GLOBAL UNIONS
SUBMISSION (13/2/09) TO THE COMMISSION OF EXPERTS OF THE
PRESIDENT OF THE UN GENERAL ASSEMBLY ON REFORMS OF THE
INTERNATIONAL MONETARY AND FINANCIAL SYSTEM
Theme 1: Financial Regulation
Broad Principles
Global Unions call for the establishment of a national and international regulatory architecture
that would ensure economic, social and environmental sustainability. This regulatory
framework should induce a shift away from financial markets’ short-termism and the primacy
of shareholders’ value and ensure that financial markets return to their primary function (i.e.
financing of the real economy). The regulatory framework should aim at limiting the negative
social and environmental impacts of financial activities and give incentives to achieve full,
decent employment and the transition to a low carbon economy.
Specific Principles
1.
Global Unions consider the following measures essential for regulating financial
markets:
Ensuring that central banks are publicly accountable for their actions, have governance
structures that allow for trade union views to be taken on board, incorporate the realisation of
full employment among their primary objectives, and have the necessary mandate to deter and
detect speculative financial bubbles;

Ensuring active supervision, proper counter-cyclical asset requirements and accounting
rules for banks and large financial conglomerates;

Prohibiting all forms of credit risk-related off-balance sheet transaction;

Submitting foreign investments and capital flows to proper domestic regulation, including
observance of internationally recognised governance and transparency standards;

Promoting community-based financial services such as cooperative and mutual systems
and targeted micro-finance schemes negotiated with national social partners;

Improving consumer protection so as to protect households against predatory lending and
aggressive sales policies by banks;

Enhancing the social purpose of pension schemes to provide decent retirement in both
pension funding and investment regulations;

Establishing an international regime for taxing financial transactions, the proceeds from
which could help support social and development objectives;

Regulating credit risk transfers, derivatives and futures and addressing the oligopolistic
structure of the credit rating agency industry, including by establishing public agencies and
developing non-financial sustainability rating;

Regulating private investment firms such as hedge funds and private equity, and
combating regulatory arbitrage within large financial groups and between jurisdictions;

Adopting controls to limit speculative behaviour in trade exchanges including
commodities and energy markets;

Curbing corporate short-termism by strengthening governance and tax rules on executive
compensation, board of directors’ responsibilities, risk management and distribution of
corporate profits;

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Tackling the loss of tax revenues resulting from the use of tax havens by ensuring that all
governments take the necessary steps to protect their revenue base, so as to offset expected
substantial reductions in corporate tax receipts resulting from the crisis in the real economy.
At multilateral level, this includes strengthening political support for the OECD’s work on the
transparency of tax havens;

Ensuring that public information is available on the nature of newly created financial
products (in addition to the information provided by public rating agencies);

Encouraging the inclusion of social and environmental indicators in investment decisions
by requesting annual information reports on non-financial issues;

Promoting the inclusion of the concept of sustainability in the notion of fiduciary
responsibility;

Promoting workers’ representation in pensions funds and (financial) companies’ boards
and ensuring they have a say in investment decisions;

Limiting leverage by ensuring respect for a minimum capital requirement;

Creating independent authorities to provide objective information on financial products
and contracts so as to reduce asymmetry of information on financial markets;

Internationally, ensuring that the regulatory framework protects developing countries
highly dependent on foreign capital against destabilising short term movements.

