FES/FKTU/KCTU
SPECIAL
LECTURE
Seoul, 5 October 1999
THE TRADE UNION RESPONSE TO GLOBALISATION
- THE VIEW FROM OECD COUNTRIES
John Evans
General Secretary, TUAC-OECD
Introduction
The
global economy has become wealthier over the last 20 years yet for
many working people around the world global developments are seen
as a threat to their livelihoods. This apparent contradiction reflects
the gap that has emerged between the process of economic change
that is brought about by globalisation and perceived social progress.
Despite the world growth:
-
4/5¡¯s of the world population remains detached from this
growth in wealth;
-
Inequality has increased between countries;
-
Relative poverty has increased in OECD countries;
- Since the Asian
crisis insecurity has increased and many workers have been pushed
back into poverty and unemployment. This is very clear here in Korea.
A central question is to what extent the process of
globalisation has contributed to this growth in inequality and insecurity
or to what extent the situation would be worse without global trade
and investment.
For trade unions the issue is no longer is globalisation
a good or bad thing, but how to make the trade union response more
concrete, concentrating on what we can change and not wasting efforts
on what we cannot influence. In sort, the debate concerns the policy
response to globalisation.
This paper makes some comments on the analysis of
¡°globalisation¡± and then examines trade union demands for policy
action in four areas:- trade, investment and labour standards; reconciling
equity and efficiency in the labour market; international economic
co-ordination; and policy towards the public sector. Lastly, it
touches on unions' action and strategies.
Globalisation
- myth or reality
Globalisation
- the integration of economic activity across national or regional
boundaries - has become the catchword dominating economic and social
policy discussion at the end of the 20th century. It is more or
less irrefutable that there are a series of interconnected developments
at work which are profoundly affecting all OECD economies and societies:-
(i)
Since the late 1980¡¯s the growth of foreign direct investment
(FDI) has been the main factor driving increased economic interdependence.
The focus of this has been regional rather than global. International
trade grew twice as fast as GNP during the 1980¡¯s, but foreign
direct investment grew twice as fast as trade. The growth of FDI
slowed in the early 1990¡¯s but picked up in 1994 and has risen
to record levels in 1995. As a result there has been a significant
deepening of international and foreign ownership, in the words of
the OECD ¡°never before have so many firms from so many industries
invested in so many countries¡±. However, FDI has been concentrated
among high and middle-income countries. Over the decade of the 1980¡¯s,
OECD countries were responsible for roughly 95% of FDI outflows
and received 75% of inflows. A change has occurred in the mid-1990¡¯s
and by 1995, the OECD share of outflows and inflows had dropped
to 85% and 65% respectively. This was largely due to the growth
of FDI in East Asia, including China (whose share of developing
country FDI inflows grew from 10% to 38% between 1989 and 1995).
It appears therefore that up to 1995 at least, the growth of FDI
has been regionally rather than globally driven.
(ii) Whilst
there may be doubts as to the extent to which manufacturing and
service companies have become fully globalised, there are no such
doubts about the globalisation of financial markets. The
appearance of the ¡°Eurodollar market¡± in the 1960¡¯s was followed
by the collapse of Bretton Woods in the 1970¡¯s and the removal
of national capital controls and deregulation of the financial sector
in the 1980¡¯s. The result has been the explosion of cross border
lending, the appearance of new financial ¡°products¡± and the appearance
of global financial institutions.
Cross border assets held by banks tripled in the decade up
to 1993. Daily foreign exchange transactions amount to more than
$ 1.2 trillion ($ 1,200 billion). This has reduced national sovereignty
and shifted power from governments to financial markets. By the
mid-1990¡¯s the perception was that this had reduced national sovereignty
and shifted power from governments to financial markets. However,
the chain events following the Thai Baht collapse in the summer
of 1997 have now shown the real impact of financial globalisation
as reflected dramatically by events here in Korea. The Asian crisis
has led to one third of the world economy being plunged into recession.
100 million people who thought they were part of a growing middle-class
have been brutally thrust back into poverty.
(iii) There
has been a shift in the development and diffusion of technology
to a global level. Access to ¡°state of the art¡± technology has
become a key factor in determining competitivity in many of the
growth sectors. On the production side, joint ventures, sourcing
agreements and other types of inter-company co-operation have become
part of this process. On the application side the integration of
information and communications technology (the appearance of ¡°global
information society¡±) is now having a radical effect on the organisation
of the production of goods and services. Internet use is transforming
communication and electronic commerce may soon transform distribution
systems. Related to this has been the decline of systems of mass
production and the appearance of ¡°flexible¡± forms of organisation.
