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
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 >>
