Global Labor Strategies

How the G-20 Can Pay for a Global Climate Deal

The G-20 summit convening in London on April 2 is preparing to create a quarter trillion dollars of brand new stimulus money to help poor countries battle the global recession.

World leaders plan to use a little-known form of global currency to pay the freight, a currency known technically as "Special Drawing Rights" (SDRs) but often referred to as "paper gold." It’s a currency that can be issued by the International Monetary Fund (IMF), and the Telegraph has reported that the U.S. government is keen on the idea.

Senior figures in the U.S. Treasury have been encouraging the Fund to issue hundreds of billions of dollars worth [of SDRs] to prevent the recession from turning into a global depression.

If leaders at the G-20 summit can create "paper gold" to jump-start the global economy, they can also turn it in a green direction to jump-start protection of the global climate.

They should put much of paper gold stimulus under discussion into an international fund, to help developing countries pay for climate protection. Such an action would remove the greatest stumbling block in the way of international climate action -- the lack of financing to pay for energy conservation, technology transfer, adaptation, forest conservation, clean energy, and research and development. It would allow negotiators to arrive in Copenhagen for climate talks at the end of the year with the finances in place to negotiate and sign a global deal. 

Without the financing, the chances of success in Copenhagen are slim. Yves De Boer, the UN's climate chief, left no doubt about that in comments he made this week criticizing EU finance ministers for putting conditions on financial help for developing countries, contrary to promises made in Bali in 2007:

I think without clarity on finance from industrialized countries there will be no commitment from developing countries.

"Paper gold" offers a way out of this stalemate -- a way to mobilize resources without either taxing or borrowing. That’s why G-20 leaders are proposing to issue a quarter trillion dollars worth of new SDRs – and why paper gold can play a crucial role in protecting the climate, too.

Measures that would fight both global warming and global economic meltdown simultaneously are being called a "Green New Deal." At the climate talks in Poznan last December, UN Secretary-General Ban Ki-moon called a "Global Green New Deal" the best chance for securing a climate agreement in Copenhagen in late 2009.  And in a February op-ed in the Financial Times, Ban together with Al Gore wrote,

What we need is both stimulus and long-term investments that accomplish two objectives simultaneously with one global economic policy response -- a policy that addresses our urgent and immediate economic and social needs and that launches a new green global economy.

World leaders convening at the G-20 have the opportunity to do just that.

The SDR Backstory

Countries normally set aside reserves, most often in gold and U.S. Treasury bills, as insurance to protect their currencies against speculation, runs, and other forms of economic adversity. If a country’s currency starts to plummet in value, the government can use the reserves to buy back its own currency and stabilize it.

Global Labor’s Forgotten Plan to Fight the Great Depression

In the early 1930s, as global unemployment tripled in two years and the world plunged into the Great Depression, the world’s labor movements developed a program for fighting the global crisis through international public works.  It’s a little-known historical might-have-been that could have helped halt the Great Depression, the rise of Adolph Hitler, and the Second World War.  And, as the efforts of world leaders to address today’s “Great Recession” threaten to break down in nationalist rivalry and petty political bickering, it bears lessons – and perhaps an alternative vision – for today.

Workers and organized labor have historically advocated government public works as a solution to unemployment.  Not only would they provide jobs and income for those directly employed, but they would raise overall purchasing power, thereby creating demand for the products of other workers and creating a virtuous circle of economic growth.  In the context of swelling unemployment in the early Depression, discussion of national public works programs developed in many countries.

The proposal for international public works originated with General German Trade Union Alliance (ADGB), which included most of Germany’s trade unions and represented the great majority of its workers.  The plan won the support first of the German union alliance, then of unions around the world, and finally of the League of Nations’ International Labor Organization. 

The plan was worked out by the head of the Alliance’s statistical department, W.S. Woytinsky.  Woytinsky was a Russian émigré who had been president of the St. Petersburg Council of the Unemployed during the 1905 revolution and had organized mass action to force the city to provide public works employment.  Observing Germany’s combination of spiraling deflation and spiraling unemployment in the early 1930s, he came up with the idea of using credit expansion to finance massive public works.

