Texte en français
INTERNATIONAL TRADE UNION STATEMENT ON THE GLOBAL ECONOMIC CRISIS
The Deepening Crisis
1. The Asian and Russian economic and financial meltdowns have pushed
a third of the world economy into recession. Those who have borne the brunt
are working people, the poor and in particular women. In Asia living standards
have collapsed and unemployment has surged; in Russia one quarter of the
labour force has not been paid for six months. Spreading bankruptcies are
leading to more widespread destitution. There remains a real risk of the
crisis spreading to Latin America and Africa, which are already experiencing
a fall in growth and a setback to prospects for employment and poverty reduction. Other
areas, notably the European Union and United States have
experienced continuing, though slowing growth, but the global economy is
inter-linked and falling trade and dangerously volatile stock markets threaten
to trigger a truly global recession with falling demand and output and
a devastating impact on employment.
2. The fundamental cause of the crisis was the mismanagement of economic
and social policies underpinning globalisation and the blinkered pursuit
of financial liberalisation without adequate national and international
frameworks of regulation. Massive flows of short-term credit and portfolio
investment were released on emerging financial markets without systems
of accountability, transparency and prudential regulation. Bankers and
financial institutions made enormous errors of judgement, the cost of which
are massive job losses not least in the finance sector. The crisis has
revealed endemic problems of corruption and institutional failure highlighted
by the collapse of hedge funds such as Long term Capital Management.
3. Since the start of the current crisis in Thailand in July 1997,
the Bretton Woods institutions, and the Group of Seven industrial countries’
governments, which dominate international economic policy-making, have
followed a strategy of containment. As the toll of victims mounts, it is
now clear that containment has failed. The crises in the global economy
dominated discussions at this year’s Annual Meetings of the IMF and the
World Bank, but governments failed to agree on effective action. The G7
countries must take further concerted action to inject demand into the
world economy so as to stave off a global recession by restoring growth
and stimulating job creation. Going beyond the October 1998 statement of
Finance Ministers and Central Bankers, they must also put in place a regulatory
framework to ensure that the current contagion can never happen again.
The Need to Expand Global Demand and Employment
4. OECD countries’ Central Banks and Finance Ministers must implement
a co-ordinated strategy to support balanced demand and restore global growth
and job creation. This must include:
- Further co-ordinated reductions in the level of interest
rates. With the move to Economic and Monetary Union, Europe has both a
responsibility and an opportunity to support demand growth;
- Radical action in Japan to re-capitalise and reform the banks, if
necessary through the nationalisation of the banking system and the introduction
of permanent tax cuts to stimulate domestic demand;
- Targeted expansion of infrastructure investment schemes to support
output and tackle structural problems; this should include the bringing
forward of Trans-European programmes;
- Financial assistance to the developing and transition countries in
the front-line of the crisis, targeted on poverty alleviation, social programmes
and the restructuring of private and public debt incorporating improvements
on the "Heavily Indebted Poorer Countries" initiative of the IMF and World
Bank so as to bring genuine debt relief for the world's poorest countries;
- Efforts to effect payment of back wages due to Russian workers, allowing
some relief from the vicious circle which has led to lost tax revenue and
prolonging the financial crisis.
5. International support for developing, transition and emerging economies
must be targeted on the countries worst affected by the crisis and the
most vulnerable people in those countries. Much of the burden has fallen
on women, who in the absence of adequate social safety nets carry most
of the burden of keeping families together and caring for the young and
elderly on drastically reduced household incomes. The priorities are:
- Protecting education and health budgets, ensuring that the
poorest are able to keep their children at school and have access to essential
healthcare;
- Creating and expanding social safety nets to ensure that the under-employed
and jobless have a satisfactory income on which to live, and extending
ILO-backed child labour eradication programmes;
- Boosting employment intensive public works schemes and extending
training and job search programmes;
- Restraining prices of essential goods and maintaining the purchasing
power of minimum wages;
- Developing sound industrial relations systems, through the promotion
of tripartite dialogue between governments, employers and unions, based
on respect for the ILO’s core labour standards.
An International Commission on International Financial Market
Regulation
6. The current crisis has revealed serious weaknesses in the international
financial system. Systemic risk and contagion effects magnify and transmit
shocks around the world. Neither the much heralded IMF "early warning system"
nor the Basle Committee's Core Principles for Effective Banking Supervision
have had any impact on this most serious crisis of globalisation. Whilst
establishing emergency funds for emerging economies is both desirable and
a significant step, the G7 initiatives of October 1998 remain inadequate.
