DIEESE/CESIT/CNPq
 
 
 

Seminário Internacional:
Emprego e Desenvolvimento Tecnológico no Mercosul
Florianópolis, Brasil
Canto da Ilha Hotel
29 a 30 de Setembro de 1998
 
 
 

NEO-LIBERAL GLOBALISATION, AND ITS IMPACT ON EMPLOYMENT AND TECHNOLOGICAL DEVELOPMENT: DEVELOPING A LABOUR MOVEMENT RESPONSE
versão definitiva
 
 
 
 

Ravi Naidoo
 
 
 
 
 
 

Sessão 2

 NEO-LIBERAL GLOBALISATION, AND ITS IMPACT ON
EMPLOYMENT AND TECHNOLOGICAL DEVELOPMENT:
Developing a labour movement response

Input to the DIEESE/ CNPq seminar on Employment and Technological Development, Florianopolis, 28 – 30 September 1998

Ravi Naidoo
 

1. Introduction
 

This paper discusses employment and technological issues from the perspective of the South Africa labour movement. Such a perspective is incorporated within a broader sense of how economic globalisation is affecting all our countries, and the options available to promote economic development. In the South African case, the movement of the country away from its apartheid past, which was based on racial oppression and deliberate economic exclusion of the majority, has added to the development deficit that must be addressed.

In beginning, there are a few general observations that will frame the discussion.

First, formal sector employment in South Africa has been in decline for a number of years. Officially, formal sector employment today has been reduced to its 1981 level. This is despite the fact that the labour force has increased each year by about 2,5%. The result is a growing unemployment, now standing at about 30% of the labour force. This declining employment situation is the legacy that the new democratic dispensation has inherited.

Second, the increased economic competition, brought on through liberalisation, has seen many forms begin to restructure employment and technology. Unfortunately, the tendency has been to shift away from labour intensive production to more capital intensive production. Where new jobs are being created, these are in the form of what is referred to as ‘atypical’ or irregular employment – that is casual, temporary, and so on.

Third, South Africa, along with Brazil and Guatemala, suffers from extremely high levels of inequality. The top 10% income earners account for 65% of national spending and the bottom 10% earners for 1%. In a situation where markets respond to those with money, the poor are effectively locked out of the markets. These markets do not register their existence, or care to respond to their needs.

Fourth, the extreme inequality and negative distribution of economic resources must be dealt with at a time that neo-liberalism has been held up as triumphant. This creates a dilemma for the South African government. Is it possible to counter inequalities (including poor domestic labour standards) and, simultaneously, engage with international competitiveness? This is especially in the light of this ‘international competitiveness’ leading to greater levels of inequality. Attracting new investment means offering opportunities for an increased profit share to capitalist. But how can this offer of a larger profit share be reconciled with a rising floor of development and labour rights?

Fifth, South Africa is the dominant economic power in southern Africa. However, a negative factor, largely due to the lack of industry in the rest of the region, is that there is an unequal balance of trade between South Africa and the southern African region. For example, the total economic output of the South Africa’s neighbouring states is less than that of South Africa’s largest province. That is the balance of power in the region. But in turn, South Africa’s total economic output is equivalent to the Munich region in Germany. That is the balance of power between the developing and the developed countries. (Brazil is similarly large in South America but small compared to the developed nations of the G-7). The levels of uneven development, in this age of rapid technological advances, are likely to grow – with the rich nations moving faster along the technological highway to the detriment of the poorer nations. It is in this sense that regionalism can be seen as a possible building block to increase the strength of marginalised and poor countries.

In tackling these matters of employment and uneven economic development, we do so in a hostile global environment. It is the conservative, neo-liberal forces that are setting the current globalisation agenda. The impact of this form of globalisation will have a serious negative impact on working people and progressive trade unions. It is important to briefly set out the drivers of globalisation.

2. What is globalisation?
There are two broad streams of thought regarding the nature of globalisation. The first view, generally from the neo-liberal right-wing, is that globalisation is the result of the “irresistible forces of technology drawing all parts of the globe into a single global economy”. This process, they argue, towards a “global village” will benefit all those who agree to play by the new rules. Those who resist will be excluded from economic growth and development.

