[Congressional Record Volume 144, Number 10 (Wednesday, February 11, 1998)]
[Extensions of Remarks]
[Pages E150-E152]
From the Congressional Record Online through the Government Publishing Office [www.gpo.gov]


   SWEENEY AND BECKER ON THE RIGHTS AND ROLE OF LABOR IN THE GLOBAL 
                                ECONOMY

                                 ______
                                 

                          HON. JOHN J. LaFALCE

                              of new york

                    in the house of representatives

                      Wednesday, February 11, 1998

  Mr. LaFALCE. Mr. Speaker, as world attention has focused on the 
financial crisis in East Asia, we have failed to consider the role of 
labor in resolving the Asian economic turmoil. The plight of Asian 
workers--and by extension, U.S. workers has been addressed only 
secondarily. Government and institutional officials lament the impact 
of reduced budgets, higher interest rates, and other deflationary 
actions on nations' workers, but opine that there is no other choice. 
In the long run, they argue, all workers will be better off by having a 
sound economy.
  Mr. Speaker, this is old-fashioned thinking for a new age of 
globalization. Globalization means that we are all tied together. 
Governments, capitalists, financiers, and labor share economic problems 
and an economic future. We must either resolve our problems together or 
the problems will not be resolved. As the President of the AFL-CIO, 
John Sweeney, recently told participants at the World Economic Forum in 
Davos, Switzerland, ``If labor has no role, democracy has no future.'' 
Labor must be part of the solution.
  If we do not craft a global economy that allows all participants to 
benefit from growth, that ensures workers a voice in the economic 
architecture of the global economy, and that gives as much importance 
to the rights of labor as to the rights of capital, then globalization 
will not work. We will continue to fight economic crisis after economic 
crisis. And in the end, it will not be the financial fires that burn 
us--it will be the social and political flames that engulf us.
  There are steps to be taken. First, the United States must speak out 
forcefully and at every opportunity for the rights of workers. 
Internationally recognized labor rights are not onerous to observe. 
They are the core, basic human rights that the United States should 
promote and defend as the world's leading democracy.
  Second, the United States must actively commit to the Conventions of 
the International Labor Organization (ILO) by ratifying its core 
Conventions. There are now 181 Conventions. The United States has 
ratified 12, and only one--Convention 105 on forced labor--is 
considered a core Convention. Other core Conventions relate to rights 
of association, the right to organize and bargain collectively, minimum 
wage, and child labor. The U.S. should make ratification of all the 
core Conventions a top priority. The White House now has Convention 111 
under consideration that would prohibit discrimination in employment 
based on race, gender, religion, or national origin. The White House 
should send this Convention to the Senate for ratification as quickly 
as possible.
  Third, the United States should urge the International Monetary Fund 
to incorporate labor considerations and standards into its discussions 
and stabilization programs with member countries. A thriving, 
prosperous community of workers will translate to a thriving prosperous 
economy. If workers are left to bear the burdens of economic 
stabilization inequitably, then countries, companies, and investors 
will not achieve their stabilization objectives. Mr. Speaker, President 
John J. Sweeney of the AFL-CIO and President George Becker of the 
United Steelworkers of America made this case with eloquence and have 
advanced specific proposals. I wish to submit to the Record Mr. 
Sweeney's speech in Davos, Switzerland on January 31, 1998 and Mr. 
Becker's testimony before the Committee on Banking and Financial 
Services on February 3, 1998.