This has implications both for the competitive strategies to be
adopted by OECD countries and the feasibility or desirability of
pursuing a national approach to managing trade.
(iv) Alongside
technological change, the policy shift to deregulation in
the late 1970¡¯s and 1980¡¯s has clearly been both a stimulant of
the globalisation process and a policy reaction to it. In the mid-1990¡¯s
the ¡°regulatory reform¡± debate appears at a cross-roads.
(v)
There has been an opening of non-OECD countries to
this ¡°global market system¡±. The formerly centrally planned countries
of Central and Eastern Europe and the former Soviet Union have to
varying degrees privatised, liberalised and deregulated their economies.
The Asian NIIC¡¯s including Korea succeeded for a time in pursuing
an export-orientated growth strategy. But now in a post-crisis world
the era of export-led growth may be at an end. Developing countries
in general, some under the pressure of the structural adjustment
programmes of the IMF and World Bank, are all seeking more reliance
on and exposure to world markets. However, despite the emergence
of ¡°new players¡± the bulk of trade, investment and GNP remains
concentrated in industrialised countries.
The impact on unions of globalisation
Globalisation has also penetrated very extensively
the daily relations between trade unions and employers. Increasingly
trade unions in OECD countries are finding that international factors
arise as a constraint in their relations with governments and in
their relations with the employers.
Government action whether it be in setting tax rates,
economic policy management, interest rate policy or exchange rate
policy, international constraints are increasingly cited as reasons
for inability of government to fulfil the tasks that they are elected
in democracies to fulfil. The election of predominantly social democratic
governments in Europe for some has been seen as a social reaction
to globalisation.
The attitude of employers towards labour unions generally
including attitudes to union recognition, their policy towards labour
costs and their attitude to technological change and work organisation
are again increasingly dictated by international competitivity and
international ¡°fashions¡±. The threat of delocation to an offshore
site has become the standard play in negotiations and in some cases
it has become the reality. These pressures are greatest along the
three North/South, East/West ¡°frontiers - Mexico/US, Central/Eastern
Europe, China/East Asia. The perception is therefore of a footloose
international production system where capital is mobile and labour
is not. This is contributing to the imbalance of relative power
of unions and employers in the labour market at the same time many
of the policies to which we looked to governments to fulfil are
being undermined.
For the two ends of the political spectrum this perception
may have its advantages.
For
some employers and governments it is convenient to exaggerate the
loss of local or regional sovereignty. It allows a ¡°deresponsibilisation¡±
of the elites from the results of their actions. The conservative
government in Britain (1979-97) was one of the most vociferous in
arguing for the need to conform to a model of competitiveness existing
in some unspecified place in East Asia. Yet, at the same time the
then Korean government argued that South Korea had to lower its
labour standards to stop Korean firms from moving to Scotland and
South Wales.
The real danger
is not globalisation itself, it is rather to argue policy paralysis
as a result of it. A spectrum of mechanisms for governance is available
with, at one end of the spectrum a set of ¡°hard¡± international
regulations covering specific fields (e.g. WTO); in the middle,
looser policy co-ordination (e.g. G7, OECD, IMF); regional integration
(e.g. European Union); continuing national regulation; and more
loosely regional or district level policies. Whilst binding, ¡°hard¡±
mechanisms of regulation at a global level will only be able to
cover a limited number of areas, and they are therefore not an alternative
for the looser forms of co-ordination and co-operation in other
areas.
The need for public policy to regulate globalisation:-
(i)
Trade and investment and core labour standards
Globalisation has drawn dramatic attention
to the need to guarantee core workers rights on a global basis.
The regulation of labour standards through the enforcement of certain
global minima is not a ¡°new issue¡±. It has been part of the response
to previous waves of globalisation:- the creation of the ILO after
the First World War; the Havana Charter and the attempt to create
the International Trade Organisation after the Second World War.
The current wave of globalisation and the creation of the World
Trade Organisation have given the issue new focus. It is perhaps
a key area where we need a hard regulation, which is internationally
binding.
Achieving a ¡°hard¡±
regulation is still some way off and there is even some criticism
from within the labour movement on the single-minded pursuit of
a ¡°Social Clause¡±. Nevertheless, the goal of effective regulation
must be pursued. Achieving other goals will be difficult as long
as core labour rights can be easily denied. Functioning civil society
is necessary to build up a momentum for satisfactory governance
of global markets. Moreover, given the fact that the world trading
system has moved to guarantee the rights of intellectual property,
investors¡¯ rights, and even environmental standards, it will become
increasing difficult to deny human rights. This debate will be before
the Seattle Ministerial meeting next month.
