From the TUC

US politician urges IMF to back off on workers’ rights in Europe

13 Oct 2013, by in International

I’m always grateful to Global Unions Washington DC representative Peter Bakvis for the information he provides about the IMF and World Bank, known collectively as the International Financial Institutions (IFIs). This weekend he’s alerted IFI-watchers to the views of member of the House of Representatives Maxine Walters, the top Democrat member of the House Financial Services Committee.

Rep Walters used the opportunity of the annual IFI meetings on Friday to  strongly criticise the IMF’s push for labour market ‘flexibility’ in European and other countries:

“The IMF should not be re-writing the social compact in countries that recasts the balance of power between labor and capital.”    

She also expressed confidence that the World Bank would “permanently abolish” the “anti-worker aspects” of the Doing Business report, notably the controversial labour market flexibility indicator that was suspended in 2009. In other parts of the speech, Waters spoke of the need for the IFIs to address the issue of growing inequality and called for the establishment of a sovereign debt restructuring mechanism.

Her remarks on IMF involvement in the European debate on workers’ rights were trenchant:

The Fund doesn’t always strike the right balance between austerity and growth, which has had some very negative consequences. … For example, it’s difficult to understand why monetary economists at the IMF should intervene in a country’s labor market policies, particularly when they encourage labor market flexibility measures. Labor market flexibility is nothing more than a euphemism for measures that make it easier for firms to fire workers and dilute the power of unions to negotiate on behalf of workers.

On Doing Business, she said:

Another area where I’m optimistic we’ll see permanent change is in the World Bank’s annual Doing Business report, which ranks countries according to their attractiveness to business.

Several years ago, the Financial Services Committee learned that the Doing Business report included a labor index – the ‘Employing Workers Indicator’ – which downgraded countries in the rankings for any and all labor protections. This included factors such as having a minimum wage, maximum working hours, vacation days, or maternity leave. It was clear this had to change.

Another area of concern in the Report was its ‘Paying Taxes’ indicator – which gave countries a higher rating based on how close to zero their corporate tax rates were. In effect, this meant that the World Bank’s guidance to developing countries was to gut labor protections and shift the funding of all government functions to workers and households. Of course, this would make it more difficult to fund social safety net programs, build a middle class, or empower workers. This was odd advice for an organization supposedly devoted to ending poverty.

International labor groups such as the AFL-CIO, the Inter­national Trade Union Confederation, and the ILO all tried in vain to convince, shame, or bully the World Bank into eliminating the ‘Em­ploying Workers’ index.

After our Committee held a hearing on the subject several years ago, we made it clear to the World Bank that its funding could be very, very slow in moving forward through the committee until this problem was resolved. The outcome was that in 2009, the World Bank suspended the ‘Employing Workers’ indicator from the Doing Business rankings – and it created a working group to develop a new indicator to measure countries’ adherence to core labor standards.

I’m confident that the anti-worker aspects of the Report will soon be permanently abolished altogether. Not doing so would greatly undermine the Bank’s legitimacy and its relevance in the fight against global poverty.

Let’s hear it for Rep Walters. If a Democrat in the USA can see – and say – all this, why can’t European political leaders (with one or two honourable exceptions)?

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