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INTERNATIONAL CONFEDERATION OF FREE TRADE UNIONS (ICFTU)
INTERNATIONAL TRADE SECRETARIATS (ITS)
TRADE UNION ADVISORY COMMITTEE TO THE OECD (TUAC)
- SECURING THE CONDITIONS FOR REDUCING POVERTY
- AND ACHIEVING SUSTAINABLE GROWTH
- Statement by the ICFTU, TUAC and the ITS to the
- Spring 2000 Meetings of the IMF and the World Bank
- (Washington, 16-17 April 2000)
-
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Introduction: Prosperity that is Unevenly Shared and Fragile
- An unprecedented era
- of world prosperity?
|
1.
Some observers of the international economic situation heralded
the beginning of the new millennium with declarations that the world economy was
experiencing an unprecedented era of prosperity that promised to continue unabated for the
foreseeable future. This prognosis appeared to be based on the fact that the economies of
the United States and some other industrialized countries have experienced strong growth
in past years, while a few of the Asian countries affected by the 1997 crisis have
recently started to show positive growth. In addition, the extension of the economic
crisis to other regions of the world, notably Latin America, was neither as extensive nor
as deep as some forecasters predicted a year ago. |
| But developing and
transition countries caught in poverty trap |
2.
In actual fact, many regions of the world continue to be
caught in a trap of poverty, with no foreseeable prospect of growth. What meagre resources
are available are going towards paying off external debt burdens. Such is the case in most
of sub-Saharan Africa, much of Asia and Central and Eastern Europe, and many countries of
Latin America. And while some East Asian economies are showing signs of growth for the
first time in two years, other countries that were among the hardest hit by economic and
monetary collapse, such as Indonesia and Russia, have yet to come out of the situations of
severe chaos in which their economies found themselves. |
| Economic collapse in some
countries of Latin American region |
3.
The condition of Brazil and some other Latin American
economies may not be as bad as the international financial community expected in early
1999, having experienced stagnation rather than negative growth. However other economies
in the region have experienced virtual economic collapse, notably some Central American
countries and Ecuador. In the latter country, economic depression has led to social and
subsequently political crisis. |
- No foreseeable
- Prospect for growth in many regions of the world
|
4.
The world financial crisis had its greatest impact on
working people and the poor. Unfortunately, much of the recovery has been visible in stock
prices and other market indicators, but has been slow to affect the lives of those most
affected by the crisis. In fact, the "recovery" that has taken place in many
countries affected by financial crisis in recent years, ranging from Mexico to Southeast
Asia and the CIS, has seen a remarkable accumulation of wealth in the hands of a few,
often those benefiting from privatization, while workers’ standard of living has
decreased, unemployment remains high and the number of those living below the poverty
level has grown. The misery index remains at an unacceptably high level. |
- Job creation in industrialized
- Countries may
- Have peaked
|
5.
Even the industrialized world has not experienced unabated
growth. In Japan, for example, after a brief period of positive growth in early 1999, the
economy went back into recession in the second half of the year. There are some
indications that the period of employment growth experienced in several other
industrialized countries may be levelling off. Recent increases in interest rates in the
United States, which are spreading to other regions, could lead to slower growth or even
recession in those areas of the world currently experiencing some degree of prosperity
while worsening the situation in those countries that have experienced crisis or
stagnation. It should also not be forgotten that the current "locomotive" of
economic expansion, the United States, is running a huge and growing current account
deficit which could provoke sudden international financial instability and a resulting
economic downturn. |
- Growing inequity
- in industrialized countries
|
6.
In addition, US growth has been particularly inequitable
in its effects, accompanied by enormous wage gaps and reduction in social expenditures.
