Responding to global economic crisis decent work and challenges before tus
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Responding to Global economic crisis, Decent Work and challenges before TUs . Global economic crisis. - What caused it ? Who is paying for it? How are govts addressing the issues? What can we learn from it? . Causes- Sub prime housing loans?.

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Responding to Global economic crisis, Decent Work and challenges before TUs

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Responding to global economic crisis decent work and challenges before tus

Responding to Global economic crisis, Decent Work and challenges before TUs


Responding to global economic crisis decent work and challenges before tus

Global economic crisis

  • - What caused it ?

  • Who is paying for it?

  • How are govts addressing the issues?

  • What can we learn from it?


Causes sub prime housing loans

Causes- Sub prime housing loans?

Crisis erupted when housing interest rates were raised in Aug 2007, housing loan defaults started, housing market crash & securities based on house loans became worthless…

banks & insurance Cos. fail  liquidity crunch  real economy faces credit squeeze  consumption, building activity & cash flows reduce  US recession + globalization global troubles


Causes

Causes

  • Crisis of over production/over capacity, erosion of profitability and imbalances in the distribution of global wealth (inequalities) within and among countries that limit purchasing powers and markets ???

  • lack of regulation of financial markets & institutions - ‘markets know the best’ philosophy – greed & speculation - de-regulation of economy & labour markets


A look at the past

A look at the past

1945 -1970s: welfare state, keynesian economic policies, strong unions, rapid economic growth – this period came to end in late 1970s due to - increased global competition, tremendous rise in productive capacities (Germany, Japan, Taiwan, Korea, Brazil), reducing profitability – on top of this process came oil price shocks

Post 1970s - Reaganism & Thatcherism: privatisation & structural adjustment (1980s) - redistribute incomes towards the rich on the theory that rich invest & that will promote economic growth – have these policies worked?


Global economic growth

Global Economic Growth

Source: Wall Street Meltdown Primer – by Walden Bello, published on Friday, Sept 26, 2008 by Foreign Policy in Focus


The world at the turn of the century

The world at the turn of the century

  • Richest 20% pocket 86% of the world’s GDP; and the poorest 20% mere 1%.

  • 200 richest people in the world had combined wealth of over $1 trillion, equal to the combined annual income of 41% of the world's people (2.5 billion)

  • 1.3 billion people — over one-fifth of the world’s population— live on less than one dollar a day & lack access to clean water;

  • Over 2 million workers die from occupational accidents or work-related diseases every year.


Unequally placed world 2002 in

Share in World Income/GDP

Share in World Trade

Share in FDI

HIC (80.5), MIC (11.5), LIC (2), China & India (6)

HIC (72.9), MIC (15.6), LIC (2.7), China & India (8.7)

HIC (76.6), MIC (12.5), LIC (1.1), China & India (9.8)

Unequally placed World (2002, in %)

Source: ILR, 2004/1-2, Vol 143, ILO, Geneva


Then came globalization

…then came Globalization

Integration of China, India, Brazil, Russia, & many other emerging market economies – as production centres, markets, sources of cheap labour, raw materials

Almost 40-50% of the profits of US corporations come from their operations & sales abroad now, especially in China.

But - Globalizationincreases the problem of over-capacity, which depresses prices & profits


Rise of financialization

Rise of Financialization

Declining profits in industry & agriculture gave spurt to financial sector investments

Financial sector creates profits but it doesn’t create new value

Growth of trading in derivatives (Value of credit derivatives market is estimated at more than 8 times the global GDP)


Financialization of economy

Financialization of Economy

Growth of (unregulated) private equity capital/hedge funds and their operations in mfg sector - profits are made by selling-off assets of companies, downsizing, reducing investment in plant & equipment, shutting down mfg operations, outsourcing production, share buy backs – all in the name of maximizing share-holder value

Even mfg companies play markets rather than produce

(Ex GE, GM, Porsche) – even social security funds


Volatility of financial sector

Volatility of financial sector

financial crises since capital markets were deregulated & liberalized in the 1980s

- Japan in 1989-91

- Finland, Italy, UK, Sweden in 1992

- Mexican financial crisis in 1994-95

- Asian Financial Crisis in 1997-98

- Russian Fin Crisis in 1998

- Argentine Fin collapse in 2001-02

- US technology stocks crash in 2000-01


Outline of 1997 asian financial crisis

Outline of 1997 Asian Financial Crisis

First - capital account & financial sector liberalization

Then came - foreign funds (seeking quick & high returns)

over investment in real estate & stock markets - prices fall

About 100 billion flees out of the East Asian countries within few weeks

economic collapse  recession in the real economy

IMF bails out FIIs BUT opposed the national govts when they wanted to impose controls & implement measures that US, Europe & other countries are doing today.


Impact of crisis

Impact of Crisis

  • 212 mn jobless worldwide in 2009 (ILO) – crisis added 34 mn additional unemployed since 2007

  • 633 mn workers & their families living on below $ 1.25/day in 2008 – about 215 mn additional workers were living on the margin and at risk of falling into poverty in 2009

  • Abt 40% drop in FDI in 2009, with more than a 50% drop in some developing countries (UNCTAD). International trade volume fell by 15% in 2009

  • Impact of economic slow down & fall in govt revenues on social welfare expenditures???


Impact on asia

Impact on Asia

Outflow of capital from Asia (>100 billion $$$ in 2008) – what was its impact on Asian economies, stock markets & currencies?

