The Impact of Globalization on Workers and Their Trade Unions -- Address by Michel Camdessus
IMF News, June 26, 1996
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- Published: June 26, 1996
Advantages of globalization (findings)
- Trade liberalization "can be a positive sum game: everyone can gain."
- Movement to lower trade barriers has increased world growth in goods and services, increased incomes and raised standards of living globally (not necessarily for each individual).
- "Around forty developing countries" that embraced open economies helped prevent a deep recession; without their buoyant activity the world would have experienced "a true recession rather than a growth rate a little higher than two percent" during "1991-93," when "the major countries—the U.S., Japan, France, and Germany— experienced a recession."
- Expansion beyond goods: "explosion of trade in services, telecommunications, financial services, computer and information technologies," creating new industries and often better paid jobs.
- Capital markets are "truly globalized"; foreign investment "is increasingly important in the creation of jobs and improvement of living standards in developing countries" and allows geographical diversification to limit investment risks.
- Empirical claim: companies investing in developing-country plants generate increased demand for parts and inputs from the developed countries where the investment originated.
Dangers and distributional concerns (findings)
- Twin evils identified: exclusion for individuals and marginalization for countries.
- Fear that a global labor market allows extremely low paid workers in developing countries to undercut wages of less skilled workers in developed countries.
- Noted increase in unemployment of the low skilled in most developed countries over the last twenty years; evidence of a large class of low skilled, poorly educated, low-wage workers in some developing countries.
- Technological change contributes to insecurity: "Who can be confident that skills learnt today will be relevant in 10 or 20 years?"
- Structural adjustment policies are criticized publicly as a cause of unemployment and poverty; Camdessus rejects that criticism while acknowledging human costs of adjustment and warning that refusal to adjust can cause higher human costs and collapse.
- Worsening risks if governments fail on priorities: "growing distortions in the distribution of incomes at the expense of the poorest, the risks of growing poverty, corruption and criminality, the risks to the environment and cultural differences."
Causes of unemployment and necessary economic responses (findings and analysis)
- Multiple contributors to rising unemployment:
- Structural change related to changing patterns of traded goods and services requiring new skills and investment.
- Low growth rates and financial instability reducing firms' willingness to invest and hire.
- Technological change displacing non-numerate, non-literate workers and speeding obsolescence of skills.
- Fund's role: "primary Fund responsibility" in better international cooperation in macroeconomic policy design and structural policy reform through surveillance and discussions with major trading nations, particularly the G7.
- Emphasis on raising growth to sustainable levels and reducing fluctuations and financial instability.
Role of trade unions and tripartite dialogue (policy recommendations)
- Trade unions have an active role to:
- Help workers retrain and ensure transferability of pensions and entitlements.
- Ensure social entitlements are fulfilled and maintained at adequate levels.
- Press for education and preparation of youth and girls for the workforce.
- Use their position in tripartite dialogue (employees, employers, government) to help shape realistic, balanced solutions.
- Tripartite dialogue is presented as essential to link market flexibility, state frameworks, and social solidarity.
The "three hands" framework (analysis and prescriptions)
- First hand: markets—importance of market mechanisms but insufficient alone.
- Second hand: "the hand of justice guaranteed by the State"—rule of law, independent judiciary, macroeconomic framework, state reform (including reducing unproductive spending, better tax collection, efficient allocation to social priorities).
- Third hand: "the hand of social solidarity"—fair income transfers domestically and internationally (monetary cooperation, development aid, aid to countries in transition).
- Key point: "the three hands must be interlinked; no one of them is efficient acting alone."
IMF operations, outcomes, and program-level findings (findings)
- The Fund recognizes social costs of adjustment and works with authorities to review budgets for social transfers and design well-targeted, cost-effective social safety nets.
- Military spending outcomes in countries with Fund programs:
- Military spending dropped from "5.3 percent of GDP in 1990 to 2.2 percent in 1995."
- In a reviewed group of countries with IMF programs, "the share of military expenditures in total public spending was reduced by 3 percentage points during the period 1985-92, while social expenditures was increased by more than 4 points."
- Instrumental support for poorest countries:
- Making loans at a "0.5 percent interest rate" on a permanent footing.
- Working with the World Bank to "find a way to help reduce the burden of multilateral debt."
Regional observations and specific concerns (findings)
- Asia: Trade unions welcome job and income opportunities but face organizing difficulties; "over one and a half billion people in the Indian sub-continent, China and Indonesia who survive on less than a dollar a day."
- Latin America: Concerns about trade liberalization and privatization; Camdessus argues competition and regulation matter, and warns against replacing public monopolies with private monopolies.
- Industrial countries: Labor market rigidities (e.g., heavy payroll taxes, rigid pay scales) can increase unemployment or discourage hiring; U.S. noted to have fewer rigidities and a significantly lower unemployment rate but rising precarious conditions ("anxious class").
Practical policy actions encouraged (recommendations)
- Promote flexible economic structures plus monetary and fiscal discipline to compete in global markets.
- Strengthen education and job training with priority on youth and girls to sustain employability.
- Design and protect well-targeted, cost-effective social safety nets to shield the most vulnerable during adjustment.
- Reform the state: reduce unproductive spending, ensure proper tax collection, and allocate resources efficiently to social priorities.
- Apply competition to state-owned enterprises and use regulation to prevent private monopolies displacing public ones.
- Encourage tripartite dialogue (employees, employers, government) to coordinate responses to globalization and structural change.
- Increase international solidarity: maintain concessional lending (0.5 percent interest), pursue multilateral debt burden reduction, and coordinate monetary cooperation and development aid.
- Press governments to keep military spending "no higher than required by the objective security conditions of the country."
Address by Michel Camdessus at the Sixteenth World Congress of the International Confederation of Free Trade Unions (ICFTU), Brussels, June 26, 1996