Over the last three years, there has been perceptible
progress in shifting ¡°conventional economic wisdom¡± to seeing
core labour rights as ¡°good thing¡± economically and socially as
opposed to either an irrelevancy or a market distortion. Focusing
on core standards (cf.:? freedom of association, rights to
collective bargaining, freedom from forced labour or prison labour,
freedom from child labour exploitation and non-discrimination) has
allowed pretty universal acceptance of them as inviolable human
rights in a way that the listing of 170 ILO Conventions would not.
The agreement on the ILO in 1998 of a Declaration on ¡°Fundamental
Principles and Rights at Work¡± has facilitated this providing a
system wide standard. The empirical and theoretical analysis of
the OECD and World Bank now regards core standards and by virtue
of this trade union recognition as at least neutral in their economic
effects, and at best positive. The mainstream thinking of those
involved in development assistance has also shifted to see core
labour rights as a part of ¡°participatory development and good
governance¡± strategies.
Five
to ten years ago, far more countries and commentators would have
argued that authoritarianism and free markets were the necessary
routes to achieving economic lift-off. Now they tend to remain silent.
The fact that in 1997 the OECD was ready to censure the then government
here in Korea - a new Member - for not living up to commitments
on freedom of association and collective bargaining given when it
joined the Organisation, is highly significant. It did not happen
in the case of Mexico¡¯s membership of the OECD and would have been
unthinkable even five years ago.
The
debate has therefore moved on to enforcement mechanisms. The ¡°stand
off¡± on labour standards at the WTO Ministerial Council between
the United States and the majority of EU countries on the one hand
and many developing countries on the other, leaves no one in any
doubt about the difficulties of getting the issue into the WTO mechanism.
There is visceral hostility amongst many trade officials about the
issue. But despite their efforts to treat it as a ¡°non-issue¡±
labour standards issues still dominate much media coverage of trade
affairs.
Urgent follow up has
to focus on the need to:-
-
continue to strengthen the ILO machinery for the follow-up
to the Declaration;
-
at Seattle start a real dialogue between the WTO and the
ILO on labour standards;
-
ensure the effective enforcement of OECD Guidelines for Multinational
Enterprises;
-
integrate obligations for core labour standards into all
of the World Bank¡¯s lending policies and IMF conditionality;
-
develop targeted consumer boycotts on persistent violations
of core standards;
-
continue to ensure that codes of conduct with companies or
industry associations have effective independent verification;
-
develop the OECD¡¯s monitoring and ¡°peer group pressure
plus¡± system for the respect of core standards in Member
countries;
-
extend labour standards clauses in hemispheric and regional
trade agreements.
None of these propositions are revolutionary in nature,
yet they are all attainable and their attainment would make a difference.
Over time with productivity growth it would allow unions to ¡°bring
the bottom-up¡± in the global system.
The process of European political
and economic integration has of course allowed cross- frontier regulation
of labour standards to move well beyond the guarantee of core workers¡¯
rights. For many on the centre-left in Europe, the European Union¡¯s
¡°Social Dimension¡± is the response to globalisation. The European
trade union movement has sought:- to establish a framework of minimum
standards to stop ¡°social dumping¡±; to establish consultation,
information and negotiation rights with multinational companies
at a European level; to expand the structural funds of the European
Community. One of the most significant developments in this process
has been the passing of the European ¡°Work¡¯s Council¡± Directive,
requiring multinational companies with more than one thousand employees
to establish consultative machinery for their workforces at European
level.
It should also be mentioned
that irrespective of mechanisms of global governance given their
national characteristics MNC¡¯s do still open themselves up to points
of leverage. At the same time some international trade union company
campaigns are becoming more targeted and sophisticated.
(ii)
A ¡°socially acceptable¡± model of competitiveness
Guaranteeing workers¡¯ rights in the
international system is a necessary but not a sufficient condition
for re-establishing social progress in a global system. Moreover,
the reappearance of the ¡°Eurosclerosis¡± debate against the background
of rising European unemployment is in danger of stalling progress
on the European Social Dimension. If the ¡°social agenda¡± is to
progress, the battle of ideas has to be won to show that it is possible
to manage change in firms, industries, regions and labour markets
in socially equitable way. A ¡°model¡± of industrial organisation
has to be developed which is both competitive and socially acceptable.
OECD countries have to restructure on the basis of a high set of
labour standards not on the basis of a low wage model of development.
Within the OECD, there are two
quite divergent analyses of labour markets which have crystallized
in the debate over European unemployment. The conventional ¡°neoclassical¡±
wisdom of many of Finance Ministries in OECD countries is that the
origin of the problem lies in the inability of the labour market
to adapt to macro economic shocks over which governments now have
little control. The focus of policy is therefore to reduce ¡°natural¡±
rates of unemployment through a search for labour market flexibility.