The second view, generally from the progressive left-wing, is that talk of “globalisation” is mainly an attempt to scare governments into accepting the neo-liberal hegemony. In reality, this view contends there is little new about globalisation; it is “merely imperialism in another guise”.

Globalisation is certainly not new. It is rather an ongoing and long-standing feature of capitalist development. A definition of globalisation that holds true is that globalisation is “a process aimed at progressively integrating national commodity, capital, finance and currency markets into a single global market operating according to universal rules”. It is not a natural process, but rather the result of a conscious effort by transnational corporations, multilateral institutions and governments of advanced countries to move beyond national markets.

However, while globalisation is an ongoing process, there is one relatively new element to it: the transnational corporation. TNCs differ from international firms whose economic activities are largely home-based in a particular country. TNCs are those corporations to which “state territories and state frontiers are not the basic framework, but complicating factors”. The rise of TNCs is regarded to add great impetus to the process of globalisation, making national policies less effective. While the development of TNCs is important, its role is also probably exaggerated. Nonetheless, suffice it to say that the pace of globalisation has picked up sharply since the 1970s, and holds serious implications for union movements.

3. What is the driving force behind globalisation?
The driver of globalisation is the ongoing search for profits. The reasons behind the rapid acceleration of globalisation, reflected through wave upon wave of liberalisations in many countries, lie in the stagnating domestic economies of the advanced nations. Caught in relatively stagnating home economies these large corporations were forced to find new production locations and markets for exports. For advanced nations, a rapid expansion of trade was needed to counteract the declining rates of profit at home. This required that trade barriers, and other barriers to entry, in the rest of the world be dismantled.

In the same period, many developing countries had?at the prompting of the World Bank?borrowed heavily at low interest rates and were heavily over-borrowed. When the oil shocks of 1973 and 1979 occurred, the pincer of rising interest rates and falling demand for exports left non-oil exporting countries with an impossible burden. The leveraging power of the World Bank and IMF increased tremendously, as they were then able to impose harsh structural adjustment programmes (SAPs), forcing liberalisation on developing countries. Developing countries were being opened up. As an additional objective, SAPs also had the effect of muzzling the political voice of developing countries (who were until then demanding a new economic order through the UN).

4. What are the basic elements of globalisation?
In seeking to increase profitability, liberalisation and economic change in the following areas are demanded.

? Trade liberalisation. By expanding exports advanced countries can increase profitability and counteract declining profits at home. Pressure is placed on developing countries to adopt export promotion and increased competitiveness, with a prevailing emphasis on cost reduction and “reciprocal” access to markets. This necessarily opens up the developing country markets. Despite a demand for “reciprocal” access, developed countries have maintained substantial levels of protection. For example, the producer subsidy for European Union agricultural products is 50% compared to 15% in South Africa. These subsidised products then compete with those from South Africa not only in EU but also in third country export markets. Moreover, access to “sensitive” markets of the developed countries, where the developing countries have comparative advantage, are often restricted or limited.
 
? Capital control liberalisation. The liberalisation of the financial markets, through the relaxation or abolition of exchange controls, essentially since 1973, has unleashed massive amounts of capital. In 1995 daily trading (on stock exchanges) amounted to $1,3 trillion, a ratio to world trade of nearly 70:1. Most of these capital flows are short-term, speculative movements and are not for the finance of trade or long-term investment. The experience with the results of liberalisation of capital controls has not been promising, as demonstrated by the ‘melt-down’ of the South East Asian economies when speculative capital took flight. (Before this, Mexico was a good example of the same tendency). However, rather than capital flowing from the developed to the developing countries, resources were being transferred out of the developing world. The largest net transfer over the period 1983 – 92 has been to the US. Currently the rapid expansion of the financial sector is a source of growth for advanced nations, but also highly unstable, as reflected in the recent collapse of financial markets in the ‘emerging markets’, and the growing likelihood of collapse in the industrialised nations.
 
