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Globalization and International Labor Standards:
Countering the Seattle Syndrome

Address by Lee Swepston ©
Lund, Sweden, 14 October 2002


Globalization is the blessing and the curse of the modern world economy. It is seen as the saviour of export economies, as the death of inefficient State-owned companies, and the chance of developing countries to tap into the world economy and achieve the development they have been missing. Others see it as a licence to exploit workers in developing economies, and as a channel to export jobs from richer countries to poorer ones. They see it as the enemy of social progress for the profit of capitalism, and as accelerating the death of the world's ecology by increasing the use of natural resources. In Seattle two years ago, as in Washington and other places where the world's financial institutions meet, protestors call for an end to globalization because of the exploitation of workers and the ruin of the world's ecology.

Globalization does do all these things, but it also carries great benefits for rich and poor alike. Is there a way to counter its ill effects and try to tap its good aspects and make them work for the common good? The ILO thinks we have a partial answer - not the whole answer, but a part of one. It consists in spreading the benefits to those who have been excluded, and in accelerating our work to improve the lot of the poorest and most excluded. The ILO calls the path to this goal Decent Work - improving the work of everyone and not just a select few. It is expressed in the original ILO Constitution as social justice, another expression that still rings well. We are not so naïve as to think that this is going to be easy, or quick, but the effort must be made. And when we try it, it does work.

The main tool the founding treaty gave the ILO is called international labour standards. This means setting standards at the global level, that are gradually ratified and applied - and these two processes do not necessarily go together - by countries at all levels of development. But many economists, and of course many people in business find the very concept of labour standards troublesome. They think that labour standards distort economic truths, that they corrupt purer economics solutions that will improve economies over time. We do not think so. We think that no true development can take place without law and human rights. And there is growing evidence that we are right.

A few weeks ago the ILO and the Asian Development Bank held a joint meeting in Manila on the subject of development and labour standards. The conclusions that the two organizations reached, from the research and consultations we carried out jointly, were the following:

Failing to take account of labor standards harms development in definite and measurable ways. Respect for basic human rights at work, and for the legal and regulatory structures necessary to give effect to them, helps workers, employers, and economies as a whole. It is essential for poverty reduction.

This does not mean that developing countries should be pushed to adopt a form of regulations and protections that will stifle flexibility, competitivity and growth. There are costs involved for all the actors that must be managed before the benefits become evident, but there are short-term as well as long-term gains to be made. The difficulty in practice is to find the appropriate level of regulation and protection in each case.

I remind you that this was the Asian Development Bank, little brother of the World Bank. The ADB, and the other regional development banks, are taking a far more positive attitude to the 'social' side of development economics these days, and even the World Bank is showing some signs in this direction. Other actors on the international stage are moving, sometimes slowly, towards the concept of a rights-based approach to development. Speaking here at this great university, it is appropriate to say that law and human rights are the foundations of what will make the new economy happen.

Let us come back to the concept of core labour standards. What are they, and why were they adopted? It is useful to review what has happened over the last few years.

The ILO was established in 1919 as one of the outcomes of the First World War, in the Peace Treaty that brought the War to an end. In 1914, before that conflict began, there had been a first globalizing economy, which bore striking resemblances on a smaller scale to the situation today. One of those resemblances was the low level of protection for many of the workers who were affected by globalization - production workers in particular, but this extended to all categories of working people. There were gross inequalities in both incomes and in protection, and a tendency in some countries to profit by giving workers low pay and small protection, in order to improve their competitive position. This was one of the main reasons for the World War, and had to be addressed in the Peace Conference that brought the War to an end. One of the fascinating things about that time is that workers' movements were reaching out to each other across enemy lines during World War I and planning what they would propose when the War was over.

The ILO therefore was created, as the sister organization of the League of Nations. While the League was purely intergovernmental, the ILO was conceived as a tripartite organization that united governments with representatives of workers and employers. Its essential purpose was, and remains, to create a system of labour standards applicable to the entire world. The ILO survived the Second World War with its mandate intact, and it was renewed by the Declaration of Philadelphia in 1944, expending the ILO's remit to look at the policies of all other international organizations as they affected the world of work.

