Vol. III, Bulletin No. 4.                                                                        February 23, 1998 

    $43 Billion Bailout for Jakarta Is Flawed

    Reforming Indonesia, IMF, and U.S. Policy

    Why has the International Monetary Fund (IMF) economic reform program for Indonesia thus far failed to work?  Because Indonesia's sickness is more than economic.  And therefore  the IMF economic prescriptions, even backed with a $43-billion bailout, can't possibly cure Indonesia's ailments.

    Just take an honest look at the man the IMF and its major financier, the United States, is counting on to make radical changes--President Suharto, the military commander who has ruled Indonesia for 32 years. It so happens that Suharto and his extended family are the chief custodians and beneficiaries of the vast financial empire that desperately needs radical reform.  Suharto does make a few promises to reform and even signs them.  No matter.  His word is law, and his word can change.  One day, because of IMF insistence, a Suharto son loses a monopoly industry; a few days later he gets it back.  No use in being a strongman if you can't take care of yourself and your own kin.

    American Complicity in Building Up Suharto Dynasty

    Don't the sharp minds at the IMF, the White House, the U.S. Treasury Department, and Wall Street--comprising an interlocking directorate of power--understand the character of this ruler?  Of course they do, but right now they have no choice except to deal with him. They are in a bind of their own creation.  Over the years members of the U.S. and Indonesian elites have established a warm mutual admiration society.  For its part, the U.S. side has long stuffed the Suharto regime with
     

    • a superbly rich diet of modern arms for Suharto's military,
    • massive investments in Suharto industries,
    • super-generous trade benefits (some contrary to U.S. law), and
    • countless other favors dignifying the dictatorship, prolonging its survival, and increasing its power and arrogance.

    Of course this cozy relationship was, and is, mutually beneficial, politically and financially--mostly to those who have become millionaires in Indonesia and in the United States--but it was, and is, detrimental to the millions of working men and women in Indonesia whose labor produces that wealth.  The relationship has so many links, known and unknown, some more corrupt than others, that no single reform can possibly suffice. Change can't come overnight.  But a good place to start right now is to require the U.S. Treasury Department to put into place a reform mandated by Congress nearly four years ago.

    Pressure on Treasury Secretary Rubin to Apply U.S. Law
     

      Under legislation approved by Congress and signed by the President in August 1994, U.S. representatives to the International Monetary Fund and World Bank are required "to the use the voice and vote of the United States to urge the respective institutions to adopt policies to encourage the borrowing countries to guarantee internationally recognized worker rights...."
       
    By law this obligation falls specifically on U.S. Secretary of Treasury Robert Rubin.  The International Labor Rights Fund has repeatedly reminded Rubin of this obligation, most recently in a letter of October 27, 1997.  At that time the IMF bailout plan was still in its development stage.  Rubin neither responded to the letter nor complied with his legal responsibility.

    The issue is now coming to a head in the U.S. Congress because of the Clinton Administration's request for an appropriation of nearly $19 billion to boost IMF resources for Asia.  The Labor Rights Fund, the AFL-CIO, and other groups are opposed to giving the IMF more money until it starts paying some attention to worker rights.  In a statement at a bipartisan Capitol Hill forum, Terry Collingsworth, General Counsel for the Fund, called for the release of Muchtar Pakpahan, an Indonesian unionist now languishing in a prison for organizing an independent trade union.

      (See the AFL-CIO's Web page at http://aflcio.org/publ/speech98/sp0122.htm for a talk by President John J. Sweeney on current worker rights issues, including those facing the IMF.)

    Taiwanese Military Discipline for China's Workers

    "What's the best way to manage workers in China?"  Taiwan Footwear News, a monthly business periodical in Taipei, asked that question recently for readers in Taiwan's footwear industry, which uses China as a production platform for large-scale exports to the United States.  The publication offered this frank guidance for Taiwanese managers now employing workers in thousands of Taiwanese-owned shoe factories in China:
     

      "Factory workers come from villages several thousand miles away.  There is no reason to place confidence in them.  What can we do but practice military-like management?  In the mainland, treating people with honor and respect cannot improve productivity. It seems the more direct and primitive the way, the more useful it is."
       