? Flexible labour markets and intensification of work processes. Profitability can be increased through the intensification of work processes, essentially getting out more value in less time. This includes longer hours of work, lower real wages, and an increased emphasis on new technology (including capital intensity). A preparatory phase requires that trade unions, labour standards and other ‘rigidities’ on the supply-side are dismantled or restricted.  In making the labour market ‘more flexible’, greater forms of “irregular employment”, such as subcontracting, labour-only contractors and so on, can be used. The implication of this would generally be an undermining of existing labour standards, or at least resistance to any improvement of labour standards.
 
? Restructuring of (global) work organisation. Akin to change in the labour market is change in the structure of the organisation. With only one third of world trade not being conducted by TNCs, it is argued that there is greater economic concentration now than previously. Along with this concentration of intra-TNC economic activity, there is a sharp increase in the use of irregular/ atypical forms of labour by these same TNCs. TNCs are downsizing their structures to be as cost effective as possible, with many activities now being outsourced to small, competitive contractors. Even in developed countries, layoffs run into millions of workers. In this high unemployment environment, subcontractor competes with subcontractor, bidding down the price to get TNC business. Wage and other costs are compressed in this process (and profitability increased), with the TNC having to take no responsibility for the regulation-evading actions of the subcontractors?who are often forced by competition to evade even minimal labour laws. This situation is best described as “concentration at the centre, competition at the periphery”.
 
? Rolling back of the state. Part of the neo-liberal agenda is the rolling back of the state, and the promotion of the private sector. This process was given impetus through the SAPs that forced government cutbacks as part of reducing government deficits, and encouraging private/ foreign investment. Moreover, with rising welfare costs due to unemployment and shrinking tax bases, as TNCs moved activities offshore, governments have come under increasing pressure to cutback on spending, essentially privatising many assets and functions. While it can be argued that, in some cases, governments were involved in too many things (and sometimes doing them badly), increasingly we are seeing the privatisation, and commodification, of basic services.
 
 In addressing this situation, it is argued that neo-liberal globalisation needs to be engaged. As a process that is being consciously driven by TNC’s and their protective governments, it is only a counter force that can hope to influence change. Some ideas for this ‘engagement’ are discussed later in this paper.
 
 5. Policy developments in South Africa
 To deal with the South African immediate problems of rising a Presidential Job Summit has been called for the end of October 1998. Government, organised labour, community constituency, and organised business will be represented at this Job Summit. This Summit will negotiate policies and projects to promote job creation. The impact of macroeconomic policies on the employment situation is central, and therefore the views of the different parties to the Summit differ depending on their perspective on these policies.
 
 The government response to globalisation has been to promote a concept of that is referred to as “progressive competition”. This is an attempt to blend in human and developmental concerns along with the drive to increase international competitiveness (as a response to the dilemma mentioned in the introduction). For the first four years of the post-apartheid (ANC) government this policy meant undoing the racist structures of previous governments – but without threatening the interests of capital. Now, as this “apartheid premium” has been dealt with, the focus is increasingly on productivity enhancements.  This has the potential to both increase profits of companies, and create more jobs. However, the global economic growth is slowing and (largely neo-liberal) contractionary domestic policies are further slowing economic growth. Rising productivity and falling economic growth have seen many workers start to work themselves out of a job. Over the last few years, labour productivity has far outstripped wage increases – yet employment continues to fall. For effective job creation, productivity increases need increases in national output. This is the challenge facing government adopting mainstream (conservative) economic policies.
 
 Business prefers to see a few ‘doable’ job creating projects being initiated. Thus they propose a minimalist and non-transformative programme. For example, business did not put forward a single proposal on social security, arguing that it had nothing to do with jobs! Instead business has announced the setting up of a R1 billion fund to promote job creation projects. This amounts to only about 0,1% of national gross domestic product. This token fund will help distract attention from business’ real contribution to the Jobs Summit -- the 100 000 net jobs shed by companies over the past year, and the thousands of retrenchments to come. Despite the abundance of exploited casual/ temporary workers and low wages, claims of an ‘inflexible labour market’ and ‘high wages’ are still voiced.
 
 The Labour movement approach is one of ‘strategic unionism’. This translates into seeking gains for workers and promoting social transformation. The need to follow such polices is to ensure unions do not get caught in to a narrow ‘economism’, and overlook the need for wider social transformation. Therefore the South African labour movement seeks to build stronger alliances with community-based structures, to further common agendas.
 
