Despite this "maturity" the big three corporations are set to
grow by absorption and the small three of the top six are predestined to
consolidate further. In 1997 Bridgestone (Japan) bought Firestone (USA), in 1999
Goodyear combined with Sumitomo (Japan) to make a strong first rank contender.
All this has put pressure on stand-alone Continental. Continental has just 8% of
the world tyre market, but most of it is in Europe - the basic territory of
leading player Michelin. There were purchases and consolidations amongst the
smaller companies, including, for example, Cooper Tyre’s of USA purchase of
Avon.
The big three will determine the direction of future
consolidations. The "triadised" industry - named after the triad of trading
blocs centred on North America, the European Union and Japan/Asia - has divided
up the world market on the basis of regional hegemonies. Thus
French-headquartered Michelin has 32% of the EU market, Japan-headquartered
Bridgestone 28% of the Asian market and USA-headquartered Goodyear 30% of the
North American and South American markets.
Chemicals: Continuous Restructuring
The global chemical industry is experiencing a slowdown after
many years of high growth, which mostly outstripped general industrial growth
rates. While this slowdown is blamed primarily on economic conditions in major
producing and consuming countries and, to a lesser extent, on the fall in South
East Asian demand, it also reflects a downswing in the traditional industry
cycle of over-capacity/under-capacity. In 1996 the global output of the industry
moved to $1.570 billion which represented a growth of only 0.2%. This contrasts
with a 10-year average growth rate up to 1996 of 6.3%.
Over the past 15 years there has been some shift in global
production, away from North America and Western Europe and towards the
Asia-Pacific region. This has, however, been a less limited shift than is often
stated. For example, it only reduced the global stake of North American
production from 28 percent of the world total production in 1985 to 25% in 1995.
The changes in the economic prospects for the East-Asian region after the
economic events of 1997 mean that the expected surge in production and
consumption in this region is likely to be dampened.
Global Top 10 Chemical Corporations
|
Corporation |
Sales billions
Nearest 1997 |
Employment
(estimate) |
|
E.I du Pont de Nemours |
$41 |
98,009 |
|
BASF |
$32 |
105,885 |
|
Bayer |
$32 |
144,728 |
|
Hoechst |
$30 |
137,374 |
|
Dow Chemical |
$20 |
42,861 |
|
ICI |
$18 |
69,500 |
|
Rhone-Poulenc |
$15 |
68,771 |
|
Mitsubishi |
$14 |
11,973 |
|
Montedison |
$14 |
27,693 |
|
Norsk |
$13 |
38,271 |
Mergers, acquisitions and alliances in the current period have
been stimulated by a desire to concentrate resources on key areas of production
and achieve savings and efficiencies compared with other producers by increasing
plant size to global scale.
Globalisation, market share, regionalisation, focusing, and
internal profit taking are the language of size and power in the global market.
In 1995 US-headquartered multinationals produced 23% of world production,
Japan-headquartered 16% and German-headquartered 8%. With such concentrations
already in place, the merger of corporations from the same headquarters country
produce dominant national and global companies needed to secure global market
share in particular product groups.
According to an authoritative UN ranking, the chemicals and
pharmaceuticals industries are the most "transnationalised" based on a criterion
that combines foreign assets, sales and employment distributions. Thus, for
example, using this index, the Solvay company becomes the second most
transnationalised corporation in the world with 92% of its assets, 94% of its
sales and 90% of its employment outside its headquarters country of Belgium. By
comparison, BASF rates as the 48th most transnationalised corporation with 43%
foreign assets, 72% foreign sales and with 37% of employees – 40,297 persons –
outside Germany.
Alliances and joint ventures for technical cooperation and
market shares are becoming common between USA-headquartered and Western-European
headquartered companies. In 1996 alone the following alliancing and joint
venture arrangements were made:- BASF with Dupont in China for synthetic fibres;
Exxon and DSM of Netherlands for speciality chemicals for rubber; Dow and
Montell Polyofines (itself out of a alliance between Shell and Montedison from
Italy); Dow and P.B. Chemicals for polyethylene process cross-licensing.
Likewise, USA headquartered companies Exxon and Union Carbide allianced for new
metallocenes; Dow and Du Pont created Du Pont Dow Elastomers.
Behind this activity lies a strategy to deal with foreseen
over-capacity and recession. The head of the strategic planning unit of Shell is
reported to be of the opinion that "joint ventures are becoming more the norm.
There are probably a lot more to come. People are using this vehicle in hopes of
getting economies of scale and increasing profits". But experts at the same
meeting noted that 50% of the surviving mergers do not outperform industrial
averages after the merger.
More violent restructuring is also to be expected as
corporations concentrate on their core activities. Japan-headquartered Shin
Etsu’s purchase of Rovin - a Shell/AKZO holding - will push the company to the
top of the world PVC production league. Hoechst and Rhône-Poulenc have a firm
agreement to merge to create a "life-science" corporation called Aventis, which
may be completed by the end of 1999. The new company would have sales of $20
billion and a workforce of 95,000, but the plan calls for both companies to sell
their chemical activities. The two companies had combined sales of $45 billion
in 1997 and it is expected that this will mean a transfer of chemical sales in
the order of $15 billion.
If all, or part, of this revenue went to any of the top five of
the chemical industry then the top structure of the industry would become even
more concentrated. Already the combined sales of the top 4 corporations are more
than the combined sales of the next 12 corporations
ranked by their sales revenues. The chemical industry’s top-heaviness is so far
less noticeable in aggregate than is the case in other industries, but the
tendency is clear when product groups are assessed.
Pharmaceuticals: A Prescription for Concentration
Pharmaceuticals have long been a global growth industry,
although the nature of its products is set to change in the next decade. The
growth is neither stable nor guaranteed, as it arises from the combination of
new markets such as India and China and from the increased use of drugs by aging
populations in Europe, Japan and North America. The Indian market, for example,
has grown to 200 million persons who are estimated to be able to afford basic
medicines and the drugs market is growing at 15% per year.
Top 10 Global
Pharmaceuticals Corporations
|
Corporation |
Sales $billion
Nearest (1997) |
|
Merk |
24 |
|
Johnson & Johnson |
23 |
|
Novartis |
22 |
|
Bristol-Myers Squibb |
17 |
|
American Home Products |
14 |
|
Glaxo Wellcome |
13 |
|
Roche |
13 |
|
Smithkline Beecham |
13 |
|
Pfizer |
13 |
|
Abbott |
12 |
Concentration in the pharmaceutical industry is increasing
rapidly. In 1995, 25 companies controlled 53% of the world prescription drug
market. That level of control is now achieved by just 15 corporations. The
merger of Sandoz and Ciba-Geigy to form Novartis joined two companies with a
2.5% world market share each in prescription drugs. This brought them level with
the Merck share of over 5 percent. The industry is now moving to the position
where the top 4 corporations will control nearly 20 percent of the world
market.
The actions of the pharmaceutical corporations are being driven
by five different trends. First, a number of patents for important profit-making
drugs are soon to expire - in the next 10 years about 135 single-source
prescription drugs will lose their patent restrictions in the USA. Second,
generic drugs are competing with the higher profit and profiled brand names.
Third, a price resistance derived from pressure on health care costs and
especially on the use and cost of drug treatment is almost universal. Fourth,
success in the global policing of "illegal" copying of drugs. (Spear headed by
the rules of the World Trade Organisation the multinationals have been putting
pressure on governments in Asia and Latin America to curb their local copying
practices with some success.) Fifth, the market for pharmaceuticals is not
homogeneous. The market is in fact a series of mini-monopolies, dictated by
specific diseases and protected by tough patent legislation.
The first wave of restructuring was to prepare for the decline
in controlled markets and brand name drugs. This meant four years of corporate
negotiations and a wave of mergers and acquisitions. A second wave is now
occurring. This wave is not characterised by defensive action but by initiatives
to increase global market shares and it is likely to continue until the
concentration looks more like the profiles of the other industries.
Japanese corporations have been in a special position in the
global corporate picture. The Japanese pharmaceutical corporations have a low
profile in size and international spread yet over the past years they have been
responsible for a disproportionate number of new drug registrations, amounting
each year to at least 35% of world total. At the same time 90% of Japanese
corporation sales are within Japan. This situation has been substantially
disturbed by new national price regulations which have required a series of
price reductions - 6.8% in 1996 alone and further regulations in the pipeline.
Paper: Dominant and Secondary Mergers
Through to 1997 paper and board production has increased for 14
years reaching near 300 million tons. Part of this growth has been driven by
Asia, which now represents 29% of paper and board production. The global
regional figures are adjusting as the South East Asian downturn works through
and Russian production is still declining.
Top 6 Global Paper Corporations
|
Corporation |
Sales $billion
nearest (1997) |
|
International Paper |
20 |
|
George-Pacific |
13 |
|
Kimberly-Clark |
12 |
|
Weyerhaeuser |
11 |
|
Oji Paper |
10 |
|
UPM-Kymmene |
10 |
The industry is consolidating and, through cross-border
mergers, rapidly globalising. In Finland 10 years ago there were 20 companies
and now there are three. These three are seeking global market shares. Swedish
corporations are following the same pattern but at the same time seeking
footholds in Finland as with the recent merger of Swedish Stora and Finland’s
Enso. In the USA, International Paper bought out Federal Paper Board and now
directly controls 34% of the bleached board market.
An industry analyst noted last year, "We are going to see five
or six global companies develop into dominant players on the market" and others
argue that the "dominant" mergers, when two already large corporations merge,
will be accompanied by downstream smaller mergers.
Typical of this process is the Finnish-headquartered
UPM-Kymmene, which was created from two Finnish corporations. Throughout 1998
the corporation aggressively sought cross-border purchases, especially in Asia.
It established a joint venture with Pacific Resources International of Singapore
making it the biggest alliance for fine printing paper. Then it acquired an USA
subsidiary of a New Zealand headquartered corporation. The CEO noted, "We have
satisfied our strategic intent. We saw we needed to be a world-wide producer not
just a world-wide seller... having achieved this in the USA and Asia I am
content with our position today."