                      Comments by John J. Sweeney

       It is a privilege and a pleasure to address the World 
     Economic Forum, and to join the distinguished members of this 
     panel.
       Does labor have a role in defining the future? In the 
     United States, ask the opponents of the minimum wage. Or the 
     management of United Parcel Service. Or the proponents of 
     fast track trade accords that ignore labor rights and 
     environmental protections.
       Let us be very clear. If labor has no role, democracy has 
     no future. Social Justice does not ``compromise the 
     efficiency of the model.'' It is essential to its survival. 
     If this global economy cannot be made to work for working 
     people, it will rap a reaction that may make the Twentieth 
     Century seem tranquil by comparison.
       We meet at an historic turning--one that everyone in these 
     meetings must see. The long effort to build the global market 
     has succeeded. Capital and currencies have been de-regulated. 
     Great corporations have built global systems of production, 
     distribution, marketing. Barriers have been dismantled. 
     Technology's miracles are turning our world into one 
     neighborhood.
       But the turnoil affliction the Asian economics sounds a 
     dramatic alarm. The question now is not how to create the 
     global market, but how to put sensible boundaries on the 
     market that already exists. How to make the market work for 
     the majority and not simply for the few. In this new effort, 
     labor and other democratic citizen movements will and must 
     play a central role.
       Look around the world. Japan mired in recession, Asia in 
     crisis that China still faces. Russia plagued by a kind of 
     primitive, gangster capitalism, Europe stagnant. Africa 
     largely written off by global investors, Latin America 
     adrift.
       The US is hailed as the great ``model.'' Our prosperity is 
     unmatched; the dollar is strong; our budget balanced. 
     Unemployment and inflation are down and profits are up. But, 
     most working people in the United States today labor longer 
     and harder simply to hold their own. One in four children is 
     born to poverty. One in five workers goes without health 
     insurance. The blessings of prosperity have been largely 
     captured by the few. Inequality is at level so obscene that 
     New York investment houses this year warned executives not to 
     talk about the size of their bonuses.
       And now, the Asian nations are forced to export their 
     deflation to the U.S. Our annual trade deficit will soar 
     towards $300 billion. Over one million U.S. workers are 
     projected to lose their jobs. Wages, only now beginning to 
     recover, will once again be depressed. And this is the 
     ``model'' in the best of times.
       The current collapse calls into question not simply Asian 
     practices but the global system itself. As Korean President 
     Kim Dae Jung has said, authoritarian systems in Asian lived a 
     lie. But their crony capitalism was bankrolled by the 
     reckless high rollers of the global casino, including 
     Japanese, European and American banks and investment houses.
       The response to the crisis reveals the limit of the current 
     arrangement. Conservatives say let the market solve the 
     problem. But since the Great Depression no sensible 
     leadership would take that gamble. The IMF is called in to 
     stop the hemorrhaging. It bails out the speculators and 
     enforces austerity on the people. Its prescription reinforces 
     the very affliction it seeks to cure.
       Treasury Secretary Robert Rubin has wisely warned about the 
     ``moral hazard'' of bailing out profligate speculators and 
     banks.
       But too little has been said about the ``immoral hazard'' 
     of forcing working people across the world to pay the price--
     in lay-offs, declining wages and increasing insecurity.
       I have just returned from Mexico, which has been presented 
     as a ``successes'' for Asians to follow. There, speculators 
     and bond holders had their losses covered. But some two 
     million workers lost their jobs. The middle class has been 
     crushed. Wages lost over half their value. Environmental 
     poisoning is worse than ever. Political violence is 
     spreading. Crime is spiraling out of control. Few nations can 
     weather this form of success.
       This global system broadcasts its stark contrasts--of 
     untold wealth for the few and growing insecurity for the 
     many, of laws that protect property and expose people, of 
     liberated capital and repressed workers. The inequities are 
     indefensible ethically, but they are also unsustainable 
     economically--as U.S. Federal Reserve Chair Alan Greenspan 
     suggests with his warnings about deflation.
       I suggest to you that we must usher in a new era of reform. 
     One that seeks not more

[[Page E151]]

     de-regulation, but greater accountability. Not further 
     unleashing of speculative capital, but channeling of real 
     investment. Not greater license for corporations, but 
     empowerment of workers and citizens.
       Labor, environmental, and democratic citizen movements are 
     already struggling to define this new internationalism in 
     practice and in policy. At the AFO-CIO, we are building 
     stronger working relations with unions across the world. We 
     fight to defend labor rights at home and abroad. We are 
     uniting with other citizen movements to struggle for basic 
     environmental, consumer and civil rights. We will demand 
     coordinated efforts to stimulate growth, to regulate currency 
     and capital speculation, to extend labor and democratic 
     rights as part of the response to the Asian collapse.
       At the beginning of this century, the industrial revolution 
     created new promise and glaring inequities. It took many 
     decades--and revolutions, wars and a Great Depression--to 
     elaborate the protections that saved that system from itself. 
     Now at the beginning of the 21st century, the global economy 
     poses the same challenge. Let us hope we need not relive the 
     horrors of the past to reach its promise for the future.
                                  ____


