VIEWPOINT MAGAZINE AUTUMN 2012

F e d e r a t i o nviewpointautumn 2012 nO: 1

Interest rates, exchange rates and the overvaluation of sterlingPage 08

Tackling austerity and climate changePage 10

Worse than austerity ahead Page 12

Greece today – Britain tomorrow?Page 20

Putting collective bargaining on the political agenda Page 15

The Institute of Employment Rights4th Floor, Jack Jones House1 IslingtonLiverpool L3 8EGTel: 0151 207 5265Fax: 0151 207 5264Email: [email protected]

The Institute of Employment Rights was launched in 1989. As a labour law ‘think tank’, supported by the trade union movement, its purpose is to provide research, ideas and detailed argument. In 1994 the Institute was granted charitable status.

The results of the work of the Institute are published in papers and booklets and developed at conferences, seminars and increasingly via on-line materials. Our aim is to provide the tools of analysis and debate for the trade union movement in the area of labour law.

General Federation of Trade UnionsHeadland House308/312 Grays Inn RoadLondon WC1X 8DPTel: 020 7520 8340 (24hrs)Fax: 020 7520 8350Email: [email protected]

The General Federation of Trade Unions was founded in 1899. It provides services and benefits, mainly in the fields of education and research, to affiliated unions. The education work of the Federation is administered through an Educational Trust, which was established in 1971.

Federation Viewpoint (the 2012 update of Federation News) is a series of short articles in the subject areas of labour law, labour economics and industrial relations, which are of interest to industrial relations practitioners and students.

EditorDoug Nicholls

Assistant Editor for this editionCarolyn Jones

Advisory Editorial BoardJohn BellRichard BeresfordStephen CavalierBill DewhurstRosie EaglesonKeith EwingJohn FrayDan GallinJohn HendyJudith JacksonCarolyn JonesJoe MannAileen McColganDoug NichollsRoger SeifertDave SpoonerRoger WelchFrank Wilkinson

We welcome the submission of articles for consideration for publication in future editions. Please send articles to the Institute of Employment Rights at the above address or electronically to [email protected].

The views expressed in Federation Viewpoint do not represent the collective views of the Institute of Employment Rights or of the GFTU, but only the views of the authors. The responsibility of the Institute and the GFTU is limited to approving this publication as worthy of consideration within the labour movement.

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FEDERATION vIEWPoInT 03

Tackling austerity and climate changePage 10

Austerity: European stylePage 17

Worse than austerity aheadPage 12

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04 EditorialBy Doug Nicholls

Features06 Reforming banksBy Prem Sikka 08 The wasted yearsBy John Mills 10 Shifting the AgendaBy Keith Sonnet12 No way to run an economyBy Enrico Tortolano 15 The role of trade unions in economic growthBy Keith Ewing 17 Monti 11, Mode 4 and social dumpingBy Brian Denny 20 Solidarity with the people of GreeceBy Paul Mackney23 European CapitalismBy Linda Kauchner26 Yankee DoodlesBy Jonathan Ledger

Biographical notes

Brian Denny is Editor of trade union journal RMT News, a journalist and author covering European affairs and culture over many years. He contributed to a pamphlet Social Europe is a Con, published by Democrat Publications ISBN 978-1-904260-10-3 available from www.caef.org.uk

Keith Ewing is Professor of Public Law at King’s College London. He is President of the Institute of Employment Rights and Legal Editor of the Journal International Union Rights.

Carolyn Jones is Director of the Institute of Employment Rights.

Linda Kaucher is a researcher on international trade. With Masters degrees in Journalism and in Human Geography, from Australia and the London School of Economics, and a broad background as an educator, she campaigns to take the lid off trade secrecy.

Jonathan Ledger is General Secretary of NAPO, the trade union and professional association for family court and probation staff.

Paul Mackney is Chair of the Greece Solidarity Campaign (GSC) and was former general secretary of NATFHE (now in UCU).

John Mills is Labour Party Councillor for Camden, Vice-Chairman of the Economic Research Council and Chairman of the People’s Pledge Campaign for a referendum on Britain’s EU Membership.

Doug Nicholls is General Secretary of the General Federation of Trade Unions.

Prem Sikka is Professor of Accounting at the Centre for Global Accountability in the University of Essex.

Keith Sonnet is co-chair of the Alliance for Jobs and Climate.

Enrico Tortolano is Head of National Bargaining Policy in the Public and Commercial Services Union.

Neoliberalism is being irreversibly fixed in international law Page 23

FEDERATION vIEWPoInT04

Welcome to this first edition of Viewpoint. We have retained the best of the former Federation News, a well-established trade union

journal, but committed ourselves to a new look, with plans to get the journal even more widely read. Viewpoint will also be placed on our website www.gftu.org.uk to attract an ever widening readership. We look forward to producing future issues with our long term partners on this publication, the Institute of Employment Rights.

Viewpoint contributions are intellectually and academically rigorous, yet written in a style that convinces and hopefully leads to action.

A good journal stimulates thought and debate and informs. It certainly does not broadcast an editor’s, or an organisation’s line. It is an educational tool seeking clarity of mind. Controversy and disagreement are essential elements of this. The best information and ideas always have popular appeal. Yet they are also very challenging. We want Viewpoint to be a source of discussion in the learning environment and in the workplace. We welcome readers’ suggestions for future issues and of course your contributions.

This is a very strong issue for our re launch.Contributors pull no punches and tackle head on the most difficult issues of our day. How is it that an unelected Coalition without a mandate has convinced workers to take all the pain while their friends get all the gain in the biggest heist of our national wealth in history?

What is happening to our political democracy, our economy, manufacturing and public services is dangerous, unnecessary and above all easily reversible. But as ever, progress is not going to come about without some hard thinking and even harder political action.

I remember distinctly in May 2010 as the Chancellor’s first budget was announced and he said that it was not really about economics, but about “changing the way in which Britain was governed for ever.” How many leading trade unionists recognised that this meant it was not business as usual? There was indeed an early recognition of how the Coalition’s obsession with supporting the City of London at the expense of any other social grouping, would lead to a disastrous double dip depression. Disaster is not difficult to predict when you are dealing with the economics of the madhouse and vandalism. But such a whole scale catastrophe as we now face is more difficult to get out of.

Fear has set in and as one union delegate reminded a conference recently, FEAR stands for how False Economics Alters Reality. It is perhaps the combination of these two factors, a continual illusion in everyday discussion and the media that the national piggy bank is so empty we have no alternative but to tighten our belts together with fear that leads to insufficient resistance to mass unemployment and privatisation.

ed

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lReality also changes with the words we use.

The most misused word is ‘austerity’. We should stop using it. Austerity really means having to do without something that is unnecessary. It assumes that there really is a need to do without something. A history book called Austerity Britain is about the five years after the war when human, economic and social structures were genuinely recovering from the depletion of war. There were real shortages of real things on the level of basic necessities.

But we are not in austerity Britain now. The bankers and super rich can genuinely do without their bonuses, fast cars, mega mansions and yachts, but we cannot do without our jobs, our public services, our free national health service, and our infrastructure of utilities, industries and publicly accountable bodies. We can’t do without our pay and pensions either. To use the word austerity is to buy into the idea that things are tough and there is little left in the kitty. In reality we cannot do without the civilising and productive effect of an infrastructure of public services, we cannot get by without well paid work, free education and health and social services safety nets for when times are hard. We are therefore not facing austerity, but a highly politically orchestrated attack on the productive, social economy. Things are tough, but not because there is a shortage of wealth creating labour, or indeed money.

Things are tough because the most sophisticated mechanisms in human history have been found to take the wealth that is created in social production and put it into the hands of a small minority of people who put it into their own pockets after gambling with it on the casino. We are in tough times because we are being so spectacularly fleeced. Always remember that everything in those bank accounts comes from us, our wages, our savings, our pension funds, our mortgage payments, the cash transactions of small businesses, our purchases. Money doesn’t grow on trees it exists as a means of exchange in the productive cycle.

We tend, in a very British way, to make a euphemism for the recent economic crises and talk of the ‘greed’ of the corporate elite and the banks. True, individuals within these institutions know no limits to their personal ambitions to stuff their astronomical private bank accounts full of our money. But the relentless, short term drive for ever increasing profits, regardless of their source and their consequences, and the near total deregulation of the financial speculation that drives this profit motive is politically, economically and legislatively approved. Indeed it is the constitutional purpose of many institutions, including the IMF, WTO and the EU to achieve such objectives.

Once a previous, post war generation found a solution to the chaos of unfettered liberal


capitalism and brought some sanity and coherence to production through nationalised industries and utilities and the development of welfare models of society, including vibrant publicly funded services and democratically accountable social and political structures. Now our generation struggles with the zombie like presence of neoliberalism. Liberalism was killed off by the post war political consensus. Now it has come back and is intent on sweeping aside all of the progress of the post war social democratic consensus.

Included in these of course were the respected place of trade unions, progressive trade union and employment rights and nationally cohesive political structures designed to introduce some elements of planning and consistency to industrial and social development. Social democracy sought to distribute wealth, build on fairer taxation systems and ensure the investment of capital in production and manufacturing at the heart of the economy. Today new solutions to new problems have to be found. Contributors to this issue do not shy away from the scale of the new solutions that have to be tackled.

Those who caused the crisis have got off with it not just scot free, but more powerful and richer than before. Professor Prem Sikka reveals not just the scale of their reckless gambling, but the futility of government plans to ‘regulate’ the banks. Needless to say current proposals through the Financial Services Bill do not even put a leash on the rabid freedoms of the spivs. Tackling the City of London is surely the touchstone of any genuinely progressive political policy for the future.

From the devastating, but unreal world of the finance houses, we are taken down with a bump by John Mills to consider the heart of the real economy in manufacturing. A lot of recent debate has concentrated on the Keynesian requirement for public investment in public works and services, but John gives us a salutary reminder of the truth that unless we protect and harness manufacturing, our nation’s ability to pay for public services is limited. He warns, like other authors here, of extremely serious consequences if present policies are pursued much longer.

A regrowth of the productive economy and industry cannot disregard climate change and the environment. Keith Sonnet argues in effect that we have to see an urgent concern to create full and meaningful employment as being integral to protecting the planet from further environmental hazards. Indeed it may well be that the increasing sophistication of techniques to harness renewable energies may turn out to be a significant driver in high skilled job creation. For sure we can no longer talk in abstract of ‘growth’ without proper consideration for the climate.

