against the background of a steadily declining collective bargaining coverage, the new regional public procurement laws were designed to stabilise the entire collective bargaining system and to avoid unfair competition on the basis of low wages. When it came to the ECJ’s judgment in the Rueffert case, however, all German federal states have in the first instance suspended their procurement laws. For a moment it appeared that with the ECJ’s ruling the whole concept of pay clauses in public contracts would disappear.

Only a few years later, however, Germany has overcome the ‘Rueffert shock’ while social considerations in public procurement have seen a strong revival. At the beginning of 2012, 10 out of 16 German federal states had concluded new regional procurement laws in the aftermath of the Rueffert case. Among them are the three city-states Berlin, Bremen and Hamburg as well as Brandenburg, Lower-Saxony, Mecklenburg-Vorpommern, North Rhine-Westphalia, Rhineland-Palatinate, Saarland and Thuringia. At least two more states (Baden-Wuerttemberg and Saxony-Anhalt) will follow this year so that large parts of Germany are covered by some legislation on socially responsible procurement.

In comparison to the older legislation, the new procurement laws of the Post-Rueffert-Era are in many respects more advanced, although they had to consider the limitation set by the Rueffert case. While the older laws were often limited to the construction industry and public transport, the new laws usually cover all public contracts above a certain de minimis threshold. Instead of making a general reference to the application of collective agreements, which is no longer allowed after the ECJ’s judgment, the new public procurement laws contain three forms of pay clauses:

First, in sectors where there are generally applicable collective agreements, companies are obliged to declare already in the tender for the public contract that they pay their workers at least the rate of these agreements. Although the extension of collective agreements is not very common in Germany, there are at least about ten branches (among them relatively important sectors such as construction, commercial cleaning, security services and care services) with collective agreements on sector-wide minimum wages which have been declared as generally binding on the basis of the German Posted Workers Law.

Secondly, in the public transport sector companies under public contracts have to accept the full provisions of the most representative collective agreements of the region, even if these agreements are not generally applicable. Such a special treatment of the public transport sector is licit, because it has a special legal status in EU law according to which the freedom to provide cross-border services underlies some restrictions in that sector. Consequently, the Rueffert case does not apply to public transport. Moreover, there is a special EU regulation on public transport (EC No 1370/2007) which explicitly allows the member states to make reference to collective agreements in the tenders “to ensure transparent and comparable terms of competition between operators and to avert the risk of social dumping”.

Thirdly, most German federal states have introduced a procurement related minimum wage. Since Germany still has no national statutory minimum wage the federal states have used the opportunity of public procurement law to make sure that all companies under public contract will have to pay their workers a certain minimum rate. Currently, the procurement related minimum wage differs from state to state between 7.50 and 8.50 Euro per hour. The highest minimum wage with an hourly rate of 8.62 Euro has been concluded in North Rhine-Westphalia which corresponds to the lowest pay grade in the collective agreement for the public sector.

Apart from pay clauses, many of the new regional public procurements laws define further social criteria which have to be taken into consideration when choosing a contracting company. Among them are the offer of training places, the employment of disabled workers or measures to promote female employees and equal opportunities at the workplace. Furthermore, most regional procurement laws make reference to the eight core ILO Conventions (covering freedom of association and right to bargain collectively; prohibition of forced labour and of child labour, and non-discrimination in employment and occupation), according to which public authorities should take care that the purchased goods have been produced in observance with the ILO core labour standards.

The future of the ILO Convention 94 in Europe

Despite the fact that Germany has seen a renaissance of pay clauses in public procurement, the Rueffert judgement of the ECJ still seriously limits the possibilities of promoting collective agreements as a procurement criteria. Obviously this has created strong tensions with the ILO Convention 94. Since Germany has never been among the various European countries which have ratified this convention, the ECJ has not explicitly discussed this issue in the Rueffert case. However, there is a strong need for political clarification in order to revise the ECJ’s position.

More recently, the European Parliament dealt with that issue in a statement on “modernisation of public procurement” from 25 October 2011. As the EU wants to adopt a new European public procurement directive, the European Parliament “calls for an explicit statement in the directives that they do not prevent any country from complying with ILO Convention 94.” Furthermore, it “calls on the Commission to encourage all Member States to comply with that Convention” and “stresses that the effective functioning of sustainable public procurement requires clear and unambiguous EU rules precisely defining the framework of Member States' legislation and implementation”. So far, however, the European Commission has ignored the demand of the European Parliament and presented its draft for a new European directive on public procurement from December 2012 without any reference to the ILO Convention 94. Therefore, it is really time for the European trade unions and other social movements to take up this issue.

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Thorsten Schulten is a senior researcher at the Wirtschafts- und Sozialwissenschaftliches Institut (WSI) within the Hans-Böckler-Stiftung in Düsseldorf, Germany.

The Microfinance Delusion

noreply@blogger.com (Harald Kroeck) — Mon, 05 Mar 2012 12:30:00 +0000

Milford Bateman

The optimistic beginning

Thirty years ago, it was widely thought that the perfect solution to unemployment and poverty in developing countries had been found in the shape of microfinance, the provision of tiny microloans used by the poor to establish an income-generating activity. Microfinance is most closely associated with the US trained Bangladeshi economist and 2006 Nobel Peace Prize recipient, Dr Muhammad Yunus. By celebrating self-help and individual entrepreneurship, and by implicitly discrediting all forms of collective effort, such as trade unions, social movements, cooperatives, public spending, a pro-poor ‘developmental state’ and – most of all – collective moves to ensure a more equitable redistribution of wealth and power, neoliberal policy-makers in the international development
community fell in love with microfinance. The World Bank, USAID and other agencies began to aggressively push forward the concept and, in order to reduce the need for subsidies, also insisted microfinance be turned into a for-profit business. Microfinance soon became the international development community’s highest profile, most generously funded and supposedly most effective economic and social development policy.

Reality finally breaks through

Unfortunately, it is now clear that Yunus was wrong. The past 30 years has actually shown microfinance to be part of the problem holding back sustainable poverty reduction in developing countries, and not the solution.[1] Not only is there no solid evidence that microfinance has had a positive impact on the well-being of the poor,[2] since 1990 the microfinance sector has been increasingly marked out by spectacular levels of Wall Street-style greed, profiteering, client abuse, and market chaos.[3] It turns out that microfinance has largely been driven forward by nothing more than hype, PR, celebrity support, and a constant stream of faith-healing-like pronouncements from Yunus and his acolytes.

The problems with microfinance are deep and multi-faceted. First, right from the start it was assumed that no matter how many informal microenterprises were helped into life thanks to microfinance, sufficient local demand would always automatically arise to absorb this additional local supply of simple items and services. Yunus was clear on this. However, this understanding is fundamentally wrong: a local demand constraint does exist. Even in the 1970s, local communities in most developing countries were a hive of informal activity with most simple items and services pretty adequately provided by a community’s poor inhabitants. An artificially-induced increase in supply was thus always likely to generate very little benefit in terms of additional jobs and incomes. Instead, cramming more and more informal microenterprises into the same local economic space typically leads to ‘displacement’, where new microenterprises only survive by tapping into the local demand that up to then was supporting incumbent microenterprises. Thanks to many new microenterprises, most of the hapless (and equally poor) individuals already struggling to survive in the microenterprise sector are faced with reduced turnover, leading to lower margins, wages and profits. Any employees might have to be dismissed. The additional supply also tends to depress the prices of the local goods and services in question, thus negatively affecting all (new and incumbent) microenterprises. In short, all too often microfinance results in promoting nothing more than an unproductive process of local ‘job churn’, with no real net employment, income or productivity improvements registered. Another way to look at it is that the existing community of poor micro-entrepreneurs are effectively being made to pay the price, in the form of lower incomes, for the few net jobs being created in the local community thanks to microfinance.[4] This is hardly fair and equitable.

Compounding the problem of displacement is the related problem of microenterprise failure. Even more than small or medium businesses, microenterprises are ‘poverty-push’ by nature, and so we tend to see a very high failure rate of such business units. This means into the longer term microfinance generates far less sustainable job creation than is typically thought. Failure also means the poor often experience the dangerous loss of important assets. Households first draw down family savings and divert remittance income to try to repay their microloan. If this is not enough, there is then the need to sell off important assets (often at fire-sale prices), such as equipment, machinery, motor vehicles, housing and land. On losing these assets, poor households all too often plunge into deeper, and often irretrievable, poverty. While the narrative of those supporting the microfinance movement (notably the World Bank’s neoliberal-inspired ‘Doing Business’ program) focuses upon maximising the ‘freedom’ and ‘opportunity’ to do business, this deliberately overlooks the negative outcomes associated with failure that are actually the main experience for the majority of the entrepreneurial poor.

In addition, the vast bulk of microfinance is not used to fuel microenterprise development, but actually goes to support simple consumption spending. Thanks to easy availability but with interest rates typically very high – one Mexican microfinance bank, Compartamos, charges its poor clients an annual interest rate of 195% - we increasingly find that the poor all too easily end up spending a large part of their incomes on interest repayments. This psychology also helps to account for the dramatic emergence of Ponzi-style dynamics in a growing number of developing countries, characterised by the poor gradually becoming trapped into accessing more new microloans simply to repay existing microloans. The most dramatic example of this destructive trend was in Andhra Pradesh state in India, a development that in 2010 eventually precipitated the collapse of almost its entire microfinance sector.

The most important drawback to the microfinance model, however, is simple: the programmed output of microfinance – informal microenterprises – is completely the wrong foundation upon which a country can attempt to escape poverty and deprivation. A country needs a flourishing enterprise sector based upon a critical mass of enterprises possessing the capacity to achieve minimum efficient scale, deploy some state-of-the-art technologies, develop some innovative capacity, productively link with other enterprises vertically (sub-contracting) and horizontally (clustering), and with some potential to exploit non-local markets. With such prerequisites in place, long-term productivity growth is possible, and so also sustainable poverty reduction. As Chang shows,[5] this is the experience of today’s rich developed economies, as well as that of the more recent East Asian ‘miracle’ economies. However, thanks to their growing exposure to microfinance, today’s developing countries have been heading in the opposite direction.

The experience of Africa and Latin America illustrates the immense scale of the problem. Africa already has more micro-entrepreneurs per capita than anywhere else, and the rapidly expanding supply of microfinance is increasing this number. Yet Africa remains trapped in its poverty precisely because it has only evolved such a shallow enterprise structure, one that is structurally incapable of giving rise to sustainable productivity growth. The Inter-American Development Bank (IDB) also points to the same adverse dynamic to explain why Latin America’s recent history is one of very high levels of poverty and unemployment.[6] Latin America has for too long channelled too much of its scarce financial resources into low-productivity informal microenterprises and self-employment, and too little into more productive formal small and medium enterprises. The IDB has blown out of the water the belief that Latin America has benefitted from the programmed expansion of microfinance.

But policy-makers still don’t get it

Bad policy choices are still being made with regard to microfinance. As even a cursory glance at CNN or Al Jazeera will have shown, the brave young people behind the Arab Spring uprisings in North Africa are not just calling for the overthrow of dictators, but also for ‘real jobs’ – that is, jobs that are meaningful, dignified, secure and make use of their high level professional skills (often expensively acquired abroad). As one demonstrator said, the young in North Africa now demand a decent working life, and ‘not just selling falafel on the street-corner’. However, the World Bank, USAID, EBRD and other agencies are currently planning to assist these young people mainly with microfinance programs, the aim of which is essentially to support exactly the type of jobs that have just been so ferociously rejected. Microfinance might actually inflame the situation in North Africa.

Similar wrong-headed thinking is found in the European Commission (EC). Through a new €100 microfinance fund, the EC hopes to promote a new raft of microenterprises in the worst recession-hit locations, and so create new jobs. With virtually all EU countries now seeing their existing microenterprise sector dramatically contracting thanks to a decline in local demand, however the vast majority of new micro-entrepreneurs are going to find it almost impossible to identify new sources of local demand with which to begin and to grow. In Greece, for instance, the dramatic fall-off in local demand has meant more than half of its existing microenterprises and small businesses - cafes, small retailers, souvenir sellers, bars, fast food joints, etc - are today unable to meet their payroll, laying off employees or closing down. The same downward spiral holds for most EU countries. It is a cruel fantasy to expect new microenterprises to be able to take root in the same communities.

Microfinance was for so long seen as an effective market-driven intervention that was massively reducing poverty and promoting sustainable ‘bottom-up’ development. Even long-standing supporters now accept this claim to have been false.[7] Even at this late stage, we urgently need to understand the drawbacks to microfinance and begin to redirect our scarce resources into much better uses, notably credit unions, financial cooperatives, community development banks, and so on. Only in this way will local communities be spared even more financial sector-driven damage than that inflicted on them already, thanks to our long-standing but fundamentally mistaken belief in the power of microfinance.

[1] See Milford Bateman (2010) Why Doesn’t Microfinance Work? The Destructive Rise of Local Neoliberalism. London: Zed Books.
[2] See Maren Duvendack, R Palmer-Jones JG Copestake, L Hooper, Y Loke and N Rao (2011) What is the evidence of the impact of microfinance on the well-being of poor people? London: EPPI-Centre, Social Science Research Unit, Institute of Education, University of London.
[3] See Hugh Sinclair (2012) Confessions of a Microfinance Heretic: How Microlending Lost Its Way and Betrayed the Poor. San Francisco: Berrett-Koehler
[4] In 2009 the ILO argued against further stimulation of the informal microenterprise sector, since ‘As was the case in previous crises, this could generate substantial downward pressure on informal-economy wages, which before the current crisis were already declining’ – see page 8 (ILO). 2009. The Financial and Economic Crisis: A Decent Work Response, Geneva: ILO.
[5] Ha-Joon Chang. (2002). Kicking Away the Ladder – Development Strategy in Historical Perspective, Anthem Press: London.
[6] IDB (2010). The Age of Productivity: Transforming Economies from the Bottom Up, Washington DC: IDB.
[7] See Malcolm Harper, M. 2011. ‘The Commercialisation of Microfinance: Resolution or Extension of Poverty?’ in: Milford Bateman (2011) (Ed). Confronting Microfinance: Undermining Sustainable Development. Sterling, VA: Kumarian Press.

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Milford Bateman is a freelance consultant on local economic development and, since 2006, a Visiting Professor of Economics at the University of Juraj Dobrila Pula in Croatia.

International Framework Agreements: Possibilities for a new Instrument

noreply@blogger.com (Harald Kroeck) — Mon, 27 Feb 2012 12:30:00 +0000

Siglinde Hessler

A new instrument of international labour regulation

International Framework Agreements (IFA) are important in international labour regulation. As the globalization of production and markets is increasing, an international regulation of labour is strongly needed. Existing instruments such as the OECD Guidelines for Multinational Enterprises, the ILO Tripartite Declaration of Principles Concerning Multinational Enterprises and Social Policy and the great number of ILO conventions among others have set important marks in the debate, but still lack recognizable success as they lack the power of sanctions. Furthermore, the growing number of voluntary and unilateral declarations on social standards, which are part of the Corporate Social Responsibility strategy of companies, have not attained concrete results as they lack binding force.

IFAs are a relatively new in international labour regulation, operating at company level. They are agreed to between companies and workers’ representatives, such as Global Union Federations and/or works councils, and they define fundamental labour standards – primarily, the ILO core conventions – for a company’s plants worldwide. Furthermore, they recommend the standards to the suppliers of the enterprises which have concluded the IFA. In contrast to other instruments of international labour regulation, IFAs have a strong binding character: As they refer to international norms such as the ILO core conventions and as they are agreed by company and workers’ representatives, they involve workers’ representation in the implementation and monitoring of the IFA. Furthermore, since IFAs are to some extent a reaction by companies to public pressure to respect labour rights, companies try to avoid the negative publicity arising from cases where labour rights are disrespected.

Since Danone concluded the first IFA in 1988, the number of IFAs has increased continuously. Today, there are about 91 IFAs worldwide, which, of course, is still a low number in contrast to 82.000 international corporations worldwide.[1] But as most of the existing IFAs are concluded by huge international corporations, they do have a ‘model’ character for other companies. For example, the 2002 Volkswagen IFA was followed by the conclusion of various other IFAs in the automotive and metal industry. Most IFAs are concluded in European companies: only recently have some Asian, African and North and South American companies agreed on an IFA. The Global Union for Skills and Services (UNI Global) has played a notable role with their efforts to conclude IFAs in corporations domiciled in Canada, USA, Brazil, Indonesia, Malaysia, Japan and South Africa.

There are two main reasons IFAs are concentrated in Europe. First, the European system of labour relations has a tradition of social dialogue and, therefore, in many cases there is a strong tradition of compromise between employer and unions and/or works councils. IFAs are fostered by this tradition, as the main actors concluding them are managements, unions and/or works councils which, in general, have direct communication and a strong commitment to cooperative labour regulation. Second, the expectations of customers, media and business and political organizations pressure enterprises to conclude IFAs. Respect for fundamental labour rights has become a significant marker of good corporate management, and an important element in the competition for customers.

But, if the circumstances in the home countries of the corporations are important for the conclusion of IFAs, and if there is nonetheless, no legal binding force to put them into practice, what does this mean for the implementation and adaptation of IFAs worldwide? How are the IFAs adapted in countries outside Europe which rely on very different labour relations systems, and where workers representation is often weak, with public pressure for the respect of fundamental labour rights limited or absent?

IFAs in Mexico

Some lessons can be learned from the implementation of IFAs in German automotive enterprises in Mexico. Several German automotive enterprises have plants in Mexico, most of which are suppliers to international automotive companies; only a few are car makers. Working conditions in the Mexican automotive sector are comparatively good, but most workers in automotive companies in Mexico are confronted with problems such as the increasing use of temporary work and a disrespect of workers’ rights, especially their collective rights.

So-called “protection contracts” (contratos de protección), which violate ILO core conventions 87 and 98, are often agreed to by a company and a union, without the knowledge of the workforce. Rather than aid workers, they establish poor working conditions. Over the past decades, the number of protection contracts has increased significantly. Experts estimate that almost 90 % of management-union contracts are protection contracts.[2] Workers in many cases do not even know about the existence of the union in the plant. Particularly in the companies operating in the maquiladoras export industry, abuse of worker’s rights is a daily occurrence. However, such violations also exist in production sites of German automotive enterprises, where protection contracts exist.

Besides these “protection” unions, there are also the official so-called “unions, which stabilized the government of the Partido Revolucionario Institucional (PRI) for more than 70 years. These too show little interest in international fundamental labour standards. Generally, the official unions are company-friendly, focusing on issues such as qualifications and work schedules. Meanwhile, the economic liberalization process has also decreased the influence of the official unions in the political system and in the tripartite structures for labour jurisdiction. At the same time, state and company power has increased.

