Financial Globalizatio Congress Economic Conference: Globalization and Irish Workers

1. Financial Globalization Financial Globalizatio Congress Economic Conference: Globalization and Irish Workers Dublin, 23 April 2008 Poul Nyrup Rasmussen PES President

2. The real economy should come first “The most competitive, dynamic, knowledge-based economy in the world, creating sustainable economic growth, more and better jobs and with greater social cohesion”. Making Europe : (2000 & 2005) “Energy- and Climate package” March 2007 Social Market Economy – not a market society!

3. Sufficient financing of the real economy? • We need well-functioning financial markets, but: • Cost efficient? • Full transparency and disclosure? • Financial stability? • Long-term financing? • Patient ownership?

4. The anatomy of the current crisis

5. Credit derivatives”Financial weapons of mass destruction” • 2007: Total volume of outstanding credit derivatives contracts stood at $62,200bn • This is 10 times the level of four years ago !

6. Are we living in a neo-liberal world? The Market • Neo-liberal model • ▼ • Full transparency • Perfect information • Optimal competition. • Asymmetric information • (J. Stiglitz) • ▼ • Conflict of interest • Market abuse • Insider trading • Lack of confidence The Real World

7. The Big Transformation: 2002-2007 Venture capital(only 5%) LBO’s 60% No demonization But dominant New global financial players LBO’s – New Employers • 20 LBO’s = 4 mio. workers • 5 big deals = Russia + India budget • LBO 2006: € 265 bn. in Europe • LBO > IPO 2007 • 25+100+7+3 = 75% • ½ of global financial market • Black box • Financial bubbles and -crisis

8. The debt and the culture of extraction Higher returns % Tax deduc-tions Fewer long-term invest-ments The debt Overburdened credit markets IMF+ SEC + ECB: High risk of distressed companies .

9. More jobs? World Economic Forum, Davos (2008): • Workplaces taken over by PE have 7% fewer employees after 3 years and 10.3 % less 5 years following the takeover than in the control group. • Companies taken over by private equity have higher rates of closure, opening, acquisition, and disposal of workplaces. .

10. Better returns than others ? • Ludovic Phalippou & Maurizio Zollo University of Amsterdam: ”Net returns - adjusted for management fees and methodological errors – 3,8% below the stock • The world’s largest pension fund CalPERS: Picking the winners? Since 1990 invested in 257 funds – 107 has given a negative return!

11. After the exit: distressed companies University of Nottingham/Barclay’s Private Equity UK data: More than a quarter of the (106 out of 400) companies disposed of by private equity in 2007 went into bankruptcy

12. What to do? • Transparency, disclosure and monitoring to ensure financial stability • Setting up limits of leverage to lower the risk of default and not to undermine firms • Public classification of credit derivatives • Effective taxation • Managing ”Conflict of interest”

13. What can trade unions do? • For pensions funds to unite to make ethical claims • To demand respect for workers’ rights to information and consultation • To demand respect for workers’ rights to collective bargaining • It’s about changing behaviour.

14. Who should do it? We don’t have to wait for a World Government!

15. New Social Europe Roadmap • Renewal of welfare states • Different reforms, common direction • Concrete recommendations • Ten principles

16. 10 principles for a New Social Europe

17. Dynamic labour markets O L D J O B N E W J O B * Shortest distance because of ALMP * Minimize risk of loss of income * Maximise ‘re-skilling’ / new competences * Rights and obligations * Social partners’ responsibility

18. 10 million more jobs in the New Social Europe!