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Breaking through on the Financial and Economic Crisis
Motion No. 4 Financial & Economic Crisis
The 3rd UNI World Congress adopts the following motion:
A. Responding to the Global Economic Crisis
In September 2008, the global financial system teetered on the brink of collapse. It took an unprecedented level of coordinated government intervention to avert a global economic catastrophe as central banks and national treasuries injected trillions of dollars of liquidity into the world’s banking systems, bailing out the banks and financial companies that caused the crisis. But even those steps were not enough to prevent the worst global recession since the Great Depression of the early 20th Century.
The 2007-2009 global economic crisis cost nearly 35 million workers their jobs and forced tens of millions of more workers to work part-time or leave the workforce altogether. According to a 2009 report from the ILO, it cast more than 100 million workers into absolute poverty. In countries like the U.S., the U.K, Ireland, Spain, Greece and Iceland, among others, the crisis resulted in millions of workers losing their homes, their pensions and the life savings. Developing countries dependent on trade and investment links with such industrialized countries suffered even more.
The root cause of the Global Economic crisis is the capitalist greed for super-profits. The global economic crisis was not an accident. It was not “a perfect storm” or a “100-year flood,” as many investment bankers and their political apologists claim. It was an avoidable man-made disaster that resulted from 30 years of “market fundamentalism” and misguided neo-liberal economic policies. These policies -- unencumbered “free trade” that subordinated the interests of workers to those of multinational corporations, deregulated capital markets, modifying the distribution of wealth to the detriment of salaries and compensating low salary levels by increased reliance on debt-financing to stimulate consumption and weakened trade union rights in both industrialized and developing countries – are responsible for the crisis.
The era of finance-dominated capitalism, in which regulators were disarmed and speculation was allowed to trump the careful allocation of capital investment, produced gaping inequality both internationally and within national boundaries. While unleashing greed and misconduct due to a lack of regulation and the failure of self regulation, it proved disastrous for workers in the real economy. Wages stagnated as the link between wage growth and productivity gains was broken by measures to weaken trade unions and “flexible” labour market policies served to shred job security and worsen working conditions, most significantly in developing countries. These policies, in conjunction with crisis and the millions of jobs that have been lost as a result, are excluding more and more workers from the labour market. This is leading to an increase in the informal economy, including in the rich countries.
This system, which is geared to maximising short-term financial gain, has also caused considerable environmental damage to the point of endangering the future of the planet and the very survival of its inhabitants.
On top of it all, the neoliberal model failed to deliver the macroeconomic goods. It created a wildly unstable global economy subject to damaging asset bubbles -- the 1980s’ thrift bank crisis (USA), the 1990s Asian financial crisis, the global dot.com equity boom and bust of the last decade, and the recent housing bubble in the USA and parts of Europe – and forced an unprecedented run up in the level of sovereign debt due to finance relentless tax cuts that only benefit the rich and endless finance sector bail outs.
Over the next four years, the international community must address the threat to social stability posed by the global jobs crisis and seek to repair the damage of 30 years of failed neo-liberal economic policy. UNI Global Union must participate in this effort. It must effectively advocate fundamental reforms to the global economic system to prevent future crises and, as the Global Union for finance workers, lead the campaign to transform the regulatory framework for the global finance sector in ways that will enhance the well-being and security of finance workers everywhere. The deterioration in public finances that this has caused is now being invoked by precisely those who want to break up the public services, our systems of social protection and all government measures that contribute to the well-being of the population.
The 3rd UNI World Congress gives top priority to the areas of work below:
· Beating the jobs crisis and transforming the global economy
· Transforming the financial system
· Putting workers at the core of the economic and financial system
Congress supports and welcomes the work of UNI Global Union at global and regional level as well as by the sectors, in particular UNI Finance.
B. Overcoming the crisis, transforming the global economy, winning more rights for workers
UNI Global Union and its trade union affiliates have a central role to play in fighting the global jobs crisis and creating a new, more just global economy by working with allies in the global labour movement and by organizing workers and campaigning to transform the rules and governance of the global economy. The new global economy must anchor growth in wage-financed consumption, public investment in green technology and infrastructure, poverty reduction and rising equality.
