When we talk about "control" in the global economy, we can identify two forms of control: corporate control and popular democratic control. Corporate control involves the increased power of corporations and the subordination of all aspects of social life and the environment to private profit. In direct opposition to this, popular democratic control is based the subordination of private profit to democratically-determined collective needs and interests, particularly the advancement of the livelihood and well-being of working people.
These two forms of control are clearly in conflict. Corporate control relies on the ever-increasing freedom of capital in a "free market", backed by government support for private corporations and the repression of labour and social movements. Popular democratic control, on the other hand, is clearly incompatible with corporate power and the "free market." As such, any initiatives or proposals put forward by the labour movement as a strategy for responding to globalisation must be assessed in terms of whether or not it shifts the balance in favour of greater popular democratic control, and less corporate control.
The Asian economic crisis highlights this dilemma. The loss of tens of millions of jobs, rapidly declining real wages, increased poverty, and the destruction of the livelihood of hundreds of millions of workers throughout the region was clearly the result of excessive corporate power and the unrestrained drive for profit. This demonstrated once again the urgent need for popular democratic control over capital, and led to debates at the local, regional and international level over how this can be done.
Unfortunately, most of the proposed strategies arising from the trade union movement at the regional level are based on a short-term view of the crisis and a flawed understanding of its real causes. In particular, there is a tendency to place the blame solely on speculative financial capital, while ignoring the role of industrial and banking capital.
In this paper we assess the most recent regional trade union strategy - the creation of an "Asian Monetary Fund" - and argue that its over-emphasis on speculative capital as the cause of the crisis leads to false solutions to very real problems. Providing more "liquidity" to bail out corporations and banks in the region at public expense ignores the failure of the export-oriented industrialisation model, and the massive over-production by corporations and over-lending by banks which underpins the crisis. The proposed "solution" serves only to increase corporate welfare at a time when social welfare continues to be cut back. Bailing out corporations with public money does not guarantee jobs or income security, especially since these bailouts involve even more corporate restructuring and ‘labour flexibility’ that further undercuts trade union and worker’ rights and interests.
After two years of regional conferences on the Asian economic crisis, the ICFTU’s Asian and Pacific Regional Organisation (APRO) has now focused its energy and resources on support for an Asian version of the IMF called the "Asian Monetary Fund" (AMF).
The proposal for an "Asian IMF" was originally made by the Japanese Finance Minister at the international meeting of the World Bank and IMF in Hong Kong in September 1997. For obvious reasons, the US government and the IMF were quick to oppose the proposal, so the Japanese government appeared to abandon the idea. A year later, in November 1998, the Japanese and Korean governments discussed the plan again, and the Korean Prime Minister suggested that the "start up" capital for the Asian fund should be US$300 billion.
It is often assumed that the Japanese government’s proposal for an AMF was "progressive" simply because it was opposed by the US government and the IMF. Since the labour movement opposes the IMF and its neoliberal structural adjustment policies, it is assumed that anything the IMF opposes must therefore be good for the labour movement. Of course, this is a based on an over simplistic logic.
The conflict over the AMF idea was based mainly on two issues: First, the IMF bureaucracy felt threatened by a regional fund that would take over its activities in Asia. Second, since the Japanese government would control the AMF in the same way that the US controls the IMF, the Japanese government was challenging US economic power in the region. In this sense, the Japanese government was seeking to extend its influence over economic policy in the region, advancing the interests of Japanese corporations and banks through the AMF - just as the US uses the IMF to advance the interests of US corporations and banks.
From this point of view, it is clear that the AMF concerns a fight over corporate power and does not seek to limit corporate power. As far as the Japanese government is concerned, the AMF would increase the power and control of Japanese corporations, trading companies, and banks. This may be an agenda supported by some Japanese trade unions, but it is clearly not in the interests of trade unions in Asia either locally or regionally.
The idea of an "Asian Monetary Fund" re-emerged dressed up as a "trade union" initiative at an exclusive workshop organised by APRO in Seoul in May, 1999. Only five national trade union centres - JTUC-RENGO (Japan), the CFL (Taiwan), FKTU (South Korea), MTUC (Malaysia), and NTUC (Singapore) - participated in the workshop. Notably the KCTU, one of the most active and widely supported trade unions in Asia, did not participate in the meeting. Representatives from the Asian Development Bank (ADB), the World Bank, IMF, ASEAN and the ILO were invited to participate, and - not surprisingly - one of the key resource persons called on to address the workshop was from the Japanese Finance Ministry, which originally proposed the idea.