So, how can IFAs help improve working conditions and labour rights in Mexico? As demonstrated, workers’ representatives should be partners in implementing IFAs. But protection and official unions in Mexico are weak, and therefore do not have the power, or the willingness, to implement fundamental labour rights. Furthermore, there is no public pressure to respect labour standards, since the media, political or other organizations do not show much interest in fundamental labour rights.

Despite unfavorable preconditions for the implementation of IFAs in Mexico, there are some prospects for success. Even if IFAs did not bring substantial changes, and have not yet been able yet to abolish the “protection” contracts, small steps towards their implementation can be noticed. In the case of a certain German automobile company, the local Mexican union used the IFA to improve the working conditions of cafeteria and other service staff. In another case, the “protection” contract in a Mexican plant was discussed, and an attempt was made to replace the “protection” union with an authentic, independent union.

In many cases IFAs, and fundamental labour standards, are published visibly in the plants, and even in the collective agreements. Furthermore, and this may be the most important impact, in many cases the IFAs have intensified communication between European and Mexican unions, helping build stronger international networks and placing the issue of fundamental labour rights on the Mexican as well as the international agenda. One example: an international campaign was mounted by the International Metal Workers Federation (IMF), with a complaint against Mexico taken to the ILO, over of the practice of the “protection” contracts.

Conclusions

It has been shown that there are opportunities to use IFAs to improve working conditions, and to internationalize labour standards. If IFAs are published and adequately promoted, they raise the expectations of actors, and can be used as leverage for other kinds of negotiations. Pressure and interference by international actors is an opportunity to strengthen actors in emerging markets, who can use IFAs (and other instruments of international labour regulation) for their immediate interests, and to build stronger networks. If we recognize small results like the strengthening of international networks as well as fundamental changes, then we can evaluate the outcome of IFAs positively.

But at the same time, it has been shown that more must be done than just agreeing to an IFA. Since IFAs are situated between formal, enforceable rights and contracts on the one hand, and voluntary declarations, on the other hand, they can be seen as embedded, and entangled, in the broader ‘emerging transnational texture of labour regulation’.[3] For successful IFA implementation, it is essential to systematically promote and discuss IFAs on an international level. This implies that, first, communication between the production sites, the central management, and the representatives of unions and/or works councils across the company, worldwide, has to be intensified; second, actors outside Europe have to be integrated into the IFA-bargaining process, so that their needs, interests and concerns can be considered; and third, that in international discourse, the role of IFAs and of fundamental labour standards generally needs to be revaluated. It has to be argued clearly that respect for fundamental labour standards is necessary not only to the workers, but also to global society, which should not be willing to tolerate violations of these rights.

[1] UNCTAD (2010) World Investment Report 2010: Investing in a Low-Carbon Economy, New York, Geneva

[2] Rafael Tena Suck (2006) Contratos de protección: a quiénes protegen?, in: Inés Gonzáles Nicolás (ed.) Auge y perspectivas de los contratos de protección. Corrupción sindical o mal necesario? Mexico City, p 113-118

[3] Ludger Pries (2008) Die Transnationalisierung der sozialen Welt. Sozialräume jenseits von Nationalgesellschaften, Frankfurt a. M.

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Siglinde Hessler is a former fellow of the Hans Böckler Foundation and wrote her PhD thesis on the implementation of IFAs in the automotive industry in Mexico, where she has worked on several research projects on labour relations. She is currently researching the social history of Opel Bochum with the Ruhr University Bochum and the Industrial Metal Union (IG Metall).

The Crisis: the Response of the European Trade Unions

noreply@blogger.com (Harald Kroeck) — Mon, 20 Feb 2012 12:30:00 +0000

Bernadette Ségol

The unanimous political response to the crisis across Europe today is that of austerity and budgetary discipline. Cutting pay and social welfare, attacking bargaining mechanisms and making employment contracts ultra-flexible: that is the current paradigm, the Berlin/Brussels consensus, offered as the only way forward.

This solution is not working and will not work. It stifles growth and blocks the way to job creation. We can no longer ignore its disastrous social consequences and the rise of nationalism in many European countries bringing into question our essential values based on solidarity.

We need to change the narrative.

Official voices are increasingly being raised against austerity, but mainly from outside Europe. The Organisation for Economic Co-operation and Development (OECD) and the International Labour Organisation (ILO) say that austerity without growth is a dangerous dead-end. International Monetary Fund (IMF) managing director Christine Lagarde has expressed concerns on behalf of the IMF. Even credit rating agencies – self-serving oligopolies that they are - have joined in the chorus.

But the message isn’t getting through to the finance ministers. While lip service is being paid in the European Council to the need to foster growth and employment, concrete proposals commensurate with the disaster we are facing are missing, in stark contrast to the sharp minutiae of the fiscal plans before us. The ETUC is for sound budgets. But the fiscal compact calls for a balancing social contract.

More austerity as the only response to austerity

Europe has entered a recession. The latest Eurostat figures on employment in the eurozone show that unemployment is hitting a new record. The average unemployment rate is 10.4% in the eurozone, meaning that 16.469 million people are out of work. This is the highest unemployment rate since June 1998. Youth unemployment is endemic; it affects nearly half of young Spanish people. Poverty is increasing and 8% of Europe's active population now faces extreme poverty.

In this dire situation, the response offered by European leaders is to tighten the screws. On 30 January 2012, a summit finalised a new international treaty setting in stone budgetary discipline, backed by sanctions. The ETUC is opposed to this treaty, which does not respond to mounting problems with employment and job insecurity. The treaty only addresses these challenges in accounting terms, without any political vision. We know, of course, that we need to return to a sustainable budgetary balance. But we would be fooling ourselves if we thought that budgets will be balanced and that confidence will return.

Moreover, the process followed was not democratic. The European Parliament was unable to play an active role. Europe's trade unions are advocating a social and democratic Europe, not the budgetary, financial and technocratic Europe that has been presented.

The recession will make an already poor social situation even worse. Inequality is growing. Social movements are emerging to protest against injustice and insecurity. Social justice must be the top priority on all political agendas at both national and European level. If European leaders drop this priority to focus on austerity measures alone, particularly in countries that are already in difficulty, we should not be surprised if poverty levels increase and if inequality leads to social and political instability.

A model of European economic governance in the neo-liberal mould

The existing framework for European economic governance consists of the European semester, the Euro Plus Pact and the 'six pack'. Thanks in large part to the efforts of European trade unions and their members, the 'six pack' that came into force last year includes a clause stipulating that national systems of collective bargaining must be fully respected. A similar notion appears in passing in the international treaty, but whether it is just is open to doubt.

The reality is that the 'Troika' - composed of the EU, the European Central Bank (ECB) and the IMF - has also imposed its rules of economic governance on Greece, Ireland and Portugal as a condition for rescuing them. This type of economic governance relies centrally on attacks on labour relations and wages set by collective agreements, devaluing pension provisions, introducing greater flexibility into the labour market, weakening social protection and the right to strike, and privatising public services. We have also seen the ECB intervening in Italian government in an unacceptable way, insisting on the privatisation and liberalisation of public services, a change in the system for setting pay, the decentralisation of collective bargaining, changes in rules on recruitment and dismissal, and an increase in the retirement age.

These diktats are usually set down in secret letters drafted in mysterious backrooms. Democracy, again, is the loser.

The crisis is also used as a pretext to tell us that a drop in pay would free up competitiveness and boost the economy, leading to a win-win situation. However, the ETUC believes that wages are a driver of economic growth rather than a barrier to it. If the rules of economic governance focus on wages and working conditions as factors for competitive adjustment, countries will compete in terms of wages, working conditions and, more broadly, social spending. And workers again shoulder the burden.

The European social model is under attack

The European social model safeguards social cohesion. It was developed as part of a social understanding that emerged in western European nations out of the ashes of World War II and covers public services, social protection and collective bargaining. But now neo-liberal forces are using the crisis to bring the social model into question. For them, not only do social protection and decent wages hinder economic recovery, but the very foundations of a model of cohesion and solidarity are anathema. Some, particularly in central and eastern Europe, espouse harsh social Darwinism, conveniently forgetting that the Scandinavian countries that have invested in a strong welfare state are also among the most competitive.

Undermining social cohesion means weakening political stability too. Social exclusion and uncertain futures pave the way for populists who advocate national self-sufficiency as a cure for all ills. The rise of the extreme right in Europe should give us cause for concern. European leaders and all defenders of deregulation must take this rampant phenomenon into account because some measures, such as austerity, feed it.

There are alternatives

The European Union needs an economic union with a strong social dimension. What we need is a real recovery plan for employment and lasting growth. We want Europe to sign a social contract, not just a fiscal pact.

Europe needs investments for a sustainable, green economy. This should include investments in the transport and energy sectors.
Europe needs an industrial policy that invests in leading-edge sectors and the sectors of the future.
The ECB must have a clearer mandate. It should aim to promote price stability, full employment and the convergence of the Member State's financial conditions. The ECB should be required to act as a 'lender and buyer of last resort' for sovereign debt, instead of merely having the opportunity to do so.
Debt should be partially pooled through euro-bonds.
There should be a wage safeguard clause, imposing full respect for the autonomy of social partners to bargain collectively and preventing the fiscal pact from interfering with wages, collective bargaining systems, collective action and unionisation.
We need provisions to safeguard growth: the exclusion of public investments that support potential growth from the ‘balanced budget rule’; protection of the public revenue sector through a financial transactions tax, by committing to tackle tax evasion, fraud and competition; and a structural role for European social dialogue to avoid a blind implementation of rigid economic rules that could harm the economy.
A Social Progress Protocol must be attached to the European treaties to guarantee the respect of fundamental social rights.

The ETUC is advocating a 'social contract' for Europe. Such a contract would prioritise investments in support of a sustainable economy, quality jobs and social justice, whilst combating inequality.

Faced with the steamroller of economic governance in place, the European trade union movement is taking action to oppose harmful policies and work together to find the best solutions together.

The ETUC is calling for a European day of action on 29 February to say 'enough is enough'. All over Europe, unions will ask for employment and social justice to be prioritised.

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Bernadette Ségol is the Secretary General of the European Trade Union Confederation. Previously she was the head of UNI Europa, the European trade union federation for services and communication which represents 7 million workers and 330 affiliated trade unions. One of her main focuses is wage equality in Europe.

A Tide of Inequality: What can Taxes and Transfers achieve?

noreply@blogger.com (Harald Kroeck) — Mon, 13 Feb 2012 16:46:00 +0000

Malte Luebker [1]

Inequality is a top issue in the public agenda, partly as a result of the financial crisis that helped draw attention to this topic. As banks relied on the support of taxpayers and millions of workers had lost their jobs, people began to see the compensation of bank CEOs – with an average 2010 pay package of $9.7 million in Europe and the US[2] – as obscene.

Those at the top of society have long captured the gains from economic growth. From 1970 to 2008, the annual incomes of the top 1% of US taxpayers rose threefold in real terms from $380,000 to $1,140,000. By contrast, the incomes of the bottom 90% remained where they were in 1970 – at $31,500 per year (in real 2008 dollars).[3]

Wages and labour markets

The top of the distribution is only part of a broader trend towards greater inequality. In the advanced countries, average wages grew by merely 5.2% in real terms over the 2000s and fell short of productivity gains. The subsequent redistribution from labour to capital income can be witnessed in dramatic declines in the labour share in countries such as Germany, where it fell by 3.9 percentage points per decade since 1991.[4] Since capital incomes are more concentrated than labour incomes, these shifts in the functional distribution of incomes have negative repercussions for income inequality between individuals.

The Luxembourg Income Study (LIS) confirms that rising inequality of market incomes has been the dominant trend in industrialised nations. Among the 19 economies where data are available for at least two points in time, 15 show increasing inequality. The long-run increase in market inequality is substantial in the United Kingdom, Finland, Germany, the US, Australia and Israel.[5] Small declines in Switzerland and Romania (which has only a short time-series) and a larger fall in the Netherlands make for rare exceptions. The average increase in the Gini coefficient for private sector incomes was 0.28 points per year, or 2.8 points per decade.

Combating inequality: some policy tools

Governments can reign in inequality through minimum wage legislation and collective bargaining rights to compress the primary distribution of incomes. They can also focus on the secondary distribution of disposable incomes and use their tax and transfer systems to offset some of the inequality.

The redistributive role of governments is often overlooked in debates on the causes of rising inequality. Much has been written about increasing wage differentials between low-skilled and high-skilled workers, which are routinely attributed to technological change or trade with emerging giants such as China and India. Inequality in the North is portrayed as an inevitable by-product of global economic integration and technological progress. This single-sided view leads to the false notion that governments can’t do much about rising inequality.

Taxes and transfers: Which impact do they have?

Yet, different governments have addressed the outcomes of the same market forces differently. Before taxes and transfers, Germany, France and Belgium all have higher market inequality than the US. In egalitarian Finland and the Netherlands the initial Gini is only marginally lower than in the US (see Figure 1). As a group, the Gini coefficient of 0.46 in European countries matches almost exactly the average Gini of 0.466 of liberal market economies Australia, Canada, Israel and the US. The key difference lies in the tax and transfer system: it reduces the Gini coefficient for disposable incomes to 0.278 in Europe, whereas it is left at 0.343 in the latter group (see Figure 2).

Redistribution is more limited in the emerging economies. The three Latin American countries in the sample (Brazil, Colombia and Guatemala) all share high Gini coefficients for private sector incomes of 0.50 and above. Moreover, the region’s tax and transfer systems only slightly reduce the Gini coefficient (on average by 0.02). A recent World Bank study concludes that “a good deal of Latin America’s excess inequality over international levels reflects the failure of the region’s fiscal systems to perform their redistributive functions”.[6] By contrast, economies in East Asia, where the initial distribution of capital was more equitable, have managed to achieve a low level of private sector inequality and arrive at relatively egalitarian outcomes without the need for redistribution (see Figure 2).

Different policy choices also explain why the impact of long-run increases in inequality is more acutely felt in some countries than in others: Germany faced a sharper increase in market inequality (+0.402 points p.a.) than the US (+0.330), yet inequality of disposable incomes rose only moderately in Germany (+0.038 points p.a.) compared to (+0.293 points p.a.) in the US. Sweden offset a modest long-run rise in market inequality almost completely. This shows that countries – even small open economies such as Sweden – still have substantial policy space in the era of globalization.

So, why don’t the poor simply tax the rich?

What drives the extent of redistribution? In the tradition of Joseph Schumpeter and Anthony Downs, the public choice literature has given some simple answers. It starts from the assumption that voters and politicians are rational, utility maximising actors, and then models redistributive outcomes. The argument runs that, the greater income gaps are, the greater the incentive for the poor majority to tax the rich. Politicians, always keen to win or regain office, will oblige and write ever-more generous welfare cheques. The problem with this theory is that legions of papers have failed to find any solid empirical evidence that links higher inequality to more redistribution.

What explains the failure of the poor to tax the rich in countries such as the US? While there is evidence that the government is responsive to preferences held by the electorate, public policy is more responsive to demands from affluent voters and bears little resemblance to the views held by the poorest voters. This matters, since the views of rich and less well-off voters differ sharply on issues such as minimum wage legislation, welfare spending or taxation. Other researchers have found the same attentiveness to the concerns of better-off constituents at the level of individual US senators.[7] The concern here is that inequality itself has corrosive impacts on democratic institutions.

Why public opinion matters

Shortcomings of representative democracy are only part of the answer. When considering unemployment and demography (i.e. the share of the population aged 65 years and above), there is no apparent difference in how the political systems of the US, France or Germany translate voters’ preferences into redistributive outcomes.[8] The key difference are the inputs: whereas a majority of voters in France, Germany and other European countries believe it is the responsibility of the government to reduce income differences, the same statement finds support among only a third of US voters.[9] This hostility towards redistribution is often linked to an unrealistic belief among the poor in upward social mobility. The irony is that social mobility in the US is no greater than in Britain – the classic example of a class-based society – and far lower than in Germany or the Nordic countries.[10]

If public opinion matters, it is worth winning the argument for a fairer distribution of incomes. The ILO has a special role to play as a global voice that defends the values of its Constitutions and challenges unfair outcomes.[11] Having lost much of its ‘hard power’ due to declining membership, the union movement can use the ‘soft power’ of arguments to win support for social justice beyond its traditional base. The moment for this is ripe, given that the financial crisis has compromised the old model. It is a good start that even a billionaire such as Warren Buffet deplores that he pays lower taxes than his secretary.

Figure 1. The impact of taxes and transfers on income inequality in 25 countries
(latest available year)

Note: The total height of the column corresponds to the Gini coefficient for market incomes (i.e. before taxes and transfers).

Source: Luxembourg Income Study (LIS), see http://www.lisdatacenter.org/; analysis of micro-data completed between February and May 2011.

Figure 2. The impact of taxes and transfers on income inequality, regional averages (ca. 2000s)

Note: The total height of the column corresponds to the Gini coefficient for market incomes (i.e. before taxes and transfers).

Source: Luxembourg Income Study (LIS), see http://www.lisdatacenter.org/; analysis of micro-data completed between February and May 2011.

[1] The author would like to thank Janine Berg, Frank Hoffer and Sangheon Lee for helpful comments. The views expressed in this column are those of the author and do not necessarily reflect the views of the International Labour Organization.

[2] FT online, 2010 bank CEO pay, by Megan Murphy, June 14, 2011.

[3] All figures include capital gains. See World Top Incomes Database by F.Alvaredo and others.

[4] ILO, Global Wage Report 2010/11 and Datenblatt Deutschland. Geneva and Berlin, ILO.

[5] See the paper by A.B. Atkinson in: G.A. Cornia (ed.), Inequality, Growth, and Poverty in an Era of Liberalization and Globalization. Oxford, OUP, 2004.

[6] E. Goñi et al., Fiscal Redistribution and Income Inequality in Latin America. Washington DC, World Bank, 2008.

[7] See papers by M. Gilens on Inequality and Democratic Responsiveness (2005) and on Preference Gaps and Inequality in Representation (2009) and by L.M. Bartels on Economic Inequality and Political Representation (2005).

[8] See M. Luebker, Income inequality, redistribution and poverty: Contrasting rational choice and behavioural perspectives. Helsinki, UNU-WIDER (forthcoming 2012).

[9] See the results of the latest round of the International Social Survey Programme’s (ISSP) module on Social Inequality at www.issp.org.

[10] See, for example, J. Blanden et al., Intergenerational Mobility in Europe and North America.

[11] See ILO (2011). Report of the Director-General: A new era of social justice. 100th International Labour Conference, 2011. Geneva, ILO.

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Malte Luebker is a Working Conditions Specialist with the ILO’s Conditions of Work and Employment Branch (TRAVAIL) in Geneva. His main research interests are wages and income distribution. Prior to joining the ILO, he was a lecturer in Political Science at the Martin-Luther-University Halle-Wittenberg (Germany).

