1. Responding to Global economic crisis, Decent Work and challenges before TUs

2. Global economic crisis
- What caused it ?
Who is paying for it?
How are govts addressing the issues?
What can we learn from it?

3. Causes- Sub prime housing loans?
Crisis erupted when housing interest rates were raised in Aug 2007, housing loan defaults started, housing market crash & securities based on house loans became worthless…
banks & insurance Cos. fail  liquidity crunch  real economy faces credit squeeze  consumption, building activity & cash flows reduce  US recession + globalization  global troubles

4. Causes
Crisis of over production/over capacity, erosion of profitability and imbalances in the distribution of global wealth (inequalities) within and among countries that limit purchasing powers and markets ???
lack of regulation of financial markets & institutions - ‘markets know the best’ philosophy – greed & speculation - de-regulation of economy & labour markets

5. A look at the past
s: welfare state, keynesian economic policies, strong unions, rapid economic growth – this period came to end in late 1970s due to - increased global competition, tremendous rise in productive capacities (Germany, Japan, Taiwan, Korea, Brazil), reducing profitability – on top of this process came oil price shocks
Post 1970s - Reaganism & Thatcherism: privatisation & structural adjustment (1980s) - redistribute incomes towards the rich on the theory that rich invest & that will promote economic growth – have these policies worked?

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

7. The world at the turn of the century
Richest 20% pocket 86% of the world’s GDP; and the poorest 20% mere 1%.
200 richest people in the world had combined wealth of over $1 trillion, equal to the combined annual income of 41% of the world's people (2.5 billion)
1.3 billion people — over one-fifth of the world’s population— live on less than one dollar a day & lack access to clean water;
Over 2 million workers die from occupational accidents or work-related diseases every year.

8. Unequally placed World (2002, in %)
Share in World Income/GDP
Share in World Trade
Share in FDI
HIC (80.5), MIC (11.5), LIC (2), China & India (6)
HIC (72.9), MIC (15.6), LIC (2.7), China & India (8.7)
HIC (76.6), MIC (12.5), LIC (1.1), China & India (9.8)
Source: ILR, 2004/1-2, Vol 143, ILO, Geneva

9. …then came Globalization
Integration of China, India, Brazil, Russia, & many other emerging market economies – as production centres, markets, sources of cheap labour, raw materials
Almost 40-50% of the profits of US corporations come from their operations & sales abroad now, especially in China.
But - Globalization increases the problem of over-capacity, which depresses prices & profits

10. Rise of Financialization
Declining profits in industry & agriculture gave spurt to financial sector investments
Financial sector creates profits but it doesn’t create new value
Growth of trading in derivatives (Value of credit derivatives market is estimated at more than 8 times the global GDP)

11. Financialization of Economy
Growth of (unregulated) private equity capital/hedge funds and their operations in mfg sector - profits are made by selling-off assets of companies, downsizing, reducing investment in plant & equipment, shutting down mfg operations, outsourcing production, share buy backs – all in the name of maximizing share-holder value
Even mfg companies play markets rather than produce
(Ex GE, GM, Porsche) – even social security funds

12. Volatility of financial sector
financial crises since capital markets were deregulated & liberalized in the 1980s
- Japan in
- Finland, Italy, UK, Sweden in 1992
- Mexican financial crisis in
- Asian Financial Crisis in
- Russian Fin Crisis in 1998
- Argentine Fin collapse in
- US technology stocks crash in

13. Outline of 1997 Asian Financial Crisis
First - capital account & financial sector liberalization 
Then came - foreign funds (seeking quick & high returns)
over investment in real estate & stock markets - prices fall
About 100 billion flees out of the East Asian countries within few weeks
economic collapse  recession in the real economy
IMF bails out FIIs BUT opposed the national govts when they wanted to impose controls & implement measures that US, Europe & other countries are doing today.

14. Impact of Crisis
212 mn jobless worldwide in 2009 (ILO) – crisis added 34 mn additional unemployed since 2007
633 mn workers & their families living on below $ 1.25/day in 2008 – about 215 mn additional workers were living on the margin and at risk of falling into poverty in 2009
Abt 40% drop in FDI in 2009, with more than a 50% drop in some developing countries (UNCTAD). International trade volume fell by 15% in 2009
Impact of economic slow down & fall in govt revenues on social welfare expenditures???