Having issued a series of statements in support of the proposed AMF (referred to as the "Asian Partnership Fund" or APF in some APRO publications), APRO is now seeking to secure a mandate from its affiliates at a conference in Indonesia from September 21-23, less than two weeks from now.
The agenda of the September conference does not deal specifically with the AMF. Rather, all the presentations from national union representatives with deal with criticisms of the policies of existing International Financial Institutions (IFIs) in their countries. The APRO Secretariat will then present the AMF as an Asian regional alternative. Both prior to and during the conference there is virtually no room for debate. In fact, APRO has already decided that the start-up capital of the AMF should be US$200 billion.
In its new booklet on the AMF, APRO indicates that it will initially have 10 country-members: Japan; China including Hong Kong; Taiwan; South Korea; Thailand; Philippines; Malaysia; Singapore; Indonesia; and Brunei. Membership will be tripartite, with national trade union representatives from member-countries and APRO as the regional trade union representative.
According to APRO, the AMF has two basic objectives:
This first objective reflects the assumption that the crisis was brought about by speculative finance capital which destabilised currencies throughout the region and generated a liquidity crisis.
Based on this assumption, any solution must be directed at the stabilisation of currencies and the provision of loans to overcome short-term liquidity problems. Quoting the conservative economist, Martin Feldstein who claims that "liquidity is the key to financial self-help", APRO criticises the IMF for exacerbating the liquidity crisis faced by corporations and banks in Asia by failing to act quickly enough and for restricting rather than loosening credit. According to APRO, this is what caused the bankruptcies that led to mass lay-offs. In response, the proposed AMF will prevent future crises by guaranteeing this liquidity and ensuring currency stabilisation.
In the context of this concern for "liquidity", there are three critical weaknesses in APRO’s AMF strategy:
In the absence of capital controls, corporations in Asia borrowed well beyond their capacity to repay debts and banks over-lent. This was one of the main causes underlying the economic crisis.
In the decade before the crisis, companies increased production while cutting prices in order to take over a greater market share from their competitors. This placed greater pressure on workers’ wages and led to cost-cutting through increasing ‘labour flexibility.’ There was a limit to how low production costs could be cut, so they borrowed from banks and other financial institutions to cover their losses. It was this accumulation of massive debts by companies and their over-production that contributed to the crisis.
For example, by the end of 1997, the Korean chaebol accumulated more than US$35 billion in bad debts, with the debt level of individual companies reaching as high as US$9 billion. Debt-to-equity ratios averaged 400 per cent in the Korean chaebol and 250 per cent in Japanese conglomerates.
In addition to this, banks were over-lending and mis-lending on an enormous scale. In 1998, the Japanese finance minister estimated that the ‘problem debts’ of Japanese banks reached US$840 billion. A large proportion of the bad debt of Korean banks and chaebol was borrowed from Japanese banks, and close to 50 per cent of all of Thailand’s private overseas bank debt is held in Japan. The Japanese government has started to bailout major Japanese banks using taxpayers’ money, starting with US$250 billion. This is three times more than the total revenue of the increased consumption tax which has worsened the impact of recession on working class people in Japan, further undermining the daily struggle of workers and their families to maintain their livelihood. Meanwhile, the sell-off of state assets, privatisation, and cuts to social welfare spending continues.
See Gerard Greenfield, "The Economic Crisis In Asia: Towards nationalisation ... of private sector debt?" http://aidc.org.za/archives/gl_eco_crisis_asia.html
The AMF and related proposals put forward as a "trade union perspective" by APRO does nothing to respond to this problem, and in fact exacerbates it by supporting further bailouts of corporations and banks. It means channeling more government funds into a regional agency that will simply provide loans to governments that will be used to bailout private banks and corporations - effectively nationalising private sector debt. This will add to growing public debt and result in further cuts in government spending on public services and social welfare. At the same time, there is absolutely no guarantee that this will lead to greater job security or job creation.
Instead of introducing capital controls and restricting speculative capital, governments claim that they need large reserves to fend off currency speculators. This is also used to justify cuts to government spending and large budget surpluses, and reinforces the dominant ideology against deficit spending.
This is precisely the argument used by the Government of the Hong Kong SAR. The budget surplus for the 1998/99 FY was HK$10.74 billion (US$1.37 billion), and total fiscal reserves at the end of the last financial year were HK$445.57 billion (US$57 billion). The foreign currency reserve stands at US$98.1 billion.
