The Tragedy of the Soma Mine-Workers: A Crime of Peripheral Capitalism Unleashed.

Erinç Yeldan

One of the greatest work-crimes in mining industry occurred in Soma, a little mining village in Western Turkey. At noon-time on Tuesday, May 13, according to witnesses, an electrical fault triggered a transformer to explode causing a large fire in the mine, releasing carbon monoxide and gaseous fumes. (The official cause of the “accident” was still unknown, at this writing, after nearly 30 hours.) Around 800 miners were trapped 2 km underground and 4 km from the exit. At this point, the death toll has already reached 245, with reports of another 100 workers remaining in the mine, yet unreached.

Turkey has possibly the worst safety record in terms of mining accidents and explosions in Europe and the third worst in the world. Since the right-wing Justice and Development Party (AKP) assumed power in 2002, and up to 2011, a 40% increase in work-related accidents has been reported. The death toll from these accidents reached more than 11,000.

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Philip Arestis and Malcolm Sawyer

There is little doubt that the “fiscal compact,” which has replaced the Stability and Growth Pact of the Economic and Monetary Union, reinforces an already-established neoliberal perspective on macroeconomic policy—with the emphasis on balanced budgets and an “independent” central bank only concerned with price stability (the latter to be achieved through interest-rate manipulation).

The perspectives on labour and product markets were not so clear-cut initially, but recent developments have seen a distinct shift in the neoliberal direction. There had long been calls from institutions such as the European Central Bank (ECB) for “structural reforms,” “liberalisation,” etc., alongside fiscal consolidation. Now, the Treaty on Stability, Coordination and Governance imposes, for any country subject to an “excessive deficit procedure,” that it “shall put in place a budgetary and economic partnership programme including a detailed description of the structural reforms which must be put in place and implemented to ensure an effective and durable correction of its excessive deficit” (emphasis added).

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Juan O’Farrell and Soledad Villafañe, Guest Bloggers

Latin American countries’ experiences over the last decade have been widely described as a success story for reducing income inequality. In a work to be published this month, we analyze how the coordination between labor and macroeconomic policies with a clear objective of employment creation and welfare expansion explains the progress made in Argentina and Brazil towards income redistribution with economic growth. Under different macroeconomic regimes, but with similarly active promotion of wage increases and labor institutions, both countries achieved an expansion of employment, wages, and social protections, breaking a long period of downward trends. These factors are behind the reduction in the gap between the rich and the poor.

What these experiences show is that, contrary to the view of labor institutions (like the minimum wage, collective bargaining, etc.) as “rigidities,” these can be key drivers of inclusive development. This holds significant relevance beyond Latin America for an important reason: despite the evidence and increasing consensus of the role of declining wage shares in the unfolding of the global financial crisis, policymakers (especially in Europe) still resist abandoning the mantra of labor market “flexibilization” and internal devaluation as a way out of the crisis. Furthermore, there was an attempt this year to reintroduce the idea of flexibilization in G20 documents.

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John Miller, Guest Blogger

The April 24 collapse of the Rana Plaza building, just outside of Dhaka, Bangladesh’s capital city, killed over 1,100 garment workers toiling in the country’s growing export sector.

The horrors of the Rana Plaza disaster, the worst ever in the garment industry, sent shockwaves across the globe. In the United States, the largest single destination for clothes made in Bangladesh, newspaper editors called on retailers whose wares are made in the country’s export factories to sign the legally binding fire-and-safety accord already negotiated by mostly European major retailers. Even some of the business press chimed in. The editors of Bloomberg Businessweek admonished global brand-name retailers that safe factories are “not only right but also smart.”

The business press, however, also turned their pages over to sweatshop defenders, contrarians who refuse to let the catastrophic loss of life in Bangladesh’s export factories shake their faith in neoliberal globalization. Tim Worstall, a fellow at London’s free-market Adam Smith Institute, told Forbes readers that “Bangladesh simply cannot afford rich world safety and working standards.” Economist Benjamin Powell, meanwhile, took the argument that sweatshops “improve the lives of their workers and boost growth” out for a spin on the Forbes op-ed pages.