Restoring long-term growth will require a fundamental reconstruction of
the way governments, through the network of international financial institutions
and organisations, regulate and manage the global market, and especially
financial markets. The aim must be to re-harness financial markets to facilitate
long-term productive investment.
7. The debate over financial market reform has been held behind closed
doors by bankers and financial ministry officials. There must now be full
public participation. Governments must therefore establish as a priority
a broad-based Independent International Commission mandated to report rapidly
on the institutional and policy changes needed to establish an effective
international regulatory framework and new financial order. Some issues
for early decision include:
- Improved fiscal and monetary policy co-ordination between
the emerging reserve currency blocks of the Dollar, Yen and Euro in order
to generate more stable parities, along with the progressive removal of
large long term current account deficits and surpluses;
- Recognition of the right of states to control short term foreign
capital inflows and outflows in the interest of domestic macro-economic
stability;
- Binding international standards for the prudential regulation of
financial markets covering capital reserve standards, limits to short-term
foreign currency exposure, controls and certification on derivatives trading
and other forms of leveraged investment built on credit;
- Ensuring that banking systems are transparent and bound by effective
disclosure criteria;
- Improved information on currency flows, private debts and reserves;
- Serious examination of the implementation of an international tax
on foreign exchange transactions;
- Extensive debt relief for the poorest developing countries, as proposed
by the Jubilee 2000 campaign, including those suffering from the consequences
of environmental disasters such as Hurricane Mitch.
8. Better standards are needed for corporate governance and the Guidelines
on Corporate Governance being developed in the OECD must include the trade
union proposals for achieving broad corporate responsibility to stakeholders
in society. Action must also be stepped up to combat bribery and corruption
on the basis of the OECD instruments, and implemented in co-operation with
the social partners.
Changing the Social Face of Globalisation
9. The crisis has demonstrated the danger of ignoring the social dimension
of globalisation. Financial and social stability are closely inter-linked.
Stabilisation policies that lead to social explosions will fail and further
undermine the credibility of the IMF and World Bank. Social dialogue between
governments, trade unions, employers and other representative bodies is
also necessary to build consensus over national social and economic development
goals and means of action. Strong social institutions, including free trade
unions, are vital to the development of human resources and the mediation
of disputes about the allocation of resources.
10. Competitive advantage will lie with those countries that have strong
social cohesion built on investment in education and training, health-care
and a sound industrial relations system, founded on core labour standards.
The most successful countries, both developed and developing, will be those
with institutions that are able to balance and rebalance the market pressures
of flexibility and dynamism with the social pressures for security and
dignity. People must be entitled to a say on their terms and conditions
of employment, and economic development.
11. A new architecture for global financial stability and sustainable
development must include a Social Code. Action is needed to:
- Reform of the IMF and World Bank, as called for by the UN's
Copenhagen Summit for Social Development, so that structural adjustment
programmes promote good governance and respect for human rights and core
labour standards, increased employment and poverty reduction, rather than
current policies of austerity;
- The implementation by all relevant international institutions of
the ILO Declaration on Fundamental Principles and Rights at Work;
- Active debate in the WTO to ensure that the 1999 WTO Ministerial
meeting includes core labour standards as a subject for negotiation in
any new round of trade negotiations; practical measures to strengthen co-operation
between the ILO and WTO; and the covering of core labour standards in trade
policy reviews;
- Learning the lessons of the failure of MAI negotiations so that future
multilateral rules governing international investment balance the responsibilities
and not just the rights of investors including among other things binding
commitments to observe core labour standards.
12. Preventing a global slump and building the foundations for recovery
and sustainable development is a challenge to the leadership of the world’s
major democracies in the industrialised and developed world. Globalisation
is man-made and not a force of nature, even if at the present time it often
gives the appearance of being out of control. The world could revert to
nationalism and isolationism. However, such a trend would prevent any global
effort to eliminate poverty, and destabilise international relations and
the quest for peace, security and disarmament. The real question facing
the international community is: does the political will exist to build
international policies and institutions to manage the process of globalisation
to meet the needs and aspirations of people?
