globalisation term paper

8/7/2019 Globalisation term paper

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LOVELY PROFESSIONAL UNIVERSITY

TERM PAPEROF

GLOBAL

HUMAN

RESOURCE

MANAGEMENTTopic-: Role of Trade Unioninsm in

Globalised countries.

PRESENTED BY - MANOJ SAYRTA

PRESENTED TO –



ROLL NO. B 35 MR.

K.P.GOPALKRISHAN SIR.

Introduction

What is Globalization

The global economy is in the midst of a radical transformation, with far-reaching and fundamentalchanges in technology, production, and trading patterns. Faster information flows and falling transportcosts are breaking down geographical barriers to economic activity. The boundary between what can andcannot be traded is being steadily eroded, and the global market is encompassing ever-greater numbers of

goods and services.

Globalization is an issue that rouses strong emotions among people. The first step in understanding thetopic is to define what it means. We are hampered by the reality that there is no one single agreeddefinition – indeed the term globalisation is used in slightly different ways in different contexts byvarious writers and commentators. What is common to all usages is an attempt to explain, analyse andevaluate the rapid increase in cross-border (trans-national) business that has take place over the last10/15 years.

Trends in global trade and output

% change per annum unless stated 1980-89 1990-99 2000-04

Global GDP growth 3.3 3.2 3.8

World trade growth in goods and services 4.5 6.5 6.2

World trade (% of GDP) 19 21 25

The OECD defines globalization as

“The geographic dispersion of industrial and service activities, for example research and development,sourcing of inputs, production and distribution, and the cross-border networking of companies, for example through joint ventures and the sharing of assets”

Globalisation is essentially a process of deeper international economic integration that involves:

1. A rapid expansion of international trade in goods and services between countries.

2. A huge increase in the value of transfers of financial capital across national boundariesincluding the expansion of foreign direct investment (FDI) by trans-national companies.

3. The internationalization of products and services by large firms.

4. Shifts in production and consumption from country to country – for example the rapid expansion

of out-sourcing of production.

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All merchandise products Trade Production

Average % change per annum

1950-63 7.7 5.2

1963-73 9.0 6.1

1973-90 3.8 2.7

1990-04 5.7 2.5

Manufactured goods

Trade Production

1950-63 8.6 6.6

1963-73 11.3 7.4

1973-90 5.5 3.1

1990-04 6.3 2.6

The data table above drawn from statistics published by the World Trade Organization shows how theannual growth in merchandise trade (trade in manufactures, agricultural products, fuels and mining products) has consistently out-paced the growth of output. This means that trade as a share of output inthe global economy has continued to increase – marking an increase in trade integration within the worldeconomic system.

Another way of describing globalisation is to describe it as a process of making the world economy

more interdependent. The expansion of trade in goods and services, the huge increase in flows of financial capital across national boundaries and the significant increase in multinational economic activitymeans that most of the world’s economies are increasingly dependent on each other for their macroeconomic health.

Shares in world exports 1991 2006Change 1991-2006

Canada 3.4 3.4 -0.1

France 6.2 4.0 -2.1

Germany 10.8 8.6 -2.2

Italy 4.9 3.5 -1.4

Japan 8.0 5.0 -2.9

United Kingdom 5.5 4.4 -1.1

United States 13.7 10.1 -3.6

Non-OECD Asia inc China 11.5 19.3 7.8

Latin America 2.6 3.0 0.4

Source: OECD World Economic Outlook, June 2006

For example, a deflationary monetary or fiscal policy introduced in one country which leads to changes inAD inevitably affects the ability of other countries to export to that economy. Consider for example adecision by the Federal Reserve Bank in the United States to raise their interest rates in response to thethreat of a rise in inflation. This could conceivably have important feedback effects throughout the



international economy. The rate of growth of the US economy is likely to slow and this will then have aneffect on the strength of demand from US consumers for overseas products.

Secondly, changes in the structure of company taxation and personal taxation from country to countrytends to influence flows of investment and have feedback effects in the long term on national income,employment and wealth.

Trends in global capital flows

1989 1999 2003

Stock of Foreign Direct Investment (% of GDP) 8.0 16.0 22.1

Foreign assets (% of GDP) 62.6 139.6 186.1

Source: International Monetary Fund

Different Waves of Globalization

Globalisation is not new! Indeed there have seen several previous waves of globalisation. Nick Stern,

Chief Economist of the World Bank has identified three major stages of globalization:

o Wave One: Began around 1870 and ended with the descent into global protectionism during the

interwar period of the 1920s and 1930s. This period involved rapid growth in international tradedriven by economic policies that sought to liberalize flows of goods and people, and by emergingtechnology, which reduced transport costs. This first wave started the pattern which persisted for over a century of developing countries specializing in primary commodities which they export tothe developed countries in return for manufactures. During this wave of globalisation, the level of world trade (defined by the ratio of world exports to GDP) increased from 2 per cent of GDP in1800 to 10 per cent in 1870, 17 per cent in 1900 and 21 per cent in 1913.

o Wave Two: After 1945, there was a second wave of globalization built on a surge in world trade

and reconstruction of the world economy. The rapid expansion of trade was supported by the

establishment of new international economic institutions. The International Monetary Fund (IMF)was created in 1944 to promote a stable monetary system and so provide a sound basis for multilateral trade, and the World Bank (founded as the International Bank for Reconstruction andDevelopment) to help restore economic activity in the devastated countries of Europe and Asia.Their aim was to promote lasting multilateral economic co-operation between nations. TheGeneral Agreement on Tariffs and Trade (GATT) signed in 1947 provided a framework for progressive mutual reduction in import tariffs.

o Wave Three: The current wave of globalisation which is demonstrated for example by a sharp

rise in the ratio of trade to GDP for many countries and secondly, a sustained increase in capitalflows between counties and trade in goods and services

Structure and financing of trade unions

Organizational structure of trade unions

The vertical line is the most important, embracing workers in the sector to which theunion belongs (agriculture, iron and steel, banking and construction). The basic units of organization are union departments within enterprises which, under the 1985 Law, are entitled tomeet, collect funds, and publicize their activities. In enterprises with more than 250 workers they are

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entitled to a shared site for meetings and a notice board (the most representative trade unions); one or more union delegates are paid for their time (trade unions are represented on an enterprisecommittee). Local and provincial organizations, as well as regional and national federations, have been set up. The most important federations are those representing workers in the public services andmetallurgy.