For example, the number of Americans without health insurance has grown in recent years
from 37 million to 44 million people. Furthermore, the US stock market is viewed by many
commentators as significantly over-valued, creating the risk of a sudden market
"correction" which leads to a serious economic contraction both in the US and
world-wide. Of course, the United States is not alone in showing growing inequality. In
most industrialized countries real wages have stagnated or declined at the same time as
wealth is increasing for a few, and years of government austerity have meant that social
benefits to the least well-off members of society have declined. |
- No action has
- Addressed structural problems that led
- to crisis
|
7.
Because of the fragile and uneven nature of the current period of
growth, the international community should not lessen its vigilance to prevent a repeat of
the economic and monetary upheavals that took place in several countries between 1997 and
1999. No action has yet been taken to address the deep-seated structural problems that led
to the 1997-99 crisis, making it all the more likely that it will happen again. This
statement therefore argues strongly for a far-reaching programme of measures to give the
world economy a stable basis to achieve long-run sustainable growth and development with
equity. |
The New Priority of Poverty Reduction
- "Poverty reduction"
- the new leitmotif
- of the World Bank
- and the IMF?
|
8.
"Poverty Reduction" has, in recent months, become
a dominant theme in public statements of the IMF and the World Bank, and both institutions
claim that reducing poverty has become the paramount objective of their interventions. The
IMF, for example, has announced that its Enhanced Structural Adjustment Facility (ESAF)
has been superceded by a Poverty Reduction and Growth Facility (PRGF). The two
institutions recently prepared a joint Poverty Reduction Strategy Paper in which they
declare that they have adopted a "new approach [which] recognizes the increasing
evidence that entrenched poverty and lack of economic opportunities and asset endowments
can themselves be impediments to growth". The paper further proclaims that "the
active involvement of civil society in monitoring relevant aspects of a [poverty
reduction] program is an important ingredient". |
| Poverty concern welcome,
but policy changes must occur |
9.
To the extent it translates into concrete policy changes, the
ICFTU, the Trade Union Advisory Committee to the OECD (TUAC) and the associated
International Trade Secretariats (ITS) welcome this newfound concern with poverty
reduction as a primary objective of both the IMF and the World Bank. They also agree with
the importance that the institutions state they accord to civil-society participation if
real gains are to be made. It is important to involve genuine democratic representatives
of civil society in the development as well as the monitoring of poverty reduction
programmes. |
| Union role vital for
poverty alleviation |
10.
Trade unions, in particular, are a vital tool for the working poor to
pull themselves out of poverty. Policies should encourage this important form of
self-help. The new commitments on poverty reduction must be made a reality and foster a
substantial reform in the institutions, something that the ICFTU, TUAC and the ITS have
called for over the past several years. The fact that international financial markets are
currently in a period of relative calm compared to the turbulence of the late 1990s should
be seen as an opportunity to be seized for making substantial reform rather than a factor
to encourage complacency while waiting for the next crisis to strike. |
| SAPs have contributed to
increasing poverty and failed in their Stated objectives |
11.
One fundamental policy change that must take place at the IMF and the
World Bank is in the area of Structural Adjustment Programmes (SAPs). The ICFTU and the
ITS have consistently condemned the SAPs’ emphasis on reducing the public sector and
liberalizing trade while ignoring their social impact. Since their introduction in 1985,
it is now evident that SAPs have, in most cases, not even succeeded in achieving their
stated objective of reducing countries’ external debt levels. Countries that have
implemented SAPs usually experienced an increase in their debt burden in addition to
sustaining an increase in unemployment, a deterioration in public services and an increase
in poverty and social exclusion. The international financial institutions should recognize
that a genuine adoption of poverty reduction as their primary objective requires a
complete overhaul of the kind of conditionality imposed by SAPs. |
- Far-reaching targets
- for achieving poverty reduction and real
- social development
|
12.
The fifth anniversary of the UN Summit for Social Development
(Copenhagen, March 1995) reminds us that the international community already recognized
the need for a far-reaching programme of international commitments for action on social
development. It did so well before events such as the financial and economic crises of
1997-99 and the failure of the Seattle Round of WTO negotiations. Among other things, the
Copenhagen Summit set target dates for the halving of absolute poverty and concluded it
was important to regulate the market more effectively to achieve equity and achieve social
development. |
| Prerequisites for a
serious commitment to poverty reduction |
13.
