Wednesday, January 28, 2009

No to the casino economy!

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International Trade Union Confederation (ITUC)

World Social Forum

Belém do Para, Brazil,

27 January -1 February 2009

No to the casino economy!

The increasingly insecure living and working conditions of millions of
workers worldwide is one of the main causes of the crisis we currently
face. This crisis primarily concerns the unfair distribution of wealth, which
has distorted the global economy. The financial crisis, which is the result
of a long process of financialisation of the economy, has further
aggravated existing economic problems, in both the North and the South.

The developing countries have a huge shortage of decent jobs, since the
latter are not being generated by their economic growth. This decent work
crisis is compounded by the high cost of living and the impact of the world
food crisis. This is leading to situations of endemic poverty. The
industrialised countries are not immune either: the number of working
poor in the United States rose sharply over the eight years of the Bush
administration. In Europe, wage moderation - despite the rise in both
inflation and productivity- has reduced purchasing power.

Almost all countries have increasingly insecure employment conditions,
with a casualisation of the employment relationship and a deregulation of
labour markets. We face a poverty crisis, certainly, but also, and above all,
a crisis based on blatant inequalities, which have become intolerable from
both a social and economic viewpoint. The neo-liberal policies of the last
20 years have reached their limit, since, for the aforementioned reasons,
impoverished workers are no longer consuming enough to keep the
economy running.

The United States is the largest consumer in the world and the reduction
of the real purchasing power of its middle class has repercussions well
beyond its borders. The high level of consumption in the US was sustained
not through wages but through credit. As a result US workers spent
beyond their means and become indebted. The ease with which
mortgages could be obtained, including for the poorest families via the
subprime mortgages, relied on the price of houses, which was pushed
artificially high by a speculation bubble. Complex financial products were
created in order to pass on these “toxic assets” to the financial markets.

The relentless pursuit of short-term profits, against a background of
reckless economic and financial liberalisation, is what chiefly characterises
today’s financial markets. Casino capitalism is largely responsible for the
extension of the crisis to the whole planet. The financial markets have
become a source of easy money and no longer fulfil their main task of
financing the real economy. During the last few decades, speculation on
financial markets has provided much better opportunities for short-term
profit than providing loans to companies willing to innovate, win new
markets or create decent jobs. As a result, workers’ futures have been
sacrificed to feed the offshore bank accounts of some unscrupulous
speculators. Governments and the international institutions have closed
their eyes, adopting the “laissez faire” principle in its most literal sense,
and as such have been accomplices.

The other key aspect of this crisis relates to the excessive opening of
markets and non-intervention by states. By way of example, China has
managed to accumulate huge reserves that are allowing it to finance the
US debt. Chinese workers, who are not allowed the freedom to form unions
to defend their collective interests, have made spectacular increases in
their productivity levels over the last 20 years. They work on 21st century
machines but are paid 19th century salaries! This globalisation has pitted
the workers of the North against those of the South to the benefit of the
multinationals and private investment funds whose profits have
continuously increased.

Huge imbalances have also developed between the financial sector and
the real economy, between rich and poor countries, between overpaid
managers and underpaid workers. Inequalities between men and women
have remained large. And the policies of repression and discrimination
against trade unionists, which have contributed to the process of wealth
concentration, have directly reduced the bargaining power of workers
compared to that of their employers.

Whilst the current crisis is financial, economic and social, it also has an
environmental dimension. It has become clear that our planet’s resources
will not cope with the extension of the consumption model of the
industrialised countries to the rest of the 6 billion people that inhabit it.
That is compounded by the effects of climate change, which are forcing us
to take collective measures to reduce greenhouse gases. There are glaring
inequalities here too, since the poor peoples are suffering more acutely
from the negative impact of climate change. The measures taken need not
only to be environmentally efficient but also socially just.

What model can we put forward to get out of this multifaceted crisis?
This crisis is proof of the unsustainable nature of the neo-liberal policies
adopted in the last few decades, which have promoted the deregulation
and liberalisation of markets and the privatisation of public services. This
market fundamentalism has concentrated wealth whilst thumbing its nose
at global public goods such as the environment, health, social protection,
food safety and, indeed, global financial stability.

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.

Tomorrow’s world will no longer have a single superpower but will be
multipolar, as the regional integration processes intensify. Multilateralism
needs to be protected within this multipolar world, which otherwise runs
the risk of exacerbating poverty and creating deeper inequalities between
countries. But it is high time that this multilateralism embraced social
issues. The unions and the whole of civil society must insist that
employment related issues are placed at the core of the new system of
global economic governance that still needs to be built. The ILO has a vital
role to play here.

Within this multipolar world, the state needs to recover its rightful position
and assume its role. It must ensure a socially just and environmentally
responsible new economic system is established. Public intervention is the
sole guarantor of social cohesion. However the corruption of certain public
bodies must be penalised and opposed by organised groups, including the
unions. The central banks must become publicly accountable and stop
bowing to the demands of the powerful financial lobby.

The strengthening and broadening of public social protection systems is
urgently needed. A Global Social Protection Fund to help the poorest
countries needs to be established. Increasing the levels and quality of
state aid to developing countries is essential. Establishing socially just
transitions towards ecologically sustainable forms of production is vital.

Setting fair rules for world trade to support national development plans
and prevent inequalities from deepening, is crucial. The priority must be to
establish decent minimum wages and real salaries in line with productivity
gains. And respect of the right of workers to form free trade unions and
negotiate collectively on the redistribution of profits is a key requirement.

The relations between industrial, emerging and developing countries need
to be established on a new basis. The current global economic and
financial system is not serving the interests of the workers in developing
countries. Reimbursing the foreign debt is strangling the poorest
countries. The terms under which they can borrow are unfair, as they are
made to bear all the fluctuation risks. The current system allows
industrialised countries to pursue counter-cyclical monetary and fiscal
policies by imposing pro-cyclical policies on developing countries. That
means the international financial institutions (IFIs) are partly responsible
for the disastrous social consequences in these countries and also for the
global financial instability. The economic and financial conditionality
imposed by the IFIs must end and the latter’s governance needs to be fair.

The time has come to build a new global economic and financial
architecture. However, none of the existing institutions has the legitimacy
or the credibility to fulfil that task successfully.

Regulation of the financial markets is required urgently. The speculation
needs to be restricted and markets must focus on financing the real
economy. More particularly, speculation on commodity markets must be
banned. Derivatives markets need to be brought back under the control of
the public authorities. Off-shore financial centres and other fiscal havens
need to be closed. Taxation of financial transactions can provide new
funds to help reduce inequalities. The obscene salaries of managers,
bankers and other financial intermediaries should be regulated. As part of
the necessary reform of the financial sector, priority must be given to the
social economy by promoting cooperatives, mutual societies and microcredit
agencies, including in developing countries.

The new economic system needs to generate green growth. As well as the
urgent need to ensure the survival of our planet, environmental protection
provides huge opportunities for job creation. Public investment in
infrastructure, public transport and renewable energies are needed all
over the world. Economic growth needs to be supported by ecologically
responsible investment.

In conclusion

It is time to build an economic system that is environmentally sustainable,
socially just and balanced in geo-political terms. This model will need to
take into account the aspirations of peoples and the proposals of the trade
union movement and the other players of civil society. From now on,
economic growth should create decent jobs and protect the environment
and its benefits should be shared, so that the unprecedented level of
inequalities we face today is significantly reduced.