The horizontal line consists of branch unions at various levels, forming a mutualassistance link which has common services and acts as a negotiating partner with employers and political authorities at this level. Thus, local and provincial unions, as well as regional and nationalconfederations, serve to unify all trade unions belonging to the same central office in a givengeographical area. The national confederation serves as a reference point for a particular union trend, be it socialist, anarcho-unionist or any other.

Representative bodies. Union organizations normally have three representative bodies.The Congress (or assembly) is the basic organ, having discretion in the appointment of lower-level bodies, the approval of action lines and the budget, and also the power to set up specific authoritiessuch as that dealing with disputes. Above the assembly is the General Council, which is the inter congressional body that sets general policy and controls lower-level organizations. In addition, the

Executive Committee meets once a week or once a month, and coordinates the implementation of agreements adopted by the higher authorities.

Main Motivations and Drivers for Globalisation



As the well respected commentator Hamish McRae has argued, “Business is the main driver of globalization!” The process of globalisation is motivated largely by the desire of multinationalcorporations to increase profits and also by the motivation of individual national governments to tap intothe wider macroeconomic and social benefits that come from greater trade in goods, services and the freeflow of financial capital.

Among the main drivers of globalisation are the following:

o Improvements in transportation including containerisation – the reduced cost of shipping

different goods and services around the global economy helps to bring prices in the country of manufacture closer to prices in the export market, and adds to the process where markets areincreasingly similar and genuinely contestable in an international sense.

o Technological change – reducing massively the cost of transmitting and communicating

information - sometimes known as “the death of distance” – this is an enormous factor behind thegrowth of trade in knowledge products using internet technology. Advances in transporttechnology have lowered the costs, increased the speed and reliability of transporting goods and people – extending the geographical reach of firms by making new and growing marketsaccessible on a cost-effective basis.

o De-regulation of global financial markets: The process of deregulation has included the

abolition of capital controls in many countries. The opening up of capital markets in developedand developing countries facilitates foreign direct investment and encourages the freer flow of money across national boundaries

o Differences in tax systems: The desire of multi-national corporations to benefit from lower

labour costs and other favourable factor endowments abroad and therefore develop and exploitfresh comparative advantages in production

o Avoidance of import protection: Many businesses are influenced by a desire to circumvent

tariff and non-tariff barriers erected by regional trading blocs – to give themselves morecompetitive access to fast-growing economies such as those in the emerging markets and ineastern Europe

o Economies of scale: Many economists believe that there has been an increase in the estimated

minimum efficient scale associated with particular industries. This is linked to technologicalchanges, innovation and invention in many different markets. If the MES is rising this means thatthe domestic market may be regarded as too small to satisfy the selling needs of these industries.Overseas sales become essential.

Division of labour on a global scale

The ease with which goods, capital and technical knowledge can be moved around the world hasincreasingly enabled the division of labour on a global scale, as firms allocate their operations in line withcountries’ comparative advantage. As a result, there has been a significant increase in the number of firms

that locate, source and sell internationally, reflecting the new opportunities presented by the ICTrevolution, alongside falling transport costs and easing trade and capital restrictions.

Globalization no longer necessarily requires a business to own a physical presence in terms of either owning production plants or land in other countries, or even exports and imports. For instance, economicactivity can be shifted abroad by the processes of licensing and franchising which only needs informationand finance to cross borders. And increasingly we are seeing many examples of joint-ventures between businesses in different countries – e.g. businesses working together in research and development projects.



TRADE UNION

A trade union is an organisation made up of members (a membeship-based organisation) and itsmembership must be made up mainly of workers. One of a trade union's main aims is to protect andadvance the interests of its members in the workplace.

Most trade unions are independent of any employer. However, trade unions try to develop close workingrelationships with employers. This can sometimes take the form of a partnership agreement between theemployer and the trade union which identifies their common interests and objectives.

Trade unions:

• negotiate agreements with employers on pay and conditions

• discuss major changes to the workplace such as large scale redundancy• discuss their members; concerns with employers

• accompany their members in disciplinary and grievance meetings• provide their members with legal and financial advice

•

provide education facilities and certain consumer benefits such as discounted insurance

Trade union recognition

Employers which recognise a union will negotiate with it over members' pay and conditions.

Many recognition agreements are reached voluntarily, sometimes with the help of the Labour RelationsAgency. If agreement can't be reached and the organisation employs more than 20 people, a union mayapply for statutory recognition. To do so, it must first request recognition from the employer in writing. If this is unsuccessful, the union can apply to the Industrial Court for a decision.

In considering the union's application, the Court must assess many factors including the level of unionmembership and the presence of any other unions. Often, the Court will organise a ballot among theaffected workforce to decide whether recognition should be awarded. Throughout the process, theemphasis is on reaching voluntary agreement.

Collective bargaining

If a union is formally recognised by an employer, it can negotiate with the employer over terms andconditions. This is known as 'collective bargaining'. For collective bargaining to work, unions andemployers need to agree on how the arrangement is to operate. They might, for example, makeagreements providing for the deduction of union subscriptions from members' wages, who is to representworkers in negotiations and how often meetings will take place.