The Government claims that these reserves are necessary to intervene in the stock market and currency market to fend off overseas speculators, especially hedge funds. Yet at the same time, the Government is cutting public spending, privatising public housing, transport, and water utilities, and refusing to spend any money on job creation or social welfare. Even with the very limited unemployment benefits available, cuts are being made and eligibility for assistance is being restricted further.
Concurrently, the Government has cut corporate taxes and continues to subsidise big business, while banks lend exclusively to big business and for short-term, high return investments that do not generate jobs. Meanwhile, hundreds of self-employed and small family-run businesses are going bankrupt every month because they cannot get access to bank loans.
This is similar to what is happening in Japan, where tens of thousands of small family-run businesses are going bankrupt while big businesses are continuing to borrow from banks. In early 1998, there were several demonstrations outside banks by shopkeepers and the self-employed who were protesting against the refusal of banks to provide loans to small businesses after the crisis began.
While the Japanese government moved quickly to bailout big banks and corporations, the injection of "liquidity" has done nothing for the self-employed and small-scale family businesses. This is despite the fact that small businesses are the most important source of employment in Japan. About 83 per cent of private businesses employ less than ten workers, and 67 per cent of the total number of workers in the manufacturing industry are in workplaces with less than 300 workers, and 40 per cent with less than 20 workers.
This highlights a number of contradictions in the AMF strategy. Governments support large corporations, particularly TNCs, and no amount of additional liquidity will change this. Small-scale family firms and the self-employed sector are an important source of jobs, yet unless there is a dramatic change in government policy, they will not have access to the loans needed to survive.
In addition, workers and their unions throughout Asia are demanding more government spending for job creation, more social welfare and unemployment benefits, and more public services. Yet the accumulation of even greater fiscal reserves for the future bailout of big business under another "Fund" means that we are instead faced with spending cuts.
It is only in the context of tightening rather than loosening liquidity that APRO finds fault with the IMF. The IMF’s neoliberal policies of privatisation and labour market deregulation are not criticised in APRO’s analysis. It is only the shortage of loans for bailouts that is criticised. This logic is reflected in the "action plan" on the Asian economic crisis drawn up by APRO in February 1998, in which it called for "increased funding for the IMF and World Bank" at a time when most labour movement and social movement organisations around the world were calling for a stop to IMF funding.
Significantly, APRO’s new proposal states that the AMF will complement the IMF.
At present the IMF is seeking to amend two key articles in its Charter - Article 8 on General Obligations of Members and Article 14 on Transitional Arrangements. These amendments will give the IMF formal power to enforce capital account liberalisation, allowing it to force member-countries to remove regulations on capital flows and investment. The changes to Article 8 will mean that member countries will require IMF permission before attempting to introduce any kind of regulation on capital flows.
If the AMF is supposed to "complement" a more powerful IMF that prevents governments from controlling capital, then there seems to be little scope for the regulation of capital, let alone popular democratic control.
As mentioned already, the second objective of the proposed AMF is to ensure Social Safety Nets (SSN). This is a positive aspect of the proposal, and we should support demands for social protection and social welfare. However, we should also be critical of the context within which this is advanced.
For a start, social safety nets are designed to "catch" those who fall too far into poverty. The causes of this impoverishment - the loss of jobs and declining incomes under restructuring and labour market deregulation, rising living costs under privatisation, etc, - seem to be ignored. Accepting the logic of economic liberalisation then "catching" workers after they fall is hardly an adequate strategy for trade unions.
Furthermore, APRO asserts that although social safety nets are important, they must be linked to the "level of development" of each country, thereby undercutting any notion of universal rights. This approach to social safety nets is expressed in the opening address by the General Secretary of the National Trades Union Congress (NTUC) of Singapore to the APRO conference, Meeting the Challenges of Economic Turmoil in February 1998, in which he said: "It is a question of survival first, rights later."
The formula, "survival first, rights later" completely ignores the fact that millions of workers throughout the region face a threat to their survival precisely because their collective rights, including the right to organize and bargain collectively, the right to job and income security, and the right to work, have been repressed. Unless the fundamental rights of workers and trade union rights are secured, there can be no "recovery" from this crisis for working people. (On the ICFTU-APRO’s "business union" response to the Asian economic crisis, see Gerard Greenfield, "The ICFTU and the Politics of Compromise", in Ellen Meiksins Wood, Peter Meiksins and Michael Yates (eds), Rising from the Ashes? Labor in the Age of ‘Global’ Capitalism. New York: Monthly Review Press, 1998, pp.180-189.)