After the end of the Cold War and the dismantling of opposing socio-economic blocks, for the first time since 1914 we returned to a virtually universal market economy, though of course a vastly larger one than existed at that earlier time - and with the crucial difference that this time the developing world is closely implicated in it. There was a relatively brief period in the early 1990s when the dominant expectation was that the combination of democracy and this universal market economy would by themselves create the growth opportunities that had been so lacking. The growth that materialized certainly was impressive in many places - but both within and between countries, it was very uneven. Some benefited, others did not; the position of many improved but others saw that the relatively secure position they had worked out for themselves and their children came under threat. This same situation operates within countries, as well as between countries - parts of some economies benefit while others lag far behind, and sometimes fall even further behind than before.

As the new universal market economy developed, it became clear that the old problems of poverty, lack of development, and defects of social justice, were still there. Not only had they not gone away; due to the increased transparency of the global economy, they were more visible than earlier. They could not be hidden, and they could not be justified by referring to cultural differences. A general consensus began to emerge that a rights-based approach to development should be pursued.

In fact, during the Asian financial crisis of the mid-1990s and the suffering it caused, ILO studies concluded that the crash had been much deeper and much longer than necessary, essentially because of the lack of standards of social protection for workers, for unemployment insurance and to regulate the conditions under which workers could be laid off. The cushion that had once been there in social structures had disappeared, and those States had done little to replace it with a social safety net.

In this new situation in the early 1990s, one of the ILO's basic Constitutional maxims became increasingly relevant in the new global context. As the Declaration of Philadelphia states: 'poverty anywhere constitutes a danger to prosperity everywhere'. It became necessary to rethink the basic principles on which social progress should be based.

By the time of its 75th anniversary in 1994, the ILO had become aware that it needed to review and update its mandate and its methods of work. World leaders and other thinkers were increasingly looking to the world of work as one that would be necessary to carry the world economy into the future, as the growing inequalities in the world economy were manifested in unequal distribution of incomes and in concentrations of highly-profitable companies in some countries, surrounded by seas of deepening poverty. International commercial undertakings began displacing governments as the most powerful economic entities in many countries, and began wielding a power never seen before. Regulatory structures that had kept national employers under control could not work on the world stage.

Why is the contribution of the ILO, and of international labor standards, important at this point? As already indicated, we believe that history has shown that it is important to adopt standards at the national level protecting workers' rights and regulating industrial relations, to accompany and sustain economies as they develop. Indeed, as this audience will recognize, the existence of a system of law itself is a crucial element in development. It is equally apparent that making this system apply across national borders is necessary now.

One of the conclusions the ILO has reached - and this one is shared by virtually the entire development community - is that there is a core of fundamental workers' rights that is essential to development. They are enabling standards, and if they are in place then the other rights that working people need can be put in place as a consequence.

I will note here that this is not easy for pure human rights theorists to accept. Prioritization of human rights is contrary to a basic tenet of modern human rights law. But that principle was formulated to state that civil and political rights do not take precedence over economic, social and cultural rights, and that there is a basic unity in human rights law. We have now absorbed that lesson sufficiently to be able to accept the need for prioritization, and that some rights have to be implemented before others can be realized.

It was not difficult to decide what these core standards were in the field of labour. The ILO had long considered that freedom of association and the right to collective bargaining; the abolition of forced labour; and non-discrimination in employment and occupation were basic to its mandate. In Copenhagen in March 1995, the World Summit for Social Development added the elimination of child labour to this list. It called on all countries to ratify the ILO Conventions that embody them, and stated that even those countries that had not ratified them should take action to respect their principles.

Around the same time, the Organisation for Economic Co-operation and Development (OECD) decided to base its first study on trade and labour standards (which came out in 1996) on this same short list of ILO standards. This OECD study concluded, among other things that respect for core labor standards did not have negative consequences for the economies and trade of developing countries. They did not find much of a positive effect either, but there are times when you take what you can get. And further work, such as the studies I mentioned earlier carried out by the ILO and the Asian Development Bank, have taken this conclusion into positive territory.

