As the global economy hurtles toward Great Recession II, the earth hurtles toward climate catastrophe.  Both represent the results of a neoliberal deregulation that has left humanity no means to shape our economies to serve human needs — not even the need for economic and environmental survival.

How global movements respond to these intertwined environmental and economic crises will be key to our common survival. The politics will surely be complicated.  A case in point is an a recent article in the New York Times about the United Steelworkers union’s WTO complaint against China for providing “illegal clean energy subsidies” to domestic solar, wind and other green industries.

To promote international dialogue on these questions, we thought it might be useful to post a recent paper, entitled “Globalization, Neoliberalism and Climate Change”, which was prepared by at the invitation of Professor Liu Cheng of Shanghai Normal University for an international conference this April on “Global Economic Recession vs. Deregulation” jointly organized by the Peking University Law School and the Shanghai Normal University Faculty of Law and Politics and supported by the ILO Beijing Office.  The paper stresses the interest of workers around the world in cooperating to create an alternative to neoliberalism based on making the transition to a green economy.

Globalization, Neoliberalism, and Climate Change: Toward a New Regulatory Regime

For thirty years, global and national economies have been guided by policies of neoliberal deregulation, often known as the “Washington Consensus.” Neoliberalism has been disastrous for workers in most countries, pitting workers against each other in a race to the bottom and making it all but impossible to protect working class interests. There is now a growing consensus that the Washington Consensus has been a failure.

There is also a growing global recognition that we are in the midst of an unprecedented climate crisis. Ready or not, that crisis is affecting every nation, every locality, and every worker. Its effects are already serious, and unless decisive global action is taken to counter it, they will soon be catastrophic. Neoliberal deregulation, by dismantling the means for public steering of society to meet social needs, has also made it nearly impossible to correct global climate crisis.

These twin realizations, the failure of neoliberalism and the climate crisis, will define the struggle for the interests of poor and working people for the next century. At the same time, the necessity to counter climate change may provide an opportunity to address the broader problems of neoliberal deregulation.

This article argues that it is only by rolling back neoliberalism that we can protect the rights of workers globally and solve the crisis of climate change. In Part 1 we provide a short history of globalization. In Part 2 we discuss the climate crisis and its effects on workers. In Part 3 describes proposals for a “global green new deal” to create full employment through climate protection. Part 4 argues that a new global and national regulatory regime is necessary both to counter both climate change and the race to the bottom. Part 5 discussions the role of organized labor nationally and globally in bringing about such a transformation.

1.    Globalization, neoliberalism, and deregulation

The systems of national and international regulation that emerged in the “Breton Woods era” after World War II provided one of the greatest periods of sustained economic growth in world history. But after a quarter-century of global change they were less and less adequate for regulating the new world that had emerged. Various strategies for updating them, such as the Third World’s proposals for a New International Economic Order, were widely discussed. But in the end, the strategy adopted was to abandon the effort to improve and update these regulatory regimes and instead to replace them with a reckless neoliberal strategy of abandoning rather than fixing regulation.

This strategy was implemented in a variety of arenas:

  • The International Monetary Fund had been created at the end of World War II as a means to regulate currencies to forestall competitive devaluation and allow nations to pursue full employment policies on the basis of Keynesian monetary and fiscal policies and/or pubic ownership and control of economic enterprise. The neoliberal transformation of the IMF turned it into the enforcer to impose austerity on poorer countries through structural adjustment. It retained the unsustainable role of the dollar as the world’s reserve currency while dismantling the regulatory regime that supported stable economic growth and provided a way to counteract crises.
  • The post-World War II international economic system included the General Agreement on Tariffs and Trade (GATT) as a vehicle for negotiating trade agreements on a the basis of the Most Favored Nation principle. This allowed a steady movement toward freer trade while allowing nations to manage their trade policies in accord with national economic development needs. The neoliberal offensive gutted the GATT-based negotiated trade agreements and replaced them with the WTO, which imposed neoliberal policies that made it necessary for all countries to turn themselves into export platforms, rather developing production for an internal market focused on the needs of their own people.
  • At a national level, countries came out of the Great Depression with systems of financial regulation to ward against the speculative binges and banking failures that had contributed so much to the Depression. The neoliberal era saw unremitting and ultimately successful efforts to eliminate such regulation. The result has been the succession of speculative bubbles, explosion of financial assets with no relation to the real economy, and crashes, most notably but not solely the one in 2008 that initiated the Great Recession.
  • The period after World War II saw significant moves toward equality between and within countries. More than one hundred former colonies won their independence. Many of them saw significant economic growth. Trade and aid policies gave at least token support to development. Within countries, progressive taxation and social welfare led to greater equality even in countries with very different economic systems. The neoliberal era saw the competitive gutting of these social protections, ranging from the destruction of the employer-based pension and healthcare systems in the US to the elimination of the “iron rice bowl” in China, to the reduction of social welfare and public employment in poor countries by the structural adjustment programs of the IMF and World Bank.
  • The 1930s and 1940s were marked by a great expansion of labor protections and labor organization in countries with very different economic systems. The neoliberal era saw the dismantling of such labor protections and a full-scale attack on the rights and power of organized labor. In the United States, less than eight percent of workers in the private sector are now represented by unions and workers right to join unions is systematically denied.
  • The 1960s saw a rapidly expanding awareness of threats to the natural environment, the emergence of the modern environmental movement, and the development of governmental policies for environmental protection. With the rise of neoliberalism, these became defined as impediments to economic growth and competitive disadvantages for the countries and other jurisdictions that adopted them.    This approach has led not only to escalating emission of greenhouse gasses but to a national and global failure to regulate the — manifested at the Copenhagen climate conference — even though the failure to do so threatens the well-being and even the survival of people and natons worldwide.

