ANOTHER 130 BILLION FOR GREECE

The complete graph you can can find on the site of Eurostat.The General Government Gross debt of Greece is sky high. In 2010 it amounts already more than 140% of the Gross Domestic Product (GPD), followed by Italy with about 120%, Belgium, Ireland and Portugal have more than 90% . Even Germany is above 80%, more or less the avarage of the Eurozone. The question is, as always in economics, whether one has faith in the future of the country. Greece is not trusted anymore that it can pay its debt. Portugal is on the brink while Ireland has won back international confidence.

Now that Greece will receive another 130 billion Euros, after very tough negotiations, it is time to question what happened with the first 110 billion Euros that Greece received two years ago?

Everybody acknowledges, including the Greek authorities, that after the first 110 billion nothing has happened. The Greek minister of Interior Affairs, Tasos Giannitsis, himself said that the Greek Government has been waiting for two years for the money without doing anything. The Greek Minister for Economic development said it even more bluntly. Last month he acknowledged that some of the Ministers did not even bother to read the agreement with the Euro-countries and the IMF. An IMF spokesman observed that they never before had seen a country that did not comply with any of the requirements that were agreed, as Greece did.

What went wrong?

1.    The Government indeed increased taxes but Greeks started to buy everything on the black-market. The Greek tax-control-system was not able to counter this problem.

2.    It was agreed that thousands of public workers should be dismissed, but politicians were reluctant to do so while they have, for many years, been offering their voters these jobs. Besides that, the Greek constitution did, and does, not allow to dismiss public workers just like that. The only way to cut public jobs is to abolish the function with the result that the worker will be placed on a list of reserves which in practice means he will then get a kind of an early State-pension.

3.    The public administration is a disaster. There is a shortage of well-trained senior officials.

4.    The administration is still on paper which makes it easy for officials to manipulate cases and ask money from those citizens that need a permit, like, for example, when starting a shop. Corruption is a way of doing business in public services.

5.    It was agreed that state-enterprises would be privatized, but the trade unions succeeded to block this. The only action taken to this regards was the attraction of foreign investment to partake in some sectors. This was, however, not the sort of privatization that was agreed upon.

Nobody knows if this bail-out of 130 billion will be enough to guarantee that Greece will not go bankrupt. The Greek economy is severely damaged which means that the income of the State is still shrinking. The will most probably result in more money to be needed in the future. When this is not granted Greece will have to leave the Euro zone.

To make the economy work again it is therefore necessary to invest in new economic activities. Europe and the IMF should do everything possible to revitalize the Greek economy and to create jobs.

DUTCH CANDIDATE FOR THE POST OF ILO DIRECTOR GENERAL

Ad melkert, Dutch candidate for the post of ILO Dierctor General

 December last year the Dutch Government announced that it will present Mr. Ad Melkert (1956) as a candidate for the position of Director General of the ILO. The election for this position will take place during the 101^st Session of the International Labour Conference of the ILO (30 May – 15 June).

In an open letter with regards to the procedures for election the ILO states: “The process for the appointment of the Director-General will be conducted by the Governing Body in two phases. The first phase will take place on Friday, 30 March 2012, which is the last day of the 313th Session of the Governing Body, and will be dedicated to the hearings of candidates. The second phase will consist of a specially convened meeting of the Governing Body for the purpose of conducting the ballot for the election of the Director-General. It will be held on Monday, 28 May 2012, prior to the opening of the 101st Session of the Conference (May-June 2012).” Further to that, the candidates must be received in the office of the Chairperson of the Governing Body no later than 9 March 2012 (www.ilo.org).

During the nineteen-eighties I got to know Ad Melkert. First as a Member of the Latin-American Committee of the Dutch Labour Party PvdA, to which I introduced him (1982). This was on the recommendation of the president of CLAT Nederland, a solidarity association for the Latin-American Labour Movement CLAT. Sometimes we disagreed on certain political matters, for example on Sandinista Nicaragua where he chose for the political line of the Socialist International (worldwide organization of social democratic, socialist and labour parties) where I followed the policies of CLAT. However, at the end we shared the same democratic views and values.