Taking a cue from recent League of Nations policy proposals, Woytinsky proposed an international agreement that would allow the lowering the gold reserve requirements for national currencies.  That would let central banks create new money that could finance international public works and thereby create the purchasing power needed to reflate the economy.

In a June, 1931, article, Woytinsky proposed an “Action Program for Reviving the Economy.”  It called for the labor movement to “assume the role of conveyor of the idea of an activist world economic policy.”  It was up to the labor movement to “force the state and all public institutions to implement measures to revive the economy.”

Labor’s policy “must be a global economic policy.  All nations are suffering because the world economy is sick, and therefore they must all concentrate their forces upon joint action to overcome the worldwide crisis.”  The international agreement would provide an alternative to the rise of economic nationalism, supporting “tariff reductions and European economic unification” as well as “internationalization of wage policy and social policy.”  The program would also support workers’ fight for higher wages, shorter hours, social rights, and regulation of business.

“GLOBALIZATION FROM BELOW” TACKLES THE “GREAT RECESSION”

At the pit of the Great Depression in 1930, an American country music group named the Carter Family recorded a song called The Worried Man Blues. It began:

“I went down to the river and I lay down to sleep
When I woke up there were shackles on my feet.”

Though many subsequent verses describe the horrific outcome, there is no explanation of what had happened or why – just an awakening to a seemingly endless catastrophe.  The song immediately became an unprecedented national hit.  It’s hard to imagine that its success didn’t have something to do with capturing the sense of being the helpless victim of incomprehensible disaster that so many felt in the face of the Great Depression. 

The seemingly sudden collapse of the global economy in 2008 has similarly left millions, indeed billions of people all over the world a victims of a catastrophe that appears both inexplicable and unending. 

But what’s now being dubbed the “Great Recession” is neither incomprehensible nor irremediable.  On the contrary, it can be understood as an expectable result of a capitalism that has been globalized and at the same time “freed” by neoliberalism of control in the public interest.     

The economic globalization that transformed the world at the turn of the century promised, according to its advocates, a glorious vista of prosperity that would provide unprecedented economic growth and raise billions of people out of poverty.  In practice it generated personal and national insecurity, growing inequality, and a race to the bottom in which every community, nation, and workgroup had to reduce its social, environmental, and labor conditions to that of its most impoverished competitor. 

But economic globalization also gave birth to a new convergence of global social forces that opposed this kind of globalization.  People all over the world fought back against this “globalization from above” with their own “globalization from below.”  They used asymmetrical strategies of linking across the borders of nations and constituencies to become a counter power to the advocates of globalization.  They created a movement – variously known as the global justice movement, the anti-globalization movement, global civil society, or as we call it, “globalization from below” -- that some in the media even characterized as “the world’s other superpower.”

The anti-globalization/global justice/globalization-from-below movement developed in response to the expansive phase of globalization and neoliberalism.  Now the global economy has entered the most severe financial crisis since the Great Depression.  The financial crisis has turned out to be the start of a cascade of other economic crises that are reshaping the global economy as definitively as an earthquake reshapes a city.  Current leaders of the world’s nations have utterly failed to develop a solution.   The likely impact of their failure on ordinary people around the world is incalculable. 

The advocates of globalization from above propounded as an article of faith that markets are self-regulating and that all would be for the best in the best of all possible worlds if only governments, labor unions, citizens organizations, and the unruly mob let them alone to do their thing.

The times they are a-changing.  US government officials long known as market fundamentalists seize banks, buy mortgage and insurance companies, and commit $7.7 trillion – half of the US annual product -- to government intervention in financial markets. 

The Clintonite “moderates” who once gutted the social safety net and sacrificed commitments to jobs programs in order to build up budget surpluses now propose vast public works programs financed by budget deficits.  The IMF, scourge of “irresponsible” countries that didn’t balance their budgets, advocates a trillion-plus dollars in global government deficits and claims to have replaced “structural adjustment conditionalities” with condition-free loans.      