The next important step was taken by the Ministerial Meeting of the World Trade Organization, meeting in Singapore in December 1996. It reaffirmed the commitment to international labor standards, stating that they belong to the competence of the ILO, which should be supported in promoting them. Secondly, labor standards should not be used for protectionist purposes and particularly not for denying the comparative advantage of developing countries from lower wages.

This meant that a favourite cause of the anti-globalization movement, the so-called 'social clause', had no chance of being adopted in any international organization in the foreseeable future. Linking performance on labour standards to trade privileges is done in theory by the United States and the European Union, but neither applies the conditionality consistently, and neither has even fully defined what they mean. It remains a matter of unilateral imposition, and not a world-wide consensus.

In June 1998 the International Labour Conference adopted the Declaration on Fundamental Principles and Rights at Work, which includes the same list of four principles. Its acceptance by the Conference includes the affirmation that all Members, even if they have not ratified the Conventions in question, have an obligation arising from the very fact of membership in the Organization, to respect, to promote and to realize, in good faith and in accordance with the Constitution, the principles concerning the fundamental rights which are the subject of those Conventions. The ILO itself, in turn, has the obligation to assist these countries in meeting these obligations.

The Global Compact, which was proposed to the international business community by the Secretary-General of the United Nations in Davos, in early 1999, also adopted the four categories of this Declaration as its labor principles. This is part of the larger movement taking a promotional approach to the implementation of labour standards through mostly voluntary action by the business community, with the wider participation of civil society keeping business under surveillance. This additional element lends strength and depth to the long-standing international mandatory and supervisory approach, and is a vital supplement to it.

The voluntary and promotional approach represented by the Global Compact and the ILO Declaration, as well as the corporate responsibility movement more generally, led some to expect that the system of international law and supervision would be undercut. This does not, however, appear to be the case, even if definitions are fuzzy and enforcement a chancy matter. The ILO launched a campaign for the ratification of its fundamental Conventions immediately after the Copenhagen Summit in 1995. This campaign has now led to nearly 400 new ratifications of these eight Conventions, and most of them are now approaching universal ratification levels.

How does this counter the Seattle Syndrome? First of all, it is impossible to roll back globalization, even if this were desirable. It is well launched and will not go away. But if we cannot stop it, we also cannot allow the exploitation and exclusion of the poor to continue at these horrible levels.

Neo-classical economics of the kind that dominate the international financial institutions have not helped us in this effort. As Joseph Stiglitz said in a recent article, 'One of the great tricks (some might say insights) of neoclassical economics is to treat labour like any other factor of production.'1 But he points out that labour is unlike any other factor of production because it deals with human beings - the ILO stated this concept in its Constitution as 'Labour is not a commodity.' Prof. Stiglitz deals with the economic fallacy that perfect information will lead to perfect markets and prevent exploitation - but of course there are what he calls 'bargaining power asymmetries' that complicate this equation. Markets are not self-adjusting and efficient, but are human institutions that do not respond to expectations such as that. And if too little is paid for labour, then there will not simply be a readjustment of demand - children will starve, and go out and work, and will never gain the skills that will make them productive adults. There are more than 250 million children working around the world today, 125 million of them in the worst forms of child labour - slavery, prostitution, extremely dangerous jobs. Economic theories have not reduced this number - hard work, application of laws, and campaigns by governments and NGOs along with organizations like the ILO and the ADB, are the only things that make a difference. In short, what works for trading other goods does not work for the labour market.

The abuses against which people were demonstrating in Seattle are real ones, but the response is not to halt globalization. It must instead be to provide decent work - jobs with real content, and with real wages - to everyone. And this can only be done by applying a universal set of minimum rules to set a floor under conditions of work and exploitation.


Footnote:

1Stiglitz, Employment, social justice and well-being, International Labour Review, vol. 141 (2002), No. 1-2, page 10.


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