In his contribution Rico Tortolano provides one of the most concise and convincing rebuttals of the entire neoliberal economic project. He points out that many other countries, notably in Latin

America and elsewhere have chosen an alternative and more successful path putting the human being again at the centre of the economic and political project. He touches also upon the inspiring role trade unions have played in reversing the direction of the all-powerful neoliberals.

Professor Keith Ewing takes up the issue of trade unions and demonstrates how the neoliberal agenda requires, almost as a centre piece of its strategy, the destruction of union rights and most fundamentally collective bargaining. This must be resisted and Keith proposes restoring collective bargaining via sectoral forums.

Already ahead of us in some senses, the neoliberals have put into place through the European Union a number of directives and policies designed to restrict our ability to defend collective bargaining and our previous gains. In his piece, RMT Journal Editor Brian Denny, clearly spells out where the latest round of difficulties comes from in the Monti 11 Regulation. This is something of vital importance for all trade unionists to become more aware of and Brian’s hard hitting expose of what is in store cannot be ignored.

Of course it is not just that there is worse ahead for us, but also the fact that we have seen the incredible unfolding of the plunder of Greece and complete disregard of the will of its people in the birthplace of democracy. Former NATFHE General Secretary Paul Mackney spells out the anatomy of destitution ravaged deliberately upon that country. Is it really that far-fetched to recognise that this is how Britain is heading?

Events do not occur by accident even at national and intercontinental levels. Lecturer Linda Kauchner gives us a flavour of the highly organised and highly secretive negotiations that take place to wreak the havoc we have witnessed in Greece and throughout Europe. The usual question is cock up or conspiracy? And the usual answer is they conspire carefully to create a cock up. The grief we are suffering has not arisen by accident and those with hands on the levers of power have worked very hard at it. Linda gives an insight into how they have done this.

Finally, we have a short free standing tail piece from NAPO General Secretary Jonathan Ledger who links the transformation of London by the Olympics to discussions with trade unionists during a recent GFTU study visit to New York. The Olympics were enjoyed by millions because of the very public BBC which the neoliberals hate, and because of the world class technical skills of BECTU members, and the wonderful photography, writing and commentating of NUJ members. Such sporting and reporting and recording brilliance give us a glimpse of what human powers would be allowed to blossom if we could as a Movement deal concertedly with the most destructive political and economic trends that constrict and diminish our potential.

Doug Nicholls

‘‘We are in tough times because we are being so spectacularly fleeced. Always remember that everything in those bank accounts comes from us, our wages, our savings, our pension funds, our mortgage payments, the cash transactions of small businesses, our purchases”’


WHAT ARE WE To Do WITH BAnks? That has been a recurring question for the last four years. Any reforms have to recognise the entities for what they are.

Banks lubricate the wheels of capitalism through credit, by effectively printing money, and are indispensable to a modern economy. But they have also brought the world economy to the edge of disaster though reckless speculation, gambling and abuses. This did not create anything of value but generated mega bonuses for bank executives.

The extent of gambling is quite frightening. At 31st December 2007, just before the banking crash, banks had written derivatives with a face value of some US$1,148 trillion. Most of the contracts were written between the years 2000 and 2008. Just five banks had derivatives with a face value of some $170 trillion. JP Morgan had $2.251 trillion of assets and $91.339 trillion face value of derivatives. Derivatives are clever bets on the movement of exchange rates, interest rates, commodity prices and anything else that moves. Of course, in the finance world they are wrapped-up in the language of risk-management and hedging.

Derivatives are a fool’s paradise which create the impression that risks are being extinguished. That simply is not the case, especially when markets go belly-up and underlying assets prices (such as houses) decline. The outcome of the derivative contracts will not be known for another 10-15 years as they involve long-term gambles and involve numerous parties as the contracts are sliced, diced and repackaged.

The warning signs about derivatives have been flashing for a long time. US economists Myron Scholes and Robert Merton are credited with developing models for trading in derivatives which offered the possibilities of comparatively low-risk trading through a calculated use of borrowing, lending and short selling. In 1997, they received the Nobel Prize for their efforts and became darlings of stock markets. They made huge profits through Long-Term Capital Management, a hedge fund. But just seven months after receiving their Nobel Prize, their models were in trouble as they took no account of the inherent weakness of the capitalist system. At one stage, LTCM had capital of only $4.72 billion, but borrowed $124.5 billion and thus tied numerous other banks to its risky positions. In 1997-98, LTCM misjudged the severity of the East Asian and Russian financial crisis and found itself with $400 million of capital, $100 billion of debts, $4.5 billion of losses and derivatives with a face value of $1 trillion. Rather than letting LTCM sink, the US government feared the knock-on effects and bailed it out with the help of a consortium of banks.

Derivatives were central to the demise of Bear Stearns and Lehman Brothers. At the time of its demise, in 2008, Lehman Brothers had 900,000 derivative contracts with a face value of around $738 billion. These are still unraveling. Bear Stearns also collapsed in 2008. For nearly six years before its demise, almost all of its pre-tax profits came from

reForming Banks

Banks have been addicted to gambling By Prem Sikka


speculative activities. The bank had shareholder funds of only $11.8 billion, but borrowing of $384 billion. Its derivatives had a face value of $13.4 trillion, not much less than the entire gross domestic product of the US. At the end of 2007, Northern Rock had derivatives with a face value of £125 billion. The bank has been sold to Richard Branson’s Virgin empire but many of its risks of derivatives remain with the UK taxpayer.

After the banking crash, the face value of derivatives is still in excess of $1,000 trillion. The exact economic exposure of banks to these bets is not known, but a 1% exposure could be catastrophic for the world economy. The global gross domestic product is currently around $65 – $70 trillion.

Gambling, frauds and fiddlesThere is a strong case for curbing the speculative side of banking. Banks have been addicted to gambling and are also serial offenders. The mid-1970s banking crash drew attention to frauds and fiddles. The crisis infected the property and insurance sectors and the government had to secure a loan from the International Monetary Fund (IMF) to see it through.

Then the 1980s saw the endowment mortgage mis-selling scandal. Around 8.5 million mortgaged related policies were sold. Salespersons collected commissions and executive collected fat bonuses, but 60% of the policies turned out to be worthless, leaving their holders with a shortfall of £60 billion. This was followed by the pensions mis-selling scandal that short changed 1.4 million people by £13.5 billion.

The 1990s saw the precipice bonds scandal and thousands of investors lost money. This was followed by the payment protection insurance (PPI) scam running into £10 billion.

In June 2012, financial regulators in the USA and UK fined Barclays Bank US$290 million and £59.5 million respectively for manipulating the London Interbank Offered Rate (LIBOR) which made the bank look more credit worthy and also generated huge profits. Other banks are also on the regulatory radar. In February 2012, Barclays also drew the ire of the UK Treasury and the government introduced retrospective legislation to halt two tax schemes that would have enabled Barclays to avoid around £500 million in corporate taxes. The Treasury’s press release referred to the schemes as “highly abusive”. Of course, other banks are also implicated in tax avoidance. The Royal Bank of Scotland (RBS) bought back its own bonds in the market at a profit of £3.8 billion. The deal was structured in such a way that the bank avoided paying any tax on this transaction. In 2009, it was reported that the bank avoided around £500 million of UK [and US] corporation tax by using large sums of money to create complex international tax-avoidance schemes.

In July 2012, the US Senate Permanent

Subcommittee on Investigations reported that HSBC facilitated money laundering for shadowy organisations and individuals from Mexico, Iran, the Cayman Islands, Saudi Arabia and Syria. HSBC is expecting a US fine of hundreds of millions of dollars.

Whichever way you look at it banks have been serially corrupt. Fines and penalties have become part of normal banking business. The costs are simply passed on to customers. The fact that banks keep on getting away with it is indicative of the bankruptcy of UK politics. There is no real competition amongst political parties. They have all been advocating the same ideology of light touch regulation and have been in awe of the City of London. The result has been an economic disaster.

The new financial services Bill going through parliament is based on a report by Sir John Vickers and is not up to the job. We need a legally enforced separation of retail and speculative (some like to call it investment) banking. The speculative side should not be able to borrow money from insurance companies, pension funds or retail banks as the gambles would surely infect and destroy ordinary people’s savings. The speculative side should have unlimited liability. Let us see how many are willing to risk their own millions?

Three reform possibilitiesThe incessant demands from the stock market for higher profits are a key driver of the predatory practices. Stock market don’t care whether profits are from tax avoidance, money laundering or from plundering people’s savings. As executive remuneration is linked to profits, they personally benefit from dodgy practices. This needs to be tackled through three possibilities. Retail banks can be nationalised and thus brought under public control and regular parliamentary scrutiny and audits by the National Audit Office (NAO). Such banks can also be used for macroeconomic policies and direct investment in specific sectors as the government seeks to rebuild and rebalance the economy. Alternatively, banks can be turned into co-operatives and mutuals.

There has been a vast gulf between the risk preferences of bank executives and ordinary people. Normal people want a reasonable return on their investment, detest rip-off charges and don’t like fat-cat salaries. The Con-Dem government hopes that shareholders will check corporate abuses, but this is not feasible as shareholders have only a short-term interest in companies and care little about the social consequences of the quest for higher returns. The duration of average shareholding is less than three months. The abuses need to be checked by democratising banks. Employees, savers and borrowers should elect directors and also fix their remuneration. This will exert pressure on directors to give good service to savers and borrowers. Rip-off charges for loans and credit cards and measly returns on savings will surely jeopardise their reappointment. In many banks the front line staff earn around £17,000 a year. They are unlikely to vote to approve a large pay packet for an executive unless they feel that they are getting an equitable share of profits.

Banks have been poorly regulated because of the revolving doors. Bank executives become regulators and then a few years later return to the banking sector. They are not in the habit of biting the hand that feeds them. The regulatory committees should contain individuals who come with a different mindset and are more concerned with the public interest rather than what is good for bankers. The collusive atmosphere should be checked through annual parliamentary hearings. All policy meetings of the banking regulators should be held in the open, and information in the regulator’s possession should be made publicly available. Regulators should have permanent strategic presence at all banks so that danger signs can be monitored on a real-time basis.

The above is the beginning of reforms necessary to curb the excesses of an industry that has damaged the lives of millions of people.


