Organised labour has mainly been consulted by governments on how to share the pain from the financial crisis in 2007-2008, but not on how to shape the future. This raises the question of whether the crisis will accelerate the decline of organised labour and the deterioration of the welfare state or whether it can be made into an opportunity for labour to regain the policy initiative.
Against this background, the 6th GLU Conference will focus on the analysis, short-term stabilisation and long-term options.
By 2008 the financial crisis that broke out in the U.S. in 2007 had developed into a full-scale global, systemic financial crisis which ignited a deep crisis in the real economy around the world.
Industrialised countries like the USA and the members of the European Union as well as developing countries around the world have all been affected by the crisis. Countries which had deregulated their financial markets to a great extent – like the USA –, countries dependent on exports – like Germany – and economies with high current account deficits and high foreign debt – like the Baltic States –suffered the most. Worldwide fiscal stimulus packages together with expansionary monetary policy and bailouts of financial institutions were able to limit the rapid contraction of production in most countries and stabilise the situation. However, there seems to be no source which could re-establish the (in many cases already low) growth rates which existed before the crisis. A scenario of long-term stagnating GDP growth in developed countries and insufficient growth in developing countries appears very likely. At all events, more and more countries are turning to severe austerity programs with wages, social security and public service cut to pay for the crisis. After looting the state for the sake of the financial system some countries are now dismantling the welfare state as we know it.
Labour markets have been hit fundamentally by the crisis. Unemployment rates increased sharply all over the world and are set to continue rising in the coming years. If the world economy or a significant number of countries fall into long-term stagnation, then unemployment and the associated social consequences, such as poverty, will become an increasing problem. During the last few decades, labour markets have been deregulated in the country after country and precarious working conditions have become increasingly common. One of the dangers that this could lead to is a deflation triggered by wage cuts, a development that could push the world economy into a constellation comparable to the 1930s. Standard labour market instruments can help to mitigate the crisis but are on their own insufficient to create adequate employment.
Financial markets are still not regulated. Despite the deep economic crisis so far widespread anger among people has not translated into major policy shifts. After the near breakdown of the financial system in 2007 and 2008, the casino opened again. Bubbles in the stock market, the real estate market, the markets for natural resources and food or foreign exchange markets are likely as long as no fundamental changes are implemented. Furthermore, such bubbles are no longer likely to lead to short-term booms in the real economy.
Organised labour has mainly been consulted by governments on how to share the pain, but not on how to shape the future. This raises the question of whether the crisis will accelerate the decline of organised labour and the deterioration of the welfare state or whether it can be made into an opportunity for labour to regain the policy initiative. Given these perspectives the following topics will be discussed at the conference: