Stepping into the Void: A New Agenda for Global Labor




IT’S A TRUTH NOW universally acknowledged that income and wealth inequalities are rising in most parts of the world. Thomas Piketty and co-authors have now combined national accounts and survey and tax data to confirm this in great detail not just for rich countries but also for China, Russia, India, and other developing countries (although, for many countries tax data are problematic in view of large tax evasion and offshoring of wealth). These inequalities arise not just from the considerable wage inequalities among different skill categories, say between janitors and super-managers, but also from inequalities between capital income and labor income in general. The share of labor (particularly of unskilled labor) is declining both in rich and poor countries. [1]

While technology and globalization are clearly important in driving this decline in labor share, the main institutional or organizational factor facilitating this is the systematic weakening over time in labor organizations. Some commentators have noted that this weakening has driven a wedge between productivity growth and wage growth. Outside Nordic countries, union membership among workers is now in dismally low percentages in many parts of the world. Trade unions, losing existing members and unable to attract sufficient numbers of new ones, have their backs to the wall. Various business interests run persistent and well-funded campaigns against unions and have captured much of the media, succeeding in shrinking organized workers’ traditional rights and domain — from the strike-breaking “right-to-work” movement pushed by employers in the American Rust Belt, to large numbers of “contract laborers” without benefits working side by side with regular workers in factories in India.

In rich countries, informal unorganized labor is growing, with increasing numbers of people in tele-work and flex-work and in the so-called gig economy of freelancers and “independent contractors.” In poor countries, the number of workers in the traditional informal sector often far exceeds those in the formal sector. In India — even in the non-agricultural sector — more than 80 percent of workers are informal.

Not only do these informal workers lack union protection, but another ominous political fallout is that without the disciplining influence of worker associations, many blue-collar workers are falling prey to the mass fanaticism of cult leaders and preachers (Muslim, Hindu, or evangelical Christian), and, of course, to the political demagogues for whom militant ethnic nationalism is the first refuge. So in a way both the rising inequality and the resurgence of right-wing populism — the defining twin menaces all over the world today — are being enabled by the weakening of labor organizations. This is evident not just in the United States under Trump or the United Kingdom with Brexit, but also in Poland under Kaczyński or Hungary under Orbán or the Czech Republic under Babiš or Turkey under Erdoğan or India under Modi.

How to reverse this trend? With the inexorable march of automation and labor-replacing technology, and with the growing concentration of corporate market power and the political clout of an entrenched financial oligarchy, a rejuvenation of the countervailing power of labor organizations is going to be an enormously difficult task. Yet considering its importance for the survival of the basic economic and political structure of a democracy we clearly need to apply all our efforts, intellectual and organizational, to this task. In this article I suggest some tentative steps toward that formidable goal in a rapidly changing world, keeping in mind the interests of workers in both rich and poor countries — much of the discourse on the subject has been confined to the United States or Europe and has avoided the global-working-class point of view. The emphasis here is on general issues, while the localized context of history and institutions will, of course, vary from one area to another, making different steps feasible or desirable in different degrees.

First on the challenge of globalization. Let us separate the issue of international trade from the issues of cross-border capital mobility and immigration. In the last quarter century, Chinese imports have seriously eroded jobs and communities in many areas of rich countries, leading to the emergence of a cruel irony of history: a reminder of the past preaching by the leadership of those countries on the untrammeled benefits of free trade to the then-protesting workers and leaders of poor countries. Now that some developing countries have acquired the ability to export substantial amounts of manufactures and services, the shoe is on the other foot. It is no surprise that in recent surveys of public attitude to international trade respondents in developing countries are more positive than those in rich countries.

Yet in today’s world economy of integrated global value chains and continuous swapping of parts, components, and tasks across borders, a retreat from relatively free trade will be extremely harmful for most countries. Trade makes for cheaper producer inputs on which our production base is heavily dependent (apart from the cheaper mass consumer goods available in Walmart or Amazon, and larger markets for goods demanded by the rising middle classes in developing countries). What is called for is a substantial strengthening of the “adjustment assistance” (currently in paltry amounts in the United States and nonexistent in many developing countries) and retraining programs lasting for a long enough period to significantly improve the adjustment capability of workers in coping with trade shocks, and making benefits (like health care) portable, not linked to particular jobs. In Europe, better safety nets than in the US, especially for workers who lose their jobs, have made import penetration less of a burning issue in the political sphere.