A serious commitment to poverty reduction requires that the IMF
and the World Bank include the following social components in their dialogue with
governments, notably in discussions under IMF Article IV annual consultations and on the
Country Assistance Strategies of the World Bank: |
- A comprehensive
- System of social
- Safety nets
|
- Social Protection
: encouraging the introduction of government programmes aimed
at developing a comprehensive system of social safety nets including retirement pensions,
unemployment benefits, child support, sickness and injury benefits. A recent IMF
Article IV Consultation Report commending the authorities of Tunisia for rejecting the
introduction of unemployment insurance despite high job losses in that country would
obviously not be compatible with the new approach.
|
- Programmes to
- Increase school participation and to make health care available to all
|
- Primary Education and Health-Care
: support for programmes aimed at maintaining
and enhancing school participation, especially for girls, up to the minimum school leaving
age and to at least the age of 14, and spreading the availability of health care for all.
All countries should be requested to develop or improve their strategies for the
elimination of child labour, especially in its most abusive forms. While showing
concern with declining school enrolment and the poor quality of private education as
compared to public schools in Haiti, a recent IMF Article IV Consultation Report for that
country admonishes Haitian authorities to put an across-the-board freeze on new public
spending. If poverty reduction were to be a priority concern, the report would have
suggested ways in which Haiti could put additional resources into public education.
|
| Labour market reform must
be based on respect for core labour standards |
- Employment, Social Institutions and Sound Industrial Relations
: enhancement of
programmes to increase vocational training, establish and improve job search systems,
implement labour-intensive public works programmes and counteract discrimination. With the
active engagement of the ILO, the IMF and the World Bank should encourage the
participation of representative employers’ organizations, trade unions and other NGOs
in the development and implementation of economic and social policies. Labour market
reform must be founded on respect for core labour standards as defined in the ILO
Declaration on Fundamental Principles and Rights at Work (June 1998) and draw on the
ILO’s competence in the development of the institutional framework for collective
bargaining and labour law. The promotion of good labour practices has been generally
absent from specific country reports, which more often emphasize the need for greater
labour-market flexibility. For example, the World Bank recently recommended to the
government of Bosnia-Herzegovina that it should not adopt reforms to the country’s
labour laws that would have favoured more widespread collective negotiation. Equally
disconcerting is a recent IMF Article IV report on Haiti which underlined as a positive
factor for the country’s "external competitiveness" the fact that the
"level of wages … is the lowest in the region". The report is silent on the
point that the extremely low level of wages may have something to do with the fact that
Haiti’s labour laws date from the era of the Duvalier dictatorship and continue to
violate basic internationally agreed workers’ rights. In addition, the disastrous
situation in Haiti is hardly a convincing argument that low wages lead to prosperity.
|
- Strong unions and
- Active labour market policies help in
- Poverty reduction
|
14.
The recent joint World Bank-IMF Poverty Reduction Strategy Paper
stated that "rapid sustainable growth is a necessary condition for poverty reduction,
along with a pattern of growth in which the poor fully participate". The ICFTU
believes that transforming sustained growth into job creation, falling unemployment and
better living standards for all members of society requires certain specific measures. On
the one hand, appropriate redistribution mechanisms must be put in place. On the other,
action is required to develop active labour market policies which equip workers for
change. Narrowly focused labour market deregulation, which in many countries has become
synonymous with weakening trade unions and dismantling wage bargaining structures,
reducing workers’ employment protection and penalizing the unemployed, in fact
contributes to increasing inequality and social exclusion. |
- Empowerment of the less advantaged is
- Vital for poverty reduction
|
15.