Finally, it is important to recognise the fact that throughout Asia (and the world), social insurance, pension funds, medical insurance, and other forms of social protection and social services are being ruthlessly privatised. Therefore any proposal for a new "Fund" that will finance social safety nets in the region must be clear that this will not result in subsidising the private sector provision of these services. Social welfare protection should be seen as a right, not a profitable service, and trade unions should oppose any further privatisation of these schemes.
The international campaign for a Tobin Tax on speculative finance capital has gained widespread support among a broad alliance of trade union, labour and citizen’s groups, and social movement organisations. It is a very important campaign because it highlights the extreme inequalities in the global economy and attempts to exercise greater control over short-term capital flows. Taxing the "casino capitalists" is certainly a move that trade unions should support.
However, when we consider the Tobin Tax in the Asian regional context, we can see some similarities with the "Asian Monetary Fund" proposal. Of course, both attempt to tackle the problem of speculative finance capital. But there is another similarity - an assumption about governments and government spending.
In the AMF plan, it is assumed that governments will spend money and allocate funds in specific ways. Yet there is no mechanism for ensuring this. And since the majority of governments concerned are not democratic, it is even less clear why we should expect governments to act in the interests of working people. All the evidence points to more government support for large private corporations and banks, more public money to cover private sector risk, and greater corporate welfare at the cost of the majority of working people.
This relates in some way to the argument that the Tobin Tax will generate more government revenue and therefore lead to increased government spending on public needs.
If the lessons of the regional/global financial crises are one of the reasons which prompted the revival of the idea of the Tobin Tax, then we should also take into account another lesson - that governments massively subsidised finance capital in the years both before and after these financial meltdowns, and under the direction of the IMF have bailed out financial institutions and TNCs by nationalising private sector debt. This was clearly the case in Mexico, Thailand, Indonesia, South Korea and Brazil.
Rather than simply demanding that finance capitalists be taxed, we must also engage in a struggle to gain control over the nature and direction of government spending, and stop governments from subsidising capitalists them and bailing them out.
The point is that in the absence of popular democratic control, any revenue raised under a Tobin Tax by governments in the region would undoubtedly be spent on subsidies or interest-free loans for big corporations, investment insurance, or other forms of corporate welfare, and (even more likely these days) increased military spending.
There is nothing "automatic" in the revenues from a Tobin Tax or loans from a regional reserve fund that will lead to spending on health, education, housing, unemployment benefits or the creation of decent jobs. Given the entrenched neoliberal policies of governments and their authoritarian character, the result will be quite the opposite. This turnaround can only be achieved through sustained, organised struggle to establish democratic controls over capital which subordinate corporate profit to working people’s needs and livelihood.
Although not directly related to the issue of control in the global economy, the following brief examples of recent struggles indicate the kinds of issues around which our regional and international strategies should be organised.
On May 23, 1999, we held the largest workers’ demonstration in Hong Kong in decades, with 23,000 public sector workers and trade unionists protesting against lay-offs, wage cuts, reduced pensions and diminished job security. This protest was in response to government plans for the privatisation of public services and restructuring of government departments that would affect the employment conditions of 189,000 public sector workers. The Alliance of Housing Department Staff Unions estimates that 9,000 of its members will be retrenched under the government plan to privatise services on the public housing estates.
This is only one demonstration among hundreds of strikes and demonstrations involving hundreds of thousands of workers throughout Asia in the last two years. In India, Pakistan, Sri Lanka, Thailand, Indonesia, South Korea, China, the Hong Kong SAR, and many other countries in the region, there has been organised opposition to privatisation and the increased corporate control that this process involves. Asserting "people over profit" in the struggle to protect public services and utilities from privatisation, public sector workers are not only defending their jobs, they are demanding that government spending be directed to meeting people’s needs.
With the exception of coordination work by Public Services International (PSI), there has been very limited recognition of the implications of anti-privatisation struggles in Asia at the regional and international level. Such struggles do not (yet) inform ongoing debates about regional and international trade union strategies for capital controls or trade union responses to globalisation.
Regardless of the talk of "economic" recovery among policy-makers and the business media, unemployment in most countries in Asia remains high and will continue to grow. The "new" jobs cited as a sign of "recovery" are predominantly casualised, low-paying jobs that are in sectors where unions are repressed or have failed to organise.
Despite the seriousness of long-term, mass unemployment, few trade union strategies appear to try to tackle this problem.
Retraining is the most common approach. Yet it is by-and-large a false solution as long as there is no job creation. An exclusive focus on retraining tends to reinforce neoliberal myth that workers are unemployed because their skills do not meet market demand or are not suited to the market. This places the blame for unemployment on the individual and creates a false illusion that retaining in the right skills will automatically lead to employment. In this way retraining often reinforces workers’ frustration because they cannot get jobs afterwards, or the jobs they get earn them lower wages under poorer working conditions.
