Seoul, 5 October 1999
THE TRADE UNION RESPONSE TO GLOBALISATION
- THE VIEW FROM OECD COUNTRIES
The global economy has become wealthier over the last 20 years
yet for many working people around the world global developments are seen
as a threat to their livelihoods. This apparent contradiction reflects
the gap that has emerged between the process of economic change that is
brought about by globalisation and perceived social progress.
Despite the world growth:
- 4/5’s of the world population remains detached from this
growth in wealth;
- Inequality has increased between countries;
- Relative poverty has increased in OECD countries;
- Since the Asian crisis insecurity has increased and many workers
have been pushed back into poverty and unemployment. This is very clear
here in Korea.
A central question is to what extent the process of globalisation has
contributed to this growth in inequality and insecurity or to what extent
the situation would be worse without global trade and investment.
For trade unions the issue is no longer is globalisation a good or bad
thing, but how to make the trade union response more concrete, concentrating
on what we can change and not wasting efforts on what we cannot influence.
In sort, the debate concerns the policy response to globalisation.
This paper makes some comments on the analysis of “globalisation” and
then examines trade union demands for policy action in four areas:- trade,
investment and labour standards; reconciling equity and efficiency in the
labour market; international economic co-ordination; and policy towards
the public sector. Lastly, it touches on unions' action and strategies.
Globalisation - myth or reality
Globalisation - the integration of economic activity across national
or regional boundaries - has become the catchword dominating economic and
social policy discussion at the end of the 20th century. It is more or
less irrefutable that there are a series of interconnected developments
at work which are profoundly affecting all OECD economies and societies:-
(i) Since the late 1980’s the growth of foreign direct investment
(FDI) has been the main factor driving increased economic interdependence.
The focus of this has been regional rather than global. International trade
grew twice as fast as GNP during the 1980’s, but foreign direct investment
grew twice as fast as trade. The growth of FDI slowed in the early 1990’s
but picked up in 1994 and has risen to record levels in 1995. As a result
there has been a significant deepening of international and foreign ownership,
in the words of the OECD “never before have so many firms from so many
industries invested in so many countries”. However, FDI has been concentrated
among high and middle-income countries. Over the decade of the 1980’s,
OECD countries were responsible for roughly 95% of FDI outflows and received
75% of inflows. A change has occurred in the mid-1990’s and by 1995, the
OECD share of outflows and inflows had dropped to 85% and 65% respectively.
This was largely due to the growth of FDI in East Asia, including China
(whose share of developing country FDI inflows grew from 10% to 38% between
1989 and 1995). It appears therefore that up to 1995 at least, the growth
of FDI has been regionally rather than globally driven.
The impact on unions of globalisation
(ii) Whilst there may be doubts as to the extent to which manufacturing
and service companies have become fully globalised, there are no such doubts
about the globalisation of financial markets. The appearance of
the “Eurodollar market” in the 1960’s was followed by the collapse of Bretton
Woods in the 1970’s and the removal of national capital controls and deregulation
of the financial sector in the 1980’s. The result has been the explosion
of cross border lending, the appearance of new financial “products” and
the appearance of global financial institutions. Cross border assets
held by banks tripled in the decade up to 1993. Daily foreign exchange
transactions amount to more than $ 1.2 trillion ($ 1,200 billion). This
has reduced national sovereignty and shifted power from governments to
financial markets. By the mid-1990’s the perception was that this had reduced
national sovereignty and shifted power from governments to financial markets.
However, the chain events following the Thai Baht collapse in the summer
of 1997 have now shown the real impact of financial globalisation as reflected
dramatically by events here in Korea. The Asian crisis has led to one third
of the world economy being plunged into recession. 100 million people who
thought they were part of a growing middle-class have been brutally thrust
back into poverty.
(iii) There has been a shift in the development and diffusion of technology
to a global level. Access to “state of the art” technology has become a
key factor in determining competitivity in many of the growth sectors.
On the production side, joint ventures, sourcing agreements and other types
of inter-company co-operation have become part of this process. On the
application side the integration of information and communications technology
(the appearance of “global information society”) is now having a radical
effect on the organisation of the production of goods and services. Internet
use is transforming communication and electronic commerce may soon transform
distribution systems. Related to this has been the decline of systems of
mass production and the appearance of “flexible” forms of organisation.