We were both on the PvdA list of candidates running for the elections to become a Member of the European Parliament on the 14^th of June 1984. Neither of us was elected because we were listed on a low eligible position. 

It was under guidance of CGT secretary general Julio Roberto Gomez that we visited in Armenia a cooperative for social housing sponsored by the CGT. (1987)

Another three years later the both of us, together with Emiel Vervliet from the World Confederation of Labour – WCL, were involved in an evaluation-mission of the Colombian Trade Union Confederation CGT on behalf of the Dutch Organization for International Cooperation NOVIB (1987). By then he had already been Member of the Dutch Parliament for the PvdA for over a year.

It was in this period that he accepted the invitation to become a Member of the Advisory Council of CLAT Nederland which consisted of parliamentarians of different political parties and other prominent personalities. As a Foreign Affairs spokesperson for his party in parliament he closely followed what happened in Latin-America.

During our mission we paid a visit to Professor Frans Rosier (1918 - 1994), who had worked and lived already a long time in Colombia. Because of his work and his many social contacts, he was well aware of the social and political reality in Colombia. We met him in the surroundings of the city of Ibagué.

In the nineties his star rose fast in Dutch politics. He became the financial specialist of his fraction in the parliament and as such the right hand of the leader of the party, Wim Kok, former president of the Dutch Trade Union Confederation FNV. He also became Minister for Social Affairs and Employment in the first Government of Wim Kok (1994 – 1998).

In 1998 he was chosen as the leader of the party. Under his leadership the party lost 22 of the 45 seats in the national parliament during the elections of 2002. After this he left Dutch politics. 

International Career

In November 2002 Melkert was appointed as Executive Director of the World Bank. He stayed there until 2006. In April 2005 he was a serious candidate for the position of Administrator of the United Nations Development Programme (UNDP). It went to the Turkish economist and politician Kemel Dervis, however. Eventually, Melkert was appointed Associate Administrator of the UNDP in January 2006 . Then in 2009 Ad Melkert was appointed Special Representative of the Secretary-General of the United Nations in Iraq.

GOLDMAN SACHS AND THE GREEK CRISIS

Goldman Sachs, acryl on paper.

I had greater expectations of the Dutch TV documentary about Goldman Sachs and the downfall of Greece (Monday, February 13th), but the programme only relied on indirect evidence and contributions. Still very interesting but less so than when we had heard and seen persons directly involved such as Greek ministers and CEO’s of Goldman Sachs. Perhaps the time was not right yet! 

The TV documentary confirmed the image I already had of Goldman Sachs and the Greek affair. It is a very complex case that is difficult to summarize in all its aspects. For that reason I will merely give some impressions here. According to a financial economist and writer, Goldman Sachs is not looking for world power. In stead he compared the bank with a squid whose tentacles are around the globe and slowly sucks the world. Not directly a reassuring picture.

To indicate how strongly committed Goldman Sachs is to get the smartest people Microsoft boss Bill Gates was quoted. He was supposed to have said that his biggest competitor was Goldman Sachs, because it succeeds to attract the brightest people available on the labour-market. These so-called nerds, according to a former employee of Goldman Sachs, are only busy creating canny financial products without ever asking whether this will be social responsible products. The financial derivatives developed by them were compared with a pie from which the top and the bottom looks familiar, but inside there are products of which nobody knows in what way they were created and how they ultimately taste.

Of course, the wickedness of the bonus culture in banks was also raised. This makes that the corporate culture has detached itself from reality so that the question whether it is still humanly justified what you sell, is no longer a matter of debate. In The Netherlands, this corrupt corporate culture at banks became infamous for the selling of insurances that according to the Dutch Financial Markets Authority were too complex for the average citizen to comprehend. Additionally, these products were too expensive for their value and eventually they proved to be too costly to get rid of it. Finally, under pressure of potential lawsuits, some banks in The Netherlands offered settlements to tens of thousands of buyers of these insurances. 

If you want to believe in conspiracy theories you can accuse Goldman Sachs of such a global conspiracy with the aim to get all financial matters into one hand, which is their hand of course. For example, the new Italian Prime Minister Mario Monti and Mario Draghi, the new President of the European Central Bank, were former advisers from Goldman Sachs and could therefore be part of a global Goldman Sachs network. But it is not that simple. Italy is a democracy and the European Central Bank is controlled by the Central Banks of the countries in the Eurozone and the people in charge there have other loyalties than Goldman Sachs. 