WE ARE FACInG A DAUnTInG PRosPECT. It is years of austerity, high unemployment, cuts in public expenditure, nil or negative growth and mounting debts, combined with more and more inequality. Is this all inevitable? Is the best we can do to defend ourselves as best we can, either individually or collectively, against this dismal scenario, while accepting its inevitability? Or is there a way ahead which would break us out of current trends, leading to a far better outcome? Let me try to persuade you that there is an alternative, that all the austerity we are promised is unnecessary and that our present economic predicament is directly the result of entirely avoidable policy mistakes which we should never had made and which would not be that difficult to correct.

solving the export deficit The starting point is to recognize that our fundamental problem, from which most of our other difficulties flow, is that we cannot pay our way in the world. We do not have enough exports to pay for our imports, so we have a payments deficit every year. This sucks money out of the economy, creating a highly depressing influence on economic output. The only practical way of filling the gap is by more and more borrowing by the government and by private consumers. This is why our public and private debts are so high. It is directly the result of our huge balance of payments deficit. Our weak balance of payments position also makes it impossible to run our economy at full throttle, to avoid the

deficit becoming even bigger. This is why we have a massive unemployment problem, with not just 2.6m but nearer 5.0m people out of a job but who would be willing to work for a reasonable wage.

Why do we have a huge and persistent payments deficit? It is because most exports from all developed and diversified economies such as ours are still manufactured goods and we have allowed our country to deindustrialise to a point where we do not have enough manufactures to sell to the rest of the world to pay for everything we want to import from abroad. Income from services and investment income is nothing like large enough to fill the gap.

And why is our manufacturing base so weak? It is because it is far more expensive to produce almost everything here than it is elsewhere in the world, especially in the Far East. And why has this happened? It is because the cost base in the UK is much higher than it is in most of the rest of the world. The cost base is made up of all the domestic costs – in the end very largely wages and salaries – which make up what we charge the rest of the world for our exports. The amount we charge is determined by the exchange rate which, in the UK and indeed in many other western countries, is far too high compared to what it needs to be to make our exports competitive in world markets.

How did we – and most of the West – ever get into this predicament? Overvaluation of sterling is a longstanding UK problem going back to the

the wastedyears

Interest rates, exchange rates and the overvaluation of sterling By John Mills


nineteenth century, but it got much more acute in the 1970s and 1980s. When prices were then rising rapidly, economic policy makers fixated on inflation as economic enemy number one. As a result, to get inflation down, interest rates were raised, the money supply was tightened dramatically, unemployment went up – and price rises did come down. But none of the policy makers involved seem to have bothered with what happened as a result to the exchange rate, which shot up as a result of high interest rates and tight money.

Unfortunately, this happened just as South Korea, Hong Kong, Taiwan and Singapore – the so called Tiger Economies – were getting into their stride and also just when China was entering the trading world. The result was that the cost base for manufacturing from the 1980s onwards charged out to the rest of the world by Pacific Rim countries, particularly China, has been on average about half what it is in the West. Because of the continuing obsession among the West’s policy makers on maintaining and reinforcing all the policies needed to keep inflation down, it still is. The result is that we have de-industrialised while the East now has far more than it fair share of manufacturing. Manufacturers in the UK and many other western countries have simply been unable to compete.

The evidence for this is overwhelming. Our share of world trade has tumbled from about 25% in 1950 to less than 3% today. Barely more than 10% of UK output is manufactured goods compared to 30% or more in some Pacific Rim countries. As manufacturing has declined, so has the supply it provided of good quality well paid blue collar jobs while areas of the country previously involved in industry have been left with very little to contribute to Britain paying its way in the world. – maybe a bit of tourism but not much else.

What can be done?What can we do about this? We have to get the value of the pound down – right down – until we can get the UK cost base sufficiently low to enable us to compete. How much devaluation would be required? Probably about 25% from where we are now, to generate enough additional exports to eliminate our payments deficit, to allow the economy to grow at 3% or 4% per annum, to reduce unemployment to perhaps 3% and to provide the funding we need for public services.

Is it possible to get the exchange rate down? Yes. If the government was determined to get this done, they could do it relatively easily. Could other countries retaliate? They might try but there is very little they could do to stop us, although actually retaliation on any major scale is unlikely. The US dollar is a reserve currency, making it much more

difficult for the USA to devalue than for us to do so. The Eurozone has plenty of other pre-occupations. As our share of world trade is now less than 3%, the Pacific Rim countries are likely to be no more concerned if the pound comes down from $1.50 to $1.20 as they were when it went from $2.00 to $1.50.

Will a 25% devaluation happen? Probably not – at least for now – because for decades practically every politician, civil servant, political commentator and academic has thought that keeping inflation at around 2% was a much more important economic objective than getting the exchange rate right. Unfortunately, policies to keep inflation down also keep the pound far too high. It is these sorts of policies which are the catastrophic mistake we have made.

Exposing the myths around devaluation Why, nevertheless, is almost everyone against ensuring that we have a competitive exchange rate if this is the key to our national economic revival? It is very largely because most people believe a whole range of things about devaluation which are not true. Here are the key ones. Most people believe that lowering the pound would increase inflation. They should look at the historical figures. This is not what happens. It is also widely believed that if we charge lower prices for our exports to the rest of the world, this must make us worse off. This is not true either, as again all the available statistics show. Then we are told that, even if we wanted to get the pound down, we could not do it because the

rate is determined by market forces and not by the government. This is also completely untrue. Government policy has a huge impact on the exchange rate. Apart from anything else, expanding the economy and deliberately making the balance of payments gap wider for a while would soon get the pound down,

If, on the other hand, the government continues to keep the value of sterling roughly where it is at the moment, this policy will eventually fail and the pound will come down whatever government policy may be. This is because with no growth and mounting debts, sooner or later we will become insolvent, a bit like Greece. When we reach this point, sterling will crash, after wasted years we persevere with the wrong policies. When this happens, however, our economy will recover, just as it did after the all too temporary devaluations of 31% in 1931 and 19%, in 1992. In both cases inflation went down and everyone’s standard of living went up.

Now is the time to do the same again and to keep sterling competitive – not to waste years in a completely unnecessary and avoidable depression.

‘The evidence for this is overwhelming. Our share of world trade has tumbled from about 25% in 1950 to less than 3% today. Barely more than 10% of UK output is manufactured goods compared to 30% or more in some Pacific Rim countries’


AUsTERITy Is THREATEnInG mILLIons of people with debt, despair and the indignity of unemployment. The Government’s policy of cutting public spending has tipped the economy into a double dip recession, pushing us deeper into recession by increasing unemployment, reducing tax receipts and limiting government funding for economic stimulus. This economic crisis, which is affecting so many, is the direct consequence of the failure of the global banking system. It will not be solved by putting more and more money into the banking system through quantitative easing. Instead, we need massive public and private sector investment in creating jobs.

Keynes said, “ Look after employment, and the budget will take care of itself”. Keynes was right. Employment leads to increasing income for individuals, families and their communities. It increases incomes for businesses as people start to spend. Tax revenues rise with employment and the decline in bankruptcies. Increasing income for governments enable them to tackle debt, deficits and the big issues of our day.

With interest rates at an all time low, government can borrow to invest in the infrastructure projects that this country so badly needs. Therefore to reduce public debt we have to grow jobs through public investment.

The Climate Change CrisisAlthough Keynes was right he wasn’t able to take into account the real crisis facing the world, which is climate change. The impact of climate

change is increasingly evident across the world. Except for a few die hard Tories like Nigel Lawson few now doubt the scientific evidence that human activity has increased average temperature, leading to rising sea levels, more frequent and intense storms, a loss of biodiversity, continued loss of artic ice and glaciers and increased intensity of precipitation. The UN climate change talks have focused on keeping the levels of carbon dioxide and similar gases in the atmosphere to 450 parts per million, which gives a 95% chance of limiting world temperature rising by more than 2% by the end of the century, which would cause the melting of the Greenland icecaps and a 2 metre rise in sea levels. To achieve this target, carbon emissions have to be reduced by 85% by 2050 with action to limit carbon emissions by between 20-45% by 2020.

To mitigate the effects of climate change will require a commitment by governments in the developed world both to invest in renewable energy and new technologies and to assist developing and underdeveloped countries to improve the living standards of their citizens in ways that do not aggravate the problems of climate change. In the UK the last Labour Government introduced the worlds first Climate Change Act and committed the country to ambitious carbon reduction targets. Despite the stated intention of the Tory led coalition to be the most ‘green’ government ever, David Cameron has yet to make a major speech on climate change as

shiFting the agenda

Tackling austerity and climate changeBy Keith Sonnet


Prime Minister and George Osborne as Chancellor is rapidly seeking to undermine previous climate change commitments. The overnight reduction in feed in tariffs is just one example.

The climate change deniers are using austerity as an argument for not taking strong action on climate change. Indeed they use the insecurity that austerity has created to portray tackling climate change as a problem rather than a solution.

The austerity cuts impact hardest on the poorest and the most vulnerable in our society. Climate change likewise impacts hardest on the poor and those with the fewest resources to prepare and plan for its impacts. Climate change has the potential to undermine past progress in poverty alleviation and, as the 2007/8 UN Development Report stated, is one of the greatest development challenges of our time. The International Energy Agency (IEA) gives us just 5 years to avoid locking-in irreversible and catastrophic climate change. Recent evidence suggests that every month we delay necessary action to decarbonize the global economy, the greater the consequences will be.

The Stern Review on the Economics of Climate Change stated that climate change is ‘the greatest example of market failure we have ever seen’. The Review demonstrated that failure to act now would lead to greater costs being incurred by future generations. Austerity is condemning this generation of young people, in particular, to unemployment and lower living standards whilst future generations will suffer both the consequences of those policies and the effects and costs of climate change.

There is an alternativeThere is an alternative to austerity, economic insecurity and climate catastrophe. We have to both create jobs for the 99% in our country and eliminate greenhouse gas emissions to keep our planet safe for the 100%. The faster we do this the cheaper and more effective it will be. Tackling climate change is therefore part of the solution to tackling the huge debts created by an out of control global financial system.