These programs may well fail in halting the downward spiral of the global economy.  But they open the door to new forms of more social and public economy.  That’s one reason conservatives normally oppose them – and one indicator of how serious the present crisis really is.  The economic crisis makes it possible to put proposals on the table that have long been ruled inadmissible.   

While economists have asserted with great confidence that one after another trillion dollar “solution” would save the global economy, one after another has failed, raising the specter that it cannot be saved in its present form.  Peter Boon and Simon Johnson of the website baselinescenario.com recently raised that possibility in the Wall Street Journal.   They note that economists generally believe even the Great Depression of the 1930s could have been stopped by proper monetary policy.  But, Boon and Johnson argue, governments may simply not be able to prevent such huge deflationary spirals.  “Perhaps the events of 1929 produced an unstoppable whirlwind of deleveraging which no set of policy measures would truly be able to prevent.”  Their implication seems evident: The same could be true today.

The multi-trillion dollar rescues and bail-outs so far just attempt – possibly futilely -- to save the status quo.  But what can we do if the status quo can’t be saved?  Can globalization from below really provide an alternative solution to the great recession? 

New GLS Discussion Paper: Global Warming and the Great Recession

Today GLS is releasing a new discussion paper Globalization From Below Tackles the Great Recession. 

Its purpose is to stimulate discussion about ways that the global conjunction of forces variously known as the “global justice movement,” the “anti-globalization movement,” and “globalization from below” can respond effectively to the new situation created by today’s historic crisis of the global economy.  That crisis is now widely acknowledged to be more severe than any since the Great Depression of the 1930s.  Indeed, it has now been dubbed, “The Great Recession.” 

As we head off the World Social Forum in Belem, Brazil we're eager for feedback, so post comments or email us directly at info@laborstrategies.org.

Read the full paper here

.

A Global Program for Hard Times

[This is the second in a series of three posts on the Beijing Declaration’s proposals and next steps in implementing its vision.]

The times they are a-changing.  US government officials long known as market fundamentalists seize banks, buy mortgage and insurance companies, and commit $7.7 trillion – half of the US annual product -- to government intervention in financial markets.  The Clintonite “moderates” who once gutted the social safety net and sacrificed commitments to jobs programs in order to build up budget surpluses now propose vast public works programs financed by budget deficits.  The IMF, scourge of “irresponsible” countries that didn’t balance their budgets, advocates a trillion-plus dollars in global government deficits and claims to have replaced “structural adjustment conditionalities” with condition-free loans.      

These programs may well fail in halting the downward spiral of the global economy.  But they open the door to new forms of more social and public economy.  That’s one reason conservatives normally oppose them – and one indicator of how serious the present crisis really is.  The economic crisis it possible to put proposals on the table that have long been ruled inadmissible.   

While economists have asserted with great confidence that one after another trillion dollar “solution” would save the global economy, one after another has failed, raising the specter that it cannot be saved in its present form.  Peter Boon and Simon Johnson of the website baselinescenario.com recently raised that possibility in the Wall Street Journal.   They note that economists generally believe even the Great Depression of the 1930s could have been stopped by proper monetary policy.  But, Boon and Johnson argue, governments may simply not be able to prevent such huge deflationary spirals.  “Perhaps the events of 1929 produced an unstoppable whirlwind of deleveraging which no set of policy measures would truly be able to prevent.”  Their implication seems evident: The same could be true today.

The multi-trillion dollar rescues and bail-outs so far just attempt – possibly futilely -- to save the status quo.  But what can we do if the status quo can’t be saved?

An excellent starting point for discussion of what to do as present efforts to address the global economic crisis fail is the Beijing Declaration, issued by a group of NGOs and social movements who met in October on the occasion of the Asia-Europe People’s Forum in Beijing.  Many of its proposals would be valid in more normal times – indeed many are already functioning in some parts of the world.  But the present crisis [link to “Present crisis in historical perspective] puts them on the table everywhere. 