Environmental Services/Waste Management: Cleaning Up
Globally
An important industry has developed around the issue of waste
management in all its aspects. Prior to the wave of privatisation restructuring
noted across all industrial sectors, this industry was largely handled as a part
of general public infrastructure. A number of major corporations, operating
across national borders, now cover an increasingly lucrative private market in
waste management and waste clean up.
According to a private-sector estimate, in 1996 the global
environmental market represented some US$ 452 billion in revenues generated by
private companies and public-sector bodies. Half of the market was generated by
fees generated by services, with the remaining half almost equally divided
between equipment sales and the sale of environmental resources. Around 87% of
the total was generated in the USA, Western Europe and Japan; only the remaining
13 per cent was generated by developing countries.
However, there is still huge potential in many developing
countries where growth in the environmental industry has reached 5-25 per cent
and where there is a critical need for environmental services to deal with
sometimes dramatic environmental problems.
The factors which are driving demand for waste management
services include:
- the development and enforcement of environmental
legislation
- market-based incentives
- fiscal policies
- public education and awareness
- multilateral and bilateral assistance programmes
Despite its relatively recent emergence from public ownership
into the private sector in most countries, the pattern of concentration in this
industry is already very marked. Its domination by global waste corporations is
also advancing rapidly. Waste Management of the USA remains the world’s largest
solid waste company. It is a thoroughly global operator, managing waste disposal
in the streets of Sydney, Australia, as well as throughout the USA and in many
countries of Europe. A recent buy-out of Marius Pedersen of Denmark has also
made Waste Management the largest company in the sector in that country. Taken
over by USA Waste Services in a recent merger at a cost of over $20 billion, the
group has received clearance from the US authorities to further extend its
empire by taking over Eastern Environmental Services, despite the fact that it
now controls 22 per cent of North America’s waste business.
The leading four companies in solid waste in the USA control
over 50 per cent of the market. This wave of consolidation is moving further
ahead with the purchase of second-place Browning-Ferris by Allied Waste
Industries Inc. for a price of over $9 billion. The new entity promises a
further round of cost-cuts, despite the burgeoning market in waste disposal.
In Europe too a similar route to market dominance is evident.
French Vivendi recently announced that it has put together a war chest of nearly
$7.5 billion to make acquisitions over the next two years. Formerly Compagnie
Générale des Eaux (a water utility) the group has been totally restructured
since 1996, with operating profit climbing vertiginously by 65 per cent in the
first half of 1998. Its recent purcahses include FCC of Spain, the country’s
biggest services provider, aimed at a joint push into Latin America. A rival
local waste company, Bofesa Medio Ambiente (BMA), has responded by buying a
controlling interest in two smaller undertakings. BMA is controlled (51%) by
German group Berzelius Umwelt Service.
Germany’s Euro Waste Services (EWS) recently acquired waste
disposal activities of Preussag Noell, following purchase of the scrap metal
business from steel maker KRUPP earlier in 1998. The German Cartel Office
approved a plan in mid-1998 that allowed the merger of the waste disposal assets
of Ruhrkhole and VEW.
Not to be left behind in the race, UK’s Waste Recycling Group
(WRG) bought the waste division of Yorkshire Water to form the biggest private
waste management company in Britain. Yet with a market share of a little over 3
per cent of the UK’s $10 billion annual waste market, the process clearly has a
long way to go before it rivals the position of the global players emanating
from the USA.
Cement: Strategic Participation
Because cement is produced for very local markets the global
industry is characterised by large numbers of smaller locally owned plants. But
the large corporations affect the local markets by "strategic participation".
Their size allows them to dominate pricing and market access through managing
economies of scale because of the large capital investment involved in building
cement works. Over 50 per cent of a typical cement plant’s cost structure is
fixed, resulting in low marginal cost of incremental units of production. Thus
financial returns are particularly sensitive to volume and pricing is crucial.
The larger the group, the more it is able to exploit this advantage in times of
crisis.
Cement travels well only in bulk and by sea. Therefore it is
not a highly traded product. Less than 6 per cent of global production enters
into international trade, with the result that there are strong incentives to
isolate national or regional markets and to secure a separate dominance in each.
Thus the pattern of consolidation in the industry is not necessarily mergers
between the large seven multinationals globally, but rather their purchase of
smaller companies in different regions.
Thus British-headquartered Blue Circle has recently expanded in
Malaysia, Singapore and in Chile. Together with Holderbank, it controls 80 per
cent of the Chilean market and 20 per cent of the US market.
Ownership of the US cement market by foreign-originating groups
has increased from just 5 per cent in the 1970’s to over 80 per cent today. None
of the largest US producers is domestically owned. Investigation of price fixing
and market allocation between the supposed competitors is a perennial problem
for regulatory authorities in all national and regional markets.
The largest cement corporations are Swiss-headquartered
Holderbank, active in 61 countries with a turnover of $4 billion and
French-headquartered Lafarge, active in 60 countries. Lafarge sold nearly two
per cent of its share capital to institutional investors during 1999 to create a
war chest of over $1 billion to pursue its acquisition plans. Heidelberger of
Germany merged with Swedish/Norwegian joint venture Scancem in the course of
1999 at a cost of $2.5 billion. The move makes the new group the dominant player
throughout the Nordic and Baltic region and becomes the second largest producer
in the UK behind indigenous Blue Circle. Italian-headquartered Italcementi and
French-headquartered Ciments Français complete the ranks of the global cement
companies. These corporations account for only about 15% of total world
production, but control much more than they produce directly for the reasons
stated above.
Privatisation of previously state-owned cement groups is
proceeding fast in Eastern Europe and elsewhere. In Uzbekistan the State
Property Commission announced the sale to foreign investors of a further 25 per
cent of Akhanarantsement, one of the largest building materials producers in the
country. Holderbank already owns nearly 36 per cent of the stock. Egypt also
announced that it would be selling off 77 per cent of the state Assuit Cement
Company as part of its ongoing privatisation drive.
Glass and Ceramics: Cost-cutting Drives Job Losses
Ceramics
The international competitive position of the ceramics industry
varies according to each subsector. Subsectors include tableware, ornamental
ware, tiles and sanitaryware. In these particular areas the fastest growth has
been occurring in the East Asian markets, with China displaying considerable
growth over the last few years to become the world’s largest ceramics producer,
with more than 9.9 billion items produced annually. New technology and equipment
have been introduced to improve production. China has more than 1,000 ceramics
companies with exports to 150 countries and regions, worth US$1.09 billion.
Faced with this new competition, mergers have been on the
increase in the industrialised countries. Waterford Wedgwood (UK) acquired 85%
of Rosenthal (Germany) and Royal Copenhagen merged with Orrefors to form Royal
Scandinavia. Low cost producers from Eastern Europe, Latin America and East Asia
have highlighted the vulnerability of small-scale producers in the west.
Companies are under increasing pressure to merge or form alliances, as evidence
mounts that the industry will soon be dominated by a handful of global players.
Just five companies now dominate 92% of the dinnerware market – these are Lenox,
Noritake, Wedgwood, Royal Doulton and Mikasa. American Standard (a US based
sanitaryware manufacturer) absorbed Britain’s Armitage Shanks last year at a
cost of $415 million. As a result, the combination now has over 18% of the
European market, making it number one in the industry and almost twice as big as
its competitors Sanitec and Keramik Laufen. It has plants in more than 20
countries (including three in China) total sales for the first quarter of 1999
were $1.7 billion. In response, Sanitec (Finland) recently announced a $124
million take-over of a Dutch rival, Sphinx Gustavsberg, to create one of
Europe’s largest bathroom products businesses. The merged entity will have
combined sales of more than $850 million.
For technical ceramics, Japan is the most important producer
worldwide closely followed by the USA, with the EU occupying third position.
Within the EU Germany dominates the market for technical ceramics. It is perhaps
in this area that there is likely to be most growth with new applications in
automotive, telecommunication computer and semiconductor industries. Many of the
companies listed as top ceramic and glass manufacturers (see below) operate
within this category.
The refractories sector is heavily dependent upon the iron and
steel industry and 65% of the 22 to 25 million tons of refractories manufactured
worldwide will be used by this industry.
It is clear that globalisation has not left the ceramics
Industry untouched. There has been a process of change within the sector for a
number of years as companies have accelerated industrial restructuring. Problems
typically faced are a low take up of technology, a lack of innovative and
dynamic management, poor premises and environmental performance. The process of
change has meant a severe loss of jobs, changes in work practices and production
processes. It is estimated that there could be further job losses within the
industry of up to 20% and possibly more. With some 262.000 people employed in
the combined sectors of the ceramics industry within Europe alone this is a
significant figure for future employment.
Glass
Similarly to the ceramics Industry the glass industry can be
broken down into subsectors. These include reinforcement / glass fibreglass,
household ware, special glass, flat glass, and container glass. Production
percentage volumes for each subsector are:
Reinforcement glass 4%
Household Ware 4%
Special Glass 6%
Flat Glass 24%
Container Glass 60%
Currently the largest glass-producing region in the world is
the European Union with the leading country being Germany. There has, however,
during recent years been a shift in production to Central and Eastern Europe,
especially on the basis of price and shifting investment. Saint Gobain is the
largest producer of container and flat glass and a prime example of this
process. As the production process is labour intensive the company has opted to
shift production to Eastern Europe, where labour costs are much lower.
Gullfiber, a subsidiary of Saint-Gobain, is opening an insulation plant in
Gliwice, Poland at the beginning of June 1999. This will be the group’s
15 th establishment in Poland. A recent
Institut der deutschen Wirtschaft research bulletin quoted labour costs in
Poland at DM 5.48 per hour worked compared to DM 47.92 per hour in Germany. At
the beginning of 1999 Saint-Gobain bought ERG-Okfens, in Czeladz, and recently
opened a car glass plant in Dabrowa Gornicza. Saint-Gobain began to invest in
Poland in 1992 and has invested more than PLN 1.17 billion. A further
development in Poland is the news that the Privatisation Agency will soon
announce a new tender inviting interested investors to bid for the Czestochowska
Huta Szkla (CHS) glassworks. The company requires an estimated PLN 200 million
in modernisation and investment within the next two to three years. Other
leading companies in this sector include Pilkington, Gerresheimer, and
Glaverbel/PPG.
