Financial crises, defl ation INTERNATIONAL JOURNAL and trade union responses: What are the lessons? 2 / Issue 1 2010 / Volume OF LABOUR RESEARCH 2010 VOLUME 2 / ISSUE 1 American labour and the Great Depression Steve Fraser Financial crises and organized labour: Sweden 1990–94 Ingemar Lindberg and Magnus Ryner The Asian crisis of 1997–98: The case of the Republic of Korea Jin Ho Yoon The Japanese economic crisis of the 1990s Naoto Ohmi The labour market and defl ation in Japan Hansjörg Herr and Milka Kazandziska The Great Recession: A turning point for labour? Frank Hoffer FFinancialinancial ccrises,rises, ddeflefl aationtion aandnd ttraderade uunionnion rresponses:esponses: WWhathat aarere tthehe llessons?essons? INTERNATIONAL JOURNAL OF LABOUR RESEARCH ISSN 2076-9806 2010 / VOLUME 2 / ISSUE 1 Financial crises, defl ation and trade union responses: What are the lessons? Financial crises, defl ILO 110030102finan0030102finan E.inddE.indd 1 117.6.20107.6.2010 111:15:401:15:40 International Journal of Labour Research 2010 Vol. 2 Issue 1 Financial crises, deflation and trade union responses: What are the lessons? INTERNATIONAL LABOUR OFFICE, GENEVA Copyright © International Labour Organization 2010 First published 2010 Publications of the International Labour Office enjoy copyright under Protocol 2 of the Uni- versal Copyright Convention. Nevertheless, short excerpts from them may be reproduced without authorization, on condition that the source is indicated. For rights of reproduction or translation, application should be made to ILO Publications (Rights and Permissions), International Labour Office, CH-1211 Geneva 22, Switzerland, or by email: [email protected]. The International Labour Office welcomes such applications. 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Catalogues or lists of new publications are available free of charge from the above address, or by email: [email protected] Visit our website: www.ilo.org/publns Photocomposed in Switzerland WEI Printed in Switzerland GEN International Journal of Labour Research 2010 Contents Vol. 2 Issue 1 5 Preface Dan Cunniah 9 American labour and the Great Depression Steve Fraser 25 Financial crises and organized labour: Sweden 1990–94 Ingemar Lindberg and Magnus Ryner 43 The Asian crisis of 1997–98: The case of the Republic of Korea Jin Ho Yoon 61 The Japanese economic crisis of the 1990s Naoto Ohmi 79 The labour market and deflation in Japan Hansjörg Herr and Milka Kazandziska 99 The Great Recession: A turning point for labour? Frank Hoffer 3 International Journal of Labour Research 2010 Preface Vol. 2 Dan Cunniah Issue 1 Director, Bureau for Workers’ Activities International Labour Office hen the financial crisis erupted back in 2008, analysts and policy- Wmakers were quick to look for historical precedents from which to draw policy guidance. As such, they were able to get inspiration from the recent ex- periences of Sweden, Japan and the Republic of Korea in the 1990s, and even from the Great Depression in the United States, where financial meltdowns led to a variety of economic outcomes. Indeed, many of the policy responses that have been put forward since the beginning of the current crisis or that are still being debated were imported in large part in what was done and not done in those countries. In January 2010, intent on drawing similar lessons from a labour per- spective, the Bureau of Workers’ Activities and the Global Union Research Network organized their own workshop on “Labour and the economic crises of yesterday and today: Lessons for a just and sustainable future”. This issue of the International Journal of Labour Research brings together the various con- tributions that were made at that event. Specifically, the authors were asked to examine the cases of the United States in the 1930s and of Sweden, Japan and the Republic of Korea in the 1990s to document the build-up to the financial crisis, its economic and pol- itical consequences and, as crucially, how the labour movement responded to the situation. The articles thus offer a range of perspectives that fully reflect the wide diversity of the political and industrial relations systems of the coun- tries studied. Beyond the recklessness of the leaders of the financial industry, what the stories make clear is the key role played by the deregulation and liberali- zation of the financial markets in creating a volatile economic environment that either provoked the crises or greatly facilitated their transmission. In each case, the crisis led to an important and painful restructuring of industry, large-scale unemployment, but also – not surprisingly – to intense fiscal pres- sures on the various governments. 5 International The narratives make a compelling case that matters of international -fi Journal of Labour nance, while too often peripheral in the priorities of labour unions, are none- Research theless central in their impact on not only macroeconomic policies, but also 2010 on the labour market institutions, and consequently on wage determination. Vol. 2 Issue 1 If labour has any hope to see improvements in the ability for government to pursue full employment policies and to improve its own capacity to influence wages and working conditions, it can only ignore these matters at its own expense. As such, the teachings directly inform the global policy priorities set forth in the ILO’s Global Jobs Pact of 2009 which calls for “building a stronger, more globally consistent, supervisory and regulatory framework for the finan- cial sector, so that it serves the real economy, promotes sustainable enterprises and decent work and better protects savings and pensions of people”. Conversely, the papers offer a strong policy prescription regarding wage policies in the context of deflation. Indeed, contrary to mainstream economic opinion, in such circumstances, downward nominal wage flexibility, far from helping to cure unemployment, might indeed become part of the problem in so far as it feeds further deflation in the goods market. It is thus suggested that a key part of a global recovery plan is to create a “wage anchor”, either through collective bargaining or through minimum wage laws. Again, this is in line with the prescriptions of the Global Jobs Pact which calls for the avoidance of wage deflation through social dialogue, collective bargaining and/or statutory minimum wages. Unfortunately, the articles reveal that governments, following the crisis, have usually adopted an oppo- site set of policies further encouraging precarious work through labour law reform in an effort to bolster, among other things, export competitiveness. The narratives also have something to say about the labour movement’s response to the challenges posed by the crisis. They reveal that, at the onset of the crisis, labour generally responded with vigour to the lay-offs and cor- porate restructuring, the rise of unemployment, as well as attempts by gov- ernments to cut into the safety net and weaken labour law. While trade unions were not wholly successful in each of their bat- tles, in all instances they did secure some gains through mobilization and negotiations with employers and governments, often in the improvement in the social protection programmes or in labour law reform on the right to or- ganize. In some cases, labour proceeded to improve its own organizational strength by attempting to move to industry-wide collective bargaining. However, labour was also hampered by the difficulty to present an overall and credible alternative to the neo-liberal prescriptions book. The task of articulating such a vision and mobilizing around it constitutes no doubt one of the biggest challenges for the labour movement in this age of glo- balized capitalism. The cases reviewed in this issue also underline the need for reliable political allies for labour when it comes to putting forward a new economic perspective. 6 The current economic crisis thus truly represents a moment of both Preface “danger” and “opportunity” for organized labour. Danger