References:

M. Luebker (2011). The impact of taxes and transfers on inequality. TRAVAIL Policy Brief No. 4. Geneva, ILO. http://www.ilo.org/travail/whatwedo/publications/WCMS_160436/lang--en/index.htm

M. Luebker (forthcoming 2012). Income inequality, redistribution and poverty: Contrasting rational choice and behavioural perspectives. Helsinki, UNU-WIDER.

Minimum Wages in Europe: a Strategy against Wage-Dumping Policies?

noreply@blogger.com (Harald Kroeck) — Mon, 06 Feb 2012 12:30:00 +0000

Lars Vande Keybus

In numerous countries such as Ireland, Greece, Portugal, Hungary, and others, the European Commission (EC) - in cooperation with the International Monetary Fund (IMF) and European Central Bank (ECB) - has imposed a dramatic policy mix that consists of blind austerity, privatisation and wage cuts. Following the adoption of the notorious ‘six-pack’ in December 2011, it is clear that such policies will become a general rule all over Europe. The ‘six-pack’ sets up a structure in which the EC is granted a role as budgetary supervisor and punisher. The commission has the opportunity to almost automatically punish European Union (EU) members who do not follow recommendations to correct
‘excessive budgetary deficits’. The recommendations can range from adjustments in public sector pay, pension systems, indexation systems, unemployment benefits or privatisation schemes. Furthermore the ‘six-pack’ creates a new system of ‘macro-economic surveillance’. On the basis of a scoreboard consisting of a set of ten indicators covering the major sources of macro-economic imbalances, the EC can decide whether a member state suffers from an excessive imbalance. The commission can then provide recommendations and, if these are not thoroughly followed, it can prescribe sanctions. This strategy will ultimately lead to wage devaluation. In the absence of the possibility to devalue currencies, the EC is pushing for a strategy to devalue wages. This strategy is wrong and foolish for several economic and social reasons. But I would like to focus on the strategies to counter this policy.

In the coming years it is clear that wage-setting will be executed at a European level. Therefore the European trade union movement needs to develop a Europe-wide offensive to protect wages. Along with coordinating collective bargaining, minimum wages play an essential part in countering the Europe-wide attack on wages. I would like to elaborate on the possibility of a Europe-wide minimum wage.

In Europe there are several systems of minimum wages. Some countries have a statutory national minimum wage as a universal wage floor - set by the government, or set by an agreement between employers’ organisations and trade unions - while others only have sectoral or occupational minimum wages with no universal wage floor. In Belgium employers’ organisations and trade unions have agreed on a statutory national minimum wage, but on a sectoral or occupational level higher minimum wages can be agreed.

I strongly believe that minimum wages, covering all workers - including those who are not covered by collective bargaining - are an essential part of cross-sectoral solidarity. In Belgium this has proven to be one of the main methods of preventing inequality from rising in the past 25 years. A recent Organisation for Economic Co-operation and Development (OECD) publication “Divided We Stand: Why inequality keeps rising” (December 2011) demonstrates that in the period 1985-2008 income inequality increased in both high- and low-inequality countries, despite the employment growth in these countries. Belgium was one of the best performing countries. However, in countries that usually obtain high scores in such international comparisons (such as Sweden, Norway, Denmark or Finland) inequality has increased dramatically (see graph below). Inequality was one of the main drivers behind the current economic crisis, without any doubt it should be the focal point of European politics in the years to come.

Gini coefficients of income inequality, 1985 – 2008

Source: OECD, 2011

Therefore I must plead for a universal system of European minimum wage floors. This system would respect the national traditions of social dialogue, using law and/or collective agreements, but would cover, whatever the tool, all workers. It would define a minimum wage in relative, not in absolute terms, e.g. a percentage of the median or average wage level. In 2009, 8.4% of the people at work in the EU were below the ‘at-risk-of-poverty’ threshold. 14% of the working people in the EU earned less than 60% of the mean wage. Almost one fifth of those who earn less than 60% of the mean wage were at risk of poverty. When setting the standards it is imperative to find a principle that defines the minimum wage in such a way that it provides a decent wage for everyone and diminishes the percentage of the working poor. In Europe the minimum wage ranges from 30% to 50% of the average monthly earnings (Eurostat), in most cases below the poverty line. This percentage even declined in a number of countries during recent years. Therefore we believe that as a principle (determined by law or national collective agreement) minimum wages should be at least 60% of the relevant national (or sectoral) average wage.

Countries with a high union density and collective bargaining coverage (e.g. Scandinavian countries) are reluctant to support the concept of a universal European wage floor. They believe it forms a threat to their collective bargaining power and their impact as a trade union. This fear is reasonable, but exaggerated. Countries such as Belgium, France, Spain and the Netherlands prove that a national minimum wage (determined by law or a national collective agreement) can be complementary to high collective bargaining coverage. A national minimum wage leads to an increased social legitimacy of trade unions. It is the ultimate proof that they do not only protect those who are covered by collective bargaining, but also those who – unfortunately – do not fall under collective agreements. As trade unions it is our moral duty to protect everyone in society, everyone who cannot or is not permitted to organise themselves.

In times where trade unions plead for more solidarity within the EU, a system of European minimum wages is the way to create solidarity among workers. Minimum wages are not an objective in themselves. They are only an instrument to fight rising inequalities and increased precarious work. The European trade union movement should find a rapid agreement on the principles and standards for a system of European minimum wages. These principles must define, in our view, the standards for national minimum wages, determined either by law or a national collective agreement.

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Lars Vande Keybus is an economic advisor at the Belgian trade union ABVV-FGTB. His specialties include macro-economic policy, European Economic Governance, Trade & Globalisation and Decent Work campaigning.

EU ‘Austerity’ Deal won’t work – Irish Workers face a grim Future

noreply@blogger.com (Harald Kroeck) — Wed, 18 Jan 2012 12:30:00 +0000

Frank Connolly

The EU summit on Friday 9 December, during which 26 out of 27 member countries agreed on a new intergovernmental treaty including a “fiscal compact” to enforce budgetary discipline on states which breach the 3% deficit (of GDP) limit, will not provide the growth strategy that is necessary to help deeply indebted euro zone countries out of recession.

The fiscal compact proposals will not solve the problems of the euro for the peoples of Europe but will instead “institutionalise austerity” by enforcing an annual structural deficit that does not exceed 0.5% of GDP. A strategy for growth and for a rapid job generating recovery is completely missing. Without such a strategy there is no relief in sight for the stressed countries.

Nor did this summit, dominated by German and French political and financial considerations, include any suggestion of debt restructuring, or euro bonds or any kind of fiscal transfer mechanism to direct resources from prosperous regions to
those which are struggling.

The key fact resulting from this European Council is that countries which are burdened by unsustainable debt will have even less prospects of growth. This is certainly the case for Ireland where the European “fiscal compact” will greatly restrict the policy space of future Irish governments. This is perhaps the greatest threat to recovery for an economy that is reeling from the weight of the 2010 EU/ECB/IMF high interest loan facility of €63 billion and an enormous sovereign debt burden following the recapitalisation of the main banks.

The proposed introduction of automatic fines for governments that breach the 3% deficit limit will indeed place substantial difficulties on countries like Ireland which require economic growth to escape from their current debt burden.

For the Irish economy this Fiscal Pact or German designed “austerity” package, as it is now being described by opposition parties, cannot have arrived at a worse moment as unemployment rates exceed 14.4% for the third quarter of 2011, with the long term jobless accounting for more than 56% of the total out of work. In the same period the Irish economy has contracted at its fastest rate in two years.

With the state’s finances totally dependent on ECB funds and a budget in early December which took a further €3.8 billion out of the economy through public service cuts, reductions in capital spending and mainly indirect taxes, the outlook for any recovery this year looks gloomy and official agencies have just down-graded growth projection for 2012 to just 1%. The faltering US, British and European economies are of particular concern for a country that is largely reliant on an export-led recovery.

For the Irish trade union and progressive political movement the outlook is stark. On the dark horizon is the out-working of what appears to be the strategy of European, mainly German finance capital, to achieve the impossible – growth through austerity. In any case where it has been claimed to have worked it has always been accompanied by a loose monetary policy by the relevant central bank. But, so far, the European Central Bank has been precluded from such an intervention.

Instead, the recipe is to slash pensions, dismantle people’s rights at work through what are euphemistically called “labour market reforms” and sell off lucrative state assets to corporate vultures at bargain basement prices. The policy is to jettison what remains of the gains made by working people across Europe in the context of the post-war settlement. The objective is, apparently, to ditch as many of the achievements of so called “social Europe” so that European Capital can participate more effectively in the global race to the bottom.

Unsurprisingly, the austerity-led strategies are being played out at a time when centre right, and overtly right-wing, parties dominate the European political map. The possibility, however slim, of a return of socialist or social democrat governments in elections this year and next in Germany, France and indeed the survival of Barack Obama for a second term in the US offers some hope for the restoration of sanity to global fiscal and economic policies.

It may be too little too late, at least in the case of Ireland, where already €20.6 billion has been taken out of the economy over the past five years and, as a consequence of the EU/ECB/IMF loan, a projected €12.4 billion will be sliced over the next four. Since 2009, the equivalent of 13.4% of GDP has been taken out of the economy with a further 8% to be extracted by 2015.

This “adjustment” has involved unprecedented cuts to the pay and pensions of workers in the public service and a severe deterioration of the services on which those on social welfare, the sick, the elderly and the vulnerable depend. It has meant that spending on vital capital projects which could create jobs for the tens of thousands of construction and other workers who have lost their jobs since the collapse in 2008 has been sharply reduced. While export-based private industries have sustained employment and wages, the international outlook is far from favourable while the domestic manufacturing, retail and other potentially wealth producing sectors are flat and falling.

Overshadowing all of this is the massive sovereign debt burden which is expected to peak close to 120% of GDP in 2013 (not including the enormous bank liabilities). The total banking (contingent and actual) and sovereign liabilities of the state are close to a stratospheric 235% of GDP.

It is evident that the Irish state cannot reduce this to any acceptable level without an EU supported write-off through the issuance of ECB guaranteed bonds and a series of other agreed measures. It is unacceptable to most Irish citizens that the state is forced to pay annual promissory notes on the debts of defunct toxic banks encouraged to borrow at low interest during the sustained and artificial property bubble, with the encouragement of German, French, British and other finance houses now seeking the return of their money with heavy interest.

It is accepted that domestic blame lies with errant and incompetent political leaders who encouraged the evolution of “blind eye” regulation across the banking and financial sectors. In late 2010, a hundred thousand Irish workers took to the streets of Dublin on the week that the EU/ECB/IMF troika arrived in town to take control of their country’s economic destiny. The anger and despair, while not mirroring the street violence in Greece, was palpable and resulted in the routing, in the February 2011 general election, of the centre right Fianna Fáil party which dominated three successive centre right governments since 1997.

In a dramatic and historic shift, some 40% of voters supported for broadly left wing parties, which represented a doubling of their traditional vote in the country. The Labour Party, the largest left-wing party, entered a coalition government with Fine Gael (FG), which has now replaced its long-time adversary, the now seriously diminished Fianna Fáil, as the main party of the right. Government policy reflects the roughly 2:1 power balance between Fine Gael and Labour which in the recent December budget managed to ensure a 56:44 ratio of public spending cuts to taxation, compared to the 75:25 envisaged in the FG manifesto.

Major internal government battles continue on issues relating to the mechanisms that protect low-paid workers, on the right to collective bargaining which is yet to be enshrined in Irish law and to which the Labour Party is committed and on the future of publicly funded community employment and other welfare schemes which provide assistance and incomes to the most vulnerable and their communities.

The health and education budgets are also under strain while an agreement that protects the pay and jobs of public sector workers in return for deep rationalisation and cost savings across the administration of government-provided services is under pressure from employer groups and right wing forces, encouraged by a compliant media, seeking to make those least responsible take the burden of the economic and financial collapse. Meanwhile, no coherent or serious effort is made to tax the considerable number of people in Irish society who have accumulated wealth at home and abroad. The gap between those at the top and those at the bottom continues to widen with reports calculating that 5% of the population controls some 48% of the country’s asset wealth. To illustrate the scale of inequality it is worth noting that Ireland has the second lowest tax take as share of GDP across the EU 27 in 2009 and was ranked 27th out of 34 across the OECD in that same year (source: Eurostat and OECD).

Modest proposals made by SIPTU (Services Industrial Professional and Technical Union) to incentivise well-endowed Irish pension funds to raise approximately €4 billion – about 5% of current pension fund balance sheets – for investment have yet to be adopted, although they are under consideration by government. Together with €2 billion from the residue of the National Pension Reserve Fund this would generate tens of thousands of jobs providing the route to growth.

Clearly, the challenge facing the trade union and progressive movement in Ireland, and globally, is truly awesome. If the EU insists on imposing even greater austerity without any prescription for recovery the Irish people may well resist any invitation to alter existing treaties through referendum change. A new, fairer way forward must be found.

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Frank Connolly is Head of Communications with SIPTU (Services Industrial Professional and Technical Union). SIPTU is Ireland’s largest trade union with almost 200,000 members from a unionised workforce of 800,000 and a total labour force of 1.8 million people.

Global Labour Online Campaigns: The next 10 Years

noreply@blogger.com (Harald Kroeck) — Tue, 10 Jan 2012 12:30:00 +0000

Eric Lee

In November 2011, the military dictatorship in Fiji jailed two of the country’s most prominent trade union leaders. Following the launch of an online campaign sponsored by the International Trade Union Confederation (ITUC) and run on the LabourStart website, some 4,000 messages of protest were sent in less than 24 hours. The government relented, the union leaders were freed, and the campaign suspended. A month earlier, Suzuki workers locked out in India waged a successful online campaign through the International Metalworkers Federation (IMF) and LabourStart. Almost 7,000 messages flooded the company’s inboxes, and after only a few days, a compromise was reached.

The spectacular success of those campaigns is the culmination of a decade-long process of building up the campaigning capacity of the international trade union movement - specifically that of the ITUC and the global union federations (like the IMF), and the role played by LabourStart in that process.

This short essay will focus on the rather narrow topic of global online labour campaigning, to see where we have been, where we are now, and to speculate where we go next.

The global labour movement has been doing online campaigning for a quarter of a century now. The first international trade secretariats (now called global union federations - GUFs) went online in the 1980s and have been campaigning ever since. For about a decade now, we have campaigned using a combination of mass emailing and web-based tools mostly modelled on successful campaigning websites such as Avaaz, MoveOn (USA) and 38 Degrees (UK).

Today the ITUC and GUFs tend to campaign either using LabourStart, or using a system similar to (and based on) LabourStart’s custom-built software and model. As a result of this, LabourStart’s mailing lists have grown steadily, from just a couple of thousands a decade ago to more than 80,000 today. Those mailing lists of trade union activists are at the heart of online labour campaigning today. They are what allow us to deliver 4,000 protest messages in 24 hours, as was done with Fiji.

But the potential is much greater than this. The ITUC, for example, claims to represent 175 million workers in more than 150 countries. The 80,000 names of activists on LabourStart’s lists are a tiny fraction of that number — not even half of one per cent. Other campaigning organizations, which have grown up out of nowhere with no built-in membership base like trade unions, have much larger audiences. For example, Avaaz claims over 10,300,000 supporters world-wide; the UK’s 38 Degrees website claims 800,000 supporters. Unions have been slow to pick up on the importance of online campaigning, and as a result lag behind NGOSs like these.

Why unions lag behind in the adoption of effective online campaigning technology is complicated, and varies from union to union and from country to country. As the widespread use of social networks like Facebook during the Arab Spring showed, there is no simple North/South divide here. Some of the most powerful unions in some of the richest countries use the net poorly. And there have been extremely effective net-based campaigns run by unions in places like Brazil and South Korea. The global trade union movement is already experiencing the problems of campaign fatigue and information overload. There is a fear that the campaigning model which has worked well for a decade may be faltering. And there are questions about what comes next.

What comes next?

One noticeable trend is a growth in the number of languages we campaign in. For example, in a campaign launched in November 2011 in support of locked-out Turkish metal workers, LabourStart produced versions in 13 languages (Avaaz works in 14 languages). This is far cry from the days when unions would publish online in just English, French and Spanish. Almost all the LabourStart campaigns now appear in Turkish, Arabic, Russian, Chinese and Japanese - hugely important languages for the international trade union movement but ones which a decade ago were rarely seen on global labour websites. We can expect in the next decade to see even more languages used — especially the languages of countries with growing industrial working classes, such as Thai, Tagalog, Korean, Portuguese, Indonesian and Vietnamese. A decade from now, it will not be unusual to see online campaigns running in dozens of languages.

The more sophisticated (and well-funded) civil society campaigners are increasingly targeting their campaigns, rather than creating one-size-fits-all versions. If you’ve shown interest in a particular subject, or come from a specific country, or speak a certain language, you can be targeted for campaigns you are most likely to show interest in. You can be approached for follow-up campaigns, as we know from experience that one campaign alone rarely solves long-running and difficult issues. At the very least, we will see the creation of extensive databases showing who has supported which campaigns, and global unions will be able to use these to build networks of activists focussed on specific subjects or regions.

How campaigns are created is also likely to change over the next decade. It’s an oversimplification to say this, but basically we’ve moved through two phases in the past ten years. In the first period, LabourStart would approach the ITUC (and its predecessor, the ICFTU) and the GUFs and suggest an online component to their traditional offline campaigns. But in recent years, it’s been the other way around, with GUFs especially coming to LabourStart with an increasing number of campaigns that need to be promoted online. As the number of campaigns being proposed grows, there are increasingly issues about prioritizing — and even turning down some requests.

A third phase could include the involvement of the campaign supporters themselves in the process — something which is already done by 38 Degrees. When there are competing issues demanding our attention, we can allow supporters to vote online for the campaigns that deserve promotion. This is admittedly quite a radical idea and one foreign to the traditions of most trade unions. Usually union campaigns are decided upon in head offices, not by a vote on the shop floor. Nevertheless, it seems likely that we will need to move in the direction of grassroots, democratic decision making — and not only because it offers a solution to the problem of prioritization. It also gives participants in the campaigns a sense of ownership, which is important as well.

The model for today’s global online labour campaigns remains very PC-centric. We imagine thousands of trade unionists working in offices, sitting at their desks reading an email, clicking on a link, opening a website and filling in a form. But a decade from now, and to a certain degree even today, this is not how people will work. A significant percentage of those now learning about a global labour campaign via email are reading that email in a smartphone, such as a Blackberry or iPhone. If they click on a link in the message, the website that displays must render correctly on a very small screen, and the entering of data such as one’s name and email address, must be as simple and easy as possible. Few unions have taken this into account, but it will be essential in the years to come. As a result, it is likely that we will see the rise of small-screen-specific campaigning apps for trade unions. These apps will need to be platform-independent, able to work on all kinds of phones and tablets. And of course the model of email messages pointing to websites is itself fading, as more and more people come to use social networks such as Twitter and Facebook as their models for online communication. Among young people, studies show a declining use of email and an increasing reliance on other tools, including Blackberry Messenger (BBM) and SMS.