In any case, over time, labor costs — as a dwindling part of total costs of a product — will be less of a decisive factor in determining patterns of trade. Particularly when it comes to high-valued products, factors like advantage in logistics, branding, connectivity, infrastructure (both physical and digital), flexibility of production process, credit and judicial institutions, et cetera, and other current rich-country advantages are already leading to what is called “reshoring.” How this will benefit wages is uncertain. With increased competition from technology and trade, the earlier rent-sharing arrangements between capital and unionized workers have declined, and with increased concentration (and mobility) of capital, labor gets an even lower share of the diminished rent.

More controversial is the case of trade agreements. Since tariff barriers today are already quite low (except for some special products), the main issues in trade agreements involve attempts at regulatory harmonization. This means that authorities in different countries work to agree on product and process standards, local content and government procurement requirements, and patents and copyrights. On labor and environmental standards, the demands of workers in rich and poor countries sometimes conflict, but most of these can be, with some negotiation, resolved under the existing ILO conventions and climate pacts. The important matter, on which labor organizations of all countries should raise their voice, is that of having a seat at the negotiating table. Trade agreements should not essentially be dictated by expensive corporate lawyers.

On local content protection, and on intellectual property rights, the developing countries had yielded too much under the Uruguay Round of negotiations that established the WTO. This made industrial policy (that allows new firms in poor countries some “learning by doing,” i.e., improving productivity from production experience itself) more difficult, and it obstructed new innovators in both rich and poor countries who depend on existing innovations to make headway in their research. WTO rules are now under challenge from different quarters, and if opportunities for renegotiation open up, labor worldwide should not relent on efforts to replace the existing lopsided deals that largely work in favor of corporations. It’s worth noting that features like the Investor-state Dispute Settlement, which lobbyists of multinational corporations insert in international trade agreements to allow corporations to avoid national jurisdictions and thus skirt domestic rules and regulations, are clearly inconsistent with domestic labor interests.

On capital mobility, it is in the common and urgent interest of labor organizations from all over the world to get together to defuse the constant threat of capital moving elsewhere by demanding a system of more restricted international capital flows. This has not been the norm in recent years, and the process has undercut labor’s bargaining power everywhere. There is now plenty of international evidence that the capital account liberalization of recent years is significantly related to the decline of labor share. There are, of course, theoretical arguments in favor of such capital account liberalization from the point of view of a more efficient allocation of capital across borders. But the evidence has now accumulated that costs and risks of capital account liberalization, particularly financial liberalization, can be devastating, and far outweigh the possible benefits. The volatility of finance capital, along with the associated importance of national credit ratings, has held domestic fiscal policy hostage to international capital. This sometimes results in austerity policies that play havoc with domestic employment and worker well-being, and that make governments reluctant to fund necessary public investment programs.

Even in the case of long-term direct foreign investment embodying new technology, where the balance of benefits over costs is usually better for a host country, one needs to be cautious in terms of its distributive and efficiency effects (if the technology is unskilled labor-replacing, or if the investment is more in mergers and acquisitions than in new enterprises, or if the capital inflow leads to excessive exchange rate appreciation or too many corporate tax concessions in competition with other countries).

Relatively free trade with restricted capital movements used to be a feature of the postwar Bretton Woods international system. When in the 1970s, under the leadership of rich countries, the world decided to give up on fixed exchange rates, it need not have discarded restrictions on capital flows — in fact China, India, Malaysia, and a few other countries did not forgo those restrictions. (Dani Rodrik traces much of the social tensions of globalization to what he calls “hyper-globalization,” with international capital moving in and out of countries with remarkable speed. [2]) “Managed capitalism,” with some restrictions on capital and some countervailing balance provided by domestic regulatory institutions and labor organizations, used to lend some stability to the international economic order.

Many otherwise free-market economists agree on the need for some capital controls (even the IMF now seems to hesitantly concur in this), the so-called sand in the wheels of international finance. Of course, there is some disagreement on the desirable extent of such restrictions, and also on their practicability, after a point. Controls are easier to evade in a world of super-connectivity.