Both these agreements on procedure and agreements between employers and unions changing the termsapplying to workers (like a pay increase for example) are called 'collective agreements'. Your contract of employment will probably set out which collective agreements cover you. It's possible that a union maynegotiate on your behalf even if you're not a member.

Some workers join a trade union because they believe that a union can:

• negotiate better pay



• negotiate better working conditions, like more holidays or improved health and safety• provide training for new skills

• give general advice and support.

Union members have the right to be accompanied to a discipline or grievance hearing by a trade unionrepresentative (although trade unions are not compelled to provide this). All employees, regardless of

whether they are union members or not, are entitled to be accompanied by a work colleague.

• Raising a grievance

• Disciplinary issues at work

Recognised unions also have rights to consultation where redundancies or a transfer of business are proposed. There is a regular subscription cost for union membership and different rates may apply totrainees and part-timers. Unions will not normally help with problems which pre-date membership.

If you want to join a recognised union in your workplace, you could approach a representative for information like the shop steward. Otherwise, contact the Northern Ireland Committee of the IrishCongress of Trade Unions (ICTU) to find out which union is relevant to you.

The law gives you the right to join a trade union wherever you work. This right applies whether a unionhas been recognised or not. You're protected from being disadvantaged for being a union member.Specifically trade union membership is an unlawful reason for:

• refusing you employment

• dismissing you

• selecting you for redundancy.

The law gives you the right not to join a trade union. The same protection applies to you as it does tounion members. In particular, employers are no longer permitted to operate a 'closed shop' (that is, make

all workers join the employer's preferred union). An employer can't deduct payments from you, to a unionor charity in lieu of union membership without your permission.

Trade union activities

When a union is recognised by an employer, members have the right to time off at an appropriate time totake part in trade union activities. These may include:

• voting in ballots on industrial action• voting in union elections

• meeting to discuss urgent matters

•

attending the annual conference

The Impact of Globalization on Workers and Their Trade Unions

"The Global Market Trade Unionism's Greatest Challenge," lays out an impressive agenda for tradeunions in a rapidly changing globalized world. It speaks on behalf not only of your immense membership

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but of all humanity when it says "mass unemployment and poverty are an intolerable waste of resourcesand a dangerous threat to social cohesion." Yes, we are confronted with the hard challenge of turning agrim picture into one where opportunities could overcome the risks. Your unions have an outstandingrecord of such fights and successes in adverse conditions, not the least in defense of trade union rights,which so frequently go hand in hand with democracy itself. And I have no doubt you will remain faithfulto such tradition.

But this is a call to action for all. Indeed, the first Article of the IMF's Articles of Agreement mandates theFund to "facilitate the expansion and balanced growth of international trade and to contribute thereby tothe promotion and maintenance of high levels of employment and real income...." This is the agenda for the Fund to complete and we are far from being there.

We agree on the diagnosis and we agree on a common objective. I would like to offer you then our viewson some of the methods to be used in reducing unemployment and poverty and, in so doing, minimizingthe risks of globalization and maximizing its positive potential. But let me start by stating that this wouldhardly be conceivable without the active contribution of vigorous and responsible trade unions; and let meadd that I feel privileged to have this opportunity this afternoon, an opportunity many of you have alreadygiven me when I visited their headquarters in their countries.

Now let us start with a look at the advantages and disadvantages of globalization. In concluding your speech this morning, Mr. Chairman, after listing the problems of the global market, you mentioned "thetremendous opportunities for working people...to benefit also" from it. So let's take a look at the positiveside:

• Trade liberalization can be a positive sum game: everyone can gain. The movement to lower trade barriers and open world trade has undoubtedly increased world growth in goods and services; ithas increased incomes and raised standards of living globally, which doesn't mean, unfortunately,for each individual.

• This has happened throughout the world, but it is clear that, so far, the countries that have enteredthoroughly and positively into this freeing of trade have gained the most. And the entire worldhas benefited from their gains. Suffice it to remember that without the buoyant activity of aroundforty developing countries that have accepted the discipline of an open economy, the entire worldwould have experienced a true recession rather than a growth rate a little higher than two percent,when in 1991-93, the major countries—the U.S., Japan, France, and Germany— experienced arecession. In fact, the recession in the major countries was less severe because of their exports tothese developing countries. Those countries—on the contrary—that have been reluctant toliberalize have, on the whole, done less well: the extreme example being the previously centrally planned economies with their closed trading system. There is no doubt that no one envies the

plight of—as you say—the 5 percent of the world's workers who, perhaps, by the turn of thecentury will be living in the very few remaining "closed door" countries.

• Originally the globalization of trade involved, principally, trade in goods; but now we have anexplosion of trade in services, telecommunications, financial services, computer and informationtechnologies, creating industries and frequently better paid jobs of a nature and on a scaleundreamt of twenty years ago.



• Capital markets also are truly globalized. Foreign investment is increasingly important in thecreation of jobs and improvement of living standards in developing countries. More generally, itallows companies to position themselves in an increasingly competitive world throughgeographical diversification. Individuals, companies, investment trusts, mutual funds, and pension funds seek returns on capital throughout the world on a scale and with investmentinstruments unknown twenty years ago. Those capital markets that have the ability to adapt will

gain the greatest advantages. And it is those investors that diversify internationally that will bestlimit investment risks.

Now, one can see dangers in this. First, that capital moving overseas represents lost output, trade, andemployment at home. Second, that foreign investment can be volatile and robs countries of their sovereignty. As I see it, it is quite the reverse. Careful studies show that companies that invest in plants indeveloping countries generate increased demand for parts and inputs from the developed countries wherethe investment originated.

