Labour and investments

Asbjørn Wahl

The history of the trade union movement is a history of struggle. Every step in the direction of better working conditions, better living conditions, better welfare, more democracy and social security has been achieved through confrontations and struggle. What the trade union movement has learnt during its history is that social development is not an effect of good intentions, but of power relations, of the balance of forces between labour and capital, between market forces and civil society.

We can learn a lot from our history in this regard. Let us go 120 years or so back in time. That was when workers started to organise in our part of the world. By means of trade union and political struggle, labour and trade union rights were gradually improved and formally institutionalised through labour laws and through agreements between trade unions and employers. What took place was a gradual shift of the balance of forces between labour and capital – in favour of labour. Labour market regulation was introduced and enforced as a result of the increasing power of organised labour.

However, the strength of labour was not only reflected in labour laws and regulations. Probably more important was the general taming of market forces. The power of capital was reduced in favour of politically elected bodies. Competition was dampened through political interventions in the market. Capital control was introduced and financial capital became strictly regulated. Through a strong expansion of the public sector and the welfare state, a great part of the economy was taken out of the market altogether and made subject to political decisions. It was this fundamental shift of power in society which made it possible to improve working conditions and trade union rights.

The welfare state as we know it in Western Europe is a product of this social struggle. It was built under the protection of capital control. Investors’ rights were delimited. Their rights had to be curbed in favour of governments’ increased power to intervene in the markets. It is a well-known and widely accepted fact that unrestricted market forces contribute to the concentration of wealth and resources. The regulation of investments was therefore a necessary precondition for increased democracy and an equal distribution of wealth. Capital control made it possible for governments to pursue a policy of national and social development without continually being confronted with capital’s exit strategies where big corporations threatened to flag out if their interests were hurt. Investment and capital were indeed regulated, and they were regulated in a way which restricted their rights in favour of democratically elected bodies.

This development culminated in the 1970s. Then, in the aftermath of a deep international economic crisis, market forces went on the offensive and the current era of neoliberalism started. What we have been facing over the last twenty years, is the abolition of capital control and fixed exchange rates, the deregulation and liberalisation of markets, the privatisation of public services, the increased use of competitive tendering and outsourcing, the downsizing of the workforce to the absolute minimum, and the consequent increasing labour intensity, and the flexibilisation of labour. In short, an immense shift in the balance of forces between labour and capital has taken place, and this time in favour of capital. This is the main reason for the brutalisation of work and the undermining of trade union and labour rights that we are now facing in the developed as well as in the developing world.

In this new world economic order we are told that there is a need for a rules-based system for investment at the international level. Immediately, this may sound sympathetic. However, under the current balance of forces, with corporate interests on the offensive, this rules-based system proves to cover a policy where regulations are imposed on governments, and not on investors. It is, in other words, not a question of regulation or non-regulation, but what kind of regulation, in whose interests and under which power relations. Therefore, completely contrary to what happened during the post WWII-period, international regulation of investments today means introducing restrictions on governments and increased rights to investors.

As a result of this development, violations of trade union and labour rights have been increasing over the last 10-15 years all over the world. A dominant part of the international trade union movement has responded to this situation by demanding minimum labour standards included in all kinds of international agreements and institutions and by multinational corporations. This is an illusive policy. Formal rules cannot balance the forces of increased marked power. The result will be further deterioration of working conditions. Good intentions represent very little power when they crash with the economic iron laws of market liberalism.

We must identify and attack the causes if we are going to improve working conditions and by that, the quality of life for working people. The undermining of working conditions is not happening first and foremost because there is a lack of formal labour standards. It is taking place in spite of relatively strict labour laws and regulations in many countries. It is mainly a question of power, and it cannot be changed only by formally introducing labour standards. Formal rules are, in other words, not enough.

I often use the following picture to illustrate this problem. To liberalise and deregulate the markets and by that give free hands to investors, and then think that you can protect the workers by introducing formal labour standards, are like opening the floodgates of the regulated waterfall and then forbid the water to fall. Truly, it is not a very productive exercise.

We can counteract this development only by limiting the power of the multinational companies, by regaining and strengthening democratic control of financial capital, by restricting the rights of investors, by fighting the neoliberal policies of the World Trade Organisation, the IMF, the World Bank, and our own governments.

The waves of speculation which we have experienced over the last ten years, indicate that further liberalisation of capital markets is not what is needed. On the contrary, we need more regulation and restriction of the free movement of capital. Investment agreements which strengthen investors at the cost of governments and democratically elected bodies must therefore be opposed. What we need are measures like the Tobin tax and different forms of capital control – rather than increased protection of investors.

These can be achieved only through a real social struggle, a struggle which empowers workers and strengthens trade unions, a struggle which is aimed at shifting the balance of forces between labour and capital. That means fighting neoliberal policies, fighting investment in the WTO, fighting a new MAI wherever they try to establish it – as a first priority. This is also the best way of protecting labour standards.

(Article in the Seattle to Brussels Network booklet, "Investment and competition negotiations in the WTO - What's wrong with it and what are the alternatives?, Brussels/Berlin, October 2002.)

The article is also available in French.