 In this regard, labour and community have tended to put forward joint positions to the Job Summit. They have argued against a limited project approach. The fundamentals of the economy must be changed, dismantling the foundations of inequality and poverty. Broadly, the approach argues for a strongly interventionist government promoting productive investments in socio-economic development, the creation of labour-intensive industries (such as housing), and redistributive policies. Specifically Labour’s proposals include a change in macroeconomic policy, prescribed investment in productive activities, implementing a social wage system and a mass housing programme. These policies will ‘kick-start’ the economy onto a better growth and development path. The approach also recognises that, in the absence of a social security system, workers support the unemployed – and that job security is pivotal.
 
 6. NALEDI research into employment and technology in South Africa
 As part of the process towards this Summit, NALEDI engaged in research on the question of job creation and technology choice in South Africa. This NALEDI research project  examined the structural nature of unemployment in South Africa. This is because the demand for labour has been influenced by economic decisions made in the past. Therefore policy directions and economic decisions which aim to increase the demands for labour and create jobs in South Africa will have to engage with the inherited structure of the economy.
 
 There are three important aspects to the current structure of the economy, which have a significant impact on the demand for labour (L). These are:
 
? The capital stock which has accumulated in the past (the level of capital accumulation) (K)
? The technology embedded in this capital (T)
? The level of capacity utilisation (U)
 
 (Or shorthand, L = K + T + U)
 
 We know that increasing investment and capital accumulation will increase the demand for labour. But the extent to which more labour is demanded depends on the technologies used. For example, highly capital-intensive technology will produce fewer jobs, then a labour-intensive accumulation.  (The matter of capacity utilisation is averaged over the regular business cycle, and not discussed further in this paper).
 
 Therefore, to develop any effective employment and economic growth strategy one needs to know:
? What causes investment to increase?
? What determines the choice of technology?

Unfortunately these issues are not well understood, despite the various theories. A wide range of variables -- the relative prices of capital and labour; business confidence; profit rates and profit share; and interest rates have been used to model investment and technology choice. Which, or what combination, is more important in determining investment and technology?

Furthermore, the current investment decisions and technological choices we adopt must interface with structures inherited from the past. For example, new labour-intensive investments can help shift the South African economy away from its historic capital-intensive bias, but this will be a gradual, cumulative process. The structure of an economy cannot be transformed by current decisions alone -- hence the structuralist approaches of the NALEDI study.

Figures 1 and 2 show these trends since 1978. Figure 1 shows the level of fixed investment as a percentage of the gross domestic product of South Africa. Figure 2 shows the labour-capital ratio for South Africa – that is, the number of jobs per million rand fixed capital investment.

One can see that, in recent times, the level of investment has dropped, only slightly recovering after 1994. Not only was investment declining during much of this period, but the number of jobs, which a particular level of investment could produce, was also dropping.
 
 
 
 

Clearly, broad policies to promote employment must interface with this structural and historical legacy – the investment and technological choices made in the past. The aim is to begin to map out the broad framework of a new employment growth path for South Africa by critically assessing the cumulative impact of past, present, and planned decisions on the current employment situation.

Much has been written about the nature of investment and accumulation and the potential impact on labour demand, although much of this focus has become lost in recent debates concerning labour market flexibility. In particular, the possibility that machinery could replace workers and contribute to unemployment has been recognised by early classical economists. If we extend the discussion beyond machinery to include any adoption of new technologies and production processes, then a modern relevance emerges in this era of rationalisation and “right-sizing.” Clearly, investment and technological change can have a significant impact on labour demand.
One common factor which can link the adoption of new technology and the drive to accumulate capital (i.e. to invest) is the competitive environment of a modern capitalist economy, in this case increased globalisation. Adopting new technologies and increasing the stock of capital can improve productivity in a firm. Increased productivity can, in turn, lower costs and improve profitability. Competition for market share and for a great proportion of the profits of industry pushes firms towards technological change and sustained investment – developments which will have a strong impact on labour demand and the level of unemployment. Furthermore, recent trends towards international market integration and a greater degree of global competition make these issues particularly relevant over the past two decades.

