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What is Sustainable Industrial Policy?

Sustainability is defined as meeting the needs of the present, without
compromising the ability of future generations to meet theirs. That
implies a healthy environment, a healthy economy, and a healthy
society, built on sound foundations and maintained through good global
governance.

An industrial policy is a plan to encourage desired patterns of
industrial development and growth. It should strategically target
specific industries and sectors, as well as consider broader needs
such as transportation and communications infrastructure, education
and skills training, research, and energy. A sustainable industrial
policy must create a healthy economy and quality employment
(decent,secure work that pays a living wage) while minimizing negative
environmental impact and advancing the interests of society as a
whole.

Sustainable industrial policy is not about creating conditions for
companies to thrive at the expense of workers, society and the
environment. It’s about creating conditions under which companies can
operate in order to make a sustainable contribution to society.

Why do we need it?

The triple crisis

Our current path is unsustainable. We are facing crises on three
fronts: environmental, economic and social.

Climate change is a real and serious threat. The Intergovernmental
Panel on Climate Change (IPCC) estimates that to maintain global
average warming below 2°C above pre-industrial levels (an amount of
warming that will nevertheless have serious consequences) very
significant actions need to be taken by 2015-2018. If the world delays
to 2020, maintaining the 2° limit will require technologies that have
not yet been developed, or are not yet proven.

The longer action is delayed, the more likely that social standards
and human rights will be sacrificed in a last minute panic to save the
planet.

The degradation of our planet’s natural systems continues with
reckless speed. Businesses have few solutions to offer. Too
frequently, private interests actively try to prevent solutions from
being found or implemented.

Global corporations act to maximize private control over resources,
production, consumption and investment, while spreading the costs and
risks of their activities over the rest of society. Their focus is on
maximizing short-term profit, in full knowledge that this is
unsustainable.

In the drive to generate ever-greater short-term profits, it has
become more profitable to manipulate financial instruments than to
actually make anything. Private equity buyouts promise phenomenal
returns to investors by maximising the short-term extraction of cash
from companies and loading them with debt at the expense of long-term
productive investment, jobs and employment security.

The economic crisis resulted from policies that fuelled unbridled
financial speculation and short-term profits at the expense of
productive investment in the real economy. In countries most affected
by the crisis, workers paid the price in massive job losses and rising
unemployment. Citizens paid the price when taxpayers’ money was used
to bail out the banks whose activities precipitated the crisis, and
continue to pay as governments use the deficits caused by the bailouts
to justify austerity measures.

The twin crises of the environment and the economy have created a
third: a social crisis. Increasing disparities in wealth and income,
reduced access to education, degraded population health (including
occupational health) and attacks on health care, an explosion in
precarious work, and vanishing opportunities, particularly for young
people and traditionally disadvantaged groups, are all consequences of
the failure to build a sustainable society.

Race to the bottom

Capital is no longer restricted to operating within national
boundaries. Companies of all sizes and industries are inter-connected
through global networks known as global value chains (GVCs).
Multinational corporations (MNCs) have driven the development of GVCs
by outsourcing parts or all of the production process.

Countries compete to be part of GVCs, often through narrow
specialisation in labour-intensive, low skilled stages of production.
Far from developing sustainable industrial policies, many governments
rely on Export Processing Zones to attract foreign investment. Tax
breaks and other incentives allow the wealth generated by production
and labour to go directly into the coffers of the MNCs at the top of
the chains, rather than into the hands of workers, or to contribute to
the development of local industry.

The result is a global competition to drive down wages. Suppliers
further down the chain are dependent on the price buyers above them
are prepared to pay, negatively impacting the capacity of the parties
to negotiate on wages and working hours and creating health and safety
risks. Governments are allowing MNCs to dictate the conditions under
which workers labour in their countries by demanding prices which do
not reflect the true cost of labour, but which they are able to impose
because of their dominant position in the chain.

We are witnessing the breaking down of the historical link between
wages and productivity through, among other factors, the decline of
collective bargaining as a mechanism to fairly distribute profits and
the gains from productivity improvements. In their drive to maximise
short-term profits, corporations seek productivity improvements via
the low road of intensification of work, rather than through
innovation.

The enormous and unnecessarily complicated value chains of today’s
MNCs have eroded respect for human rights. The UN Guiding Principles
on Business and Human Rights make it clear that corporations have
responsibility for what happens in their value chains, but the size
and complexity of the chains make it impossible for MNCs to know what
is really going on within them.

What does it look like?

Promoting equity

Social sustainability begins with respect for fairness, equity,
justice, human rights, and human cultures and communities. The United
Nations Universal Declaration of Human Rights, and the labour
standards of the International Labour Organization articulate many of
these values.

