Relations with the International Financial Institutions
Evaluation and Recommendations 1998-2005*
Panel on: Politics of Participation in Economic Multilateral Institutions
Opportunities & Constraints
By Paul Nehru Tennassee
INTRODUCTION
This paper reviews the relations between the World Confederation of Labor (WCL)1 and the International Monetary Fund (IMF) and the World Bank Group (WBG). It supports the position that the relations with the IMF-WBG are necessary and useful for workers and their unions. It will also address the opportunities and constraints in influencing the policy process and policymakers. The WCL has successfully created a space in the International Financial Institutions (IFIs) for its members to dialogue, engage in policy debate and participate in capacity building. Unions do not only challenge the IFIs over industrial relations and labor market policies. The IFIs have not made any loans to developed countries over the last 25 years. Their “clients” are predominantly from the Global South while the “creditors” are from the Global North. The majority of the WCL affiliates are from the Global South and Tranistion Economy Countries. As such, the Labor’s contribution to nation-building, governance, poverty eradication and development continues to be a priority. Trade unions engage these global institutions because they design and implement labor market, governance and development policies that impact on their members and implicitly erode the sovereignty of nation-states.
In the opinion of trade unionists, the IMF and the WBG champion a neo-liberal model of globalization, popularly referred to as “The Washington Consensus,” that has generated very few benefits to workers, contributed to the expansion of the informal economy and escalting poverty. Labor contests the validity and effectiveness of the economic model, since its application has resulted in most countries where growth has occured in the Global South, to jobless growth and/or growth without development. Unions accuse these institutions of formulating and implementing policies that ignore International Labor Organization (ILO) Conventions. Consequently, workers’, trade unions’ and human rights are frequently violated. Trade unions also are aware of the governance deficits at the institutions. They advocate the reform of the IMF and the WBG and call for new economic, social, environmental and governance policies.
The relations between the WCL and the IMF-WBG (International Financial Institutions – IFIs) are very challenging. The IFIs have corporate structures while the WCL has democratic structures with 85 years experience working within the tripartite system of the ILO that is based on social dialogue. The trade unions as institutions have been in existence for over 150 years. Their mission at birth was defined as a commitment to end the poverty of working families, at first in Europe, and then globally. Labor reacted to the impact of global capitalism by articulating “workers of the world unite.” Additionally, unions throughout the world celebrated “May Day” as an activity of solidarity with international dimensions. Trade unions in the global north contributed significantly to the development of trade unionism in the global south.
In spite of the differences with the IFIs, trade unions have sought relations based on exchange of information, technical policy meetings/workshops, policy debate, capacity building and dialogue. The WCL leadership received a mandate to engage the IFIs at its Global Congresses.
EVOLUTION OF THE RELATIONS
The ACV-CSC (Christian Trade Union) of Belgium and the NAPFE of the USA, affiliates of the WCL, play a very important role in facilitating relations between the WCL and the IFSs. A former President of ACV-CSC, Jef Houthys, maintained contacts with the Belgian Executive Director at the IMF-WBG since the 1970s. His focus was on the role of multinational corporations and their impact on workers and unions. With the advent of structural adjustment programs and the debt crisis, WCL interest in the IFSs became more intense. Willy Peirens, President of WCL, who at the same time was the President of the ACV-CSC, visited Michel Camdessus, IMF Managing Director and recommended that relations with trade unions be established and requested a trade union economist be seconded to the IMF. The ACV-CSC obtained an annual fund /subsidy from the National Bank of Belgium to support trade union dialogue with the IFIs. This was possible because the Presidents of ACV-CSC hold a seat as a member of the Council of Regency at the National Bank.2 Carlos Custer, Secretary General of the WCL and Willy Peirens had meetings in Washington DC with officials of the IMF and WBG. They lobbied IMF Managing Director to advise his staff to consult trade unions in the countries when they do Article 4 and Program missions.
