“Governance by Contract?” What?

Starting in January 2013, I’m going to be running a research project based in the Institut d’études politiques et internationales at the University of Lausanne in the French-speaking part of Switzerland. The funding for the project comes from an organization called the Swiss Network for International Studies.

As these projects normally do, it has a short title, “Governance by Contract?”. This doesn’t give much of a clue about what it’s actually about, which is also normal. It has a subtitle, which might help a bit but still won’t get you very far: The impact of the International Finance Corporation’s Social Conditionality on Worker Organization and Social Dialogue

If you really don’t have anything better to do with your time you could even read the 500-word summary that you can see here, but I’m still not guaranteeing enlightenment if you do.

However, all will hopefully become clear if you read the rest of this post.

Most people have probably heard of the World Bank, which is an international organization that lends money to developing world governments. The Bank is in fact only one part (although the largest) of the World Bank Group, which also includes something called the International Finance Corporation (IFC). Rather than lending to governments, the IFC invests directly in private sector businesses. Starting around the middle of the 1980s, a lot of people began to wonder if the IFC, along with the other international financial institutions (IFIs), were throwing the development baby out with the financial bath water in the sense that their policies and lending activities seemed to be more about providing multilateral corporations based in the global North with access to markets, natural resources and (above all) cheap labour than they were about encouraging genuinely sustainable economic development whose benefits would be felt by ordinary people in the global South. This was part of a more general worry that the new international policy orthodoxy of free trade and deregulation, whose supporters argued that it was the quickest and most effective means to lift the greatest number of people out of poverty, actually harmed those it was supposed to help. Many people argued that the IFIs were in effect using public funds to subsidise economic development based on environmental degradation and exploitative working conditions.

By the turn of the millenium, in the wake of well over a decade of argument, protest and pressure, the IFIs had for the most part realised that they had to do something to ensure that the governments and businesses they supported behaved reasonably – at the very least, that they did not violate internationally recognised human and community rights. An important turning-point in this respect was the International Labour Organization’s identification in 1998 of what it called ‘core labour standards’, essentially the most important individual and collective rights that should be respected in every workplace. These core labour standards (CLS), based on international conventions that were already widely supported, quickly became the single most important reference point for labour rights within corporate codes of conduct and other regulatory schemes. Among the IFIs, the IFC was something of a pioneer in terms of its approach to taking action, announcing in 2003 that it aimed to require all of its clients to respect CLS as a condition of investment. In 2006 it introduced what it called its ‘Performance Standards’ system, which specified the social and environmental standards with which IFC client businesses were required to comply. Among the social standards included in the system is a standard on labour and working conditions which makes explicit reference to the ILO’s 8 core labour standards.

The IFC has been using its performance standards system for over six years now, and the aim of the research project (finally he gets to the point…) is to assess how much impact it has had on the 1800 or so businesses that have been taken on as IFC clients since then. We’re going to be looking at how IFC staff go about assessing whether businesses applying for investment are in compliance with its standards, and how – and how effectively – it helps those that are not to meet them. We’re going to be asking managers and workers in IFC-funded businesses whether they think that anything significant has changed as a result of having to get in line with the performance standards. And we’ll be comparing employment practices in client businesses with those in similar businesses in the same region that have not had any IFC investment to see what, if anything, is different about the way those businesses are run. We’re interested in all aspects of employment practice, but we’ll be focusing in particular on freedom of association, which is to say the degree to which employees are able to organize themselves into unions or other types of worker organization and to bargain about pay and conditions with their employers.

As well as me and Jean-Christophe Graz at the University of Lausanne, the project involves Frank Hoffer of the ILO’s Bureau for Workers’ Activities (which is also home to the coordination of the Global Labour University and the Global Unions Research Network), Layna Mosley of the University of North Carolina at Chapel Hill, Christoph Scherrer of the University of Kassel and Fiona Murie of the Building and Woodworkers International.

The project officially starts in January 2013 – at least, that’s when the money starts to arrive – and will last 2 years. I’ll be posting stuff here about it, irregularly I expect, so tune in for the next exciting episode, which will probably be something to do with trying to get in touch with the IFC itself.


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