The subsector for special glass covers areas such as glass used
in PC screens and TVs. Largest producing countries are Japan and the USA with
the top three companies being Schott, Corning, and Nippon Electric Glass. This
area is growing as the reduction in cost of PCs has increased demand in the
retail sector.
Household ware is the most "visible" glass sector in the market
and international competition is fierce. The sector includes general tableware,
crystal giftware, stemware and barware. The Far East is increasing production in
this area but Eastern Europe remains a dominant producer with the Czech Republic
being the biggest producer and exporter of table and crystalware. A recent
report in CTK business news stated that the glass sectors restructuring
amounting to some Kc30bn had to a large extent been carried out with the support
of foreign capital. Of the above amount 70% was said to be earmarked for
technological equipment with environmental elements of the investment amounting
to some Kc6.5bn. Leading companies in this area are Waterford, Mikasa, Noritake
and Oneida.
The effects of cost cutting on the glass industry are typified
by Pilkington’s recent efforts to reduce overheads and increase margins by axing
as much as 20 per cent of its workforce.
Global Top 10 Ceramics & Glass Companies
|
Corporation |
Revenue
$ billion |
Home Country |
|
Compagnie de Saint-Gobain |
16.7 |
France |
|
Philips NV
Semiconductors Division |
15 |
Holland |
|
Lafarge S.A. |
11 |
France |
|
Motorola Schaumburg, IL
Motorola semiconductor product sector |
8 |
USA |
|
Asahi Glass Co. Ltd |
7.3 |
Japan |
|
American Standard Companies, Inc |
5.8 |
USA |
|
Kyocera Corp. |
5.5 |
Japan |
|
Cooper Industries, Inc. |
5.289 |
USA |
|
Pilkington, Inc. |
4.8 |
UK |
|
Owens-Illinois Inc. |
4.7 |
USA |
The "Normal" Trend to Mega-Corps
The tendency for businessmen to cooperate, collude or conspire
for market control has been a known characteristic of the market system since
the earliest days of capitalism. For this reason almost all countries have laws
against "unfair" competition, monopoly behaviour, abuse of market power, and
cartels.
"People of the same trade seldom meet together, even for
merriment and diversion, but the conversation ends in a conspiracy against the
public, or in some contrivance to raise prices. It is impossible to prevent such
meetings, by any law which either could be executed, or would be consistent with
liberty and justice. But though the law cannot hinder people of the same trade
from sometimes assembling together, it ought to do nothing to facilitate such
assemblies; much less to render them necessary."
Adam Smith (often considered as a guru of ‘free market’
economists) writing in his classic study, ‘The Wealth of Nations’ in 1776
– nearly two hundred years before the establishment of the GATT and World Trade
Organisation!
In May 1999 a $725 million fine was imposed on the European
chemical giants, Roche and BASF, for their part in a nine year long
market-rigging cartel in vitamins. Joel Klein, head of the antitrust division at
the US Justice Department, said: "This cartel was truly extraordinary. It
lasted almost a decade and involved a highly sophisticated and elaborate
conspiracy to control everything about the sale of these products". The
nature of business, it seems, does not improve with time.
These laws are the proof that past politicians and economists
were convinced that "healthy competition" in the market was not a natural
process, but one which had to be artificially enforced - if necessary, through
fines, injunctions and imprisonment - against businessmen who departed from the
agreed rules of the competition game.
Economists accepted that oligopolies could earn "abnormal
profits" (and do so in the long term) if barriers to entry to the industry were
maintained. But all these politicians, writers and theorists made a fundamental
assumption: this was that amalgamation and restraint of competition was a
national matter that could be controlled by national laws.
There are no international laws that can be enforced against
global monopolies to promote competition on a world basis. Corporations that
have the scope to operate at global level may therefore to a large extent escape
from the constraints imposed upon national companies, even though they may have
"local" or regional problems. In 1994 in the European Union, for example, 33
cement companies were convicted for fixing prices across the region and were
fined for this infringement of competition rules. It made no difference to the
structure of the global industry, which continued its headlong concentration to
the point where now just 5 companies command a dominant market position. Nor did
it make a difference to the practice of charging substantially different prices
for the same product in different national markets.
Given this general trend to unrestricted concentration, two
internal factors of corporate governance have assumed increased importance.
These are internal profit taking and the divorce between stockmarket valuation
and productive effort.
Executive Pay and Internal Profit Taking
It is widely agreed that executive salaries and benefits in
large corporations have reached irrational and unacceptable levels. Even
pro-business journals and organisations have complained over the past 10 years
of the increasing divorce between real corporate performance and the level of
executive remuneration. In the 1998 Business Week survey it was revealed that
Chief Executive Officers of the leading US corporations received an average
annual ‘compensation’, including their stock options, of $7.8 million. That
represented a 35% increase over the previous year (compared with average wage
increase for production workers of 3%) and was 326 times the earnings of the
average American factory worker. Furthermore, an analysis of these earnings by
the Institute for Policy Studies revealed that many of the highest paid
executives were the ones who had eliminated the most jobs.
;)
Executive "reward packages" are composed of four components:
basic pay, bonus, privileges and stock and pension options. In the USA, stock
options can be worth more than a third of the total package, although in other
countries, such as Germany and Japan, stock options are less important.
Executive super-salaries and their knock-on effect upon the
salaries of lower ranked executives and smaller companies (see chart) have been
a major factor increasing the gap between the lowest and highest paid in all
industrial countries.
Excessive executive pay has another important incentive: it
encourages top management to increase the size of the corporation through merger
and acquisition. Increased size lowers the accounting impact of big salaries as
a proportion of turnover or profits and increases the stock market valuation of
the corporation. As part of top executive pay is increasingly linked to stock
value, executive rewards increase with corporate size.
Executive pay is part of internal profit taking within the
corporation. This means that an important part of the surplus made by corporate
operations is distributed internally in unequal proportions between professional
and production workers. Top management divides any surpluses created amongst
themselves, the stockholders and a host of professionals - consultants, lawyers,
accountants, architects, management consultants, designers and other
professional contractors. In recent years such external professionals have not
only increased in number but have also increased their fees. For example, in
order to pay the directors and CEO’s their average $7.8 million in 1997,
corporations employed "remuneration committees" who, in turn, employ "pay
consultants" who most certainly employ lawyers. The surplus is thus distributed
among a wider and wider circle outside the ranks of those who made the original
surpluses.
All these fee-earners have an interest in inflating executive
pay, fees, perks, bonuses, and expenses. Under the current circumstances, they
also share an interest in laying off workers, cutting social overheads,
resisting customer claims, reducing health, safety and environment expenditures
in order to create greater surpluses upon which this feeding frenzy breeds.
From Productive Capitalism to Finance Capitalism
If stock prices rose only in response to the excellence and
efficiency of the company then the reward system would at least be logical, even
if still excessive. But stock prices no longer move year-on-year in that way.
With the increase in internal profit taking has come a vast growth in the use of
shares as speculative instruments on the open market. The ‘stockholder’ of the
past has become the ‘stockdealer’ of the present. Share value has become more a
function of market image than a reflection of productive effort. Shares can -
and do - increase because of cost cutting moves that promise to add
effectiveness. They can - and do - increase because assets of the corporation
appear to be more valuable, or are said to be more valuable, through no action
of the corporation - as in the re-evaluation and over-evaluation of real estate.
But, above all, they always increase at a time of merger.
Stockdealers and top managers thus have a vested interest in
the rise in the external value of the corporation’s stock prices and therefore
in mergers which produce short-term increases in stock prices. This system not
only produces an excessive interest in the short term, but also results in a
drive towards gigantism and cost cutting that has little or nothing to do with
real productive efficiency.
Ownership of capital has become increasingly divorced from its
application to productive purposes. One recent authority (Joel Kurtzman, writing
in ‘The Death of Money’, 1993) estimates that, for every $1 circulating in the
productive world economy, between $20 and $50 circulates in the economy of pure
finance. According to 1993 US Federal Reserve figures, corporate capital raised
from the sale of new share offerings amounted to only 4 per cent of the total
finance capital of US companies. The rest came mostly from earnings retained
within the corporation (82 per cent), or from external borrowing (14 per cent).
Between 1987 and 1994, companies paid out more to the market to shore up their
own share price than they received in new stock issues. In early 1998 what is
now inaccurately called ‘investment capital’ was flowing FROM
corporations INTO the stock markets at an annual rate of $110 billions.
In other words, the net flow of funds from the stock market into the companies
in which stocks are theoretically invested is actually a negative flow.
Productive effort is being bled dry for speculative gain.
From Profits to Surplus
Market propaganda promotes the idea that profits are obtained
for investors by investment in efficient businesses that show results in
increased sales, productivity and expansion of market demand for goods, leading
naturally to a profitable outcome.
The consolidation and gigantism at the top of key industrial
sectors has changed this pattern.
Most leading companies have achieved, or are aiming to achieve,
stable market shares within relatively stagnant or mature world markets. The
result is frequent bouts of over-production that put downward pressure on
product prices. Under such circumstances surpluses are achieved by short-term
cost-cutting. Output and market scope may remain the same – or even may decline
- but raw materials, labour costs and other operating costs must be reduced to
produce high "profitability".
There are other factors that have become important in the new
situation. Corporations have begun to rely on receipts of extra income from
activities that have little or no direct connection to core business operations.
When real estate held by the corporation is revalued it represents an apparent
gain in that year - economists call this ‘rent’ and when it becomes a policy it
is ‘rent-seeking’.
Rent-seeking, coupled with cost-cutting, represents a new
corporate concept that differs substantially from the classical idea of "profit"
under the old economic system. In fact, the corporation increasingly seeks not
externally declared profits but internally consumed "surpluses" which are
derived from squeezing labour, raw material prices, exchange speculation,
real-estate revaluation, transfer pricing and other non-productive devices.