The 3rd UNI World Congress therefore pledges the following actions:
1 UNI Global Union and its affiliates will campaign to demand that governments and international institutions take concerted action over several years to overcome the global jobs crisis with an agenda to:
a) Sustain long term economic stimulus and job creation efforts in order to achieve full employment.
b) Invest in public works projects to create jobs quickly;
c) Support job training programs to assist young workers and women seeking access to decent work. This requires in particular the recognition of formal as well as informal qualifications and skills.
d) Develop action plans to implement the ILO Global Jobs Pact, with the participation of trade unions and employer organizations;
e) Provide support for the Millennium Development Goals (MDGs), with a focus on decent work and sustainable development in development assistance programs at the national and international levels, by investing in education and health care.
f) Campaign to fight and abolish child labour.
g) Support a ‘just transition’ towards a low carbon economy by creating ‘green economy’ jobs geared toward increasing energy efficiency, promoting renewable energy sources and reducing emissions of greenhouse gases in national and sub-national infrastructure systems.
h) Support the adoption of new indicators and macroeconomic control instruments in addition to GDP.
2 UNI Global Union and its affiliates will attack the rising tide of economic inequality and the declining share of income going to labour in most countries, as recognized by both the OECD in its 2008 Growing Unequal report and the World Bank in its annual World Development reports, and seek reforms to restore the link between wage growth and productivity: Specifically, UNI Global Union will:
a) Use its existing Global Framework Agreements with multinationals to help affiliates organize new groups of workers and seek to new GFAs where UNIO affiliates are active;
b) Promote the rights to organize and bargain collectively in all its activities with the World Bank, IMF, WTO, OECD and other international organizations;
c) Work within the Council of Global Unions with the ITUC and the other Global Unions to resist “labour market flexibilisation” and the spread of precarious work at the national level and international levels;
d) Pressure the IMF and World Bank to completely abandon regressive, anti-labour conditionality in their structural adjustment, project lending and country-level advise programmes, while encouraging positive developments in support of core labour standards in the IFI’s procurement and policy advice programmes; and
e) Expose and combat gender discrimination in pay and benefits and seek national and international commitments to promote equality for women in all aspects of employment.
f) Ask the IMF to set up a mechanism for the orderly restructuring of sovereign debt for those countries that are in default. The purpose of this mechanism is to allow governments to maintain essential services and citizens’ acquired social rights.
g) Condemn the macroeconomic imbalances that have been created by the fanatical worship of competitivity and social dumping.
h) Condemn the use of the crisis and public debt to launch an attack on the welfare state, and in particular on workers’ pensions and the retirement age.
3 UNI Global Union and its affiliates will promote improved social protection in the global economy and will see to it that existing systems are not weakened or subject to criteria of financial profitability by advocating the ILO’s “social protection floor,” which would establish a global minimum level of income security for all countries, extending unemployment insurance to all workers, ensuring a minimum wage for all and providing basic training and job placement services.
UNI Global Union and its affiliates demand more rights for workers and their organizations to influence the process of takeover or restructuring of companies.
4 UNI Global Union and its affiliates will promote a social dimension within the system of governance of the global economy to ensure that government and international institutions embrace ILO standards and policies and provide a role for trade unions in key decision-making bodies at the national and international levels. Specifically, UNI Global will:
a) Act to ensure the integration of core labour standards and the decent work agenda of the ILO into the work of the World Trade Organization, particularly in efforts to revive the Doha round and include core standards in the General Agreement on Trade in Services;
b) Promote trade union participation in policy development in the World Bank, the IMF, regional development banks and various UN organizations;
c) Endorse and promote a formal role for both the ILO and labour and employment ministers in the emerging G-20 Framework and the elaboration of the G-20’s Charter for Sustainable Economic Activity, while strengthening the emerging process of trade union consultation in the G-20’s activities; and
d) Support the development of a Memorandum of Understanding between the OECD and the ILO on issues related to the governance of the global economies and the activities of multinational companies.