This has implications both for the competitive strategies to be adopted
by OECD countries and the feasibility or desirability of pursuing a national
approach to managing trade.
(iv) Alongside technological change, the policy shift to deregulation
in the late 1970’s and 1980’s has clearly been both a stimulant of the
globalisation process and a policy reaction to it. In the mid-1990’s the
“regulatory reform” debate appears at a cross-roads.
(v) There has been an opening of non-OECD countries to this “global
market system”. The formerly centrally planned countries of Central and
Eastern Europe and the former Soviet Union have to varying degrees privatised,
liberalised and deregulated their economies. The Asian NIIC’s including
Korea succeeded for a time in pursuing an export-orientated growth strategy.
But now in a post-crisis world the era of export-led growth may be at an
end. Developing countries in general, some under the pressure of the structural
adjustment programmes of the IMF and World Bank, are all seeking more reliance
on and exposure to world markets. However, despite the emergence of “new
players” the bulk of trade, investment and GNP remains concentrated in
Globalisation has also penetrated very extensively the daily relations
between trade unions and employers. Increasingly trade unions in OECD countries
are finding that international factors arise as a constraint in their relations
with governments and in their relations with the employers.
Government action whether it be in setting tax rates, economic policy
management, interest rate policy or exchange rate policy, international
constraints are increasingly cited as reasons for inability of government
to fulfil the tasks that they are elected in democracies to fulfil. The
election of predominantly social democratic governments in Europe for some
has been seen as a social reaction to globalisation.
The attitude of employers towards labour unions generally including
attitudes to union recognition, their policy towards labour costs and their
attitude to technological change and work organisation are again increasingly
dictated by international competitivity and international “fashions”. The
threat of delocation to an offshore site has become the standard play in
negotiations and in some cases it has become the reality. These pressures
are greatest along the three North/South, East/West “frontiers - Mexico/US,
Central/Eastern Europe, China/East Asia. The perception is therefore of
a footloose international production system where capital is mobile and
labour is not. This is contributing to the imbalance of relative power
of unions and employers in the labour market at the same time many of the
policies to which we looked to governments to fulfil are being undermined.
For the two ends of the political spectrum this perception may have
For some employers and governments it is convenient to exaggerate the
loss of local or regional sovereignty. It allows a “deresponsibilisation”
of the elites from the results of their actions. The conservative government
in Britain (1979-97) was one of the most vociferous in arguing for the
need to conform to a model of competitiveness existing in some unspecified
place in East Asia. Yet, at the same time the then Korean government argued
that South Korea had to lower its labour standards to stop Korean firms
from moving to Scotland and South Wales.
The real danger is not globalisation itself, it is rather to argue policy
paralysis as a result of it. A spectrum of mechanisms for governance is
available with, at one end of the spectrum a set of “hard” international
regulations covering specific fields (e.g. WTO); in the middle, looser
policy co-ordination (e.g. G7, OECD, IMF); regional integration (e.g. European
Union); continuing national regulation; and more loosely regional or district
level policies. Whilst binding, “hard” mechanisms of regulation at a global
level will only be able to cover a limited number of areas, and they are
therefore not an alternative for the looser forms of co-ordination and
co-operation in other areas.
The need for public policy to regulate globalisation:-
(i) Trade and investment and core labour standards
Globalisation has drawn dramatic attention to the need to guarantee core
workers rights on a global basis. The regulation of labour standards through
the enforcement of certain global minima is not a “new issue”. It has been
part of the response to previous waves of globalisation:- the creation
of the ILO after the First World War; the Havana Charter and the attempt
to create the International Trade Organisation after the Second World War.
The current wave of globalisation and the creation of the World Trade Organisation
have given the issue new focus. It is perhaps a key area where we need
a hard regulation, which is internationally binding.
Achieving a “hard” regulation is still some way off and there is even
some criticism from within the labour movement on the single-minded pursuit
of a “Social Clause”. Nevertheless, the goal of effective regulation must
be pursued. Achieving other goals will be difficult as long as core labour
rights can be easily denied. Functioning civil society is necessary to
build up a momentum for satisfactory governance of global markets. Moreover,
given the fact that the world trading system has moved to guarantee the
rights of intellectual property, investors’ rights, and even environmental
standards, it will become increasing difficult to deny human rights. This
debate will be before the Seattle Ministerial meeting next month.
