Financial Globalizatio Congress Economic Conference: Globalization and Irish Workers Dublin, 23 April 2008 Poul Nyrup Rasmussen PES President Financial Globalization

The real economy should come first “The most competitive, dynamic, knowledge-based economy in the world, creating sustainable economic growth, more and better jobs and with greater social cohesion”. Making Europe : (2000 & 2005) March 2007 “Energy- and Climate package” Social Market Economy – not a market society!

We need well-functioning financial markets, but: Cost efficient? Full transparency and disclosure? Financial stability? Long-term financing? Patient ownership? Sufficient financing of the real economy?

The anatomy of the current crisis Collapse of the credit bubble ”The trigger” Sub-prime Investment- banks Credit Rating Agencies Hedge- funds Private Equity

Credit derivatives ” Financial weapons of mass destruction ”  2007: Total volume of outstanding credit derivatives contracts stood at $62,200bn  This is 10 times the level of four years ago !

Are we living in a neo-liberal world? The Real World The Market Neo-liberal model ▼ Full transparency Perfect information Optimal competition. Asymmetric information (J. Stiglitz) ▼ Conflict of interest Market abuse Insider trading Lack of confidence

The Big Transformation: Venture capital (only 5%) LBO’s 60% No demonization But dominant LBO’s – New Employers 20 LBO’s = 4 mio. workers 5 big deals = Russia + India budget LBO 2006: € 265 bn. in Europe LBO > IPO = 75% ½ of global financial market Black box Financial bubbles and -crisis New global financial players

The debt and the culture of extraction The debt Higher returns % Tax deduc- tions Fewer long- term invest- ments Overburdened credit markets IMF + SEC + ECB : High risk of distressed companies.

More jobs? World Economic Forum, Davos (2008): Workplaces taken over by PE have 7% fewer employees after 3 years and 10.3 % less 5 years following the takeover than in the control group. Companies taken over by private equity have higher rates of closure, opening, acquisition, and disposal of workplaces..

Better returns than others ? Ludovic Phalippou & Maurizio Zollo University of Amsterdam: ”Net returns - adjusted for management fees and methodological errors – 3,8% below the stock The world’s largest pension fund CalPERS: Picking the winners? Since 1990 invested in 257 funds – 107 has given a negative return!

After the exit: distressed companies University of Nottingham/Barclay’s Private Equity UK data: More than a quarter of the (106 out of 400) companies disposed of by private equity in 2007 went into bankruptcy

What to do? Transparency, disclosure and monitoring to ensure financial stability Setting up limits of leverage to lower the risk of default and not to undermine firms Public classification of credit derivatives Effective taxation Managing ”Conflict of interest”

What can trade unions do? For pensions funds to unite to make ethical claims To demand respect for workers’ rights to information and consultation To demand respect for workers’ rights to collective bargaining It’s about changing behaviour.

Who should do it? We don’t have to wait for a World Government! NationalEUUS/Global Taxation Company law (own money) Limited partnerships Bonusses, stock options Transparency Capital Requirements Excessive debt Conflict of interests Systemic risks/supervision Worker’s rights Capital Requirements Transparency Conflict of interests Supervision

New Social Europe Roadmap Renewal of welfare states Different reforms, common direction Concrete recommendations Ten principles

10 principles for a New Social Europe

Dynamic labour markets OLD JOBOLD JOB NEW JOBNEW JOB * Shortest distance because of ALMP * Minimize risk of loss of income * Maximise ‘re-skilling’ / new competences * Rights and obligations * Social partners’ responsibility

10 million more jobs in the New Social Europe!