This new operating goal has important impacts on the world of
political activity. Wages, raw materials, currencies, are influenced by an
interplay of forces between business, governments, unions, civil organisations,
regional organisations, etc. To manipulate these forces in the interests of
increasing surplus, the corporation must shift its focus from strictly business
to political operations. Altering the prices of these inputs requires recourse
to political pressure, lobbying, bribery, propaganda, price fixing and
manipulative public relations.
Many key corporations have effectively moved in this way from
the profit-seeking market arena to the surplus-seeking power arena.
Cost-cutting = Redundancies, Speed-ups, Health and
Environmental Hazards and Non-Sustainability
Under this new situation, the corporation is driven from inside
by the desire for ever-rising stock market valuation and executive salaries and
from the outside by the need for increased market share and global power. As a
result, the company may pursue a number of alternative strategies that affect
workers, lower income groups and society in general.
Labour cost reductions have become the principal route to cost
cutting. -Reducing the wages bill used to mean increasing the productivity of
existing workers as sales also increased; now it means cutting numbers employed,
lowering wages and benefits and increasing the intensity of work.
Union members have become very familiar over recent years with
the mechanisms used by companies to reduce wages. Universal demands for "more
flexibility" in labour markets amount to:
- replacing senior and permanent workers with temporary and
junior workers
- increasing the pace of work for the same or lower wages and
benefits
- out-sourcing tasks to lower-waged smaller enterprises and
informal workers
- shifting production to lower wage areas
"Production chains" have been established by the mega-corps
that shift the focus of parts production from the familiar central factory to
small sub-contractors and across national boundaries to exploit cheaper,
unorganised labour.
All these strategies have impacted heavily upon all sections of
the workforce, but the most noticeable victims have been women at work and in
the home. Often the first to be laid off when restructuring takes place, they
are also shouldering the burden of reduced public expenditure on health care,
child care and care for the elderly. Even in the workplace, the scandal of lower
pay for women has not been eradicated. Job classification schemes that
discriminate against "women’s work" are still the rule rather than the
exception.
These strategies attack all the existing laws, regulations and
institutions that have been established by slow and painstaking social
negotiation over 70 years for the protection of workers against precisely such
threats. National governments, which have in the past been pressured by big
business to reduce anti-trust laws and corporate taxation, are now being asked
to deliver deregulation in the labour market, wage reductions in the public
services, and cuts in health and environmental protection costs in order to
assist the search for surplus.
From Competition to Contest
The search for surplus has also meant a retreat from open
"market competition" in the traditional sense of competing on price and
efficiency of production. Instead, a winner-takes-all "contest" has ensued in
many sectors where merger, acquisition, politics, and economic coercion are used
to destroy other market participants and thereby to eliminate competition. The
modern mega-corporation is as much a political animal as a business enterprise
in its efforts to secure a position of enduring market dominance.
The global tyre industry may be a model for these developments.
The three leading companies each have an overwhelmingly dominant share in their
own region. Although each may stake a claim to global spread,
French-headquartered Michelin controls of 32% of the European market,
USA-headquartered Goodyear 30% of the Americas market and Japanese-headquartered
Bridgestone 28% of Asia-Pacific. Each segment allows the companies to make their
surpluses in different ways. Labour costs are lowest in the Goodyear segment,
prices are higher in the Michelin segment and Bridgestone can adjust between a
large number of countries which have a tyre-dependency not characteristic of the
other markets.
For this reason, traditionally flexible or free systems have
increasingly come under corporate control. Of all these systems, world trade is
the most important example.
Managed World Trade: From Exchange to Transfer
One of the closely kept secrets of the times is that the much
vaunted "free" trade system is not free at all - 70% of it is controlled
directly or indirectly by the mega-corps.
Commentators still persist in describing trade as if it were
concerned simply with the exchange of goods and services between independent
nation states. Yet today’s so-called "trade wars" are really struggles between
global corporations in which state delegates are the spokespersons. Statistics
from official sources produce tables of inter-national imports and exports
without mentioning corporations. Politicians exhort populations to export or
become "competitive" when success or failure lies in the hands of a few giant
companies and the interplay of global power.
Here are the facts of "world trade":
1) The modern multinational mega-corporations have widely
distributed their chains of production around the world. The notion of "national
origin" for any specific product has therefore become increasingly meaningless.
Total capital in place invested in production facilities of foreign ownership
now exceeds $3,000 billion. Almost all of this (98 percent) is owned, operated
and manipulated by the mega-corporations.
2) At least 35% of "world trade" consists of internal parts and
product transfers between subsidiaries of the same corporation. A shipment of an
intermediate chemical from one plant in Uruguay to the same corporation’s plant
in Argentina, for example, will be recorded as an "export" from Uruguay and an
"import" to Argentina. There is no way to describe this as "competition on the
world market"; it is merely a transfer between parts of the same
corporation.
3) Another 35% percent of so-called "world trade" is accounted
for by the sale of goods produced by subsidiaries of the same corporations. If a
corporation closes a plant in Germany and opens the same plant in Hungary to
send the goods to the same customers as before in Germany, then according to the
statistics, Hungary and Germany have increased their trade and the sum of "world
trade" has increased.
4) In addition to this 70% of world trade that is directly
managed by multinational corporations, a sizeable (but unrecorded) part of the
remainder is accounted for by the supply of raw materials, parts and supplies
from smaller sub-contracting firms that feed the needs of the mega-corps. This
proportion is growing as raw materials from the South decline in price and
privatisation shifts state exporting companies to the private sector.
In the new corporate world, contests between corporations are
hidden behind old mythologies of trade between nation states.
Managing National Governments?
Corporate influence over national governments is a complex and
controversial issue everywhere in the world. Accusations of being "pro-big
business" often reflect on specific items of policy rather than on the political
shading of the government. Yet statistics over the past 25 years do demonstrate
that the main policy lines adopted by governments of all types have tended to
encourage rather than to impede the growth of the mega-corps.
Firstly, over this period the biggest companies that the world
has ever seen have been created without serious government intervention.
Secondly, corporate taxation has been declining. Thirdly, there have been no
effective legal or tax attempts to restrain the growth of high reward packages
for executives. Fourthly, the abandonment by governments of full employment
policies has helped to reduce wage costs. Fifthly, the relaxation of protective
labour laws has allowed corporations to secure surpluses from cost cutting at
the expense of workers.
Privatisation programmes that have enabled the private
corporations to increase their size by consuming public assets have cemented all
of these policies. Between 1994 and 1999, Western European governments have
offered $217 billion of state assets for sale. The "transitional" economies of
Central and Eastern Europe and the countries undertaking structural adjustment
programmes in the South have given rise to even greater proportional windfalls
to private capital.
Ideology and business interests provide almost insurmountable
barriers to action by national governments to sustain employment and to ensure
that income is more evenly distributed. Any move to oppose the higher income
groups and corporations that currently benefit from this social injustice would
meet with an immediate flight of capital and result in destabilisation of the
economy.
From Constructing to Merging
The contest for survival, the switch from seeking profit for
distribution to making surpluses for maximising share prices and the dynamic
towards megacorporations have changed the nature and dimensions of the old
international economy. The rules and operating culture established during the
last century either no longer exist, are directed at false targets, or are in
drastic need of updating to fit the new situation.
The economic dynamics of the mega-corps has produced a major
over-supply of all types of goods. The imbalance between a world in need and an
oversupply of manufactured goods that the greater part of the world’s population
cannot buy is the major contradiction of our age. It cannot be solved by the
current dynamics at play in the private sector.
All these factors encourage a basic strategy – to restrain the
expansion of production, cut costs and grow larger by acquisition. In the late
1970s corporate spending on acquisition of existing companies for the first time
exceeded new investment. Since then the trend has accelerated as corporations
have steadily absorbed existing capacity rather than build new. (See graph). The
mega-corporation is created, stock market value goes up, layoffs mount and the
global social economy spins downward.
From Democratic Dialogue to Market Force
A barrage of propaganda that has also distorted any debate on
social policy has disguised the changes to the global governance of the world
economy. Attempts to plan the future in a reasoned dialogue between elected
representatives have been undermined by the exercise of private power.
The corporate agenda is everywhere proclaimed as the received
wisdom. The virtues of the market, the need for competition, for flexibilisation
of labour and for de-regulation of the corporations are preached with a
religious fervour. Financed by company sponsorship at the national level through
subsidised institutes, agencies, universities, business schools and captive news
sources, the global media is itself thoroughly dominated by
mega-corporations.
At the international level the World Bank with 10,000 employees
concentrates, as its constitution requires, on providing public relations for
the virtues of international investment and market forces.
Many commentators have noted that:-
l
the less competition that exists between corporations,
the greater the flood of propaganda for the virtues of competition
l
the more managed international trade becomes, the more
business sources preach the importance of "free" trade
l
the more corporations control the economies and the
lives of the people, the more citizens are told by politicians that they cannot
control the power of the market
l
the larger the corporations become, the more
"smallness" is presented as a virtue
l
the more the market becomes an arena for the contest
between corporations, the more it is presented as the uncontrollable product of
the "invisible hand of the market"
l
the more that nationalism is said to be dead and
undesirable in the face of globalisation, the more the nation-state is used as a
unit of competition in the world economy.
"The development of a global economy has not been matched by
the development of a global society. The basic unit for political and social
life remains the nation-state. International law and international institutions,
insofar as they exist, are not strong enough to prevent war or the large-scale
abuse of human rights in individual countries. Ecological threats are not
adequately dealt with. Global financial markets are largely beyond the control
of national or international authorities. I argue that the current state of
affairs is unsound and unsustainable. Financial markets are inherently unstable
and there are social needs that cannot be met by giving market forces free
rein."
George Soros (leading market speculator, identified by
Malaysia’s President Mahathir as the architect of the Asian financial collapse),
in his book ‘The Crisis of Global Capitalism: Open Society
Endangered’,1998.