Unions need to take this into account when deciding how to promote their campaigns, and it’s likely that a decade from now, they will need to use simultaneously a wide range of media — including social networks and instant messaging — to reach their members and supporters. Email is likely to remain part of that package, but can no longer be the only way to get the word out.

A decade from now we will probably discover other things online protest campaigns can do beyond filling up the inbox of employers and governments with protest messages. It’s likely that we’ll continue to do that, but we need to find other ways of putting pressure on governments and employers to respect workers’ rights. One of the traditional trade union tools that has been under-utilized in recent years has been the boycott — and its opposite, the “buy union” campaigns. Both can be done more effectively online and at a fraction of the cost of old-fashioned offline versions. In a hyper-competitive market, if unions can cause a tiny fraction of sales to fall for one company, and to rise for another, this might give us the leverage that we never had in the past.

And beyond using our power as consumers to reward and punish companies, we can be inspired by the example of the Arab Spring and consider the possibility of using online campaigns not only to apply pressure online, but as a tool to bring people into the streets.

A decade from now global unions will still campaign online, but they will do so in ways radically different from how we work today — and the result will be more powerful and effective trade unions. But to achieve that, we must be open to new ideas, and new ways of working.

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Eric Lee is the founding editor of LabourStart, the news and campaigning website of the international trade union movement.

The G20 and Jobs: Time for Plan B

noreply@blogger.com (Harald Kroeck) — Tue, 20 Dec 2011 12:57:00 +0000

John Evans

When the economic crisis broke following the collapse of Lehman Brothers in September 2008 and the global banking system seized up, workers began to be laid off, families saw their houses repossessed and banks teetered on the brink of collapse. Financial panic knew no frontiers. It was clear that a coordinated global response by governments and institutions was required to counter what the IMF termed the “Great Recession”. The major economies used the G20 as the forum to coordinate their responses, scaling it up from a low-key Finance Ministers’ Forum into a Heads of Government Summit process – effectively replacing the G8.

The international trade union movement responded rapidly[1], matching the “heat” of the street with the “light” of policy messages coming out of the G20 Summits. Trade union demands centred on stabilising employment, putting in place social protection for workers hit by the crisis, and effective and coordinated government intervention to support the global economy so as to prevent the “Great Recession” becoming a 1930s-style “Great Depression”.
Three years later, with the crisis in a new and even more dangerous phase and major economies slipping into recession, the trade union agenda is as valid as it ever was.

At the first G20 Summit of Leaders held in Washington DC in November 2008, the Global Unions’ “Washington Declaration” called on governments to initiate a major recovery plan that invested in infrastructure and “green jobs” and protected low incomes; reregulate financial markets and put an end to “an ideology of unfettered financial markets”; and to democratize economic governance – giving the ILO a seat at the G20 table and providing for the meaningful participation of trade unions. The trade union statement also stressed the need for governments to attack the “crisis before the crisis” – the explosion of inequality in income distribution that today is recognised as being one of the causes of the debt bubble in the United States that contributed to the financial meltdown.

The Washington DC G20 Summit was followed by two Summits in 2009 in London and Pittsburgh. The initial policy response by the G20, whilst far from meeting all of the trade union demands, was nevertheless positive. Coordinated stimulus plans were put in place, which the ILO estimated saved some 21 million jobs worldwide in the period 2009-2010. At Pittsburgh, G20 governments made a commitment to “putting quality jobs at the heart of the recovery”, largely a result of the policy advocacy of the global union movement. In 2010, at the G20 Labour and Employment Ministers’ Meeting held in Washington DC, the G20 went even further and called for “corrective measures” to address the widening of income inequality through “minimum wage policies and improved institutions for social dialogue and collective bargaining”. However, little was done to translate these commitments into action. Moreover, despite potentially far-reaching announcements of the desire to reregulate financial markets and institutions at the London Summit Action Plan on financial regulation, the governments who bailed out major financial institutions left the power relations and corporate cultures unchanged with disastrous effect. The opportunity was missed for a more radical nationalisation and restructuring of the major institutions when this would have been politically feasible in 2008 and 2009.

The progress made in supporting growth was also brought to an abrupt end as a recovery began in early 2010. The trigger for the change was the sovereign debt crisis that exploded with Greece in the spring of 2010. In the space of just a few weeks, the G20 finance ministers pivoted away from supporting employment and demand in the global economy to a premature focus on fiscal consolidation for fear that they would be faced with rising spreads of interest rates on their sovereign debt and therefore hoped to appease the bond markets. Moreover, the agenda for fiscal consolidation was dominated by public expenditure cuts and austerity measures rather than revenue-raising measures such as the introduction of a Financial Transaction Tax (FTT), which would help ensure that the financial sector makes its contribution to paying for the crisis as well as calming speculation.

By the second half of 2010, G20 government policymaking was being driven by global financial markets rather than the other way round. The banks returned to profits thanks to the unprecedented guarantees of their liabilities provided by governments. They got on with the business of paying massive bonuses and lobbying against financial reform, while failing to start lending again to small and medium-sized enterprises. And all these problems were compounded by the reinforcement of the austerity message at the Toronto and Seoul G20 Summits in 2010, chaired by deeply conservative governments with little ambition to move the G20 agenda forward and even less concern for the “jobs” agenda.

The trade unions’ primary objective for the 2011 French G20 Presidency was to put past G20 commitments to quality employment and financial market regulation back on track. Trade unions put these issues on the table at the first “L20” – “Labour G20” – held at the Cannes G20 Summit in November 2011. Trade unions called on the G20 to recognise that their priority in the short-term should be to reduce unemployment, while making public budgets sustainable in the medium-term. This means first and foremost getting people back to work, not slashing expenditure.

The Cannes G20 was a tale of two Summits. On the one hand there was a Summit that delivered progress, on paper at least, with regard to growth and jobs, monetary reform, food prices, social protection, development and G20 governance, including an “institutionalisation” of social partner participation in the G20 process. It also created a G20 Task Force on Employment to focus on youth employment and called on the ILO, OECD, IMF and World Bank to report to G20 Finance Ministers on the global employment outlook and the employment impact of the G20 Framework. On the other hand, there was a parallel Summit dominated by the Euro-zone crisis, which filled the press headlines that almost totally focused on the Greek sovereign debt crisis and its potential contagion to Italy and other countries.

In any case the outcomes of Cannes have been completely overtaken by subsequent events. First, the Greek and Italian leaders have resigned and been replaced with “technocrat” administrators who have the expressed aim of “reforming” public finance in order to stabilise the bond markets. Then, at its meeting in December 2011, the European Council adopted an inter-governmental agreement which imposes considerable budget “discipline” and a dangerous balanced budget rule on Euro-zone member countries implying greater austerity and budget cuts. This significantly undermines the prospect of achieving growth levels sufficient to create the number of jobs required in the G20 – 21 million a year to bring unemployment down to 2008 levels in the medium-term as estimated by the OECD and the ILO.

The author is writing this column having just participated in discussions on youth unemployment during the social partners’ consultations at the first meeting of the G20 Task Force on Employment held in Mexico on December 15. Unions now have a “seat at the table” for at least some of the G20 meetings. But many of the government representatives on the Task Force see the limits of their ambition as exchanging good practice on apprenticeship systems or other supply side measures. Against the background of renewed austerity, neither such supply side-measures nor the positive announcements on jobs at the G20 in Cannes will significantly reduce the numbers of unemployed.

There is, however, an alternative. “Plan B” would involve those economies with fiscal space and who still have access to capital markets taking stimulus measures – even the OECD November 2011 Economic Outlook has said that this applies to half OECD members – and making this stimulus growth contingent, as Australia did in 2009, i.e. the withdrawal of stimulus should be contingent on growth returning to above trend rates.

The Global Unions have put forward a four point plan for jobs and recovery – a “Plan B” that would not only stem the crisis but shape a post-crisis world that would be economically, socially and environmentally just and sustainable. This Plan B entails that G20 governments should:

Fulfil their Pittsburgh commitment to put “quality jobs at the heart of the recovery” by establishing differentiated but coordinated job targets for the G20 countries. This would include immediate measures for job-intensive infrastructure programmes, green jobs investment and labour market programmes to raise skills;
Transform the structural policy agenda to strengthen labour market institutions, social partnership, collective bargaining, negotiated and legislated minimum wages, and income support for low-income groups so as to reduce income inequality. This must include a jobs pact for youth;
Move forward to establish a social protection floor that is supported by adequate funding according to levels of development;
Implement rapidly the reforms to the financial sector that had been agreed at the G20 London Summit but never effectively enacted, and go beyond this to effectively restructure financial groups that have become too-big-to-fail, and establish a financial transaction tax.

If coupled with “Plan B”, commitments made on jobs by G20 governments in the Cannes Declaration might actually have a chance of being met.

[1] The Global Unions Statements to the G20 Summits and Ministerial meetings and the ITUC-TUAC evaluations of the outcomes are available on the TUAC and ITUC websites www.tuac.org and www.ituc-csi.org

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John Evans is General Secretary of the Paris-based Trade Union Advisory Committee to the OECD (TUAC). Prior to joining TUAC, his previous appointments have included Research Officer at the European Trade Union Institute (ETUI) in Brussels, Industry Secretary at the International Federation of Commercial, Clerical and Technical Employees (FIET) in Geneva and Economist in the Economic Department of the Trades Union Congress (TUC) in London. He is currently a member of the Board of the Global Reporting Initiative, and member of the Helsinki Group.

How Capital Flight Drains Africa: Stolen Money and Lost Lives

noreply@blogger.com (Harald Kroeck) — Mon, 12 Dec 2011 18:05:00 +0000

Léonce Ndikumana

James K. Boyce

Financial scams often cheat working people. In most cases, the victims simply lose their money. In Africa, some lose their lives.

Sub-Saharan Africa experienced an exodus of more than US$700 billion in capital flight since 1970, a sum that far surpasses the region’s external outstanding debt of roughly US$175 billion. Some of the money wound up in private accounts at the same banks that were making loans to African governments.

Inflows of foreign borrowing and outflows of capital flight are closely intertwined. As we document in the book Africa’s Odious Debts, there is a strong correlation between the two. For every dollar of foreign borrowing, on average more than 50 cents leaves the borrower country in the same year.
This tight relationship suggests that Africa’s public external debts and private external assets are connected by a financial revolving door.

How does it work? Common mechanisms include inflated procurement contracts for goods and services, kickbacks to government officials, and diversion of public funds into the bank accounts of politically influential individuals. Some of Africa’s flight capital comes from other sources, too, such as earnings from oil and mineral exports. But foreign loans make an exceptionally easy mark in that there is no need to bother with the messy business of extracting natural resources to convert them into cash.

The tight relationship between external debts and capital flight suggests that the legitimacy of parts of Africa’s debts may be challenged, as they were not used for the purposes for which they were contracted and did not serve the interests of the people.

Principals and agents
The history of finance is littered with examples of the hazards of lending other people’s money and borrowing in other people’s names. In theory, bankers are meant to serve the interests of their depositors and shareholders by making prudent loans that will be repaid with interest. In practice, however, they often are rewarded above all for “moving the money,” getting loans out the door. In the wake of the U.S. financial crisis, this issue belatedly began to attract attention at the U.S. Fed.

An analogous principal-agent problem operates on the borrower side, where government officials negotiate and disburse loans on behalf of their citizens. Some of them borrow in the name of the government, line their pockets and those of their cronies, and saddle the public with the debt.

When a fraction of foreign borrowing is siphoned abroad, Africa still receives an inflow of money, albeit less than the face value of the debt. The net drain comes in subsequent years when the creditors are repaid with interest.

Using World Bank data, we estimate that each additional dollar of external debt service means that 29 fewer cents are spent on public health, and that each $40,000 reduction in health expenditure translates into one additional infant death. Putting these together, we calculate that debt-service payments on loans that fuelled capital flight translate into more than 77,000 extra infant deaths annually. It is not only money that is being stolen in Africa: it is human lives.

What is to be done?
The haemorrhage of scarce resources from Africa can be curbed. Efforts by some African governments to recover wealth stolen by past officials have won international backing in the Stolen Asset Recovery Initiative launched by the World Bank and United Nations Office on Drugs and Crime. More can and should be done to identify looters and their accomplices and to repatriate stolen funds.

Tougher anti-money laundering laws and enforcement are needed to staunch the illicit financial flows from Africa into safe havens abroad. In the United States, Treasury Department officials concede that banks routinely accept deposits of funds that enter the country in violation of existing laws. Moreover, the banks currently are not prohibited from handling proceeds from many activities, such as tax evasion, that would be considered crimes if committed within the U.S.

More transparent information about financial inflows to African governments would also help. Much as the Publish What You Pay campaign launched by international NGOs promotes disclosure of corporate payments for natural resource extraction, a Publish What You Lend campaign could strengthen transparency and accountability in financial markets.

Sealing Africa’s financial hemorrhage will also require breaking through the shadows of international finance to enforce transparency and accountability in debt transactions. African countries can and should selectively repudiate odious debts incurred by past regimes. These are debts that were incurred without the consent of the people, where the borrowed funds were not used for the benefit of the public and where creditors knew or should have known this to be the case.

The selective debt repudiation strategy is backed by the principle of domestic agency in British and American law, which requires agents to act in good faith in the interest of the principals. This principle has been frequently violated when African corrupt leaders entrusted to borrow in the name of their countries have instead used the proceeds of the loans to line their pockets and accumulate luxury assets abroad. Similarly their lenders have also breached the principle when they continued to dish out funds despite the evidence that the money was systematically squandered. In such cases, it is unjust to ask the African people to pay back these loans.

African countries should initiate systematic audits of national debts to establish legitimacy or illegitimacy of each debt covenant. Such audits would shed light on how loans were negotiated, at what conditions, which debts are owed to whom, and at what terms. We can expect that at least some of the past debts will be found to be illegitimate and therefore suited for repudiation. To the extent that audits are conducted competently and transparently, this will lend objectivity and credibility to the process of selective debt repudiation. The labor movement and civil society can play vital roles both in advocating for debt audits and in helping to ensure their transparency.

In 2007 President Rafael Correa of Ecuador established a national debt audit commission in order to attempt to shed light on the nature of the country’s debt. The following year, Ecuador’s debt audit commission reported that a substantial portion of the debt was illegitimate and that it has done severe damage to the country’s people, its economy and its environment. The depreciation of the value of the country’s debt following this pronouncement substantially eased the burden of repayment. Disconcerting the critics who predicted doomsday where lenders would cut off the country for further financing, Ecuador’s economy not only survived but has grown faster than that of the United States.

Critics of selective repudiation argue that it would bring hardship on the debtor country as it is penalized by financial markets and cut off from further borrowing. But this threat is ‘tiger paper’. First, with selective debt repudiation, legitimate creditors would have no reason to fear, as all debts found to be legitimate will be properly honored. Second, repudiation will certainly benefit countries that are now paying more in debt service than they are receiving in new loans. For these countries, debt repudiation is a wise financial decision. Third, debt repudiation will actually serve the aid effectiveness agenda as grants and loans henceforth will finance genuine development initiatives, rather than being used to bail out the odious debts of irresponsible lenders.

These steps would not only benefit Africa’s people today. They also would help to repair our dysfunctional international financial architecture by strengthening incentives for the exercise of due diligence by creditors and for responsible borrowing by governments. Without these changes in the institutional environment, debt relief at best can offer only a temporary palliative. In the world of international finance, what Africa needs most is justice, not just charity.

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James K. Boyce and Léonce Ndikumana are the authors of Africa’s Odious Debts: How Foreign Loans and Capital Flight Bled a Continent, published by Zed Books in association with the Royal African Society, the International African Institute and the Social Science Research Council. Léonce Ndikumana is the Andrew Glyn Professor of economics and Director of the African Development Policy program at the Political Economy Research Institute (PERI) at the University of Massachusetts, Amherst. His research interests include issues external debt and capital flight, financial markets and growth in Africa. James K. Boyce is professor of economics at the University of Massachusetts, Amherst, where he directs the program on development, peace building and the environment at the Political Economy Research Institute.

What role do big corporations play in the economic well-being of the European Union? A non-standard view of Eastern Europe

noreply@blogger.com (Harald Kroeck) — Mon, 05 Dec 2011 12:40:00 +0000

Ognian N. Hishow

The global economic crisis caused demand in the European Union (EU) to drop to low levels. In order to mitigate the effects of the crisis, stimulus packages were hastily put up in the old member states (OMS). A considerable part of the spending was directed to the financial and banking sectors as it was concluded that these were systemically important. In addition, the core sector of Europe’s industry, car production, also received significant financial support.

Both the banking sector and the automotive industry play a crucial role in the new member states (NMS) of the EU. Hence one would expect that spending on banks and automotive firms in Western Europe, where the OMS are located, is what would have kept Eastern Europe’s economy, where most of the NMS are located, afloat during the crisis.
Yet that assumption is wrong; the money that has gone to the big international European corporations has largely benefited them alone. To see why, it is important to consider how the economic integration of the NMS was conducted.

Since in the early 1990s, the NMS have opened up to trade and investment, sold off the banking industry to foreign investors, closed certain sectors to better exploit their comparative advantages and implemented the Acquis Communautaire of the EU. One important side effect of the deepening integration is that if there is a - upside or downside - shock in Western Europe, the NMS feel the impact within a short period of time. Given their advanced integration into the Western European economy, part of the additional spending in the OMS therefore entered and invigorated the NMS’s economies.

At the beginning of the crisis the European Statistics office, Eurostat, added gloom to the already pessimistic mood by forecasting a dire outcome in the NMS. In fact, all the NMS are deficit economies with current accounts in the red ranging between a few percentage points and a dramatic one quarter of their respective GDPs. Fortunately, the structure of capital inflows has been dominated by direct investment with a rather small share of “hot money”. Hence, there was not much capital outflow while at the same time decreasing imports narrowed the current account deficit. That is why the subsequent “miracle” in Eastern Europe does not come as a surprise. On average, the NMS fared better than the OMS during the global economic crisis. Average GDP output loss in 2009 was 3% in the NMS while the old members faced a loss of 4%. Unlike the situation in the eurozone for example, a serious systemic crisis in the Eastern part of the EU never emerged.

Attempts to explain the outcome mostly draw on a multiplier approach: because the old member states spent some 3% of GDP on stimulus measures in 2009 and 2010[1] it is expected that they would have an effect on the NMS.