                       Testimony of George Becker

       Mr. Chairman and Members of the Committee: My name is 
     George Becker, and I am president of the United Steelworkers 
     of America and chairman of the Economic Policy Committee of 
     the Executive council of the AFL-CIO. I appreciate the 
     opportunity to be here today on behalf of the thirteen 
     million working men and women of the AFL-CIO. We in the labor 
     movement are well aware that the financial crisis now roaring 
     through east Asia will have profound consequences for working 
     people all over the world. We stand in solidarity with the 
     working people of Asia to urge the International Monetary 
     Fund (IMF) and the U.S. Congress to put the interests of 
     workers and communities at the top of their priority list as 
     they take steps to address this crisis--not at the bottom, 
     after the bankers, financiers, and multinational businesses 
     have been taken care of.
       Deep currency devaluations, in conjunction with austerity 
     programs, will cut wages and purchasing power in South Korea, 
     Indonesia, and Thailand. The United States will be pressured 
     to act as importer-of-last-resort, absorbing cheap Asian 
     goods while at the same time Asian markets for our exports 
     dwindle.
       In the aftermath of the crisis, the U.S. trade deficit is 
     projected to grow by about $100 billion in 1998, resulting in 
     a loss of approximately 1 million jobs (or potential jobs), 
     most of them in the better-paying manufacturing sector. Job 
     losses will be heavily concentrated in industries such as 
     steel, electronics, apparel, and automobiles, in which east 
     Asia is a large producer. Buyers in these key industries are 
     enormously price sensitive. Export-intensive industries such 
     as aircraft and capital goods will also suffer. Boeing is 
     already reporting that Garuda Airlines of Indonesia has 
     delayed taking delivery of six jets. If the crisis worsens, 
     China will certainly reduce others.
       Without fundamental changes in the structure of 
     international financial markets and the institutions that 
     regulate these markets, we can expect continued volatility 
     and future crises of growing severity. The present moment of 
     crisis is the time to press for necessary changes in the 
     international financial system, particularly in the 
     conditions imposed by the IMF in exchange for the 
     ``bailouts'' it gives to countries that have exhausted all 
     other sources of credit. The United States should condition 
     further contributions to the IMF on fundamental changes in 
     the IMF's program.
       The clout and leverage exercised by the IMF must serve a 
     broad set of social and economic goals. Currently, the IMF 
     defines its mission narrowly, as protecting the interests of 
     international capital. The IMF requires debtor governments to 
     raise interest rates, cut public spending, deregulate 
     financial markets, and weaken labor laws to facilitate 
     massive layoffs and deep wage cuts. These terms may solve 
     some short-term credibility problems with foreign investors, 
     but will necessarily exacerbate the tensions, inequality, and 
     instability of the global economy. Such policies are short-
     sighted and must be fundamentally altered.
       The United States, which is the single largest contributor 
     to the IMF, must use every means at its disposal, both formal 
     and informal, to change the way the IMF operates. The AFL-CIO 
     will support members of congress in efforts to assure that 
     IMF programs reflect the following principles:
       1. Commitment to and vigorous enforcement of international 
     labor and human rights. Countries that receive IMF funds must 
     commit themselves, in an enforceable way, to respect for 
     internationally recognized worker rights. If necessary, this 
     would involve modification of laws and practice to comply 
     with ILO standards and human rights. These commitments must 
     ensure that governments will protect workers' rights, even 
     during times of crisis. Strong and independent labor unions 
     play a crucial and irreplaceable role in assuring that the 
     benefits of economic expansion are equitably distributed.
       Some Administration spokespeople have argued that it is 
     impossible to introduce worker rights conditionality in the 
     context of emergency bailouts, given the short timeframe and 
     the many other demands being put forth. We disagree. In any 
     case, however, time pressures do not prevent the IMF from 
     taking such action with respect to the seventy or so 
     countries not in immediate crisis that are also receiving IMF 
     funding. We realize that implementing such provisions cannot 
     be accomplished unilaterally by the United States, but 
     representatives of the U.S. government need to declare 
     publicly that this is a policy we are seeking to achieve. 
     This need to be consistently reinforced by all relevant U.S. 
     government agencies.
       The Sanders-Frank Amendment, enacted by Congress in 1994, 
     requires that the U.S. Executive Directors to the 