Over the last three years, there has been perceptible progress in shifting
“conventional economic wisdom” to seeing core labour rights as “good thing”
economically and socially as opposed to either an irrelevancy or a market
distortion. Focusing on core standards (cf.:- freedom of association, rights
to collective bargaining, freedom from forced labour or prison labour,
freedom from child labour exploitation and non-discrimination) has allowed
pretty universal acceptance of them as inviolable human rights in a way
that the listing of 170 ILO Conventions would not. The agreement on the
ILO in 1998 of a Declaration on “Fundamental Principles and Rights at Work”
has facilitated this providing a system wide standard. The empirical and
theoretical analysis of the OECD and World Bank now regards core standards
and by virtue of this trade union recognition as at least neutral in their
economic effects, and at best positive. The mainstream thinking of those
involved in development assistance has also shifted to see core labour
rights as a part of “participatory development and good governance” strategies.
Five to ten years ago, far more countries and commentators would have
argued that authoritarianism and free markets were the necessary routes
to achieving economic lift-off. Now they tend to remain silent. The fact
that in 1997 the OECD was ready to censure the then government here in
Korea - a new Member - for not living up to commitments on freedom of association
and collective bargaining given when it joined the Organisation, is highly
significant. It did not happen in the case of Mexico’s membership of the
OECD and would have been unthinkable even five years ago.
The debate has therefore moved on to enforcement mechanisms. The “stand
off” on labour standards at the WTO Ministerial Council between the United
States and the majority of EU countries on the one hand and many developing
countries on the other, leaves no one in any doubt about the difficulties
of getting the issue into the WTO mechanism. There is visceral hostility
amongst many trade officials about the issue. But despite their efforts
to treat it as a “non-issue” labour standards issues still dominate much
media coverage of trade affairs.
Urgent follow up has to focus on the need to:-
- continue to strengthen the ILO machinery for the follow-up
to the Declaration;
- at Seattle start a real dialogue between the WTO and the ILO on labour
- ensure the effective enforcement of OECD Guidelines for Multinational
- integrate obligations for core labour standards into all of the World
Bank’s lending policies and IMF conditionality;
- develop targeted consumer boycotts on persistent violations of core
- continue to ensure that codes of conduct with companies or industry
associations have effective independent verification;
- develop the OECD’s monitoring and “peer group pressure plus” system
for the respect of core standards in Member countries;
- extend labour standards clauses in hemispheric and regional trade
None of these propositions are revolutionary in nature, yet they are
all attainable and their attainment would make a difference. Over time
with productivity growth it would allow unions to “bring the bottom-up”
in the global system.
The process of European political and economic integration has of course
allowed cross- frontier regulation of labour standards to move well beyond
the guarantee of core workers’ rights. For many on the centre-left in Europe,
the European Union’s “Social Dimension” is the response to globalisation.
The European trade union movement has sought:- to establish a framework
of minimum standards to stop “social dumping”; to establish consultation,
information and negotiation rights with multinational companies at a European
level; to expand the structural funds of the European Community. One of
the most significant developments in this process has been the passing
of the European “Work’s Council” Directive, requiring multinational companies
with more than one thousand employees to establish consultative machinery
for their workforces at European level.
It should also be mentioned that irrespective of mechanisms of global
governance given their national characteristics MNC’s do still open themselves
up to points of leverage. At the same time some international trade union
company campaigns are becoming more targeted and sophisticated.
(ii) A “socially acceptable” model of competitiveness
Guaranteeing workers’ rights in the international system is a necessary
but not a sufficient condition for re-establishing social progress in a
global system. Moreover, the reappearance of the “Eurosclerosis” debate
against the background of rising European unemployment is in danger of
stalling progress on the European Social Dimension. If the “social agenda”
is to progress, the battle of ideas has to be won to show that it is possible
to manage change in firms, industries, regions and labour markets in socially
equitable way. A “model” of industrial organisation has to be developed
which is both competitive and socially acceptable. OECD countries have
to restructure on the basis of a high set of labour standards not on the
basis of a low wage model of development.