The IEA estimates that $1million invested in renewable energy creates 15 jobs whereas $1million invested in oil and gas creates only 7 jobs. The Green New Deal Group has illustrated very clearly in its reports the jobs that public and private investment can generate that help meet our carbon reduction targets. The ETUC estimates that just 1% of national income invested in innovative technologies can create up to 2 million jobs. The Association of Public Service Excellence has shown how Feed-in Tariffs and the Renewable Heat Incentive can provide a source of funding to enable local authorities to create jobs, tackle climate change and reduce energy bills. Investing in insulating every home can create many thousands of jobs.

There is an alternative to austerity, economic insecurity and climate change. What we lack is the political will to act. A new approach is essential if people are to have hope for the future. Creating the political will starts with building a movement from below, linking anti-austerity struggles with the environmental movement.

The Alliance for Jobs and Climate – shifting the agendaThe Alliance for Jobs and Climate was created following a meeting in January 2012 of 24 organisations representing trade unions, faith groups, climate activists, young people and NGOs including Greenpeace and Friends of the Earth. All agreed that despite all the political activity around climate change there remains a vacuum of both effective public pressure and political will for real change. The failure to unite a broad based movement with a limited range of demands is undermining effectiveness. A key reason for this lack of cohesion is the absence of common, shared goals and demands that can provide an effective link between the environmental/green movements, the trade unions and others concerned with the economy and employment. The Alliance for Jobs and Climate is seeking to provide the coordination and coherence needed and to promote activism nationally but also through alliances locally.

Through it’s SHIFT campaign the Alliance’s key demands are for• Massive investment in jobs: Decent jobs, to meet real needs, transform

our economy and safeguard the planet on which we all depend• Massive Shift to Renewable Energy:Shift from fossil fuel to renewable

energy, powering innovation, meaningful employment, securing energy supply and reducing energy costs.There is an alternative to austerity. But, we need to SHIFT the agenda.

From austerity to jobs; recession to economic activity; fossil fuels to renewables.

Join the Alliance for Jobs and Climate: Shift the Agenda

For further information go to www.jobsandclimate.org

‘The IEA estimates that $1million invested in renewable energy creates 15 jobs whereas $1million invested in oil and gas creates only 7 jobs’

‘The Stern Review on the Economics of Climate Change stated that climate change is ‘the greatest example of market failure we have ever seen’


THE REALIGnmEnT oF PoWER and privilege at the summit of British politics has delighted corporate boardrooms and City bankers. For the rest of us the coalition Government has meant hardship, the hemorrhaging of our public services, social unrest and increasing inequality. The plan to tackle the fiscal deficit by implementing the economic policies of deregulation, privatisation and massive public spending cuts has seen billions of public money siphoned off to the ultra-rich. According to research by the Tax Justice Network a global super-rich elite has also exploited gaps in cross-border tax rules to hide an extraordinary £13 trillion of wealth offshore – as much as the American and Japanese GDPs put together.

In the UK, latest ONS figures have shown after the output of the economy fell by 0.7% between April and June 2012 the UK recession has deepened to an historical low. The contraction was much bigger than expected and follows a 0.3% drop in the first three months of the year. BBC economic correspondent Stephanie Flanders describes the downturn as “... by some measure the worst four-year period for the UK, outside wartime, in at least 100 years – worse than what happened in the 1920s and 1930s, and worse than anything in the 1970s and 1980s”

In fact the economic illiteracy masquerading as government deficit reduction policy has worsened to such a degree that even the IMF in their latest UK report (July 2012) felt compelled to urge George Osborne to start preparing an emergency package of spending increases to deliver growth as it called for further interest rate cuts and more electronic money creation from the Bank of England to lift Britain out of its double-dip recession. We’re now in the first ‘double-dip’ recession since the economic turmoil of 1975. ‘Double dip’ of course is where the economy goes back into a recession before it has had a chance to recover its previous high of economic output.

All in this together?Prime Minister David Cameron delivered his line in postmodern irony when he claimed we were all in this together. The super-rich such as himself are actually increasing their share of national wealth as working people get force-fed austerity. His ideologically motivated programme of cutting public spending, tax breaks for the rich and a new wave of privatisations are the coalition’s tools for plundering the public purse. At the same time, the mass of wealth sitting out of reach of tax authorities is so great that it reveals government measures of inequality radically underestimate the true gap between rich and poor. Recent calculations show that £6.3tn of assets is owned by only 92,000 people, or 0.001% of the world’s population – a tiny class of the mega-rich

no way to run an economy

Worse than austerity ahead By Enrico Tortolano

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who have more in common with each other than those at the bottom of the income scale in their own countries. “These estimates reveal a staggering failure: inequality is much, much worse than official statistics show, but politicians are still relying on trickle-down to transfer wealth to poorer people,” said John Christensen of the Tax Justice Network. The trade union movement needs, as a matter of urgency, to expand and accelerate its campaigns, political education and economic liaison groups.

Economists such as Nobel Prize-winner Paul Krugman and former World Bank chief economist Joseph Stiglitz rightly argue that further cuts now will prolong the “double dip” recession, exacerbate inequalities, give rise to stagflation and push Britain towards another economic crash. Yet Cameron, Clegg and Osborne persist with lies and distortions about the urgent need to cut debt and deficits. George Orwell could have been describing the coalition when he warned “political language is designed to make lies sound truthful… and to give an appearance of solidity to pure wind.” The political, corporate and media elite have manipulated the national deficit and cutting public expenditure into the defining political issue. The ruling establishment has turned a global financial crisis caused by corporate greed and private sector incompetence into a virulent attack on public services.

Naomi Klein in her excellent book The Shock Doctrine documents this strategy of turning ‘crises’ perceived or otherwise, into profit-making opportunities for the rich. The thesis of The Shock Doctrine is that we’ve been sold a fairy tale about how these radical policies have swept the globe, that they could only do so on the back of economic crises and dislocation. As Klein rightly argues “It doesn’t necessarily have to be an outright military coup, which are the conditions in which this ideology had its first laboratories. It can just be a bad-enough economic crisis, in an electoral democracy that allows politicians to say, “Sorry about everything we said during the campaign. Sorry about the usual way in which we make decisions, debate discussion. We’re going to have to haul up, form an emergency economic team and impose shock therapy,” usually with the help of the International Monetary Fund and the World Bank.

What we are witnessing is the temporary triumph of corporate political action. The public relations industry has become a powerful tool in the struggle to subordinate political decision-making and public policy to corporate rule. Since the introduction of universal suffrage and with it the threat that people might act against business interests, business lobbyists and their allies in government have fought a relentless battle to manipulate public opinion, trade unions and the wider labour movement.

Government is simply seen as a mechanism for allocating resources to business; the government’s bailout of the banks was the supreme example.

It’s time to challenge the ruling ideologyThe time for challenging this philosophy has never been more propitious. As unemployment soars and job insecurity increases, deficit reduction is not the priority its proponents claim. The cuts policy is not a matter of economic necessity but of political choice. There are alternatives. Latin America was a laboratory for neo-liberalism, but rapidly turned into the leading region for resistance and building alternatives. Privatisation, deregulation, labour flexibility: these were the tools used in Latin America to facilitate a massive transfer of public wealth to private hands – and also huge private debts to the public purse. The seeds of the new Latin American socialism were sown from this.

Right across the continent, it was neo-liberalism’s poor economic performance that led to the defeats of the governments that pioneered it. This was most vividly seen in Argentina. After the International Monetary Fund’s holy trinity of deregulation, privatisation and public spending cuts led to economic meltdown and the flight of capital, millions of Argentineans poured onto the streets to protest against the financial and moral bankruptcy of the political and economic rulers. Their cry “Que se vayan todos” (“All of them out”) became a global

one. Trade unions called a nationwide strike against austerity plans similar to the ones being implemented by the coalition in Britain. Five governments fell in less than three weeks. Powerful bottom-up struggles, often funded and organised by trade unions, developed right across the continent in the 1980s and ‘90s. As a result, Latin America now has more than 420 million people living under radical social democratic or socialist governments.

In the UK, it’s worth noting that thirty years ago we were one of the most equal countries in the western world. Today the UK is a very unequal country, and this inequality is the result of a major shift in income distribution. Over the last three decades an increasing share of national income has gone to bankers and business executives. The diminishing share of GDP going to workers has led even the IMF Managing Director to acknowledge the need for strong trade unions and policies that increase the share of national income going to workers. The widening wages gap has been worsened by cuts in benefits and tax credits as low incomes fail to keep pace with the rise in earnings. With the obscene income differential between the top earners and the rest,

‘The diminishing share of GDP going to workers has led even the IMF Managing Director to acknowledge the need for strong trade unions and policies that increase the share of national income going to workers’


PCS show in their new booklet Inequality: The price of austerity that we urgently need to increase pay for the 99% as Britain is creating a profound and damaging economic segregation.

By organising mass resistance, Greek workers have set an example. The economic crisis and fiscal aftershocks demonstrate the damage that can be done by a political class obsequious to a financial sector that has its own reactionary agenda. We cannot let David Cameron, George Osborne and Nick Clegg bleed the economy for an indeterminate time while working people are mired in poverty and misery. Unfortunately, Labour has a policy of deficit reduction and job losses so similar to the Conservatives that effective opposition is muted. We need a radical solution: democracy. We need to shift the balance of power away from the political and corporate elite towards ordinary people.

Trade unionists have a key role to play in promoting and bringing to fruition the alternative to austerity. Closing down the tax loopholes exploited by multinationals and the super-rich to avoid paying their

fair share will be a good start and reduce the deficit. This way the government can focus on stimulating the economy, rather than squeezing the life out of it with cuts and tax rises for the 99% of people who aren’t rich enough to avoid paying their taxes.” This would also mean investing in HMRC to employ more staff to close the £120bn tax gap. A financial transactions tax (popularly known as the Robin Hood Tax) would raise revenues to pay back the debt, but is also designed to deter financiers from speculating on markets – which can have highly volatile and disruptive effects on the real economy.

The banking collapse, which caused such economic damage and required a £1.3 trillion bailout, means the finance sector has lost the right to carry on as before. It must now act in the public interest; publicly owned and controlled. This would enable government to direct investment into new infrastructure that will create jobs and meet public need: renewable energy, public transport and new affordable housing. The money, real money that is held by the finance sector is ours anyway: our pension funds, our savings, and the cash in our current accounts. The rest of it is credit – electronic money (as over 90% now is) created out of thin air by the banks to lend.

