The Ecumenical Institute for Labor Education and Research, Inc. (EILER,Inc.) expressed apprehension that the global financial crisis will ultimately affect ordinary workers.
EILER executive director Paul Quintos said, “Unfortunately, massive credit losses and asset write downs don’t just affect financiers. Indeed, it is the ordinary working people, both globally and locally, that will bear the brunt of its devastating consequences.”
What began as a sub-prime crisis in the United States (US) housing market, in 2006, exploded into a global financial crisis in 2007. The International Monetary Fund (IMF) estimates that expected losses and write downs on US assets could total 945 billion dollars following the fallout of Bear Stearns, Lehman Brothers and Merrill Lynch. Morgan Stanley and Washington Mutual are facing the same fate.
US workers hurting
In the US alone, Quintos said, due to less investment and slower consumer spending which push slower economic growth and even recession, almost 10 percent of the workforce is now unemployed or underemployed, and job losses continue to mount.
The private-sector has shed 411,000 jobs over the past six months. The nominal rises in employees’ earnings are falling well behind inflation now running at 4 percent. This implies continued losses in the real value of wages or the purchasing power of most workers which has been stagnant or declining since the 1970s.
“As the US falls into recession, the rest of the global economy is being sucked downwards with it. The collapse of credit instruments originating in the U.S. is also weakening the financial balance sheets of banks and other overseas holders of these investments, affecting not just the banking sector but also stock markets abroad. Hence the US is exporting a credit crunch overseas and pushing the entire global economy towards recession,” he explained.
‘Severe and protracted’ effect
Quintos predicted that the effect of the current global financial crisis on the welfare and livelihoods of working classes in the countries like the Philippines will be more severe and protracted.
First, he said, the global credit crunch means reduced capital flows for third world countries who are chronically dependent on foreign capital inflows to pay for older debts, sustain imports from the advanced capitalist countries and paper over chronic deficits.
Second, most unindustrialized countries who are dependent on exporting agricultural products, raw materials, minerals, low-value added manufactures and services (e.g. business process outsourcing) to the advanced capitalist countries will be faced with shrinking exports due to the combination of depressed consumption in the US.
Remittance ‘crunch’, higher unemployment
Third, because the country is heavily dependent on the export of labor, particularly to the wealthy industrialized countries, Quintos said the country may be experiencing reduced earnings for foreign remittance dependent households, lower consumption spending in the domestic economy as well as higher domestic unemployment.
The international labor migration serves as an outlet for the surplus labor that cannot be absorbed by stunted domestic industries in these countries, as well as an important source of foreign exchange remittances that help pay for imports and debt-service. But recessions and rising unemployment in the advanced capitalist countries are invariably associated with the tightening of borders to keep out foreign workers.
Spikes in food and energy prices
Fourth, and perhaps most importantly, Quintos pointed out that as financial instruments and stock markets become less attractive to financial investors, speculative capital shifts more into commodities trading such as oil, minerals and agricultural commodities.
“This is contributing to the precipitous rise in food and energy prices beyond what conditions in the real economy warrant, thereby rapidly eroding the real incomes of the vast majority especially in the third world,” he said.
Food accounts for 30-40 percent of the consumer-price index in most developing countries, compared with only 15% in the G7 economies. The Economist estimated that two-thirds of the world’s population suffer double-digit rates of inflation this season (mid-2008).
This is pushing millions of people deeper in poverty. In the Philippines, for instance, the Asian Development Bank estimates that “for every 10 percent increase in food prices, about 2.3 million more fall into poverty.”
They will be joining nearly three billion people — half the world’s population — who are living on less than two dollars a day, including 1.3 billion workers.
Quintos warned that the current financial crisis will be used even more to erode and press down on wages and social spending, lay off workers, promote precarious employment, tear up workers rights, clamp down on workers concerted actions and intensify the exploitation of the working class.
He said that workers “must counter monopoly capital’s desperate attempt to shift the burden of the crisis onto the people” by consolidating their ranks, reaching out and organizing more workers in the factories, offices and in the communities, building unity with other affected sections domestically and internationally, and waging more concerted workers’ actions. #
