Is it time to rethink our strategy?

The global banking crisis hit us more than two years ago – in August 2008. Meeting just a month after the fall of Lehman Brothers, the EI Executive Board foresaw the risks for education funding and called for a campaign to focus on education as a key investment in sustainable recovery. EI Officers and staff worked on a campaign strategy that was endorsed by the Board in March 2009 and pursued by EI and many member organizations through the remainder of 2009 and into 2010.

This strategy combined global advocacy with national and local action. We worked with our coalitions of Global Unions and the Global Campaign for Education to get our key messages to the G8 and to the G20 as well as the UN, the OECD, the World Bank, ILO and UNESCO. Our messages on education as an investment not a cost, and on maintaining funding commitments for EFA, were carried forward nationally during the Global Action Weeks of 2009 and 2010.

By the time the EI Board met in December 2009, we knew that the big risk for education was the push by many governments towards so-called “exit strategies”, which would translate into budget cuts in many OECD countries, and reduced aid budgets for the developing countries.

In the wake of the Greek debt crisis and destabilization of the Euro zone, by the time the G20 met in Toronto in June 2010, the focus had shifted from stimulus to fiscal consolidation. This trend was confirmed at the latest G20 in Seoul last week, overshadowed by the US-China tension on trade imbalances and currency exchange rates.

And education is virtually nowhere on the agenda.

Today it is time to rethink.

The situation does vary significantly among countries – as three EI’s surveys of member organizations have shown. There are some bright spots. But in general, our campaign to put education in the spotlight in all countries and wherever leaders meet seems to have run out of steam.

There are both external and internal reasons for this.

Externally, the environment is far from favourable, as the pendulum of economic orthodoxy has swung back to cost-cutting of national budgets. The political environment in many countries has not been favourable either.

Internally, we have not maintained the vital link between global advocacy and national/local action that we talk about all the time. We have to ask ourselves why. Is it because national member organizations are overtaxed with the daily exigencies of responding to national situations? Talking with colleagues from other sectors, such as the banking industry, we are not alone. As one Global Union colleague put it: “Our national members are too busy putting out the fires at home to give much attention to our global calls for action”. Yet, we all recognize that the crisis was and remains a global one; that the way out must also be sought globally.

We will have to rethink how EI can help its member organizations join global advocacy to national action. Our campaign website “Hands-up for Education” needs revamping. It is hardly used anymore. Mea culpa: entries on this blog have not been as frequent either!

After the successful Quality Public Services: Action Now! Conference in Geneva last month, a new attempt will be made to mobilize locally, with joint campaigns to defend and promote public services in selected cities around the world.

But, if we are honest with ourselves and objective in our evaluation, the time has surely come to rethink our strategy for defence of education. Any suggestions?

IMF announcements

• 12% unemployment in Eurozone
• More stimulus recommended for Brazil and Indonesia
• Some easing of conditions in Central and Eastern Europe ?
• More lending for low income countries

Several IMF announcements over the last few days have significant implications for EI members and for education funding around the world.

Unemployment will surge in Europe
For 21010 the IMF predicts 12% unemployment for the 16 countries of the Eurozone region. As we said earlier, even as the stock markets in Europe and the US recover (yesterday the CAC40 in France reached the highest level since 9 months), the consequences of the crisis will be felt by working families for months – perhaps years – to come.

More stimulus recommended for emerging economies/middle income countries
IMF released country reports for Brazil and Indonesia endorsing more fiscal stimulus. The Global Unions Washington office says «The Fund may be attempting to respond to widespread criticism, including from trade unions, of the application of a double standard in its policy advice to countries affected by the global recession, whereby rich countries are encouraged to engage in expansionary fiscal policy while developing countries are advised to practice fiscal discipline»
(links: Brazil: http://www.imf.org/external/np/sec/pn/2009/pn0992.htm
Indonesia: http://www.imf.org/external/np/sec/pn/2009/pn0993.htm)

Some easing of IMF conditions in Central and Eastern Europe?
The IMF announced it would accept a bigger deficit in Ukraine, as part of loan conditionality. The IMF has been widely criticized for the severity of its conditions in Central and Eastern Europe, and for applying conditions when helping countries that are in direct contradiction with the calls of IMF Director Dominique Strauss-Kahn in favour of fiscal stimulus. Will the IMF ease its conditionality in countries like Latvia and Hungary as well?
Weblink to the IMF report on Ukraine: http://www.imf.org/external/np/sec/pr/2009/pr09271.htm