We need to invest in infrastructure like new council housing for the nearly two million families on council house waiting lists, not lending recklessly and creating a housing bubble (and inevitable crash). It means investing to create new jobs in renewable energy rather than speculating on food prices to profit from starvation. And it means investing in new businesses and ideas, not getting windfall dividends and bonuses for merging existing businesses and laying-off staff.

no justice, no peace!The coalition plan is to make £80 billion of cuts in the next three years. The need for a strategy of unification, organisation and resistance is obvious. Mass mobilisation can move us towards democracy with social and economic justice. This needs to be driven by the trade union movement allied to an explosion of grassroots activism and trade union recruitment. Latin Americans, led in many cases by their trade union movement, have shown that constructing a better economic and political system is possible. In Greece and elsewhere, protesters are terrifying the world’s privileged with their direct action and confrontation – symbolised by the slogan “No justice, no peace”. After a decade of public spending cuts, massive privatisation programmes and deregulation, Greece is near bankruptcy. More austerity imposed on top of what has happened in the past few years means it is almost certain that the ‘Greek rescue’ and the new administration will fail. Austerity in Spain also hasn’t worked. Spain has entered a double dip recession throwing the spotlight on the dire state of the whole Spanish economy. The unemployment rate has hit a new record high of 25%, its property bubble has burst, and its banks need a €120bn bailout.

Moreover, the global economic crisis and fiscal aftershocks demonstrate the damage that can be done by groups of politicians too closely tied to a financial and corporate sector that has its own reactionary agenda. The coalition government and much of the media have used the economic crisis, the national deficit and decisions to cut public expenditure as a means to shrinking the state. They have turned a global financial crisis caused by corporate and personal greed into an ideological attack on workers, their public services, pay and pensions. Over the coming months the British trade union movement needs to win across all sectors to the economic arguments for fair pay, quality jobs, growth and redistribution as a means of creating a more cohesive, inclusive economy.

The politics of hope is infectious and this has always terrified the rich and powerful. A sense of responsibility now rests with Britain’s labour movement to organise popular forces and join the global resistance. Events are moving fast. From a situation in which nothing seemed to be happening, suddenly anything is possible. It’s up to us now.

‘The need for a strategy of unification, organisation and resistance is obvious. Mass mobilisation can move us towards democracy with social and economic justice. This needs to be driven by the trade union movement allied to an explosion of grassroots activism and trade union recruitment. Latin Americans, led in many cases by their trade union movement, have shown that constructing a better economic and political system is possible’


DAnny BoyLE’s BRILLIAnT DIsPLAy at the opening of the London Olympix has rightly been widely acclaimed. It represented the real history of these Isles – a history of exploitation, class struggle and political achievement; rather than a history of stately homes, King’s and Queen’s, and the National Trust.

But above all it was a celebration of workers – the workers who toiled in the fields, who moved to the towns and cities to labour in the smoke-stacks and the mines, and the workers who now sustain the NHS despite the attempts by Andrew Lansley and his cronies to undermine their best efforts.

What was missing from this great celebration of humanity – at least as televised by the BBC – was the contribution of trade unions. True, the suffragettes had a conspicuous part, while the CND symbol was also on display. It is also true that the founder of Liberty was seen carrying the

Olympic flag. But as one Guardian correspondent pointed out, trade unions were nowhere.

This is a pity, if only because the great social progress that alleviated the plight of workers during the industrial revolution was due entirely to trade unions, not the suffragettes, the peace movement or the NCCL (founded by Ronald Kidd in 1934). It was trade unions that struggled for better working conditions, and trade unionists who made huge sacrifices for their families and fellow-workers.

It was trade unions that campaigned for better legislation to protect workers from the horrors of the truck system, the unsafe factories and mines, and the long hours and low pay in sweated industries. And it was the trade unions that were ultimately responsible for the creation of the Labour party, inspired by a vision of a better tomorrow based on liberty through equality.

This of course is known to everyone of a certain age, labour history proudly taught once upon a time in school classrooms throughout the land. But we live in a country where the trade union contribution is gradually being erased from collective memory, as modern generations no longer learn about the role of trade unions in protecting workers and building a fair society.

That memory is being lost on the movement itself, racked by four decades of neo-liberalism, and now struggling to recall what it is for. Trade unions perform many functions, but central to what they do

the role oF trade unions in economic growth

Putting collective bargaining on the political agenda By Keith Ewing

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is to bargain collectively on behalf of workers. When Margaret Thatcher became Prime Minister in 1979, collective agreements negotiated by trade unions reached 72% of the workforce. Now it is 32% and falling.

I would call this a crisis for the Movement. But it is only a crisis if we agree that collective bargaining is important. It is true that we can always find other things for trade unions to do. We can secure legislation from a Labour government, such as the National Minimum Wage. And we can provide valuable services to members when employers fail to pay the minimum wage, or fail to comply with other legislation we have persuaded a friendly government to pass.

But this is a dead end to nowhere – displacement therapy and not much else. Not only is collective bargaining density in freefall. Trade union membership is also in decline, though there are welcome signals now and again bucking the trend. Trade unions will not survive as a protest movement enforcing the rules that have been made by someone else. It is essential for the very soul of trade unionism that trade unions make the rules (with employers) by which workers are governed, and that trade unions police compliance with these rules.

But it is not only in the United Kingdom that collective bargaining is under threat. Once the bastion of trade union activity, the great social democracies of the EU are also yielding to the forces of neo-liberalism fuelled by the dogma of austerity. Earlier this year, I attended a meeting of trade unionists in Rome along with my colleague Daniel Blackburn from the International Centre for Trade Union Rights. The hospitality was warm, but the conversation was chilling.

We heard of how in countries like Greece, Portugal and Spain there is strong pressure on employers to decentralise their collective bargaining activities down to the level of the enterprise, giving more power to employers. We heard of how in new member states like Bulgaria and Romania, various anti – union strategies are being deployed by governments and employers, and of how even in countries like Germany companies are looking for ways to escape from sector wide collective bargaining.

We also heard from Cypriot trade unionists, awaiting nervously the arrival of the Troika (the European Commission, the European Central Bank and the IMF), fresh from its blitzkrieg of the national economies of other member states. They have every right to be nervous, the ILO having recently sent a High Level Mission to Greece, the report of the Mission lamenting that the effect of the Troika has been to bring the industrial relations system in Greece close to collapse.

What was also striking about the meeting in Rome was the total failure to apprehend what is likely to happen. Returning to Danny

Boyle’s vision of British history, it is like being on the innocent threshold of a great and bloody war with no capacity to imagine just how brutal it will become. It is only when the lesson has been taught by the great ‘Professor Experience’ that the lesson will be learned. By then of course it will be too late, much too late.

We have been there and have much to teach the rest of Europe. With us collective bargaining decentralisation started in the 1960s, partly because of the demands of employers, and partly because of our own hubris. We have learned a bitter lesson, and we need to put together again that which has been destroyed. If trade unionism is to recapture its historic role, we need to raise our ambitions with strategies that will ensure that every worker is covered by a collective agreement.

That does not mean a strategy for trade union recognition in which we demand some tinkering with the statutory recognition procedure, though that would help. On the contrary, it means a strategy for collective bargaining in which we rebuild the sector wide national agreements that were once as prevalent in this country as they were until recently in most of the EU member states. That will require government support. But is that not why trade unions support a Labour government?

One of the most shocking features of 13 years of Labour government was the failure to engage with this agenda, which is essential to the future of trade unionism. It is all the more shocking for the fact that there were several opportunities to have that engagement – the first with the proposals for sector forums which were promised at Warwick in 2004, and secondly after the decision of the European Court of Justice in the Laval case in 2007 and the related dispute at East Lindsey in 2009.

There is so much that is good to come out of a collective bargaining strategy. Restoring the fortunes of trade unionism is not an end in itself, but a means to an end. Higher collective bargaining density will lead to higher wages and a more equal society, which it turn will aid economic recovery by stimulating demand. As a result it will create more jobs and lead to less unemployment, and in the process will reduce the welfare bill while also increasing the tax take.

It is not clear to me what we are waiting for. Eventually the penny will drop, as it did when in the 1930s a Tory-led government embraced collective bargaining as a key lever in the journey from misery to happiness. Labour talks a good game about reflation and growth. But it is about time it proclaimed the virtues of trade unionism and collective bargaining in order to get us out of the current mess. And it is now time for trade unions to do the same, with the same boldness and confidence we saw on display in the work of Danny Boyle.

‘Restoring the fortunes of trade unionism is not an end in itself, but a means to an end. Higher collective bargaining density will lead to higher wages and a more equal society, which it turn will aid economic recovery by stimulating demand’


THE EURoPEAn CommIssIon HAs unveiled new EU Regulations, known as Monti 11, which effectively gives impunity to employers to exploit cheap imported labour to provide ‘goods and services’ and removes workers’ rights to take action to protect themselves.

Drawn up by the unelected ‘technocratic’ Italian prime minister Mario Monti, the regulation attempts to bury the controversy that has raged around two famous anti-trade union judgements by the European Court of Justice – recently renamed the Court of Justice of the European Union – known as the Viking and Laval cases.

In the Viking case, a Finnish ferry company undermined the terms of Finish seafarers by reflagging in Estonia and hiring cheaper Estonian workers.

In Laval, a Latvian company undermined the terms of a Swedish collective agreement by employing cheaper Latvian workers to work on a Swedish building site.

In both cases the trade union members affected had taken industrial action in defence of their terms and conditions. And in both cases, the ECJ

decided that Article 43 (freedom of establishment) or Article 49 (Freedom to provide Services) of the EC Treaty defending business freedoms were more fundamental than the right to strike.

These judgements have now been applied widely in domestic courts of EU member states, undermining trade union organisation, driving down wages and massively accelerating social dumping as companies cross borders to exploit wage differentials.

monti 11 Regulations and ILo standardsThe judgements have also been the subject of complaints to the International Labour Organisation supervisory bodies, which in turn have said the legal precedents set by the ECJ are not consistent with obligations arising under ILO Conventions 87 and 98.

One such complaint was taken by the pilots union BALPA, which, during a dispute with BA was threatened with legal action and unlimited fines, not because the union had acted in breach of domestic law, but because its proposed action would constitute a breach of the employer’s right under the EC Treaty, Art 43 (now TFEU, Art 49) following the decision in Viking.