In the emerging global economy, competitive advantage will lie with those
countries that have strong social cohesion built on investment in education and training,
health-care and a sound industrial relations system founded on strong trade unions. The
World Bank’s draft 2000 World Development Report rightly makes the point that
economic growth does not entail poverty reduction unless adequate institutions and
democratic practices exist that empower less advantaged sectors of society. |
| Consultations with
employers’ organizations and trade unions essential |
16.
Representative and independent employers’ organizations and trade unions
are essential to achieving sustained economic growth. They play a vital role in ensuring
that the constant process of adjustment to changing conditions in world markets takes
account of the need to reduce unemployment, reduce poverty and build social infrastructure
that protects the vulnerable and encourages enterprise. The IMF and World Bank should meet
regularly with employers’ organizations and unions, both nationally and
internationally. For example, the IMF should systematically seek out and meet with
representative national employers’ and trade union organizations during Article IV
consultations. |
| IMF and World
Bank must incorporate Copenhagen Summit Commitments |
17.
The UN Secretary General has been asked to prepare proposals on
sound principles and good practices for social policy, in the context of the UN Special
Session on "The World Summit for Social Development and Beyond: Achieving Social
Development for All in a Globalizing World" (Geneva, 26-30 June 2000). The ICFTU
considers that this UN process should result in clear recommendations to the IMF and World
Bank to incorporate the Copenhagen Summit Commitments fully into their programmes and
policies, requiring them, among other obligations, to respect internationally-recognized
core labour standards and to ensure their policies do not undermine those standards. |
Making Debt Relief Effective
| The Highly Indebted Poor
Countries Initiative must be overhauled |
18.
While appearing promising at first sight, the improvements to the
joint IMF/World Bank Highly Indebted Poor Countries (HIPC) initiative which were announced
at the Cologne G8 Summit (June 1999) made only marginal changes to the existing framework.
The initiative continues to be dogged with a number of flaws which result in most HIPC
countries remaining trapped in a vicious cycle of poverty, with scarce resources still
going to onerous debt-servicing and unavailable for vital social spending in health,
nutrition, and education. The HIPC initiative should be overhauled in favour of a strategy
aimed at achieving debt cancellation for these countries early in this new millennium, as
called for by the Jubilee 2000 coalition. |
| Reduction of waiting
periods, end of structural adjustment conditionality, targeted social relief |
19. The
ICFTU continues to call for a complete overhaul of the HIPC initiative, along the
following lines: |
| |
- The waiting period of six years to the completion point for receiving HIPC debt relief
should be greatly reduced;
|
| |
- The existing severe and poverty-creating structural adjustment conditionality should not
be used as a basis for determining a country’s track record of implementation of
macro-economic policies;
|
| |
- Austerity measures should be reduced considerably, and quick-disbursing interim sources
of financing on a grant basis should be used for urgent, targeted social relief to
crisis-ridden or severely debt-strapped countries, provided they respect human rights
including fundamental workers’ rights.
|
International Financial Market Regulation
| Far-reaching measures to
regulate International financial markets are necessary |
20.
The shock of the Asian crisis, followed by crisis in Russia and serious
repercussions in other parts of the world, revealed the serious flaws in the highly
deregulated international financial system. Before another wave of devaluation and stock
market crashes around the world undermine the current span of unequal or, in some regions,
non existent, recovery, governments and the international financial institutions must
decide on far-reaching measures to regulate and manage the global market, and especially
international financial markets. |
| A process of public
consultations must be put in place |
21.
Bankers and financial ministry officials have held the debate over financial
market reform behind closed doors, as is the case with the Financial Stability Forum
co-ordinated by the Bank for International Settlements, which includes G7 officials and
representatives of private financiers and bankers. Financial market regulation is too
important to be left just to the bankers and their regulators. Governments must create a
broad-based independent international commission having the mandate to provide
recommendations for establishing an effective international regulatory framework and new
financial order. As an initial step, the Financial Stability Forum must hold public
hearings and consultations, including participation of trade unions and other
representative organizations. |
| Several measures are
needed to avoid new currency collapse and harness financial markets to long-term
productive investment |
22.