The financial sector link
As the crisis began, observers were wondering whether the financial integration within the enlarged EU was going to make things worse. Up to 98% of bank capital and assets in the NMS are owned by Western European banking institutions. On average, the foreign capital share of the sector in the NMS is more than twice the share in the OMS. Since the financial link across the EU has grown so big, integrated financial markets mean a quick and unrestricted transmission of shocks. On the downside one could plainly expect that the dependence of most NMS on Western European banks should further facilitate the spill-over of the crisis from the West to the East. On the upside, recapitalisation and the bail-out of banking corporations in the old member states are supposed to positively affect the economy of the NMS.

The actual result is sobering: The EU has channelled approximately 3% of its aggregate GDP/GNI in 2009 and 2010 (automatic stabilisers not included) into stimulus spending. Approximately one third of that 3%, or 1% of GDP/GNI, went to the financial (mostly banking) sector. Yet spending on the banks in the West has – other things equal – accelerated the NMS’s economy by a meagre 0.42% in 2009 and in 2010.

The automotive sector link
The car industry is the pride of the NMS. It is perceived to be their most effective transmission of technological innovations and modernisation. Moreover, it constitutes a large proportion of their exports to the OMS and is an important employer. In 2008 car sales dropped sharply in Germany and Western Europe putting more pressure on a sector already overburdened with overcapacity and structural imbalances. As the industry is too important in terms of employment and export share, Germany, France, and other major car-producing nations in Western Europe introduced temporal publicly-financed schemes based on bonuses of up to €2500 per old car being scrapped in exchange of a new one. These “scrappage schemes” came at a cost of up to €5 billion in Germany, and €0.5 billion in France, Italy and UK respectively, whereas the NMS in general abstained. However, in percentage terms, the effect on the GDP growth in the NMS is not impressive. Even if assuming the lion’s share of the stimulus has gone to the five largest car producers in the NMS, the effect is negligible. The overall effect is a mere 0.12% of the NMS’s GDP.

(Another beneficiary may have been the governments of the spending nations themselves. It is estimated for Britain that an average price of €10,000 for a new car bought under the scheme would generate a total of €120 million profit for the state in VAT receipts for all cars)

Who rescued the new entrants?
It seems then that the NMS have not been able to draw on much of the money spent on big Western European corporations. Actually, the major source of recovery in the NMS has been their own stimulus packages. It ought to be borne in mind though that different states in Central and Eastern Europe were affected differently by the crisis, with Poland not being affected at all. But what counts is the response to the crisis, particularly the vigour with which the NMS reacted. The new entrants extended their fiscal deficit, although less than the Western European members. The extension was partly attributed to the automatic stabilisers as less tax revenues and more spending on items that cannot be cut easily (e.g. social programs) began to tell. The automatic stabilisers in the NMS as a group are roughly 40% of GDP. Therefore, since the fiscal easing is 3.3% of the NMS’s GDP, about 1.3% is due to the automatic stabilisers, while the remaining 2% is due additional spending to stimulate the economy. This is consistent with the data provided by the EU Commission.[2] Stimulus decisions usually address both the revenue and expenditure side of government activities. The NMS spent roughly 0.8% of their aggregate GDP on investment initiatives which translates into a 1.25% contribution to growth. Within the group of new entrants the effect of crisis-related investment programs spreads from zero in Lithuania and Hungary to 1.88% in Poland and Slovenia. This finding sheds light particularly on the better performance of Poland compared to the other NMS.

Surprisingly, although most countries engaged in (temporary or permanent) tax reforms, the contribution of tax cuts was small. GDP only changed by a small fraction in 2009 and stayed constant in 2010.

Next we look at the effect of measures aimed at keeping households’ income stable which usually take the form of either new or increased government transfers. Transfers encourage growth through increased demand and are expected to have mitigated the effect of the downswing. Additional transfers are estimated at up to 0.9% of the aggregate NMS GDP which makes them a significant part of the aggregate discretionary stimulus in the new members. Given the NMS’s multiplier they seem to have produced an additional output of up to 1.4% of GDP (all other indicators kept unchanged).

Finally, we calculate the overall effect of the NMS’s own stimulus package. With some precaution it seems to have reached roughly 2.66% of GDP - made up of the contribution of the investment spending, expanded government transfers, and a smaller tax burden due to various tax cut initiatives.

Conclusions
Turning to the question “What roles do cross-border corporations play in Europe’s economic reality, and how have these roles shown up during the global crisis?” we can assess that without the NMS’s domestic stimulus packages their GDP performance would have been a dismal one. The economy would have shrunk by 6% instead of 3% as it has been repeatedly estimated by Eurostat. In that sense the domestically-designed efforts in the region have contributed to a considerable anti-crisis effect.

The stunning conclusion is that the automotive industry has not been a significant engine of growth despite the perception that the sector is vital for both Western and Eastern Europe. Regarding large financial firms, particularly banks, the feeling of the general public is that cross-border financial businesses play a destabilising role. Their key role in domestic politics means that they have a strong influence over the articulation of fiscal and economic policies in the form of socialising losses while privatising benefits. (And it is assumed that only the so-called “Vienna Accord” has barred them from doing more harm to the NMS). Moreover, the European automotive giants have been of little help.

Praise is not justified when estimating the role of cross-border industrial and financial corporations during the crisis on a cost-benefit basis. While certain contributions to the GDP performance cannot be denied, on balance, the relatively good outcome in Eastern Europe is mostly attributed to the domestic efforts of the nations there. This defies the assumption that the NMS have been free-riders on the ticket of the West and vindicates perceptions of large firms being less helpful in times of crisis.

[1] Calculations of the overall stimulus package involve diverging considerations of data. However, most observers tend to estimate it around 3% of GDP over a two-year period. For a good short overview see for instance Stéphanie Marie Stolz and Michael Wedow, Extraordinary measures in extraordinary times – public measures in support of the financial sector in the EU and the United States, Deutsche Bundesbank Discussion Paper Series 1: Economic Studies No 13/2010 at: http://www.bundesbank.de/download/volkswirtschaft/dkp/2010/201013dkp.pdf.
Other estimates are done by the EU Commission: Dominique Simonis, Emmanuelle Maincent, Jonas Fischer and Markus Schulte, The EU's response to support the real economy during the economic crisis: an overview of Member States' recovery measures. European Commission, EUROPEAN ECONOMY Series, OCCASIONAL PAPERS 51, July 2009, Brussels, at: http://ec.europa.eu/economy_finance/publications/publication15666_en.pdf

[2] Simonis, Maincent, Fischer and Schulte, The EU's response to support the real economy during the economic crisis, op. cit., Table 2

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Ognian Hishow is a senior research fellow at the German Institute for International and Security Affairs (SWP), Berlin and Visiting professor at the University of Rochester, New York. His current work is around the debt crisis in Europe and disintegration of the Euro-area while his general research interests include European economic integration, growth and employment in the enlarged EU.

Working for a Social Protection Floor

noreply@blogger.com (Harald Kroeck) — Mon, 28 Nov 2011 22:35:00 +0000

Ellen Ehmke

Andreas Bodemer

Worldwide, 75% of the population have no or insufficient access to social security provision. Despite the long record of social security as a human right, which is enshrined in the Universal Declaration of Human Rights (Art. 22, 25) and the International Covenant on Economic Social and Cultural Rights (Art. 9), its implementation has been widely disregarded.

Many pretexts have been given to excuse this severe injustice. Prominently, the competitiveness of a globalised economy has allegedly caused a scarcity of financial resources available for social policies. On the one hand, the assumed negative effects of social security on economic growth have served as reason to cut back globally.
On the other hand, during and after the economic crisis of 2009/2010 many observers confirmed the benefits of wide-ranging use of existing social security structures.

Amidst these contestations, the need to extend social security receives growing recognition among some national governments and in international forums.[1] This could be seen during this year’s International Labour Conference (ILC), when delegates from nearly all countries – workers, employers and government representatives – reaffirmed that social security is a basic human right and a prerequisite for social and economic development. To facilitate such an extension the delegates initiated a process which should lead to an International Labour Organisation (ILO) Recommendation on Social Protection Floors (SPF) to be discussed at the next ILC in 2012.

According to this year’s ILC delegates, the recommendation should provide guidance to member states to develop social security extension strategies that enlarge the number of people covered (horizontal extension) and thereby establish national Social Protection Floors. This should be combined with the encouragement to reach progressively higher levels of protection (vertical extension) guided by the up-to-date ILO social security standards (above all Convention No. 102, 1956). The four key elements of the SPF should be nationally defined minimum levels of protection before, during and after working life, including child and unemployment benefits and pensions, as well as access to essential health care. The ILC furthermore strengthened the mandate of the ILO as the international body in which this issue should be discussed and decided upon.

While the formal proceedings are certain and an agreement could be reached on the envisaged components of the floors, many other questions are still open for discussion. During the ILC debates the worker representative raised a number of points that should be included in the recommendation, such as the “definitions of the general principles of social security including, inter alia, a rights-based approach, adequate benefits, universality, resource pooling, collective financing, sound financial governance ... guidelines on the content of the Social Protection Floor … recognizing the UN concepts of access to essential services (water, sanitation, health, education), and a basic set of essential social transfers.”[2]

Yet, many of these issues raised by workers – such as the adequacy of benefit levels, whether or not the benefits shall be universal, the extent of involvement of the social partners, the definition of targets for progress (defined time periods and growth of percentage of population covered) – are contested, on a national as well as on an international level.

Worker organisations can play a key role in defining, implementing, monitoring and enforcing social protection policies. Therefore, it will be crucial that they get active and mobilise on all levels in the run up to the next ILC in June 2012, to ensure that the recommendation provides clear guidance on design, funding, governance and a timeframe for the implementation of SPFs. In doing so the labour movement faces a number of challenges but there are also opportunities ahead.

A first challenge is connected to financing social protection. Despite other claims, ILO research has been essential in establishing that “No society is too poor to share.”[3] And indeed: studies show that countries with similar levels of government expenditure (in proportion to the GDP) spend significantly different proportions of their (often small) budgets on social security. According to ILO studies, ‘packages’ of basic social transfers (excluding health care) can be provided at the level of 2 to 5% of GDP.

Even for poorest countries like Burkina Faso, Ethiopia and Nepal it has been shown that it is possible to provide elements of such ‘packages’ like (modest) universal basic pension schemes at the cost of between 1.0 and 1.5% of GDP.[4] In Brazil the conditional cash transfer programme Bolsa Familia covers 46 million people at a cost of only 0.4% of GDP. Investments in social protection are, hence, a matter of political choices and of the ability to implement these amidst varying power constellations, rather than determined by the unavailability of fiscal resources. The labour movement plays a key role in making these choices visible, and conclusively in reversing them where they fail to make social security for all reality.

A second challenge is the representation of the unorganised. But, thinking beyond core membership and developing an encompassing vision of social security is an opportunity for trade unionists to overcome the insider-outsider problem. The debates around the ILO Convention on Domestic Workers No. 189 (2011) showed that, with considerable efforts from all sides, it is possible to bridge a potential divide between informal and formal workers and create a united workers group. In the process for the planned Recommendation on Social Protection Floors, formal sector workers will need to engage with those working informally, to understand and take up their social security needs. Established worker organisations should use their position in consultation and decision-making bodies to lobby for the social protection of and together with the hitherto uncovered and unorganised.

Overcoming the insider-outsider problem will be important to build strong civic coalitions that can counter attempts by private interest groups that seek to capture public policies, or prevent necessary policy change. For such coalitions it will be important that trade unions themselves are not perceived as a group with clientelist interests. Even if some workers may fear that a SPF will erode existing levels of social protection, the response to defend benefits for insiders at the costs of outsiders is not viable in the long run. Going beyond the needs of today’s members is a tough challenge, but can be rewarding when it opens room for new members and overall stronger worker representation.

On a global level workers are confronted with a third challenge. The debate on the cushioning of the negative effects of the globalised current economic order has been focused on the eradication of extreme poverty. Although this focus might seem pragmatic, it is reductionist. It typically lacks the analysis of the multidimensionality of poverty and focuses on ‘lifting’ people above an internationally set poverty line.

But, the concept of social security as presented by worker representatives in the ILC and elsewhere, goes beyond poverty alleviation or human capital investment. The International Trade Union Confederation (ITUC) has already called for “social protection floor[s] set at a level above the poverty line, and sufficient to provide reasonable living standards.”[5] Social security is a need for all those who cannot or should not work, i.e. children, women in maternity, the ill, the aged and the disabled. And equally for the working age able-bodied who are hit by un- or underemployment, low productivity or hazardous employment that constrains them from leading a decent life. Social security is about the creation of an environment in which each individual can develop to her or his full potential, ultimately free from hunger, want and disease. It is about life and work in dignity for everyone. Worker organisations can use the debate around the new ILO Recommendation to challenge the dominant minimalist approach.

Overall, the global and national debates around the Social Protection Floors offer an opportunity for the labour movement to be a prominent part of a broader popular movement to put pressure on governments to incorporate social protection provision as well as corresponding equitable employment and economic policies into national politics.

[1] International Labour Organisation (2011) Social protection floor for a fair and inclusive globalization. Report of the Advisory Group chaired by Michelle Bachelet, Geneva.
[2] More information on the debates on the Recommendation can be found in the Report of the Committee for the Recurrent Discussion on Social Protection, http://www.ilo.org/wcmsp5/groups/public/@ed_norm/@relconf/documents/meetingdocument/wcms_157820.pdf)
[3] International Labour Organisation (2009) Social security for all. Investing in social justice and economic development, Geneva. p13.
[4] International Labour Organisation (2008) Can low income countries afford basic social security?, Geneva.
[5] International Trade Union Confederation (ITUC) (2010) 2nd World Congress: Resolution on Extending Social Protection and ensuring good occupational health and safety, Vancouver, June 2010.

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Ellen Ehmke is an associate doctoral fellow of the International Centre for Development and Decent Work (ICDD), an academic North-South cooperation project hosted by the University of Kassel. Her research focus is on social protection policies in non-OECD countries. She has worked as a consultant for the ILO Social Security Department and taught social policy in Kassel and Berlin.

Andreas Bodemer is a former fellow of the Hans Boeckler Foundation and holds a PhD in political science from the Free University of Berlin. He worked at the DGB Brussels office before joining the Bureau for Workers' Activities at the ILO in Geneva. His research interests are Global Social Policy, International Labour Standards and Trade Unions.

Supporting Dissent versus Being Dissent

noreply@blogger.com (Harald Kroeck) — Mon, 21 Nov 2011 13:30:00 +0000

Steven Toff

Jamie McCallum

When the Occupy Wall Street movement (OWS) began on September 17th 2011, few could have predicted the wave of occupations that would soon sweep the rest of the country and indeed much of the world in what has been referred to as the American Fall. While it remains to be seen how this inchoate movement will mature, it has so far exceeded everyone’s calculations - it is the first time since the 1999 anti-WTO demonstrations in Seattle that tens of thousands in the US are taking to the street for economic reasons. Average Americans, many of whom have long understood the moral and economic turpitude at the root of Wall Street, are now expanding that stance to make a wholesale critique of neoliberalism and questioning some of the most foundational principles of capitalism.
Despite its occasional penchant for protest and militant action, and its position as nearly the sole organization comprised of the US working class, the labor movement has been unable to mobilize itself or recruit others in the cause against rising income inequality and the erosion of democratic protections for workers. Now that the OWS movement has raised the issue, built a movement base, and reached out to labor, there remains a looming question: how will unions respond to the call?

Enterprise Bargaining & Moving the Labor Movement

For many of our international comrades, the question has been “What took you so long?” Despite labor’s best intentions and goals, neither unions nor traditional left organizations have driven this movement. For those familiar with the idiosyncrasies of US unions, their peripheral role in the occupy movement is no surprise. In many countries, unions are seen—and more importantly, see themselves—as representing the interests of all working people. By contrast, as a consequence of legislation that legitimized trade union activity in this country in the midst of the Great Depression, nearly all unions have fallen into the role of advocating solely on behalf of their members, a constituency that has been declining rather steadily toward extinction and political apathy for the last five decades.

Fast forward to September of this year, and we see an almost spontaneous uprising of mostly non-unionized working and poor people, unemployed youth and students, taking the very message that labor should have been championing directly into the seat of power. These events were as shocking for labor as they were for everyone else, though for unions, the surprise has been accompanied by at least slight embarrassment. As one US labor activist remarked, “There is a sense that they [the occupy movement] beat us at our own game.”

The Present Role of Unions in the Occupy Movement

On October 5th 2011, AFL-CIO president Richard Trumka announced that US unions “support the protesters”, remarking that he was “proud that today on Wall Street, bus drivers, painters, nurses and utility workers are joining students and homeowners, the unemployed and the underemployed to call for fundamental change.” SEIU, the largest union within the Change to Win federation, likewise declared, “Occupy Wall Street: We’ve Got Your Back.” These are welcome pronouncements of support for direct action, but they do not constitute a comprehensive response. There is a difference between supporting dissent and being dissent. There has not recently been a more opportune moment for labor to forge a new course; as labor activists, we join a growing chorus within the union movement that feels the occupy movement is labor’s movement too.

There are isolated examples of this. Unions have turned out thousands for specific rallies in New York as well as throughout the country for different marches and days of actions. This adds a substantial dose of legitimacy to the protests within the national media. National Nurses United (NNU) has joined the actual occupations in a number of cities, setting up ‘Nurses Stations’ at the encampments, sleeping in the camps, and even being arrested with the occupiers. On numerous occasions in New York, Massachusetts, California, Ohio, Pennsylvania, Vermont and elsewhere, unions have joined marches and rallies. They have worked alongside the occupy movement to draw attention to some of their otherwise insulated contract fights, such as those at Verizon and Sotheby’s Auction House. By and large, unions have followed through on the pledge made by Richard Trumka to “open our union halls and community centers as well as our arms and our hearts to those with the courage to stand up and demand a better America”. But nowhere has the prospect of a labor-community coalition been more of an issue than in Oakland, California.

Oakland’s General Strike

On November 2nd, in response to brutally repressive police tactics and in an effort to escalate the campaign, Occupy Oakland called for a city-wide general strike, the first one in the US since 1946. On October 26th, a general assembly drew close to 2,000 people who voted almost unanimously for a general strike one week later. This extraordinary process sheds much light on the present state of affairs in each movement.

Although a number of unions did endorse the action, none actually mobilized their members to strike. One reason has to do, again, with the legal structure that has ensnared the labor movement. US unions have almost without exception traded away or lost their right to strike during the duration of a contract with management. It is a supreme irony of US unionism that the few strikes that do occur today are usually directed at winning a contract, the same mechanism that binds them to quiescence. But unions have broken the law before, and there are other factors that discouraged labor from mobilizing its base as well—a lack of will, a bureaucratic structure that renders decision-making difficult, a membership base unaccustomed to militancy, a political perspective that blames “greedy” individuals instead of economic systems, etc.

