Social and ecological sustainability in the globalized economy : proceedings of a conference sponsored by the Friedrich Ebert Foundation, New York, Helmsley Hotel, Wednesday, April 21, 1999. - [Electronic ed.]. - New York, . - 21 Bl. = 60 Kb, Text
Electronic ed.: Bonn : FES Library, 2001
Two decades ago, the process of the growing integration of markets for goods, services and finance the phenomenon now known as globalization held the promise of producing a rising tide of wealth that would lift humanitys collective boat.
Today, the promise remains unfulfilled. As the UNDPs 1997 Human Development Report concluded, some boats are more seaworthy than others; the yachts and ocean liners are indeed rising in response to new opportunities, but the rafts and rowboats are taking on water and some are sinking fast."
The widening inequality gap and grinding poverty that afflict a startlingly high percentage of the world population have led to a stark reappraisal of globalized production patterns. Was the original promise of globalization a false one? Can globalization be reshaped, reconfigured, or reinvented so that it will benefit not just the yachting set, but those who ride rafts and rowboats?
This reappraisal is taking place among all sectors of society and from all corners of the globe.
Against this backdrop, the Friedrich Ebert Foundation organized a conference to discuss problems that have arisen from globalized production patterns, especially with regard to export-oriented industrialization in developing countries.
The goal was to assess the feasibility of different policy approaches to regulate export industries, while bearing in mind the general desirability of an international division of labor and the necessity for developing countries to earn hard currencies by securing trade balance surpluses.
The key questions before conference participants were: Which form of governance is most likely to achieve the double feat of continued political support for trade liberalization in the North and South, while at the same time guaranteeing an equitable distribution of its gains among all the stakeholders? What sort of institutions or regimes need to be created in order to make global production patterns sustainable, particularly in developing countries?
The Friedrich Ebert Foundation invited international experts in the fields of sustainable development, human rights, the environment and labor to explore these issues at a daylong conference titled Global Production and Sustainable Development" in New York City on April 21, 1999. The event took place during the seventh session of the United Nations Commission on Sustainable Development (CSD 7). One of the overarching issues that the commission deals with in its work is the sustainability of consumption and production patterns. The conference aimed at linking this important issue to development policy, by discussing the effects of development strategies based on export driven growth on social and environmental sustainability.
The conference was held in advance of the UN Commission on Sustainable Developments annual conference, held in New York April 19-30.
The issues were tackled by three panels made up of experts in the fields of sustainable development, human rights, the environment, and labor. The first panel looked at social and environmental consequences of global production, the second focused on good governance and human rights, and the third examined new initiatives toward sustainable global production.
The opinions expressed by speakers were as diverse and wide ranging as their backgrounds. However, they reached a clear consensus: the system is not working, and it must be fixed.
The solutions ranged from those at the micro level to those at the macro level. On banana plantations and coffee fields in Central America, small-scale farmers and agricultural workers are receiving fair prices for their products and labor through the efforts of the Fairtrade Labelling Organizations International. In New York, the Council on Economic Priorities Accreditation Agency is urging corporations to adopt a new set of workplace standards. Other speakers argued on behalf of systemic changes in the ways that governments, global governance regimes, and the corporate world function.
II. Proceedings of the Conference
Panel I: The Consequences of Global Production
Stephen P. Marks, Director, United Nations Studies Program
Mark Barenberg, Professor
Ronald Blackwell, Director, Department of Corporate Affairs
Clarence Dias, Director
Professor Barenberg outlined four key points relating to transnational global governance regimes, paying particular attention to regimes affecting labor and social conditions.
While some see a global governance gap," Professor Barenberg instead finds transnational governance regimes to be pervasive but highly problematic. First of all, they are systematically biased toward wealth creation or, at least, ideologies of wealth creation rather than the redistribution of wealth-creating capacity (another way of saying sustainable development). These governance regimes also are biased in favor of economic power. Political power globally aligns itself with economic power and affluent states, to the exclusion of states and individuals lacking power and wealth.