     international financial institutions (including the IMF and 
     World Bank, among others) use the ``voice and vote of the 
     United States'' to urge these institutions to encourage 
     borrowing countries to guarantee internationally recognized 
     worker rights. Our experience to date with this law has been 
     disappointing. Nowhere in the IMF program for Indonesia, for 
     example, are worker rights given even a cursory mention. Yet, 
     in principle, with a contribution of 18 percent of the IMF's 
     quotas, the United States could, if it so chose, effectively 
     veto any loan package (IMF rules require 85 percent agreement 
     on most decisions).
       In addition to using our voice and vote at the IMF to this 
     end, the U.S. government can and should act to garner support 
     for such a move from our trading partners, especially in 
     Europe. It would be useful to consult with the new 
     governments of France and Britain, in particular, to develop 
     a joint strategy, that would be more effective than 
     independent action on the part of the United States.
       We encourage the U.S. government to continue its efforts to 
     bring the ILO into a more central role in the development of 
     structural adjustment packages. Incorporating labor standards 
     and social safety nets in the IMF program will produce an 
     adjustment program that is more equitable, more successful 
     and more sustainable, as has been shown in the case of the 
     Czech Republic. A more balanced program will ensure that IMF 
     demands for labor market flexibility (often functionally 
     equivalent to weakening labor unions) are consistent with 
     core labor rights.
       Finally, the imprisonment of Muchtar Pakpahan in Indonesia 
     continues to serve as an egregious and glaring example of the 
     IMF's and the U.S. government's indifference toward worker 
     rights. If it is possible for the IMF to recommend 
     dismantling Korean labor law as a condition of emergency 
     loans, then surely it is possible for the IMF to use its 
     extraordinary leverage to force the Indonesian government to 
     free this courageous and suffering man. Mr. Pakpahan's only 
     crime is to have worked toward building independent labor 
     unions. His health continues to be precarious, and his 
     medical care continues to be extremely inadequate. U.S. 
     government officials who have visited Indonesia recently have 
     failed to make any public statements advocating the release 
     of Mr. Pakpahan. Whatever private communications that may 
     have taken place, if any, have failed to yield results. The 
     release of Muchtar Pakpahan would be a symbolic, but 
     important, step toward recognition of how integral the 
     improvement of labor rights is to the current situation. It 
     would also be a positive statement to Indonesian workers that 
     welcome changes are occurring.
       2. Domestic economic growth and development, not austerity 
     and export-led growth. The model that led to this crisis 
     glorifies export expansion as the preferred development path. 
     This model leads to destructive, low-road international 
     competition and worker impoverishment and is ultimately 
     unsustainable, as the current crisis demonstrates. The United 
     States has neither the capacity nor the will to absorb 
     unlimited exports; thus, the rescue plan for east Asia must 
     not rely exclusively on this premise. The U.S., Europe, and 
     Japan must work together to stimulate domestic demand in the 
     developing economies and avert a dangerous tendency toward 
     global deflation.
       3. Reduction in the volume of destabilizing capital flows. 
     Over the long run, it is essential that policies to regulate 
     short-term borrowing and to dampen speculative flows of 
     capital be implemented. There are three structural dimensions 
     to the crisis. They concern the interaction of exchange 
     rates, foreign portfolio investment, and foreign currency 
     denominated lending. All three dimensions need to be 
     addressed.
       First, the existing system is unstable and vulnerable to 
     speculative exchange rate movements. A small ``Tobin'' 
     transactions tax on foreign exchange dealings would 
     discourage speculatively induced collapses. It would be 
     sufficiently large to penalize speculative trading, but not 
     so large as to deter long-term investors.
       Second, foreign portfolio investment is extremely sensitive 
     to exchange rate movements. The natural mechanism to slow 
     such flows are ``speed bumps,'' whereby investors commit to a 
     minimum stay when they bring money in. Speed bumps stop 
     sudden outflows because investors cannot withdraw their money 
     at will. This has the beneficial effect of forcing investors 
     to consider risk carefully before committing money.
       The third element of the crisis concerns foreign currency 
     denominated loans. Many countries cannot borrow in their own 
     currency, and are therefore exposed to increases in debt 
     burdens resulting from foreign exchange fluctuations. Since 
     it is costly to ``hedge,'' or pay a small fee to ensure 
     against currency loss, borrowers often choose not to