In November 1992, the IMF and WBG organized a seminar for labor union officials at the IMF headquarters in Washington DC. IMF Survey reported that it was part of ongoing efforts to improve contacts with the labor unions. Forty-five trade unionists were in attendance from 23 countries. They were affiliates of both the WCL and the International Confederation of Free Trade Unions (ICFTU). The subjects addressed were structural adjustment programs, external debt, roles of the public and private sectors in the economy, labor market and various social issues, trade and foreign aid, environmental, regional and development issues. Michel Camdessus, in his opening remarks at the seminar quoted article 1 of IMF Charter that included emphasis on the employment issue. Labor has championed the policy of full employment consistently. The Article 1 reads that the purpose of the IMF is: “to facilitate the expansion and balanced growth of international trade, and to contribute thereby to the promotion and maintenance of high levels of employment and real income and to the development of the productive resources of all members as primary objectives of economic policy.” The labor leaders were very critical of structural adjustment programs and requested that they be consulted when IMF-WBG staff and their governments formulate structural adjustment and “social safety-nets” programs. Subsequently, regional seminars were organized in Vienna and Harare. The focus was on the transition economy countries and the CFA devaluation in Africa. Both the WCL and the ICFTU participated.3 Funds were available for a CLAT/ORIT seminar in the Americas, but neither CLAT (WCL-LAC Affiliate) nor ORIT (ICFTU-Inter-Hemispheric Affiliates could agree on the conditions for organizing the event.
It was reported that after the regional seminars, IMF staff on country missions consulted some unions. Roberto Brauning, Deputy Division Chief in IMF Public Affairs Department, played an important role in promoting the seminars. He was fully supported by his superiors particularly Michel Camdessus. Officials within the IFIs who are committed to dialogue with unions advocate such a policy within the institutions with difficulties. However, support from the top leadership has been very important for Trade Union/IFIs relations to advance. In December 1997, Michel Camdessus in a speech entitled: “Making Globalization Work for Workers” addressed the 24th Congress of the WCL that was held in Bangkok, Thailand. He again engaged 50 leaders of the WCL in a three-hour debate at its Confederal Board Meeting in Washington DC in 1999.
In the latter part of the 1990s the IFIs interest in labor unions intensified especially around the time of the Asian crisis. In the opinion of WBG officials, the 1995 World Bank Development Report titled “Workers in an Integrating World” placed labor issues “centrally on the World Bank’s agenda than before.” In one of the Bank’s Press Backgrounder, it was reported “the World Bank supports labor standards, such as health and safety at work, the elimination of forced labor, the ending of discrimination, and the avoidance of harmful child labor. These are human development objectives, which the Bank addresses within its mandate of sustainable development and poverty reduction.”
On initial contacts with the IFIs, it was difficult for trade union leaders to meet James Wolfenshon, President of the WBG. He was more focused on NGOs. However, that changed around the time of the Asian Crisis. At a meeting with Trade union leaders, James Wolfenshon discovered that there was no one on his staff dealing with the labor unions. He advised the trade unions that the Social Protection Unit within the World Bank should be the “gateway” into the Bank. Subsequently, Robert Holzman, Director of Social Protection in the Human Development Network, was mandated to develop the relations with the unions and to hold the overall coordination of the Bank’s relationship with the international trade union movement. A Senior Economist, Gordon Betcherman, was contracted and his responsibilities included liaising with trade unions. Amy Luinstra was also recruited as a Labor Policy Specialist. The IMF had named Roberto Brauning as the point person to liaise with Labor. Later, he was replaced by Bassirou Sarr, followed by David Bell and Sofia Soromenho-Ramos.
The WCL elected a new Secretary General, Willy Thys, in 1996, and in 1999 Luc Corteebeeck was elected President of the ACV-CSC and Vice President of the WCL. The new leadership intensified relations with the IFIs. At WCL’s 1997 Congress in Bangkok, a resolution was approved to establish an office in Washington DC to liaise on a permanent basis with the IFIs. The WCL Washington Liaison Office (WCL-WLO) was formally established in June 1998 at the national headquarters of its US affiliate, the National Alliance of Postal and Federal Employees (NAPFE) in Washington DC. NAPFE and WCL shared the cost of the Liaison Office. Until 1998, Ronald Janssen, Head of ACV-CSC Research Department, based in Brussels liaised with the IFIs, on behalf of the WCL. Between 1998 and 2001, the WCL-WLO coordinated missions of trade union leaders to the IMF and the WBG from Asia, Africa, Latin American and the Caribbean and Eastern, Western and Central Europe. The WCL organized workshops before each mission to prepare the delegations for engagement with the IFSs. At the end of each mission, agreements were made to engage in seminars and workshops on policy issues. The delegates since 1998, had access to the Heads of the IFIs, Executive Directors and Senior Management and Staff. The WCL also participated as a member of TUAC (Trade Union Advisory Committee to the OECD) on their missions to the IFIs. In 2001, the IFIs recommended to the WCL and the ICFTU/Global Union Federations that there be joint (WCL-ICFTU/GUF) biannual missions and agreement on a work program of their respective staffs on policy issues in the intervening years. Both trade union internationals agreed, and since 2002, there has been joint missions and work programs.