5 UNI Global Union and its affiliates will ensure that all measures aimed at overcoming the financial and economic crisis as well as transforming the global economy respect and comply with the principles and goals set out in the 2005 UNESCO Convention on the Protection and Promotion of the Diversity of Cultural Expressions. All governments and international bodies are called upon to uphold the principles and goals set out in the convention, and to act in accordance with the duties and measures contained therein. This means in particular:
a) to promote a dialogue between the cultures in order to secure a broader and more balanced cultural exchange at the global level, with the aim to promote mutual respect for different cultures and the culture of peace;
b) to affirm the importance of the connection between culture and development for all countries, in particular developing countries, and to support measures at the national and international level that ensure that the true value of this link is recognised;
c) to adopt measures aimed at establishing and supporting public institutions in the most appropriate form and providing public financial support for them;
d) to adopt measures aimed at increasing respect for human rights and basic freedoms, such as freedom of speech, freedom of information and communication, as well as media diversity.
C. Transforming the Financial System
The pervasive lack of regulation and the failure of self regulation in national and international financial markets damaged the real economy and the situation of workers. Comprehensive transformation of the global financial architecture is essential to ensure that such a crisis cannot happen again and to restore the financial system to its appropriate role in support of the real economy – not the other way around.
The 3rd UNI World Congress pledges to pursue the following aims regarding the transformation of the financial system:
6 A strong, comprehensive and transparent framework of financial regulation and supervision needs to be created at national, regional and world level;
a) this framework should cover all financial products and players in the industry, include bank and insurance companies but also credit rating agencies, pension funds, hedge funds, private equity companies and sovereign wealth funds;
b) it should stop ‘regime shopping’ and ensure that rules are strictly enforced;
c) the launch of any new financial product must be preceded by an assessment and an authorisation by a supervisory body.
d) Recognising that central banks need to remain independent, UNI wishes to see greater democratic control exercised over central banks. Today’s monetary doctrine, with its focus on fighting inflation, has shown its limits. Control over monetary policy should be exercised by parliaments, but trade unions too should play a greater role vis-à-vis central banks.
7 The systemically relevant role of banks as financial intermediaries needs to be boosted, ring-fenced and safeguarded;
a) The safety of savings must be guaranteed by insulating commercial and retail operations from high risk, speculative activities by investment banks on the one hand, and on the other by the exercise of stricter control over banks’ market activities by subjecting them to certain regulations and even banning them entirely if the risk is considered to be too great or if controlling them is impossible.
b) The stand-alone capability of systemically important banks as financial intermediaries within a country should be ensured; this principle should set the framework and limits for foreign ownerships and ownership abroad as well as for off shoring of relevant operating and management functions or their integration across borders.
8 Regulators and supervisors, including central banks, should have the necessary independence to ensure that the public interest prevails, to resist the pressure from financial companies in the sectors concerned, and to have a long-term perspective. They must act in a transparent manner and be accountable for their actions.
9 Regulations should specify for top decision-makers in financial institutions, including pension funds, that fiduciary duties entail pursuing a long-term and sustainable business strategy and avoiding undue risk-taking and a focus on short-term profits.
10 Capital adequacy ratios should ensure that all loans and credit liabilities are backed by corresponding equity reflecting the level of risk. There should be a stop to excessive leverage by financial institutions. There must be full transparency on the liabilities of a financial institution at any time. A limit needs to be set on the use of leverage in excess of the level established by the national monetary authorities and international regulatory bodies.
11 Tax havens and unregulated offshore financial centres should be controlled efficiently, including effective and proportional sanctions on countries undermining proper regulation/supervision.
12 Credit rating agencies should be subject to regulatory and supervisory oversight; they should be independent and prohibited from providing consultancy services. Public credit rating agencies should be established; they could be linked to central banks.
13 The following practices for financial institutions should be prohibited and be made punishable: off-balance sheet transaction, trading with financial products that are not listed at a recognised stock exchange, financial transactions with companies and persons that are legally registered in tax havens or in countries with insufficient financial regulation and supervision.
14 Measures to increase financial stability and containing short-term financial and currency speculations, especially the introduction of a global financial transaction tax, in order to limit speculative financial transactions and thus the instability of financial markets. Banks must be encouraged to prioritise their loans for projects that hold out the promise of job creation and sustainable development. The involvement of the public authorities of each country in the financial sector would be a way of contributing to this goal.
