Many economists predict that the COVID-19 pandemic will produce the worst economic downturn since the Great Depression of the 1930s. Policies and the details of their implementation will not only determine if economic recovery is successful, but if that recovery accelerates or slows the achievement of the Sustainable Development Goals (SDGs), produces a fairer or less just world, boosts or erodes public services, and further endangers or protects our planet.
Three recent trade union publications have analysed the economic situation and policy scenario. In one paper, the Trade Union Advisory Committee (TUAC) to the Organisation for Economic Co-operation and Development (OECD) discusses economic recovery measures in the post-pandemic economic crisis. The two other publications, by the International Trade Union Confederation (ITUC), provide useful and relevant background policy arguments that focus on the International Monetary Fund (IMF) and the World Bank.
TUAC: Lessons to learn
In “ The global economy is in unchartered waters, but governments must also learn from the Great Recession”, John Evans, former TUAC General Secretary, argues that, although the current crisis is very different than the earlier one in 2008, which was precipitated by a failure of the banks, there are lessons to be learned from it.
The massive, coordinated investments in the economy, agreed by the G20 in 2008, were crucial to preventing an economic depression. Unfortunately, rather than continuing that approach, governments, also in a coordinated manner, imposed austerity programmes that slowed the recovery of employment and, in many cases, crippled vital public services. The rush from recovery to destructive policies left a legacy of greater inequality and poor economic performance. That is the starting point for this recovery, not only to overcome the impact of the virus, but of a legacy of bad economic policy. To achieve success in this economic crisis will require radical changes in policies as well as global coordination and massive solidarity.
ITUC: IMF and World Bank issues
The ITUC’s publications focus on the core values and evolving positions of the international financial institutions. “ The IMF’s Renewed Supply-Side Push: Four decades of structural adjustment and austerity conditionality” was written by Peter Bakvis, the former Director of the Washington, DC office of the International Confederation of Free Trade Unions (ICFTU)/Global Unions. He outlines the origins of the IMF and the World Bank, the “Bretton Woods” institutions, in 1944. They were charged with maintaining monetary cooperation, the balanced expansion of world trade, and “promotion and maintenance of high levels of employment and real income”. Both institutions were viewed positively in those first decades and were non-controversial.
IMF market liberalisation approach
This began to change in the late 1970s when IMF managers set out to promote market liberalisation, particularly in developing countries. That approach was later supported by major governments. What became known as the “Washington Consensus” fundamentally altered the founding mission of the organisation.
The IMF began to promote cutting budgets and public services, deregulation of business, the adoption of measures to attract foreign investment, privatisation and, later, public-private partnerships (PPPs). Deregulation proposals often included reductions in worker protections and violations of collective bargaining rights.
“Reforms” came both in the form of policy recommendations and conditions on loans. In other words, these reforms were, in effect, imposed on many governments.
Although this approach has largely not delivered in terms of generating economic activity and reducing budget deficits, failures often recognised in the IMF’s own reports, Bakvis provides many examples of how discredited approaches continue or are reborn. Given the decision-making role of major governments in the IMF, this failure is not just one of the Secretariat, but of misguided, but agreed, policies.
World Bank’s drive towards privatisation
The second ITUC paper focuses on the World Bank and was written by Lara Merling, Economic Research Officer of the ITUC, based in the Washington, DC, office. It is entitled “ Market Fundamentalism and the World Bank Group: from Structural Adjustment Programmes to Maximizing Finance for Development and Beyond”.
Merling describes the role of the World Bank in promoting and carrying out the Washington Consensus. She stresses that the Bank’s “Maximizing Finance for Development” approach, which is supposed to “deliver” by 2030 for the SDGs, is repackaging long-standing approaches to favour private investment, including through privatisation and PPPs. Health care and education are highlighted as areas where the Bank’s ideological focus on privatisation and PPPs has damaged vital public services, contradicted the SDGs, and hindered development, while aligning the bank with major multinational firms rather than furthering the public good.
Maintaining failed approach
Like Bakvis, she describes the failures of the World Bank approach, as reported in some of its own evaluations but shows that it, nevertheless, continues to follow the same path. The Bank has shifted some direct development aid to measures to encourage private investment. Its recommendations, while aiding investors, do not, on balance, stimulate development and often have dire consequences for workers and their trade unions.
EI: Economic recovery requires public investment and international solidarity
Education International’s General Secretary, David Edwards, has called for a “hands-on” economic recovery that builds a better world. “World leaders have failed, up until now, to effectively cooperate to provide the massive solidarity needed to meet the challenge of the pandemic,” he said. “That challenge includes rebuilding our global community so that it is fairer, greener, and more cohesive. Economic recovery requires public investment and international solidarity to fund effective, quality, and democratically controlled public services as well creating an enabling environment for human rights, good jobs and working conditions and social justice.”
Commitment to UN agencies
Dealing with the consequences of COVID-19 means that governments, rather than looking inwardly, should renew their commitment to the UN and its specialised agencies, especially the International Labour Organization, so that workers’ rights are not left on the side of the recovery road, said Edwards. “It also means that IMF and World Bank goals and actions need to reflect their original mission of stability, growth, and employment. We have been encouraged by international financial institutions (IFIs) support for massive investment to get the economy moving and willingness to abandon some persistent, dogma-driven failures by, for example, freezing aid to private, for-profit primary and secondary schools. However, that example also illustrates that the policies of the IFIs are not just positions of their Secretariats, but the responsibility of the governments that control them.”
Leadership must be assumed
The COVID-19 pandemic offers many lessons. “The question is whether those lessons have also been learned by the leaders of the world,” added Edwards. “This is the time to take responsibility, to lead, and to act. Leadership can neither be sub-contracted nor privatised. It must be assumed. We, as educators and trade unionists, are determined that those lessons will not be forgotten, but will serve as a source of wisdom, guidance, and hope for a better future.”