Changes in the World of Work

 
Nov 13th 2003.

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 the people in the world have remained broadly the same, or have deteriorated rather than improved. After more than a decade of corporate globalization, 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 continue to be determined by the 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 globalization, 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 of the world economy to maintain stability. Such a role requires the fulfilment of three functions at a minimum: discounting in crisis; counter-cyclical 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 bail-outs 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, counter-cyclical 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 an 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 decelerated rates of growth of world trade (in value terms) despite the enforced liberalization 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, counter-cyclical or expansionary macroeconomic policies remain out of reach for governments because of a combination of fear of the power of finance and domination of the neoliberal economic policy approach.

Second, corporate globalization has been marked by greatly increased disparities, both within and between countries. While there is-inevitably-a debate over this, most careful studies find increased inequality within and across
regions[1] 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, and public services have been privatized 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, 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 that are 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 make the export of capital appear to be more attractive. The United States attracted 70 per cent of the world's savings over the last two years; even after the supposed 'revulsion' from dollar assets in the last 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 counter-cyclical 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 previous 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-ŕ-vis the developing countries, and net flows positive into most emerging markets are no longer. (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 are 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 globalization 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 intensification of competitive pressures. 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 reorganization and restructuring of production takes the form of a decline in importance of smaller, more employment-intensive manufacturing units and the growing dominance of large players employing much fewer people. Associated with this are the well-known stagnationist tendencies of monopoly capital, which also tend to indirectly reduce employment 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 has involved further liberalization and privatization, 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 the 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 compromise 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 industrialization.

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 the developing countries, and has continued to grow thereafter, as Table 1 indicates. This marks a change, because developing countries typically have had lower open unemployment rates simply because of the lack of social security and unemployment benefits in most such societies, which 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 >>

[1]  Cornia, 2001; Milanovic 2002, etc. A more extensive survey of the literature on globalisation and inequality is available on www.networkideas.org.

 
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