Theme 2: Multilateral Issues
Broad Principles
Global Unions believe that now is the time to reshape the global financial and economic
architecture through a new set of negotiations that go beyond the exchange rate regime
created at Bretton Woods in 1944. By reducing the role of the state and by promoting labour
market deregulation in the countries in which they were implemented, IMF policies and
programmes contributed significantly to the rise in inequalities worldwide, a major cause of
the current crisis. Furthermore the unbalanced governance structures of the IFIs made them
unable to carry out their supervisory role successfully and to warn against or prevent the
current crisis, and the IFIs do not have the credibility to determine the new financial
architecture, which should be designed through a consultative multilateral process including
representation of trade union organisations.
Specific Proposals
1.
Current arrangements for international financial regulation have been significantly
unsatisfactory. There is a need to review existing institutions for financial regulation,
economic policy supervision and development finance at the global level, with a view to
ensuring transparency, accountability and a clear relationship to the framework provided by
the United Nations and its General Assembly.
2.
Developing countries need support for their economic and social development and when
there are balance of payments difficulties, in which context the case for strengthening the role
of regional development banks should be considered. A broader number of currencies need to
be used as a reference point to reduce over-reliance on the dollar, in order to offset the cost of
exchange rate fluctuation born by borrowing countries. International institutions should
absorb a broader part of the fluctuation risks faced by borrowing developing countries with
regard to both interest and exchange rates.
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3.
Emerging economy and developing country governments must form a central part of the
new governance structure of the IFIs so as to prevent any country from having undue power
or a veto over the decision making process. In the case of the World Bank, whose mandate is
focused on developing countries, there is a need for a deep and systematic reform which must
result, at the very least, in parity of voting power between developing and industrialised
countries.
4.
Liberalisation of capital markets in developing countries should not be promoted by
international institutions as the risks of destabilisation for weaker economies are too high.
Both the World Bank and the IMF must put an end to the economic policy conditionality that
has characterised their interventions in developing countries over the past three decades. This
has minimised rather than strengthened the application of fiduciary controls and respect for
internationally agreed standards, including core labour standards. The deregulation,
liberalisation and privatisation conditionalities of the IFIs, in addition to interfering with
countries’ own policy choices, have frequently led to serious and damaging impacts.
5.
Financial support to countries with balance of payment deficits should protect
employment and social safety nets. It should be provided quickly to help boost demand, and
stimulate growth.
6.
The normative standards of the ILO, and notably core labour standards, must underpin
the new governance system. Governments must now encourage and rebuild the institutions
that help distribute income and wealth more fairly, as opposed to continuing to call for
deregulation of labour markets and dismantlement of workers’ protection. The worsening
economic situation, on top of the explosion in food prices over the past year, will further
accentuate income inequality and add to the deficit of decent work across the developing
world, which has already been identified by the ILO.
7.
There is a need for a new growth regime that – as was the case during the post-war
period until the early 1980s – ensures balanced real wage growth in line with productivity
increases. Fair responsible and progressive taxation neither facilitate the accrual of fortunes,
nor provide incentives for the pursuit of speculation, but rather contribute to growth. Wage
stagnation and the lack of purchasing power for working families are both a result of
damaging policies and themselves a major factor behind the fall in household savings and the
emergence of unsustainable debt that led to the mortgage crisis in many countries. Financial
deregulation allowed creditors to promote borrowing against home equity as a substitute for
income. Financial bubbles in asset prices, stimulated by excessive leverage and lax rules,
substituted for sustainable growth based on shared earnings.
8.
Whilst governments must lead the work, the debate must not be held between bankers
and finance ministry officials behind closed doors. Trade unions representing working
families across the globe – the victims of the current crisis – must be present at the table.
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Theme 3: Macroeconomic issues and addressing the crisis
Broad Principles
Recovery packages should be designed to redress the underlying fundamental economic
imbalances that have produced the current crises. These are notably the imbalance between
the US and other parts of the global economy, the imbalance between finance and the real
economy and the imbalance of bargaining power between workers and their employers. Those
economies that have surpluses should redirect them to supporting domestic consumption and
productive investment. Trade union rights should be fully respected and promoted so that
workers can improve their living standards.
A new approach to fiscal responsibility must accompany a global New Deal. The worst error
in the current circumstances would be to cut public sector budgets further. There must be a
renewed commitment to the provision of publicly financed, quality public services.
It is essential that recovery measures contribute to efforts to reduce greenhouse gas emissions
and to attaining greater carbon efficiency, and do not detract from those multilaterally
established objectives, thereby assisting in the obtention of an ambitious agreement at the UN
Conference of the Parties in Copenhagen in December 2009.
Specific Proposals
1.
Fiscal stabilisers such as unemployment benefit schemes must be strengthened and
supplemented by direct job creation schemes, where necessary. Fiscal stimuli should target
increases in aggregate demand of sufficient magnitude to revitalise the real economy:
employment, wage and household disposable income growth. Tax and expenditure measures
must be targeted at low and middle income families who are suffering most in the current
situation and who, having higher consumption rates, will feed this back into consumption,
production and hence employment most rapidly.
2.
While most industrialised countries have adopted various types of counter-cyclical
fiscal stimulus programmes, most developing countries are operating pro-cyclically, often
through no fault of their own but because they are pressured by the IFIs to practice "fiscal
discipline". The international community must be more supportive of recovery programmes
implemented by developing countries, which can prevent poverty from growing further and