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

16. Impact on Workers Job losses (migrants, youth, women)
Implications for collective agreements & industrial relations (wage cuts, wage freeze, higher work loads, forced unpaid leave, default on social security contributions, rise in casual unprotected work, violations of FoA – all these are decent work deficits)
Impact of job losses on family welfare: nutrition levels, children education (girl child), burden on woman, alcoholism, housing
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

17. Impact on Social Security
SS revenues & reserves fell - due to fall in contributions & investment incomes, decline in govt subsidies & through rising non-compliance
Public social security funds lost over $ 225 bn in for some funds, the loss represents as much as 5 five years of investment income
Loss in private pension assets in 2008: $ 5.4 trillion (as per OECD estimate)
This loss has been followed by rising social security expenditure due to increased demand for benefits for unemployment, housing & social assistance.

18. Responding to Crisis
Measures to stabilize financial markets & preserve lending to enterprises & households & hence employment and incomes - included
Central banks cut interest rates, expanded money supplies & eased requirements on collateral for refinancing operations by central banks
fiscal stimulus packages by Govts, borrowing & spending to offset the reduction in private sector demand due to crisis
Bail-out of Banks & firms thru loans, asset purchases, guarantees, and direct spending
Establishment or enhancement of bank deposit guarantees

19. But many countries with large levels of foreign debt, high inflationary pressures and facing massive capital flight could not take counter cyclical measures (Hungary, Ukraine, Latvia & other CIS countries) – to avoid depreciation of currencies & increasing debt servicing costs – these countries had to take loans from IMF and implement austerity measures – to build confidence in the financial markets BUT these had negative impacts on employment, wages and investment.

20. “The current recovery plans are necessary, but insufficient
“The current recovery plans are necessary, but insufficient. It is not enough to inject money into the economy, we need to change its principles to make sure it generates social justice, development for all, equity, stability and long-term prosperity,” – says international labour movement.

21. Union view
Regulate Global Finance - such as hedge funds & private equity funds;
Create a financial transaction tax – to dampen speculation & raise funds for development – Ex: 0.005% tax on just currency exchanges & derivatives trading would raise £100 billion ($150 billion) a year globally
Regulate executive & shareholder bonus & remuneration – to discourage short term view of financial investments;
Close down tax havens;
What should be the objectives of International financial markets ? expand the casino in more orderly fashion OR to channel resources into real economy? Regulate financial markets so that these serve the objectives of real economy

22. Union view
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 - worries about economic insecurity lead to people postponing decisions regarding consumption or investment)
What else???

23. ILO Approach
Tripartite dialogue with social partners - should play a key role in addressing the economic crisis & developing policy responses at national level.
Pre-condition for effective social dialogue: ???
Global Jobs Pact – a decent work response to crisis - adopted on 19 June 2009, following the ILO Summit on the Global Jobs Crisis (which was attended by the heads of state & governments, ministers of labour, workers' & employers’ representatives) .

24. ILO’s Global Jobs Pact
Framework for national & international policies aimed at:
A global economic recovery with job creation and the provision of social protection to working people and their families at its core;
Stronger regulatory framework for the financial sector;
Efficient and well-regulated trade and markets;
Policy options identified include:
Employment incentive public investment;
Special employment programmes, training, skills
Support for enterprises
Broadening social protection and minimum wages

25. Atleast one lesson for Asia
Over dependence on exports & western markets
Almost 60% of final demand for Asian goods comes from developed countries. Exports account for about 47% of developing Asia’s output
For economic & social stability at home - Asian countries need development & expansion of domestic markets – this implies Decent Work & respect for fundamental labour standards.

26. Sources & further readings
Wall Street Meltdown Primer – by Walden Bello, published on Friday, Sept 26, 2008 by Foreign Policy in Focus
Talking Points: Economic Meltdown – by Chuck Collins, Oct 27, 2008, Institute for Policy Studies (
How bailouts Dwarf other global crisis spending – by Andersen, Cavanagh & Redman, Institute of Policy Studies, Nov 24, 2008
Voices from the South – Impact of the financial crisis on developing countries – Institute of Development Studies, Nov 2008 (
ILO Global Employment Trends Report 2009
IUF ( The G20 and After–Questions for Labour, 15 Dec 2008
Source: Financial Times, Asia and the crisis: Unlucky numbers By David Pilling, February
RECOVERING FROM THE CRISIS: A GLOBAL JOBS PACT -
For FTT, see-