While productivity improvements and technological innovations can displace workers, greater levels of investment will encourage employment. Therefore, two forces work, often in opposite directions, to define the nature of labour demand in an economy. In a competitive capitalist environment, growing investment is often accompanied by labour-displacing technological change with the outcome that the impact on employment can be ambiguous. If new investment cannot compensate for jobs lost through productivity improvements, then the phenomenon know as ‘jobless growth’ can make itself known.

How these two factors – capital accumulation and technological change – help to define the nature of labour demand in South Africa is a critical question in devising a job creation strategy. If the nature of global capitalism is such that the process of competitive accumulation destroys jobs or dramatically slows the ability of the private sector to generate employment, then a different policy approach from a wholesale emphasis on productivity improvements and competitiveness is needed to address the unemployment crisis.

Case studies of ten firms in ten different industrial sectors were conducted. Combined these firms employ over 100 000 workers in South Africa. Most of the firms examined had undergone a process of retrenchment or rationalisation over the past three years. Furthermore, the majority of these firms predict that they will continue to need fewer employees in the future. Almost all firms expect a shift in the skill profile in the future. They will be employing more highly skilled workers and fewer lower skilled personnel.

Despite the general expectation in most firms that their employment levels will drop in the future, all firms examined expect to continue to invest. In some cases, future investment is expected to simply be the acquisition of existing firms as opposed to the expansion of productive activities in the economy. Of the different variables which could influence investment behaviour, interest rates, economic growth, and the overall stability of the economy were the most important factors. Consumer spending and exchange rates were significant to a number of firms, while average wage levels and maintaining good labour relations were the least important of the variables.

All firms examined indicated that they had made significant technological shifts in the past and expect to do so in the future. Most manufacturing firms expected that future technological changes will reduce their demand for labour as production processes become more capital-intensive. All firms did indicate, however, that changing technologies are expected to have a substantial impact on the types of skills they demand. Labour demand is expect to shift towards more highly skilled, highly trained workers.

From the results, it is unlikely that any of these large corporations will substantially increase employment in the short to medium term. Because firms will need fewer, more highly skilled employees in the future, skills-development is clearly necessary to ensure equitable access to jobs, but it could have a minimal impact on the actual number of jobs provided by large firms. Much more emphasis should be placed on public works programmes, sustainable public employment, public investment (particularly in infrastructure), and the equitable, sustainable development of smaller and medium-sized enterprises. Such an emphasis could potentially increase domestic expenditure, stabilise the economic situation, and increase the rate of economic growth in South Africa.

The different firms demonstrated a wide variation in their current demand for labour, although the perceived future trends showed a substantial level of consistency. Each firm was asked to estimate the skills profile of their current workforce, giving the percentage of workers which would fall into three broad categories – highly skilled management and professional; skilled artisans and production workers; and semi- or unskilled. The composition of the labour force, using the median percentage in each category, can be summarised in Table 1.

Table 1. Skills Profile
Skill Classification Percent
Highly skilled management/professional 15 percent
Skilled artisans/production workers 30 percent
Semi-skilled or unskilled workers 56 percent
Note: Percentages do not add up to 100 because the figures reflect the median of each individual skill category.

Of the firms examined, the median figures show that, on average, more than half of the current demand for labour is made up of un- or semi-skilled workers. Less than a third of the workforce composition is classified as skilled artisans or production workers, while management and profession staff account for an average of 15% of the workforce.

Most of the firms examined had undergone a process of retrenchment or rationalisation over the past three years. Furthermore, the vast majority of these firms predict that they will continue to need fewer employees in the future. This trend is particularly strong among the manufacturers – every manufacturing firm except one replied that they expect to need fewer employees in the future. The one exception expected that, while it would not need fewer employees, it would not be expanding its workforce in the near future.

Several firms stressed that the types of jobs which they would make available in the future would be more temporary, linked to contract work, and more flexible working arrangements.

Almost all firms reported an expected shift in the skill profile in the future. They will be employing more highly skilled workers and fewer un- or semi-skilled personnel. Several firms stressed that semi-skilled workers will need to become “multi-skilled” in the future to meet their expected demand for labour.

