Finance ministers and national leaders are girding themselves for the upcoming G-20 summit in London, where they will have to overcome deep policy divisions to reach global agreement on the worsening economic crisis. The United States and Britain are calling on other wealthy nations in Europe and Asia to break the deflationary cycle through increased government spending. But the European Union, led by Germany and France, so far has balked at the idea, instead stressing the priority of financial market regulation and the need for fiscal restraint. Disputes over trade restrictions, reserve currencies and control of international financial institutions, meanwhile, have revealed cleavages between the United States and Western Europe on one hand, and developing nations like Brazil, India and China on the other. Diminished expectations for a global pact abound on the eve of the April 2 meetings, even in the financial press. “The summit may agree on minutiae like tax havens (none of which will be represented) and bankers’ bonuses,” The Economist grumbled recently. “But on the important stuff, the stage is set for disappointment.”
And yet while G-20 leaders fiddle and Rome burns, the international trade union movement has laid out an ambitious set of principles for addressing the worst global downturn since the Great Depression. On March 23 a coalition of labor organizations from more than a hundred countries issued a statement calling on the G-20 to avoid settling for “half-measures” and instead move quickly to tackle the recession and “establish a new model for economic development that is economically efficient, socially just and environmentally sustainable.” Looking far beyond the internecine squabbles among the major capital powers, the union agenda takes aim at the neoliberal model that has dominated global economic policy for at least a quarter-century.
“Workers around the world, who are losing their jobs and their homes, are the innocent victims of this crisis,” reads the unions’ fourteen-page London Declaration, “a crisis precipitated by greed and incompetence in the financial sector, but which is underpinned by the policies of privatisation, liberalisation and labour market deregulation.”
“This is a historic pivot,” says John Sweeney, president of the AFL-CIO. “The first objective of the summit needs to be to get other countries to do their share in fighting the global recession. But in the longer term, we also need to be focused on the fundamental imbalances that led to the crisis, and on building a stronger, more stable economy with results that are more fairly distributed.” Sweeney is playing a leading role in an international delegation of labor leaders to the summit, which will present the London Declaration to British prime minister and G-20 chair Gordon Brown during a meeting on March 31.
Along with an internationally coordinated commitment to government spending and public employment, the London Declaration calls for taking public control of insolvent banks; establishing a new global framework for financial regulation, “with full stakeholder engagement”; reforming international institutions like the World Bank and IMF; bolstering core workers’ rights and wage standards; and extending social safety nets to cushion the ranks of the unemployed, which could grow by more than 50 million worldwide by the end of this year.
“The reaction to the London Declaration on the union side has been a very strong agreement on principles,” remarks John Evans, general secretary of the Paris-based Trade Union Advisory Committee to the OECD, which helped prepare the document. “I’ve never known the global union movement to be quite so united as we are on what we’re calling for at the moment.”
The unions’ paramount concern is to get the global economy working again. “The first priority for G-20 leaders,” according to the declaration, must be “halting the freefall in world growth and reversing the decline in employment.” Industrial production has dropped off dramatically in many G-20 nations during the recession–12 percent in Europe, 15 percent in Brazil and as much as 31 percent in Japan over the past year. Large economies like China and Germany have seen exports fall by 20 percent or more in that time, and the decline in output is fueling a growing employment crisis in rich and poor countries alike.
In the United Kingdom, the number of unemployed swelled by 138,000 in February alone, according to Paul Talbot, assistant general secretary of Unite, Britain’s largest trade union. By the end of the year, he estimates, there could be as many as 3 million out of work. “We’ve fought recessions in the past,” Talbot notes, but he worries that “what’s really unique about this one is the speed with which it’s unfolding.”
Talbot and other British trade unionists, along with dozens of citizens’ groups, helped organize a March 28 pre-summit day of protest, when thousands are expected to show up for a march and rally in central London. Their message to the G-20 leaders will be the need for an “economy based on fair distribution of wealth, decent jobs for all and a low carbon future.” Other unions in Europe have also been staging massive protests in the weeks leading up to the meetings–most notably a one-day French general strike on March 19, which drew as many as 3 million into the streets to demand that the French government take more considerable action to protect workers during the recession.