Foreign investment is only volatile if it is under threat. It is a positive and stable contribution under awell-run and well-defined legal system of guaranteed ownership of assets and profit repatriation, andabove all with safeguards for transactions and people. Most important of all, if economic policies are

sound, the investment will remain and expand. If macroeconomic policies are ill-judged and puteconomic and civil order at risk, then clearly capital may leave. This unsurprising fact puts the onus ongovernments to behave responsibly.

Let us now consider what these negative aspects are. They can be encapsuled in the twin evils of exclusion for individuals and marginalization for countries.

Put bluntly, the greatest fear is that a global labor market allows extremely low paid workers indeveloping countries to undercut the wages of the less skilled workers in developed countries.Undoubtedly, in the last twenty years, there has been a marked increase in unemployment of the lowskilled in most developed countries. There is also evidence in some developing countries of a large classof low skilled, usually poorly educated, workers employed at very low wages. But this is not exclusivelyrelated to an excessive globalization of trade. As the products traded change, with more skill-intensiveexports expanding from developed economies and less skill intensive ones from developing economies,the industries of both sets of countries must adapt. That change in production can involve major changesin investment and in worker skills. It is really traumatic when workers through lack of the ability or means to learn new skills, or because they are too old to change, lose their jobs. Trade unions have a roleto play to help workers re-train, ensure that social entitlements are fulfilled and are maintained at anadequate level, and that pensions are transferable. This must be part of the tripartite dialogue on which Iwill comment later.

Is this the whole story? Hardly. In addition to structural unemployment, the rise in unemployment inmany developed countries is also associated with the low rates of growth in those economies. So, part of the solution must be to raise growth rates to sustainable levels and to reduce the range of fluctuations andthe financial instability—which is made more dangerous by globalization—that have reduced firms'willingness to invest and employ more workers. Better international cooperation in macroeconomic policy design and structural policy reform must help. This is another area of primary Fund responsibilitythrough our surveillance, and our not much publicized, but intense, discussions with all major tradingnations, particularly the G7 countries. Indeed, this reminds me of my busy agenda for tomorrow and thedays after.



A third reason is suggested to explain the rise in unemployment. People point to technology, especiallythe applications of computers, as pushing the non-numerate, non-literate to the sidelines of employment.The speed of technological change, the speed at which production techniques become obsolete, at which products are replaced, materials altered, new patents filed, all contribute to an increasing feeling of insecurity even amongst those who are fully employed. Who can be confident that skills learnt today will be relevant in 10 or 20 years? What we need is security of "employability." Society reaps the benefits of

technology and has the corresponding responsibility to ease the adaptations required through better education and job training to ensure continuing employability.

Lastly, there is another explanation for global unemployment and poverty which is frequently advanced,and which, you will not be surprised, I reject: structural adjustment policies promoted by the IMF and theWorld Bank! This was mentioned in the preparatory papers of your congress. I presume, at least in part,to offer me an opportunity to take exception to it! There are, it is true, human costs of adjustment. All thehigher, when adjustment is postponed and the therapy, which could have relied on two tablets of aspirin atan early stage, calls for surgery. It is our common task to reduce the human costs of adjustment, and I willcome back to that later; but allow me to tell you my conviction rooted in 50 years of IMF experience witha worldwide membership: nothing causes higher human costs than the refusal to adjust, as it leads, sooner or later, to the collapse of economies and societies. As a matter of fact, I am convinced that structural

adjustment and globalization, far from being the main sources of unemployment, can be taken advantageof in a strategy for better growth and employment. The remarkable example of those 35 to 40 countries,which are now the world growth locomotives and saved the world from recession, amply demonstrates— as so many of them worked with us in structural adjustment programs—how such programs, applied with perseverance, can contribute to improving human living standards. But such improvement will never bean automatic result of a miraculous economic model; similarly, we cannot expect an economic model to prevent the major plagues of our societies. And here I have in mind the growing distortions in thedistribution of incomes at the expense of the poorest, the risks of growing poverty, corruption andcriminality, the risks to the environment and cultural differences. These major plagues cannot but worsen,unless governments have their priorities right, and accept to complement the structural adjustment program by a major effort at reforming the state, including, in particular, reducing unproductive spending,collecting properly the taxes from those who can pay, and allocating them more efficiently to key social

priorities. Please do not accept the populist propaganda of those governments that so easily make theWorld Bank and the IMF the scapegoats of their own unacceptable negligence. What economic modelscannot deliver, it is the imperative task of governments to provide; and no government will accomplishthis task, except under the pressure of public opinion, particularly the permanent pressure of strong tradeunions in the framework of the tripartite dialogue, and within a context of strengthened internationalcooperation, because it is only in a context of international solidarity, and with the support of strongmultilateral institutions, that the other major risk of globalization—marginalization of countries—can beresisted.

So, for all these reasons, and to respond to the people's worries about globalization and its possible effectson employment, trade unions and the Fund have crucial roles to play in ensuring that globalization is for the benefit of all. Let us look at these roles a little further, starting with your own struggles in various

continents.

Trade unions in many developing countries, especially in Asia, welcome the opportunities globalizationcreates for new jobs, greater output and higher incomes. However, as your own congress report remindsus, there are still over one and a half billion people in the Indian sub-continent, China and Indonesia whosurvive on less than a dollar a day, and trade unions in many Asian countries have great difficulty inestablishing workers' rights to organize. Your report places great emphasis in this respect on the role of the ILO, and I join you in your tribute to our elder sister in the family of the United Nations. The IMF



entirely agrees with this, and Michel Hansenne and I have given detailed instructions to our staffs tocooperate throughout the world, particularly at the field office level, to ensure that each organizationcomplements the other and its policies.