[[Page E152]]

     do so. Monetary authorities should require lenders to hedge 
     their foreign country loans. This is equivalent, in a rough 
     sense, to requiring international deposit insurance. This 
     will cause the cost of credit to rise. However, the risk is 
     there, and it needs to be priced in. Credit should not be 
     subsidized through the provision of bail-outs paid for by 
     taxpayers.
       4. Transparency and broader participation in determining 
     IMF policy. The IMF must consult regularly with labor unions 
     and other broad-based organizations, not just with business 
     and financial institutions, in the development of structural 
     adjustment programs and emergency loan packages. Program 
     documents should be made publicly available. By recognizing 
     that workers must be included in developing a response to 
     economic crisis, the tripartite commission (including 
     representatives of labor, business, and government) 
     established in South Korea is a promising step.
       5. Ensure that speculators pay their fair share. The banks, 
     corporations, and individuals who profited from risky 
     investments during good times must not be shielded from 
     losses during downturns. Banks must reschedule their debts 
     with longer maturities and at appropriate terms, ensuring 
     that financial losses fall on those who made poor decisions. 
     This must be an explicit and widely understood condition for 
     future IMF funding, as well. Asian and American workers and 
     taxpayers must not be asked to foot the bill for a party to 
     which they were not invited.
       In his testimony before this committee on January 30, 
     Secretary of the Treasury Robert Rubin argued that forcing 
     investors and creditors to take losses involuntarily would 
     ``risk serious adverse consequences.'' He cited three 
     reasons, none of which is entirely convincing. He argued that 
     forcing losses could cause banks to pull money out of the 
     country involved. Yet, banks are already pulling what money 
     they can out of these countries. He raised the concern that 
     such actions would reduce the nation's ability to access new 
     sources of private capital. This was not, however, the 
     experience of the 1980s, when banks did return to markets 
     (such as Brazil) where they had been forced to accept reduced 
     payments on their loans--after stability had returned. Third, 
     Secretary Rubin argued, the ``most troubling'' issue was that 
     this could cause banks to ``pull back'' from other emerging 
     markets. But is not a central cause of this problem that 
     banks have loaned excessively and imprudently in these 
     emerging markets? It should be considered an advantage if a 
     policy change causes banks to act more cautiously in the 
     future.
       Even if we move toward reform of the international 
     financial system, concrete steps must be taken to stop the 
     destabilizing flood of cheapened imports which have already 
     been unleashed by this crisis. Strategic intervention by the 
     United States and Japan could help the embattled currencies 
     of Indonesia, Thailand, and South Korea stablize and regain 
     some of their lost value. In the United States, steel, 
     autos, electronics, apparel, and other threatened 
     industries face an immediate threat which requires 
     specific trade actions to maintain import shares 
     consistent with 1997 levels in order to protect the jobs 
     of these workers.


