The Global Economy: The Need To Act

Let me also take a moment to recognize one of your distinguished members, a friend and colleague, Jay Mazur, the president of UNITE!, the interntional union of textile employees. You have chosen well. Jay is a remarkable leader who serves as the chairman of our AFL-CIO Executive Council International Committee. His union has launched path-breaking organizing drives across borders, and invented the most creative initiatives to fight against sweatshops at home and abroad. When the history of the struggle for workers’ rights is written, Jay Mazur’s name will be writ large.

Jay’s work and that struggle provides the context for what I want to talk about today. I’ve been asked to speak briefly about workers’ perspectives on the global economy. I’ve had a chance to review the fine paper presented on 21st Century Strategies of the Trilateral Countries to frame this meeting. Let me suggest, with all due respect, that the situation we face is much more perilous than the paper suggests. The global crisis is more acute. The divisions are deeper. The need for leadership—and the leadership vacuum—is more stark.

Bosnia, Iraq, NATO’s future, proliferation, etc.—all these are serious questions. But the future relations of the Trilateral countries, and their relations with the rest of the world, will largely be determined by the response to the current global economic catastrophe. The question is whether we can ensure that the new global economy works for working people. Because, as President Clinton has warned, if it does not, then it cannot long be sustained.

These are strong words. They are meant to be. Let me set out a series of propositions to make my case and then elaborate briefly on each in turn:

• First, the global economic crisis is more than a financial crisis—it is a human tragedy of staggering dimension.
• Second, the crisis marks the end of business as usual. The so-called Washington consensus is not even the consensus in Washington anymore.
• Third, attempts to continue down the old path will not work—and already are fueling a growing and destructive reaction.
• Fourth, we must now create rules that can save the global market from its own excesses. Workers’ rights and environmental and consumer protections must be at the center of that process—along with a renewed emphasis on demand-led, bottom-up growth.
• Finally, this debate cannot and will not be limited to the comfortable suites of the few. It is already being joined on the streets, in union halls, on computer screens across the world.

Let me elaborate on each of these propositions in turn.

A Monumental Human Tragedy
First, President Clinton has said that we face the worst global financial crisis since the Great Depression. That is true—but this is far more than a financial crisis. It is a monumental human tragedy. Much has been said about the “moral hazard” of bailing out speculators when their bets go bad. But too little is reported on the immoral hazard of enforcing austerity on working people to cover those bad bets. Now, in Asia, millions of working men and women who thought they were part of a rising middle class have found themselves thrust back into poverty overnight. In Russia, workers are not being paid for months at a time. One of the world’s industrial nations is being reduced to barter. Life expectancy is falling; disease and hunger are spreading; desperation is rising.

The Wall Street Journal reported on Monday that the Mexican economy is humming, exports soaring, 100,000 new manufacturing jobs in the last year. Yet, Mexican workers have suffered a 40 percent reduction in purchasing power over the past five years. Absolute poverty—measured as people making less than $2 a day—has increased dramatically. And this is when the economy is working. It will soon get worse when Mexico is hit by the aftershocks of Brazil’s recession.

The Trilateral nations have suffered less, but we are not immune. The Japanese find themselves trapped in a cycle in which prescriptions dictated by the old orthodoxies fail one after the other. In Europe, unemployment has taken a terrible toll on an entire generation of young men and women.

In the U.S., of course, these are the best of times: unemployment low; wages rising; the stock market soaring. But don’t be fooled. Working people are laboring longer and harder for less reward than they did two decades ago. One in five children is raised in poverty. The trade deficit has soared to record levels. Last year witnessed the highest announced layoffs of the 1990s. And no one knows how long we can survive as an island of calm in a sea of trouble.

The End of Business as Usual
This global crisis marks the enct of business as usual. We shouId be very clear about this. Some suggest that now that Asia seems to have survived the worst, the global system is headed back to health. That is a profound misjudgment. Not only is the contagion still spreading, but its full political and economic effects have yet to be felt. Across the world, the magic of the marketplace has been dispelled. In its place, there is a renewed awareness of the cruelty of markets, the manias of speculators, the terrible price of instability.

