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The
more things change, the more they remain the same.
Perhaps at no time in the past century have changes
in the world economy been so rapid, extensive and
full of implications for people across the world.
Yet, as global economic integration proceeds apace,
and technological changes become ever more rapid,
many of the basic conditions of work for the majority
of people in the world have remained broadly the same,
or have deteriorated rather than improved. After more
than a decade of corporate globalisation which meant
an increase in the power of international capital
and a corresponding decline in the bargaining power
of workers and the socio-economic rights of citizens,
the early years of this century have experienced an
acceleration of those adverse trends. Now, more than
ever, work prospects and working conditions in local
and national markets are crucially affected by international
and national macroeconomic processes, even as they
also remain determined by structural features of particular
societies and economies. Meanwhile, millions of working
men and women across the world, who were promised
greater prosperity and opportunities through globalisation,
find hardly any change in their conditions or changes
for the worse.
Global Economic Processes
There are
at least six recent processes in the international
economy that have a direct bearing upon labour markets
and work conditions in countries across the world.
The first, and possibly the most important, is the
fact that the world economy is operating substantially
below capacity. The global unemployment equilibrium
is actually getting more severe, because of the deflationary
impulse imparted by the domination of finance capital
and the inadequate role played by the US as "leader"
of the world economy.
This
is especially noteworthy because the US administration
is otherwise exerting itself to impose newly aggressive
and militaristic imperialism upon the rest of the
world. The US is not currently fulfilling its role
(in the Kindleberger sense) of leader in the world
economy to maintain stability. Such a role requires
the fulfilment of three functions at a minimum: discounting
in crisis; countercyclical lending to countries affected
by private investors' decisions; and providing a market
for net exports of the rest of the world, especially
those countries requiring it to repay debt. The absence
of discounting in crisis is not universal; there are
countries that have received large bailouts orchestrated
by the US Treasury and the IMF. But the spectacular
collapse of Argentina, the bleeding of Sub-Saharan
Africa despite impending large-scale famine, and the
indifference to implosions in Eastern Europe and elsewhere,
bear witness to the fact that the US administration
does not see its responsibility to discount in crisis
in terms of salvaging the larger system.
Similarly, countercyclical lending has been discouraged,
as private finance (including portfolio capital) has
been associated with creating sharp boom-and-bust
cycles rather than mitigating them, and US policy
has been geared towards protecting such behaviour
rather than repressing it. Finally, while the US did
play a crucial role as engine of world trade by running
very large external trade deficits in the 1990s, that
role has been much diminished after 2000. Indeed,
even before then, the import surplus in the US reflected
private investment-savings deficits, as the government's
budgetary role became more contractionary.
Partly because of this inadequately accepted role
of the leader, and partly because of the deflationary
impulse provided by the greater mobility of finance
capital, aggregate growth in the world capitalist
system has been far below expectations, especially
in the recent phase. It is now clear that the period
has been associated with a deceleration of economic
activity in much of the developed world, a continuing
implosion in vast areas of the developing world including
the continent of Africa, and a dramatic downslide
in what had hitherto been the most dynamic segment
of the world economy - East and Southeast Asia. These
processes are reflected in rates of growth of world
trade (in value terms) which have decelerated despite
the enforced liberalisation of trade in most countries,
as well as in declining rates of greenfield investment
across the world. Even as most economies remain in
the grip of recession or even the possibility of deflation,
countercyclical or expansionary macroeconomic policies
remain out of reach for governments because of the
combination of fear of the power of finance and the
domination of the neoliberal economic policy approach.
Second, corporate globalisation has been marked by
greatly increased disparities, both within countries
and between countries. While there is – inevitably
– a debate over this, most careful studies find increased
inequality within and across regions
as well as a stubborn persistence of poverty, and
a marked absence of the "convergence" predicted by
apologists of the system. In addition, the bulk of
the people across the world find themselves in more
fragile and vulnerable economic circumstances, in
which many of the earlier welfare state provisions
have been reduced or removed, public services have
been privatised or made more expensive and therefore
less accessible. This has not only affected the socio-economic
rights of citizens; it has also added to the problem
of inadequate effective demand, and therefore contributed
to recessionary tendencies worldwide.
Such inequalities are only likely to be intensified
by the third process exemplified by recent patterns
of international capital flows. For the last four
years, there has been a net transfer of resources
from the less developed countries to the developed
North, and particularly to the United States. This
peculiar, and even appalling, result indicates the
way in which international flows of money increasingly
reflect the international distribution of power, with
private citizens and central banks of the developing
world (especially in Asia) choosing to hold their
savings and foreign exchange reserves in the safe
havens of the North. The United States economy (and
of course, US Treasury Bills in particular) remain
the most favoured destination for investors across
the world. But even the recent partial flight from
the dollar has generally had the effect of strengthening
European financial assets, rather than flowing to
developing economies in need of such resources. Indeed,
the paradox is such that the developing countries
that could most profitably use these capital resources
are imposing deflationary policies at home, which
create excess capacity and inadequate demand, and
which make export of capital appear to be more attractive.
