FOCUS□ LABOURRIGHTSANDTHE GLOBALECONOMY Great challenges ■ What are thechief causesofthecurrent crisis? First and foremost, thederegulation of financial activities. Theabsenceofregulation is notonlya problem intheUnitedStates: itis evenworseat international level,withtheglobalisation of the financialsector over the last few decades. Nothing has been done to place even minimal controls on thedevelopment of financial trade, on the abilityof financial institutions to grant loans in anothercountry, to develop so-called securefinancial products that wereinfacthiding high-risk investments, or to make massiveand purely speculative investments, inderivatives for example, which ended up undermining the financial system as a whole. ■ Wasthesub-prime crisis in theUnited States really thetrigger? Ifithadn'tbeen that, itwouldhavebeen somethingelse , but a bubble was, indeed,created, especiallyin the real estate sector.It wasn't uniquetotheUnited States, butitwas particularlybad inthiscountry. Itwas instigated byunregulatedfinancial practices: itwas inlenders' interestto see people payingmoreand moremoney forhouses,to have themtakeout increasingly costlymortgages, with termsand conditions, suchas variable interest rates, that thecustomers werenotawareof.The system worked, until the daythebubbleburst. Housepriceinflation inthe United States was completely detachedfrom the realeconomy, from realwages,whichare stagnating and have even been falling overthelast ten years.The financial sectorlet people buy housesthatwerefarbeyondtheir means.They then sold the repayment commitment, these mortgages wrapped up like so-called secure products, toother parties aroundtheworld, such as Europe.Thatis how Europeanfinancial institutions foundthemselves in difficulty. Butthere are otherreasonsbehindthiscrisis, suchas the fact that manyshareswereoverpriced inrelation to therealvalue of the companies.Therewas assetinflation, notonlyin theUnitedStatesbut inEuropean countries too,whichhavenowbeen hitbythebursting ofthisbubble. ■ Why didnooneseemtoanticipate thescaleof thecrisis? Itis,indeed, very damning forprofessional economists . TheIMFandtheOECD, despitethethousandsofeconomists they haveinchargeofmonitoring theworldeconomy, didnotsee itcoming. Therewere,ofcourse,a fewisolatedeconomists hereand therewho calledattention to thatfact thatwhatwas happening in therealestatemarketwastotally disconnected andunreal. Butmost economists workfor theprivate sector, andwhile thissystem keptgenerating profits fortheir companies ,theydidnotwanttobe thefirst to shoot thegoose laying goldeneggs. Conversely, attheILO andtheUNDP,and ina fewindependent or tradeunionresearchunits, someeconomists had underlined theimbalances between the financialeconomyand the real economy.But itwas a smallpercentage of the profession. ■ Which workers are likely tobehardest hitin themedium and longterm bytherepercussionsofthiscrisis ? Unfortunately, even withthe emergency measures and the massiveinjections of fundswe have seen in Europeand theUnitedStatesover recent weeks,itseemswe areheadingtowards a globalrecession. I think everyone isgoingtofeel it,butin different ways.In industrialised countries , thefinancial crisistriggered in theUnited Statesis bringing thefinancial sectorto a near standstill: thebanksdo notwanttolendcompaniesmoneyin theabsenceofguaranties, which companiesarenotable toprovide. Itwillnotbe long beforethisimpactson the real economy, industrialised countries'manufacturing sectors. Wecan expectto see a riseinunemployment in all thesecountries. Inthedeveloping world, thefinancial crisis has come in addition to an alreadyverypresent crisis , the food crisis.Workers in poor countries oftenspend overhalfof theirincomeon basic foodstuffs, and thesehave seen huge inflation overrecentyears,reaching a peak aroundJuly 2008. These price rises have had exceedingly negative repercussions. AnILO study, forexample ,revealsthat workers earning a basicsalary in thetextile industry ofBangladesh haveseena 20 percent fallin purchasing powersolelybecause oftheinflation ofthepriceofrice.Therearesimilarexamplesinmanyotherpoorcountries . The priceofstaplefoodswas starting to fallinJuly, butwe arenotyetsurehowthefinancial crisis is goingaffect foodstuffs. In the same way as thereis speculationon sharesandintherealestatemarkets, there isalso speculationon basic commodities,including foodstuffs. Largequantities of rice are bought basedon speculation that thepricewillrisewithin a few months,which effectively resultsin pushing thepriceup. Lowpaid workers inpoor countries, who depend on theseproducts, are very badly affectedby this speculation.The financial crisis ofthelastfewmonths is therefore aggravating thefallinpurchasing powerinthese countries. ■ Which countries are likely tobeleastaffected bythecrisis? Ratherinterestingly, it is thought thatthe least The crisis was instigatedby unregulated practices:this was inlenders' ITUC SPOTLIGHT INTERVIEW with Peter Bakvis, Director of the ITUC/Global Unions Washington Office INTERVIEW by Samuel Grumiau Page 9 Volume 16Issuel 2009 INTERNATIONAL union rights I the insist represented table inequalities our the negotiating We societies to on issue have tackle being to of at in insiston being representedat the negotiating table to tackle the issue of inequalitiesin oursocieties globalisedcountries willbe bestable to isolate themselves from thecrisis.Atthebeginning of October, theIMFreleaseditsforecasts for2009, inwhichitstudies countries likeIndiaandChina, whichexporta greatdeal butare also wellprotected .The two countries stillhave substantial controls on imports, theyplace strict conditions onforeign investors, andtheir capitalmarkets are tightly controlled and regulated. Growth inIndia is expectedtogo from eightpercent thisyearto sevenpercent in 2009,a fallthatis byno means comparable withthatofindustrialised countries, whichcanexpecttosee negative growth. Growth inChinaisforecast togo from 10percent in2008 to 9 percent in 2009.The growth rateinAfrican countries does notappearto be muchaffected either (thepriceoffoodstuffs is,however, stronglyaffecting thepeople ofAfrica, especially those withlow incomes).The picture is quitedifferent in countries thatrelyheavilyon themarkets of theindustrialised...
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Aug 22, 2017
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