For over two decades, corporations and banks forged this new global economic order. They set the pace; they made the rules. Workers, consumers, environmentalists were not invited to the table. We were told to bite our tongues and bide our time, and we would eventually enjoy the rewards of faster growth and greater prosperity. Well, after twentyfive years, the results are in. As Joseph Stiglitz, the chief economist of the World Bank reports, countries large and small have been whiplashed by financial crises of ever greater frequency and severity. And in both industrial and developing countries, the result has been slower growth with growing inequality within and between nations.

The so-called Washington consensus—the systematic dismantling of controls over capital, currencies, and corporations—has been shattered. Democratic peoples will not support it. Authoritarian regimes will fear to impose it.

In the United States, at the height of the current recovery, a majority of Americans—even a majority of Republicans—are skeptical about the benefits of trade. In Washington itself, a coalition of unions, consumers, and environmentalists—backed by the vast majority of the American people—blocked fast-track trade authority for the president, not once but twice. The Washington consensus is not even the consensus in Washington anymore.

One would hope that this reality is finally sinking in. President Clinton has called for a new dialogue on trade, saying it is vital to put a “human face on the global economy.” British Prime Minister Tony Blair called for a new Bretton Woods, presumably a bold initiative to rewrite the global rules. French Prime Minister Lionel Jospin summarized that “we have learned three things: capitalism remains unstable, the economy is political, and the global economy calls for regulation.”

Yet, inertia still seems to be the rule of the day. In the wake of the global crisis, there has been much hand wringing, but little change. The IMF admits that it made things worse in Asia, and then proceeds to enforce the same brutal austerity on Brazil. Central bankers worry aloud about global deflation, yet the new European Central bank continues to fight the old war against inflation even as Germany lurches toward recession. Fed. Chair Alan Greenspan warns about the dangers of the U.S. trade deficit, yet the Treasury and IMF prescriptions give countries no other hope but to export their way to recovery.

The Treasury Secretary announces we need a new “global architecture,” yet seems to debunk anything that goes beyond patching the leaks in the roof and washing the windows.

We Need Another Way
We need to go another way. Already, countries are acting on their own Throughout Asia—for example, in Malaysia, and even in Hong Kong—govemments are intervening to protect their people from the speculative gales. The European nations, focused on their own unity, have clearly chosen to limit their exposure. The U.S. administration has to act—belatedly—on the distress caused by a flood of cheap imports. Financial leaders in the Trilateral countries raise cautions about the dangers of protectionism. But such warnings ring hollow if there is no collective response to the current crisis.

Here the leadership vacuum is most apparent. The Trilateral nations should be taking the lead—coordinating immediate steps to stem the crisis, and initiating bold efforts for fundamental reform.

In the short term, we need immediate steps to stimulate growth. Japan should be applauded for its bolder efforts, and encouraged to do more. The European central bank should lower interest rates immediately to boost growth in Europe. The United States should be wary about making long-term commitments to fiscal austerity in a world struggling against deflation.

The Trilateral nations should also push a coordinated effort to relieve and restructure the debt burdens that trap developing nations in austerity, force cuts in health and education, and foster a beggar-thy-neighbor competition for export markets.

And at home, we must use our trade laws to blunt the destabilizing flood of imports unleashed by enforced devaluations.

Rewriting the Rules of the Global Economy
In the longer term, we need a new internationalism—a rewriting of the rules of the global economy to make it work for working people. This will require bold new ideas, new initiatives, and new institutions. Controls must be devised to limit capital speculation; to make currencies more, not less stable; to make corporations more, not less accountable. Global arrangements for trade and investment must leave nations free to follow different paths to prosperity. The Trilateral countries should take the initiative now to call for a new Bretton Woods to begin rewriting the rules of the global economy.

In this country, Treasury Secretary Rubin is right when he warns that we cannot continue to serve as the buyer of last resort. Our trade deficit is unsustainable economically and indefensible politically. Some of the most efficient steel companies and workers in the world find themselves submerged under a flood of low-priced steel from countries whose currencies have collapsed. Workers lose their jobs; families lose their hopes and often their homes; communities are disrupted. Their reaction is fierce and utterly understandable. It is not an adequate answer, as Steelworker President George Becker has stated, to give workers a “pat on the head and put them at the front of the unemployment line.” If the U.S. economy slows, as most observers believe it will, demands for protection and nationalist fears and anger will build rapidly.