This has been behind the recommendations in the OECD Jobs Study
to decentralise collective bargaining systems; remove administrative
extensions to agreements; weaken minimum wage regulation; and to
use competition in product markets to keep downward pressure on
nominal wages. Restriction of unemployment benefits goes in the
same direction.
However, there
is strikingly little practical support for many of the policy elements
described and short of ¡°something turning up¡± little confidence
can be given to such policies reducing unemployment through high-quality
employment creation. The ¡°unemployed poor¡± risk being transferred
into ¡°working poor¡± with the same social consequences. These doubts
were echoed by the OECD itself in the successive OECD Employment
Outlooks which honestly review the evidence on wage dispersion and
employment creation. Moreover, countries as such as the Netherlands,
Ireland and Denmark have all succeeded in combining strong economic
performance and equity by not following the ¡°Anglo-Saxon¡± model.
It is also significant that recent meetings of OECD and G8 Labour
Ministers have now recognised the problems associated with low paying
jobs.
A more positive view of
the policy options emanates from work being carried out in the OECD
with regard to:- technological change; the nature of ¡°flexible
organisations¡±; skill acquisition and education policy; and corporate
governance issues. The changing strategies of firms to the global
market are seen to be a key factor. One interpretation of this work
is that firms in the OECD area are becoming polarised. On the one
hand there are those trapped in old production systems having to
compete in an ever tougher global market with low wage competition
from non-OECD countries. Increasingly it is not the firms themselves,
which have to compete but the workers in different countries bidding
for their jobs with the same employers. On the other hand there
are firms who have shifted to new forms of work organisation in
which a high premium is given to the flow of knowledge and innovation.
These ¡°high skill - high trust¡± organisations compete in a different
and clearly more benign world than their mass production rivals.
The policy implications of this are
that governments can move their economies onto higher growth paths
by encouraging technological diffusion, innovation, ¡°good practice¡±
management techniques and the development of appropriate infrastructures
for the ¡°information society¡±. ¡°Learning societies¡± and knowledge-based
firms are the key to success. In this scenario labour market deregulation
is not a central issue. Internal functional flexibility of workers
in line with changing work organisation is much more important to
firms. Flexibility to ¡°hire and fire¡± looks at best irrelevant
and at worst could encourage the low wage/ low skill route to competitiveness.
The challenge for OECD countries is how to move the whole of their
societies and not just an elite onto a ¡°high route¡± to competitiveness.
Many of the same issues arise in
the parallel debates taking place in the debate on corporate governance
around the issue of ¡°stakeholder capitalism¡±; on strategies for
regional, district or community level development strategies; and
on the development of sustainable consumption and production. The
OECD Guidelines on Corporate Governance agreed this year do have
a ¡°stakeholder¡± chapter achieved due to union pressure.
Establishing a ¡°new paradigm¡± in this
area is not a question of ¡°hard¡± international regulation, it
is a question of shifting attitudes and winning the arguments and
shaping the strategies of different levels of government and firms.
(iii)
International Economic Co-ordination
For some time there have been calls for a more ¡°expansionary
macroeconomic strategy¡± and a ¡°new international structure¡± to
co-ordinate policy built on the existence of the G7 as a necessary
condition for fighting unemployment. Progress in this area faces
three central problems:- diverging analysis and political priorities
between different OECD members; the hegemony of Central Banks; and
the related globalisation of financial markets.
Diverging priorities in macroeconomic policy have
to some extent replaced the supply-side consensus of the 1980¡¯s,
but they have prevented a co-ordinated policy response coming from
the G7. Despite differing emphasis within the Clinton Administration,
the broad approach has been to ¡°keep growth going¡± until inflationary
constraints really do appear. The success of the fall in measured
unemployment to below previously stated ¡°natural rates¡±, remains
clouded by the prevalent growth in poverty, declining real wages
and insecurity but nevertheless has reflected an accommodating monetary
policy. Japan has also shown itself ready to intervene through traditional
public work programmes when faced by genuine recessionary fears.
It is in Europe where Finance Ministers and Central Banks continue
to inflict ¡°monetary masochism¡± or more accurately ¡°monetary
sadism¡± on their populations. The battle is now being fought for
the economic architecture and hence priorities of the post Economic
and Monetary Union period. The central issue must be to shift policy
to a less deflationary stance. The political changes in Europe now
help. Even the OECD has warned of the dangers of the timing of fiscal
restriction, though of course it does not disagree with the goal.