In recent years we have been using retraining activities as a forum for workers’ education and advocacy, and to support self-employment schemes, community-based employment and cooperatives. Some of these initiatives involve job-sharing among self-organised groups of workers especially women workers. At the same time, HKCTU is organising its membership beyond full-time regular workers to part-time, casual, and unemployed workers to take into account the reality of these changes.
While there is frequent discussion of basic workers’ rights and "core" labour standards at the regional level, "the right to work" often goes unmentioned. This is usually because job losses are treated as inevitable, or necessary. But the fact is that in mass protests in China involving tens of thousands of workers, and thousands of workers in countries such as Thailand, Indonesia and the Philippines, are demanding "the right to work" as a basic right. They are telling us that the threatened loss of their jobs is not inevitable and must be resisted.
Sadly, many of the tripartite agreements signed by trade unions in the region involve compromises with governments and business that significantly undercut the right to work. More importantly, these agreements undercut the ability of workers and their unions to fight for this right by introducing labour flexibility and casualisation.
We should recall that when the extraordinary convention of KCTU delegates voted in February 1998 to reject the tripartite accord signed by the KCTU leadership, it was in defence of the "right to work" that the rank-and-file revolted. The tripartite accord included an agreement on the law on lay-offs which brought an end to lifetime employment and dismantled job protection. It was argued that accepting the terms of the existing agreement would destroy workers’ livelihood and lead to a greater decline in workplace conditions. Delegates demanded that the agreement be renegotiated or a general strike be called. Although the KCTU later joined, quit, then rejoined the accord, the most important lesson was that the right to work is a right that the trade union leadership is compelled to defend.
Clearly, failure to recognise and defend the right to work only serves to increase corporate control and diminish our capacity for popular democratic control.
Ultimately, popular democratic controls over capital which lessen corporate control require a democratic environment in which to operate. This environment cannot be assumed to exist, as so many proponents of new regional and international trade union initiatives seem to suggest. Nor can trade union initiatives be separated from democracy and democratic principles as the "Asian Monetary Fund" proposal does.
The exercise of democracy and democratic principles does not simply involve a seat for labour at the bargaining table or a place in a tripartite structure. There are plenty of examples throughout Asia of authoritarian regimes which allocate a "seat" for labour or allow labour "representation." There is nothing democratic about this.
Exercising control over capital in a global economy requires freedom of expression, including freedom of speech and freedom of assembly - freedoms which are banned or severely restricted in most countries in the region. Freedom of expression is not essential simply because it is part of a set of democratic principles. It is essential because neither globalisation and its effects, the power and greed of TNCs, the nature of the problems that workers face, or real any solutions can be critically discussed, debated and acted on in the absence of this freedom. We cannot assume that a good proposal can just materialise and gain both the understanding and support of working people and their unions simply because it is a good, sensible initiative. In most cases these initiatives are manipulated and coerced, trade unions are restricted and threatened, and what emerges as government policy is very different from what was originally intended.
Regardless of "good intentions", democratic trade unions need to examine any strategies or proposals for the control of capital in terms of the following (often neglected) questions:
There is no doubt that debates will continue, with new strategies proposed and old strategies revised. Whatever the outcome, it is important to keep in mind the following question:
Do these international and regional trade union proposals shift the balance toward greater popular democratic control and less corporate control?
If the answer is ‘yes’, then we must put all our efforts into realising these proposals and making them effective, workable strategies.
If, on the other hand, the answer is ‘no’ or ‘maybe’, then we need to go back to our rank-and-file members in the workplace and in the community to understand what needs to be done. We often spend too much time looking up to the ‘experts’ - the very same experts who brought about this crisis, including those experts from the World Bank, IMF, etc, who are fundamentally hostile toward democracy.
We also tend to forget about the actual initiatives and strategies undertaken by our rank-and-file members in their workplaces, communities and in the streets. It is these initiatives which should inform our regional and international strategies. Not least because we risk losing sight of the aspirations of the mass of the working people who we claim to represent.
Hong Kong, September 6, 1999
* This is the original version of a paper prepared for the Hong Kong Confederation of Trade Unions (HKCTU) in September 1999. A much revised version was presented by the HKCTU Executive Secretary, Elizabeth Tang, under the title "Globalisation & Labour: "Global Control and Its Effects": An Asian Trade Union Perspective" at a conference in Sweden on September 9, 1999. The views expressed here are my own and do not reflect those of HKCTU.