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EMploYMEnt, work, And hEAlth inEquAlitiEs - a global perspective
The very high OPEC oil price that came with the oil embargo of 1973
placed vast amounts of financial power at the disposal of states such as Saudi
Arabia or Kuwait. While the US was actively preparing to invade these
countries to restore the flow of oil and bring down oil prices, the Saudis
agreed, presumably under military pressure if not open threat from the US,
to recycle all of their petrodollars through New York investment banks and
then throughout the world. New York investment banks became even more
active internationally, focusing less on direct investment, an issue which
required a strategy of liberalisation of international credit and financial
markets. Large corporations became more and more financial in their
orientation, even when they were engaged in production. The interests of
owners and managers were fused by paying the latter in stock options. Stock
values, rather than production, became the guiding light of economic activity,
and financial interests gained the upper hand within the ruling classes. Neoliberalism
meant the "financialisation of everything" and the relocation of the
power centre of capital accumulation to owners and their financial
institutions at the expense of other factions of capital (see Case study 1). The
support of financial institutions and the integrity of the financial system
became then the central concern of neo-liberal states (such as the G7) that
increasingly dominated global politics (Harvey, 2005).
Case Study 1. Globalisation, financial markets and employment. - ted schrecker
"Financialisation" is among the dominant characteristics of today's global economic system (epstein, 2005). while the total
value of foreign direct investment (to build new production facilities and acquire ownership of existing assets) in 2006 was us$1.2
trillion, the daily value of "traditional" foreign exchange transactions on the world's financial markets is now estimated at us$3.2
trillion, not including a variety of financial derivatives, the market for which is growing even more rapidly.
Financial crises resulting from large outflows of hypermobile short-term capital can reduce the value of a country's currency by 50
percent or more and result in economic contractions that push millions of people into poverty and economic insecurity. this is what
happened in Mexico in 1994-95, several south asian countries in 1997-98, and argentina in 2001-2002. the damage done by financial
crises in terms of lost gdp and employment can be substantial. For example, griffith-Jones and gottschalk (2006) estimate the cost of
the asian financial crisis to the affected economies at us$917 billion over the period 1997-2002. effects on the economically vulnerable
are compounded by public sector revenue losses and austerity measures often demanded by financial markets or the international
Monetary Fund (iMF) as the price of restoring "investor confidence." Furthermore, a comparison of financial crises in 10 countries (van
der hoeven & lübker, 2005) showed that employment tends to recover much more slowly than gdp in the aftermath. Following the
collapse of the Mexican peso, the then-managing director of the iMF described the underlying power dynamic in terms of "market
perceptions: whether the country's policies are deemed basically sound and its economic future, promising. the corollary is that shifts
in the market's perception of these underlying fundamentals can be quite swift, brutal, and destabilising" (camdessus, 1995).
even governments committed to reducing economic privation and stimulating employment often hesitate to displease financial
markets. For example, investor concern about policies that might be adopted by the workers' party in brazil (in advance of the 2002
elections) and the african national congress in south africa (after democratisation) reduced the value of the country's currency by
roughly 40 per cent in each case. at least temporarily, the governments in question accepted high unemployment and limited social
expenditure -- in the brazilian case, in the form of a program of reforms dictated by the iMF -- rather than risk further depreciation
of their currencies (evans, 2005; Koelble & lipuma, 2006). in south africa, the result was "dismal development and excellent
macroeconomic outcomes" (streak, 2004) with the former including negative employment growth in every year between 1996 and
2000 and an official unemployment rate of over 30 per cent; unofficial unemployment rates, using a broader measure, were and are
considerably higher (Kingdon & Knight, 2005).
even high-income countries are affected by the need to maintain "credibility" with financial markets. in contrast to the managed
exchange rate environment that permitted expansionary full employment policies in the 1960s, "[t]he demands of credibility … imposed
broadly deflationary macroeconomic strategies on the g7," at least through the early 1990s (eatwell, 1995: 297). writing about the
oecd as a whole, eatwell argues that neither technological change nor competition from newly industrialising countries provide
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