From crisis to recovery: How the world responded? & ILO Response (GJP)

Globalization How is it changing the world? Participants views… Picture Source: Kate Raworth, Oxfam presentation on Trade & Human Development,

Implications of New Policies Shift from development cooperation to free trade; More competition between unequals; High income countries have more than 80% of the world incomes, receive more than 3/4 th of the foreign investment and almost 3/4 th of the world trade is between them. Equality of “access” (to international trade) does not mean equality of “opportunity” - unequal capabilities lead to unequal outcomes New’ freedom of mobility of ‘Capital’ pits workers in different countries against each other – affecting also labour solidarity Changing nature & terms of employment pose challenges for unions, collective bargaining, social protection systems & also undermines labour law & TU rights

A look at the past Post war – rise of welfare state Post war – rise of welfare state Deregulation & shift to market economy since 1970s – but economic growth & profit rates still slow Deregulation & shift to market economy since 1970s – but economic growth & profit rates still slow Privatisation & structural adjustment (1980s) - redistribute incomes towards the rich on the theory that rich invest & that will promote economic growth Privatisation & structural adjustment (1980s) - redistribute incomes towards the rich on the theory that rich invest & that will promote economic growth 1990s: Globalization - integration of China, India, Brazil, Russia, & many other emerging market economies – as production centres, markets, sources of cheap labour, raw materials – but this increases the problem of over-capacity, which depresses prices & profits 1990s: Globalization - integration of China, India, Brazil, Russia, & many other emerging market economies – as production centres, markets, sources of cheap labour, raw materials – but this increases the problem of over-capacity, which depresses prices & profits

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

Rise of Financialisation Declining profits in industry & agriculture gave spurt to financial sector investments & deregulation of capital markets Declining profits in industry & agriculture gave spurt to financial sector investments & deregulation of capital markets Financial sector creates profits but it doesn’t create new value Financial sector creates profits but it doesn’t create new value Growth of (unregulated) private equity capital/hedge funds and their operations in mfg sector - Even mfg companies play markets rather than produce (Ex GE, GM, Porsche) – even social security funds Growth of (unregulated) private equity capital/hedge funds and their operations in mfg sector - Even mfg companies play markets rather than produce (Ex GE, GM, Porsche) – even social security funds Growth of trading in derivatives (Value of credit derivatives market were estimated at more than 8 times the global GDP) Growth of trading in derivatives (Value of credit derivatives market were estimated at more than 8 times the global GDP)

Global economic crisis - What caused it ? - Who is paying the price for it? - How are govts addressing the issues? - What can we learn from it? What needs to be done?

Causes Sub prime housing loans? OR Sub prime housing loans? OR Result of ‘liberalization’, speculation & greed - ‘markets know the best’ philosophy Result of ‘liberalization’, speculation & greed - ‘markets know the best’ philosophy Crisis of over production/over capacity, erosion of profitability and inequalities in the distribution of wealth (within and between countries that limit purchasing powers and markets – unequal distribution of income between capital & labour that limited households’ ability to consume other than through debt (Stiglitz) Crisis of over production/over capacity, erosion of profitability and inequalities in the distribution of wealth (within and between countries that limit purchasing powers and markets – unequal distribution of income between capital & labour that limited households’ ability to consume other than through debt (Stiglitz) Reduction of public control on the economy - ‘markets know the best’ philosophy – lack of regulation of financial markets & institutions - greed & speculation - de-regulation of economy & labour markets Reduction of public control on the economy - ‘markets know the best’ philosophy – lack of regulation of financial markets & institutions - greed & speculation - de-regulation of economy & labour markets

Impact on Asia Capital Outflow from Asia (>100 billion $$$ in 2008) – its impact on Asian economies, stock markets & currencies? Capital Outflow from Asia (>100 billion $$$ in 2008) – its impact on Asian economies, stock markets & currencies? Impact of recession in western markets on Asian production, employment & economic growth Impact of recession in western markets on Asian production, employment & economic growth Impact of credit squeeze on domestic investments, industry & jobs Impact of credit squeeze on domestic investments, industry & jobs Remittances, foreign aid, govt revenue – all go down Remittances, foreign aid, govt revenue – all go down

Impact of Crisis 212 mn jobless worldwide in 2009, crisis added 34 mn new unemployed since mn workers & their families living on below $ 1.25/day in 2008 more than a 50% drop in FDI in some developing countries (UNCTAD), drastic fall in AID too Wage cuts/wage freeze, higher work loads, forced unpaid leave, default on SS contributions, rise in unprotected precarious work, violations of FoA & CBAs