Despite the general expectation in most firms that their employment levels will drop in the future, all firms examined expect to continue to invest in the future. In some cases, future investment is expected to simply be the acquisition of existing firms as opposed to the expansion of productive activities in the economy – such acquisitions will yield no new jobs. Nevertheless, firms who foresee a future drop in employment do not link this drop directly to a decline in investment or to dis-investment in South Africa.

Firms were asked to assess the importance of different economic variables on their investment decisions. The results of these questions are summarised in Table 2.
The scale used in the interviews was as follows:
 0 = not at all important
  1 = somewhat important
  2 = quite important
  3 = critically important

Table 2. Determinants of Investment
Variable Response = 0 Response = 1 Response = 2 Response = 3
Interest Rates 0% 20% 10% 70%
Inflation Rates 0% 20% 40% 40%
Exchange Rates 0% 20% 30% 50%
Economic Growth 0% 0% 40% 60%
Consumer Spending 0% 10% 40% 50%
Average Wages 10% 20% 40% 30%
Good Labour Relations 20% 20% 30% 30%
Overall Stability 0% 0% 30% 70%

Of the different variables which could influence investment behaviour, interest rates, economic growth, and the overall stability of the economy were the most important factors. Consumer spending and exchange rates were significant to a number of firms, while average wage levels and maintaining good labour relations were the least important of the variables.

All firms examined indicated that they had made significant technological shifts in the past and expect to do so in the future. The nature of these technological changes varied from industry to industry (and even within different divisions of the same corporation). Furthermore, the anticipated impact of these technological changes on employment differed.

Most manufacturing firms expected that future technological changes will reduce their demand for labour as production processes become more capital-intensive. Firms in the service industries, however, seemed to expect a minimal effect of technology on employment levels or, in some cases, a positive link between technological change and the number of jobs. For example, a firm in the transportation sector indicated that it would invest in new, more efficient motor vehicles to cut costs, but this is unlikely to translate into lower levels of employment. Likewise, a firm in the retail sector stressed that their past experience with technological shifts (e.g. scanners at the tills) actually increased their labour demand in areas such as inventory control and information management.

All firms did indicate, however, that changing technologies are expected to have a substantial impact on the types of skills they demand. Labour demand was expect to shift towards more highly skilled, highly trained workers.

Firms were asked to rate the importance of different variables on their choices of technology. As with their investment decision-making, they were asked to assign a value to each variable, depending on its importance. The scale used in the interviews was identical to the investment question:

  0 = not at all important
  1 = somewhat important
  2 = quite important
  3 = critically important
 Table 3. Technological Choice
Variable Response = 0 Response = 1 Response = 2 Response = 3
Innovation by Competing Firms 0% 0% 20% 80%
Need to Adopt International Standards 0% 0% 40% 60%
Increase Productivity 0% 20% 0% 80%
Reduce Labour Costs 0% 30% 40% 70%
Improve Quality of the Product Produced 0% 0% 0% 100%

All firms pointed to the need to improve the quality of their products as a critical element in making the technological choices they do. Innovation by competing firms and the need to increase productivity were also critical variables. Some firms made a distinction between improving productivity and reducing labour costs – in these cases, labour costs were not seen as important as broader productivity improvements.

The NALEDI study therefore found that when foreign competition increases, firms would adopt more capital-intensive technologies. When foreign competition is relatively low, changes in the labour-capital ratio are less likely to be capital-intensive in nature. The study results have important implications for trends in labour demand in the face of globally integrated markets. Increased competition and the drive to protect profits in the face of internationally integrated markets could produce structural shifts in the demand for labour which will make job creation harder, not easier, to achieve, particularly in the short to medium term.

The results of the study presented in this paper therefore directly challenge the conventional neo-classical wisdom. High interest rates can actually promote high levels of capital intensive production as firms attempt to maintain profit share by displacing labour. Lower interest rates, in contrast, can relax pressures on profit share and the drive to become much more capital intensive.

