By Joseph E. Stiglitz Senior Vice President and Chief Economist, Keynote Address, Industrial Relations Research Association, American Economic Association Meetings, January, 2000, Boston.
Objectives of Development
Today, there is growing recognition that the objectives of development go beyond simply an increase in GDP: we are concerned with promoting democratic, equitable, sustainable development.[1] If that is our objective, then it is natural that we should pay particular attention to the issue of how the plight of workers changes in the course of development; and we should look not only at their incomes, but broader measuresóat their health and safety, and even at their democratic participation, both at the workplace, and within the broader political arena. Workersí rights should be a central focus of a development institution such as the World Bank.
I am just completing serving three years as Chief Economist of the World Bank. During that time, labor market issues did arise, but all too frequently, mainly from a narrow economics focus, and even then, looked at even more narrowly through the lens of neo-classical economics. Wage rigiditiesóoften the fruits of hard fought bargainingówere thought to be part of the problem facing many countries, contributing to their high unemployment; a standard message was to increase labor market flexibilityóthe not so subtle subtext was to lower wages and lay off unneeded workers. Even when labor market problems are not the core of the problem facing the country, all too often workers are asked to bear the brunt of the costs of adjustment. In East Asia, it was reckless lending by international banks and other financial institutions combined with reckless borrowing by domestic financial institutionsócombined with fickle investor expectationsówhich may have precipitated the crises; but the costsóin terms of soaring unemployment and plummeting wagesówere borne by workers. Workers were asked to listen to sermons about ìbearing painî just a short while after hearing, from the same preachers, sermons about how globalization and opening up capital markets would bring them unprecedented growth. And nowhere, in all of these discussions, did issues of workersí rights, including the right to participate in the decisions which would affect their lives in so many ways, get raised?
It was finance ministers and central bank governorsóand outsiders who often seemed to be representing international financial interestsóthat had the seats at the table, not labor unions or labor ministers. Indeed, even as debate on reforming the international economic architecture proceeded, these people, who would inevitably face much of the costs of the mistaken policy, were not even invited to sit in on the discussions; and I often felt myself to be the lone voice in these discussions suggesting that basic democratic principles recommended that not only should their voice be heard, but they should actually have a seat at the table. To be sure, increasing attention did get focused on safety nets, but: was it simply an attempt to assuage feelings of guilt, providing too little, too late, or even worse, an attempt to moderate public criticism of ìglobalization without a human face?î The suspicion of the international institutions evidenced in Seattle was perhaps the not unsurprising outcome of the attitudes and policies of recent decades.
As Chief Economist, I faced several problems. I simply could not ignore the standard arguments about the adverse effects of inflexible labor marketsóand while I agreed with some of the arguments, there were others that left me unconvinced. I had to tackle those issues on terms that the economists themselvesóviewing the world from their particular perspectiveócould understand. But there was a more positive agenda: Improving labor relations, including promoting core labor standards.
[1] See, e.g. Stiglitz [1998].
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