The voices of concern, those urging prudence, those protesting,
those concerned for the future of the world, are relegated to marginal
organisations of limited size and even more limited means. The debate on social
policy, on the public means for solving the public issue of unemployment, the
mechanisms that can be used to redress the balance towards democracy and
transparency in the world, are distorted and weakened.
Restoring democratic health and empowering the social policy
debate is the key task of any organisation interested in a more just world.
Section 4. THE WORLD SOCIAL ECONOMY: INCREASING
INEQUALITY
The world economy has never been just. There have always been
vast differences in wealth and welfare between countries and between income
groups within countries. But now the world social economy displays the greatest
inequalities since the last century. Inequalities between income earners,
between those with work and those without, between nations and groups of nations
have widened almost everywhere.
From 1930 onwards the differences between rich and poor nations
and the rich and poor within nations had modestly begun to narrow. The great
events of that time left a positive impact on social justice in the world. By
1945 trade unions had become legitimate in all the major economies of the world.
This was an early indicator of the acceptance by democratic governments that
they were responsible and accountable to the public and it was their duty to
ensure policies that attended to the needs of the population. The "welfare
state" became a desired goal and even an achievement in some countries.
The liberation of the colonies brought improved living
conditions for millions and other developments assisted countries to escape from
the serfdom and warlordism of the last century and to begin to concentrate on
education and basic needs.
These modest and stumbling advances were halted in the 1970s
and the psychological clock turned back to the turn of the century in which
privilege was the dynamic force in the social economy.
Wage and Income Inequality
In the global social economy the most visible and universal
aspect is the widening income inequality. The rich are getting richer and the
poor are getting poorer at the plant, local, national and international levels.
The concentration of enormous wealth in fewer hands has continued to the point
where just 225 people are estimated by the UN Human Development Report for 1998
to have a combined wealth of over $1,000,000,000,000 (one trillion dollars) –
more than the poorer half of the world’s population earns in a year.
"Wage dispersion" is the economic jargon for the development in
which the wage gap between the lowest paid and the highest paid in the
enterprise or country has widened. According to the ILO Employment Report 1997
there were only three small European countries which had escaped this trend. The
worst cases were the UK and the USA.
A variety of strategies have been used to bring about this
situation. One of them has been the dismantling of full employment policies
which has lead to greater unemployment or to a much greater number of low-paid
jobs.
The most recent ILO survey shows that at least one third of the
world’s 3 billion labour force is unemployed or underemployed. There are
minimally 150 million fully and official unemployed and a further 850 million
that would wish to work full-time but are not able to find full time work. The
so-called financial crisis in Asia will add at least 10-15 million to this
figure.
But unemployment does not of itself explain the redistribution
of income. There has been an income struggle in which the lower paid and poorer
people have lost in contrast to the period before 1975 where gains had been made
through full employment policies, social security systems and educational
expansion. In many cases the worsening distribution of income fell on countries
which already had very unequal income shares.
The global economy of the mega-corps is the enemy of social
economics and the effects of this are now beginning to be seen. Conflicts are
mounting between groups, between nations and within regions. Desperate people
will take desperate action.
Rich and Poor Countries: In the Same World Economy?
The global trend towards widening income disparities has been
matched by a widening difference between rich and poor countries. Regionally it
is Latin America and Africa that have seen their relative position decline most
dramatically. Between 1980 and 1990 Chile, often quoted by free market
apologists as the miracle economy of Latin America, saw the percentage of people
in urban poverty increase from 12% to 32%, Bolivia 15% to 43%, Argentina 7% to
15%. In Africa, where statistics are less easily available, Zambian urban
poverty moved in 20 years from 26% to 45% and in Kenya from 10% to 29%. Only in
Asia were there some gains in reducing poverty but these have been reversed in
many cases since 1997.
Globally, the richest 20 percent of the world’s population have
seen their income increase. Over the past 25 years their share of world income
has increased from 70 per cent to 83 per cent.
Statistically, the rich and poor countries seem to inhabit
different planets. Even after adjusting for exchange rates and local purchasing
power, it is still the case that the average income for a Swiss citizen is
$25,000 as compared with the average for a Honduran citizen of $2,000 - a 12
times ratio. On the scale from the highest, Brunei with $31, 000 per inhabitant,
to the lowest, Democratic Republic of Congo at $335 per inhabitant, the ratio is
one to 92.
The most important aspect of world income inequality is not
perhaps the size of the gap between the very rich and the very poor, but the
fact that this gap is progressively widening. In 1960 the top 20% income earners
in the world received 30 times as much as the lowest earners; after 30 years of
further development of human society this ratio had doubled to 60 times.
If other factors of human existence are added to these -
availability of clean water, education, health care - then the gap between the
rich countries and poor is so great and the life styles are so different that
they may indeed feel themselves to be inhabiting different planets.
Environment: Emphasising The Need for Global Action
Public acceptance of the environment as a "global commons" that
should be protected for all of the world’s citizens to enjoy has been confronted
by vested corporate interests. Effective international regulation has been
difficult to achieve in the face of organised opposition from many of the
mega-corps.
Research into hazards and regulation to ensure protection – of
humans and the environment - is frequently inadequate and contradictory.
According to the USA Environmental Protection Agency, for example, basic
toxicological information is available on less than 300 of over 3000 key
large-volume chemicals. Yet the USA probably represents the best case as far as
provision to the public of such information is concerned.
Under the impact of neo-liberal policies in which production
and trade are placed before citizens’ protection, regulation is going backwards
rather than forwards. For example, in the 1970s there was an extensive debate
involving thousands of scientists concerning the environmental and occupational
hazards of asbestos. The result was a ban on its use beginning in Sweden in
1974. More recently, however, asbestos corporations have been lobbying the World
Trade Organisation to get the ban lifted. Who will now determine whether this
substance is once again unleashed on the world? Three little-known scientists
appointed by an internal WTO committee have been given the task of
re-assessment.
The push towards deregulation as a part of the neo-liberal
agenda can spell disaster for the global environment. More than any other area
this question emphasises the need for a defence to be mounted of the global
public interest and for global regulation of the activities of mega-corps to be
reinforced.
Globalisation as Solidarity versus Globalisation as
Competition
There are some positive trends towards a globalisation of
solidarity. Most impressive of these is the increased access to information and
the easing of communication.
The development of the Internet and of multilingual media and
the relative decline in the cost of air travel all assist to bring people
together, to create common goals, to exchange information and technology and to
assist democratic involvement.
Even the globalisation of finance and production could be seen
as a contributor to positive development, if it resulted in the transfer of
modern technologies to needy countries, coupled with enabling investment in
local skills and resources.
But these means and processes have been highjacked by those
promoting the globalisation of competition for private gain. Globalisation of
this type argues that market forces must decide the destiny of the world’s
peoples, that protective labour laws are a barrier and that investment must
remain unfettered by social or humanitarian considerations. This is neo-liberal
globalisation. Given that 95% of world direct investments is in the hands of
mega-corps, that at least 70% of world trade is corporate controlled and that
nearly half the world’s production comes from mega-corps (see box),
neo-liberalism globalisation embraces corporate power as its central concept.
The globalisation of competition does not allow citizens and
countries to decide democratically which other countries they wish to support
through trade or investment, or to decide democratically that they will not play
host to a corporation guilty of abuse of human rights. The globalisation of
competition does not support the argument that trade, loans and investment
should be used to achieve maximum social and economic improvement within a
framework of social justice.
The globalisation of competition is the deadly enemy of the
globalisation of solidarity.
Inter-State to Inter-Corporate
In the past, attempts at international co-operation resulted in
the creation of inter-state organisations. Their purpose was to ensure that
individual states lived up to a set of legal and moral responsibilities that
were held as common norms by the international community of nations. These
bodies drew their power from the assumption that private organisations and
citizens of any nation would be bound by the agreements, rules and regulations
to which their elected representatives were signatory.
So, ratification of the ILO conventions by member nations
advanced the goals of social reformers and the World Bank and IMF were initiated
to advance world development in the manner approved by the member states that
funded them.
But in the mega-corp/mega-bank world of today, power has
shifted from the state to the private sector. As a result, the international
organisations have also shifted their focus towards serving the interests of the
banks and corporations whose lobbying power has been exerted both directly and
via the member states.
The distribution of headquarters of the mega-corps is not equal
amongst nations. The chart above shows the current headquarters locations of the
top 500 global corporations. This situation means that there is a very uneven
stake per economy in the so-called global economy. The wide variations between
the number of corporations relative to size of economy and population impacts on
the importance of exports, imports, employment and income distribution as income
from abroad goes disproportionately to the higher-paid corporate crowd.
The matrix of corporate and potential national power makes
comprehension of global governance impossible without understanding the
importance of both elements and the points at which they interact. The efforts
of unions, citizens’ groups and other social organisations to influence the
global agenda in the direction of solidarity must clearly distinguish the
relative power of these forces if they are to achieve progress.
World Trade Organisation: Dispute Settlement between
Corporations
The disguise of the corporation behind the state is most
complete in the case of trade disputes. These are fought out by national
governments acting on behalf of corporations. Market contests between the
photographic filmmakers Kodak and Fiji or between the banana corporations
Chiquita and Fyffes are represented as trade disputes between the USA and Japan
or between Europe and the USA. In a rare moment of clarity, the EU Trade
Commissioner, a former British Conservative Government minister and a known
"free-trader", said of the banana dispute "the whole process is driven by
politics in the United States. It is driven by the fact that Chiquita (the major
US banana producer) gives money to the political parties...". State
representatives may speak in solemn quasi-judicial proceedings of defending
their national interests, but what is at stake is the market share of global
corporations.
The WTO was, from the beginning, an institution captured by the
corporations. It attached to its trade rules enforcement measures concerning
international investments and patent rights (TRIPS and TRIMS) which are almost
the 100% concern of corporations. The objective of this linkage was to be able
to punish states with trade sanctions if they infringed corporate patents or
tried to impose investment rules that the corporations did not want.