In Latin America a couple of weeks ago, I had discussions with trade union leaders in Argentina, Bolivia,Haiti, Paraguay, and Venezuela. They expressed concern at the implications of trade liberalization for

workers and their trade unions. I must tell you what I told them. I said globalization offers many rewards but also imposes many challenges; to compete, countries need to adapt to the reality of the market place.This calls for flexible economic structures and monetary and fiscal discipline. I also said that merelynominal increases in wages or pensions are a cynical and duplicitous bargain when inflation erodes bothincomes and pensions at an ever increasing pace. Social benefits and incomes, even when enshrined inlegislation, do not exist in reality when they are not paid due to resource constraints, or equally bad, whenthey are paid by printing money "en monnaie de singe," as we say in French, and "en ZOREILLEBOURRIQUE," as they say in Haiti. And let's not forget that resource constraints often stem frommisappropriation of workers' contributions by an incompetent, free-spending, selfish state.

I must also tell you that many complained about the privatization of public enterprises. I agreed that private ownership per se was not the exclusive goal, but that the historical record of public sector industry

in both developed and developing countries was, alas, frequently disappointing. Competition must applyto state-owned industry to produce efficiency, and in the case of privatization, state regulation has a rolein ensuring that we do not simply replace a public monopoly with a private monopoly.

Among industrial countries, workers are confronted with no less demanding challenges. The UnitedStates, with fewer labor market rigidities than Europe, has a significantly lower rate of unemployment.But, precarious social and working conditions frequently contribute to the emergence of what SecretaryReich calls a new "anxious class." Also, governments, particularly in Europe, that levy heavy taxes onwages increase the marginal cost of employing labor and discourage new hirings. Also, at times—andhere will perhaps take exception—the increases in, or even the maintenance of, favorable scales of pay or working conditions and the very rigid regulation prevailing in the labor market, add to the disincentives tonew hirings. And beyond that, they are faced with the challenge of helping an anemic economy recovery.

These are important questions for trade unions, employers, and governments to confront and debate, andfor which they can only propose realistic solutions together.

What is the general response of the IMF to this panoply of problems? It is very different from the onewhich would consist of giving the exclusive and final word to the markets for goods and services and tothe markets for capital and labor. Markets cannot have the last word. Of course, we recognize theimportance of Adam Smith's "invisible hand." However, we also need a second strong and not soinvisible hand—that is, the hand of justice guaranteed by the State. This sets the framework under whichmarkets can work reliably and efficiently, including the rules governing workers' rights. An independentand objective judiciary, in particular, is a complementary necessity for efficient markets. Last but notleast, the state must put in place the proper macroeconomic framework to optimize the growth potential.

But there is a "third hand" which is needed that I might call the hand of social solidarity. Clearly, withineach country, we have a responsibility to help promote fair income transfers, from the rich to the poor, thehealthy to the sick and from employed to the unemployed. There is also an international dimension tosolidarity, particularly, through monetary cooperation, development aid, and aid to countries in transition.This solidarity is the glue that binds society and the international community together. And with growingcompetition it has become increasingly indispensable.



The international dimension of solidarity must grow stronger with the growing interdependence thatglobalization generates. I am deeply concerned that in certain fields, we witness the opposite. The Fundreacts to that with all its energy, trying to make sure that the three hands work together permanently. Atthe national level, the Fund recognizes the social costs of adjustment and works with the authorities toreview the budgetary provisions for social transfers to protect the most vulnerable members of society.We recognize that the costs of adjustment are too often borne by those least able to do so, and we try to

help design social safety nets that are well targeted and cost-effective. As you know, we also pressgovernments to set military spending no higher than required by the objective security conditions of thecountry. You know our efforts in this domain, and we have recently assessed the outcome. Militaryspending in countries with Fund programs dropped from 5.3 percent of GDP in 1990 to 2.2 percent in1995. Of course, this is due in no small part to the end of the cold war, but it appears that countries withlonger IMF program experience reduced military spending more sharply than others, and there is alsoevidence that these reductions allowed countries to increase social spending in the face of cuts in totalspending. You will be interested to know that in a group of countries with IMF programs that we havecarefully reviewed recently, 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. This is only an example of what we are trying to do—and to my judgment not yet fullysatisfactory—in the framework of the programs of structural adjustment.

At the international level, and particularly in Africa, we spare no effort to design and put in placeeffective new instruments to help the poorest—for instance, by putting our instrument for making loans ata 0.5 percent interest rate on a permanent footing, and—together with the World Bank—by finding a wayto help reduce the burden of multilateral debt. But in order to ensure that the international contribution issufficient to contain the risks of marginalization, we do need your active support, and I salute the high priority this objective has always had in your activities.

However, the key point is that the three hands must be interlinked; no one of them is efficient actingalone. A harmonious society requires the appropriate degree of emphasis on the market mechanism, onthe role of the state, and on internal and external solidarity; a right emphasis which can better derive fromanother tripartite approach—this time, one of dialogue between employees, employers, and government.

This tripartite structure, as we know, also faces new challenges stemming from globalization, and I notewith pleasure that trade unions, no less than employers, are re-assessing their role, as you are doing today.As we have seen, markets are ruthless and will challenge vigorously those that do not adapt. The world'scommon good will be greatly helped by the unions using their strength and their place at the table to helpworkers adapt and to engage employers and governments in dialogue to ensure—inter alia—that thosewho are unemployed through structural change are helped to retrain, to find new jobs, and to carry their entitlements from job to job.