The United States attracted 70 per cent of the world's
savings over the past two years; even after the supposed
"revulsion" from dollar assets in the past year, it
continues to attract at least half of the rest of
the world's savings.
The fourth feature is also related to the mobility
of capital and the domination of finance. Developing
countries in general, and semi-industrial "emerging
markets" in particular, experience much greater economic
and financial volatility because of their exposure
to boom-and-bust cycles created by rapid and unsustained
capital flows of relatively large magnitudes. There
is therefore much greater vulnerability to capital-account-driven
external shocks, even as the role of domestic countercyclical
macroeconomic policies has been greatly diminished
by the fear of further capital flight and the hegemony
of the neoliberal economic policy paradigm. By the
end of 2001, it was estimated that there had been
more than 67 currency crises in emerging markets over
the pervious decade. The only reason that such crises
have been somewhat less in evidence since then, is
because private capital markets have actually dried
up vis-à-vis the developing countries, and net flows
are no longer positive into most emerging markets.
(India is of course currently an exception, receiving
relatively large inflows of portfolio capital which
are simply adding to the external reserves of the
country and therefore extremely expensive for the
government to allow.)
The fifth feature is the growing concentration of
ownership and control in the international production
and distribution of goods and services, and also among
the agents of international finance. It is no secret
that the decade of globalisation has been marked by
some of the strongest and most sweeping waves of concentration
of economic activity that we have known historically.
Periods of high concentration are also periods of
the intensification of competitive pressures. The
intensification of competition in turn means that
the "normal" tendencies of capitalist accumulation
are sharpened and aggravated, including the pressure
to find more and more means of reducing labour costs,
for example. Concentration also involves the amalgamation
or destruction of smaller capitals. The very process
of the big swallowing up the small, at both national
and international levels, tends to reduce employment.
So the reorganisation and restructuring of production
takes the form of the decline in importance of smaller
more employment intensive manufacturing units and
the growing dominance of large players which employ
much fewer people. Associated with this are the well
known stagnationist tendencies of monopoly capital,
which also tend to reduce employment indirectly through
their effect on aggregate demand. Crises in emerging
markets are typically associated with further concentration,
as the attempt to resolve such crises within the basic
neoliberal paradigm have involved further liberalisation
and privatisation, thus allowing the sale of domestic
business units to large multinationals.
One very recent feature deserves to be noted: the
apparent breakdown of multilateralism. While the collapse
of the WTO negotiations in Cancun has been ascribed
to a group of developing countries, the truth is that
the intransigence, refusal to admit past transgression
and reluctance to negotiate on the part of developed
countries was instrumental in creating the deadlock.
The implementation of the 1994 GATT agreement and
the functioning of the WTO have already been heavily
skewed in favour of the interests of developed countries,
particularly the United States. Nevertheless, The
Bush administration has clearly shown that it has
scant regard for international institutions, which
it uses only when they explicitly serve its own immediate
ends. The US government's attitude towards the WTO
has been similar in that it has been unwilling to
make even the smallest compromises to an international
institution that has already been biased towards the
US in its functioning. The current decline in multilateralism
is likely to herald a period of greater uncertainty
and fluidity in world trade, as well as a scramble
for bilateral and regional deals and pressure for
competitive devaluations. While this may appear to
reduce the power of developing countries, it is worth
remembering that in the past century, such periods
in the world economy have been precisely those when
today's semi-industrial economies could achieve some
amount of autonomous industrialisation.
Changes in Labour Markets
These
broader changes in the international economy have
also affected national and international labour markets.
The most significant change is the increase in open
unemployment rates across the world. By the turn of
the century, unemployment rates in most industrial
countries were higher than they had been at any time
since the Great Depression of the 1930s. But even
more significantly, open unemployment was very high
in developing countries, and have continued to grow
thereafter, as Table 1 indicates. This marks a change,
because developing countries have typically have had
lower open unemployment rates simply because of the
lack of social security and unemployment benefits
in most such societies, which usually ensures that
people undertake some activity, however low paying,
and usually in the form of self employment. Therefore
disguised unemployment or underemployment has generally
been the more prevalent phenomenon in developing societies.
The recent emergence of high open unemployment rates
therefore suggests that the problem of finding jobs
has become so acute that it is now captured even in
such data, and may also herald substantial social
changes in the developing world.
Table 1 >>
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