Regimes are also highly fragmented. Vertically, they are fragmented into local, state, regional and international regimes. China, for example, has 175 official export processing zones. Unofficially, China has more than 2,000 EPZs, many of them self-declared." Horizontally, regimes are fragmented by subject area. These subject areas are technically outside of labor and social conditions, but bear heavily on these areas. Some even affect labor and social conditions to a greater degree than does direct labor regulation. Examples include the International Monetary Fund and World Bank regimes (and the conditionality attached to their public loans), and regulations over global capital markets, hot capital, international banking, and efforts at multilateral liberalization and regulation of long-term capital flows and the Multilateral Agreement on Investment (MAI).
Trade-related regimes (WTO, NAFTA, bilateral treaties and unilateral trade sanctions embodied in domestic law) have a tremendous indirect, but perhaps more powerful, effect on social conditions than ILO standards or direct labor regulation.
Another powerful regime is that of immigration law, which remains an area of sovereign authority that, in a quiet way, has survived globalization. It is not hyperbolic, Professor Barenberg asserted, to say that our world is one of global apartheid. Immigration laws keep workers territorially trapped. The great pools of underemployed labor in low wage countries do not have equal access to the accumulated physical and human capital of high-wage countries.
Labor markets and production chains, through which wealth-creating capacity is created, destroyed or redistributed, also are complex and fragmented. Professor Barenberg identified five categories of labor, each of which poses distinct problems of governance.
These classifications are more than arid taxonomy," said Professor Barenberg. Legal strategies for protecting labor standards and labor rights within transnational corporations are different from those aimed at production and distribution chains that are contractually linked. Consider, for example, labor standards embodied in multinational codes of conduct, whether they are unilateral or multilateral, public or private, voluntary or mandatory. If multinational codes are applicable exclusively to workplace conditions within transnational corporations, they may not reach similar labor abuses in cross-border enterprises that are linked contractually through subcontracting chains or even-more indirect multiple chains of contractual relations.
What comes to mind immediately for Professor Barenberg is the question of Chinas integration into the world economy. China has a workforce of 600 million, but many of those workers would not be reached by a multinational code. A similar disjuncture occurs when a country tries to apply its domestic law outside its borders. The United States anti-discrimination law, Title VII, for example, applies to subsidiaries of U.S. multinationals, but it does not reach subcontractors or any other workplaces not owned or controlled by U.S. multinationals.
Solutions will require local action and creative thinking, according to Professor Barenberg. Universal rights, he emphasized, are meaningful and effective only if they are put into local context by local worker organizations on the ground," he said. These organizations must specify, particularize and interpret rights, monitor violations, and participate in dispute resolution processes.
Creativity is needed in the development of mechanisms to redistribute wealth from rich to poor countries, and within rich countries, to avoid the recurring nightmare of economic dualism, polarization and uneven development." One example is drawn from the European Union, where structural funds automatically redistribute public capital from countries with above-average standards of living to those with below-average standards of living.
We expected to see races to the bottom as a result of economic integration in Europe, but we were pleasantly surprised by a few races to the top," Professor Barenberg noted. What seems to be crucial is that the governance structure created a central deliberative body that was charged with a mandate of looking at best practices throughout the EU, and then requiring a harmonization upward toward best practice."
Are global governance regimes as pervasive as Professor Barenberg claimed? Mr. Blackwell holds the alternative view, that we are living in an ungoverned economic space" in which workers are forced to surrender their fundamental freedoms in order to put food on the table.
Mr. Blackwell described a disturbing disjuncture between societal ethics and the ethical structure under which the world economy is expected to function. He drew a historical parallel to slavery in the United States.
Slavery is unjust because it violates the most fundamental norms of human rights. However, the way you organize an economy, the way you price slaves, and the products they produce, and the costs to raise them, that can motivate human institutions, both public and private, to support slavery," Mr. Blackwell noted.