For sweatshop apologists like Worstall and Powell, yet more export-led growth is the key to improving working and safety conditions in Bangladesh. “Economic development, rather than legal mandates,” Powell argues, “drives safety improvements.” Along the same lines, Worstall claims that rapid economic growth and increasing wealth are what improved working conditions in the United States a century ago and that those same forces, if given a chance, will do the same in Bangladesh.
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C.P. Chandrasekhar and Jayati Ghosh

In the desperate search for evidence that the global recession has bottomed out and the recovery has arrived, the story told by the long-term trend in unemployment levels and rates is being missed.

Early this year, the International Labour Organisation (ILO) had noted that the global unemployment rate was close to 6 per cent, implying that 197 million people were unemployed, even ignoring the 39 million who had dropped out of the workforce, discouraged by persistent failure in job search.

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Malcolm Sawyer

In “Political Aspects of Full Employment,” a still widely cited article from 1943, Michal Kalecki raised many questions about the ability of a capitalist economy to maintain prolonged full employment — even though in light of the understanding of tools for stimulating aggregate demand and the use of fiscal policy brought about by the Keynesian ‘revolution.’ In a series of papers, Kalecki showed that the arguments against the use of budget deficits to secure full employment were invalid. Among these arguments, and their rebuttals, were that:

> deficits add to government debt, which is a burden on future generations
(rather, the government debt is bonds owned by individuals, pension funds etc.);

> deficits crowd out investment
(rather, they allow savings to take place and enable investment); and

> deficits cause higher interest rates
(the current situation makes the rebuttal to this clear).

Yet those arguments are still trotted out.

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Econ4.org, a new platform for discussing and promoting urgent structural changes needed for a healthy American economy, is now introducing a five part video series called The Bottom Line. The videos will cover Jobs, Housing, Healthcare, Regulation and The New Economy. In the first one, Jobs, they argue that tax cuts and spending cuts, far from stimulating job creation, are counterproductive. They make the case that government has a significant role to play in generating employment growth.

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Barry Eidlin, Guest Blogger

For the past two decades, retail giant Walmart has served as a model for corporate America to emulate. Now, by forcing unions to break out of old habits, its workers might be showing the way forward for labor.

Walmart stores and critical parts of its distribution chain have been hit by a series of strikes in recent weeks. These strikes are remarkable for three reasons. First, the workers involved have no union protection. While their strikes are technically legal, they are taking huge risks by walking out. Second, many are not technically employed by Walmart. Rather, they work for a variety of sub-contractors that Walmart can replace at will. Third, despite items one and two, these workers are winning, and the strikes seem to be spreading.

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Yılmaz Akyüz

It is now generally agreed that China cannot go back to the export-led growth it had enjoyed in the run-up to the global financial crisis even with a return of the US and Europe to vigorous growth.  It needs to expand the domestic market by reversing the secular decline in the share of private consumption in GDP, which has been hovering around wartime-like levels of some 35 per cent.  It should do so not so much by reducing the household propensity to save as by increasing the share of household income in GDP which has been in a downward trend for almost two decades.  This would require a judicious combination of wage, agricultural pricing and tax policies and significantly increased government transfers, particularly to poor rural households, financed with dividends from state-owned enterprises (Export Dependence and Sustainability of Growth in China).

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Jayati Ghosh

A new BIS working paper by Cecchetti and Kharroubi makes a point that is becoming more widely known, especially after the continuing financial crises experienced globally since 2008. This is that the level of financial development is good only up to a point, after which it becomes a drag on growth. In fact, the authors argue that when the focus is on advanced economies, a fast-growing financial sector is actually detrimental to aggregate productivity growth. This is explained by the authors on the grounds that, because the financial sector competes with the rest of the economy for scarce resources, financial booms are not, in general, growth-enhancing.

The recent experience of the United States and now particularly Europe, certainly confirms this – and even established doyens of the world of private finance are now more willing to concede this. But one critical aspect of the failure of financial intermediation is still inadequately recognised and discussed: the inability of the currently constituted private financial system to deliver funds to small and medium enterprises (SMEs), which still account for the bulk of employment not just in developing countries but also in advanced economies.

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