Neoliberalism and globalization have been comprehensive in their effect.  They have reshaped the economy at every level from local villages to global markets and institutions.  And they have reshaped every sphere, from private finance to government taxation, from government spending to international trade, from the environment to agriculture and industry.

The Beijing Declaration provides a vision [link to Globalization from below in hard times post] of a similarly comprehensive transformation.  Its proposals would affect local, regional, national, continental, and global economies.  And it makes concrete proposals for finance, taxation, public spending and investment, international trade and finance, environmental protection, agriculture, and industry.

The following account provides a bit of background on the problems in each of the spheres, then summarizes the main elements of the Declaration’s proposals.

FINANCE
With their trillions of dollars of financial bailouts, governments are acquiring new leverage over, and even outright ownership of, banks and other financial institutions.  The conservative officials who are conducting the bailouts hate this and would like to return control to private hands asap.  But once the financial system has proven itself to be so catastrophically dysfunctional, and once such vast sums of public money have gone into rescuing it, the argument for making finance a public utility serving public purposes becomes irrefutable. 

In the Shadow of the Pyramids

Their payment was three weeks late and their supervisors notorious for corruption.  So Egyptian workers at Deir El-Medina stopped work and walked out.  The year was approximately 1500 BC.  It may have been history’s first recorded strike.

At the very end of 2006AD another group of Egyptian workers, angered at the denial of their year-end bonus and the corruption of their managers, quit work and shut down their workplaces.  The strike startled the Egyptian people, and apparently the government and the government-owned employer as well.

Labor, Water, and Human Rights

Access to safe drinking water is a basic human need and a fundamental right. Those of us who live in the developed world take this for granted. But for millions of people around the world it is a need and a right that have yet to be realized. World-wide millions are without safe water—in Latin America alone 75 million people do not have reliable access to safe water. Each year two million people in the world die of water born illnesses.

Fooled Again: IMF Avoids Oversight

When the International Monetary Fund (IMF) loans money it imposes strict conditionalities on the borrowing countries. These conditionalities require countries to stay within IMF-imposed budget constraints that frequently block increased spending on health, education, and other needed social services. These are the kind of requirements that contribute to preventing countries from adopting development strategies that lift their people out of grinding poverty.

For years a broad array of civil society and labor groups have tried to force the US the use its power with the IMF to end such conditionalities. Last week the US Congress passed an amendment that appears to restrict the IMF from imposing hiring and wage ceilings, as well as limitations on health and education spending, as a condition of loan assistance.

But appearances are often deceptive. While some global justice advocates are heralding this as a victory, the fact is that Congress has once again passed an amendment that will have little if any affect on IMF practice. If we want an effective international labor rights regime, we should learn from this experience and its back story.

The devil is in the details. The amendment that passed last week instructs the IMF US Executive Director to use her “voice and vote” to ensure that the IMF “does not penalize countries for increased government spending on health care or education by exempting such increases from national budget caps or restraints, hiring or wage bill ceilings or other limits imposed by the International Monetary Fund.” This provision follows months of campaigning by organizations in the US that, according to one US activist, “have denounced such conditionality imposed by the IMF, which in some cases resulted in poor countries canceling expenditures...such as expansion of their programmes to combat HIV/AIDS or hiring new primary school teachers.”

The “voice and vote” language in the amendment is supposed to mean that the US will argue against specified conditionalities and vote against them when possible. Unfortunately, history proves that this such language will have little or no effect on IMF behavior.  We know, because we’ve been down this road before.

Back in 1998 the IMF needed approval from Congress for $18 billion re-authorization funds. The problem was that relations between the IMF (and its supporter the Treasury Department) and Congress were highly strained.  For 20 years the IMF had repeatedly ignored “voice and vote” and other non-binding policy directives attached by Congress to International Financial Institution (IFI) funding bills. At the time, experts cataloged more than 31 distinct laws—ranging from core labor rights and transparency provisions to environmental requirements and health and education protections—passed by Congress over 20 years (in 1983, 1986, 1992, 1994, etc) that were largely ignored by the IMF and other IFIs.  Then, just before IMF re-authorization, the Asian financial crisis hit, and the IMF bailed out Indonesia’s dictator Suharto. 