High interest rates are often defended as part of a strategy to bring down inflation and to deal with an unfavourable balance of payments situation. No strong relation between inflation and investment, however, was uncovered in this study. Moreover, encouraging productive investment can actually help to solve problems with price increases and balance of payments. For example, if price inflation occurs as an economy moves closer to full capacity, then one solution would be to expand the productive capacity of the economy by encouraging investments. Lower interest rates could promote this outcome and would be far more “job friendly” than high interest rates which aim to lower the level of capacity utilisation.

Greater investment can also relieve pressures on the balance of payments. If the productive capacity of an economy expands, that increase in productive capacity can take place in an export-oriented sector or in a sector which produces for the domestic market. In either case, pressures on the balance of payments is likely to be eased. On the one hand, exports could be increased, bringing in foreign exchange and improving the trade balance. On the other hand, the level of imports could be reduced, saving foreign exchange and also improving the trade balance. In both cases, the foreign exchange position is improved and pressures on the balance of payments are relieved.

One counter-argument to the above argument is that the short-term dynamics of the financial markets within a global context prevent the type of medium-term strategy outlined above. There is a great deal of validity to this argument, but maintaining high interest rates is not the only solution. Institutional changes – such as controls over the movement of short-term financial and speculative capital – could free-up interest rate policy and allow the cost of capital to fall.

7. A closer look at regional integration in Southern Africa (SADC)
Many of the South African economic development challenges are reflected in the southern African region. However countries in the region have a worse time of it. They have a far less developed industrial base, weak domestic markets, insufficient skills base, and a general lack of political stability indirectly the result of the grinding poverty).

Southern Africa’s situation is best represented by the case of SADC .

The Southern African Development Community (SADC) region comprises 14 countries, and is growing in membership. The region is seen as leading hope in Africa to attain economic development. Much of this hope stems from the fact that the region has reached positive growth rates between 1994 and 1996, with Malawi and Angola achieving growth rates of 13% between 1995 and 1996.

Unfortunately the situation is less positive than appears at first sight. In the main, this stems from the low benchmarks against which positive growth is measured. The high growth rates are often coming off the back of collapsed and war-ravaged economies, and offer little real economic change to the lives of its people. This is not to suggest that these positive growth rates are not a step forward, but rather that the road to effective economic regeneration has barley begun.

The growth recorded above is usually a reflection of the balance of payment position with regard to the export of raw materials to the developed countries and not a reflection of the transformation of the production processes in the economy resulting in increased production of goods and services. Most countries except South Africa, Zimbabwe, Swaziland and Mauritius have no real industrial sector capable of transforming each country’s natural resource endowments into goods and services needed by the regional market.

Most SADC countries, especially Angola Mozambique, Zambia, Malawi, Zimbabwe and DRC are experiencing the highest levels of unemployment among the citizens to the tune of 50% or more of the labour force.

Majority of SADC countries are heavily indebted to international banks and to bilateral creditors. The debt burden is so heavy that it precludes economic recovery further worsening each country's development efforts. Estimates of the region's debt shows that the debt is between US $150 billion to US $180 billion. The debts have become difficult for any country to repay and cannot be repaid. Most of these countries have been declared uncredit worthy in the eyes of creditors and cannot qualify for further loans. For example, of the 52 countries of Africa, only 15 are considered by the African Development Bank as being credit worthy. The remaining 37 are so heavily indebted that no form of loan can be granted to them anymore. Grant aid resources constitute the only form of resource that is permissible. The question is how these countries will develop without access to vital financial resources.

The heavily indebted countries are running out of solutions to the increasing debt crises. All rescheduling of the debt with the IMF, World Bank the Paris and London Clubs have been done without providing long term solutions to the debt. Debt forgiveness is not  a long-term solution as the same countries will want to borrow again.

The implementation of the Structural Adjustment Programmes of the IMF and World Bank has not had positive effects. Nine out of the 14 SADC countries are implementing one form of (SAPS) or another, including the usual prescriptions of devaluation of currencies, removal of financial controls, privatisation, reduced tariff barriers, and other similar neo-liberal proposals.