The world economy today is organized in a way that supports indecent wages and working conditions. Mr. Blackwell pointed to New York Citys Chinatown. Not only are those circumstances horrible and unacceptable, but theres nothing in those sweatshops that can change those circumstances. Because in that sweatshop, the power is not even in the contractor that owns the sweatshop, or the apparel company that buys from that contractor. The power is not in the apparel industry. The dynamic under which it is moving has nothing to do with Chinatown. The dynamic under which it is moving is international."
What the retailers say when they estimate a price-point is, Make this price and well buy it. If you cant make that price, we wont buy it. That price cant legally be made in the United States. The choice to the manufacturer is to go out of business, to leave the country, or to go underground. This explains why sweatshops are back in the United States, and theyre back with a vengeance," Mr. Blackwell said.
Even a medium-sized chain such as Nordstrom has thousands of suppliers worldwide. A large percentage of them change every year, and they will claim they have no responsibility, no knowledge of how (products) are actually produced. That kind of sourcing strategy is exactly (responsible) for the kind of exploitation, oppression and abuse that is so rampant in the world today," he said.
The fundamental problem with regulatory structures, Mr. Blackwell said, is that our economy is international, while the structures remain largely national and local, which renders them ineffective for the purposes for which they were designed.
States have no incentives to pass progressive labor legislation because if they do so, they will lose jobs or fail to attract them in the first place. Workers have no incentive to demand their rights because to do so will cost them their jobs. Do I want my rights, or do I want a job? No worker should have to make that choice, but the current disjuncture in our governance structure requires workers to make that choice, and thats what we have to straighten out," Mr. Blackwell said.
Solutions must encompass the public and private spheres. On the public side, Mr. Blackwell suggested that states condition trade and investment on respect for fundamental labor rights. In the United States, 10,000 workers a year are fired for activities protected under freedom of speech and association, Mr. Blackwell said. It is worse in developing countries, where EPZs are set up to avoid unionization. Mr. Blackwell learned first-hand how the system works during a tour of an EPZ in the Dominican Republic: We went in representing the Amalgamated Clothing Co. of New York. It was carefully explained to us, You will never have to deal with a trade union in this zone. You will get all the labor you want, at the right price, fully loaded, and much better than you would get anywhere else in the Caribbean. This was proven to be true when we unsuccessfully tried to enter the same facilities several days later with representatives of local unions. The armed guards made sure that nobody could enter the facilities without special permission from management."
Government protection of fundamental freedoms in the workplace will open the door to the creation of workers organizations. These organizations will constitute one mechanism to redistribute the value created by corporations. If we had this kind of mechanism, we would eliminate the perverse incentive for oppressing workers to gain an advantage in attracting capital in order to provide employment."
In the private sphere, the governing structure of corporations must be changed so that they no longer are run primarily for the private benefit of shareholders. The social responsibility of corporations is to create wealth for society, thats why national laws suffer the existence of corporations. Yet we have laws that regulate the way theyre owned, the way theyre governed, and the way theyre financed in such a way that they are for the exclusive benefit of only one of the constituents of the corporation the shareholder."
Now, shareholders are very important. Because they bear residual risks, they deserve residual control rights, a place in the governance of companies, and a large claim on the residual income that results from the successful activities of the company. But theyre not the only party in a corporation that bears residual risks. When working people contribute first-specific knowledge, they too invest in that company."
If you leave in place the current structure of lack of enforcement of fundamental worker rights, social and environmental standards, and you let corporations run for the private benefit of shareholders only, there is nothing after that youre going to be able to do to constrain them."
Is the world witnessing the twilight of human rights? Mr. Dias fears the answer is yes. Five years ago, then-UN Secretary-General Boutros Boutros-Ghali spoke of human rights as the spirit of our age and the reality of our times." Today, Mr. Dias sees a global pandemic of neoliberal economics threatening to erase 50 years of painstaking protection and realization."
