Ahead of the G20 Leaders’ Summit in Pittsburgh, ACTU and ITUC President Sharan Burrow outlines the union movement’s plan for a stronger global economy.
What has changed in the 12 months since the collapse of the US investment bank Lehman Brothers?
A lot, and not much.
Certainly, there have been major changes for millions of working people across the globe who are the victims of a global financial collapse they did not cause.
But it seems for the big end of town its business as usual with news that outgoing Qantas CEO Geoff Dixon and Boral’s Rod Pearse are pocketing $15 million between them despite a big slump in their company’s fortunes.
What is the business case for these payouts?
Hearing that company bosses are still getting golden handshakes is a cruel blow to the 420,000 Australians who have lost their jobs or suffered cuts to hours of work in the past 12 months since the onset of the Global Financial Collapse.
The GFC was caused by greed, hubris, excess, and recklessness on Wall Street and other financial centres. These conditions had been created by years of light-handed regulation, or de-regulation, of financial markets and corporate governance.
The panic that followed Lehman Brothers’ collapse saw an unprecedented response by governments in the last few months of 2008.
The United States government alone spent $US175 billion bailing out the nine largest banks. Around the world, that immediate response – which included unprecedented nationalisation of leading banks – was soon followed by massive fiscal and monetary programs to stimulate domestic economies, and prevent the world sliding into a second Great Depression.
It is estimated that in 2009, the G20 nations will spend an extra $US692 billion on stimulus measures – about 1.1 per cent of global GDP.
In Australia, the Rudd Government has committed an initial $10 billion and then a further $42 billion (5.4 per cent of GDP) to its stimulus packages, with the result that, according to the OECD, up to 200,000 jobs have been saved.
Yet more than 200,000 jobs have been lost over the past 12 months, another 220,000 workers have had their hours cut, and the toll is still rising.
The International Labour Organisation says worldwide unemployment is likely to increase by up to 59 million by the end of the year, while more than 200 million workers could be pushed into extreme poverty. The OECD Employment outlook is equally bleak.
But, at the same time, not enough has changed to address the causes of the GFC.
The business culture of risk-taking in greedy pursuit of short-term gains and reckless behaviour that places long-term viability and job security in jeopardy must be reined in.
Why shouldn’t we be angry when the $US32.6 billion in bonuses paid to executives in the nine largest US banks in 2008 was enough to cancel the remaining debt of all Heavily Indebted Poor Countries or cover the gap in education costs for the poorest 68 countries for three years.
Sadly, it already seems that after a brief pause, many in the corporate world want a resumption of business as usual.
That is why this week’s summit of G20 leaders in Pittsburgh must re-commit to reforms that strengthen the economy and set us on a path to a more sustainable and equitable economic future.
There can be no return to the failed policies and flawed thinking that caused the GFC.
It is essential for the G20 to proceed with a comprehensive program that tackles unemployment, supports developing countries and reforms financial regulation and the system of global governance. We must build a new model for a balanced global economy, including real action on climate change to create a low-carbon world.
Those who argue that the recovery has begun are either naïve or self-interested.
The “green shoots” that have economists declaring recovery have been confined to stock markets and business confidence.
The true yardstick of a recovery in the real economy will be when jobs begin growing strongly again.
But the latest forecasts confirm high worldwide unemployment will extend well into at least 2011.
Unemployment is the largest single threat to recovery, and it would be dangerously premature to begin winding back stimulus measures. Indeed, it may be the case that some G20 countries must boost their stimulus programs until there are clear signs of recovery.
The reform process has only just begun, and the G20 leaders must not drop the ball on business regulation to prevent financial mismanagement and corporate excess or walk away from the job before it is done.
Global unions have proposed a comprehensive plan, which includes employment, ending tax and regulatory havens, clamping down on the ‘shadow’ financial economy, protecting working families against predatory lending, preventing asset bubbles and reducing leverage risks in private banking, and controlling executive remuneration.
In Australia there are 420,000 reasons why the regulatory reform must continue. Those who have lost their jobs or too many hours know all too well the costs of continued unemployment and underemployment.
There are tens of millions more like them around the world. I urge the G20 leaders not to let them down.