The current Greek Finance Minister Evangelos Venizelos of the Social Democratic party PASOK. He gained national fame by his performance as a defender of Andreas Papandreou in a corruption trial. In 2004 he was Minister of Culture and Sport responsible for coordinating among other infrastructure and links with the Olympic Committee of the 2004 Olympic Games in Athens. He followed Giorgos Papaconstantinou on 17 June 2011 as Minister of Economic Affairs in the recasting of the Cabinet of Papandreou in connection with the great economic problems of Greece.

Finally the Greeks themselves or rather their political elite who has for years made a financial mess. For example, both left and right parties give public money and jobs to their voters. It is a political elite that, encouraged by the membership of the Eurozone, was able to continue play fair-weather with borrowed money without explaining to their people and their voters that someday the borrowed money should have to be paid back. They were addicted to credits and when a rearrangement of the Greek debt was needed, they asked Goldman Sachs for help. 

Goldman Sachs is anything but a Santa Claus, however, as everyone knows by common sense. But the problem with addicts is that they only see their own reality and unfortunately at that time EuroStat did not do anything to open their eyes. Thanks to Goldman Sachs the debt mountain could continue to grow more. At the same time Goldman Sachs was the only one that benefited, because it had hedged itself against the risks they understood but the Greek politicians did not. Now the price for their artificial prosperity has to be paid and the Greeks awaken rudely from the dream that their political leaders with other people's money had juggled out of their sleeves.

ILO: 600 MILLION JOBS NEEDED

As you can see in the picture, young people are very creative with little money to earn an income. (Veracruz, Mexico)

The ILO published its annual Report on Global Unemployment 2012. It is a report full of statistics nearly beyond our imagination. The ILO press release announcing the report starts with the conclusion that “the world faces the ‘urgent challenge’ of creating 600 million productive jobs over the next decade in order to generate sustainable growth and maintain social cohesion”.

400 million new jobs

The ILO report continues with such astronomical figures as “more than 400 million new jobs will be needed over the next decade to absorb the estimated 40 million growth of the labour force every year. In addition the report says that “the world faces the additional challenge of creating decent jobs for the estimated 900 million workers living with their families below the US$ 2 a day poverty line, mostly in developing countries.”

Youth unemployment

The report confirms the trend that youth aged between 15-24 are the most

affected by unemployment. An estimated 75 million young people are unemployed. Globally, young people are nearly three times as likely as adults to be unemployed.

Growing labour force

But not every outlook is just black. The report also concludes that “favourable economic conditions pushed job creation rates above labour force growth, thereby supporting domestic demand, in particular in larger emerging economies in Latin America and East Asia.”

This guy tries to earn an income with minimal investment by a diversion of a highway. (Mexico)

Labour productivity gap

Another positive sign is that “the labour productivity gap between the developed and the developing world  - an important indicator measuring the convergence of income levels across countries – has narrowed over the past two decades. But there is still a lot to do. Output per worker in the Developed economies and European region was US$ 72,900 in 2011 versus an average of US$ 13,600 in developing regions.

What should be done?

The ILO believes that the real job machine will be the private sector and therefore calls policy-makers to act “decisively and in coordinated fashion to reduce the fear and uncertainty that is hindering private investment.”

In a clear warning to be careful with measures to control the state debt crises, like is going on in the Eurozone, the report says “that in times of faltering demand further stimulus is important and this can be done in a way that does not put the sustainability of public finances at risk. The report calls for fiscal consolidation efforts to be carried out in a socially responsible manner, with growth and employment prospects as guiding principles.”

The balancing act of this artist can be seen as a metaphor for many people in developing countries balancing on the edge of poverty due to a shortage of well paid jobs.(Veracruz, Mexico)

It goes without saying that what will be a “socially responsible manner” , will be the subject of a political battle. Trade unions have to raise their voice in this political battle as to show that they are willing to contribute to a solution

You can find on the ILO site an animated infographic for the main findings of the report, a press release and a link for downloading the complete report in different languages.