Impact of recession in western markets on Asian production employment & economic growth

Impact of credit squeeze on domestic investments, industry & jobs

Remittances, foreign aid, govt revenue – all go down


Impact on workers

Impact on Workers

Job losses (migrants, youth, women)

Implications for collective agreements & industrial relations (wage cuts, wage freeze, higher work loads, forced unpaid leave, default on social security contributions, rise in casual unprotected work, violations of FoA – all these are decent work deficits)

Impact of job losses on family welfare: nutrition levels, children education (girl child), burden on woman, alcoholism, housing

Workers pension funds - globally pension funds lost over 5 trillion $ between 2007 & 2008) – in some countries where pensions were privatised (ex in Latin America), they lost more


Impact on social security

Impact on Social Security

  • SS revenues & reserves fell - due to fall in contributions & investment incomes, decline in govt subsidies & through rising non-compliance

  • Public social security funds lost over $ 225 bn in 2008 - for some funds, the loss represents as much as 5 five years of investment income

  • Loss in private pension assets in 2008: $ 5.4 trillion (as per OECD estimate)

    This loss has been followed by rising social security expenditure due to increased demand for benefits for unemployment, housing & social assistance.


Responding to crisis

Responding to Crisis

Measures to stabilize financial markets & preserve lending to enterprises & households & hence employment and incomes - included

  • Central banks cut interest rates, expanded money supplies & eased requirements on collateral for refinancing operations by central banks

  • fiscal stimulus packages by Govts, borrowing & spending to offset the reduction in private sector demand due to crisis

  • Bail-out of Banks & firms thru loans, asset purchases, guarantees, and direct spending

  • Establishment or enhancement of bank deposit guarantees


Responding to global economic crisis decent work and challenges before tus

  • But many countries with large levels of foreign debt, high inflationary pressures and facing massive capital flight could not take counter cyclical measures (Hungary, Ukraine, Latvia & other CIS countries) – to avoid depreciation of currencies & increasing debt servicing costs – these countries had to take loans from IMF and implement austerity measures – to build confidence in the financial markets BUT these had negative impacts on employment, wages and investment.


Responding to global economic crisis decent work and challenges before tus

“The current recovery plans are necessary, but insufficient. It is not enough to inject money into the economy, we need to change its principles to make sure it generates social justice, development for all, equity, stability and long-term prosperity,” – says international labour movement.


Union view

Union view

Regulate Global Finance - such as hedge funds & private equity funds;

Create a financial transaction tax – to dampen speculation & raise funds for development – Ex: 0.005% tax on just currency exchanges & derivatives trading would raise £100 billion ($150 billion) a year globally

Regulate executive & shareholder bonus & remuneration – to discourage short term view of financial investments;

Close down tax havens;

What should be the objectives of International financial markets ? expand the casino in more orderly fashion OR to channel resources into real economy? Regulate financial markets so that these serve the objectives of real economy


Union view1

Union view

End deregulation of employment market & ensure respect for fundamental rights of workers (FoA & CB rights)

Ensure basic social security for all (effective social protection measures would have minimized ‘impact of economic crisis’ and assisted in improving effectiveness of stimulus/recovery packages - worries about economic insecurity lead to people postponing decisions regarding consumption or investment)

What else???


Ilo approach

ILO Approach

Tripartite dialogue with social partners - should play a key role in addressing the economic crisis & developing policy responses at national level.

Pre-condition for effective social dialogue: ???

Global Jobs Pact – a decent work response to crisis - adopted on 19 June 2009, following the ILO Summit on the Global Jobs Crisis (which was attended by the heads of state & governments, ministers of labour, workers' & employers’ representatives) .


Ilo s global jobs pact

ILO’s Global Jobs Pact

Framework for national & international policies aimed at:

  • A global economic recovery with job creation and the provision of social protection to working people and their families at its core;

  • Stronger regulatory framework for the financial sector;

  • Efficient and well-regulated trade and markets;

    Policy options identified include:

  • Employment incentive public investment;

  • Special employment programmes, training, skills

  • Support for enterprises

  • Broadening social protection and minimum wages


Atleast one lesson for asia

Atleast one lesson for Asia

  • Over dependence on exports & western markets

    Almost 60% of final demand for Asian goods comes from developed countries. Exports account for about 47% of developing Asia’s output

  • For economic & social stability at home - Asian countries need development & expansion of domestic markets – this implies Decent Work & respect for fundamental labour standards.


Sources further readings

Sources & further readings

Wall Street Meltdown Primer – by Walden Bello, published on Friday, Sept 26, 2008 by Foreign Policy in Focus

Talking Points: Economic Meltdown – by Chuck Collins, Oct 27, 2008, Institute for Policy Studies (www.ips-dc.org)

How bailouts Dwarf other global crisis spending – by Andersen, Cavanagh & Redman, Institute of Policy Studies, Nov 24, 2008

Voices from the South – Impact of the financial crisis on developing countries – Institute of Development Studies, Nov 2008 (www.ids.ac.uk/go/financial-crisis-impact)

ILO Global Employment Trends Report 2009

IUF (www.iuf.org): The G20 and After–Questions for Labour, 15 Dec 2008

Source: Financial Times, Asia and the crisis: Unlucky numbers By David Pilling, February 9 2009 http://www.ft.com/cms/s/0/65599c38-f6e1-11dd-8a1f-0000779fd2ac.html

RECOVERING FROM THE CRISIS: A GLOBAL JOBS PACT - http://www.ilo.org/wcmsp5/groups/public/---ed_norm/---relconf/documents/meetingdocument/wcms_108456.pdf

For FTT, see- http://www.tuc.org.uk/economy/tuc-17566-f0.cfm


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