Within the OECD, there are two quite divergent analyses of labour markets
which have crystallized in the debate over European unemployment. The conventional
“neoclassical” wisdom of many of Finance Ministries in OECD countries is
that the origin of the problem lies in the inability of the labour market
to adapt to macro economic shocks over which governments now have little
control. The focus of policy is therefore to reduce “natural” rates of
unemployment through a search for labour market flexibility. This has been
behind the recommendations in the OECD Jobs Study to decentralise collective
bargaining systems; remove administrative extensions to agreements; weaken
minimum wage regulation; and to use competition in product markets to keep
downward pressure on nominal wages. Restriction of unemployment benefits
goes in the same direction.
However, there is strikingly little practical support for many of the
policy elements described and short of “something turning up” little confidence
can be given to such policies reducing unemployment through high-quality
employment creation. The “unemployed poor” risk being transferred into
“working poor” with the same social consequences. These doubts were echoed
by the OECD itself in the successive OECD Employment Outlooks which honestly
review the evidence on wage dispersion and employment creation. Moreover,
countries as such as the Netherlands, Ireland and Denmark have all succeeded
in combining strong economic performance and equity by not following the
“Anglo-Saxon” model. It is also significant that recent meetings of OECD
and G8 Labour Ministers have now recognised the problems associated with
low paying jobs.
A more positive view of the policy options emanates from work being
carried out in the OECD with regard to:- technological change; the nature
of “flexible organisations”; skill acquisition and education policy; and
corporate governance issues. The changing strategies of firms to the global
market are seen to be a key factor. One interpretation of this work is
that firms in the OECD area are becoming polarised. On the one hand there
are those trapped in old production systems having to compete in an ever
tougher global market with low wage competition from non-OECD countries.
Increasingly it is not the firms themselves, which have to compete but
the workers in different countries bidding for their jobs with the same
employers. On the other hand there are firms who have shifted to new forms
of work organisation in which a high premium is given to the flow of knowledge
and innovation. These “high skill - high trust” organisations compete in
a different and clearly more benign world than their mass production rivals.
The policy implications of this are that governments can move their
economies onto higher growth paths by encouraging technological diffusion,
innovation, “good practice” management techniques and the development of
appropriate infrastructures for the “information society”. “Learning societies”
and knowledge-based firms are the key to success. In this scenario labour
market deregulation is not a central issue. Internal functional flexibility
of workers in line with changing work organisation is much more important
to firms. Flexibility to “hire and fire” looks at best irrelevant and at
worst could encourage the low wage/ low skill route to competitiveness.
The challenge for OECD countries is how to move the whole of their societies
and not just an elite onto a “high route” to competitiveness.
Many of the same issues arise in the parallel debates taking place in
the debate on corporate governance around the issue of “stakeholder capitalism”;
on strategies for regional, district or community level development strategies;
and on the development of sustainable consumption and production. The OECD
Guidelines on Corporate Governance agreed this year do have a “stakeholder”
chapter achieved due to union pressure.
Establishing a “new paradigm” in this area is not a question of “hard”
international regulation, it is a question of shifting attitudes and winning
the arguments and shaping the strategies of different levels of government
(iii) International Economic Co-ordination
For some time there have been calls for a more “expansionary macroeconomic
strategy” and a “new international structure” to co-ordinate policy built
on the existence of the G7 as a necessary condition for fighting unemployment.
Progress in this area faces three central problems:- diverging analysis
and political priorities between different OECD members; the hegemony of
Central Banks; and the related globalisation of financial markets.
Diverging priorities in macroeconomic policy have to some extent replaced
the supply-side consensus of the 1980’s, but they have prevented a co-ordinated
policy response coming from the G7. Despite differing emphasis within the
Clinton Administration, the broad approach has been to “keep growth going”
until inflationary constraints really do appear. The success of the fall
in measured unemployment to below previously stated “natural rates”, remains
clouded by the prevalent growth in poverty, declining real wages and insecurity
but nevertheless has reflected an accommodating monetary policy. Japan
has also shown itself ready to intervene through traditional public work
programmes when faced by genuine recessionary fears. It is in Europe where
Finance Ministers and Central Banks continue to inflict “monetary masochism”
or more accurately “monetary sadism” on their populations. The battle is
now being fought for the economic architecture and hence priorities of
the post Economic and Monetary Union period. The central issue must be
to shift policy to a less deflationary stance. The political changes in
Europe now help. Even the OECD has warned of the dangers of the timing
of fiscal restriction, though of course it does not disagree with the goal.