Congressman Bernie Sanders and Congressman Barney Frank tried to stop the Suharto bailout by pointing to the violation of the 1994 Sanders-Frank amendment, which instructed the Secretary of Treasury to direct the US Executive Director of the IFIs to “use the voice and vote of the US” to enforce ILO core labor standards.

This appeared to be the perfect case for denial of further IMF funding. Here, after all, was a brutal dictator who was holding the labor and pro-democracy leader Muchtar Pakpahan in jail and violently suppressing the strikes of women Nike workers. Unfortunately this did not happen, and the bailout was approved. George Becker, then President of the Steelworkers Union, commented that “….our experience to date with this law [“voice and vote provision”] has been disappointing. Nowhere in the IMF program for Indonesia, for example are workers’ rights given event a cursory mention.”

Based on this 20 year history of the IMF ignoring the “voice and vote” mandates by Congress, it’s clear that another tack must be taken to enforce core labor and other standards. Indeed, those of us that worked on this bill in 1998 discovered after extensive hearings that the US Director had voted only twelve times in the course of participating in some 2,000 key decisions.  We also discovered that the IMF did not even keep minutes of their Director’s meetings, which is the only way for the public to track whether US IMF representatives are voicing objections to draconian measures. A letter signed by the Campaign for Labor Rights, the Sierra Club, Global Exchange, and 50 Years is Enough, stated that this fact makes “the Congressional requirement to use her vote practically meaningless.”

According to Legislative Director Alan Reuther, writing on behalf of the United Auto Workers, “the IMF has failed to use its leverage to encourage developing nations to abide by internationally recognized worker and human rights” and as a result “the UAW opposes providing the additional $18 billion in funds that the IMF has requested.”

Congress ended up passing the IMF funding legislation in 1998 with the ‘voice and vote’ amendments. According to a Financial Times story “This so called “voice and vote” provision by Congress has rarely been effective since many loans are agreed to without formal votes.”  The FT was right. So now we are back where we started.

The proper legislative fix—and one that was voted on in 1998 but failed to pass—is to withhold authorization of US contributions to the IMF "until the US Treasury Secretary certifies that the IMF had amended its bylaws to prohibit the IMF from providing assistance to any country which has not adopted and enforced laws promoting respect for internationally recognized worker rights," as well burdensome conditionalities.

There is anecdotal evidence that proves the point about the weakness in enforcement.  According to a 1999 memo from Elizabeth Drake in AFL-CIO Public Policy Department, the “voice and vote” provisions were less than useful between 1997 and 1999. “A March 1999 report by the U.S. Treasury lists seven countries about which the U.S. Executive Director to the IMF had raised labor concerns. However, an AFL-CIO analysis reveals that these interventions were virtually unmentioned in public IMF documents and they appear not to have had any policy impact.”

Fool me once, shame on you; fool me 2,000 times, shame on me.

N.H.

New Labor Standards Adopted by World Bank

Back in 1997, during the Asian financial crisis, one of us at GLS who was working on the staff of the House Banking Committee drafted federal legislation to force the International Monetary Fund and World Bank to make respect for the core ILO labor standards a condition of all future loans.  At the time, under intense pressure from the Clinton Administration, the AFL-CIO public policy department actually lobbied against the legislation.  Almost a decade later much has changed, with the US labor movement now in wide agreement with the rest of the working world that IMF and WB policies hurt workers and grease the wheels for the race to the bottom.

There are signs that that the global labor movement's new ability to speak with one voice on international funding and reform is having an effect. A few weeks ago, the International Confederation of Free Trade Unions (ICFTU) announced that the World Bank directors had agreed  that all private sector, International Funding Corporation (IFC), loans must pass a core labor rights screening.  After the new standard is implemented in April, all companies that borrow from the IFC will be required to abide by the core labor standards (CLS) as defined by the International Labor Organization (ILO). This commitment stands to affect a wide range of private investment in the developing world since during its 2004-2005 fiscal year the IFC initiated 236 new projects in 67 countries totaling $6.45 billion.