Sustainability must address inequality, not by competing on the lowest
wages, but by promoting collective bargaining to ensure that
productivity improvements benefit those that contribute to them, thus
raising wages and in turn contributing to industrial and social
stability, reducing inequality and driving demand for the products of
industrial production.

Crucially, sustainable industrial policy involves the development of
effective industrial relations to mediate between the competing
interests of workers and capital.

Harnessing technology

Sustainable industrial policy involves developing strategies to
encourage greener technologies that address problems like climate
change, while creating large numbers of decent jobs. Technological
development should benefit workers and make their jobs easier, leading
to increased productivity. It should not be used to reduce work to
limited, repetitive tasks which make work unfulfilling, de-skill
workers and cause illnesses and injuries, nor to cut jobs.

Advancing labour standards

A sustainable industrial policy includes the effective implementation
of labour standards. This includes promotion of collective bargaining,
resources for labour inspection, promotion of dialogue between
industry and trade unions and labour laws which restrict precarious
work. All international bodies concerned with development need to
promote freedom of association and collective bargaining as enabling
rights, to make sure that the gains are passed onto workers.

Moreover, a sustainable industrial policy must be underpinned by
social protection policies addressing unemployment, retirement and
health care, to which industry must be required to contribute.

Building sustainable industry in a globalised world

Participation in global value chains must be about employment and
quality of employment, not just driving increased profits for MNCs.
Governments need to create industrial policies which lead to a more
equitable distribution of the benefits of participation in GVCs
towards workers and society and reinvestment in research and
development and skills. We need integrated industrial development
strategies, linked to the sustainable development of local industries
as opposed to the enclave approach of EPZs.

Government policies should aim at encouraging higher level
participation in value chains to capture more of the value added, thus
strengthening the position of local companies and leading to increased
wages, better working conditions and higher skill levels. But these
benefits do not flow automatically. Collective bargaining must be
promoted as the means to ensuring that workers also benefit from a
higher level of participation in GVCs.

Just Transition

Knowing that our present-day systems are failing, the labour movement
seeks to create a better, fairer society. There will necessarily be a
transition period in getting to where we want to be, from where we are
now. It is not sufficient that many new, greener, jobs will be created
during that transition. The transition must consider the needs of
present-day workers in present-day industries, as well as the
potential to create newer, greener jobs in our journey to a
sustainable future. This is a “Just Transition”: a complete package of
sustainable industrial policies and social programs that will allow
workers to benefit from change, rather than bear its costs.

How can it be implemented?

Strengthening the role of government

The free market cannot create sustainable development. There is no
automatic link between economic growth and improved living standards.
Per capita GDP can increase, while inequality worsens, and the
environment is degraded. Government intervention is needed to
rebalance the distribution of the benefits of economic activity.

As the only institutions that can stand against corporate greed,
governments must create public policy that is genuinely in the public
interest; backed by a strong and enforceable legislative and
regulatory framework.

But the rise of free-market ideology has seen the decline of
industrial policy-making by governments. State intervention to shape
the direction of industrial development is challenged as protectionism
and an illegitimate constraint on capital. Trade rules and agreements
restrict government capacity to legislate environmental and social
protections in the interests of their own citizens. Investor-state
dispute settlement provisions in international trade agreements allow
corporations to sue governments when legislation conflicts with their
investment goals.

There needs to be a rebalancing of the power to dictate the terms of
industrial development, away from MNCs and back to
democratically-elected governments. Industrial policy needs to be
revived, in order to correct for market failures through state
intervention.

Inclusive policies

Sustainable industrial policy development requires an integrated
approach which ensures policy coherence between the different arms of
government, including departments of labour, the environment,
industry, trade, research and energy. Similarly there must be policy
coherence between and within the global institutions - the WTO, IMF,
World Bank, ILO, UN, OECD - so that governments do not receive
conflicting messages, particularly on labour market deregulation.

Unions must be part of industrial policy formulation and have an equal
seat at the table with industry. The transformation of industry cannot
happen without the active participation of workers.

Establish targets

Sustainable industrial policy needs targets in areas such as
employment, R&D, energy efficiency, carbon emissions, reducing
inequality, observance of labour standards, active labour market
policies focussed on employment creation, retraining and re-employment
of redundant workers, youth skills development. It should be guided by
the development of both qualitative and quantitative indicators which
are measured and analysed with the involvement of the social partners:
business and trade unions.

Who is going to pay for it?

Financing for sustainable industrial policy

Global corporate profits have reached unprecedented levels.
Shareholder dividends have increased at the expense of investment,
jobs and social protection. Instead of profits being reinvested in R&D
and innovation, they are directed towards speculation and
rent-seeking. Shareholders are privileged through financialisation of
corporate investment to deliver maximum short term financial returns.

