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ECONOMY: Workers Will Pay the Costs of Global Crisis

Gustavo Capdevila

GENEVA, Mar 18 2008 (IPS) - International union leaders warned representatives of governments and employers, and World Bank President Robert Zoellick, that the burden of the current financial turmoil will fall on the world’s workers.

The net result of the current global financial crisis, caused by the bursting of the subprime mortgage market bubble in the United States, is that workers will lose their jobs, as in the past, a labour representative predicted.

Roy Trotman, of Barbados, chair of the Workers’ Group within the International Labour Organisation (ILO) Governing Body, said that “the working poor will sink further into the margins of society” as a result of the financial turbulence.

Another consequence, according to Trotman, is that “we will endanger the modest progress being made towards meeting the Millennium Development Goals,” the eight objectives established by the United Nations, which include halving the proportion of people living in extreme poverty and experiencing hunger in the world by 2015, from 1990 levels.

Workers and their families will not be able to afford to meet their basic needs, Trotman said at a debate about the repercussions of the global financial crisis, held on Monday by the tripartite Governing Body of the ILO, made up of workers’, employers’ and government representatives. Zoellick was present as a guest speaker.

The discussion was based on a study prepared by the ILO in February, which describes how financial irregularities in the United States overwhelmed the housing market, with serious negative effects on employment, retail sales and other indicators.

The report, on “Current prospects and policies for decent work: The challenge of multilateral cooperation and policy coherence for a fair globalisation,” says that “the depth and length of a U.S. slowdown or recession is uncertain, as is its spread to other countries.”

Trotman compared the present crisis with earlier financial upheavals in Russia and Asia in the last two decades. “These crises have all raised the fundamental question of the lack of good governance of financial markets,” he said.

“Left on their own, markets cannot resolve these crises, which end up affecting the livelihoods of working men and women,” he maintained.

In Zoellick’s view, there are marked differences between what is happening now and the crises of the 1980s and 1990s, because today, in spite of the crisis, healthy economic growth is continuing in some middle-income countries. The world has multiple growth poles now, he said.

The previous crises began in developing countries, but this one started in an industrialised nation, he noted. Meanwhile, China and India continue to perform well in terms of economic growth, which will help Brazil and other emerging countries to keep growing too, he said.

The president of the World Bank recalled that when the first economic tremors appeared in mid-2007, investment risk ratings were raised in emerging economies.

But these have now improved for such countries. Some governments in developing countries are implementing the right policies, Zoellick said.

In this respect, the ILO study suggests that developing countries could cushion and counteract the effects of the crisis, by reducing their dependence on exports as the motor of economic growth, and by fomenting internal consumption and investment in job creation.

The suggestions would be most feasible in countries with a positive fiscal balance and sufficient foreign reserves to afford to carry out these steps, the report says.

The ILO report describes financial markets as the most integrated part of the global economy. For this reason, credit restrictions in the U.S. and other industrial countries will have repercussions on companies and jobs all over the world.

The credit crunch also affects investment and consumption. Consequently, it is bound to affect production in rich countries and, through trade links, in developing countries, it says.

The study admits that it is uncertain how severe, how long, or how extensive the credit restrictions will be, or how much they will affect production and jobs.

In this context, the ILO points out that its Decent Work Programme offers policy tools that are particularly pertinent to periods of slowdown.

Among those instruments, the study mentions the ILO’s Global Employment Agenda and its mechanism of social dialogue based on international labour standards.

Charlotte Ponticelli, the U.S. representative at the ILO Governing Body, objected to the study’s conclusions about the mortgage crisis in her country, which triggered the present economic crisis.

She said the ILO study would have been more useful if it had concentrated on solutions for the problem, rather than diagnosing its causes.