Focus: Disrupting inequality: the IMF, union rights and growth

Abstract

INTERNATIONAL union rights Page 10 Volume 22 Issue 2 2015 The capacity of the the IMF and the World Bank for directing economic thinking and influencing policy-makers is global in reach and highly potent FOCUS ❐ FINANCE, AUSTERITY AND TRADE UNION RIGHTS I n March 2015, Florence Jaumotte and Carolina Osorio Buitron, two economists from the International Monetary Fund (IMF), unveiled research on the relationship between the declining share of workers affiliated to trade unions and the increase in top income shares. The study – entitled ‘Power from the People’1 – examines a sample of advanced economies over the period from 1980 to 2010. While the IMF’s interest in union density is fairly novel, what it uncovers is hardly surprising: the authors point to strong evidence that lower union density and weaker bargaining power are associated with higher wage inequality. But throughout the world, the IMF has long been instructing its borrowers to agree to labour flexibisation reforms, wage cuts and the weakening of collective bargaining arrangements in order to encourage economic growth. The capacity of the international financial institutions (IFIs) – the IMF and the World Bank – for directing economic thinking and influencing policy-makers is global in reach and highly potent. They deploy massive resources to produce and disseminate ‘empirical’ research on economic policy-making and through their lending operations are able to compel borrower states to adopt their recommended policy reforms. An ITUC report shows that in post-crisis Europe, major de-regulatory labour market reforms were encouraged in IMF policy advice for eight European countries since 2008, despite the fact that the IMF were unable to identify ‘a single European country where labour market regulations were an important impediment to growth’. Of the countries in the study, five of these contracted IMF loans between 2008 and 2011 (Greece, Iceland, Ireland, Portugal and Romania)2 . So any trade unionists feeling vindicated by the IMF’s recent foray into the realm of union rights might be advised to take a look at how the study sits – not simply within the trade union movement (which is unlikely to dispute such findings) – but within the IMF’s repertoire of economic analysis. The Jaumotte-Buitron report does usefully debunk several of the lazier assumptions about the effects of stronger trade unions on levels of unemployment. But in their conclusion, the authors remain wholly neutral about whether the weakening of unions is a positive or negative development: ‘Whether the rise of inequality brought about by the weakening of unions is good or bad for society remains unclear… More research is needed to investigate which aspects of unionisation (for example, collective bargaining, arbitration) are most successful and whether some aspects may be more disruptive to productivity and economic growth’. This seemingly innocuous conclusion is quite significant. The work of the IFIs in disseminating and propagating neoliberal economic doctrine has to date been highly effective. Characteristically, orthodox neoliberal economic theory is largely ambivalent about issues such as ‘inequality’ and ‘unionisation’, except insofar as they impact upon growth. For several decades, both the IMF’s and World Bank’s economists have been attempting to measure diverse – and potentially infinite – constellations of human and economic factors, in their search for a relationship between economic growth and inequality. But ‘economic growth’ – measured in GNP or GDP – has long been its mantra. In a speech to the UN Economic and Social Council in 1990, Michel Camdessus (at the time, the IMF’s Managing Director) announced that ‘high-quality economic growth’ was the institution ’s ‘prime objective’3 . With the concept of ‘inclusive growth’, the current IMF Managing Director, Christine Lagarde, has championed ‘more inclusion in economic growth’4 . Very soon, however, the policy of ‘more inclusion in less economic growth’ might become an unavoidable reality. The IMF’s World Economic Outlook for 2015 warns that we should prepare for a future wave of ‘secular stagnation’ – the institution’s chosen euphemism for no-growth or negligible growth. Talking about ‘somethingother -than’ growth has long been gaining momentum among economists, activists and some trade unionists. Recently, Mark Serwotka, the General Secretary of the Public and Commercial Services Union in the UK, responded to the debate developing around the issue of ‘growth...