The focus of the WTO is as an enforcer of corporate rules upon
national governments. It is this quality that has given it power in the role of
arbitrator for inter-corporate disputes in the contest for market shares.
The attempt to introduce global controls over sovereign
governments in the interests of easing the passage of international investments
took a step too far in the case of the Multilateral Agreement on Investment
(MAI). Such was the outcry from the emerging global civic society (with the
notable absence of official labour from the mix) that the secretive backroom
discussions were halted and the project put on hold for the time being.
Arguments based on the need to agree rules to govern the rapidly expanding flow
of cross-border capital took no account of the fact that the entities being
controlled were not the investors, but the recipient states.
Defeat of the Global Social Policy Organisations
Some of the organisations of the world social economy have been
specifically established to affect the conduct of global social policy. These
were principally the specialised agencies of the UN, for example, ILO (labour
and labour relations), FAO (food and agriculture), UNESCO (science and
education), WHO (health), UNCTAD (trade and development) and UNEP
(environment).
These agencies have been consistently undermined by mechanisms
serving the corporate interest. Their importance as institutions of policy
formation was specifically challenged by the World Bank, which is not a UN
agency, but which has had cheap loans to dispense on behalf of those economies
where corporate power is strongest. Together with the International Monetary
Fund, the World Bank insisted that its funds would only be made available to
needy governments on conditions that challenged liberal social policies espoused
by the UN agencies. The social issues raised by FAO on food security, by UNESCO
on global balance in information exchange, by UNCTAD on a new world economic
order and by the ILO on employment and working conditions, were confronted by
competitive policies promoted in exchange for cash.
The agencies were starved of funds and pressures brought to
bear to reverse their policies: UNESCO initiatives were destroyed by media
mega-corps; FAO programmes infiltrated by the agri-business mega-corps which had
opposed its activities since the early 1970s; the WHO experienced enormous
pressure from the pharmaceutical industry over its branded drug policies; the
ILO employment programme switched to researching labour markets, small
enterprises and flexibilisation as its previous Director General accepted the
IMF "structural adjustment" package as the10 year policy directive for the
organisation. The UN Department of International Social and Economic Affairs was
effectively closed and the UN Center for Transnational Corporations was
disbanded because they produced information that the mega-corporations did not
like. The UN was accused of overspending and important countries demanded
sweeping reforms and refused to pay their fees. The UN budget, including those
of all the specialised agencies, has for many years been around $7 billion
dollars, excluding only peacekeeping missions. This sum is about what a small
country like Sweden spends on defence or about one 26th part
of the annual revenues of the newest oil mega-corp. In global and corporate
terms the UN budget is minuscule.
Even though these agencies have been undermined, they have
until now escaped direct control. Given the under-funding of the UN system,
infiltration by mega-corps may be all the more pernicious and effective. A move
by the UN Secretary General to offer corporations the possibility of entering
the UN system directly for a fee has raised concerns among a wide range of
observers. The UNDP programme now offers direct integration of the mega-corps
into "poverty alleviation programmes". In return for as little as $50,000 a
corporation can acquire a privileged inside position within the UN system, which
may also be used in its "corporate image" publicity. Among the ICEM sector
mega-corps that have already signed up for the UNDP "corporate" programme are
Rio Tinto, Owens Corning, Novartis, Dow Chemical, BP/AMOCO, Royal Dutch Shell
and Pfizer.
Who Controls the Organisations of Global Governance?
The two organisations that have taken a central role in
promoting the dominant culture of the global economy are the World Bank and the
International Monetary Fund (IMF). Both were constructed in the 1940s as
inter-state organisations. From the outset they were structured as entirely
non-democratic organisations. But, above all, these organisations did share with
institutions of the UN system the controlling belief that it was internationally
prohibited to interfere in the economic, social and political life of a
sovereign nation.
Third World Debt ($ billions)
| |
1980 |
1987 |
1997 |
|
Total debt |
573 |
1,290 |
2,171 |
|
Interest (inc. arrears) |
48 |
85 |
128 |
The creators of the IMF could never have envisaged that within
30 years the organisation would be sending missions to over 80 countries to
demand that they re-organise their economies, to warn them (as they did recently
in Kenya) not to accede to wage claims, to forbid them to give subsidies to the
poor or to instruct them how to undertake a land reform. The power that the IMF
possesses is based only on the threat that it can organise the withdrawal of the
benefits of the global economy.
Controlling the IMF and World Bank
(Both have similar voting
systems)
|
5 Major Countries |
Population 1996
(millions) |
% Votes on
Executive
Board |
|
USA
Japan
Germany
France
UK |
269
125
82
58
58 |
17.8
5.4
5.4
4.9
4.9 |
|
Total 5 Major Countries |
592 |
38.4 |
|
Rest of World Total |
6 billion |
61.6 |
Ratio of votes = 6 to 1
6 per citizen for 5 Major Countries, 1 per citizen for Rest of World
To this power was added the power of the debt collector as more
and more countries faced the impossibility of repaying huge loans that had been
thrust upon them during the profligate 1970’s. The outstanding debt of the
poorer countries to the banks and governments of the richer countries has never
ceased to grow and now stands at over $1,200 billion. The payment of the
interest on that debt in 1997 cost $125 billion. That was more than two times
the total of development aid.
Structural adjustment policies have been based on making the
target economies more efficient in paying back the interest on this debt. Only
some of the weaker economies in Africa have been unable to pay the debt and
their cancellation and default has not amounted to more than 5% of the current
total. Latin American countries have suffered the most and their populations
have been most squeezed to pay the debt. A recent highly publicised event is the
World Bank "initiative " to help the most indebted countries. In fact, this
initiative is directed at countries which will never be able to pay back their
debt and it will, in any case, involve only $10 billion - or no more than
120th part - of the total outstanding world debt (see box).
The recent policies of the IMF in South East Asia and in Russia have had the aim
of producing the same type of economies as in Latin America - paying upwards of
30% of their exports in debt, allowing unrestricted access to resources and
investment in the industrial and banking sectors.
The nature of IMF and World Bank activities has finally begun
to raise questions as to whose interests these organisations of global
governance are serving. Certainly the longer-term implications of their actions
are not in the national interests of their member states. IMF bailouts have
underwritten losses for US and European banks at taxpayers’ expense (Mexico,
Thailand, Indonesia). The IMF has given support to the demands of the mega-corps
for flexible labour markets (implying lower wage costs). It has campaigned for
privileged entry for international banks to the national financial sectors of
Mexico, Korea and Japan. It has demanded the cancellation of national programmes
that have tried to impede the exports of indigenous raw materials used to pay
off debt. In fact IMF policies have the character of a blank cheque passed to
consortiums of mega-banks and corporations.
Despite the public perception of its dominant role, World Bank
"disbursements" are less than 10% of the total financial flows to the Southern
poorer countries. In any one year it dispenses less than $25 billion in cheap
loans. This compares, in recent years, with $85 billion for the mega-corps in
annual direct investment, $92 billion in annual loans from the mega-banks and
$31 billion for stock purchases.
One of the principal tasks of the World Bank is to serve the
structural adjustment programmes of the IMF and the mega-corps. Unlike mass
advertising its publicity output is directed at the concerned public, academics
and the employees of the $50 billion aid industry. Its message, to use its own
language (see box), is "finely textured" because it cannot address the real
issues of social policy for the world citizenry. More recently there has been
encouraging talk of reform and of past mistakes that has raised hopes that there
is a change of heart. But that change of heart will come only when the global
organisations are transformed and made accountable to the electorate through
meaningful social participation in creating policies that serve the public
rather than private interest.
PART 2: GLOBAL UNIONISM: ENGAGING NEW
SOLIDARITIES
Introduction: The Direct Impact on Unions
The results of the globalisation of competition – increased
unemployment, lower share of income, weaker social security and more
exploitative work systems – have hit workers and their unions hard. But harder
still has been the direct attack on the idea of collective action on which trade
unions are based. Under intense lobbying from business and its media,
governments of every shade have introduced legislation over the past two decades
that has weakened union rights and practices. Secondary picketing in support of
inter-union or inter-plant solidarity is widely outlawed, but industrial joint
ventures, cross licensing and market segmentation are allowed to flourish under
the law. Legal obstacles are placed in the path of union organising, while
companies are free to force workers to accept individual contracts or lose their
jobs.
The dispersal of work through "production chains" of informal
and sub-contracted workers has increased the difficulty of making contact
between workers in the same corporation. The spread of this production globally
has split apart previous bargaining arrangements and undermined solidarity.
Patterns of centralised national or industry negotiation have been broken down
to the level of the individual company or even the individual work site, losing
the strength of collective action at every step.
Continued mergers and take-overs of key corporations have meant
that local managers frequently take their orders from owners who are as likely
as not to be located in a quite different country. Traditional trade union
structures, based on the workshop, regional and national levels are not well
equipped to negotiate solutions with absentee owners. This factor too has
diminished union bargaining strength.
"If labour wins, your way will be easy. The United States, and
the whole world for that matter, will enter upon a new and tremendous era.
Instead of being crushed by the machines, life will be made fairer, and happier,
and nobler by them. You of the destroyed middle class, along with labour ...
will participate in the equitable distribution of the products of the wonderful
machines. And we, all of us, will make new and more wonderful machines. And
there won’t be any unconsumed surplus, because there won’t be any profits." "But
suppose the trusts win this battle over the ownership and the world?" Mr. Kowalt
asked. "Then", Ernest answered, "you, and labour, and all of us, will be crushed
under the iron heel of a despotism as relentless and terrible as any despotism
that has blackened the pages of the history of men."
Jack London, ‘The Iron Heel’, 1907.
Meanwhile, the sum result of these pressures has been a
reduction in union membership, particularly in the advanced economies that have
been the stronghold of trade union power. Thus the base of organised strength
from which we must begin this task of reconstruction has narrowed alarmingly.