Impact on Workers 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 SS revenues & reserves fell - due to fall in contributions & investment incomes, decline in govt subsidies & through rising non-compliance – while SS expenditures rose in this period Decline in real wage growth from 4.7% in 2007 to 1.5% in 2008, situation worsened in Real wages fell in most countries;

Response to Crisis

Responding to Crisis With the hope of stabilizing financial markets, maintain lending to enterprises and to safeguard employment and incomes, following measures were taken: Governments’ fiscal stimulus packages - spending to offset the reduction in private sector demand Bailing out Banks & firms thru loans, asset purchases, guarantees, and direct spending Central banks cut interest rates, expanded money supplies & eased requirements on collateral for refinancing BUT so far no effective measure taken to regulate financial sector or prosecute those responsible

Union view Regulate Global Finance - such as hedge funds & private equity funds; Close down tax havens Regulate Global Finance - such as hedge funds & private equity funds; Close down tax havens Create a financial transaction tax – to dampen speculation & raise funds for development – Ex: 0.005% tax on just currency exchanges & derivatives trading would raise $150 billion a year globally Create a financial transaction tax – to dampen speculation & raise funds for development – Ex: 0.005% tax on just currency exchanges & derivatives trading would raise $150 billion a year globally Regulate executive & shareholder bonus & remuneration – to discourage short term view of financial investments; Regulate executive & shareholder bonus & remuneration – to discourage short term view of financial investments; What should be the objectives of International financial markets ? expand the casino in more orderly fashion OR regulate financial markets so that these serve the objectives of real economy? What should be the objectives of International financial markets ? expand the casino in more orderly fashion OR regulate financial markets so that these serve the objectives of real economy?

Union view End deregulation of employment market & ensure respect for fundamental rights of workers (FoA & CB rights) 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) 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) Role of State – in providing social security to all – State is the ultimate financial guarantor - social security should be seen as human right and not as a savings account of individual contributors Role of State – in providing social security to all – State is the ultimate financial guarantor - social security should be seen as human right and not as a savings account of individual contributors What else??? What else???

ILO’s Response Global Jobs Pact adopted in June 2009 – Global Jobs Pact adopted in June 2009 – a framework for policies aimed at economic recovery with job creation and the provision of social protection to working people and their families at its core; Among other measures, members agreed on the need to “maintain employment” and to “avoid the damaging consequences of declining wages and worsening working conditions. Among other measures, members agreed on the need to “maintain employment” and to “avoid the damaging consequences of declining wages and worsening working conditions. Process: Tripartite dialogue with social partners for addressing the crisis & developing national policy response. Process: Tripartite dialogue with social partners for addressing the crisis & developing national policy response.

What does Global Jobs Pact signify? No return to business as usual No return to business as usual Employment intensive growth pattern, including green jobs Employment intensive growth pattern, including green jobs Need for Wage led recovery process (MWs, CB) Need for Wage led recovery process (MWs, CB) Set up / Extend Social Security system Set up / Extend Social Security system Financial & tax system that serves real economy & people Financial & tax system that serves real economy & people

Areas for action at national level include Employment intensive public investmentEmployment intensive public investment Special employment programmesSpecial employment programmes Measures for promoting training & skillsMeasures for promoting training & skills Support for enterprises, especially SMEsSupport for enterprises, especially SMEs Measures to promote real wage increases thru - social dialogue, collective bargaining & statutory or negotiated minimum wagesMeasures to promote real wage increases thru - social dialogue, collective bargaining & statutory or negotiated minimum wages Enhancing social protection, starting with a basic social protection floor for all – covering basic health services and Income/subsistence security for all children, working poor, older people, persons with disabilities & those without main breadwinner in a family.Enhancing social protection, starting with a basic social protection floor for all – covering basic health services and Income/subsistence security for all children, working poor, older people, persons with disabilities & those without main breadwinner in a family.

Issues for discussion How do working people share in benefits of economic growth? How do working people share in benefits of economic growth? What kind of employment is being offered nowadays?

Global Economic Crisis … at least one lesson for Asian Countries Over dependence on exports & western markets For economic & social stability at home - Developing countries need to depend on domestic markets – this implies Decent Work & respect for fundamental labour standards.