The gap between rich and poor countries is growing at a staggering rate. Quoting from John Grays False Dawn: The Delusions of Global Capitalism, Mr. Dias predicted that the ultimate effects of the emancipation of market forces from social and political control will ensure that the age of globalization will be remembered as another turn in the history of servitude." And no segment of society is hurt more by globalization than women, Mr. Dias asserted. Globalization is resulting in the economic enslavement of women and the re-enslavement of once-liberated women."
Human rights instruments particularly economic, social and cultural rights are a tool to bring market forces under social and political control. To be effective, these rights must be taken seriously. Mr. Dias outlined a strategy for tackling this problem.
Economic, social and cultural rights are not just aspirations, they are rights under law. But these rights lost ground during the Cold War. Civil and political rights were emphasized, to the detriment of economic, social and cultural rights. Individual rights took precedence over group and collective rights. Rights against the state overshadows rights claimed against non-state actors. And what about the role of empowerment from below, in securing ones human rights, in asserting and claiming ones human rights collectively, rather than passively waiting for the state to protect ones human rights?"
Mr. Dias turned for an answer to the International Covenant on Economic, Social and Cultural Rights. The ICESCR contains 31 articles. Enshrined in these articles, however, are just four economic rights. Briefly stated, they are the right to work, the right to an adequate standard of living, the right to health, and the right to education. Two more articles deal with social rights. One lays out the fundamental importance of the family and the right to protection of the family, the other deals with the right to social security and social insurance. One article deals with cultural rights the right to take part in cultural life, the right to a cultural identity, the right to pluralism and diversity in societies, and the rights not to be dominated by majoritarian or minority ethnic politics.
The obligation to respect these rights, that is to say, to not violate these rights, is owed by all entities state and nonstate, individual and collective. Obligations to promote and fulfill these rights are subjects for negotiation between actors in the public and private sectors. Its imperative that we take economic, social and cultural rights seriously by attempting to enforce them at every level local, regional, national, and international," Ms. Dias said.
Ambassador Extraordinary and Plenipotentiary
Permanent Representative, Permanent Mission of India to the United Nations
Trade Policy and Sustainable Development A View from the South"
Poverty is the biggest polluter." Prime Minister Indira Gandhis words remain as true today as when she uttered them in 1972, according to Ambassador Sharma. Without the eradication of poverty, any other measures will be ineffective or transitory at best, as poverty creates unremitting pressure on the environment. The linkage of poverty eradication with sustainable development is, therefore, a central one."
The South believes that the WTO has an important role to play in coordinating trade and environmental policies in a mutually supportive way. An open, non-discriminatory and equitable multilateral trading system will create a more efficient allocation and use of resources, and contribute to an increase in production and incomes, and to lessening demands on the environment.
With respect to the interface between trade and the environment, the South generally believes that the existing provisions of the 1984 GATT are adequate to deal with trade measures taken pursuant to legitimate environmental objectives contained in existing MEAs, and that trade measures pursuant to future MEAs should keep in mind the provisions of multilateral trading systems.
However, much more needs to be done by developed-country WTO members toward full implementation of existing agreements and achieving an enlightened view of equitable global trade expansion. This has become particularly urgent in the era of globalization," the Ambassador stated, because globalization is an opportunity for some, but a grave threat to others."
Let me tell you a metaphor, which I thought was very pertinent in the high noon of Reaganomics, of the neoliberal, freewheeling market. It was said that the American society was a society of opportunity, which everyone could access. This was to say that if poverty exists, what you have to examine is not the economic system, but the poor themselves. So, the whole spotlight would focus on people, who, for a variety of reasons sociological or educational were not in a position to join the society of opportunity."
To transpose this argument into the global argument was largely unspoken, but very much evident in all policy formulation," the Ambassador continued. That this is a world of opportunity, and this world of opportunity can be created along the free market system, and if many societies have not been able to plug into this world of opportunity, it was the fault of their statism, state control, lack or empresarial encouragement, corruption, or mismanagement of public resources."
The Washington Consensus was based on the belief that whatever the IMF or the Worldbank does is basically the correct way to proceed in producing the kind of world to which I have been referring, with some course correction from time to time, but no structural change or revolution in viewpoint. The belief was that nothing is broken, so we dont have to fix it."
