## The Impact of Globalization on Workers and Their Trade Unions -- Address by Michel Camdessus

_IMF News, June 26, 1996_

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## Bibliographic details
- Published: June 26, 1996

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### 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*

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## References

- [Haiti and the IMF](http://www.imf.org/external/country/HTI/index.htm)
- [United States and the IMF](http://www.imf.org/external/country/USA/index.htm)
- [Speeches](https://www.imf.org/en/news/searchnews)
- [PRESS CENTER](http://presscenter.imf.org/)
- [https://www.imf.org/en/home](https://www.imf.org/en/home)

_Source: https://www.imf.org/en/news/articles/2015/09/28/04/53/spmds9613_