In response, the ILO Committee of Experts has made clear that the effect of Viking as reflected in BALPA was to take the UK even deeper in breach of Convention 87.

monti 11, mode 4 and social dumping

Austerity: European style By Brian Denny


According to the Committee, ‘the omnipresent threat of an action for damages that could bankrupt the union, possible now in the light of the Viking and Laval judgments, creates a situation where the rights under the Convention cannot be exercised’.

Predictably, Monti – leading Eurocrat; member of the secretive Bilderberg Group and a former advisor to Goldman Sachs – has now backed the ECJ judgements and is enshrining them into EU law.

The Regulation now codifies the ECJ decisions, leaving ECJ and national judges to even use a ‘proportionality’ test that is narrow and weighted in favour of business interests.

According to professor Keith Ewing of the Institute of Employment Rights (IER):”There will be no solution to the Viking and Laval problem until there are clear rules indicating that collective action may be taken in accordance with human rights principles, and until the threat of unlimited damages is lifted from trade unions for exercising a fundamental social right”.(1). As it stands the draft Monti 11 proposals, signed off on March 21, undermines the right of trade unions to engage in collective bargaining at a stroke (see box).

This EU corporate strategy of atomising trade union labour and profiteering through social dumping is also reflected in proposals for an EU/India Free Trade Agreement (FTA) due to be ratified in 2012.

This deal will see the EU open up to temporary cheap highly-skilled labour from India to work in most professions, undercutting local pay scales. This labour entry concession is called ‘Mode 4’ and, in return, western corporations will have unfettered access to India’s huge retail, finance and insurance markets (2).

Although this is an EU agreement, the EU Trade Commission admits that it is essentially a UK deal. So City of London financial firms will mainly benefit, in terms of investment opportunities in India, while UK workers will suffer most from job displacement.

EU Legal and Economic frameworks promoting austerityThe legal framework being erected to justify Monti 11 and Mode 4 is based on the so-called ‘four freedoms’ enshrined in all EU treaties as well as a neo-liberal cornerstone of the EU’s single market. That is, the complete ‘free movement’ of ‘capital, goods, services and labour’ (3).

In the minds of ECJ judges and European Commissioners – the only EU bodies that can make legislation – any impediment of this ‘free movement’ such as national agreements with trade unions and other domestic collective bargaining arrangements contravene the EU’s relentless ideology of ‘free market competition’.

A simple analogy is the Taff Vale judgement of 1901 when the House of Lords upheld an appeal that striking rail workers had been acting ‘in restraint of trade’ and the Taff Vale Railway Company could claim huge sums of money from the Amalgamated Society of Railway Servants.(4)

Taff Vale was met with outrage in the labour movement which led to the establishment of the Labour Party and the judgement was soon reversed by the Trade Disputes Act 1906.

However ECJ judges are immune from such changes in the law as national parliaments have no jurisdiction over them and the so-called European parliament is not a legislative law-making body and has no powers of veto over EU treaties.

The European Commission is solely responsible for proposing legislation, implementing decisions, upholding the Union’s treaties and day-to-day running of the EU.(5)

It was the Commission that proposed the Fiscal Pact on March 2 to be ratified by all of the member states, except the Czech Republic and the UK, which will enter into force on January 1 2013.

At the height of a massive debt crisis in the Eurozone, this Pact demands permanent austerity and budgets must be in balance or surplus. The ECJ can even fine a country up to 0.1per cent of GDP if this is not done a year after ratification.

Then the bailout of EU states such as Greece and Ireland – effectively a bail-out of the German banks that owned most of the debt – led to the creation of a bail-out mechanism: the European Financial Stability Facility (EFSF) and the European Financial Stability Mechanism (EFSM). These, together with the International Monetary Fund, would bail out EU states.

However, the EFSF and EFSM lack any legal basis in the EU treaties. The European Constitution (Lisbon Treaty) makes clear there cannot be a bail out of any of the 17 Eurozone member states.

Therefore the Commission has been attempting to ram through a European Stability Mechanism Treaty (ESM) (6) with as little debate as possible and pressurising national governments to ratify it as soon as possible with no referendums.

The proposed ESM is the fundamentally undemocratic solution to the current legal dilemma and is specifically designed to finance what is in reality a slush fund. It would be based in Luxembourg with a board of governors appointed by the 17 eurozone states and will operate outside the EU.

The ESM has been concocted in great haste by France and Germany to dictate to eurozone members that they have to make national balanced budgets by 2013. This structural adjustment includes an assault on public sector spending and severe austerity policies. In other words national sovereignty, parliamentary democracy and the separation of powers in the EU are to be suspended by mutual agreement between Paris and Berlin.

The proposed ESM measures are an attempt to salvage the wreckage of what is left of the credibility of monetary union. Yet these measures will not bring stability to an unstable monetary union as daily evidence continues to makes clear.

Ultimately endless EU austerity, social dumping and attacks on collective bargaining does not leave

Monti 11 Regulation restricts the right to take collective action in a number of ways:• It ensures that economic freedoms take priority over fundamental

social rights • It reinforces the ‘proportionality’ test as developed in the Viking

case allowing ECJ and national judges to decide if collective action is necessary

• It reinforces the interpretation given by the ECJ in Viking and Laval cases and does not solve the problems resulting from the judgments


much for the purveyors of the so-called Social Europe agenda to boast about. European Central Bank president Mario Draghi was even franker in the Wall Street Journal a few days before Monti 11 was launched when he said: “The European social model is already gone”.

ConclusionThe current economic crisis has exposed the stark reality that EU structures do not protect workers or public services.

The escalating Eurozone crisis reveal the most powerful member states protecting their debt-laden banks by demanding vicious austerity measures in the Eurozone states starting with Ireland, Greece and Portugal and spreading rapidly across the entire EU.

Along with cheap credit-fuelled growth, the illusory concept of ‘Social Europe’ launched 25 years ago is disappearing before our very eyes, while attacks on workers’ rights and industrial relations cultures gather pace across Europe driven by the EU institutions; the Commission, the ECB, the EFSF and – the latest incarnation – the European Stability Mechanism.

As Carolyn Jones of the IER recently pointed out: “If unions continue to be restricted in how they can legally respond to those cuts, then perhaps

nEXT yEAR THE GFTU EDUCATIonAL TRUsT is introducing into its educational programme some exciting Dayschools. Expert speakers will introduce debate on some big issues of the day to inform and stimulate discussion for a wide audience.

The Dayschools will be free of charge to participants and in the first instance all central London based. A contemporary video of the event will be made so that the experience can be shared to a large audience and a record of the main educational points of discussion will be kept.

They will be very thought provoking events in the best traditions of adult education and participatory learning. Early bookings via the GFTU website are strongly recommended.

1 Understanding the European crisis.The collapse of economies and the take over by banks and mass unemployment have not all happened by accident, some people have been working on it for years. A trade union expert on the policies and institutions of the European Union will introduce a discussion on how it has all taken place.

2 The wages of austerity: no way to run an economy.A leading trade union research officer will draw on very wide

experience and knowledge to show how the politics of austerity worldwide has been well planned and led to disaster while the existence of real alternatives shines bright and can inspire our action.

3 It’s not just the bonuses – understanding how the banks and finance houses work their magic.One of the country’s foremost experts in how the banks and accountancy firms work in the climate of deregulation to make profit the sole social objective and get governments in their pockets will introduce this no nonsense, plain talking analysis of the realities behind the numbers.

4 Investing in jobs and tackling clime change – an alternative agenda to austerity.We can have full employment and stop the deterioration of the planet, Keith Sonnet, Deputy General Secretary of UNISON will lead a debate on this crucial area.

5 The origins of trade unions is in the battle for equality – yet Britain has never been more unequal.How have we become more unequal, what are the effects and what can we do about it. Leading experts in the politics of inequality worldwide will show how we need to get back to our roots in egalitarianism and social justice if we are to turn the tide.

The Dayschools will take place between 11.00am and 4.00pm. Lunch will be provided free of charge.

alternative action is now required. “One such action that would help focus the minds of the EU would be to support calls across Europe for referendums on EU membership,” she said.(7)

More and more voices in the labour and trade union movement are questioning whether remote and undemocratic EU institutions that directly represent big business interests at the expense of working people are worth supporting at all.

Such a debate is integral to the formulation of genuinely growth-based, worker friendly and social alternatives to relentless neo-liberal dogma.

notes 1. The Draft Monti II Regulation: An Inadequate Response to Viking and

Laval, available from www.ier.org.uk2. See Social Europe is a Con p29, Mode 4 is Social Dumping, Linda

Kaucher3. Treaty on the Functioning of the European Union – Articles 14, 26-29,

45-66, 114, 115, 1184. See P.S. Bagwell, The Railwaymen: History of the National Union of

Railwaymen (1963)5. http://europa.eu/about-eu/basic-information/decision-making/

index_en.htm6. The European Stability Mechanism and the case for an Irish

referendum, published by the People’s Movement http://www.people.ie/eu/esmref.pdf

7. Morning Star, July 2, 2012

gFtu dayschools 2013


WE’vE sEEn onLy 20% oF THE CUTs the Con-Dem government has planned for us. If you want to see the logical end of this process, go to Greece which is being used as the test bed for extreme ‘austerity measures’.

You don’t expect to see working people queuing in food lines in modern European cities but you’ll see them in Greece. These are not generally lines of poorly clothed people but people who have recently been impoverished.

Their distress is the direct result of conditions imposed, in return for loans to bail out bank debts, by the so-called Troika (the International Monetary Fund, The European Central Bank and the European Union).

A Delegation to GreeceA GSC solidarity delegation, sponsored by Tony Benn, went to Greece, in March 2012 in response to an invitation from two world war two resistance fighters – Manolis Glezos (famous for pulling the swastika

down from the Acropolis) and Mikis Theodorakis (composer of Zorbas the Greek).

Our trip was both harrowing and inspiring. The people of Greece, after five years of recession, are being bled dry. One in three lives in poverty. Many shops and small businesses are now empty, with ‘for rent’ signs on display.

Greece’s social fabric is being torn apart. We were appalled by 20% unemployment, 50% youth unemployment, a quarter of a million depending on humanitarian handouts and food lines, and mass homelessness particularly for non-Greeks.

Wages have been slashed, often by up to a third, in some cases retrospectively. 400,000 are owed back pay. National collective bargaining and agreements have been abolished and employment rights slashed.

The minimum wage for adults has been reduced by 22% (for youth by 33%), unemployment benefit (available for only a year) by 22%, and pensions by 22%.