The financial sector should be at the service of the economy, and not the other way round. Hence the need for far-reaching reforms that could include public initiatives, a public sector bank and public investment institutions, which meet strict, trustworthy and transparent management criteria, and which channel savings towards the investments necessary for switching our economies to a low-carbon economy (R&D, new technologies with low CO2 emissions, low energy consumption).
15 For a revision and an effective regulation and limitation of remunerations and incentive systems for managers and traders;
a) develop a stable remuneration system by increasing the fixed portion of the salary based on a real recognition of qualifications and skills. In particular, variable pay schemes should be kept at reasonable levels where it plays a secondary role, depend on the results of companies over several years and no longer be tied to the sale of high risk products and include claw-back provisions;
b) encourage socially responsible investments and strengthen the protection of workers who apply them;
c) prudent and risk-conscious behaviour should be encouraged, rather than short-term revenue generation and excessive risk-taking;
d) stock options should be eliminated as instrument of remuneration.
16 The provision of state aid and public bail-out programmes to financial institutions should follow similar conditions across countries. The fact that currencies are a public good and that banks, whatever their status, fulfil a mission of general interest justifies the fact that states may intervene to help financial institutions in difficulty, with measures that could include nationalisation. In addition to compliance with the principles that have been adopted for reforming the whole of the financial system, state intervention must be subject to the following rules:
a) in a market economy, losses must be borne by shareholders and investors.
b) the financial sector must contribute in an equitable and substantive manner to cover the totality of costs related to government measures taken in support of the banking system.
c) the respect of competition rules should not stand in the way of measures adopted to protect the public interest. However state aid provided should not have negative effects on competitor businesses, on other sectors or on other countries.
17 Further consolidation, not least as a response to the financial crisis, must not result in oligopolistic structures of private institutions that are too big to fail but also too big to be saved. Consolidation should not be a political objective in itself, but should bring clear benefits to the economy by stimulating growth and encouraging innovation.
D. Putting Workers at the Core of the Financial System
National and international regulatory reforms of the finance sector are essential. However, they will fail to protect the global economy without other internal changes in the way workers in financial institutions are treated. Finance employees, who are crucial to creating a sustainable, risk conscious and customer-oriented business model, must be empowered to do a good job. They must not be punished for the mistakes made by greedy executives or ineffective regulators. And they must be allowed to organize and bargain collectively to protect themselves and the global financial system.
The 3rd UNI World Congress pledges the following action:
18 Congress supports the work and policies of UNI Finance, in particular:
a) to ensure that the business model, internal operation procedures and actual practice in finance companies promote rather than hinder regulatory objectives, excellent customer services, not least in terms of remuneration, incentive systems, skills development and working conditions. To this end, regulatory and supervisory approaches for the finance industry as well as internal risk assessment in finance companies need to be adapted accordingly.
b) to work towards balanced representation of stakeholders, including UNI Global Union and its affiliates, in supervisory structures for the finance industry at national, regional and international level as well as in international colleges of supervisors for finance multinationals. Regular and meaningful exchange with trade unions provides a complementary means of checks and balance and an early warning mechanism for companies’ risk management and supervisors. Employees are in an exposed position to provide information about finance companies’ day-to-day practices and should therefore be used in this respect.
c) to engage with finance companies, together with other stakeholders, to agree a charter on responsible sale of financial products. This is based on UNI Finance’s model charter that sets out explicit, public and verifiable principles on sale of products and services as well as relevant working practices.
d) to work towards legislation protecting whistle blowers and establishing ombudsman systems that allow finance employees to report breaches of regulatory standards, regulation avoidance, undue risk taking and unsustainable business practices.
e) to fight for full transparency and comprehensive consultation of labour in government imposed restructuring processes, both by the respective companies and state agencies at all levels and in all countries affected. Labour standards and collective agreements must be respected.
f) to promote a diverse finance industry with small, medium and large, with local, national and multinational, with private, cooperative and public companies.
g) to further develop the UNI Finance G20 network of unions from the key countries in terms of the global financial system. Trade unions and employees have no confidence that this time bankers and finance ministers will get it right. It is essential that the voices of employees are heard. The purpose is to influence the reform process of the global financial system effectively by enhancing cooperation and action with affiliates at regional and global level.
19 Congress vows to intensify and coordinate international solidarity through mass struggles in the next Congress period.