While the action may have been smaller than general strikes in the past, and short-lived, it was a clear success. The Port of Oakland was shut down, businesses that had advertised their hostility to the occupy movement were threatened into closing for the day, and mainstream and independent media were largely sympathetic. Although unions were peripheral participants, with the notable exception of the ILWU, individual rank and file members took to the streets together with broad swaths of radicals in what was so far the most powerful display of working class solidarity the occupy movement has yet produced. “Our members couldn’t strike, but we still brought people out,” said a California union organizer.

Labor and Occupation: Past, Present, Future

It was labor that pioneered occupation as a tactic within American social movements. The workers who took over the automobile plants in the American Midwest in the 1930s transformed the labor movement and the social fabric of industrial life. Recently, this tactic made a brief but spirited comeback during the Republic Windows and Doors sit-in in Chicago, which targeted Bank of America as much as the local employer, and the occupation of the capital in Madison Wisconsin by a group of students, workers, unionists, and community activists. Throughout the late 1990s and early 2000s unions made common cause with domestic and transnational social movements against NAFTA, the WTO, the IMF, and World Bank. Moreover, in addition to actual instances of labor-OWS collaboration, we also see recent events shifting the ideological and discursive orientation of some large unions today, as they replace the rhetoric of “saving the middle class” with the new vernacular of the 99%. It would therefore be a mistake to suggest that labor’s “bit actor” status within the occupy movement is structurally pre-ordained or historically unprecedented.

Moreover, the student and community movements have been increasingly keen to couch their actions in the language of labor. The Oakland general strike is just one example; other student strikes and community pickets are now being proposed. This opens up an even wider possibility for labor’s participation.

There has historically been an uneasy peace between unions and broader movements. Political maneuvering of elites, outright deception, and a perceived conflict of interest has divided coalitions of labor and social movements in many recent upsurges: Europe and the US in 1968, Seattle 1999, the Arab Spring in Egypt, in Madison Wisconsin, and already there are reports prefiguring a similar dynamic within the occupy movement. The current moment bears a certain likeness with the past, but the occupy movement’s insistent focus on so many themes central to those taken up by labor is nonetheless cause for hope.

Writing in the midst of the explosive revolts in Paris, 1968, Henri Lefebvre said, “Events belie forecasts. To the extent that events upset calculations, they are historic.”[1] In this respect, OWS is already historic, as it has defied the unsympathetic and pessimistic predictions of both the Left and the Right. But the biggest question now regards its future. The recent evictions of occupy encampments in New York City, Oakland, and Burlington suggest that democratic governments are not allies, and that the movement will need to be innovative to remain relevant. Indeed labor has found itself in this position for a long time. Therefore, our Eleventh Thesis should be: labor leaders and workers have long recognized the need for an opportunity to forge a new future; the point now is to take it.

[1] Henri Lefebvre, The Explosion: Marxism and the French Upheaval, (New York: Monthly Review Press, 1969), 7.

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Both authors are veteran staff and organizers from the US labor movement. Steven Toff, a GLU alumnus, is currently studying law as a Public Interest Law Scholar at Northeastern University in Boston, and Jamie McCallum is a professor of Sociology and Anthropology at Middlebury College in Vermont.

Decent Work 2.0

noreply@blogger.com (Harald Kroeck) — Mon, 14 Nov 2011 13:30:00 +0000

Frank Hoffer

Last month, Juan Somavia, the long serving Director-General of the International Labour Organisation (ILO) announced his departure in 2012.

As head of the ILO, he introduced the Decent Work Agenda in 1999 to re-focus the ILO and make it relevant for the 21st century. Twelve years later, the concept of ‘Decent Work’ is firmly established in the global debate and as an objective of national policy. It appears in many documents of the multilateral system, the G20 and national policy fora. It generates millions of Google hits. It is the subject of much academic research and debate. It is enshrined in several ILO Conventions and Declarations, and the international trade union movement introduced the annual Decent Work Day to campaign for workers’ rights. ‘Decent Work’ is so ubiquitous in ILO documents that some cynics say: "Decent Work is the answer, whatever the question!"

Will Decent Work survive the departure of the Director-General who coined the term and so successfully marketed it? Should it survive? The answer to the former question is one of the unknowns of “Realpolitik”. The answer to the latter depends on the assessment of what Decent Work means and how it should evolve.

The Decent Work concept recalls the values and commitments of the ILO constitution and the Declaration of Philadelphia in two words. This brevity comes at a price. It broadly expresses a vision about the world of work without explaining how to get there, allowing many people to support it; thus its success as a value statement, as well as its weakness for guiding concrete policy.

Despite its generality, Decent Work is not trivial. It emphasises the importance of work in peoples’ lives, independence and dignity. It gives equal recognition to all workers and underlines work as the source of value creation, rejecting ideological and class-based concepts like entrepreneurship, where the rich single out a specific form of work as superior to others, and implicitly diminishing the contribution of teachers, bricklayers, doctors, waste-pickers, designers or caregivers to wealth creation. Decent Work includes the millions of workers outside the formal economy and demands decent living conditions for all who work, as well as for those who should not work or who cannot find adequate work. It embodies the concept of workers’ rights, social security, quality employment and collective representation of workers.

The early vagueness of the concept can be justified on three accounts. First, developing a comprehensive concept takes time. Second, it should be developed through a broad deliberative process. Finally, the late 1990s saw the high tide of neoliberalism, when any skepticism towards free trade, free markets and the virtues of entrepreneurship was branded as either “loony-left” or as hopelessly old fashioned. The best the world could hope for then was Blairite - third way neoliberalism.

Whatever the reasons, there can be little doubt that the ILO gave priority to promoting Decent Work in the political arena, but underinvested in developing concrete policies to promote its vision. ‘Decent Work 2.0’ has to deliver in this respect, if the concept is to survive.

Times have changed! Unfettered entrepreneurship has ruined our economies, global free capital markets are no longer part of the solution but part of the problem, and the ‘Occupy Wall Street’ movement shows that people are fed up with a system that demands that 99% of the population work harder to make 1% of it richer.

Reining in financial markets, building a fair trading system, restoring state capacity to tax and provide quality public services as well as limiting socially harmful forms of market power and competition must be key elements of the resurrection of democratic governance.

Democracy will only survive if elected officials can make policy decisions without merely subordinating their people to the Darwinian logic of a global race to the bottom. Instead of improving democratic control on markets, European leaders seemed to be driven by markets and saw no alternative but forcing the Greek prime minister to abandon the idea of giving his people an opportunity to decide the destiny of their country through a democratic referendum. If there “really are no alternatives”, what is the point of having a vote? People, not market power must determine government policy and choices. This requires a global regulatory framework that limits capital freedom and supports sustainable development, social justice and greater equality, respecting and strengthening the policy space for democratic decision making at national level. International Labour Standards (ILS) that address the needs of all working people and that provide a minimum floor of guaranteed substantive social and labour rights is the most important contribution of the ILO to this process.

The recent focus on core labour standards, as defined in the 1998 Declaration of Fundamental Principles and Rights at Work, gave greater visibility and human rights status to the elimination of child labour, forced labour, discrimination and the right to associate freely and bargain collectively. But neoliberalism plus core labour standards falls far short of the initial aspiration of the ILO that labour standards should guarantee substantive minimum levels of protection internationally in order to support the efforts of national labour movements and societies to achieve higher wages, shorter working hours, greater work place security, full employment, industrial democracy, and equality. More urgently, it falls short of what is needed to prevent a potentially deflationary downward spiral of working conditions in today’s crisis.

To this day, the existing framework for labour standard adoption, ratification, implementation and supervision has not delivered the expected results. An open discussion should start on how to overcome the prisoner’s dilemma of the current international labour standard setting mechanism, which has seriously limited its effectiveness: all governments would be better off, if they agree to cooperate, but each country fears a competitive disadvantage if it ratifies first.

The ILO has argued for decades that this fear is unjustified, that standards help to ensure social peace and reduce transaction and information costs in societies. Labour standards contribute to dynamic economic efficiency, the violation of workers’ rights does not result in better trade performance, there is no trade-off between higher expenditure for social protection and economic growth, and countries with liberalised labour markets such as the US or UK are out-competed by countries with higher labour standards like Germany, Sweden, Netherlands or Austria. The Gini coefficient is lower in countries that ensure workers’ rights, and labour market institutions are crucial to reduce inequality and ensure shared productivity gains between capital and labour. In short, the ILO has presented standards as win-win instruments for everybody.

Despite the evidence for the positive or neutral economic impact of well designed labour standards, the ILO has not achieved widespread ratification of its Conventions. It failed to do so because it answered the wrong question. Labour standards are ultimately not contested because of overall economic performance, but rather because of their distributional outcomes and their potential to empower working people.

Labour standards contribute to the common good of social justice, equality and industrial democracy by not allowing for beggar-thy-neighbour policies, providing basic income security and social services to all, limiting the freedom of reckless employers, and depriving them of the pleasure of unlimited power vis-à-vis their underlings. Labour standards also change the balance of power in societies. Inevitably, some lose power. Discussing economic efficiency without mentioning power is convenient for consensual policy statements, but fails to address the key factor that determines the application of labour standards: it is not the economy, stupid, but power.

A meaningful debate on the future of standards cannot limit itself to basic human rights on the one hand, and economic efficiency on the other. It needs to say upfront what labour market regulation is primarily about: building inclusive and democratic societies by countering the economic power of capital through legal rights and entitlements of working people. In order to achieve this, core labour standards need to be complemented with substantive positive rights like minimum wage, working time, maternity protection and social security.

The ILO is not leading the intellectual and conceptual debate on the future of labour standards. Nor is it providing sufficient innovative ideas to ensure that labour standards fulfill their purpose. Maintaining the existing supervisory machinery is important, but not enough. Some simple steps to improve effectiveness could be:

Obligatory, regular public hearings in non-ratifying countries with parliamentarians from ratifying countries to promote ratification;
consolidation and modernisation of existing labour standards without undermining existing levels of protection
financial obligations for governments that fail to consider ratification or implementation of conventions;
a global fund to help governments ratify and implement labour standards;
assessing the policy advice of other international organisations and government policies against the objective of social justice as defined through labour standards;
measuring Decent Work and providing internationally comparable country data about progress in levels of social protection and labour rights; and
a Decent Work label for countries that have ratified and implemented an internationally agreed package of relevant labour standards

Markets need to be governed; otherwise they govern us. The need for international rules and safeguards is more apparent than ever after the visible disaster of the belief in the invisible hand. Realizing the potential of ILS is the challenging task and opportunity of Decent Work 2.0. The vision requires effective universal rules and standards to become a reality.

The ‘cautious realists’ maintain that this dream, in today’s world, is unrealistic. For the conservative Utopians of the permanent status quo, change never has a chance. But if the future of Decent Work is the question, cautious realism is not the answer.

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Frank Hoffer is senior research officer at the Bureau for Workers' Activities of the ILO. He writes in his personal capacity.

New Economy vs. Old Ways

noreply@blogger.com (Harald Kroeck) — Mon, 07 Nov 2011 20:13:00 +0000

Goran Lukić

New buzz-words are entering into the traditional economic landscape of industrial relations. Managers and politicians who want to be in touch with new economic trends are using terms such as 'green economy', 'renewable energy' and 'corporate social responsibility (CSR)'. Another concept that is being touted as a 'big idea; is 'fair-trade' or 'Creating Shared Value (CSV)'. It seems that these terms are being translated into real action. According to an HSBC Global report, 19% of anti-crisis measures in France were put into the renewable energy sector in 2009, while 13% of Germany's 2009 anti-crisis measures were put into green investment and green tax reform. Q-Cells, a manufacturer of photovoltaic cells, which has its headquarters in the German city Bitterfeld-Wolfen, began its operations in 1999 with 19 employees, and soon had more than 1 000 people on its payroll.[1]

According to Fairtrade International (FLO), the fair-trade industry is booming. The sales of Fairtrade-certified products grew by 15% between 2008 and 2009. In 2009, Fairtrade-certified sales amounted to approximately €3.4 billion worldwide. There are now 827 Fairtrade-certified producer organisations in 58 countries, representing over 1.2 million farmers and workers. In addition to other benefits, approximately €52 million was distributed to communities in 2009 for use in community development.

All the above-mentioned new economic models, which are based on regenerative development demand, are receiving vast policy attention as a new post-industrial alternative to corporate globalization.[2] As such they are being transformed into concrete policy goals. For example, the President of the European Commission Jose Manuel Barroso said in the European parliament in 2010 that he wants to see 3 million “green jobs” by 2020. FLO estimates that six million people already benefit directly from Fairtrade.

Be that as it may, the following dilemma arises out of these observations: is it that capitalism has acknowledged its social and ecological limits of growth or has it acknowledged the second contradiction of capitalism, as James O’Connor puts it (the first being capital versus labour) and started to transform itself into “human-face” capitalism? This second contradiction is related to the observation that capitalism undermines the "conditions of production", like soil, water, energy, and public services, which all necessarily need to be sustained. The latest report from the Working Group on Climate Change and Development (NEF, 2009) was very clear on the grounds of the limits of growth – it quoted the words of Professor Roderick Smith of the Royal Academy of Engineering at Imperial College who observed that with each ‘doubling’ of the economy, you use as many resources as with all the previous 'doublings' combined.[3]

An alternative view is that this very same human-face capitalism is a mere spin-off strategy of capital, which rests on the Marxist warnings of a long history of converting the limits of capital into its advantages. This means that the very same 'new economic models' are being (ab)used for further 'global integration' of the basic capitalism model by seeking new territories with cheap production costs, only this time it is with the help of governments and consumers.

Unfortunately, we can find more and more concrete cases of the latter scenario.

Evergreen Solar, a company based in the United States of America (USA), received at least US$43 million in assistance from the government of Massachusetts in the last three years. That did not stop the very same company from closing its American operation, laying-off 800 workers by the end March 2011 and moving to China for a joint venture. According to the company chief executive, they couldn’t compete with Chinese state-subsidised low prices for solar panels.[4] Only two weeks after the news about Evergreen Solar the Financial Times issued an article about the light bulb maker Bridgelux, which uses low power, light-emitting diodes. Most of the Bridgelux workers are based in Asia. Bridgelux is also considering moving its remaining manufacturing staff offshore.[5] Q-cells, the German company mentioned in a previous section, suffered heavy losses in the second quarter of 2011. On the other side, state-subsidised Chinese competition benefits from the billions in feed-in tariffs in Germany. German electricity consumers are helping to fund the rise of Chinese solar producers. The numbers support the claim. According to the Rhenish-Westphalian Institute for Economic Research, the average German household pays about €123 a year to subsidise green electricity.

It seems that when it comes to implementing the green economy as a business model, it is obviously not only back to the “business as usual” migration of capital towards cheaper production costs. It’s also about having access to new state-subsidised capital. A case in point is the car company Fiat. While it stands as the greenest car company in the latest Newsweek 2011 'green rankings'[6] , it is the same company that implemented the highly controversial Pomigliano agreement. The Pomigliano agreement gives a strong impetus to the process of the deconstruction of the social pact set up in July 2009 and even forbids any strike action against the new anti-labour regulations put in it.[7] And when building a common FAS plant in Serbia, it got vast state subsidies, which also include large sums of tax relief until 2018.

The triangular formula of sustainable relation between three economies (of people, market and planet) as was put by NEF (2009) is obviously in real danger of falling into a formula of a state-subsidised 'saving of the planet' whose cost is social dumping and workers’ rights. The reality of that unsustainable formula is Evergreen’s labour costs in China, which are about one-ninth of that in the USA. To put it another way: in 2008, the National Labour Committee (NLC) published a report entitled “The Toyota you don’t know” in which it stated that low-wage temporary workers make up one-third of Toyota’s Prius assembly-line workers, mostly in the auto-parts supply chain.[8] They are signed to contracts for periods as short as four months, and are paid only 60 percent of a full-time employee’s wage. It’s obvious to say that the very same worker cannot afford to buy a Toyota Prius.

Which leads us to fair trade, “a trading partnership, based on dialogue, transparency and respect, that seeks greater equity in international trade”, according to FINE, an informal association of the biggest fair trade networks. I must say that I firmly agree with the goals. But let’s go back to the worker, for whom it’s much too obvious that he can’t afford a Toyota Prius. Now let’s ask him a different question: are you capable of being a consumer of fair trade products, which are traditionally more expensive? The answer is very likely to be the same as in the case of the Toyota Prius – no. This kind of answer won’t come only from this worker - it will come from a larger global pool of low-wage workers who are losing their buying power. Over the whole period from 1973 to 2006 the average real wages of a USA worker (outside agriculture) for example rose by less than 1 per cent.[9] At the same time, much of the production moved to the offshore and machine-controlled operations, which meant big losses of jobs. General Motors (GM) for example now makes most of its cars in China, where it employs 32 000 hourly workers, against only 52,000 hourly workers in the United States, down from 468 000 in 1970.

One could find more 'fair trade' consumers if one climbs further up the social and economic status ladder. Put simply, it is rare to find working class people in fair trade stores. There is something seriously wrong with that picture, because it seems that fair trade widens the gap between social classes. If you can afford fair trade goods you are probably a middle–to-upper class consumer. Companies define that kind of social stratification as market segmentation – they want to shape a “highly conscious ethical consumer” as a new market niche. And on the way there they will try to clean up their public image by emphasising their fair trade direction (although that means one extremely small department with ten fair trade products) – and by making some additional profit. In 2006, Starbucks paid US$1.42 per pound for the coffee from Ethiopian farmers. The very same coffee had a selling price of US$10.99 per pound[10] .

As important as it is, the 'brave new world' of new economy has real dangers. It recognises class division only to transform it into market division. It recognises social stratification, only to transform it into social labelling. And finally, it recognises human values, only to transform them into market components. So, it’s not only the orientation of the economy, that we need to change, it’s also the basic framework of economy, that we must change. Or will having an expensive hybrid car and drinking fair trade Ethiopian Starbucks coffee satisfy our need to change the world?