We have noted that the unemployed and poorly paid are often those who have difficulty learning newskills. It is particularly shocking when these are young people whom the educational system has not prepared for this new world. The Fund, the World Bank, and the regional development banks are all pressing governments to put education high in their spending priorities. As your own congress report

states, the growth of youth unemployment across the world is a "criminal waste" of young ambitions,talents, and hopes. Trade unions have a responsibility to see that their members enter the work force withcredentials that give them a reasonable chance of success. This, and particularly the education of girls, isone of our biggest challenges to meet the changes demanded by globalization.



Trade unions have a role to play in international

development

Economic growth without workers rights, social protection and a voice in decision-making does notamount to development

Labourers work on the production line at a toy factory in Panyu, in China's Guangdong province.

We're often told that the rights workers have in the UK are only possible in developed economies. Wewent through an industrial revolution marred by children up chimneys, interminable working days andappalling industrial accidents and diseases - the argument runs - and developing countries need to do thesame before they can have modern workplace rights.

It's not, strangely, something that trade unionists in developing countries often say, though. We – and our colleagues in the global south – see no reason why people can't learn from Europe's industrial revolution,and do it better.

That's why unions have a role to play in international development: building better economies,communities and societies. We want vulnerable workers to have the same protections as permanentworkers. We want women to have equal pay. And we want workers everywhere to be treated withrespect.

"Decent work" is a term developed by the International Labour Organisation (ILO), the UN's workplaceagency, which provides a voice not only for the world's governments, but for workers and employers too.It has developed a set of core labour standards – freedom from child or forced labour, freedom fromdiscrimination at work and freedom to join a union and bargain with employers. We think these are vitalto any sustainable model of development. Created with the active involvement of workers from the globalsouth, these are universal values, not imposed from the north.

We're currently pressing the ILO to adopt a convention on the rights of domestic workers. The TUCrepresentative in the negotiations is Marissa Begonia, a London-based domestic worker originally fromthe Philippines, and a member of our largest union, Unite. In June, the TUC brought representatives fromour partners the Nepal Independent Domestic Workers' Union (NIDWU) to the ILO headquarters inGeneva.

The NIDWU president, Sonu Donuwar, told us: "I wanted to make domestic work into decent work andthat is why I became a trade unionist. As a union, we try to make sure that employers recognise thatdomestic workers are like other workers and should enjoy full rights."

So decent work includes workers' rights – as well as better jobs, social protection and a voice in decision-

making. Those elements are also crucial to development, because growth alone – industrial revolutionswithout social rights – does not amount to development.

The UK's international development secretary, Andrew Mitchell, speaking at the London School of Economics in October, said that growth needed to be "broad-based, inclusive and sustainable; in which all people benefit from the proceeds of prosperity and in which even the poorest have access to theopportunities and markets that it creates." That's the sort of growth that requires not only entrepreneurs, but trade unionists. People to make wealth, and people to make sure it is spread around more fairly.

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As Helen Clark, the former prime minister of New Zealand and now administrator of the UNDevelopment Programme, says in the foreword to the TUC's new international development strategy:"Development is about far more than just increasing gross domestic product per capita. Fundamentally,development must also be about improving people's ability to shape their own lives. Through unionorganisations workers can have a more effective say, not only on wages and conditions, but also on thewide range of policies which have an impact on their lives."

The TUC has three main goals for international development work with our partners in the global south'strade unions: that all workers, including the vulnerable, can enjoy decent work; that all workers and their families enjoy safe working conditions, social protection and access to quality public services; and that allworkers, speaking through their unions, promote and defend human rights, equality and social justice.

Trade unionism is not a foreign import into most southern countries. It's simply what workers do whenthey join together to influence their working lives. But there are foreign imports into the global south, andmultinational companies are one of the most obvious. Last year, we assisted our colleagues in Pakistan to protest about the culture of casual labour and lack of union rights at a Unilever factory. As a result of our partnership, Unilever has agreed to create 200 new, permanent jobs. Local worker Siddiq Aassi said: "Ihave been working at Unilever Khanewal for more than 20 years, but never imagined I would one day

enter the factory as a permanent worker."

Trade unionism brings rights that he wants and deserves now. Not a luxury, and not something to aspireto in the future, but a vital component of lifting 1.4 billion workers around the world out of poverty.

Trade unions are one of the most important social movements underpinning democracy. Workers' right tofreedom of association and thus to take collective action lies at the core of all human rights because itcreates the means by which all other rights are asserted and defended. For over a century and a half, tradeunions have fought for the right to decent pay and conditions for men and women at their place of work and for improved social welfare through, for example, health care, education and social security.Generations of struggle for basic democratic rights at the workplace have created in the ICFTU a freetrade union organization that now embraces 127 million men and women in 136 countries in all fivecontinents. We are the largest single international movement advocating social justice, equality andhuman dignity. But our movement is now under attack on a global scale and with an intensity never before experienced in its history.

Unions at national level are seeing much of what they have achieved being undermined by globalfinancial and industrial decisions. The need for an effective national, regional and international tradeunion response is greater than ever before. The 1996 Congress of the ICFTU is therefore of historicimportance for trade unionism as our affiliates define what policies and strategy are needed to meet thisglobal challenge. International solidarity in the 21st century will have to be more than a rhetorical slogan.Communication barriers that in the past made the international work of trade unions a specialist activityhave to be swept away. We must develop new methods of organization to give a fresh dimension tointernational solidarity. And it is essential that the ICFTU re-examine its own structures, including therole of its regional organizations, and its interaction with the International Trade Secretariats, the TradeUnion Advisory Committee to the OECD, the European Trade Union Confederation, the WorldConfederation of Labour and other international union bodies. We need to change and equip ourselves toreshape the features of the emerging international economic and social order.