                         ASIAN FINANCIAL CRISIS

       The financial crisis now roaring through east Asia will 
     have profound consequences for working people all over the 
     world. Deep currency devaluations, in conjunction with 
     austerity programs, will cut wages and purchasing power in 
     South Korea, Indonesia, and Thailand. The United States will 
     be pressured to act as importer-of-last-resort, absorbing 
     cheap Asian goods while at the same time Asian markets for 
     our exports dwindle.
       In the aftermath of the crisis, the U.S. trade deficit is 
     projected to grow by about $100 billion in 1998, resulting in 
     a loss of approximately 1 million jobs (or potential jobs), 
     most of them in the better-paying manufacturing sector.
       Without fundamental changes in the structure of 
     international financial markets and the institutions that 
     regulate these markets, we can expect continued volatility 
     and future crises of growing severity. The present moment of 
     crisis is the time to press for necessary changes in the 
     international financial system, particularly in the 
     conditions imposed by the International Monetary Fund (IMF) 
     in exchange for the ``bailouts'' it gives to countries that 
     have exhausted all other sources of credit. The United States 
     should condition further contributions to the IMF on 
     fundamental changes in the IMF's program.
       The clout and leverage exercised by the IMF must serve a 
     broader set of social and economic goals. Currently, the IMF 
     defines its mission narrowly, as protecting the interests of 
     international capital. The IMF requires debtor governments to 
     raise interest rates, cut public spending, deregulate 
     financial markets, and weaken labor laws to facilitate 
     massive layoffs and deep wage cuts. These terms may solve 
     some short-term credibility problems with foreign investors, 
     but will necessarily exacerbate the tensions, inequality, and 
     instability of the global economy. Such policies are short-
     sighted and must be fundamentally altered.
       The United States, which is the single largest contributor 
     to the IMF, must use every means at its disposal, both formal 
     and informal, to change the way the IMF operates. The AFL-CIO 
     will support members of Congress in efforts to assure that 
     IMF programs reflect the following principles:
       1. Commitment to and vigorous enforcement of international 
     labor and human rights. Countries that receive IMF funds must 
     commit themselves, in an enforceable way, to respect for 
     internationally recognized worker rights. If necessary, this 
     would involve modification of laws and practice to comply 
     with ILO standards and human rights. These commitments must 
     ensure that governments will protect workers' rights, even 
     during times of crisis. Strong and independent labor unions 
     play a crucial and irreplaceable role in assuring that the 
     benefits of economic expansion are equitably distributed.
       2. Domestic economic growth and development, not austerity 
     and export-led growth. The model that led to this crisis 
     glorifies export expansion as the preferred development path. 
     This model leads to destructive, low-road international 
     competition and worker impoverishment and must be reversed. 
     The United States, Europe, and Japan must work together to 
     stimulate domestic demand in the developing economies and 
     avert a dangerous tendency toward global deflation.
       3. Political and economic democracy. Without a strong and 
     vibrant civil society, there is no counterweight to crony 
     capitalism and no accountability for governments.
       4. Reduction in the volume of destabilizing capital flows. 
     Policies to regulate short-term borrowing and to dampen 
     speculative flows of capital must be implemented.
       5. Stabilization of exchange rates at levels closer to 
     their pre-crisis values. The excessive devaluations caused by 
     the loss of confidence in the East Asian currencies should be 
     reversed. This is essential to blunt the negative impact of 
     the crisis on American workers.
       6. Transparency and broader participation in determining 
     IMF policy. The IMF must consult regularly with labor unions 
     and other broad-based organizations, not just with business 
     and financial institutions, in the development of structural 
     adjustment programs and emergency loan packages. Program 
     documents should be made publicly available. By recognizing 
     that workers must be included in developing a response to 
     economic crisis, the tripartite commission (including 
     representatives of labor, business, and government) 
     established in South Korea is a promising step.
       7. Ensure that speculators pay their fair share. The banks, 
     corporations, and individuals who profited from risky 
     investments during good times must not be shielded from 
     losses during downturns. As banks reschedule their debts, 
     financial losses must fall on those who made poor decisions. 
     Asian and American workers and taxpayers must not be asked to 
     foot the bill for a party to which they were not even 
     invited.
       Even if we move toward reform of the international 
     financial system, concrete steps must be taken to stop the 
     destabilizing flood of cheapened imports which have already 
     been unleashed by this crisis. Steel, autos, electronics, 
     apparel, and other threatened industries face an immediate 
     threat which requires specific actions to maintain import 
     shares consistent with 1997 levels in order to protect the 
     jobs of these workers.

     

                          ____________________