Reform can sensibly begin by addressing the glaring contradictions of the current policy. Consider our policy towards China. Already the radical right in our country is campaigning to isolate China for its human rights abuses, its repression of religious freedom, its military buildup.

The AFL-CIO supports engagement with China. We think it foolish to pretend we can isolate a nation of 1.1 billion people. But current U.S. policy is indefensible. Last year, the Congress labored to change the terms of the trade debate over China from “most favored nation” to “normal trading relations.” Some pollster must have thought it was easier to sell the latter than the former.

Better get a new pollster. How can you call “normal trading relations” a $60 billion trade deficit with a nation that controls access to its market, targets its trade, suppresses independent labor organizing, and trashes its environment? We currently sell to the Chinese about as much as we sell seven million Australians. Our trade deficit with China helps destabilize its neighbors whose systems are more democratic and more open. The $60 billion trade deficit with China directly subsidizes the race to the bottom that undermines support for the global economy. I can tell you one thing. We will either gain greater balance in our trade with China—and with the world—or we will feed a xenophobic populism that may make Pat Buchanan look like Woodrow Wilson.

At the same time, the Trilateral nations should be seeking to ensure that the global economy works to lift standards up rather than drive them down. At the AFL-CIO, we will continue to fight to make core labor rights, environmental and consumer protections central to trade agreements, to the conditions enforced by financial institutions, to the standards required for preferred access to our markets.

Some argue that child labor is a necessity for poor countries and attempts to ban it a form of Western chauvinism. Or that enforcing internationally recognized, core labor rights—the right to organize, to bargain collectively, to strike—is protectionism.

Here is the simple truth. No society benefits from exploiting its children rather than educating them. No society benefits from impoverishing its workers rather than empowering them. And no culture or creed condones slave labor, sweatshop labor, or imprisonment of workers seeking to organize trade unions.

Labor rights are a core human right, vital to the development of a robust civil society central to democracy. But they are also economic necessities. As former UAW president Walter Reuther said, “You can’t build an automobile economy on bicycle wages.” Today too many workers are making goods that they cannot afford to buy. Empowering workers is central to creating a prosperous economy.

This Debate Cannot Be Contained
One final point. This debate cannot be contained among the accredited few in these upholstered suites. The negotiators of the Multilateral Agreement on Investment found that out. They thought they could write what they called the “constitution of the global economy” in closed meetings in fine quarters in Paris. They discovered to their dismay that their constitution was being debated and rejected across the world in union halls, on computer screens, and on the streets by workers, consumers, environmentalists, and human rights activists.

Some years ago, tbe Trilateral Commission gained notoriety for Samuel Huntington’s essay complaining about the “excess of democracy” during the Cold War. But, it is the “deficit of democracy” in the global economy that must be redressed. Trade accords cannot be negotiated in the closed precincts of trade representatives and corporate lobbyists, ratified on a fast track, and enforced in a secret tribunal. The Trilateral nations alone cannot impose the new order. Others now demand a place at the table. And their interests, concerns, and values can no longer be easily ignored, or quietly deferred.

I don’t pretend that any of this is easy. Simply finding ways to limit destabilizing speculation in currencies and short-term capital flows would tax even the brilliance of Paul Volcker. But we have faced similar challenges before. In this country, at the beginning of the century, the great corporations and trusts forged a national market and an industrial economy. The transition generated booms and busts, displaced workers and fanners, sparked upheaval and protest. Progressives of the era joined to organize unions, extend democracy, and develop new rules that would make the economy work for people—food and drug standards, antitrust regulation, fair labor standards, a ban on child labor—and eventually, labor rights, a social welfare net, consumer and environmental protections. These reforms did not come easily. They were not granted by the generosity of those Roosevelt called the “malefactors of great wealth.” They required organizing by citizens and workers, a crusading press, and bold leadership.

Now we face the same challenge once again—only this time on a global level. I do not claim to have the answers, merely the first of the questions. In this country, it took many decades—and two world wars and a Great Depression—to elaborate protections that saved the industrial economy from itself. Now at the beginning of the 21st century, the global economy poses the same challenge. Let us hope that we need not relive the horrors of the past to unlock its promise for the future.