There are at last welcome signs that membership numbers have stabilised in
several countries as unions have given top priority to organising work. But it
has become increasingly obvious that trade union survival in the global economy
requires that we construct a new global unionism that reaches out to the corners
of the modern multinational corporation and up to its global boardroom.
a) Engagement
For many years the international trade union federations have
tracked the growth of the global corporations. Some have tried to build
countervailing structures among member unions to confront their burgeoning
power. Ironically, however, it has been the very forces generated by global
business expansion that have brought ordinary trade union members and their
national leaders to demand an appropriate response.
Global media show the ways in which events in one part of the
world affect outcomes in another. Global communications help co-ordinate product
flows between plants of the same worldwide company. The same technology gives
workers easy access to facts via the Internet and facilitates contact with
workers on the other side of the world.
The first step in building a global trade union response is to
upgrade this level of communication between organised workers within the
mega-corps of each sector. In addition to general studies, policy papers and
resource documents – like the present paper – members are interested to know
about strategies within their own sectors and companies that will affect them
directly. Up-to-date news on the job effects of the company’s investment plans
or on the experience of other workers with new work and pay systems are sources
of practical support in local negotiations.
For this reason, the ICEM has concentrated on starting networks
between its affiliated unions in the same sectors and their members within the
same companies. The regular exchange of strategic information links previously
separate groups of workers and strengthens understanding of different trade
union methods and traditions. It assists each group to prepare its negotiations
within a wider context and lays a firm basis for solidarity.
The International will be better prepared by its networks to
intervene directly with central management alongside and on behalf of its
affiliates when an issue arises. Direct engagement with the employer by an
international trade union federation acting together with its affiliates around
the world can change the nature of bargaining with global corporations.
Management must act in the knowledge that its workers are no longer isolated in
national groupings but view the global operations of the company in their true
light. The ICEM has already experienced several cases where joint engagements
with central management of a company have given positive force to union
negotiating power.
Based on the successful experience of joint international work
in the Bridgestone/Firestone dispute, the United Steelworkers of America (USWA)
President, George Becker, Chairman of the ICEM’s Rubber Industry Section,
initiated a network for the Goodyear group in 1999. An early task will be to
develop a specific "engagement team" to negotiate at top corporate level in case
of need. This pattern is being adopted in other ICEM networks too.
These initiatives could gain from closer co-ordination with the
work of European member unions within the legally created European Works
Councils (EWCs). The challenge is to increase the level of trade union
organisation within the EWCs to effect a seamless strategy between different
levels of operation – national, regional and global.
b) Corridors of Contact
Recognition of a trade union’s validity as a representative
negotiating partner is a hurdle in contacts with global concerns as it is in
industrial relations at national level. With the end of the Cold War and the
collapse of old trade union rivalries, ICEM membership has expanded to include
the most representative unions from every major economy with the exception of
China. As a result, it is able to bring together an impressive force of
organised workers within a significant number of corporations in its sectors.
When a group of ICEM member unions met with management of the
newly-merged BP/Amoco group in late 1998, union representatives at the table
were able to speak on behalf of organised workers totalling over one third of
the combined company’s workforce on a world scale.
Despite the decline in union membership numbers over past
decades, combination at the global level in a single union has an impact on
management perception. No union, however weak, stands alone within an ICEM
network. The group as a whole takes up its problems. Central company management
must learn to cope not singly with more or less powerful national unions, but
with the combined campaigning effect of unions from right around its global
operations.
Several corporations within ICEM sectors of industry have
already acknowledged the global nature of modern industrial relations. Titles of
previous "Human Resources" directors have changed recently to "Global Staff
Relations" directors. The emergence of the ICEM as a coherent global force
representing significant numbers of their employees has encouraged certain
companies to take the next logical step. Global corporations need global
unions.
Following initial engagement over a variety of issues,
"corridors of contact" have been opened with central management of some global
companies. Problems that are intrinsically global (e.g. world-scale mergers and
acquisitions, or environmental hazards), or those that are potentially damaging
to the central corporation (e.g. illegal or outrageous conduct by a local
subsidiary that threatens the corporate image), may be raised through these
channels by the ICEM engagement team for discussion, clarification and
negotiation. These relationships are built on existing contacts of key
affiliates with the company but extended by combining those affiliates within
the global engagement team. Shell International, BP/Amoco and even Rio Tinto
during the depths of dispute have seen the value of maintaining such corridors
of contact.
A promising dialogue has been established between the ICEM and
the world chemical industry employers’ association, the ICCA. A number of
informal contact meetings resulted in an invitation to address the ICCA
international executive committee. Following this meeting and co-operation
within ILO sector discussions, it was agreed to establish an ICEM/ICCA working
group to put teeth into the chemical industry’s public initiative on
"Responsible Care" by adopting a joint approach to standard-setting and
training.
c) Global Agreements
At the time of writing, the ICEM has signed only one full
global collective agreement – with the multinational oil and gas group, Statoil.
However, discussions with several other companies are ongoing and it is likely
that further agreements of a similar kind will be signed in the near future. A
partial agreement has also been signed with a group of chlorine producers
concerning their attitude to trade union organising in their sector. Sister
international, the IUF (food and agricultural workers), has also signed accords
with two global employers on behalf of its members. The IFBWW (construction and
woodworkers) and the IMF (metalworkers), have also made progress in this regard.
It is clear that the global agreement is a coming reality of trade union
relations with the mega-corps.
These agreements are not intended to over-ride or to substitute
for national collective contracts. They may extend and reinforce the efforts of
the ICEM’s national affiliates to organise and to improve conditions within the
company, however. The point of departure is the company’s agreement to apply the
ILO core labour conventions: on basic trade union rights to organise and to
bargain collectively, against child labour, bonded or forced labour, on equality
of opportunity and treatment in employment, on fair payment of wages and
benefits according to good industry standards. The Statoil agreement goes beyond
the ILO conventions to undertake that the company agrees "not to oppose efforts
to unionise its employees". This neutrality aspect is taken for granted in many
countries, but is of vital assistance in countries (such as the USA) where the
law allows management to ride roughshod over workers’ attempts to organise a
union.
Companies signing such agreements are expected to apply the
principles contained within them throughout their global operations, even where
the local law does not require them to abide by such strict standards. The force
of the agreement is derived from the ability of the ICEM affiliates organised
within the company around the world to monitor its application in practice and
to correct abuses. This, in turn, requires that trade union members in the
company be trained in the terms of the agreement and in how to enforce it. The
Statoil agreement contains specific language regarding joint training to achieve
‘best practice’ health, safety and environmental standards throughout the
corporation. Violations may be taken up by ICEM affiliates individually or
through the engagement team. An annual review meeting takes place to check
progress and to discuss general questions relating to the company’s industrial
and financial performance.
The unions involved help to ensure that the company’s global
spread does not mean that it can lower operating around the world. Corporate
management obtains a stable framework for its global employee relations and an
early warning system in case of problems. It also gains from public approval of
its ethical performance.
Campaigning in the Public Arena
One recent consultant survey of the performance of the ‘Fortune
500’ companies on the New York Stock Exchange concluded that up to 30 per cent
of a company’s stock value is dependent upon its public image. Key factors
influencing that image include its record on environmental, human rights and
consumer issues. Given the direct link between share value and top management
reward noted above, it is evident that attention given to ethical issues is not
only right morally, but is also in the self-interest of multinational managers.
While not condoning business structures that put image before quality, this
development can provide additional leverage against those wishing to ignore
social aspects of business operation.
The mega-corps are coming under increasing pressure from a wide
constellation of issue-based citizens’ groups. NGO’s such as Greenpeace, Amnesty
International, Third World Network, women’s groups, consumer associations and
many others have begun to construct a global civic society around the global
corporation. Much of the territory that these groups occupy was a part of the
original trade union philosophy. The ‘specialisation’ of these groups is a
reflection in part on the fact that trade unions have allowed themselves to be
restricted to workplace ‘bread and butter’ issues and to leave wider social
questions to others. Fragmentation of this kind allows those being criticised to
divide the opposition and to set one group against another.
The NGO’s have begun to learn this lesson of solidarity and
have begun to group together over major issues. The most impressive example of
this in action was the combined assault by a wide range of social groups upon
the Multilateral Agreement on Investment (MAI), which resulted in its withdrawal
from the globalisation agenda – at least for the time being. Most of the
international trade union movement was notably absent from the alliance –
separated by its own decision to push for a set of labour protection clauses
within the body of the agreement, rather than to oppose the agreement
itself.
It now seems certain that this debate will be revived within
the World Trade Organisation (WTO). This will give a second opportunity to forge
a stronger civic alliance that this time can include the trade unions. Most
national governments recognise that the sheer scale of international investment
calls for a response. The issue that will again confront emerging global civic
society will be – can a coalition of mega-corps and neo-liberal politicians be
allowed to punish individual governments through trade and other sanctions if
they dare to use or to create legislation to protect their own economies from
destabilisation by foreign investors.
The Reform of Global Governance
Many politicians who have maintained their silence throughout
the decades of increasing indebtedness among developing countries and through
the "structural adjustment programmes;" of the IMF and World Bank, have at last
begun to call for "overhauling the financial architecture" of the world economy.
Whatever notions lie behind these calls, there is a clear message – "Things
cannot continue as they are. Changes must be made."
Certainly the old systems have served workers very poorly, as
the above discussion indicates. Structural adjustment policies have paved the
way for free capital movement throughout the world. They have sought to
restructure the indebted countries to yield long-term surpluses sufficient to
repay interest on outstanding debt to the international financial community.
They have not advanced the level of social protection to the populations
involved. Indeed, there is much evidence that they have worsened it
considerably.
The international trade union movement, acting through the
International Confederation of Free Trade Unions (ICFTU), has campaigned for
reform of the policies of global governance. In general these calls have been
focussed on the existing organisation and structure of global economic
governance. These protests have had some effect. Recently some agencies have
been forced at least to recognise that there have been severe social
consequences to their economic prescriptions. But demands for more fundamental
change are also being voiced by parts of the national and international labour
movement, and are giving courage to increasing numbers of politicians to call
for full structural reform of the inter-governmental organisations originally
established under the post-war Bretton Woods agreements.