To jump-start production, the London Declaration urges the G-20 nations to make substantial commitments to “public expenditure targeted on employment,” including “large-scale investment in green infrastructure, such as energy efficiency and renewable energies–thereby stimulating the creation of high quality employment across a range of sectors.” The push for a “Green New Deal” would be part of a coordinated global recovery plan equal to at least 2 percent of world GDP–roughly equivalent to the amount the Obama administration has allotted to its stimulus package, but significantly more than many EU countries have pledged thus far.
To help struggling countries in Eastern Europe and the global South, where “ten years of progress in poverty reduction has been undone in just a few months,” the unions are calling for policies to boost domestic demand, guarantee food security and increase financial assistance. “Most developing and some emerging countries are operating pro-cyclical fiscal policies, because they are pressured by the International Financial Institutions to practice ‘fiscal discipline’ at times of crisis.” The London Declaration urges G-20 leaders to “support expansionary recovery programmes in developing countries” and pushes for an “end to the harmful economic policy conditionality attached to assistance,” which often forces poorer countries to curtail public spending on employment and social welfare programs when it is most needed.
On the crisis in the financial markets, the union plan is similarly far-reaching. It rejects efforts to “create taxpayer-sponsored ‘bad asset’ pools,” like those at the core of the US Treasury’s recently announced Public-Private Investment Program. Instead, the unions argue that nationalizing insolvent banks “is the only way to restore confidence, provide fair risk-sharing and ensure that taxpayers benefit from any gains once solvency is restored.” Governments should intervene quickly to protect workers’ pension funds from further losses, promote alternatives to the “too big to fail” banking model and exert broad new regulatory authority in the shadowy world of hedge funds and private equity.
Looking beyond the crisis, TUAC’s John Evans argues there needs to be “a far more balanced view of the role of government in markets,” and he worries that some governments are “already talking about exit strategies. The idea that we can go just go back to the same old failed deregulated policy that led to this mess in the first place just is not socially acceptable.”
To that end, the London Declaration calls for continued “public control and oversight of all financial institutions, products and transactions.” It criticizes G-20 leaders for their failure to engage with “trade union, civil society or other stakeholders” in discussions about financial market regulation, and for their willingness to defer to the “same experts who created the current system that has now collapsed so disastrously.”
“The G-20 remains tied to a very financial sector-driven agenda,” says Evans. “At the moment, stakeholder voices are not included in key places. The Financial Stability Forum”–which brings together central bankers, national Treasury Department officials and international financial authorities to provide guidance to G-20 leaders on market issues–“is a very closed, technocratic group. One message that we’ll be bringing to the summit is that you need to open up the process of financial market regulation.”
More effective oversight and greater democratic control of the financial sector should help prevent a repeat of the meltdown. But as Andrew Jackson, chief economist of the Canadian Labour Congress notes, “the crisis we’re in now is not just the product of the collapse of the housing bubble. Working families were going further and further into debt because of stagnating wages, which kept the system going,” even as jobs were disappearing and earnings were flat or declining. At its most ambitious, the union program is a first step toward a broader effort to dismantle the ascendant neoliberal policy regime, and “bring to an end the financialisation that has devastated the real economy” and led to runaway inequality at home and abroad.
“The stagnation of wages in recent decades, if not a direct cause, has been one of the principle reasons why the effects of the crisis have been so dire for working people in all countries,” says Ron Blackwell, who as chief economist of the AFL-CIO played a key role in drafting the London Declaration. In two-thirds of OECD countries, including the United States, wages had fallen behind productivity well before the economic collapse; and lax labor regulations in developing countries, often reinforced by structural adjustment policies imposed by the IMF and World Bank, had only exacerbated global income inequality.
“Even if we get out of this crisis,” Blackwell argues, “we’re going to be back into it if we don’t address the fundamental imbalances between the US and the rest of the world, between finance and the real economy, and between workers and capital.” The unions’ program is an invaluable starting point for a discussion of what a new global economy might look like. At the upcoming international summit, the feckless financial leaders and heads of state who presided over the crisis and are now assembling in London would be wise to heed their call.