Tuesday, 11 November 2008

Trade union statement to the “G20 crisis summit”

Exec summary below, full statement here (PDF).

Hat-tip: Pierre

G20 leaders are meeting as the global economy is teetering on the edge of a precipice. The spectacular worsening of the financial crisis in September and October 2008 is now having a dramatic impact on the real economy. GDP is forecast to fall and unemployment surge in the major industrialised countries. The crisis is spreading to emerging and developing economies.
Already, several governments have had to request emergency loans from the International Monetary Fund (IMF) as their financial sectors become paralysed, capital flows out of the country, currencies collapse and economic growth comes to a standstill. The global economy is facing a very serious recession. How protracted and deep this proves to be depends on how timely and well-focused government action is. This systemic crisis comes on top of the unprecedented rise in food and commodity prices earlier in the year and the resulting food crisis in developing countries. It also occurs against the background of accelerating climate change which, without rapid action, will affect the poorest across the globe most severely, and especially vulnerable groups including women.

History has shown that crises on this scale lead to social and political instability with unpredictable and often tragic results. Working families have an enormous stake in the response to this crisis. Already, for more than two decades social cohesion has been under stress as a result of growing inequality in most countries. Today, those who are losing homes, jobs and pensions as a result of the financial crisis, for which they bear no responsibility, as taxpayers are being called on to bail-out those who are responsible. The G20 governments must acknowledge the urgent need to begin work on a more inclusive, just and democratic system for the governance of global markets. Trade unions must have a seat at the table and be part of the crucial negotiations that will be held in the different institutions, during the months ahead.

The current economic crisis began in the US as a conjunction of a housing crisis, a credit market crisis and, increasingly, an employment crisis. Each of these crises is serious enough in itself, but their interaction makes for a particularly complex and dangerous dynamic in the real economy. Housing prices have collapsed, foreclosures have surged and trillions of dollars have been drained from household net worth.

Consumers are pulling back sharply as their wealth declines, slowing the economy and forcing employers to shed jobs and cut wages and benefits.

The continuing decline of housing prices also aggravates the credit crisis as the value of mortgage-backed assets continues to undermine the balance sheets of under-capitalized financial institutions. Unless the decline in asset prices and employment is halted, the banking system will continue to haemorrhage. This vicious circle is now repeating itself in other industrialised countries and in emerging economies originally thought to be immune.

The entry of governments into the financial markets to nationalise banks, guarantee deposits, buy up bad debts and recapitalise the banking systems across the US and Europe, is necessary. However it is unacceptable that governments nationalise the losses of financial capital and let financial institutions privatise the profits. This most serious economic crisis since the Great Depression of the 1930s must mark an end to an ideology of unfettered financial markets, where self-regulation has been exposed as a fraud and greed has overridden rational judgement to the detriment of the real economy. A national and global regulatory architecture needs to be built
so that financial markets return to their primary function: to ensure stable and cost-effective financing of productive investment in the real economy.

Beyond this governments and international institutions must establish a new economic order that is economically efficient and socially just – a task as ambitious as that confronted by the meeting in Bretton Woods in 1944.

The leaders of the major nations meeting in Washington must set in train a process to work with countries beyond the G20, in order to:

* Initiate a major recovery plan to stabilise global capital markets, move economies rapidly out of recession, stave off the risks of a global depression and get back on the track of creating decent work. There should be further coordinated interest rate cuts as necessary. Governments should bring forward infrastructure investment programmes that can stimulate demand growth in the short term and raise productivity growth in the medium term. Now is the time to move forward with a “Green New Deal” to create jobs through alternative energy development and energy saving and conservation. Tax and expenditure measures should be introduced to support the purchasing power of middle and low income earners. Development assistance budgets need to be maintained to the Least Developed Countries (LDCs) to help meet the Millennium Development Goals (MDGs) with the adoption of binding commitments and a timetable to meet the UN target of 0.7 % of GDP.


* Ensure that a financial crisis on such a scale never happens again. For two decades most governments, together with the International Financial Institutions (IFIs), have promoted the lightly regulated ‘new financial architecture’ that has characterised the global financial markets responsible for this crisis. Governments have now been forced to intervene to save the banking system; the quid pro quo must be properly regulated financial institutions. The agenda must cover: the public accountability of central banks; counter-cyclical asset requirements and public supervision for banks; the regulation of hedge funds and private equity; the reform and control of executive compensation and corporate profit distributions; the reform of the credit rating industry; the ending of offshore tax havens; the taxation of international financial transactions; proper consumer protection against predatory lending and aggressive banking sales policy; and active housing and community-based financial service public policies.

The new system needs to reflect the requirements of all regulators; bank regulators, tax and competition authorities, and governance and consumer bodies in each country. There must be no more piecemeal approaches to reform.

* Establish a new structure of economic governance for the global economy. This must go beyond financial markets or currency systems to tackle all the imbalances of growth and capital flows that contributed to the crisis. Just as the post-World War II economic settlements included the strengthening of the International Labour Organisation (ILO), in parallel with the creation of the United Nations, the new postcrisis settlement must address international economic governance.

Governments must start work on the necessary structures. But this debate should not be held between bankers and finance ministry officials, behind closed doors. Trade unions must have a seat at the table.

* Combat the explosion of inequality in income distribution that lies behind this crisis. The new system of economic governance must tackle the crisis of distributive justice that has blighted the global economy. It must ensure more balanced growth in the global economy between regions, as well as within countries, between capital and labour, between high and low income earners, between rich and poor, and between men and women.

The G20 meeting should mark the beginning of a process. The agenda for change must be progressed at other meetings in the months ahead; notably at the Follow-up International Conference on Financing for Development, to be held in Doha at the end of the month. At the subsequent Conference of the Parties to the United Nations Framework Convention on Climate Change (UNFCCC), being held in Poznan in December, there must be pledges of immediate assistance from industrialised countries to enable
more technology transfer and climate change adaptation in developing countries. This would further contribute to establishing the trust that is required to successfully conclude the current climate change negotiations by the end of 2009. The G8 meetings in Italy, as well as the meetings of the IFIs and the Organisation for Economic Cooperation and Development (OECD) in 2009, must all be used to maximum effect – there can be no return to ‘business as usual’.

2 comments:

CapitalWorker said...

Why no comment on pension fund ownership? Seems strange.

will said...

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