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Globalisation and the informal economy

category international | worker & community struggles and protests | opinion/analysis author Friday September 22, 2006 02:57author by Paul Baynes Report this post to the editors

During the week of the annual conference of the IMF and the World Bank, some thoughts on the nature of employment in the current phase of globalisation.

More and more, workers throughout the so-called developing world are relying on low paid, unstable employment in the informal economy.

Protests in Singapore
Protests in Singapore

This week saw the annual conference of the International Monetary Fund (IMF) and the World Bank in Singapore. The meeting was addressed by the Director-General of the International Labour Organisation (ILO), Juan Somavia.

Somavia’s topic was the nature of employment in the modern world. The current phase of globalisation has meant that a high proportion of jobs in the developing world have now moved to the services sector. While this includes reasonably well paid and stable jobs in financial services, tourism, etc., it also includes jobs in the informal economy. Apart from the low level of income, these jobs are characterised by short-term contracts or no contracts at all, bad working conditions, sexism, casual employment, and unhygienic or dangerous circumstances: the workers are, in a word, vulnerable. This form of employment is unstable and does not address poverty.

Somavia’s remarks are backed up by the research of Irish social scientist Peadar Kirby. In his analysis of the World Bank’s World Development Report of the year 2000, Kirby outlines the shortcomings of the World Bank’s conception of poverty, drawing on the work of Karl Polanyi:
“poverty is not primarily an economic condition, based upon exploitation or low income, but a cultural condition, based on the status and security of the individual as a member of a community” (Kirby, 2002).

The World Bank and IMF take on poverty is that it should be addressed using market mechanisms. Because the market is supposedly the most efficient way to create economic growth, it should follow that market mechanisms are appropriate to ensure that wealth is distributed equally. Therefore, from the point of view of these international financial institutions, the solution is to focus on how market-led economic growth benefits the poor.

However, whether it is creating economic growth or not, it is this focus on the market – and the consequent economic liberalisation and deregulation – that is generating and compounding poverty among the populations of the developing world. Rather than continuing to give primacy to the market, governments should be encouraged to take action to mitigate the negative effects of market reforms. The World Bank and IMF have yet to take this approach to poverty.

ILO Director-General Juan Somavia’s address to the annual conference of these institutions brought the contradictions of globalisation into sharp focus. Despite economic growth, global unemployment has risen. More importantly, the quality of work available has severely lessened. Most are forced to work in the informal economy, which means that income may be sporadic or the job dangerous. Examples of these jobs include petty trading, washing car windows at traffic lights, shining shoes or cleaning houses.

As a solution, the ILO has put forward its four point ‘decent work agenda’. This involves:
- Job creation as an explicit objective of policy (as opposed to as a by-product of increased profits)
- The promotion of employment rights
- The extension of social protection
- The support of institutions responsible for governance of the labour market

The following is a link to an edited version of Somavia’s remarks which gives the core of his argument. This contains a link to his full address to the conference:

See also ‘The World Bank or Polanyi: Markets, Poverty and Social Well-Being in Latin America’, Peadar Kirby, 2002, New Political Economy, Vol. &, No. 2

I am amazed to learn that this week, none other than Ronan Keating has protested against UK funding of the IMF and World Bank:

Singapore has clamped down on dissent during the conference:

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