The global economic slowdown

Trevor Evans

The 1980s finance-led phase of capitalism has been characterised by marked cycles led by the US economy, with periods of expansion leading to increasingly serious recessions in 1990/91, 2001/02 and of course 2007/09. The most recent expansion, now in its seventh year, has been especially weak, and the latest forecasts anticipate that growth will remain low (IMF 2016; OECD 2016; UNCTAD 2016). This is led by the world’s three largest economies – the US, the euro area, and China – which together account for more than half the world’s output.

United States
The US’s most recent expansion began in 2009, boosted by Obama’s US$ 787 billion expansionary programme, but it was not until 2012 that output returned to its pre-crisis peak, and growth has remained uncharacteristically weak.[1]

The expansion raised profitability. The share of profits in national income is strongly cyclical, and the peak has risen in every expansion since the 1980s, reaching a high of 14.5% of GDP in 2012. But the rise in fixed investment, which is also strongly cyclical, has weakened. Firms have made record distributions to shareholders through dividends and share buybacks, which incur lower taxes. Non-financial corporations have also become significant financial investors since the 1990s, with the value of their holdings rising from 4% to 9% of GDP. They have continued to borrow despite relatively weak fixed investment. Their indebtedness relative to GDP, which declined in the aftermath of the crisis, is once again as high as in 2008.

Two different approaches that fail to protect Brazilian or British agricultural workers

Vitor Filgueiras

Brazil and the United Kingdom are very different regarding the levels of working conditions achieved historically, but both have faced the same strategies to undermine public regulation lately. The failure of different approaches provides clues about the solutions for similar problems.

Many cases of labour exploitation have been uncovered, including slave-like conditions, in both countries. These exploitative conditions are typically found in the agricultural sector, and most of them are associated with outsourcing/subcontracting arrangements.

In Brazil, almost 90% (44) of the 50 largest cases of slave-like conditions uncovered by public institutions between 2010 and 2014 involved workers hired by main companies through intermediaries. These cases cover different regions, company sizes, and intermediaries’ appearance, ranging from gatos (‘cats’, as labour suppliers are called in the Brazilian rural area) to formal contractors. In the UK, labour exploitation and regulation of labour in rural areas are strongly linked to outsourcing, which is predominantly arranged through so-called gangmasters. Between 2013 and 2015, 900 victims of labour exploitation were assisted by the Gangmasters’ Licensing Authority (GLA) (GLA CEO 2015).

The Insufficient protection of Vietnamese domestic workers in Saudi Arabia

Ly Trinh Khanh

Recently the Vietnamese media has reported many cases of Vietnamese female domestic workers being maltreated in Saudi Arabia. They were required to work between 16 and 20 hours without breaks in a day. Ms. Ha Thi Thu Trang, a 36 years old domestic worker from Thai Nguyen province, reported that some of her friends were either provided insufficient food by the employers or had to eat the food left over from the tables of the employers’ families. Other female domestic workers were sexually abused, such as Ms. Oanh from Nghe An and Ms. K. from Ho Chi Minh City. The domestic workers reported that they were treated like slaves, being forced to work until exhausted (Dai, 2015). 

However the labour sending companies require workers who want to terminate the employment contract before the expiry date to pay a compensation of approximately VN$60 million (around US$2770) (Dai, 2015). It is reported that 30 Vietnamese domestic workers who were rescued from their employers’ maltreatment are residing in the labour camps in Saudi Arabia to wait to return home. Some of them have been waiting for more than one year without the intervention of the Vietnamese authority bodies (PVH, 2016).

Issues in the Restructuring of the Korean Shipbuilding Industry

Kim Kyung-Ran

“Restructuring” was the buzzword that defined Korean society and economy in the wake of the Asian financial crisis of the late 1990s. It has returned with similar vigour. This time, the origin is the shipbuilding industry.

The shipbuilding industry has been the star of the Korean economy until now, providing massive exports and employment. At the end of 2014, there were 16 shipbuilding companies in total, with another 5 800 or so businesses of varying sizes tied up in the same industrial ecosystem. Since 2000, the Korean shipbuilding industry has been growing at an astonishing pace, focusing on high-end vessels, taking advantage of cheap and flexible subcontract labour, expanding the non-shipbuilding areas of its business including the development of offshore plants, and increasing offshore production.

The global financial crisis of 2008, however, has hit the industry hard, while the plummeting oil price since 2014 has radically contracted the demand for offshore oil plants. The offshore plant businesses of all the Big Three shipbuilding companies[1] began to produce deficits in 2014 and operating losses over the last three years. The Korean government, which waited for the market to naturally solve the problem, belatedly organised the Industrial and Corporate Restructuring Council, led by the FSS (the Financial Supervisory Service) and other government departments, in October last year. The Council announced the three principles of restructuring[2] in April this year, and began to exert mounting pressure on individual shipbuilding companies through banks. The three principles provide a guise of consistency, but can be reduced to making cuts to facilities and the number of employees.

Social Audits as a tool of transparency in the rural public works scheme of India

Rahul Tiwrekar    

This column uses a rights-based framework to analyse the assessment of social safety-net schemes meant for poverty alleviation. One of the most prominent initiatives taken by the Indian state is to provide a guarantee of employment to its rural citizens under the Mahatma Gandhi National Rural Employment Guarantee Act (NREGA). Today this is the world’s largest public works scheme. To bring about transparency and accountability in the implementation of this scheme, a social audit was made at regular intervals. This column analyses this social audit tool.

In 1972 the Maharashtra state government initiated an employment guarantee scheme. After 35 years, the government of India adopted it nationally for all rural districts of the country. Many efforts were made to reduce embezzlement of funds and implement this public works scheme effectively. However, there were still complaints about fake attendance, bogus works and low wages. Against this backdrop, the National Advisory Council (NAC)[1], comprised of activists, proposed to include a social audit in the NREGA. Under section 17 of the NREGA, every village council (Gram Panchayat) should conduct a social audit of work undertaken in its jurisdiction every 6 months. Beneficiaries of the government welfare scheme publically record their observation about the benefit they are receiving, and also issues related to its implementation.