The argument behind the above SAPS is that the client countries would be able to realise economic recovery that is led by the private sector through the realisation of greater investment flows and increased trade in goods dud services. Governments are called upon to put in place the above policy reforms in order to make the investment environment attractive to both domestic regional and international investors. It is also argued that countries will lose some industries in this liberalisation process and will gain other new lines of production. Those lost may have been uncompetitive and were bound to frill in time any way.

The experience of most countries implementing SAPS shows that very little new investments have come into their economies. Leaders in the region have travelled to the rich countries of the north to present the reform packages that they have implemented and to urge investors there to come and take the opportunities that the reforms have created. In addition stock markets have been put in place in every SADC country with the aim of attracting portfolio investments into the expansion of existing industries.

Within the region intra-regional trade has remained at around l0% of overall trade. This is considered to be very low. The reasons behind this low level of trade is that all SADC countries, except South Africa and Zimbabwe, have a narrow industrial base, and often the few industries in place produce similar goods to those produced by the neighbouring countries. For these countries, trade outside the domestic market is characterised by the export of raw materials to the developed world.

The lack of political stability is another key constraint on economic development. The risk premium in the region (especially in the light of the conflict in central Africa) is close to prohibitive. However, for as long as poverty is wide-spread through out the region political stability will only be realised in those countries that are seen to be genuinely attempting to resolve the problems of development and backwardness of their people. This is a vicious cycle that is unlikely to be broken by an approach of limited government, waiting on the private sector to come in and invest. Rather an active interventionist state role would have better success.

8. What can the labour movement do to influence progressive change?
There are a number of steps that unions can take to counter neo-liberal globalisation.

First, for the labour movement, economic regionalism could be a stepping stone to the introduction of progressive (pro-working class) interests. However, the call for economic regionalism comes from both conservative and progressive quarters – indicating that it is a double-edged issue. From the Left, economic regionalism could be a path building strong national and regional structures to oppose the neo-liberal agenda, and introduce an appropriate one suited to local conditions and needs. Therefore there is a need to actively influence the processes of regional integration.

Second, the recent rush towards neo-liberal globalisation is now coming under threat. The collapse of financial and currency markets in many countries and regions has caused many erstwhile supporters to reconsider the merits of the package. For example, many other countries in the region, who are beginning to distance themselves from the IMF advice, have supported the move by Malaysia to impose capital controls.  There is a window of opportunity opening for an international campaign for economic change.

Third, despite the strength of transnational corporations, unions are not helpless. Unions needs to build their capacity to engage with these issues. Employment and workplace issues can no longer be settled at factory floor level only. Now with growth of TNCs, one needs to organise and bargain at national, regional and international level. Need to engage on issues of multilateral trade and investment treaties. The recent joint international campaign against RTZ is a case in point. In that case, unions in South Africa and Australia were able to apply strong pressure on the transnational corporation.

Fourth, as TNCs generally still operate out of their home bases in advanced countries, unions in those countries are well-placed to apply pressure. This pressure can be brought to bear jointly with union movements in countries where those TNCs operate. This is one are where more attention must be given. The decision by the CUT and COSATU to join the ICFTU is an opportunity to build stronger links with unions in industrialised countries, and assert pressure on TNC agendas.

Fifth, while the national regulations are likely to be undermined by transnationals, international regulation is likely to increase. There is increased talk of introducing more powerful international regulations over capital flows, to curb the more destructive elements of speculative flows. The labour movement needs to be at the forefront of this process, articulating and mobilising for greater international regulation.

Sixth, unions (and many developing countries) often lack the capacity to engage sufficiently with international economic and trade issues. For example, many international NGOs at the 1996 WTO Ministerial meeting were better informed than many national delegations from developing countries. Unions, mainly in developing countries, are in a similar situation. It is clear that an international effort is needed for the labour movement to build its research and technical policy capacity to ensure that they can strategically engage these processes.

Last, struggle begins at home. In engaging with international debates and processes, the importance of building and maintaining strong domestic organisation is key – as weak unions will always have weak bargaining positions. Therefore strong union structures are needed to build a strong local base, from which one can challenge neo-liberal policies. It is those unions with the strongest local and national bases that will have the most to offer in engaging globalisation issues, and contributing to social transformation.

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