The world in which we and our members work is changing dramatically. Competition is global andintensifying, bringing a new level of insecurity to developed nations and increased poverty to much of thedeveloping world. Over one-fifth of the world's population survive in conditions of abject poverty and

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more than 700 million working men and women are not productively employed. Social inequality withinand between nations is increasing and is a root cause of the numerous conflicts that threaten to sweepaway restored or newly-won democratic rights and the fragile foundations of international cooperationagainst unemployment and poverty. And we must never forget that many of the world's citizens are stilloppressed by dictatorial and authoritarian regimes that continue to deny, often by violent means, freedomof association and other basic human and trade union rights.

This report analyses working and living conditions around the world and the impact of "globalization" onthe lives of working people and their families. It also traces some of the key features of the global marketeconomy whose power is challenging the ability of even the world's strongest nations to manage their development and improve the well-being of their citizens.

It aims to provide an objective assessment of what, in today's setting is necessary to provide a moreefficient service to affiliates; and to identify the ways in which international action can help to focus thestrength of our movement on the people and the issues which are driving forward the process of globalization.

The report first looks at the main issues facing workers and their trade unions. It then seeks to show theunderlying causes of inequality and insecurity in the world of work, and identifies the major pressure points that unions can use to bring about progress, with particular emphasis on the international arena. Inthe final section, the report draws out the implications for the ICFTU and the international trade unionmovement of these findings, and makes recommendations to Congress.

It signals the determination of trade unionism to fight again to defend the principles that have won somuch for working people. These principles are as relevant in today's world of global competition as theywere at any stage of our history. Our movement was founded to fight injustice and to ensure basic humanand economic rights of working men and women and their families. The report attempts to capture thewidespread frustration that unions increasingly sense that globalization - for all its potential to spread prosperity - has been hijacked by the representatives of wealth and privilege in order to pursue their narrow interests.

Although it is aimed at trade unionists, we believe that the report will also provoke reflection in manyother quarters. The World Social Summit in Copenhagen in March, 1995, confirmed that there is a globalsocial crisis which must be tackled by new action within and between countries across a wide range of policy areas. Without a strong, free trade union movement able to express the aspirations of working people and negotiate with employers and governments to find solutions, social tensions will worsen withdisastrous consequences for the world.

Trade unions in most countries in the region have had to function in a legal framework which iscontrolled by government. Unions representing skilled workers managed to secure a degree of security inemployment and real wage increases for their members. However, organizing the unskilled has been

actively discouraged through intimidation by employers who are protected by laws which fail to protectworkers' right to organize.

By comparison with other developing regions, the East and South-Asia Asian business community ischaracterized by a generation of strong business patriarchs who have not simply exported profits tooverseas banking havens, but have reinvested in expansion. But the traditional culture of deference andduty which pervades employment relations in Asia, and discourages independent trade unionism, isstarting to break down. A new generation of professionally trained managers is taking control. Companiesare beginning to compete for internationally mobile investment capital on the newly emerging stock



markets of the region. The new generation of Asian workers is also increasingly asserting their rights toindependent representation and non-discriminatory treatment by management. Governments are nowconfronted by the reality that a more open law-based and democratic society is essential to development.

The Global Division of Trade union : The Changes - The Consequences

Of the 2.5 billion working men and women worldwide, 1.4 billion live in developing countries whereeach person has an average yearly income of less than $695. Three out of five workers in the least-developed countries work on the land, mostly on their own small farms. A further 22% work in theinformal sector. Only 15%, mainly urban factory and service workers, have employment contracts. In themiddle range of developing countries, nearly half of the workforce have formal wage-paying jobs inindustry and the services. Fewer than a third remain in agriculture and about one in five is in the rural andurban informal sector. In the industrialized countries only 4% work in farming activities, 27% are inmanufacturing industry and 60% have service sector jobs. The vast bulk have employment contracts,although in some countries self-employment is on the rise. Worldwide, unemployment totals 120 million but about 600 million more are estimated to have no regular work or income for most of the year.

Over the last three decades there has been a steady fall in the still predominant share of agriculture in totalemployment and a rise in the proportion of service sector jobs. Industrial employment has fallenmarginally from 19 to 17% of all jobs. Over the last thirty years, it has fallen sharply from 37% to about26% of the total in industrialized countries, and has risen in developing countries from 11 to 14%. Mostof this expansion has been in East and South-East Asia where industry now accounts for 18% of total jobscompared with 9% in 1965. There are now more manufacturing workers in the developing world than inthe industrialized countries, many of whom work in export processing zones.

The global labour force is projected to rise by a further 1.2 billion over the next thirty years. If poverty isto be reduced, priority must be given to increasing the productivity and incomes of the developing world's poor farmers. Liberalization of agricultural trade should help this process but only if it is accompanied bya major effort to tackle problems such as land reform, transport and discrimination against women who do

the bulk of farm labour in the developing world. But the sheer scale of the developing world'sunemployment problems means that hundreds of millions of jobs would need to be created to prevent asocial disaster. To achieve this in a world where the industrialized countries already dominate about half of world output requires more positive international measures than currently exist to ensure a balancedand sustainable pattern of world growth.

Industrialized countries will be faced with job-creation problems. Currently they are turning their attention to trade with the faster-growing developing Asian economies, in particular, to meet the demandfor capital equipment such as machine tools. For some time, nevertheless, trade between the industrializedcountries will account for the bulk of their export production. However, as the Uruguay Round tradeliberalization measures are put into effect, coupled with the elimination of controls on the movement of capital, the already intense competition for markets is likely to heat up. In industrial countries,

unemployment is rising amongst low-skilled and relatively low-paid male workers, who have traditionallyfound work in the manufacturing sectors that are most exposed to increased competition. These countriesface a major challenge in creating new jobs and in equipping workers with the new skills they will need.If growth falters in the industrialized world or fails to spread beyond the East and South-East Asianregion in the developing countries, the industrialized nations' own jobs crisis could worsen.