Demands for much greater transparency and democracy both within
the intergovernmental finance organisations and within the global corporations
themselves are being heard with increased insistence. The ICEM has been a part
of the global opposition to the social irresponsibility of structural adjustment
policies. It has developed clear demands for increasing democratic social
control over the development process through legal and institutional change. It
supports calls for fundamental reform and socialisation of the objectives of
multilateral aid organisations. It engages them wherever their policies and
programmes affect our members’ interests in order to direct them towards
sustainable social outcomes.
The ICEM also supports calls by the wider labour movement
internationally to:
- pressure governments to increase democratic involvement and
co-ordination at global level to deal with urgent economic and social
problems;
- put in place multilateral controls over speculative financial
flows;
- use taxation as an instrument on individual corporations and
against speculative transactions in order to encourage expansive, productive
investments;
- insist that national economic programmes and international
regulations proposed and financed by international agencies (such as the
IMF/World Bank/WTO/WIPO) are designed to increase employment-generating
initiatives by local governments and companies;
- create an effective monitoring and enforcement mechanism for
minimum labour standards within all appropriate international agreements.
The Reform of Corporate Governance
Organised labour has an important and direct role to play in
bringing the corporation back to society. Those who control companies have
become increasingly remote from the process of production over recent decades.
Power has shifted from the entrepreneur boss, the inventor and the industrialist
to banks, financiers and directors who are largely unknown to the workers who
toil in the factories that they command.
At the same time as insisting on democratic control over the
mega-corps through inter-governmental agencies at the global level, it is
important to look again at how the corporation is governed from within. The
broader social interest is usually best served by investment decisions based on
the longer-term view and by investors firmly rooted within their community or
country of origin. Supplements to this investment entering from outside should
likewise be required to conform to the longer-term interests of the community.
The danger posed by globalisation springs primarily from its tendency to
encourage unstable, flighty investments that switch their allegiance from
country to country according to their own criteria of advantage.
The best way to ensure that investment stays loyal to its roots
is to give a solid stake in the company to the workers and the community who
have invested their lives and the infrastructure of their town to its
maintenance. A new power relationship needs to be built within the company. Real
decision-making power, reinforced by legal ownership rights, needs to be vested
in the workers of the undertaking and in the communities within which they
operate. Countries that already have such laws have a better record of capital
stability than others. However, these laws and advantages, achieved historically
at the national level, are now under pressure from the force of globalisation
and will need a strong defence. The rate of foreign direct investment into the
industrialised economies rose by almost 70 per cent during 1998, fuelled by a
surge in cross-border mergers and take-overs. The diluting effect of this influx
has already begun to change the culture and practice of industrial relations in
many sectors. Trade unions need to reopen discussion at the public level on
effective systems of industrial democracy to counter the anti-social effects of
current investment patterns.
We need to recapture the moral high ground with claims that
those who are employed and who live around the plant should have their natural
rights protected at least as thoroughly as those who are only owners of
property. Workers should be recognised as those who have made the most personal
investment in the undertaking. Their years of labour have established a natural
right of "work equity" within the company that is more fundamental and more
valid than the interest of those who have only a passing relationship to the
value of its shares. The local community that has provided infrastructure and
support services to the factory has also made an equally valid investment in the
future of the undertaking. Labour needs to campaign for recognition of these
rights under the law. For example, before companies are allowed to close a
plant, to merge it or to sell it, why should workers and the local community not
have a recognised legal right of first option to buy it at preferential rates?
Why should bankruptcy laws put workers and the community at the end of the queue
for compensation rather than first?
More needs to be done by unions to enforce controls over
pension funds that are the real property of workers. Too often such funds are
controlled by faceless managers – or even by the company management itself.
Cases where workers’ pensions have been taken as part of the company’s capital
assets and handed on to a new buyer, without consultation with their real owners
and even without guarantees that they will be maintained, are all too common.
Direct voting control over pension assets could add
leverage to workers’ demands for greater transparency and democracy within the
corporation.
All these initiatives to re-establish the eroded position of
labour in the general policy framework will undoubtedly face an uphill struggle.
Governments – even those with links to labour - have largely capitulated to the
prevailing market ideology in the face of international competition for
investment. As has already been indicated, social budgets have been cut and
taxation reduced. Any attempt to argue for a new social agenda will need to be
backed by more than rhetoric.
Reinforcing International Labour Policy
To bring together these separate strands of policy requires a
broader strategy that can reinforce initiatives at the level of the corporation
by applicable legal measures. The absence of international law in areas of
social affairs, while the corporate agenda moves forward to constrain national
governments on financial issues needs to be addressed urgently.
The ILO ‘core conventions’ – regarding freedom to organise and
to bargain collectively, the elimination of forced labour, of child labour and
of discrimination at work – do represent the best efforts to date to develop a
body of regulation dealing with social relations at work and applicable
internationally. Agreed over the years in negotiation between government,
employer and labour representatives, these conventions represent ‘quasi law’
that relies solely on the force of moral judgement for their effectiveness. They
are not supported by any enforcement other than the weight of public opinion and
they are not ratified by a majority of the world’s governments (including some
of the most advanced economies). The essentially amoral nature of corporate
policy-making, based on the ‘business is business’ principle, has meant that the
impact of these standards within globally operating companies has been piecemeal
at best.
The embedding of the core ILO standards within individual
company/union agreements at the global level is therefore of major importance.
As the number and scope of these global agreements increases, so the validity of
the core standards themselves is strengthened. The settlement of specific cases
that arise under the global agreements will, in time, also add an effective
practical overlay to the core standards, extending their applicability from
governments to corporations and interpreting their application in industrial
practice. This can support the weak volition of national governments to
reinforce social standards in defiance of the prevailing free market ideology.
It can also drive the national acceptance of these standards within legislation
by extending corporate social principles to smaller contractors and
suppliers.
"The respect of human rights includes:
- the right of every employee to be represented by a union of
his or her own choice and the basic trade union rights as defined by ILO
Conventions 87 and 98. Statoil therefore agrees not to oppose efforts to
unionise its employees
- to employ no forced or bonded labour as proscribed in the ILO
Conventions 29 and 105
- to employ no child labour as proscribed by ILO Convention
138
- to exercise equality of opportunity and treatment in
employment as required by ILO Conventions 100 and 111
- to pay fair wages and benefits according to good industry
standards in the country concerned
- to provide a safe work environment, deploying common ‘best
practice’ standards"
Agreement between NOPEF/ICEM and Statoil,
7 July 1998, Copenhagen
The monitoring and enforcement of each global agreement is the
task of the unions involved. It is their job to build the necessary networks
inside the company and to train representatives to apply the agreed principles
at the place of work. It is a job too important to leave to external agencies.
Even so, disputes will inevitably arise within the terms of these contracts and
will need resolution without endangering the whole basis of the agreement
itself. Although the tripartite nature of the ILO will not permit it to act as
an international arbitration service, its role could extend to establishing an
"arm’s length" International Industrial Court that can conciliate - and
eventually rule upon - individual issues arising under the new corporate global
agreements. An advance on this front would greatly assist the formation of a new
global industrial relations perspective.
Fit for the Struggle
Just as communism did not deliver freedom, so raw capitalism
has not delivered social justice. The search for a system based on social values
that can combine useful labour with just reward is not over yet. Workers and
their unions are the repository of these values and any successful approach will
need to secure their involvement and support.
This also requires an effort on the part of trade unions to
upgrade their ability to respond to the challenge. Structures developed from the
struggles around industrialisation in the 19th century will
not serve in the 21st century economy driven by finance.
Restructuring is essential to sustain effectiveness and to gain ground for the
message of organised labour.
"...however weak and imperfect in respect of organisation the
ITS’s may be, however little international, nonetheless the development of
capitalism will compel them to take up the task that is incumbent on them,
unless the proletariat is to lapse internationally into a condition of more
hopeless dependence and enslavement than that of the working class in its
national subdivisions today."
Edo Fimmen (first post-war Secretary of the IFTU
and General Secretary of the ITF from 1919 until
1942) in ‘Labour’s Alternative: the United States of Europe or
Europe Limited’, 1924.
A thorough review is underway within and between the
international trade union federations and the ICFTU as to how this restructuring
can best be achieved without creating unnecessary bureaucracy. The ICEM itself
is a product of merger and other mergers are taking place among ITS’s. The
latest is a combination of the FIET (banking, insurance and commercial
employees), CI (post and telecommunications workers), MEI (media and
entertainment workers) and IGF (graphical and printing workers), to create a
conglomerate Union Network International (UNI). Other industrial federations are
eyeing merger prospects. However, the clear dangers of loss of identity and
overwhelming weight of bureaucracy are aspects leading to wariness among others.
A looser grouping of sectors around a core of common services (for
administration, printing, translation, research, training, etc) is an
alternative attracting much interest.
The most effective reorganisation of top level structures is
worthless, however, without an increase in effective membership at the base. The
greatest challenge to trade union advance over the coming period remains the
need to organise and to develop workers in our sectors into strong and effective
unions. The decline of membership has been slowed and even turned around in
several key countries, but remains well below what is needed to underpin the
breakthroughs already discussed. The strength of numbers allied to a coherent
strategy is still the powerful combination that can impress the hardest employer
with the need to negotiate.
Priority must be given to supporting organising at local union
level:
- by obtaining more ‘neutrality’ agreements from companies and
sectoral employer associations that give freedom from harassment to local
organisers;
- by exchanging information on new investments and company
strategies towards unions in receiving countries;
- by reinforcing national bargaining committees with advisers
from other plants of major global companies in other countries;
- by integrating regional structures and agendas with both
national and global efforts;
- by realising the potential for organising women workers and
ensuring equality of access within the international;
- by targeting union development work effectively at building
union strength on the ground.
An ICEM organised from its base in the factories, through its
national affiliates and its regional structures up to the level of its interface
with the global corporation can achieve the goals it sets for its future and the
future of the labour movement.
Vic Thorpe
June 1999
ICEM, Brussels
written in association with
Professor Jeffrey HARROD
Amsterdam
University.