Given the power over monetary policy now vested in independent central
banks, it is clear for the need to “reform the objectives of central banks
so they will support a pro-growth regime instead of thwarting it”. The
one dimensional pursuit of price stability has now to give way to approach
which now does allow decisions to be made on the balance of risks and trade-offs
between the objectives of employment and inflation. The theoretical battle
is being fought around whether or not monetary policy does affect the real
economy in the longer term. Many of the features of this current debate
don’t look particularly new, they mirror very closely the policy debate
of the 1920’s in Europe and the United States. By the 1930’s it is significant
that the conventional wisdom had shifted to being concerned at falling
prices and deflationary expectations rather than inflationary expectations.
Policy shifted to putting floors in markets rather than de-regulating them.
The Asian financial crisis and the danger that is stability brought
about here in Korea has brought home the need to “throw sand in the wheels
of international finance”. This is now recognised not just by Keynesian
nobel laureates such as James Tobin, but more dramatically by speculators
such as George Soros. “Bond market vigilantes” contribute to the deflationary
overkill of real interest rates, unwarranted currency fluctuations wipe-out
years of efforts to manage structural change in the real economy. The unsustainable
growth of derivative markets raise major problems of the adequacy of prudential
rules for dealing with systematic risk. Successive G7 calls for “new financial
architecture” look like “too little too late”. What is needed is a co-operative
framework of action between the main institutions, mixing national and
international measures. They should include the following:-
National Level Initiatives:
- the establishment of effective minimum reserve requirements
for the banking system;
- the introduction of capital standards for other types of financial
activity, particularly securities dealing;
- the introduction of more extensive disclosure requirements by financial
institutions, so as to increase the transparency of their risk exposure;
- the introduction of minimum deposit periods for short-term financial
- increasing the transparency and accountability of the operations of
the large institutional investors and notably the reduction of speculative
international exposure of pension funds.
- the progressive removal of structural surpluses and deficits
on both trade and capital account, between the United States, Europe and
Japan together with the further lowering of real interest rates through
concerted action by monetary authorities;
- the introduction of an international tax on foreign exchange transactions;
- the certification of financial markets with acceptable risk and prudential
- the introduction of more stable parities between the currencies of
the Euro, the Yen and the Dollar;
- the development in the longer term of an international reserve currency;
- the implementation of international agreements on capital taxation;
- increased co-operation between taxation and banking regulatory authorities
to eliminate money laundering resulting from illicit activities;
- increased international prudential monitoring of financial markets.
But most important there is a need to open up to the public the debate
on financial markets and for this the international trade union movement
has called for a broad-based International Commission to be set up to report
on the changes necessary.
(iv) The future of the public sector
The common theme of the years 1985-95 has been privatisation and deregulation
and a withdrawal of the state from direct intervention in the economy or
direct ownership. Despite this, “government” expenditure as a share of
GDP in the OECD area as a whole has moved little from around 40% on average
over the last decade. The state at different levels remains responsible
for administering very substantial proportions of national income. The
challenges ahead are increasing the demands on public finances not reducing
them:- the ageing of most OECD populations; the need to invest in lifelong
education; the need to reverse the decline in infrastructure investment;
counteracting the growth in poverty.
The “governance” debate does provide a framework, which allows a non-ideological
debate on the role of the public sector. A “social” agenda must on the
one hand espouse the need to change the management of public services and
administration to make them responsive to the public and not just to save
money. “Partnership” approaches to change do work. On the other hand, the
pressures of ageing and health care costs, together with the delivery of
lifelong learning are going to dominate the debates on resource allocation
at the start of the next millennium. This will be a global debate and we
need to really “re-invent government” and not re-invent the private sector,
paid for by taxpayers.
The response of the trade union movement to globalisation cannot be
to bemoan changes or react defensively. It must be to respond and manage
them. To fulfil the legitimate aspirations of consumers, employees, investors,
markets require effective governance, whether or not they are organised
on a national, regional or global scale. Against a background of globalisation
it is the forms of governance that have to change not the principle. But
unions themselves are also changing:- reaching out to new groups of workers,
using new sources of influence, such as their control over pension funds
and developing through the international trade secretariats their studies
for dealing with multinational enterprises. The challenge is to shape the
global debate on globalisation and to show the unions are a key part of
the solution to re-linking economic development and social progress.