"GLOBAL, ECONOMIC AND SOCIAL
DEVELOPMENT FROM A TRADE UNION PERSPECTIVE" *
JOHN EVANS GENERAL SECRETARY TRADE UNION ADVISORY COMMITTEE
TO THE OECD (TUAC-OECD)
* This paper is a revised updated
version of a chapter published in The Search for Equity, Ed. David Foden
& Peter Morris, Lawrence & Wishart Limited, London, 1998. &
Peter Morris, Lawrence & Wishart Limited, London, 1998.
This paper takes stock of the current debate in OECD countries on the
orientation of public policy in response to "globalisation" - the increasing
integration of economies internationally. It makes some comments on the
analysis of "globalisation" and then examines the "social" agenda 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. These were some of the priority areas
that have been identified as comprising part of the "social dimension"
of globalisation (1).
Globalisation - myth or reality
Globalisation - the accelerated 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. Despite the
debate between academic economists and commentators as to the extent and
effects of globalisation and as to whether this is a new phenomenon, it
is more or less irrefutable that there are a series of interconnected developments
at work (2) which are profoundly affecting all OECD economies and societies:-
(i) Since the late 1980s 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 1980s, but foreign direct investment
grew twice as fast as trade. The growth of FDI slowed in the early 1990s
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" (3). However, FDI has been concentrated
among high and middle-income countries (4). Over the decade of the 1980s,
OECD countries were responsible for roughly 95% of FDI outflows and received
75% of inflows. A change has occurred in the mid-1990s 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. Moreover the empirical
analysis that has been done on FDI data up to 1993 suggests that "International
businesses remain heavily nationally embedded and remain MNCs rather
than TNCs" (5). This has implications for government policy towards MNCs.
The political economy 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 1960s was followed by the collapse of Bretton
Woods in the 1970s and the removal of national capital controls and deregulation
of the financial sector in the 1980s. The result has been the explosion
of cross border lending, the appearance of new financial "products" and
the appearance of an oligopolist structure 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-1990s 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. 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,
and the crisis is far from over.
(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 Taylorist
systems of mass production and the appearance of "post fordist" and "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 1970s and 1980s has clearly been both a stimulant of the
globalisation process and a policy reaction to it. In the mid-1990s 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 NIICs 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 the "TRIAD".
Whatever the macroeconomic significance of the "globalisation" process
it has penetrated very extensively the micro level relations between trade
unions and employers. Increasingly trade unions 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 the "free market" right this is a wholly desirable situation and
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. Globalisation is being used as catalyst for a new round of policies
to "roll back the state" at a time when the enthusiasm for the Reagan and
Thatcher supply-side revolutions of the 1980s has clearly flagged. It
is argued that the full benefits of the "reforms" of the last two decades
will only be felt when all economies and sectors are fully opened up to
international competition and "market contestability". Thatchers "there
is no alternative" has now become "la pensée unique". 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.
At the same time for some on the "left" globalisation represents a convenient
opportunity to rediscover a capitalist conspiracy or reassert the concept
of "socialism in one country" or at least "protectionism in one country".
But a populist reaction is dangerous terrain. In Europe it is firmly occupied
by the National Front in France or concepts such as the Austrian extreme
rights notion of a "Europe of Fatherlands".
The real "conspiracy" is not globalisation, it is 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 "social" agenda:-
(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 (6) from within the labour movement on the single-minded
pursuit of a "Social Clause". Nevertheless, it 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.
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 (7). The empirical
and theoretical analysis of the OECD (8) and World Bank (9) 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 (10).
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 Republic of 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 Mexicos 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;
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" (11)
in the global system.
- start a real dialogue between the WTO and the ILO on labour standards;
- ensure the effective treatment of labour issues in any future multilateral
investment agreement and strengthen the enforcement of Guidelines for Multinational
- the further use of the US and EU GSP labour rights machinery;
- integrate obligations for core labour standards into all of the World
Banks 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 OECDs 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
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 Unions "Social Dimension" is the response to globalisation
(12). 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 "Works 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 MNCs 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 the majority 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 (13) 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 empirical 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 1996 OECD Employment Outlook (14) which honestly
reviewed 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 very different 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 Taylorist forms of production 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 Taylorist 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 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 being developed in the first half of 1999 are likely
to have a "stakeholder" chapter.
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 (15) as a necessary condition for fighting unemployment.
Progress in this area faces three central problems:- diverging analysis
and political priorities between the "TRIAD" North America, Europe and
Japan within the G7; 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 1980s, 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" (17).
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
dont look particularly new, they mirror very closely the policy debate
of the 1920s in Europe and the United States. By the 1930s 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 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 (18), 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 BIS, the IMF, the OECD and European 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;
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.
- 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.
(iv) The future of the public sector
The leitmotif 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 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 the
US health care reform stalemate was salutary. 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. The
challenge is to shape that debate.
(1) Will Hutton, Robert Kuttner, et al., "Jobs and Growth" - A Fabian/Unison
(2) See for example Charles Oman: "Policy Challenges of Globalisation
and Regionalisation" - OECD Development Centre Policy Brief, 1996
(3) OECD, "Financial Market Trends", June 1996
(4) UNCTAD, "World Investment Report", 1996
(5) Paul Hirst and Graham Thompson, "Globalisation in Question", Policy
(6) Phil Evans, "The World Trade Organisation: Challenge to the International
Labour Movement", Labour and Society International Discussion Paper, January
(7) ILO, Declaration on Fundamental Principles and Rights at Work and
its Follow-up, June 1998
(8) OECD, "Trade, Employment and Labour Standards", 1996
(9) World Bank, "World Development Report", 1995
(10) OECD Development Assistance Committee, "Orientations on Participatory
Development and Good Governance", 1993
(11) William Greider, "One World, Ready or Not: The Manic Logic of Global
Capitalism", Simon and Schuster, January 1997
(12) Elizabeth Guigou, "LEurope, une Réponse à la Mondialisation",
CFDT Aujourdhui, November-December 1996
(13) OECD, "The OECD Jobs Study - Facts, Analysis, Strategies", June
(14) OECD, "Employment Outlook", July 1996
(15) Pollard, Hutton and Kuttner in "Jobs and Growth", op. cit.
(16) OECD, "Economic Outlook", December 1996
(17) William Greider, "Global Warning", The Nation 13/20, January 1997
(18) Mahbub ul Haq, Inge Kaul, Isabelle Grunberg, "The Tobin Tax: Coping
with Financial Volatility", OUP, 1996