accelerate the global recovery, and this requires increased financial assistance from IFIs and
donor countries. At a minimum, industrialised-country governments must fulfil the
commitments they made at the G8 Gleneagles Summit to increase the level of ODA.
3.
In developing and emerging countries, governments should counter economic
slowdown through monetary policy, by supporting job creation programmes and extending or
creating social safety nets. Macroeconomic policies are not gender neutral. Attention must be
paid to the disproportionate negative impacts of the crisis on women, and measures taken to
counter these, in the context of job creation programmes, social safety nets, and the provision
of social services. The IFIs must not repeat the errors of the Asian financial crisis a decade
ago by pressuring countries to increase interest rates, cutting back government spending and
allowing widespread bank failures – the opposite of what industrialised countries are doing
today. Instead developing countries should be encouraged to maintain levels of employment
and offer government assistance to the most vulnerable sectors of the population.
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4.
The international community must swiftly expand emergency loans through the IMF
and increase assistance from the World Bank and UN agencies to the many developing and
emerging countries that are likely to be in situations of balance-of-payments deficits because
of the financial crisis and continued high food and fuel prices. There must be no austerity
conditions attached to this support. Rather there should be ‘positive conditionality’, which
assists countries to restore short-term growth, fair distribution of costs and benefits and longterm sustainability.
5.
Similarly, the World Bank should give priority to projects that are employmentintensive, extend social safety nets to the majority of developing-country workers currently
without protection, and build up public services and infrastructure for sustainable growth.
Proposals have to be agreed with workers organisations in the countries concerned.
Governments must also agree emergency responses to the continuing food crisis, including
action to counter speculation in food markets and to extend emergency support to the poorest.
In the medium term, steps should be taken to expand sustainable food production and rebuild
buffer stocks. Beyond this, governments must, in the coming months, identify the steps to be
undertaken to ensure that they meet their commitments on ODA and the MDGs.
6.
Rethinking the responsibilities of both the private and public sectors must include
responsible resourcing of the public sector through fair taxation and a new commitment to
efficiency and the ethical value of quality public services, in which the organisations
representing public employees can play a key role.
7.
There is an urgent need to maintain and expand social protection, which will require
putting in place more progressive tax regimes and expanding social protection systems. It is
important to remember that, even as unemployment is predicted to increase sharply in 2009, a
majority of the world's workers do not have recourse to unemployment benefits when they
lose their jobs and most can rely only on their own savings or their family's support when they
reach old age.
8.
Restoring the public legitimacy of the world trading system and concluding the Doha
Round requires simultaneous progress on the enforcement of the protection of fundamental
workers’ rights through all international institutions, including the WTO, and on ensuring that
developing countries are able to achieve economic recovery, employment and future
industrial development.
Theme 4: Reforming the global financial architecture
Broad Principles
Global Unions agree that institutional reforms must go beyond financial regulation and
introduce sustainable economic management aimed at reducing the imbalances and
asymmetries in the global economy, as well as efficient and equitable allocation of resources
to the real economy, including for employment, decent work, social protection, and green
jobs.
Reforming the global financial architecture must be anchored in the right institutional
arrangements and principles that support the process in socially sustainable ways. Therefore,
reform of the institutions of global governance must go hand in hand with reform of the
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global financial architecture. Institutional arrangements must be inclusive and operate
democratically, allowing representative groupings of all countries to participate in the process
of finding solutions to restore sustainable economic growth with decent livelihoods for all.
Consultative mechanisms must be built into these governance arrangements, allowing for the
full participation of trade unions and other constituents of civil society.
Specific Proposals
1.
Global Unions support an enhanced role for the UN in the establishment of global
regulations. There is a need for policy coherence between the IFIs, WTO and UN institutions,
in particular as concerns the currently unequal importance given to employment creation (and
decent work) by the different institutions.
2.
Establishing better accountability and transparency mechanisms in financial and
international systems of governance and organisations is essential in order to coordinate
efforts in reducing the economic and social vulnerability caused by macroeconomic instability
and exacerbated by high food prices and climate change.
3.
At multilateral level, maximum use should be made of existing institutional
competencies in the financial, economic, trade, environment, development, human rights,
social and employment fields. The various multilateral institutions with mandates in these
fields must establish strong mechanisms of cooperation and collaboration, ensuring that
policy responses reinforce each other, in the interests of sustainable growth and development,
and not undermine each other. The process of reforming the institutions of global governance
therefore provides an opportunity to revamp policies with negative social impacts that have
served to exacerbate the crisis, such as the policy conditionalities of the IFIs, imposed capital
accounts liberalisation, privatisation of pension funds and the provision of social services, and
the liberalisation of trade in services.
4.
The United Nations and its specialised agencies in the social, development,
environmental, human rights, employment fields (ECOSOC, DCF, the Human Rights
Council, ILO, UNEP, UNDP, UNIFEM) should be central to institutional arrangements for
effective global governance to deliver social justice and a fair globalisation. They should form
the core of an Economic and Social Security Council that would be a convening authority to
bring the key global governance actors together, with a strong coordinating role, linking the
economic, financial and trading systems to policies for employment, development,
environmental sustainability, gender justice, and poverty eradication.
5.
Furthermore, in light of the overlapping nature of the various topics under discussion by
this Commission, reference is needed to the Global Unions responses above under Item I,
“Financial Regulation” and Item 2, “Multilateral Issues”.