Monday, April 6, 2009

COSATU response to the G20 2 April 2009 London declaration

The Congress of South African Trade Unions broadly welcomes the G20 London Summit Declaration but rejects some of its conclusions.

COSATU regrets that the G20 meeting did not clearly acknowledge that the global economic crisis has been caused by the policies of the Washington Consensus, which propagated a ‘one size fits all’ economic model based on withdrawal of the state from the economy, emphasis on market fundamentalism, deregulation, privatisation, trade liberalisation, cuts in government spending and high interest rates, implemented through lending conditions attached to IMF and World Bank loans for poor countries. This policy led to gross imbalances in the global economic system, overproduction and over-accumulation, and non-regulation of the financial services sector.

This resulted in rising unemployment, income inequality and poverty, stagnating wages, cuts in social protection, erosion of workers’ rights, and increased insecure work. The International labour Organisation (ILO) estimates that 50 million jobs could be lost and 200 million people could sink into poverty as a result of the current economic crisis.

In South Africa, contrary to the local proponents of the Washington consensus, workers are being laid off or put on short time, and wages are being reduced; there is a decline in exports, a fall in commodity prices and decline in manufacturing and mining sectors.

COSATU therefore rejects the G20’s reaffirmation of a free market policy to address the international crisis, which is precisely the result of such free market policies.

We had expected that there would be a paradigm shift in policy away from the Washington Consensus. The real economy, decent work, and poverty reduction were treated as marginal to the crisis, with the main focus on finance issues. The G20 should have focused more on social issues, and particularly on jobs. We are very unhappy that the Summit did not adopt the Global Jobs Pact on the social dimensions and employment impact of the economic crisis, as proposed at the ILO.

The G20 should have followed the South African example and called on governments, business, labour and the community to work together to protect the poor, the working class and vulnerable groups from the effects of the crisis through industrial, fiscal and social measures.

However, we commend the G20’s position on following social measures:

Its acknowledgement that the crisis unfairly affects the poor and the vulnerable in poor countries and a need for a collective responsibility to mitigate the effects of the crisis on the poor.
An increase in resources for social protection for the poorest countries and investment in long-term food security, and increased resource allocation of more than $1trillion to assist emerging markets and poor countries,

The UN to monitor the impact of the crisis on the poorest and the vulnerable
A commitment to meet Millennium Development Goals and implement pledges for aid as per the Gleneagles commitments, and more development assistance.

Support for employment by investing in education and training and through active labour policies focusing on the most vulnerable and the role of ILO to assess actions taken and those required for the future,
An undertaking to reach an agreement on the UN climate change conference in Copenhagen in December 2009.

Macroeconomic policies should address world trade imbalances which have resulted in inequality, poverty and unemployment. They should deal with equity and redistribution of wealth to close the widening income inequality, eradicate poverty and achieve the MDG goals to halve poverty and unemployment by 2014.

COSATU calls for a significant revision of the world’s social architecture to place workers’ rights and development at the absolute centre of the new global agenda.

Other social measures to address the impact of the crisis on the poor, which should be at heart of the stimulus packages, should include:

Commitment by all ILO member states to ratify ILO convention and comply with all labour standards. We are disappointed there was no express provision for adoption of the ILO decent work agenda. Decent work is the foundation of the fight against poverty and inequality and it should be at the cornerstone of the responses to the economic crisis.
Implementation of the ILO Declaration on social justice for a fair globalisation.

Adoption of the Global Jobs Pact on social dimensions and employment impact of the economic crisis, as proposed at the ILO.
Measure to curb speculation in staple food prices,
Measures to avert unemployment, wage losses, and to provide income support.

Support to companies that are temporarily affected by credit difficulties in order to protect jobs.
Putting more money into the pockets of the poor and working class in order to stimulate the economy. This would boost growth, as the poor are more likely to spend their cash quickly and thereby stimulate the economy. This can be done through increased benefits, direct job creation schemes such as investment in public infrastructure, and tax breaks.

COSATU agrees that countries should strengthen financial supervision and regulation among others:

Public control, oversight and regulation of all financial products and transactions in particular, hedge funds
Introduction of measures to address executive pay and bonuses that are behind much of the risky investments and regulation of remuneration schemes by law.
Introduction of laws to regulate corporate social responsibility of firms
Stopping the race to the bottom between tax jurisdictions which is eroding tax revenue for most countries and introduce sanctions against non cooperative jurisdictions including tax havens.
Requiring of oversight and registration of credit rating agencies which are responsible for hiding some of the risks associated with the current crisis

The G20 Summit called on central banks to lower their interest rates, so that government investment in public infrastructure can be financed at a low interest rate cost. We demand that our SARB take heed of the G20’s call.

We welcome the commitments to reform the IMF, in particular for appointments of head of international financial institutions on merit. We regret that there was no commitment to reflect developmental objectives including the social mandate of decent work which means increasing employment and improving the quality thereof in the IMF mandate.

There should have been commitments to abolish lending requirements for the IMF and WB that leave developing countries with little or no policy space to develop their economies. The G20 should address the US veto powers and representation of the developing countries on the IMF board.

COSATU deeply regrets that the IMF has been given an enhanced role in coordinating the global financial reform. This organisation has been responsible for actively pursuing policies which have contributed to the current crisis, and indeed is still pursuing them during the crisis. Its policy mandate, governance structures and policies must be transformed. An unreformed IMF could aggravate rather than resolve the crisis. Otherwise the coordination should be done by the UN.

We regret that the Financial Stability Board, which is meant to provide early warning on macroeconomic and financial risks in cooperation with IMF, is not representative of the poor countries; only one regional organization, the EC is represented. Other regional organisations such as the African Union and Association of South East Asian Nations (ASEAN) countries should have a place in the G20 just like the European Commission.

On protectionism, we regret that the G20 did not reprimand the rich countries for breaching their November 2008 Washington declaration not to impose protectionist measures. Since Nov 2008, 17 of the G20 countries have imposed trade-restricting measures, through among others, export subsidies in the form of fiscal measures.

Poor countries should not accept calls to avoid protectionism, which are in fact designed to stop poor countries from using targeted trade measures to protect their industries from the crisis, whilst the rich countries are using fiscal measures to protect their industries.

We regret that the G20 did not reaffirm the mandate of the Doha round to put the interests of developing countries at the heart of its programme. We still demand that trade policy negotiations in the WTO must be developmental in character and Non-agricultural-market-access (NAMA) provisions should not result in further trade liberalisation of markets in developing countries and job losses.

The next G20 meeting should be convened within 6 months to enhance coordination and a common approach to the crisis. COSATU demands that the trade unions should be directly represented at that Summit.

The G20 should ensure that there is a paradigm shift in policy making away from an economic model which focus on one option namely of opening markets and deregulation to a model which focuses on decent work, economic, environmental and social sustainability, an economic model that puts people first.


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Revitalising Labour attempts to reflect on efforts to rebuild the labour movement internationally, emphasising the role that left-wing political currents can play in this process. It welcomes contributions on union struggles, internal renewal processes within the labour movement and the struggle against capitalism and imperialism.

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