9:06 AM Jun 3, 1996
DON'T BLAME THE SOUTH FOR JOB LOSSESBiel, Switzerland 31 May (TWN) -- Job insecurity and job losses in the North should not be blamed on the South since the real reasons for the rise in unemployment in the North lie in policies and developments in the Northern countries themselves. Although there is some relocation of Northern corporations to the South, this constitutes only a small part of global foreign investment flows. Job gains from this process are far outweighed by the loss of jobs in the South caused by massive and continuous outflows of resources from South to the North. These points were made at a seminar on "Expectations from the South" held on 31 May and organised by the Swiss Coalition of Development Organisations -- the umbrella organization of Swiss NGO aid agencies. About 200 leading members of Swiss NGOs attended the seminar, held to celebrate the Coalition's 25th anniversary. During the discussion period of the seminar, Swiss Member of Parliament Rosemarie Simmen, who chaired the meeting, remarked that globalisation process was posing a threat to Northern societies like Switzerland because their companies were relocating to Southern countries with lower production costs. And since globalisation could not be left unchecked, it would be a positive development to include a social clause as well as environmental concerns in the World Trade Organisation, she said. Referring to this comment, a member of the audience asked whether it was true that job losses in Northern countries were caused by lower costs in the South and whether there was thus a good rationale for introducing labour standards in the World Trade Organisation. Answering the question, Third World Network's Director, Martin Khor, who was in the panel of speakers, refuted the thesis that job losses in the North were caused by TNC relocation in the South. "The South is just being made a scapegoat or a whipping boy for Northern job insecurity because it is more easy and convenient for governments or some interest groups in the North to choose people outside their own society to blame," Khor said. "The real situation is that the major causes of job losses in the North lie within Northern countries themselves." Khor said that firstly it was a fallacy that so much investments were flowing to the South that the Northern countries were losing their jobs significantly. Most of foreign investments from the North have been going to other Northern countries, and only a small percentage was landing in a relatively few countries in the South. In contrast, hundreds of billions of dollars of economic resources were flowing annually from the South to the North due to losses from terms of trade decline, interest on foreign debt, royalties and technical payments on account of technology dependence, profits accruing to foreign investors as well as capital flight. According to Khor, these resources constitute potentially investible funds, which if they had remained in the South could have boosted investments in developing countries and thus contributed tremendously to job creation. For instance, prices in real terms of Third World commodities were notoriously low and had fallen even lower through the years, thus causing loss of job opportunities and depriving developing countries of revenues which could have generated more jobs. Khor said that for every job gained in the South from FDI, the South was losing several more jobs to the North because of massive resource outflows arising from the South's weak position in global economic structures. "It is thus wrong and misguided to blame Northern job loss on the South," Khor said. Instead, he added, governments and citizens of the South should be blaming the North for the lack of investment resources in developing countries and their resultant high unemployment rates, which were far higher than in the North. The real reasons for Northern job insecurity, Khor added, lay in the macroeconomic policies of the North and in unregulated technology developments and corporate behaviour stressing downsizing of personnel. He said that in recent years many Northern governments had abandoned full employment (or low unemployment) as the main goal in macroeconomic policy and had instead opted for controlling inflation in order to satisfy the demands of bond and equity holders. As a result, higher and higher rates of unemployment had been allowed or even planned for, including under such concepts as "NAIRU" (non-accelerating inflation rate of unemployment). Khor said Northern technological change and radical organisational reform had also contributed significantly to Northern unemployment. Automation had affected blue-collar jobs, then computerisation had made many white-collar workers redundant. And finally, the concept and practice of "re-engineering the corporation" had led to "downsizing", with significant loss of middle and high level management jobs. There is in fact increasing outrage among the Northern public that Chief Executive Officers of major corporations are receiving higher and higher income packages even as they engineer the loss of many thousands of jobs through "corporate downsizing." Khor concluded that to counter job insecurity, citizens and workers in the North should urge their governments to change the macroeconomic policy priorities -- back to full employment rather than tight monetarist policies. They should also demand greater governmental regulation of the effects of technological change. Policies that promote technological changes that lead to significant job losses should be discouraged, and the kind of organisational strategies that cause downsizing should also be reviewed. "It would be wrong to treat technological change as something uncontrollable or beyond the scope of intervention," Khor said. "In developing countries, the choice of technology is considered a very relevant and legitimate area of concern, and we are taught that in a situation of high unemployment, government should opt for labour-intensive rather than capital-intensive methods. So when there is high unemployment in the North, it is equally legitimate to have a look at technology policy, to see whether incentives and policies can be adopted for technologies and organisational forms that create rather than destroy jobs." These were the relevant questions that Northern groups and governments should investigate in their efforts to counter job insecurity, and not pick on poor countries in the South to blame job losses in the North, he said.