1 Hawranek, D., Jung, A., Klawitter, N., Wagner, W. (2011): The Sun rises in the East. Available at: http://www.spiegel.de/international/business/0,1518,784653-2,00.html
2 Milani, B. (2000): Designing the Green Economy. Rowman and Littlefield Publishers Ltd.
3 New Economics Foundation (2009). Available at: http://www.neweconomics.org/sites/neweconomics.org/files/Other_worlds_are_possible_0.pdf
4 Bradsher, K. (2011): Solar Panel Maker Moves Work to China. Available at: http://www.nytimes.com/2011/01/15/business/energy-environment/15solar.html?_r=1&pagewanted=all
5 Waters, R. (2011): China dims prospects for Silicon Valley jobs. Available at: http://www.ft.com/intl/cms/s/0/99e5fa62-2b1b-11e0-a65f-00144feab49a,s01=1.html#axzz1ckDPt6yC
6 Yarett, I. (2011): The World Green Giants. Newsweek, 24th October 2011.
7 Garibaldo, F. (2011): Fiat is at war, says Sergio Marchionne. Available at: http://www.ilo.org/wcmsp5/groups/public/---dgreports/---dcomm/---publ/documents/publication/wcms_155448.pdf
8 Available at: http://www.globallabourrights.org/admin/reports/files/TOYOTA_JAPAN_FINAL_WEB.pdf
9 Wade, R. H. (2011): The Great Slump: What next? Available at: http://www.ilo.org/wcmsp5/groups/public/---ed_dialogue/---actrav/documents/publication/wcms_158927.pdf
10 Quora (2011). How much profit does Starbucks make on a typical coffee? Available at: http://www.quora.com/How-much-profit-does-Starbucks-make-on-a-typical-coffee

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Goran Lukic works for the Association of Free Trade Unions of Slovenia. He is currently involved in a three-year project for the integration of migrant workers, asylum seekers and refugees and the empowerment of young workers. He also works on issues of precarious work.

Contesting a ‘just transition to a low carbon economy’

noreply@blogger.com (Harald Kroeck) — Mon, 31 Oct 2011 12:30:00 +0000

Jacklyn Cock

Introduction

Recently, the South African labour federation, the Congress of South African Trade Unions (Cosatu), has expressed its commitment to a ‘just transition to a low carbon economy.’ However, at this moment the content of that commitment is unclear. Members of Cosatu affiliates could have very different understandings of the scale and nature of the changes involved. A ‘just transition’ could involve demands for shallow change focused on protecting vulnerable workers, or it could involve deep change rooted in a vision of dramatically different forms of production and consumption. In this sense, the ecological crisis represents an opportunity to not only address the unemployment crisis in our society, but to demand the redistribution of power and resources, to challenge the conventional understanding of economic growth and to mobilise for an alternative development path.

It could also generate a new kind of transnational solidarity, larger, deeper and more powerful than anything we have yet seen. Moving beyond solidarities based on interests or identities, Hyman emphasises that ‘the challenge is to reconceptualise solidarity in ways which encompass the local, the national, the European and the global. For unions to survive and thrive, the principle of solidarity must not only be redefined and reinvented: workers on the ground must be active participants in this redefinition and reinvention’ (Hyman, 2011). Most clearly in its warnings of the threat to human survival, the discourse of climate change could be contributing to such a process.

Obviously, the transition to a low carbon or green economy has massive implications for labour. Historically, the labour movement in South Africa has neglected environmental issues. This is largely because of a widespread understanding that environmental protection threatened jobs (Cock, 2007). For example, while the contamination of the local air and groundwater by the steel corporation Arcelor Mittal was known, workers’ participation in the struggle for environmental justice was blunted by the fear of job losses. Ironically, what is now driving trade unions into a concern with climate change is the indirect threat posed to existing energy intensive jobs and the possibility of new ‘green’ jobs. However, the labour movement still has to resolve a key question: ‘are green jobs one component of a new green capitalism, which is turning the climate crisis into an opportunity for accumulation? Or, are green jobs part of a ‘green economy’ which - “based on rights, sustainability principles and decent work” - can meet the challenge of a just transition’? (Sustainlabour, 2011). To complicate the question, while reference to the green economy appears in many official policy documents, it is often either undefined, or defined in a very narrow, technicist sense of being viewed as something separate, as an ‘add on’ to the ‘real economy. This last approach is evident in the National Climate Response White Paper issued by the South African government.

The International Trade Union Response

Trade unions have participated in the United Nations Framework Convention on Climate Change (UNFCCC) since its inception, under the umbrella of the International Trade Union Confederation (ITUC), which represents 170 million workers through its affiliated organisations in 157 countries. The ITUC report (2009) entitled Equity, Justice and solidarity in the fight against climate change stresses the need “to create green and decent jobs, transform and improve traditional ones, and include democracy and social justice in environmental decision-making processes”. A Just Transition is described as “a tool the trade union movement shares with the international community, aimed at smoothing the shift towards a more sustainable society and providing hope for the capacity of a ‘green economy’ to sustain decent jobs and livelihoods for all”. (ITUC, 2009)

The Congress of South African Trade Unions (Cosatu) response

In recent years, Cosatu, a trade union federation with 2 million members and 20 affiliate unions, has started to recognise climate change as a developmental and social issue. In September 2011, the central executive committee endorsed a policy framework on climate change, based on fifteen principles including the following: Capital accumulation has been the underlying cause of excessive greenhouse gas emissions and therefore global warming and climate change. As such, a new low carbon development path is needed which addresses the need for decent jobs and the elimination of unemployment. The issue of food security must be urgently addressed and all South Africans should have the right to clean, safe and affordable energy. Cosatu rejects market mechanisms to reduce carbon emissions and contends that developed countries must pay their climate debt and the Green Climate fund must be accountable. Finally, a ‘just transition’ towards a low-carbon and climate-resilient society is required.

Different understandings of a ‘just transition to a low carbon economy: ‘paradigm shift’ or ‘regime change’?

While capital’s discourse of a low carbon economy emphasises growth, competitiveness and efficiency, the labour movement agrees on this notion of a ‘just transition’. However, a point of contention among unionists involves the substantive content in the notion of a ‘just transition’. Whereas the ITUC speaks of a ‘paradigm shift’, some activists from the Cosatu affiliate the South African Municipal Workers Union (Samwu) speak of ‘regime change’. While a ‘paradigm shift’ simply involves a change in ways of thinking about the issue, which could be ‘thin’ or minimalist, a ‘regime change’ implies a fundamental transformation in the way power and resources are distributed, and economic activities are regulated and controlled.

Two broad approaches to this notion of a ‘just transition’ may be identified:

(i) The minimalist position emphasises shallow, reformist change with green jobs, social protection, retraining and consultation. The emphasis is defensive and shows a preoccupation with protecting the interest of vulnerable workers.

(ii) An alternative notion of a just transition involves transformative change; an alternative growth path and new ways of producing and consuming.

The difference is clear in comparing two statements: first, let us observe the position of the ‘Cancun agreements’, formulated at the Conference of Parties (COP 16 in 2010), which states that a just transition means ensuring “…the importance of avoiding or minimising negative impacts of response measures on social and economic sectors, promoting a just transition of the workforce, creating decent work and quality jobs in accordance with nationally defined development priorities and strategies and contributing to building new capacity for both production and service related jobs in all sectors, promoting economic growth and sustainable development.”

In contrast, the Cosatu affiliate Samwu’s language differs quite dramatically, as seen in its response to the South African government’s National Climate Change Response Green Paper, drafted in February 2011, which states that “tackling greenhouse gas emissions is not just a technical or technological problem. It requires a fundamental economic and social transformation to substantially change current patterns of production and consumption.”

In the Cosatu policy framework, the explanation of a just transition reads, “The evidence suggests that the transition to a low carbon economy will potentially create more jobs than it will lose. But we have to campaign for protection and support for workers whose jobs or livelihoods might be threatened by the transition. If we do not do that, then these workers will resist the transition. We also have to ensure that the development of new, green industries does not become an excuse for lowering wages and social benefits. New environmentally-friendly jobs provide an opportunity to redress many of the gender imbalances in employment and skills. The combination of these interventions is what we mean by a just transition.”

The Policy Framework goes on to say, “The Just Transition is a concept that COSATU has supported in the global engagements on climate change that have been led by the ITUC. The basic demands of a Just Transition are:

Investment in environmentally friendly activities that create decent jobs that are paid at living wages, that meet standards of health and safety, that promote gender equity and that are secure
The putting in place of comprehensive social protections (pensions, unemployment insurance etc.) in order to protect the most vulnerable
The conducting of research into the impacts of climate change on employment and livelihoods in order to better inform social policies
Skills development and retraining of workers to ensure that they can be part of the new low-carbon development model.

The question is: are these necessary but sufficient conditions for a just transition? COSATU affiliates are going to interpret the concept very differently with perhaps the National Union of Mineworkers feeling the most threatened by the changes implied.

Conclusion

No serious observer now denies the severity of the environmental crisis, ‘but it is still not widely recognised as a capitalist crisis, that is, a crisis arising from and perpetuated by the rule of capital, and hence incapable of resolution within the capitalist framework’ (Wallis, 2010). In this sense the climate crisis represents an opportunity for labour to promote a transformative understanding of a ‘just transition to a low carbon economy’ and to mobilise for an alternative development path.

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Jacklyn Cock is a professor emeritus in the Department of Sociology at the University of the Witwatersrand and an honorary research associate of the Society, Work and Development (SWOP) Institute. She has written extensively on militarisation, gender and environmentalism in Southern Africa. Her latest book is The War Against Ourselves. Nature, Power and Justice. (Johannesburg: Wits University Press, 2007).

References

Cock, J. (2007). ‘Sustainable Development or Environmental Justice: questions for the South African labour movement from the Steel Valley Struggle’, Labour, Capital and Society. Vol. 40, Nos. 1 and 2

Hyman, R. 2011. ‘Trade unions, global competition and options for solidarity’, in Bieler, A. and Lindberg, I., (eds.). Global restructuring, labour and the challenges for transnational solidarity. Rethinking globalizations.pp16 - 29

Sweeney, S. 2011. ‘How unions can help secure a binding global climate agreement in 2011’, http://www.sustainlabor

Sustainlabour, UNEP (2008). Climate Change, its Consequences on Employment and Trade Union Action. A training Manual for Workers and Trade Unions. Madrid, sustainlabour

Wallis, V. (2010). ‘Beyond green capitalism’, Monthly Review. February

The Costs of the Financial Crisis 2008/09: Governments are Paying the Tab

noreply@blogger.com (Harald Kroeck) — Tue, 18 Oct 2011 12:30:00 +0000

Sebastian Dullien

One could almost get the impression that the storyline of the global economic and financial crisis of 2008/9 is forgotten. Questions of bank regulation and financial sector oversight are hardly discussed in public anymore and legislative efforts to rein in speculative and highly risky activities seem to have petered out. Instead, the public debt crisis has taken center-stage. Around the world, discussion focuses on cut-ting public deficits, with a strong focus on cutting public expenditure and a secondary focus on raising general direct and indirect taxes. The debate has turned from one about obvious market failures, especially in financial markets, to one about alleged government failure. That is, governments spending much more than they take in as revenue and hence piling up increasingly unsustainable public debts.

However, if one looks into the details of the development of the public debt in many of today’s crisis countries, it becomes clear that it is precisely the economic and financial crisis of 2008/9 which has put the debt levels onto an unsustainable path. Prior to the crisis, countries such as Spain or Ireland and probably even the United States were on a path of (or at least close to) fiscal sustainability. After the crisis, markets now question public finance sustainability even in countries such as France.

In a study commissioned by the Friedrich-Ebert-Foundation, we calculated the costs of the global financial and economic crisis for Germany, a country which is not a core crisis country, but is often revered for its resilience in the crisis and its rapid recovery afterwards. In this study, we tried to pin down the costs of the crisis for the economy as a whole as well as for different groups in the country such as wealth owners, wage earners and the government. Germany is an important case study here as it did not experience a real estate bubble prior to the crisis. One can thus argue that the crisis costs can be seen as being completely exogenous to the crisis.

Computing the costs of the crisis is not as simple as one might think. It starts with the government sector. One cannot simply use the headline figures presented in the mainstream media on bank rescue packages and stimulus packages and add them up. Firstly large parts of the bank rescue packages have not been real costs to the governments. If a government gives a guarantee to a bank and the bank continues business without the government ever having to pitch in, this is not a real cost in the end. If a government injects capital in private banks and later sells off the shares again, only the net loss can be counted as a cost. If the government sells the shares for more than it has injected earlier (as has been the case for the Swiss measures to support the country’s large banks), there are no costs, but even profits. Only if the government has to inject money into the financial system in a way that it cannot recoup later, the injection has to be counted as a cost. Similarly, if a publicly owned financial institution has inferred losses, these are clearly net losses for the government. For these costs stemming either from direct losses of public banks or non-recoverable injections of public funds, we use the term direct costs of the crisis.

Secondly, stimulus packages cannot completely be seen as net costs. If a government builds new highways or repairs public buildings in the crisis as a stimulus measure, it incurs expenditure, but at the same time the value of the public’s assets increases. Again, as long as the government does not overpay and does not build useless gimmicks such as pyramids, this spending is not a net cost.

In contrast, tax cuts used to stimulate private spending might at least be net costs to the government; yet, if we are interested in the macroeconomic costs, we need to keep in mind that these tax cuts increase the disposable income of the private sector and hence are not net costs to the economy as a whole.

Be that as it may, looking only at expenditure for stimulus packages and bank rescue packages misses an important part of the costs: The automatic fall in tax revenues caused by the recession and the automatic increases in expenditure stemming from such a crisis, that is, for unemployment compensation. We have called costs of lost government revenue or higher transfers of lost output indirect costs.

Similarly, computing the costs for the private sector is not completely straightforward. If someone defaults on her mortgage and the value of mortgage backed securities falls, this is not necessarily a net cost to the economy. While the bank loses, the person defaulting on the mortgage might increase her net wealth. As long as both the debtor and the creditor are domestic, this does not change the net wealth of the economy. Only if the debtor is foreign, a default changes the net wealth of the country in question. However, just looking at losses in the financial markets again neglects important elements of the crisis costs: The loss of output and consequently wage and profit income of the private sector through the crisis. In parallel to the terms used for the public sector, the private sector has borne both direct and indirect costs of the crisis: Direct costs are those caused by a fall in the net value of assets. Indirect costs are income flows foregone due to the crisis.

We calculated three scenarios: an optimistic rapid return to the old growth path; a slower return to the old growth path and a pessimistic scenario in which output never recovers to the pre-crisis growth path, but remains significantly below this path.

By now, at least until the summer of 2011, the German economy has developed roughly in line with our most optimistic scenario. The scenario assumes a GDP growth rate of 3.5 percent in 2010 and 2.8 percent in 2011. However, at the time of writing, there are some signs that the recovery is seriously slowing down and a risk of a new recession is emerging. Thus, it is unlikely that the most optimistic recovery scenario continues. One can probably say that the most likely real-world development will be between our most optimistic and the medium scenario.

Table 1 below presents the results of our computation. The first very interesting result is that indirect costs of the crisis dwarf direct costs. Total costs even in the most optimistic scenario are around €700bn, of which only a little less than €100bn are direct costs. In the less optimistic scenario, the ratio becomes €2154bn to €100bn. The second central result is that the government bears most of the crisis costs. Government revenue even in the most optimistic scenario (which now can be seen as the lower limit) has been hit by a total of €270bn or more than 10 percent of GDP. In the less optimistic scenario (which now can be seen as the upper limit), costs to the government even add up to about €800bn or more than 30 percent of current GDP. The third interesting element is that wage and transfer earners in Germany might not be quite as hard hit as sometimes feared. In the more optimistic scenario, their incomes are only reduced by €177bn, yet in the less optimistic scenario by €755bn. The low value for the optimistic scenario is probably a special feature only to be found in Germany and might be explained by the labour market policies during the crisis when the German government paid firms to keep workers on reduced hours instead of firing them (“Kurzarbeit”) which in turn led to a very low increase in unemployment in Germany during the crisis.

In international comparisons, the costs in Germany can probably be seen as rather modest. Germany has experienced one of the most vigorous recoveries after the crisis. Yet, already in Germany, the crisis can be seen to have been responsible for a significant deterioration of public finances. Wealth owners, who can be seen of the main beneficiaries of a deregulated financial sector which has finally wreaked havoc with the economies of most advanced countries, in contrast, have only borne a comparatively modest part of the crisis costs.

Table 1: Crisis costs for wage and transfer recipients, wealth owners and government in Germany

This imbalance in bearing the crisis burden should be kept in mind when measures to rebalance the public accounts in the OECD countries are discussed. Wealth owners here should at least pay a fair share of the burden. Specifically, this means that the balance between spending cuts and tax increases and the specific changes to the tax codes which have been part of many austerity packages need to be re-thought. The first point here is that budgets should rather be balanced by tax increases than cuts in social security spending.

Second, when taxes are increased, a focus should be on those types of taxes which are borne by people who have in the decades before benefited the most from deregulated financial markets: This would mean a focus on increasing taxes on interest and dividend income, capital gains and wealth. In addition, one should also increase the income tax rates in the top tax brackets as these individuals disproportionately benefit from the investment opportunities in deregulated financial markets. Last but not least, these numbers support a financial transaction tax as well as a financial activities tax: Both make financial transactions and financial intermediation slightly more expensive and will secure that society at least gets a small share back of the costs that irresponsible financial markets and financial institutions have incurred.

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Sebastian Dullien is Professor at HTW — University of Applied Science, Berlin. His extensive work on the financial crisis has recently been summarized in his book Decent Capitalism (published by Pluto Press in 2011, written with Hansjörg Herr and Christian Kellermann).

Summer days on Utøya

noreply@blogger.com (Harald Kroeck) — Mon, 10 Oct 2011 12:30:00 +0000

Dan Gallin

I shall never forget the summer days I spent in 1955 on Utøya, the small island near Oslo that the Norwegian trade unions had given to the Labour Youth League as a study and leisure centre.

I had arrived in Europe in March 1953, back from the United States where, as a student, I had discovered socialism in the shape of a Trotskyist dissidence. The brilliant explanation of the world, the heroic and tragic story of the “Old Man” and his movement, had taken hold of my imagination and my emotions. So much so that I drew the attention of the authorities who gave me one month to leave the country.

So there we were, my companion and I, in Europe and needing to find our bearings. She was a member of the same group. By the summer of 1955, we were ready to discover Scandinavia, the bastion of a social democracy that we viewed with suspicion.

In Oslo, we found the Labour Youth League in the phone book. We turned up unannounced at the office of the man in charge, who was the General Secretary, and told him we were members of the American Socialist Youth League and we were looking for Norwegian socialists to discuss socialism with. The Norwegian comrade looked at us for what seemed quite a while and then said, “You’ve timed it nicely. Our summer course has just started. Later on, we can take you over there. You can spend a week with us. It’s on Utøya, a little island near Oslo. You’ll see.”

On Utøya, there is a central building for the logistics (meals, showers, course rooms) and the participants were living in tents pitched all over the place, but mainly in a meadow in front of the building. We were assigned a tent, but we spent most of our time with the young Norwegians. I spent a whole night discussing with Reiulf Steen, who was later to become the Minister of Foreign Affairs and the Prime Minister, very much involved in assisting the resistance movements against the dictatorships in Latin America. We discussed the USSR, its social and political nature, and Stalinism. One night was not enough.

