Bearing the Burden, an IPS Report

This paper is a contribution to the Workers in the Global Economy Project, a collaborative effort involving the Institute for Policy Studies, International Labor Rights Fund, Economic Policy Institute, and Cornell University and funded by the Ford Foundation. We are grateful to the international labor experts, including Fernando Leiva, Kjeld Jakobsen, Lisa McGowan, Young-mo Yoon and others, who provided useful comments on a first draft at a conference at the AFL-CIO’s George Meaney Center in October 1999. Special thanks as well to IPS intern Katrin Jordan for research support.

About the Authors:

John Cavanagh is the Director of the Institute for Policy Studies and Sarah Anderson is the Director of the Institute’s Global Economy Program. They are the co-authors (with Thea Lee) of a new book entitled Field Guide to the Global Economy (New Press, 2000). For a quarter century, IPS has been a leader in strengthening citizen responses to the global economy through research, writing, education, film, and coalition building.

Introduction

In the aftermath of the global financial crisis that exploded in July 1997, tens of millions of workers lost their jobs around the world. Hundreds of millions watched their real wages fall. Millions of immigrant workers were sent home. The ripple effects were felt by workers in every country. Meanwhile, those most responsible for causing the crisis suffered little of the pain. As former World Bank Chief Economist Joseph Stiglitz, put it,

"in East Asia, it was reckless lending by international banks and other financial institutions combined with reckless borrowing by domestic financial institutions—combined with fickle investor expectations—which may have precipitated the crises; but the costs—in terms of soaring unemployment and plummeting wages—were borne by workers. Workers were asked to listen to sermons about "bearing pain" just a short while after hearing, from the same preachers, sermons about how globalization and opening up capital markets would bring them unprecedented growth."

By the end of 1999, most of the crisis countries were showing signs of recovery in terms of their economic growth rates. But while international investors celebrated, working families in these countries saw little improvement in their own lives. A World Bank study released in January 2000 reveals that incomes of the low and middle class in East Asia have not been restored. Urban poverty has risen, as laid-off industrial workers struggle to survive with little or no social safety nets. In many countries, displaced workers have returned to rural villages, where they try to eke out a living on small family plots.

Perhaps even more disturbing than the lingering effects of the financial crises of the last half decade is the fact that little has been done to prevent such tragedies in the future. Although the crisis did provoke a vigorous debate around a "new global financial architecture," no clear and comprehensive vision has emerged from official policymakers. Moreover, even though workers bore the brunt of the last crises, their representatives are not among those at most tables where the new financial architecture is being debated and drawn. Hence, it should come as little surprise that official proposals for change either ignore workers’ interests or undermine them.

This said, there are well-developed proposals for new rules and institutions that would serve workers’ interests. In addition, it is widely recognized that the massive demonstrations against the World Trade Organization by the international labor movement and others in Seattle in December 1999 have opened up new opportunities for promoting a labor and social agenda within all the international financial institutions. There remains, however, a major challenge to educate and mobilize people on this issue in order to raise the profile of workers’ concerns in both the public and the official debates.

This paper attempts to bring alive the impact of the financial crisis on working people. It outlines the mechanisms by which the crisis has hurt workers. It then offers an analysis of the impact of the crisis on workers in eight countries: Korea, Indonesia, Thailand, the Philippines, Russia, Brazil, Ecuador, and, finally, the United States. A final section outlines the official debate on resolving the crisis as well as components of an emerging North-South citizens agenda on the global financial crisis that advances the interests of workers.