But the recent series of economic collapses around the world have resulted in two important realizations, the Ambassador stated. One is that something is broken, and it needs to be fixed. The other realization is that the consequences of economic failure in the developing world are not economic, but rather social and political, the Ambassador said. That, the Ambassador added, is the human face" of globalization.
Rainer Braun, Program Officer
Judith Gearhart, Project Director
Julie Pereira, Executive Secretary
Matthew Quinlan, Manager, Coffee & Agroforestry Program
Companies compete for business on the basis of price, quality and style. Why not also compete on the basis of social accountability? Thats one of the goals toward which Ms. Gearhart is working on, as part of the CEPAAs efforts to promote better workplace conditions worldwide. A growing number of transnational companies are beginning to see workplace conditions as an important dimension of their routine quality control, not only because it affects product quality, but also because it affects the companys reputation among concerned consumers.
One example of companies engaged in positive competition is Nike and Reeboks response to the crisis in Indonesia. After Suharto fell, inflation rates were rising in Indonesia, so the government mandated a minimum wage increase of 15 percent. Several months later, Reebok increased wages an additional 20 percent and in October of 1998, Nike announced a wage increase of 25%. The press quoted Nike saying it was prompted to this increase after surveying workers, however, it was significant that Reebok had preceded them with a wage increase.
Were these increases sufficient? According to a Sweatshop Watch wage survey, a greater increase was needed. It is difficult to pin down what exactly is a decent wage, but it is even more difficult to make a significant increase in wages when other companies in a sector do not. This example signals that companies are starting to realize that decent wages and work conditions make good business sense. The pay-off comes in terms of a more secure reputation, stable relations with suppliers and improved productivity.
One of many tools available to a company seeking to improve its social image is CEPAAs auditable standard for workplace conditions, Social Accountability 8000 (SA 8000). The standard is based on principles enshrined in ILO conventions and human rights treaties, and covers eight areas working hours, compensation, free association and collective bargaining, forced labor, child labor, health and safety, discrimination and discipline. One of its more controversial elements is a wage component. Some of our critics say thats aspirational, but we think it is an essential part of the debate on workplace conditions. In the auditing process, compensation issues often go hand in hand with problems in free association and collective bargaining. Similarly, health and safety problems can reflect an abuse of overtime hours, or vice versa." Ms. Gearhart said.
The standard was born out of a growing realization in the 1990s that individual corporate codes of conduct were frequently ineffective, inconsistent, unenforced and failed to include even basic labor rights such as freedom of association and collective bargaining, Ms. Gearhart said.
What SA8000 does is take international norms and write them up in very practical ways, in effect translating them into management language so they can be used in the workplace setting. When you are talking to factory managers, you need to put directives into terms that are very specific. For example; the company: shall not engage in or support the use of child labor; shall ensure that workers representatives have access to their members in the workplace; and shall ensure workers always have one day off in every seven-day period.
Once more companies understand that socially responsible policies make them both more efficient and more competitive in the marketplace, countries will have less incentive to compete to offer lower wages and more flexible labor regulations. I participated in a conference in Peru in December, where local NGOs are still trying to bring the human rights debate into the mainstream. One strategy is to show companies that respect for human rights is also becoming a business issue, and lack thereof will make it increasingly difficult to compete for multinationals business. One of the interesting things these NGOs were saying to Peruvian companies was: Look, international standards like SA8000 are in increasing demand among U.S. and W.European multi-nationals. Central American factories are already implementing them and Peru will fall behind the curve if you dont realize your companys image is linked to its social image.
Countries face a similar dilemma to most of the companies wanting to improve workplace conditions and pay better wages; they face the challenge of attracting investment while also promoting human development.
How does a small-scale coffee grower stay in business when his bag of beans brings less at market than it cost to produce? Some simply give up. Others stay in the black with the help of retail schemes such as the one offered by Fairtrade Labelling Organizations International, the international umbrella organisation of Transfair and Max Havelaar initiatives worldwide. Fairtrade products cost a little more at the check-out stand so that producers can get a fair return on their labor.
