Will Asia/World Waste the Crisis?Towards Policy Coherence &

Social Protection for All

Rene E. Ofreneo, Ph.D.Professor XII

The Global Financial Crisis:A horror story about to end?

2007, 2008 – anni horribilisUS housing crisis became Wall Street crisis & later Main Street crisis (from Bear Stearns to GMotors)

US crisis also quickly became a global financial crisis precipitating a recession in US, UK, Europe, BRIC, Japan, SKorea, Singapore

China’s displaced in 2008 reached 20 M, prompting ILO to revise global job loss estimate to 50 M + by 2009

Also, financial crisis aggravated food crisis & fuel crisis (3Fs), especially in 3rd World

But today, Obama & G20 proclaiming global recovery!

Is recovery on hand?Is recovery sustainable?

Yes, stock markets in US, UK & elsewhere are recovering & Big banks are once again giving fat bonuses to their CEOs

Yet , REAL ECONOMY not recovering yetUS unemployment rate continues to rise, now 9.8 per cent or

twice the pre-crisis rate (from 7M + to 15M today)Europe’s unemployment rate at about 9 per cent Japan’s unemployment at post-WWII high Global job growth generally flat except for a few countries,

including China

Above all, no indications that growth will be broad and sustainable, with effects of Climate Change aggravating economic situation in many Asia-Pacific countries

Wasting the Crisis – Root causes of GFC unaddressed

Old Chinese saying: crisis is an opportunity but only if lessons are learned & crisis give rise to higher level of development

What G20 has done are timid responses to the GFC:-- monitoring tax havens in Switzerland & elsewhere-- limit to bankers’ pay & bonuses-- capital build-up for IMF, expanded role for China-- huge stimulus packages, which in US-Europe, saved the big

banks (too big to fail)

But issues of financial deregulation, financialization of housing & other things, speculative investments not being addressed decisively

Above all, global trade & dev’t & income imbalances unaltered

Explanations for D’ Crisis?

Bubbles bursting –• US housing bubble, financial bubble• EU financial bubbles• Commodity bubbles + Financial scandals (BMadoff’s $50B+ scam)

‘Financialization’ -- speculative finance capital ruling over productive capital & dominating global economy, facilitated by policy of deregulation – leading to corporate/CEO GREED!

6

Globalization: finance dominating trade

Figure 1 Finance driven globalization

0

20

40

60

80

100

120

140

160

180

1980 1990 1995 2000 2006

Years

US

$ Tr

illi

on

s

0

50

100

150

200

250

300

350

As

per

cen

t o

f G

DP,

in

dic

es 1

980=

100

Global financial assets Global merchandise tradeGlobal financial assets as a percentage of GDP (right axis) Global merchandise trade as a percentage of GDP (right axis)

Deeper explanations for the crisis:Unequal World, Missing Labor

ShareSince the 1980s, predominance of Neo-liberal TNC-led globalization characterized by

• Global overproduction, due to global supply chains (esp. in China & Asia) & new technology (ICT, transport, etc.) facilitated by free trade policy (IFIs, WTO, etc.)

• Yet global underconsumption, due to limited compensation to global mass producers (workers/farmers) – global RACE to the Bottom

• Global profits brought in US/UK & invested on speculation, e.g., GE, Ford, Toyota going financial; even China invested $1trillion in US bonds & acquired Blackstone, a PE hedge company

US productivity/compensation gap – 1947-2008

ILO 2008-2009 Global Wage Report

1995-2007

global wages grew by 0.75 per cent annuallyvs.

GDP per capita growth of one (1) per cent annually

Moreover, -- share of wages in GDP going down-- share of profits in GDP going up-- gap between top wages and bottom wages widening-- wage gaps between genders remain high-- collective bargaining coverage going down

Flashback in history: labor rights solved Depression of 1930s

1930s – Great Depression gave birth to-- Keynesian economics (gov’t has central role)-- institutional economics (instis matter)-- industrial relations discipline (L-M relations mgmt)-- stronger unions, collective bargaining, social security, etc. established-- strengthening of ILO (supported by the likes of John Rockefeller)

After WWII up to 1960s – above reforms deepened by Social Democrats/labor govts in Europe & Canada (Social Market Economy model in West Germany)Welfare states w/ strong unions & social security competed w/ Communist statesUS – growth of tripartism (big government, big industry, big unions) – led John Dunlop to theorizing on IR systemJapan – developed IR practices such as nenko, productivity gain sharing, lifetime employment

Golden decades of Western capitalism – 1950s-mid-1970s: aggregate demand nearly equal aggregate supply in OECD

But in 1980s-present…

• Neo-liberal thinking prevailed & became a global Washington Consensus starting w/

privatization programs of Reagan & Thatcherand WB’s “structural adjustment programs” (SAP) for

indebted countries (preaching privatization, economic deregulation and trade liberalization)

Neo-liberalism spread in labor economicsProtective labor institutions seen by neo-liberal economists as “rigidities” in the labor market

In practice, neo-liberalism became a Global race to the bottom & gave rise to Factory Asia

neo-liberal globalization and global crisis of IR, employment

Erosion of post-WWar II Social Contract in OECD

Erosion of tripartism, w/ unionism steadily marginalized everywhere, labor market flexibility becoming the rule everywhere,

outsourcing (varied levels) subverting traditional concept of job security

Crisis of Industrial Relations

HRM overshadowing IR

In Asia: good jobs for a few, but many excluded (informals constitute 65 per cent of labor force!, large number of “informalized” formals)

Challenge: reversing & transforming

neo-liberal paradigm of globalization

Race to the Bottom should become Race to the TOPILO’s DWAgenda – good starting point for a debate:

-- core labor standards-- job creation for men & women-- social dialogue-- social protection for all

However, ILO’s campaign clear only on core labor standards – how to address job creation & social protection a big issue

Policy Coherence a Must

• Coherence in economic, social and labor policies

Efforts to cast aside one-size-fits-all framework and mindless proliferation of bilaterals and regionals

Review of world’s experience with trade liberalization, w/ special focus on winners and losers

Revival of SDT principle in global trade talks, esp. calibration of trade policies in accordance w/ development priorities

An end to global/regional race to the bottom. Integrate w/ trade talks 6 guidelines identified by the 1999 HDR -- ethics, equity, inclusion, human security, sustainability, and development.

Social Protection for All:Part of Global Coherence Program

•

History shows Social Protection – an instrument for stability and sustainability

History also shows No country is too poor not to be able to provide social protection for all (experience of post-war Germany, initiatives from India today)

-- ILO study shows less than 6 per cent of GDP, much less than country spending on military/defence

Global social security floor – YES. Basic human right.