Governments in those countries which have implemented free market measures, such as wage and socialsecurity reductions, claim that jobs have been created as a result of their policies. The results so far are



that there is growth in jobs that are insecure, part-time or temporary and have low pay and poor conditions.

In the USA and the UK, there is additionally disturbing evidence of widening pay gaps between theunskilled and higher-income groups. This failure of the free market solution was the main issue before the1994 Detroit Jobs Summit. The industrialized countries were confronted with the "diabolical dilemma" of

mass long-term unemployment or the creation of a new large under-class of working poor. Both optionsare socially and politically dangerous; both create a massive waste of human resources and fertile groundfor anti-democratic extremist politicians and organized crime. Of equal concern is the trend for someright-wing politicians in government to try to distract attention from the disastrous effects of their freemarket policies by scapegoating foreigners and the institutions of international cooperation.

Trade union internal strategies

Free and strong trade unionism is a sine qua non for sustained national development.

The starting point is to ensure that workers are free to organize. Once unions exist, theycan perform their roles of fighting poverty and campaigning for a fair globalization process. However, they need to be independent, strong and accountable to their members.They also need to have the capacity to respond to changing challenges. In order to achievethis, the capacity-building programmes of ACTRAV are essential.

(ii) Trade union campaigns towards governments

(a) Promoting a rights-based approach to development. For a holistic approach todevelopment, economic rights should be pursued at the same pace as socio-economicrights. Good governance and transparency facilitate sustained growth and enable the participation of the poor in its benefits. This is the role that the State should guarantee

as a means of poverty reduction.

(b) Gender . There is a need to promote gender mainstreaming in socio-economic policyand to secure equal opportunity and treatment for women. Implementing proactivetargeted policies aimed at eradicating gender discrimination and promoting decentemployment opportunities for women is another important dimension.

(c) Social dialogue. A key challenge facing unions is how to promote and institutionalizesocial dialogue over and above traditional industrial relations. Social dialogue todetermine the pattern of growth, to share the fruits of growth and to negotiate thetrade-offs necessary for the creation of more dignified jobs is an important challengefacing unions.

(d) The creation of decent jobs. Holistic strategies should be developed based on the needto promote faster, sustained and employment-intensive growth so as to accelerate the pace of poverty reduction. Active labour market policies must be implemented, withinthe framework of national employment policies, to tackle the problem of youthemployment. The specific requirements of the informal economy need to be dealtwith in line with the 2002 International Labour Conference Report, Decent work andthe informal economy.



(e) Macroeconomic policy for job creation. Creating the necessary space for country ownedmacroeconomic policy is an urgent challenge. Furthermore, for economicgrowth to have positive poverty outcomes, full employment policies must be placed atthe centre of these policies.

(f) Social protection for all . To meet the MDGs, social-sector expenditures in education,

health, nutrition, water and sanitation have to be scaled up. Governments have toregain their responsibility for providing safety nets to workers facing changingeconomic relations and invest in human capital. The extension of social securitysystems to the poorest remains an important challenge.

(g) Investment in agriculture. Considering the high levels of poverty in rural areas, ruraldevelopment and the creation of productive rural employment must be a cardinal pillar of development policy. In this respect, particular attention must be paid to: poor female peasant producers and resources should be redirected to them to promote foodsecurity, a dynamic articulation between peasant agriculture and the rest of theeconomy, improved capacity, skill development, the creation of non-farm productiveemployment activities, microfinancing and providing support for socio-economic

initiatives and cooperatives.

Trade union actions in influencing international organizations

(a) Social justice in the global economy. International organizations, particularly theIMF, the World Bank, the WTO, the OECD and the United Nations system, need toalign and harmonize their actions with the recommendations of the WorldCommission on the Social Dimension of Globalization.

(b) Engaging the Bretton Woods institutions. The incremental progress in having theseinstitutions support respect for core labour standards needs to be consolidated.Country-specific policy dialogue with these institutions and the regional development banks need to be reinforced in order to avoid policy advice that is anti-labour andanti-poor. A lot more needs to be done to enhance trade union participation in thePRSP process, as well as to influence the policy content of the papers.

(c) Debt cancellation and increased ODA. Together with other organizations involved inthe Global Call to Action against Poverty, trade unions are campaigning for extendeddebt cancellation for all low-income countries without IMF/World Bank structuraladjustment conditionalities. This effort should also be linked to increasing officialdevelopment assistance to levels agreed upon by the international community.

(d) Trade for decent jobs and poverty reduction. Making the global trade regime createmore decent jobs, reduce global poverty and achieve respect for workers. rightsremains the central challenge facing the Sixth WTO Ministerial Conference. The endof the Agreement on Textiles and Clothing underscores once again the danger of arace to the bottom without adequate labour, environmental, social and developmentalsafeguards in the WTO multilateral system. Whether it is in respect of issues of agriculture and food security, democracy within the WTO, services or negotiations onnon-agricultural market access, the impact of trade on labour and the poor shouldremain a central concern.



This paper has demonstrated that trade unions are a crucial part of the fight against poverty and their actions contribute to the regulation of the global economy. The persistence of poverty and inequalities in the world calls for a global rethinking of thecurrent globalized development paradigm. There is an urgent need to effect true globalsolidarity today. The swift response to the tsunami in the Indian Ocean shows us that

humanity is capable also of tackling the .silent tsunamis. of poverty, hunger, malaria andunemployment. Only with such determined actions can poverty become history in our lifetime.

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