    The booming factories in China and elsewhere in Asia owned by Taiwanese and Korean investors are notorious for disciplining workers through physical beatings, verbal abuse, and other forms of  punishment (such as forcing a group of workers to stand unprotected in the midday sun for an hour). This is the first time, however, that the industry itself has publicly sought to justify its "primitive" practices.  The quote was found and translated by the Hong Kong Christian Industrial Committee and published in its informative newsletter, Change.

    Especially informative are Change's two latest issues:  "The Working Class in China: the Biggest Losers in the [Communist Party's] Fifteenth Congress" and "Transnationals in China." You can enter your subscription by email (hkcic@topaz.hknet.com) or fax (852-274-5098). The newsletter is free, but welcomes donations of $20 or more for a year's subscription of six issues.  Address: HKCIC, 3rd floor, 57 Peking Road, Kowloon, Hong Kong.

    The Struggle Against Child Labor

    Here are some late news items on the child labor front:

    • From the International Labor Organization, which at its June conference will discuss new international standards to eliminate extreme forms of child labor: The paper that will serve as the basis of those discussions has been released, and is available on the ILO Website at http://www.ilo.org/public/english/10ilc/ilc86/child.htm.
    • From the Global March Against Child Labor, a world-wide series of events involving more than 700 non-governmental organizations, trade unions, and children's rights groups:  The U.S. portion of the March will start in Los Angeles and San Diego May 2-3 and proceed by bus caravans through Texas, Arkansas, Tennessee, Missouri, Illinois, Michigan, Ohio, Pennsylvania, New York, and Pennsylvania, winding up in  Washington, D.C., on May 27.  Details are available on a new Web site, http://www.globalmarch.org.
    • From the Child Labor Coalition, a Washington, D.C.-based network of organizations:  The Coalition's 1998 conference, to be held May 5-7 in Orlando, Florida, will focus on domestic U.S. child labor problems, such as oppressive child labor in agriculture. For details on exploitation of children in U.S. agriculture, see the Website of the Association of Farmworker Opportunity Programs at http://www.afop.org.   For information on the conference, check the Coalition's pages in the National Consumers League Website at http://www.natlconsumersleague.org.
    • From the International Confederation of Free Trade Unions, which brings together unions from every continent:  The ICFTU has collected fresh evidence of widespread bonded labor of children (and adults) in Pakistan, and is presenting a documented report to the European Union in support of a petition to deny selected Pakistani exports tariff-free privileges.  For more information, see http://www.icftu.org.

    The Drive for Global Rules To Help Out Investors

    Searching for International Accountability

    Humdrum though their work may be, accountants play a crucial role in assuring that the financial system functions in a way that inspires confidence.  Among other things, accountants help investors keep track of  how corporate managers are using their money.

    That responsibility becomes much more complex in an era of rapid internationalization, when more and more investment money circles the globe.  How can investors really have confidence in the reports of accountants in far-off countries using diverse standards?  Answer: adopt a single set of accounting standards that apply universally.

    Easier said than done.  But some highly influential organizations are trying to meet the challenge.  They include:
     

    • The International Accounting Standards Committee [http://www.iasc.org.uk], an independent private-sector body, headquartered in London, with 122 professional accountancy organizations in 91 countries as members.
    • The International Organization of Securities Commissions [http://www.iosco.org], headquartered in Montreal, with 134 governmental agencies that regulate financial markets around the world.
    "Arguably," says the Economist magazine, "the future of global finance hangs on the outcome" of current negotiations in those organizations.

    Negotiators face many controversial issues.  But they have some leverage to reach a consensus.  For example, firms in many countries with low-quality accounting are seeking access to the capital markets now closed to them, especially those of the United States, which has more transparent and rigorous accounting standards than most countries.  Without an improvement of their own policies and practices by adherence to minimal global rules, such firms will continue to be barred from the attractive financial markets of the United States and Britain.

    There are lessons here for applying international labor standards to countries that flagrantly and persistently ignore them.
     


     

    Human Rights for Workers: Bulletin No. III-4, February 23, 1998
    http://www.senser.com
    Robert A. Senser, editor

    Copyright 1998
    hrfw@senser.com. (Send e-mail)

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