The long-term result of neoliberal deregulation has been a “race to the bottom” in which workforces, regions, and nations compete to provide the cheapest labor, least environmental and social protection, and largest subsidies to globally mobile capital. That has led to growing inequality within and between countries. These results are economically, socially, and environmentally unsustainable for any nation and for the world as a whole.

These long-term trends have, not surprisingly, culminated in global crisis. On the one hand, neoliberal deregulation has put the world into the deepest economic crisis since the Great Depression, with little indication that anything more than further crisis lies ahead. On the other hand, neoliberal deregulation has brought on an unprecedented global environmental crisis whose magnitude is so great that it dwarfs the problems that the human species has ever had to deal with previously.

2. Labor and climate change

The International Trade Union Confederation, which represents 175 million workers in 155 countries, has noted “the dangerous and irreversible consequences of climate change.” It points out that “The effects on the economy — including on employment — will be catastrophic if ambitious and effective measures are not taken to reduce GHG [greenhouse gas] emissions.

Both climate change and the effort to combat it will directly affect workers and unions. Climate change, if not halted, will lead to massive economic disruption and job loss. Some climate protection measures will lead to job losses in particular sectors and this presents a challenge to the unions that represent those workers as well as to traditional notions of labor solidarity. At the same time, there are huge opportunities for job growth presented by many climate protection measures.

The reality of climate change and its catastrophic consequences are today beyond debate. But organized labor in many countries is caught in an internal stalemate among those who fear job loss from efforts to deal with climate change, those who have not considered climate change an important union issue, and those who see the climate crisis as a call for immediate action and an opportunity for sustainable economic development. Labor will confront critical issues to which it must respond at the bargaining table and in the public policy arena.

Labor must develop a coherent response that meets the specific needs of its members at the bargaining table and the general needs of its members as human beings confronting a potentially catastrophic threat. Labor must stake out a position if it is to remain a vital social and political force. Tackling the tension between the specific sectoral interests of unions and their more general class and social interest is an essential first step in that process.

A serious “climate debate” is finally underway throughout the world. Labor is one of the few organized forces that can represent the interests of ordinary people in that debate. A constructive labor involvement is essential both for establishing the measures needed to counter climate change, and for ensuring a “just transition” in which workers and the poor are not forced to bear the burden while corporations and the wealthy further enrich themselves. The search for constructive involvement offers an important way for unions and worker friendly organizations from around the world to work together.

3. A Global Green New Deal

A series of conferences by world leaders, from the 2009 London conference for “Stability, Growth, and Jobs” to the 2010 Copenhagen conference on climate protection, have tried to address the global economic and climate crises through neoliberal market-based approaches. They have failed miserably. Each country has pursued the competitive advantage of national elites and privileged economic interests while abandoning the planet and its people to their fate.

A solution to these crises requires that the world abandon neoliberalism and adopt a new strategy that puts the world’s human resources to work meeting the world’s desperate need for economic transformation that radically reduces carbon and other greenhouse gas emissions. Such a new regulatory regime has often been referred to as a “Global Green New Deal.”

In the depths of the Great Depression, US President Franklin D. Roosevelt launched the New Deal — a set of government programs to provide employment and social security, reform tax policies and business practices, and stimulate the economy. It included the building of homes, hospitals, school, roads, dams, and electrical grids, as well as extensive programs to protect and restore vulnerable natural environments. The New Deal put millions of people to work and created a new policy framework for America democracy.