The health service is being dismantled. 60,000 small businesses have gone bust. Pharmacies have stopped giving prescriptions on credit because the government owes them so much. Many schools lack chairs and books. The railway service and workforce are being severely cut.

solidarity with the people oF greece

Greece today – Britain tomorrow?By Paul Mackney


suicidesOld people cannot live on their pension, many parents cannot feed their children and the young face a life without hope. Every day the papers carry stories of suicides in a country where they were almost unknown.

This was symbolised on 3 April by 77 year-old Dimitris Christoulas shooting himself in front of the Parliament building, shouting out that he didn’t want to leave debts for his grandchildren. He left a note at his flat saying he hoped the young people would hang the government traitors just as the Italians had hanged Mussolini in 1945.

Greek mythsWe’re told the Greeks have only themselves to blame and it is true that, not unlike here, there has been corruption in government and a failure by the rich to pay their full share of tax.

However, the principal reason for the crisis in Greece is that it is the weakest link in the chain of European countries hit by the banking crisis.

It is not true, as the media would have us believe, that Greeks won’t or don’t work. In fact Greeks work the longest annual hours and take the least unauthorised leave of any workers in Europe. Their age of retirement is at the EU average.

The British trade union movement has a critical role, because ‘our’ hellenophobic prime minister, David Cameron, has said he is “prepared to over-ride Britain’s historic obligations under EU treaties and impose stringent border controls that would block Greek citizens from entering the UK, if Greece is forced out of the Euro”, claiming “the powers are available if there are particular ‘stresses and strains’ arising from the Eurozone crisis.” (The Guardian 4.7.12)

The ImFOn the news here, the International Monetary Fund (IMF) is presented as a bunch of benevolent folk who come round and say: “Sorry to see you’re having a bit of difficulty. Here’s a few bob to tide you over while you sort yourselves out.”

In fact the IMF is more like a ‘do-it-our-way-or-else’ protection racket and is seen by many Greeks as an invading army. The IMF imposed on Greece two ‘memoranda’ which require privatisation, the removal of employment rights, and forbid solutions to the crisis like nationalisation and programmes of state investment. Nearly all of the ‘bail out’ money goes back to foreign banks to pay off debt repayments.

Elections In the two Greek elections in May and June this year, the majority of Greeks voted against austerity

measures. The May election was inconclusive and the pro-austerity parties (New Democracy ‘Tories’ and PASOK – the Pan-Hellenic ‘Socialists’), were only able to form a coalition government in June because the Greek constitution gives 50 extra seats to the party with the most votes.

A relatively new party, Syriza (Coalition of the radical left) increased its vote from 4.5% in 2009 to 27% in June 2012 – just a couple of percent behind the leading government party.

Jeremy Corbyn MP attended an election rally of over 2,000 in the Athens suburb of Keratea, where the Syriza leader, Alexis Tsipras, told the crowd that there had only been seventeen present in 2009.

This rise in the left vote reflected the spirit of resistance which has seen seventeen general strikes, massive demonstrations, occupations of hospitals, community action to prevent privatization and the sell-off of public land, and worker occupations of newspaper and TV premises.

The crisis deepensSince the June election, the Troika has returned and any hint of a softer approach has evaporated. By 2013 the Greek economy will have contracted by 20% from 2008 pre-crisis levels, with unemployment at 25%.

Clearly, the austerity ‘cure’ is killing the patient, yet the Troika is demanding further savings of 11.5 billion euros over the next two years – a sombre warning to countries such as Spain and Portugal and others to come.

Not wanting to ‘waste the opportunities presented by a crisis’, international financial institutions, together with the EU, are demanding policy changes and even changing governments, with scant regard to democratic institutions and with the express intention of smashing working class organisations.

Keith Ewing has asked in an excellent Morning Star article whether the neo-liberal measures required by the Greek bail memoranda are legal, noting “the crisis of legality now engulfing the EU” with “this entity free to do what it likes and to ignore the legal foundations upon which it was supposedly built.” (http://www.morningstaronline.co.uk/news/content/view/full/119520)

Alternative strategiesIn this situation, the ‘what-would-you-do-then?’ question arises in every kafenion in Greece and also across the world labour movement.

Agreement is not easy when, if the opinion polls are to be believed, 80% of the Greek electorate oppose the austerity measures and 80% want to remain in the European Union.

There is much agreement on an economic programme to socialise

‘It is not true, as the media would have us believe, that Greeks won’t or don’t work. In fact Greeks work the longest annual hours and take the least unauthorised leave of any workers in Europe’


or nationalise the banks, rein in financial markets, control capital movements, redistribute wealth, penalise those attempting to use tax havens, deal with corruption and clientilism, reverse privatisation, and so on

It is recognised by all left parties that the crisis is not just Greek but of European dimensions and wider. This is reflected in the KKE (Greek Communist Party) policy of exit from the Euro and the Syriza strategy of refusing to implement the Troika’s austerity memoranda and challenging the EU to act.

It is not the job of a solidarity campaign, whose purpose is to support all those opposing austerity, to determine what is ‘correct’ for the Greek people. The Vietnam Solidarity Campaign opposed the Vietnam War because it was wrong: it did not lay out a prescriptive agenda for what sort of society should follow the US withdrawal.

One thing the whole left is united on is the need to continue the political, union and community resistance to the cuts, sackings, privatisations and measures to destroy collective bargaining.

DebtThe debt question is more complex but, as almost every Greek can tell you, Germany, strategically located between the ‘east’ and the ‘west’, was treated leniently by the 1952 London Debt Agreement, in the spirit of rebuilding Europe after world war two.

There was little compensation for Greece whose war losses included: demolition of a quarter of all buildings; annihilation of 2,000 villages; destruction of 66% of motor transport, 75% of the merchant fleet, 90% of railway rolling stock and all main road bridges; and deportation, slaughter or starvation of around 700,000 people, including the murder of 60,000 Jews.

The whole of Europe needs a new programme of investment for growth. To put Greece back on its feet, this must be accompanied by cancelation of the debt which, in Syriza’s words, has been identified by audit as ‘odious’.

UnityCurrently the left is divided in Greece, with Syriza polling 27%, KKE (with tremendous union power) 4.5% and the anti-capitalist left less than 1%.

A worrying development has been the emergence, with 7%, of an overtly fascist organisation – ‘Golden Dawn’ or ‘Dark Dawn’ as dubbed by Glezos.

There is evidence of a new unity with joint demonstrations against the growth of fascism and xenophobic attacks – recalling Paris February 1934 when the demonstrators on separate Socialist and Communist Party anti-fascist protests joined together with cries of ‘Unity! Unity!’

Join the Resistance One of the distinguishing characteristics of the Greek people is their spirit of resistance to oppression, fascism and military dictatorship.

Everyone the GSC delegation met stressed that our primary task was to resist the cuts being made by our own government.

There was a period near the start of the second world war when the British and the Greeks stood alone against the Nazis. We should stand with them now.

Greek working people may sometimes be down but they will never give up.

Neither should we.

Some things you can do in solidarity with the people of Greece• Sign Tony Benn’s Appeal and affiliate to the

Greece Solidarity Campaign (GSC) – at www.greecesolidarity.org.

• Introduce a motion on Greece in your union, students union, pensioners’ organisation etc.

• Link your branch with a school, workplace or community in Greece.

• Challenge those who peddle cheap anti-Greek jokes and myths.

• Organise a social event with music, dance and food.

• Organise meetings, education events, stunts or protests to explain the situation. Show the GSC video of the March 2010 delegation to Greece http://www.youtube.com/watch?feature=player_embedded&v=G2WcC3y3RN4.

• Discuss how things might be run better if we started, not from the needs of banks, but of people.

• Write to MEPs and MPs asking what they are doing to learn about and help the situation of Greek people.

• Indulge in some ‘solidarity tourism’ by going on holiday to Greece and talking with ordinary people.

• Read about the history of Greece – e.g. James Pettifer’s ‘The Greeks – The Land and People since the War’ (Penguin); or, for a lighter approach, Victoria Hislop’s novel, set against a Thessaloniki backdrop since 1914, ‘The Thread’ (Headline Review).

• Join the Saturday 20 October TUC March – For a Future that Works! – and reserve a special welcome for our Greek com rades in the international contingent.


sInCE THE DEmIsE oF THE sovIET UnIon the dominant economic spin has been that there is no alternative to capitalism. But claims that capitalism produces overall benefit ignore both its failure to redistribute benefits and its tendency to increase inequality. And capitalism’s claimed ‘efficiencies’ hide an overall wastefulness which is destroying the planet. As the latter is the real bottom line, there has to be a better economic alternative.

Yet currently unfettered corporate capitalism or ‘neoliberalism’ is being irreversibly fixed in international law precisely to eliminate the possibility of any other economic system emerging. This is being done effectively secretly.

In contrast to abstract theorising, current developments ensuring that future governments prioritise the interests of investors over those of democracy are concrete, specific and legalised.

Alternative economic theories that fail to confront these hard core realities are unlikely to change the economic trajectory. Factual information that directly challenges the secrecy underpinning these structural shifts has more chance of thwarting the neoliberal corporate takeover of the world.

A secret agendaThere is secrecy around: the fact that financial services are at the heart of the neoliberal agenda; the EU’s international trade agenda whereby

corporate-interest trade rules are being irreversibly fixed in international law; the strategy of moving workers across borders not only for profit and to reduce labour costs but also to destroy the power of workers to counter the neoliberal agenda; and global corporate ambitions for rights to access governments’ spending.

Bringing information to the public sphere to counter the secrecy is a practical, productive and necessary first step for the emergence of economic alternatives. Allowing the secrecy to continue guarantees that no alternatives can emerge.

Behind the trappings of gold chains and traditions of the 1000 year old institution of the City of London Corporation, there is a veil of secrecy. Overtly a local authority, the Corporation is also a key global financial services centre, offering, not least, a premier tax haven network1. London-based transnational financial corporations are a major force for the deepening neoliberalism of the EU, both internally and in EU external trade activity.

While there have been some cracks in the secrecy of the Corporation and its lobbying mechanism, TheCityUK, more light is needed to counter the spin that the City’s hefty PR budget2 – part of a legacy left for the poor – funds.