More lending for low-income countries – G20 follow-up
The IMF announced «unprecedented measures that will sharply increase the resources available to low-income countries in this time of global crisis». This follows decisions at the G20 London Summit in April. However, as usual, the devil is in the details. The Global Unions Washington office notes that:

- a substantial part of the projected increase will depend on additional bilateral grants from donor countries which have not yet been committed;
- only a small part of the increased resources (called special drawing rights – SDRs) voted recently by the IMF Board will actually go to the 78 low-income countries (US$ 18 billion out of US$ 250 billion).
- IMF language about more flexibility on conditionality is vague, with plenty of loop holes.
- Commitments to increase social spending have not been applied so far in practice.
Weblink to the IMF communiqué: http://www.imf.org/external/np/sec/pr/2009/pr09268.htm

EI and PSI have resolved to mount a campaign aimed at IMF Governors and key funding countries. Details will be posted on the EI campaign site in August/September.

Summer Pause
Much of Europe is on summer holiday break, and the writer of this blog will be taking off 3 weeks too. Back on 24 August!

Thinking about the unthinkable

A few weeks ago I wrote about the notion of a “jobless recovery”, ie a recovery for the financial markets, but not for the real economy, nor for employment (see blog posting of 10 June). I concluded that a “jobless recovery just doesn’t make sense”.

Well, as we head into the Northern summer break, that is just what seems to be happening. Stock markets are up – in many cases to the best level in over 6 months. Banking institutions like Goldman Sachs have announced – believe it or not – record profits, and have paid back their bail-out money to the government. Bonus payments to high fliers are back up too – despite castigation from political leaders including President Obama of the US, and Chancellor Merkel of Germany. This week French Finance Minister Christine Lagarde said banks that have started paying guaranteed bonuses again are an “absolute disgrace” and should be reined in by governments at the next G20 Summit in September (www.FT.com, 22 July 2009).

Meanwhile, announcements of job cuts and lay-offs come out daily in country after country, affecting local communities across the planet.

Writing in the New York Times a week ago, Paul Krugman stated: ’the American economy remains in dire straits, with one worker in six unemployed or underemployed’, even as Goldman Sachs announces a record quarterly profit and a return to outsize bonuses (Paul Krugman: “The Joy of Sachs”, NY Times, 16 July 2009, www.NYTimes.com). Krugman writes that rescuing the financial system without reforming it will only make another crisis more likely.

Six months ago, Trade Union leaders at the Council of Global Union, the ITUC and TUAC felt that the crisis was the occasion to push for a resetting of balances – a better balance between employee bargaining power and financiers, a better balance between resources for the public and private sectors, a start on the tough issues of global imbalances in trade and financial flows.

What we are seeing instead is a return to the very behaviour that led to the crisis in the first place. The industrial and financial landscape has been shaken up, but is settling back into a new configuration with the same underlying structure.

“Jobless recovery” seemed unthinkable. But it may be upon us – at least until the next crisis.

World Bank confirms sharp drop in financial flows to developing countries

Six months ago many in the South thought the financial crisis was mainly a problem of the North. In February, however, the head of the IMF, Dominique Strauss-Kahn warned that the impact on the developing countries could be devastating. In March, financier and philanthropist George Soros wrote in the Financial Times that the G20 had to take action to prevent both a financial and a human catastrophe for the countries of the South. This was in the lead-up to the London G20 Summit which announced a trillion US dollars of funding for the IMF to support countries in difficulty – developing countries of the South, and Central and Eastern European countries.

Now the World Bank confirms the warnings. In its Annual Global Development Finance report released yesterday, the bank says private capital flows to developing countries will fall almost to just one quarter of 2007 levels – to $363 billion for all countries from $1,200 billion in 2007. This drop in private flows is huge.

But it comes on top of a likely sharp drop in Official Development Assistance from government aid agencies – that is the pattern of previous downturns in the North. Moreover, NGOs and foundations have contributed significant resources for development in recent years, but they have been hit by the crisis too, especially US endowments.

The IMF funds are not the solution. Firstly, the actual contributions have not yet reached the one trillion ($1,000 billion) level promised in London. Secondly, they are being allocated subject to “old” IMF conditions, notably cuts in public sector spending. A colleague from Angola told the ITUC Executive Board yesterday that her government had announced a 30 percent cut in public sector spending for next year – and other developing countries will do likewise.

The World Bank said yesterday that developed nations are misguided in focusing efforts on restoring demand in their own economies. Prospects in developing countries will impact on growth prospects in the developed countries too, the Bank warns.

We agree. The trade union movement said that all along – see the Global Union Declaration to the G20 Summits in Washington and London.

When will they listen? And when will they act?

Sources: Global Unions Washington office, Financial times