We met many of the hundreds of young socialists who were full of energy, joy, humour and determination, sons and daughters of the midnight sun which, during the Norwegian summer, never sets. They were ordinary young people, citizens like all others in a social democracy. No professional revolutionaries, but they were out to change the world. There were as many of them on this little island, maybe even more, than in the whole of our American grouplet. The American comrades whom we had left behind were no less committed and courageous, but we had now discovered something we had not experienced before – a mass movement of young socialists.

This was the movement that Anders Behring Breivik, a fascist activist, attacked on 22 July 2011. After setting off a bomb in the government quarter of Oslo, killing eight people, he landed on the island disguised as a policeman, called together the young people there and started gunning down defenceless youngsters who had not had the slightest inkling of what was about to happen to them. On Utøya, Breivik killed 69 people in the space of an hour and a half.

Norway’s Prime Minister Jens Stoltenberg, who is also the leader of the Labour Party, declared that the massacre was an assault on democracy and the open society, and he pledged that Norway would not cave in to it. More precisely, though, it was an attack on the Norwegian labour movement. Breivik was quite explicit: the labour movement, guilty of “cultural Marxism”, had to be targeted – and what had to be hit was labour’s most precious asset, its youth, to punish it for betraying the nation by promoting its “islamisation”. If the shooting had happened just a few hours earlier, Stoltenberg himself and former Prime Minister Gro Harlem Brundtland might well have been among the victims. They had visited Utøya that day, to take part in the debates.

We socialists ought to be more concerned about what is happening to us in Northern Europe. On 28 February 1986, Sweden’s Prime Minister Olof Palme was assassinated. He had been to the cinema with his wife Lisbet, and as usual they had no bodyguards. At 11.20 p.m., while they were walking home, a man stepped up from behind and fired two pistol shots. The first one mortally wounded Palme. The second one injured Lisbet, who survived. The assassin fled and was never found. A man was arrested and sentenced, but was later released upon appeal. The motives for the assassination, and those who may have ordered it, were never identified. The police investigation, which went on for years, led nowhere.

Stemming from the upper reaches of the bourgeoisie, Palme was a “traitor to his class” and the Swedish Right harboured an intense hatred for him. In government since 1965, twice Prime Minister (1969-1976 and 1982-1986), and Chairman of the Social Democratic Workers' Party(SAP) from 1969 to 1986, he strengthened the Social State even further, as well as the trade unions’ power vis-à-vis the employers. As regards foreign policy, he was the only leader of a western government to oppose the Vietnam War. He also opposed the invasion of Czechoslovakia in 1968, the Pinochet coup in 1973 and more generally, throughout his career, the military dictatorships in Latin America, the fascist dictatorships in Europe and the apartheid regime in South Africa. Although never really on the Left of the Party, he has often been described as a “revolutionary reformist”.

Palme’s assassination was a turning point in the history of our movement. None of his successors have had his charisma, political intelligence and daring. The SAP lowered its profile. In fact, its moderation probably pushed it out of office. It has lost two parliamentary elections in a row since 2006. It has less of an international presence now, and as a result the Socialist International has lost some more of what little influence remained to it. Had Palme lived, the capitulation of social democracy to neoliberalism and the “third way” buffoonery of Blair and Schröder would have been more difficult. If Palme’s assassination had been the result of a right-wing conspiracy, that plot would have achieved its aims.

It could all have gone differently. In 1998, Swedish Social-Democracy had somewhat recovered. It had a rising star: born in 1957, Anna Lindh was the brilliant chairperson of the Social-Democratic Youth League from 1984 to 1990, a Member of Parliament from 1982 onwards, Environment Minister in 1994, and Foreign Minister in 1998. She was cast in the Palme mould, and the intention was that she would succeed the dull bureaucrat Göran Persson as head of government and of the Party.

But the assassin was lying in wait. On the afternoon of 10 September 2003, Anna Lindh was shopping in a Stockholm department store, without any bodyguards of course, when a man knifed her in the chest, stomach and arm. Despite the doctors’ efforts, at 5.29 the next morning she was dead.

The assassin was caught on 24 September. He was Mihailo Mihailovič, born in Sweden of Serb parents, angry with the Swedish government because it had supported NATO in Kosovo. Following various judicial bouts, and his certification as psychologically deranged, he was sentenced to life imprisonment.

After Sweden, that historical bastion of Nordic socialism, it is now the turn of Norway, the only remaining Nordic country with a social democratic government that defends progressive causes at the international level as well as defending the social State. Yet again, a lone madman has struck.

A lone madman? That claim is made mainly by the extreme Right. Because, of course, if the ideas of the extreme Right are to be safeguarded, it is vital to put as much distance as possible between the ideology vehiculated by its parties and the criminal acts their ideology inspires. The belief has to be fostered that fascism is an opinion, not a crime, and that the organisations of the extreme right are made up of normal, ordinary citizens. Whereas in fact, they are nurseries for Breiviks who can emerge anytime, anywhere, armed to the teeth and ready to sow death.

Shortly after the Norwegian drama, Oskar Freysinger, an extreme right-wing Swiss politician famous for opposing the construction of minarets and for stating that abortion has caused an “invisible genocide”, gave the following reply to a journalist who pointed out that a number of Breivik’s standpoints matched Freysinger’s own and those of his party, the Swiss People’s Party: "Do you think there will be fewer terrorist attacks and madmen if I’m forced into silence? It will be worse!” That answer should be taken as a threat.

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Dan Gallin is currently chair of the Global Labour Institute (GLI). Prior to this, Dan worked for the IUF (International Union of Food workers) from August 1960 until April 1997, since 1968 as General Secretary. He is currently researching union organization of women workers in the informal economy, labour movement history and issues of policy and organization in the international trade union movement.

The dilemma of job creation and decent work

noreply@blogger.com (Harald Kroeck) — Mon, 26 Sep 2011 12:30:00 +0000

Edward Webster

In August 2010 South African government officials began closing down clothing and textile factories in Newcastle, in the province of KwaZulu–Natal. This came in the face of angry protests from the workers because the owners were paying less than the statutory minimum wage of R324 ($49) a week. The factory owners said they could not pay more and survive in the face of cheap Chinese textile imports.

Globally, the clothing and textile industry is to a large extent controlled by an oligopolistic group of large retailers and branded manufacturers, who stipulate their supply specifications in terms of low price, high quality and short lead times. But due to the strengthening of the local currency (the rand) since 2003, the end of the Multifibre Agreement (MFA) in 2004 and relatively high labour costs, South Africa no longer has a comparative advantage in an integrated global economy.[i]This challenge is not peculiar to South Africa. The existence of fragmented and outsourced manufacturing, accompanied by aggressive buying practices, militates against a living wage in the global apparel sector. This is in spite of the fact that there is general consensus on all sides of the industry that an increase in the unit labour costs by the amount proportional to what is deemed to be a living wage would only marginally impact on the retail price of the garment (Miller and Williams, 2009:104-105).

The result of these competitive pressures is the undercutting of local jobs from low wage sectors of the global labour force, as the case of Newcastle illustrates, where costs of labour are a small proportion of the total costs in production. On average wages constitute less than one-half of 1% of the retail price of branded sweatshirts. Miller and Williams conclude that progress is possible only through an acceptance of collective bargaining through trade unions in supplier factories.

Andre Kriel, the general secretary of the Southern African Clothing and Textile Workers Union (SACTWU), takes a similar view:

“Some Newcastle employers expect us to decrease wages and compete in the world as a low wage country. This is a short term and impractical view. If we drop wages, other countries will respond by dropping theirs further – a vicious downward spiral. Getting trapped in a race to the bottom is not a sustainable option. The other option, which we support, does not focus only on wages but also includes a long–term, sustainable and human rights–based solution. It requires compliance with our laws, decent work, a focus on improving productivity, modernising work, upskilling workers, improving quality, diversifying product range and ensuring reliable delivery times” (Kriel, 2011).

Workers in the developing world, as early as the seventies and eighties in Brazil, Korea and South Africa, became the architects of their own future. No longer willing to accept their designation as either victims or as labour elite, they took control of their lives, went out on strike and started a struggle for democratic trade unions. While the ILO was debating on how to respond to their ‘discovery” of the informal sector in Kenya in 1972, Ela Bhatt had begun to organise these workers into a union, the Self Employed Women’s Association (SEWA).

A new labour paradigm has emerged in the Global South that does not see decent work as an obstacle or add-on to development, but is instead attempting to integrate decent work into an alternative developmental path. Work, I suggest, is the missing link in the current discourse on development; none of the dominant theories on globalisation integrate the struggle for decent work into their developmental trajectories. All three dominant theories of globalisation – neo-classical liberalism, the social reformist or anti-capitalist/ autonomist theories that underpin the current anti-globalisation movement and development statism – treat the struggle for decent work as either an obstacle or an add-on (Bowles, 2010).

In the course of my research on working life I have seen the erosion of standard employment relationships, the growth of insecure and low non-core jobs, together with the expansion of the informal economy and large-scale unemployment. These jobs lack the characteristics of decent work as defined by the ILO; they have, in other words, a decent work deficit.

This deficit can be expressed as an absence of the four goals of decent work: an absence of sufficient employment opportunities, inadequate social protection, the denial of rights at work, and shortcomings in social dialogue. “It is a measure of the gap between the world that we work in and the hopes that people have for a better life” (ILO, 2001:8). These absences can be expressed in terms of four gaps: an employment gap; a rights gap; a social protection gap; and a social dialogue gap (ibid, 8- 10).

The economic crisis which began in late 2008 has accelerated this logic leading to the widespread bail-out of banks and now austerity programmes with cutbacks on public sector jobs and benefits. Many countries no longer hire permanent public sector staff and appoint on short term contracts. For those in the informal economy the situation is worse with their incomes being cut by an estimated 50%.

How can this decent work deficit be reduced? This can only be done, I argue, by developing a long term goal that integrates decent work into a country’s growth path. In other words the goal of decent work should be seen as an objective to be progressively realised. Quite simply this involves accepting that decent work is not an immediately achievable goal. Each country will have to take into account its specific social and economic context and set itself a series of immediate, medium and long term goals.

Governments, together with their labour movements and employer associations, in some developing countries, have begun to identify how these long term goals can be achieved. The crucial step in advancing this debate was the demonstration that a basic set of social security benefits, or at least parts thereof, are affordable in developing countries. The realisation that, in the short term, it is possible to imagine building a global social floor – a basic pension, child benefits, access to health care, temporary employment guarantee schemes or income transfers for the long term unemployed -broke the spell of the “non-affordability myth” (Cichon, Behrendt and Wodsak, 2011:3).

But if these policies are to be more than mere rhetoric, resources must be allocated to implement these policy frameworks. The only way to create sustainable employment is through turning “bad” jobs into “good” jobs through skills development and the improvement of infrastructure.

This attempt at developing an alternative development path is not some way-out revolutionary adventure, “tilting at windmills” as it were. Instead it is swimming very much with the current by grounding political innovation in successful social policy initiatives. This is happening in countries such as Brazil, through a conditional family grant, the Bolsa Familia, in India through the Mahatma Ghandi National Rural Employment Guarantee Scheme (MGNREGS), a guarantee of 100 days paid work for each rural household and South Africa is experimenting with an employment guarantee of two days a week, the Community Work Programme (CWP).

The Global South faces a massive challenge to overcome the legacy of its past and meet the challenge of globalisation. If we take the modest sum of R1500 per month (250 US dollars) as a minimum for a “decent” wage, then over 10 million people out of South Africa’s workforce of over 19 million suffer from a decent work deficit. But the challenge is not financial; it is one of thinking long term around strategies of future growth. This is a matter of priorities and political will. It was estimated that in India the MGNREGS costs 1.3% of GDP. Estimates for a similar employment scheme in South Africa vary between 1% and 3% of GDP.

But there are signs of an awakening civil society and a revitalised labour movement in the Global South that could provide the pressure from below that brings together not only wage labour and the great swaths of informal, precarious labour, but also joins them to movements against the commodification of nature and of money in a new employment generating and ecologically sensitive development path.

[i] It is beyond the scope of this article to examine the validity of employers’ claims that they cannot afford to pay the minimum wage. This would require undertaking a price breakdown of a Newcastle factory and the implications of a minimum labour price/cost floor for clothing retailers in South Africa.

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Professor Webster is currently leading a research team designed to develop a diagnostic tool to track the goal of decent work in the province of Gauteng , South Africa. His most recently co-authored book, Grounding Globalisation: Labour in the Age of Insecurity, won the American Sociological Association (ASA) prize for the best book on labour in 2008.

References

Bowles, P (2010) Labour and globalisation, Global labour journal, Volume I, Number 1.

Cichon, M, Behrendt, C and V. Wodsak. 2011. The UN Social Protection Floor Initiative: turning the Tide at the ILO Conference 2011. Friedrich Ebert Stiftung

Miller, D and Williams, P. 2009. “What price a Living Wage? Implementation Issues in the Quest for Decent Wages I the Global Apparel Sector’, Global Social Policy: Volume 9(1):99-125.

Argentina’s ‘Year of Decent Work’, a critical assessment

noreply@blogger.com (Harald Kroeck) — Mon, 19 Sep 2011 12:30:00 +0000

Bruno Dobrusin

The centre-left government of Cristina Kirchner declared 2011 as the ‘Year of Decent Work’ in Argentina, following consultations with the ILO and other international institutions regarding government programmes during the current global economic crisis. The Kirchner administration has indeed promoted several counter-cyclical measures to fight against the global recession and maintain levels of employment in the country. The relative success of these policies, together with the continuous economic growth that Argentina has witnessed since 2003, led the government to tour the international forums such as the G20 meetings and claim that Argentina is an example of a successful response to the crisis. Despite the improvements in the overall economy and the high levels of employment that the country is witnessing, the so-called ‘model’ is far from ideal, and has to be questioned on its main claims. This article discusses the recent improvements as presented by the government and the counter-facts suggested by a recent study carried on by the Workers’ Confederation of Argentina (CTA)[i].

The Decent Work Agenda proposed by the ILO is based on four pillars: employment creation, rights at work, extending social protection and promoting social dialogue. The main focus here is on employment creation in Argentina over the past few years, and on the quality of employment created. Since 2003 Argentina has had a remarkable economic recovery, with an average eight percent annual growth. The devaluation of the currency in late 2002 led to the protection of an important part of industrial production, which explains the generation of employment in the time period. Between 2002 and 2007, the rate of employment increased to levels unseen since 1974, creating approximately 3.7 million new jobs out of which half are in the formal sector[ii], with the industrial sector as the main participant. It has to be recognised that the success of the industry is the reduction of the labour cost in dollars of an important industrial sector, which, due to the low technological component, can compete with imported products through the lowering of salaries in dollars. The leading sectors in the period, the automobile and the iron and steel industries, do not need the exchange rate protection nor did they contribute to employment recovery. Towards 2009, with higher production, employment in the automobile companies was lower than that registered in the middle of the 1990s. The reason is that it is an enclave industry, with small participation of production from Argentina

In the period 2003-2010 social protection was improved, with a current 86 percent of the population receiving benefits from social security systems (both private and public), up from 60 percent in 2003[iii]. In addition to this, the government has also produced a recovery in the minimum wage negotiations by bringing back the Minimum Wage Council, with participation by unions, the state and the employers. This has produced a consistent increase in the minimum wage, at an average rate of 20 percent a year. This set of achievements is being presented by the Kirchner administration to the G20 as an example for other countries to follow. The ILO has supported the government in its promotion of a firm decent work agenda. However, behind this policy, there is a harsh reality that is not being heard about Argentina and the labour policies of the current administration.

There are a number of reasons that justify the assessment that Argentina is not indeed the paradise of decent work. According to two different studies made by alternative trade unions, the employment situation in the country is actually grimmer than that presented by the government. The main difference in the evaluation of these studies is the statistics used. The government has consistently denied the inflation levels and has intervened in the National Institute of Statistics, through appointing a new director and changing the figures of inflation on a monthly basis. This arbitrary decision has been consistently criticised by the workers’ representatives in the Institute. When we take the statistics produced by other public non-intervened institutes, employment figures remain virtually the same since 2007, without improvements in the 8 percent unemployment figure[iv]. If we look at employment creation, it was significant in the period between 2003-2006 that an average of 750,000 jobs was created per year, but it declined in the period between 2007 and 2010 to an average of only 200,000 jobs annually[v]. Moreover, the government claims that informality has decreased over the past decade, when it actually remains at historically high levels. Out of the 3,7 million jobs created, more than half are in the informal sector, which remains at an overall level of 40 percent of the employed population[vi]. Among the youth, informality is even higher, reaching 60 percent of the employed[vii], and with worse working conditions. These factors are closely related to the still relevant 30 percent poverty levels, and just over 5 million people below the level of extreme poverty[viii]. Argentina is not then a good example of a country overcoming the decent work deficit and there remains a need for significant change in the working conditions of the majority of Argentinian citizens.

In reality, informal and precarious working conditions continue in Argentina. Only the salary of the formal workers compensates for the increases in prices, leaving a minority that can sustain their living standards. The current real wage is similar to that of low earners in 2001 at the moment of the economic crisis. The unemployment rate continues to be greater than the same rate in the early 1990s, and it is still much higher than in the 1970s and 1980s. In addition, the stages of ‘social dialogue’ promoted by the government only include the main trade union confederation (CGT), a key ally of the government. There is no intention in the Kirchner administration to recognise any of the alternative trade union confederations, countering the demands made consistently by the ILO in its Freedom of Association reports.

At the September G20 meeting of Labour Ministers, the Argentine government will present their response as the example for other G20 governments to follow, especially those undergoing economic crisis. However, Argentina is still far from an ideal place for labour policies and labour rights. As presented here, the country still has to discuss the productive and developmental model that currently produces immense wealth and a GDP growth of 8 percent a year, but it provides these high profits for a small group of heavily concentrated business groups, mostly foreign, and keeps workers in precarious working conditions.

[i] IDEF-CTA. “Sobre el trabajo decente. Contexto general, informalidad laboral y políticas publicas”, July 2011.
[ii] Labour Ministry of Argentina. “Trabajo, Empleo y Ocupacion. Una Mirada a sectores económicos desde las relaciones laborales y la innovación”, June 2010, p. 43
[iii] Labour Ministry of Argentina. “Trabajo y Empleo en el Bicentenario. Cambio en la dinámica del empleo y la protección social para la inclusión social. Periodo 2003-2010”, September 2010., p.49.
[iv] IDEF-CTA, p.2.
[v] IDEF-CTA, p.4
[vi] Ibid, p.21.
[vii] Ibid, p.27.
[viii] Ibid,p.14

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Bruno Dobrusin is MA candidate at the Tata Institute of Social Sciences, Global Labour University. He is also advisor to the International Relations Secretariat of the Argentine Workers' Confederation (CTA) and research scholar at the Institute of Studies of State and Participation, belonging to the State Employees' Union of Argentina. He is currently involved in the follow-up of the process of regional integration within South America for CTA.