Behind the scenes, TheCityUK’s3 secretive committees in which key government policy makers participate ensure that the UK government prioritises the global ambitions of financial services

european capitalism

Neoliberalism is being irreversibly fixed in international law By Linda Kauchner


and that UK domestic policy fits with them. The current public service cuts agenda, hiding a program of privatising and liberalising public services, fits the financial services global grab for governments’ public procurement. Despite the dominant role of the Corporation and TheCityUK in government policy directing, most of their activities are exempt from Freedom of Information.

The European Union is the world’s biggest economic unit. Corporations, not just ‘European’ and primarily financial services4, have inbuilt control of the governing institutions of the EU5.

The EU Trade Commission negotiates international trade agreements, overtly on behalf of Member States but heavily influenced by London–based financial service corporations via UK government input and direct input in Brussels. The main lobbying organisation there, the European Services Forum is closely allied with TheCityUK, using the same ‘research’ organisations and similar spin for similar purposes6.

Bilateral trade agreements in trade and servicesCorporations are utilising the mechanism of the EU to impose neoliberalism globally via a program of bilateral trade agreements. The EU is now ‘scoping’, negotiating, finalising or enacting bilateral or regional trade agreements with much of the world. The contents of bilateral trade agreements are secret until negotiations are completed.

A pretence that ‘trade’ is mainly about selling goods is maintained and promoted7 even though most EU internal and external trade is in ‘services’, thus part of the secrecy.

Services agreements grant corporations rights while reducing governments’ control of corporations and their policy space to prioritise benefit to populations.

A major aspect of international trade agreements is Mode 4, allowing corporations to exploit the wage differential between cheaper labour and higher wage countries by moving workers temporarily across borders. There is huge profit potential in both the supply and use of cheaper labour, while the subsequent loss of working conditions and jobs undermine the potential for host country workers to fight back. Labour commodification is backed up by neoliberal judicial rulings of the European Court of Justice within the EU and Trade Dispute Settlement panels internationally.

To induce other countries to enter into trade deals which primarily benefit transnational financial service firms, the EU always offers Mode 4 concessions. Yet this Mode 4 element of ‘trade’ is kept secret in the countries targeted to receive temporary migrant labour.

India, with a fifth of the world’s population, is a major demandeur

of Mode 4 concessions from the EU, on behalf of its megacorporations. In the currently negotiated EU/India Free Trade Agreement, in effect ‘85%’ a UK/India trade agreement8, the Mode 4 access that is India’s single demand is being traded for investment opportunities in India, particularly in banking and insurance. The trade commitment categories of the UK Points Based System have been prepared for this with no numerical limits.

But this effectively permanent trade deal with India, the UK’s central role in it and the present and future employment implications of the Mode 4 offer have all been kept secret from UK resident workers who will pay the price.

Privatisation and LiberalisationThe UK cuts and austerity agenda disguises a push to privatise and liberalise public services. UK public services privatisations, whether through sell-offs, tax-funded privatised contracting or PPP or PFI mechanisms, are always simultaneously liberalised. Liberalisation means the investment opportunities are opened to transnational investors. That this automatic full liberalisation is a policy choice driven by financial services and possible policy alternatives are never publicly debated.

Committing liberalisations to trade agreements means commitments to keep investment opportunities open transnationally. There is no noticeable change if the service is already liberalised, but in this trade commitment process, both the liberalisations and the privatisations underpinning them become quietly irreversible.

So if NHS privatisations and liberalisations prove disastrous, as trade commitments any reversals towards public or even specifically UK provision is disallowed. This legalised irreversibility is not emerging in debates about the NHS, but should.

Public services are part of ‘public procurement’ or ‘government procurement’ which includes all government spending at all government levels.

The EU Commission is introducing a regulation which will, in one single regulatory move, coerce EU states to liberalise their public procurement to the world, with all the implications of cheap labour supply, while coercing other countries to open their public procurement to ‘EU’ investment if their firms want to bid for EU contracts,.

Such regulatory shifts in the EU slip through without publicity to member state publics because the media, notably the BBC, even with its funded Brussels office, fail to report them, in effect maintaining secrecy on vitally important issues.

The Global Services Coalition, primarily financial services corporations, is a powerful force for coercing public procurement liberalisation globally. Within the multilateral WTO, a plurilateral Global

‘A major aspect of international trade agreements is Mode 4, allowing corporations to exploit the wage differential between cheaper labour and higher wage countries by moving workers temporarily across borders’


Procurement Agreement has been signed by some WTO members. When signatory countries commit their unilateral procurement liberalisations to the Agreement, those liberalisations become irreversibly locked in, even if their populations are unaware, while countries outside of the Agreement are coerced into joining if their firms want to bid for contracts.

Liberalisation commitments on public procurement not only give transnational corporations access to governments’ spending but inalienable rights to access, with financial compensation from governments to corporations if commitments are not kept.

This key pillar of neoliberal economics, procurement, the broader context for public service changes, is not publicly recognised.

Insofar as action for an alternative economic model begins with countering secrecy about the current model, this has hardly started.

With some exceptions, the organised Left, in the form of trade unions and Left political groups, is generally still: failing to disseminate meaningful economics information; maintaining a limited UK horizon when issues are broader; and supporting the corporate-dominated EU while anticipating a ‘Social Europe’ which neoliberal EU directly excludes9.

The TUC’s limited focus on ‘fighting cuts’ is not sophisticated or intelligent enough to address the underlying agenda. And the TUC bureaucracy has failed to act on the September 2011 Congress directive to counter the secrecy of the EU/India Free Trade Agreement with public information even after a year10.

The vanguard newspaper of the Left, the Morning Star, is counterproductively avoiding key information, considering it ‘too complex’ for readers.

We must fight the battles to win the war. The urgent battles are against the secretive strategies being used to fix neoliberal economics permanently in place. Neither inadequate responses from unions nor theoretical economic alternatives will change the current neoliberal trajectory without addressing these. If we want a different economic model, the way forward is to disseminate real information about what is going on to create an informed public.

notes1 See ‘Griffin’ chapter in ‘Treasure Islands: Tax Havens the Men who Stole the World’ Nick Shaxson, 2011 Bodley Head 2 http://www.thebureauinvestigates.com/2012/07/09/revealed-the-93m-city-lobby-machine/ 3 http://www.thecityuk.com/ See membership of boards with participation of government officials as ‘observers’. UK Trade and Investment bureaucrats attend and are directed in Liberalisation of Trade in Services (LOTIS) committee meetings then attend Brussels trade policy meetings.4 Swiss research report ‘The Network of Global Corporate Control’ by. James B. Glattfelder, Stefania Vitali, and Stefano Battiston. See http://truth-out.org/index.php?option=com_k2&view=item&id=4217:the-network-of-global-corporate-control5 See the work of Corporate Europe Observatory, especially ‘Europe Inc’6 An example is the Brussels-based European Centre for International Political Economy with personnel from the London School of Economics, provides ‘academic backing’ to trade deals In Brussels and also used by financial services in London too. LSE staff produce business-friendly research for the City of London Corporation.7 This is a strategy used regularly by Secretary of State for Business, Innovation and Skills (BIS) Vince Cable. Peter Mandelson as Secretary of State for Business habitually promoted the idea that trade is primarily a developing country issue. Though different, both strategies divert attention away from the effects of trade-in-services commitments on people in the UK. 8 Information from key Trade Commission staff9 See Campaign Against Euro Federalism booklet ‘Social Europe is a Con’10 See this writers article in Campaign Against Euro Federalism booklet ‘Social Europe is a Con’

‘Behind the trappings of gold chains and traditions of the 1000 year old institution of the City of London Corporation, there is a veil of secrecy’


I HAvE sPEnT mUCH oF THE PAsT 2 weeks cheering enthusiastically at sports I don’t really understand such as hockey, taekwondo and, most bizarrely of all, beach volleyball. Olympic fever has hit many of us and I was lucky enough to see several events live. But it is the atmosphere around London which has been most striking to me with strangers engaging in friendly conversation and smiling at each other. As a Londoner I can confirm that that sort of behaviour usually gets you a seat all to yourself on the tube.

I also sat through a live match in another sport alien to me when in New York recently. The entertainment on offer whilst watching the baseball at the Yankees Stadium came from the crowd as much as it did the two teams. However, the main reason I was in the Big Apple was to meet with trade unionists and exchange experiences and ideas as part of a General Federation of Trade Unions’ delegation. Unlike the baseball the encounters with our sisters and brothers threw up familiar and worrying issues.

The “Lock out”Workers in New York and across the States are suffering sustained attacks on their terms and conditions and job security. We spoke to trade unionists representing building workers, machinists, utilities workers, bakers, hotel staff as well as workers across the public services. Reductions in pension rights struck a chord with us, of course, but one feature of the industrial relations environment which felt chilling was the repeated use of the lock out of staff when a dispute was recorded. Such vicious and prehistoric tactics appear to be

on the increase in some parts of the US and cause enormous suffering to ordinary people with legitimate grievances.

One such lock out was taking place at the Con Edison Electrics company while we were in the city. We were proud to be able to join hundreds of staff and supporters at a rally and march in support of the locked out workers. Happily, the lock out ended with a settlement a couple of days later thanks, in no small part, to an electrical storm passing over the city.

No strike deals are quite common in the contracts (negotiated settlements) that unions agree with employers. However, the Unite Here union, which represents hotel staff, provided us with insights into how unofficial action can be organised if a hotel reneged on an agreement. It was also clear, along with pensions, how important health care provision is as part of the remuneration package to staff. We were reminded of how integral to a fair and decent society is the NHS.

The US based British academic Professor David Harvey spoke to us about his take on the global economic crisis http://www.democracynow.org/20...f_may_day_david_harvey. A leading Marxist thinker he argued that (formerly discredited) Marxist theories on capital and its impact on communities are on the rise. I couldn’t disagree with his attack on the austerity policies of many western countries and the failure to prosecute the vast majority of bankers involved in the financial meltdown and, more recently, in fixing LIBOR. He gave us a theoretical context in which to evaluate the attacks on workers’ rights, job cuts and privatisation.

As in sport, there are many differences between the US and Britain. But there is also much we have in common along with trade unionists across the globe. Maybe sometimes we underestimate the potential we have not just to defend the disadvantaged and under protected but to help build a better and fairer world.

And to all those who told me that I would love New York – you were right!

yankee doodles

Growing use of lockouts during disputesBy Jonathan Ledger

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