ILO AND THE IFIs
The ILO and the IFIs embrace opposing philosophies. In 1944, the ILO in Philadelphia, affirmed the following basic principles that are enshrined in its Constitution: labor is not a commodity; freedom of expression and association are essential to sustained progress; poverty anywhere is a danger to prosperity everywhere; the war against want requires to be carried on with unrelenting vigor within each nation, and by continuous and concerted international effort in which the representatives of workers and employers, enjoying equal status with those of governments, join with them in free discussion and democratic decision with a view to the promotion of the common welfare. It also upholds the principle of the primacy of the social over economic policy goals. In expanding the ILO’s mandate, it reaffirmed “all national and international policies and measures, in particular those of an economic and financial character, should be judged in this light and accepted only in so far as they may be held to promote and not to hinder the achievement of this fundamental objective.”3
In spite of this fundamental difference with the IFIs, the former Director General of the ILO, Michel Hansenne, took initiatives to establish working relations with the Bank and the Fund. That relationship has been given continuity under the present Director General, Juan Somavia. The ongoing relationship with the ILO sensitized the IFIs’ leadership and staff to labor issues and trade unions. In 1987 the IFIs participated for the first time in a High Level Meeting on Employment and Structural Adjustment with government, trade union and employers as part of ILO Governing Body. It was not until 1995, however, that the ILO Director General was invited to the IMF Interim Committee Meeting. That said year, the World Bank and the ILO undertook a joint study on reforms in vocational education and training policy in developing and transition countries. Joint research was also done on export processing zones. There was an agreement to cooperate on child labor. Operationally, there was cooperation in War-to-Peace-Transition in Mozambique, Angola, Cambodia and Namibia. Both institutions shared data. The 1997 WBG/World Economic Indicators used ILO data. ILO staff also participated in a Bank sponsored training workshop on post-conflict reconstruction and social funds with a range of other donors and client country nationals.
The Asian crisis to an extent influenced a more consistent relationship with both the ILO and the trade unions. In 1998, the IFIs invited Michel Hansenne to make a presentation at their headquarters entitled: “Globalization, Liberalization and Social Justice.” In publicizing the event, the invitation highlighted the following: “the international financial crisis has dramatically demonstrated the importance of social dialogue and basic social justice as essential foundations for national and international economic liberalization. ILO Director General, Michel Hansenne, will describe the relevance of the new ILO Declaration on Fundamental Principles and Rights at work as a benchmark and framework to advance social stability and economic development.”
Hansenne emphasized in his speech the social costs of the Asian crisis and the loss of millions of jobs. He insisted that a commitment to social dialogue was key to deeper cooperation with the IFIs. He supported the inclusion of workers’ and employers’ organizations in formulating economic and social policies which he said “will bear rich dividends in terms of avoiding social unrest, especially in the context of economic crises and adapting to structural change.” He argued that the ILO and IFIs have a “common interest” in supporting workers right to collective bargaining and in “the formulation of economic and social policies.” He cited examples of such practice in the consultations with unions and other crisis-ridden Asian countries with the trade unions. Further, he added, the “impact of economic policies on employment creation should thus be a constant preoccupation.” He invited the IFIs to ensure that “economic policies are supportive of employment growth and of improvements in the quality of employment.”
On the subject of labor market reform, he clarified that the ILO “accepts this as an important area for policy analysis in many countries. But it does not accept that the only way forward is to aim for the dismantling of existing labor market regulations and systems of social protection. We would prefer to define the problem as one of finding the best possible compromise between the equally important objectives of labor market efficiency and social protection. A case in point was collaboration on the social consequences of the CFA currency devaluation in West Africa…. We also firmly believe that the most effective way for achieving workable and durable labor market reforms is through dialogue and a search for consensus.”