Government action is needed to drive companies towards re-investing in
development. Equally, companies need to be protected from destructive
private equity buyouts. Governments must (re-) establish a regulatory
environment which promotes productive investment. Legislative changes
that have opened the doors to private equity buy-outs must be
reversed. Preference should be given to investment in venture capital
funds which focus on longer-term development and can thus contribute
to job creation.

External costs should be internalised so that companies are liable for
the true costs of their business, not society. Governments should
steer behaviour towards sustainable practices, for example through the
creation of incentives and public procurement.

Thanks to corporate exploitation of tax loopholes and tax havens,
governments are missing out on enormous amounts of tax revenue which
could otherwise be used to support local industrial development and
the public infrastructure that it needs. Regulation is needed to close
the loopholes as well as action by global institutions to chase down
missing tax revenue.

The financial sector must be put to the service of the real economy.
Sustainable industrial policy needs to improve access to private
sector financing for the transition to sustainable production as part
of the re- regulation of the financial sector.

The introduction of a Financial Transactions Tax would have the
benefits of restraining the excesses of the financial sector, helping
to stabilize currencies and raising a great deal of money that could
be used to address climate change and other global issues.

What can IndustriALL do?

IndustriALL, representing 50 million workers in both energy producing
and energy consuming industries, has a critical role to play in
calling for sustainable industrial policy. The industries where
IndustriALL’s members work create value through the transformation of
extracted natural resources into products, through manufacturing and
processing. How this is done can have significant positive or negative
impacts on sustainability.

Every industrial sector and every region has its own particular
challenges and concerns, with considerable variation between and
within them. Sustainability can only be achieved when each of those
challenges and concerns is dealt with in a consensus-seeking,
integrative fashion that attempts to balance the environmental,
economic and social imperatives of sustainability.

The IndustriALL Action Plan calls for strong industrial policies that
recognise manufacturing as a key engine of growth for national
economies. Yet well-paid, secure industrial jobs, which have
traditionally been drivers of social progress, are in decline, thanks
in part to global competition to drive down wages and the spread of
precarious forms of employment. Many countries still have no
industrial policy to speak of, let alone one that incorporates
sustainability.

IndustriALL has a responsibility, reflected in its Action Plan, to:

Promote strong industrial policies that recognize manufacturing as a
key engine of growth for national economies

Encourage investment in research and development, and training and
skills to assure sustainable industrial production and long-term
employment prospects

Support transfers of skills and technologies to developing countries
to accelerate industrialization and the creation of good quality jobs
while safeguarding the environment

Develop a proactive energy policy which establishes security and
sustainability as the foundations of industrial production world-wide

Support a fair, ambitious and binding global treaty on climate change
that takes into account social implications, promotes the creation of
green jobs and encompasses the principles of Just Transition, thus
ensuring that the transition to low-carbon societies is fair

Pursue union participation in all aspectsof industrial policy
development and implementation

Fight for a new global economic and social model that will confront
disparities of opportunity and wealth within and between countries

Make the voice of industrial workers heard in the global institutions,
including the ILO, OECD, WTO, IFIs and G20, to promote sustainable
development, social and economic justice and democratic global
governance

Work with other Global Unions to get governments and IFIs to take
concrete measures to combat poverty, unemployment, inequality and
social injustice

Insist on trade to be based on the principles of fairness and equity
in order to lift living standards by supporting employment growth,
improving social protections and providing for fundamental workers’
rights, environmental standards, human rights and democracy

Take action to ensure that ILO Core Labour Standards are included in
all trade agreements and IFI mechanisms

Build solidarity among affiliates against the negative effects of
market opening on employment and workers’ rights in trade deals

Push for regulation of global financial markets that will prevent
financial speculation from precipitating another disaster to the real
economy and fight against tax havens

Call for the introduction of an international Financial Transaction
Tax system.

The way forward

Significant work has already done by IndustriALL’s founding
organizations, which each have a long tradition of work on sustainable
development. This earlier work created the space for IndustriALL’s
affiliated trade unions to speak up for a fair, ambitious and
legally-binding global agreement on greenhouse gases.

Now there is a real - and urgent - need for IndustriALL to look at
resource extraction, processing, manufacturing and energy through the
lens of sustainability to develop a coherent and sustainable
industrial policy at the international level, and to assist its
affiliates in their work at the national and regional levels.

To this end, IndustriALL is developing a framework for sustainable
industrial policy to be endorsed by affiliates and widely promoted as
a basis for influencing governments, the global institutions and MNCs.
This will involve building on our alliances with other labour
organizations and with broader social movements.

All affiliates are encouraged to get involved in shaping IndustriALL’s
approach to sustainable industrial policy, to maximise the impact we
can make towards reorientating the global economy towards a
sustainable future.