WHY TRADE UNIONS IN RICH COUNTRIES ARE LOSING MEMBERS?

The  figure above and below are coming from the research document “Politics Matter, Changes in Unionization Rates in Rich Countries, 1960 – 2010 from the authors John Schmitt and Alexandra Mitukiewicz, November 2011 published by The Washington Office of the Centre for Economic and Policy Research CEPR.

 

Why trade unions in rich countries are losing members? If we look to the trade union membership in these 21 rich countries we see this trend reflected in the statistics since 1960 until today. (figure 11)

One of the several explanations for the decline of unionization is that ‘globalization’ and the technical advances embodied in the ‘new economy’ have made trade unions obsolete. However, if the decline in unionization is the inevitable response to the twin forces of globalization and technology, then we would expect unionization rates to follow a similar path in countries subjected to roughly similar levels of globalization and technology.  Instead we see over the last five decades a wide range of trends in union membership and collective bargaining, the core activity of trade unions.

Globalisation and technological change?

Union membership (the share of workers who are members of a union) fell in most of the rich economies, but losses varied substantially from country to country as shown in the figure above. Can these differences be explained by differences between levels of globalization and technical change of these countries? 

 

To get an answer on this question the authors compared trade union coverage (the share of workers in a country covered by collective agreements) with export and new technology rates. The authors concluded “Given that all of these countries were at approximately the same level of economic development and all were subjected to the same kinds of pressures from globalization and technological progress, the different trends apparent across the rich economies strongly suggest that more globalization and better technology do not inexorably lead to lower unionization rates.” (page 9)

The broad national political environment

If it is not ‘globalization’ or ‘technological changes’ what else could explain the observed variations in unionization trends? The authors look for an explanation to what they call ‘the broad national political environment’. They define this ‘broad political environment’ with help of a political typology used in the article “Is globalization undermining the welfare state”. ( Navarro, Vicente, John Schmitt and Javier Astudillo, Cambridge Journal of Economics, vol.28,no 1, 2004). The 21 rich countries are divided in “four broad political regimes”:

1.     “Social democratic” with the countries Denmark, Finland, Norway, and Sweden

2.      “continental market” : Austria, Belgium, France, Germany, Italy, the Netherlands, and Switzerland

3.      “liberal market,” by the 19th century and contemporary European usage of the term liberal: Australia, Canada, Ireland, Japan, New Zealand, United Kingdom, and United States

4.     “ex-dictatorships”: Greece, Portugal, Spain

Based on the analysis of the four country groups and the

decline of union membership and union coverage the authors conclude that " National political traditions established in the period 1946 through 1980 have a strong capacity to predict changes in unionization rates from 1980 to the present. Of course, our analysis cannot establish causality, but the data are consistent with the view that national politics are a major determinant of national unionization rates and changes in those rates in recent decades. At the same time, the data contradict the view that a decline in unionization rates is an inevitable implication of “globalization” or technological change.”

This is of course a very general conclusion that still does not explain for example the differences between the trends of unionization in two countries like Belgium and the Netherlands that share to a certain extend the same post war “broad political environment”, a combination of Christian and Social Democratic policy, more or less the same economical standard of living and that are both geographically small countries that since World War II are united in the Benelux together with Luxembourg.

Belgium and the Netherlands

However, trade union decline differs significantly between the two countries. While the Belgium trade unions lost only 2.2% of its members in the period 1960 – 2010, the Dutch trade unions lost 15.8%  or 7 times more than the Belgium trade unions. One of the explanations could be that in Belgium unemployment funds are administrated by the trade unions like in the Scandinavian countries, which is not the case in the Netherlands where unemployment funds are administrated by state institutions. The question is why in Belgium it was decided that public unemployment funds are administrated by trade unions and in the Netherlands this did not happen? 

Conclusion

Based on the examples of these two countries it is likely to conclude that trade union membership is linked directly to the functions trade unions have in the broad social field of a country. The less social functions trade unions have, the less they are needed  because people are protected socially by the national welfare state institutions. But there are still other factors that need to be investigated like for example the rule that only majority unions in an enterprise have the right to sign a collective agreement, or the closed shop system.