A global equivalent has been endorsed by UN Secretary-General Ban Ki-moon. He maintains that the financial crisis requires massive global stimulus, and that a big part of that spending should be investing in a green future: “An investment that fights climate change, creates millions of green jobs and spurs green growth.” What the world needs, in short, is a “Green New Deal.”

The United Nation Environment Program (UNEP) has formed a Green Economy Initiative, which advocates “mobilizing and re-focusing the global economy towards investments in clean technologies and natural infrastructure such as forests and soils.” According to UNEP Executive Director Achim Steiner, the financial, fuel, and food crises result in part from “speculation and a failure of governments to intelligently manage and focus markets.” Enormous economic, social and environmental benefits are likely to arise from “combating climate change and re-investing in natural infrastructures — benefits ranging from new green jobs in clean tech and clean energy businesses up to ones in sustainable agriculture and conservation-based enterprises.”

According to UNEP, the objectives of a “Global Green New Deal” should be to create jobs and restore the financial system and global economy to health; to put the post-crisis economy on a sustainable path that deals with ecological scarcity and climate instability; and to end extreme poverty. It spells out investments and policy reforms to achieve these goals.

4. Toward a new regulatory regime

Such a new strategy is currently made impossible by the neoliberal “rules of the game.” Under the neoliberal policy regime, all countries are forced to concentrate their resources on “competitiveness” in the global market, rather than on meeting social needs — including in particular the need to protect the climate. In such a regime, public employment and investment in climate protection are defined as costs that detract from competitiveness. Countries that pursue them are punished by international policy discrimination and capital flight.

What is required is a new regime of national and global regulation. The design of such a “new architecture for the global economy” can draw on the pre-neoliberal era of economic regulation, but will need to move far beyond it to deal with the new problems of economic globalization and climate change.

Such a strategy will need to be implemented in a number of arenas:

  • A global climate protection agreement should be the spearhead of new global environmental protection regime, creating the basis for green jobs-based full employment in a new global full employment regime.
  • Neoliberal export platform models of development need to be replaced by a new global Keynesianism in which each country and the world as a whole can pursue full employment of its human and material resources to meet its people’s needs.
  • This full employment model can be constructed initially around the need for every country to mobilize its human and material resources to reconstruct and develop its economy on the basis of a sharp reduction in greenhouse gasses.
  • In order to move the world toward greater equality, this must be complemented by a new regulatory regime that protects labor and social rights around the world and that rewards rather than punishes countries for implementing such rights.
  • Nations should establish a globally coordinated regime of financial re- regulation, leading to a new public purpose financial system.
  • WTO rules should be revised to provide for mutually managed trade and green development based on global full employment for the green transition.
  • The New International Economic Order strategy for global redistribution should be updated in the context of a global “grand bargain” that combines rapid greenhouse gas reduction with sustainable development.

5. The role of international labor

The need to confront climate change offers a new potential venue for building global labor cooperation. Despite all the high-profile conferences of world leaders, movement in this direction has failed because those leaders have pursued short-term interests of national elites rather than long-term common interests of people and planet. Working people around the world, however, have a common interest in pursuing such a new approach.

Unions around the world are taking the lead in filling the vacuum in means to express the common interests of people around the world in a program of this kind. The International Trade Union Confederation (ITUC) has laid out a program to meet the economic and environmental crisis through a “global green new deal.”

The ITUP has partnered with UNEP on a “Green Jobs Initiative” whose program is summed up in the report “Green Jobs: Toward Decent Work in a Sustainable, Low-Carbon World.” It describes the role of green jobs in “averting dangerous and potentially unmanageable climate change and protecting the natural environment” while “providing decent work and thus the prospect of well-being and dignity for all in the face of rapid population growth worldwide and the current exclusion of over a billion people from economic and social development.” It describes how green jobs are already growing in many parts of the world, but that many of them will not become good jobs unless deliberate policies are followed to make them so.

Indeed, the world labor movement emphasizes that addressing both the problem of climate change and the problem of economic decline require government leadership and cooperation among governments. As the ITUC’s statement to the Copenhagen climate conference put it,

Economic transformation can not be left to the ‘invisible hand’ of the market. Government-driven investments, innovation and skills development, social protection and consultation with social partners (unions and employers) are essential if we want to make change happen.

As the Stern Review reminds us, climate change represents the biggest market failure in history. We cannot risk the same failed market mechanisms to successfully steer out of this crisis. The problem has to be solved through regulation, democratically- decided and implemented public policies and most importantly political leadership.

By working together around the world to form a consensus among working people on their common interests, the international labor movement is in a unique position to develop an alternative to neoliberal deregulation. By making use of the power they wield in all the world’s countries, workers and their organizations can pressure their national governments to begin pursuing a new strategy that represents both the interests of their own people and of the earth and its people worldwide.