From October 23 to 25 of last year, the High Command of the International Monetary Fund (IMF) and the World Bank met ceremoniously at their splendid headquarters in Washington with the representatives of selected international trade unions. The Joint Chiefs themselves appeared for the initial encounter: Horst Kohler, Managing Director of the IMF, and James Wolfensohn, President of the World Bank. During the first frank exchange, one brave working person referred hopefully to the new mission of the Bank and the Fund: fighting poverty with passion and professionalism. (To be absolutely accurate, only the Bank commits itself to passion and professionalism. The Fund only promises to fight.) Nonetheless, the questioner asked pointedly, would the IMF and the World Bank now require their borrowing countries to respect the core labor standards recognized in five International Labor Organization (ILO) Conventions?
A hasty consultation took place between the Chiefs before Wolfensohn responded. Of course, both institutions are on record as opposed to slavery, discrimination and—in most cases—child labor, he waffled. That’s three out of five. More than half. The remaining two—the right of association and the right of collective bargaining—are a little trickier. This is because many borrowing countries do not implement the standards nationally, and it would therefore be imperialistically intrusive for the Fund or the Bank to intervene in the political affairs of these sovereign states. As everyone knows, the IMF and the World Bank have the highest respect for national political processes and would never presume to boss supplicant governments around.
The spokespersons for organized labor sat back stunned. They had hoped that someday soon the Bank and the Fund would formally recognize the signed conventions of the ILO, but they never expected the explicit repudiation of labor’s international rights. And until that very moment, many labor reps harbored the illusion that one effective means of fighting poverty was to foster a climate in which trade unions can at least exist. Unions, after all, tend to raise wages, and this is the best way we know of to reduce poverty. Moreover, the spokespersons had become accustomed over the years to the unilateral demands—political and otherwise—of the Bank and the Fund. Cases are legion. Like, what about structural adjustment? What kind of intervention was that?
Structural adjustment was simply sound macroeconomic policy advice, retorted the Joint Chiefs. And, poor people do not need unions. They need microenterprises so that they can make some money by exploiting themselves—and their children—freely and at their own discretion. This approach promotes “local ownership” of projects and persuades impoverished stakeholders to take heart and help themselves in an optimistic and industrious fashion.
Trade unions actually hurt poor people, said the High Command and their proxies appearing in subsequent conference sessions. Unions create a rigid and inflexible economic environment in which it is impossible for the truly innovative and ambitious to flourish. Let’s take an example. In the squatter settlements outside Buenos Aires, enterprising community groups are digging the ditches and laying the pipe for the French and Argentine-owned Aguas Argentinas. The lucky stakeholders are allowed to pay in labor for the cost of their water connections. The water workers union would have selfishly insisted that their members lay the pipe and sewerage according to tedious engineering and environmental specifications and that they be paid a living wage for doing it. Since there would be only middling profits in this approach and the public utility has been sold off, poor people would still be hauling their water. Now, in contrast, the ditch-digging volunteers from the barrios have a connection for water that they cannot afford to pay for; unionized water workers don’t have jobs anymore, so they can’t pay either; and Aguas Argentinas can make more money providing less water because the company benefits from free labor. “We have learned a lot from these pilot projects,” said one perky Aguas executive we met in the Bank foyer.
For those of us in the Americas, Wolfensohn’s statement that the World Bank does not recognize the right of association was especially alarming. After all, we have Brazil in our hemisphere, where ILO Convention 87 establishing the right of association has never been ratified, and income distribution is one of the most unequal in the world. The Americas also include Colombia, where between January and June, 47 trade unionists were assassinated. According to the data base from the Escuela Nacional Sindical, 1,336 trade unionists were killed between 1991 and 1999, and 14 union headquarters bombed. Six hundred and seventy-six trade unionists in 1999 publicly acknowledged that they had received death threats. Of these, the majority were teachers and health care workers.
But the Bank takes a different tack on this than the ILO. Rather than relying on unions to protect their rights and wages, working people can now depend on the World Bank’s evolving Social Protection and Social Risk Management Strategy. To explain this, the Bank produced Robert Holzman, the Director of the Social Protection and Human Development Network and the Bank’s liaison to organized labor. His paper, published by the Bank in 2000, informed us all that poor people are poor because they are insufficiently innovative, and that they cannot afford to be innovative because they “lack appropriate risk management instruments.” As a result, they cannot engage in higher return activities. Holzman goes on to point out that the tired, traditional approach to poverty reduction relied on the failed prescriptions of trade unionism, such as unemployment insurance, social safety nets and labor market interventions (minimum wage, health and safety standards, etc.).
The Bank’s promising new approach is based on social protection. Not just a safety net, but also a springboard. “While a social safety net should exist, programs should also provide the poor with the capacity to bounce out of poverty,” writes Holzman animatedly. He recognizes that poor people are inordinately vulnerable to the impact of risk; his catalogue of calamity is comprehensive. It includes ethnic discrimination, illness, terrorism, high winds, volcanic activity, coup d’etat, currency crisis and—our favorite—output collapse. If you are poor, these eventualities will really stop up your income stream. You may think that in these situations you will need job security, a living wage and quite possibly health insurance. Wrong. What you need is an income- and consumption-smoothing strategy to minimize your individual risk. If you are a household around the poverty line, according to Dr. Holzman, your strategy would look like this:
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