What were trying to do with Fairtrade is actually link producers and consumers much more closely. Its a niche market. There are people out there who are willing to pay more for a product because they understand there is a problem with bargaining power in trade. Out of that, a lot of people are getting a lot of benefit," Ms. Pereira said.
The Fairtrade concept dates to the 1950s with the establishment of European charity shops" specializing in products from the South. The idea was borne out of frustration of the development agencies of not being able to move beyond traditional aid. It really became one of the more sustainable kinds of aid."
A decade ago, Fairtrade entered the mainstream retail market. Goods bearing the Fairtrade label started appearing on supermarket shelves throughout Europe. Today, the 17 foundations which together own the Fairtrade label market 7 products coffee, tea, honey, sugar, bananas, cocoa, and chocolate with a retail value of about $300 million a year. Fairtrade coffee sales account for 2 percent of the world market. In Switzerland alone, Fairtrade controls about 15 percent of the banana market. In the Netherlands, 89 percent of consumers recognize the Fairtrade name.
Why is a retail scheme such as Fairtrade necessary? Pereira blames the formidable power of transnational corporations, as well as trade liberalization policies in developing countries. Take the example of coffee. Prices are set on the New York Stock Exchange, and they fluctuate daily. Obviously, a small-scale farmer has very little impact on those prices, which are below the cost of production. So, very quickly, a farmer gets into a cycle of debt. The cost of credit can be very high. In Central America, for example, interest rates can go up to 50 percent around harvest time."
We believe that trade is very important for development, but we feel that its necessary to take care that trade doesnt just strengthen the stock in the trading relationship. Fairtrade is an opportunity for producers to trade at prices they would normally trade at if they came in at a level playing field and had similar bargaining power as the import buyers of their products," Ms. Pereira said.
The difference between the Fairtrade label and codes of conducts is frequently misunderstood. When you buy a pair of shoes made by a company that has a code of conduct that is thoroughly monitored, you know that those shoes were made by somebody working in certain conditions. When you buy a Fairtrade packet of coffee, you are making an economic transfer to that producer. That producer is earning more for that product than another producer would. So its quite different."
Fairtrade and similarly structured programs are no solution to trade inequality, Pereira conceded. To stay in business, Fairtrade is able to label only mass-market products, and contracts only with producers capable of meeting stringent quality and delivery criteria. That means were not targeting the weakest or the most disadvantaged producers around the world. Well never be able to help the women basket weavers at home. Nevertheless, it is an exciting concept, and it does many, many good things," Ms. Pereira said.
El hambre habla mucho más fuerte que la ecología. Hunger speaks much louder than ecology. Thats how a Latin American coffee grower responded when Mr. Quinlan tried to convince him of the benefits of good land stewardship.
The point was not lost on Mr. Quinlan, who has witnessed first hand the devastating consequences of highly intensified coffee production on small-scale farmers in Latin America.
Transnationals got heavily involved, especially in indigenous communities, which ended up turning traditional systems of labor exchange and redistribution of wealth into very unique and beneficial mechanisms for assuring crop at low cost. This transformation created a movement from a system of high biological and economic diversity to one in which you have one product highly dependent on a volatile market," Mr. Quinlan said.
The impact on biodiversity is evident to even the casual observer. Forested coffee fields that at one time supported 75 percent of the species found in neighboring forests now only support 20 percent. Farmers are very aware of it. One of them said to me, I remember when my grandfather used to count 10 of these rare parrots every day. Now Im lucky if I see one in 10 years." Producers experienced soil loss, hybrid burnout, and lower quality.
There has also been a great social cost. To have indigenous systems that were once self-regulators of a communitys conduct turned into mechanisms of exploitation has deep impacts that last generations. It means kids leave and go to the city because they see no future in a system that their own parents couldnt get out of."
What about solutions? Mr. Quinlan pointed to several possibilities.