Given the power over monetary policy
now vested in independent central banks, it is clear for the need
to ¡°reform the objectives of central banks so they will support
a pro-growth regime instead of thwarting it¡±. The one dimensional
pursuit of price stability has now to give way to approach which
now does allow decisions to be made on the balance of risks and
trade-offs between the objectives of employment and inflation. The
theoretical battle is being fought around whether or not monetary
policy does affect the real economy in the longer term. Many of
the features of this current debate don¡¯t look particularly new,
they mirror very closely the policy debate of the 1920¡¯s in Europe
and the United States. By the 1930¡¯s it is significant that the
conventional wisdom had shifted to being concerned at falling prices
and deflationary expectations rather than inflationary expectations.
Policy shifted to putting floors in markets rather than de-regulating
them.
The Asian financial crisis
and the danger that is stability brought about here in Korea has
brought home the need to ¡°throw sand in the wheels of international
finance¡±. This is now recognised not just by Keynesian nobel laureates
such as James Tobin, but more dramatically by speculators such as
George Soros. ¡°Bond market vigilantes¡± contribute to the deflationary
overkill of real interest rates, unwarranted currency fluctuations
wipe-out years of efforts to manage structural change in the real
economy. The unsustainable growth of derivative markets raise major
problems of the adequacy of prudential rules for dealing with systematic
risk. Successive G7 calls for ¡°new financial architecture¡± look
like ¡°too little too late¡±. What is needed is a co-operative framework
of action between the main institutions, mixing national and international
measures. They should include the following:-
National Level Initiatives:
-
the establishment of effective minimum reserve requirements
for the banking system;
-
the introduction of capital standards for other types of
financial activity, particularly securities dealing;
-
the introduction of more extensive disclosure requirements
by financial institutions, so as to increase the transparency
of their risk exposure;
-
the introduction of minimum deposit periods for short-term
financial flows;
- increasing
the transparency and accountability of the operations of the large
institutional investors and notably the reduction of
speculative international exposure of pension funds.
International Initiatives:
-
the progressive removal of structural surpluses and deficits
on both trade and capital account, between the United
States, Europe and Japan together with the further lowering
of real interest rates through concerted action by monetary authorities;
-
the introduction of an international tax on foreign exchange
transactions;
-
the certification of financial markets with acceptable risk
and prudential controls;
-
the introduction of more stable parities between the currencies
of the Euro, the Yen and the Dollar;
-
the development in the longer term of an international reserve
currency;
-
the implementation of international agreements on capital
taxation;
-
increased co-operation between taxation and banking regulatory
authorities to eliminate money laundering resulting
from illicit activities;
-
increased international prudential monitoring of financial
markets.
But most important there is a need to open up to the
public the debate on financial markets and for this the international
trade union movement has called for a broad-based International
Commission to be set up to report on the changes necessary.
(iv)
The future of the public sector
The common theme of the years 1985-95 has been privatisation
and deregulation and a withdrawal of the state from direct intervention
in the economy or direct ownership. Despite this, ¡°government¡±
expenditure as a share of GDP in the OECD area as a whole has moved
little from around 40% on average over the last decade. The state
at different levels remains responsible for administering very substantial
proportions of national income. The challenges ahead are increasing
the demands on public finances not reducing them:- the ageing of
most OECD populations; the need to invest in lifelong education;
the need to reverse the decline in infrastructure investment; counteracting
the growth in poverty.
The ¡°governance¡±
debate does provide a framework, which allows a non-ideological
debate on the role of the public sector. A ¡°social¡± agenda must
on the one hand espouse the need to change the management of public
services and administration to make them responsive to the public
and not just to save money. ¡°Partnership¡± approaches to change
do work. On the other hand, the pressures of ageing and health care
costs, together with the delivery of lifelong learning are going
to dominate the debates on resource allocation at the start of the
next millennium. This will be a global debate and we need to really
¡°re-invent government¡± and not re-invent the private sector, paid
for by taxpayers.
Conclusions
The response of the trade union
movement to globalisation cannot be to bemoan changes or react defensively.
It must be to respond and manage them. To fulfil the legitimate
aspirations of consumers, employees, investors, markets require
effective governance, whether or not they are organised on a national,
regional or global scale. Against a background of globalisation
it is the forms of governance that have to change not the principle.
But unions themselves are also changing:- reaching out to new groups
of workers, using new sources of influence, such as their control
over pension funds and developing through the international trade
secretariats their studies for dealing with multinational enterprises.
The challenge is to shape the global debate on globalisation and
to show the unions are a key part of the solution to re-linking
economic development and social progress. |