On this subject the Director General added: “It is no secret that we have on occasion had our differences with the Bretton Woods Institutions on this issue of labor market reform. But these differences can be narrowed through open debate based on empirical research on these issues in specific country contexts. Our respective research products and country-level experiences merit review by our counterparts so as to assess critically their quality and to find common ground and to register remaining divergencies. Some of this research could even be done jointly by our respective institutions. Similarly, there is room for intensifying contacts at the country level, for exchanging country information and analyses in our respective fields with a view to offering coherent advice and options to our constituents. These suggestions not only apply to labor market issues and to social dialogue but are equally relevant to the pursuit of fundamental labor standards and social protection…. For us in the ILO, this dialogue has been most promising and we are ready to play our active part to promote growth and social justice equitably” (4). This was a defining speech by the Director General of the ILO. It was comparable to a guidance note on ILO/IFIs relations. For the WCL, the spirit and substance of the speech continues to be relevant in the IFIs/Trade Union relations.
Since then, the present Director General of the ILO, Juan Somavia, has visited the IFIs often, attend the IMFC and Development Committee Meetings, publicly addressed the leaderhip, managements and staffs of the institutions. He also has emphasized the Decent Work Agenda and Core Labor Standards (CLS). As a matter of fact, he has popularized the concept of Decent Work similar to Kofi Annan’s poularization of the MDGs. It is widely known that Juan Somavia played a major role in the World Summit for Social Development which was held in Copenhagen in 1995. At that summit, 8 Global Development Goals were endorsed by Heads of States and Governments. One of those goals, missing in the MDGs, is jobs creation. It, however, should be noted that the ILO Office in Washington DC is still to fully develop its potential in lobbying the IFIs.
THE 1998 CONJUNCTURE
Prior to 1998, the relations between the IFIs and trade unions were sporadic. The Asian crisis was another factor that influenced more systematic relations between the IFIs and trade unions. Michel Camdessus in two speeches, WCL Congress in 1997 “Making Globalization Work For Workers” and at Seton Hall University in New Jersey “Addressing Concerns for the Poor and Social Justice in Debt Relief and Adjustment Programs”, spoke of the need to integrate social dimension into IMF policies. He proposed that even though the IMF is a “monetary and not a development institution it had to incorporate poverty concerns to the heart of its program design.” However, ultimately, he explained that he had to convince the inter-governmental membership of the IMF that the “goal must be high-quality growth.”
At the IMF-WBG Annual Meeting in 1998, the President of the WBG invoked the 8 Goals of the UN-World Summit For Social Development (WSSD) which was held in Copenhagen in 1995. Later, Michel Camdessus placed the 8 Goals on the seats of all the government delegates at that meeting. However, IFIs’ officials qualified their commitment to the social question by reminding all that support was contingent on countries sticking to the “fundamentals.” At that meeting, they also declared that they intended to provide more information to civil society and would be more flexible in aiding labor-intensive projects.
The Asian Crisis undermined the credibility and legitimacy of the IFIs. At the annual meeting, officials expressed fears that Brazil and Argentina that had scrupulously complied with the IFIs macro-economic fundamentals ran the risk of “infection.” The IMF recognized that its surveillance system was inadequate and had failed to foresee the crisis. At the said time, the IFIs blamed the East Asian governments for not implementing their policy advice in a timely manner. The scandal over the misuse of IFIs loans to Russia and crony capitalism in East Asia further added fuel to the “fire.” Short-term capital flows was also identified as one of the causal factors for the crisis. Consequently, IMF officials lobbied to obtain a modification of the rules to allow the institution to impose controls. There was stiff opposition and no change. Additionally, there were external pressures on the IFIs to merge or reform. However, officials of both institutions maintained that the two were different in nature and mandate.
Finally, the need for integrating the social dimension into IFIs’ policies was captured by the Development Committee in its October 5, 1998 communiqué which read: “Ministers noted that the primary role of the World Bank was to help eliminate poverty and improve social well-being, in line with international development goals. They therefore encouraged the World Bank to work with the United Nations, the Fund and other partners to develop general principles of good practice in structural and social policies (including labor standards).” The communiqué concluded, “To respond to this request, principles and good practices are also being prepared for fiscal transparency, monetary and financial policy, corporate governance, and other structural areas.” For the trade unions, this was a step in the right direction only if implementation will match the speeches and the communiqués.
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