The new policy represents two major advances. First, it applies to private corporations—not just governments—and is thus a good precedent for creating labor rights rules that target global corporations. Second, it contradicts the general neoliberal/WTO principle that the processes and working conditions under which products are produced cannot be regarded as a factor in allowing them "free trade".  (This is an extension of the "free trade" principle that it is each individual government, not the corporation/vendor, that is responsible for setting and enforcing standards.)

But take it from few wounded warriors who have battled the international funding institutions for many years: The World Bank has a long history of talking social movements to death while in practice they continue to foster a race to the bottom. Only time will tell if the Bank has had a change of heart.  But don't hold your breath.

Below is a copy of the ICTFU press release announcing the deal. Once the new standard is implemented, ICTFU's  Washington office (Contact: Peter Bakvis, pbakvis@earthlink.net ) will send periodic reports advising the relevant Global Union Federations and national organizations of upcoming IFC investments in their sectors or country. 

ICFTU Communiqué, 22 February 2006
Action by World Bank's IFC on Workers' Rights a Major Step Forward

The ICFTU has applauded yesterday's adoption by the International Finance Corporation (the private sector lending arm of the World Bank) of a new loan performance standard on labour rights and working conditions.  After the new standard is implemented in the coming weeks, all companies that borrow from the IFC will be required to abide by the core labour standards (CLS) as defined by the International Labour Organization (ILO).  The CLS prohibit the use of forced labour, child labour and discriminatory practices, and require recognition of freedom of association and the right to collective bargaining.  The new standard also obliges IFC clients to observe some other basic conditions, including health and safety standards, protection for contract workers, and a policy for managing reductions in employment.

'"Thousands of workers in IFC-financed projects stand to benefit from this decision, which we believe should be a precedent for international lending in both the private and public sectors", said ICFTU General Secretary Guy Ryder.  "The World Bank funds billions of dollars of development projects each year, and we will be working to ensure that this landmark decision is extended across the entire scope of its activities.  In the meantime, we have offered to work with the IFC to implement this new standard", he added.

The IFC decision demonstrates what can be achieved when the World Bank engages in serious consultation with trade unions.  "In the two years during which the standard has been developed, the IFC sought input from trade unions and the ILO as well as IFC's traditional partners, governments and business.  As a result, the IFC corrected several problems and weaknesses in earlier drafts that we helped them identify," said Ryder.

At the ICFTU's suggestion the IFC accepted two years ago, on a pilot basis, to include a CLS condition in a loan to a clothing manufacturer, Grupo M, which opened new production facilities in Haiti.  The firm initially dismissed hundreds of workers when they attempted to create a union, and it took several months of pressure by the Haitian union, along with international support from trade unions and other organizations, before the workers were rehired and the company recognized the union.  In December 2005 Grupo M and the Haitian union signed the first collective agreement aimed at improving wages and working conditions.

The Haitian example demonstrates both the challenges and opportunities created by the new IFC standard, especially the need for an effective implementation mechanism.  An effective mechanism, coupled with the CLS standard, can have a tremendous positive impact on workers' living standards and working conditions. This is particularly significant in a country such as Haiti, where workers' rights have been ignored and the poor disenfranchised for so long.

Ryder believes that the onus is now on the other branches of the World Bank, namely those that lend to the public sector, to follow the positive step taken by the IFC: "This is not a matter of asking the Bank to do the job of the ILO, governments or anyone else.  It is a matter of asking the Bank to ensure that all of the its operations abide by internationally-recognized workers' rights' standards."

In 2004, a coalition of Indonesian trade unions and researchers published a report showing that child labour, discrimination against women workers and denial of freedom of association were taking place in public infrastructure projects financed by the World Bank.  The Bank's spokesperson in Indonesia acknowledged at the time that the practices were inconsistent with Bank policy and promised corrective action.  However, except for this IFC standard, the Bank has not taken measures to ensure respect for CLS in its projects.