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?.
Global economic crisis challenges before TUs
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
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?
Source: Wall Street Meltdown Primer – by Walden Bello, published on Friday, Sept 26, 2008 by Foreign Policy in Focus
Share in World Income/GDP challenges before TUs
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
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
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)
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
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
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.
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
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
This loss has been followed by rising social security expenditure due to increased demand for benefits for unemployment, housing & social assistance.
Measures to stabilize financial markets & preserve lending to enterprises & households & hence employment and incomes - included
“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.
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
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)
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) .
Framework for national & international policies aimed at:
Policy options identified include:
Almost 60% of final demand for Asian goods comes from developed countries. Exports account for about 47% of developing Asia’s output
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