The draft 2000 World Development Report reminds us that each new financial
crisis ratchets up the level of poverty and inequality in the world. Several issues call
for early decisions if another devastating round of financial collapse and currency
devaluation is to be avoided, and if financial markets are to be harnessed to facilitate
long-term productive investment: |
| |
- Improved fiscal and monetary policy co-ordination between the reserve currency blocks of
the Dollar, Yen and Euro in order to generate more stable parities;
|
| |
- Recognition of the right of states to control short-term foreign capital inflows and
outflows in the interest of domestic macro-economic and social stability;
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- Binding international standards for the prudential regulation of financial markets
covering capital reserve standards, limits to short-term foreign currency exposure, and
controls and certification on derivatives trading and other forms of leveraged investment
built on credit;
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| |
- Ensuring that banking systems are transparent and bound by effective disclosure
criteria;
|
| |
- Improved information on currency flows, private debts and reserves;
|
| |
- Better standards for corporate governance in line with the recently adopted OECD
Guidelines and company accounting (building on the existing work of the IASC and ISAR
accounting standards organizations);
|
| |
- The international taxation of foreign exchange transactions.
|
| Increasing attention is
being given to some required measures |
23.
The ICFTU notes with satisfaction that there is increasing
attention given to several of these measures that would allow for some elements of
regulation of financial markets nationally and internationally: |
| |
- In the past year some national parliaments have adopted resolutions in favour of the
establishment of a tax on foreign exchange transactions (also known as a "Tobin
Tax");
|
|
- In some countries, ministers responsible for financial affairs have expressed the need
for international financial market controls;
|
| |
- The IMF recently published a report which stated that comprehensive national controls on
external capital flows could have some positive effects, especially in emergency
situations, and reduce national vulnerability to the impact of external financial crises;
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| |
- The World Bank has created a Global Corporate Governance Forum to carry out studies and
consultations on the issue.
|
| The international
financial institutions have not shown necessary leadership to combat world poverty and
financial instability |
24.
Despite some positive gestures in favour of international
financial market regulation, the movement towards any significant developments in this
area is going forward in a piecemeal fashion and at a very slow pace. The international
financial institutions have so far not shown necessary leadership in offering concrete
solutions to reduce world poverty and inequality as well as inherent financial
instability. Continuing failure to do so can only but contribute to the increase of a
growing current of world opinion which feels that these institutions are, at best,
irrelevant and, at worst, harmful to the welfare of the peoples of the world. |
Conclusion
| The April 2000 meetings
are an occasion for the World Bank and the IMF to address world-wide popular concerns |
25.
The debacle of the Seattle WTO Ministerial Conference in December 1999, which was
meant to have launched a new round of WTO negotiations, made clear the growing concern
around the world about the roles played by international institutions which, in the past,
could operate in relative anonymity. This concern will not go away. On the contrary,
people around the world are demanding that governments demonstrate some degree of policy
coherence. National governments, whether from developing or from industrialized countries,
cannot show concern for fundamental labour rights and the social dimension of
globalization when they are at the ILO and the Copenhagen Summit, and then turn around and
deny these same concerns when they are at the WTO, the World Bank and the IMF. The ICFTU,
TUAC and the ITS encourage the IMF and the World Bank to use the occasion of the April
2000 meetings to address these world-wide popular concerns and to demonstrate their
capacity to make significant new strides in the areas of debt relief, poverty reduction,
equity and gender awareness, financial market regulation, and the respect of core labour
standards. |
PB/JH/JB - 13-03-00
International Confederation of Free Trade Unions (ICFTU)
Boulevard Emile Jacqmain 155, B - 1210 Brussels, Belgium.
For more information please contact: ICFTU Department of Employment & International
Labour Standards Tel. 32.2.224.03.33 e-mail: jobs&justice@icftu.org
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