Immigration is an even more sensitive issue. Here the economist’s usual arguments that immigrants do not always take native workers’ jobs or compete in public service benefits, however substantiated with data, do not cut much ice with voters in rich countries, as the economic issues are entwined with the cultural. We’ll come back later to the cultural issues as part of a general approach that labor organizations need to consider. It is interesting to note, however, that the German anti-immigrant right-wing party AfD is strongest in East Germany, where there are very few immigrants — the same is largely the case for Brexit voters in northern England.

There are some constructive economic proposals around to defuse part of the anti-immigrant tension. Take, for example, the proposal for a Global Compact [3], whereby rich countries will identify particular skill shortages at home, say, certain kinds of nursing or care-giving service, and start funding training centers for such service workers located in poor countries, and then only a controlled number of them will be part of an immigration permit system, whereas the other such trained workers at those centers will serve their home country needs.

This way both the causes of relieving specific skill shortages in rich countries (at a lower cost than training them in rich country locations) and that of mitigating the impact of skill drain from poor countries are served. One can think of many such global skill partnerships.

Let us now move away from globalization and look into other labor issues. With some effort, corporate shareholders may be persuaded that negotiating and co-managing job stability and welfare and training programs with labor organizations may be good for long-run productivity and profits, in contrast to the short-run focus of managers on their year-end bonuses and the next quarterly earnings — a view that regards labor as just another disposable cost item. Trade unions can also put pressure on the big pension funds to play a more active role toward such long-term goals. In other words, unions may actually help in “saving capitalism from capitalists.”

Workers often care less about the top one percent making more money (the topic that preoccupies the “Occupy” people), and more about their own job insecurity and the general “job-churning” that technology and competition have brought about. Across OECD countries there is not much correlation between change in labor share and the increase in the income share of the top one percent. For example, in the Netherlands the income share of the top one percent hardly changed over the last three decades, but there was a large decline in the labor share of income as well as in unionization rates; the country coincidentally saw a resurgence of right-wing populism (even though Geert Wilders, often called the Dutch Donald Trump, did not do as well in the elections in March 2017 as was earlier expected, his extremist message has been absorbed in the political mainstream). In poor countries, as well, the majority of informal workers do not seem to pay much attention to rising income inequality, their main concern is being trapped in low-paying dead-end jobs. Economic insecurity is a much more pressing concern than economic inequality. The concentration of income in the top one percent is, of course, structurally important, as it strengthens the hands of the oligarchy that tries to block pro-worker policies and regulations. This inexorable political factor needs to be instilled in the minds of those labor voters (say in the United States or India) who are not much concerned about inequality as such.

For the insecure workers both in rich and poor countries, a supportive measure can come from a generic proposal that is being discussed worldwide in a slightly different context. A universal basic income supplement can provide some minimum economic security, allowing them to look for better jobs and entrepreneurial opportunities, or for retooling and retraining. Whether a country can afford such a supplement will, of course, depend on its fiscal resources and the existing state of its public safety nets. According to a recent IMF estimate for eight countries (the United States, France, the United Kingdom, Poland, Brazil, Mexico, Egypt, and South Africa), a universal basic income calibrated at 25 percent of median per capita income will roughly cost between two to seven percent of GDP, depending on the country.

In rich countries, advances in the use of robots and artificial intelligence may make the need for such supplements more imminent, but they are also fiscally more costly. In poor countries where most workers don’t have a safety net and where the official poverty line is extremely low, a reallocation of substantial government subsidies that currently go to the better-off sections can fund a decent basic income supplement for everybody. [4] At a time when wealth inequality is increasing, more taxation of wealth and inheritance, and drastic measures to stop the corrupt under-assessments of property values — not to speak of the off-shore tax shelters — could not only mitigate such inequality, but also raise some revenue for a basic income supplement. (For India I have estimated that nearly 10 percent of GDP could potentially be made available this way.)

Along with some libertarians, many (even poor voters in the United States and elsewhere) express moral objections to schemes of plain handouts for everyone, as these supposedly undermine work incentives and ultimately the social contract. Experimental data from unconditional cash grants in different parts of the world, however, do not show much evidence for such disincentives. Besides, in developing countries the poor, if anything, are overworked, particularly the women. Nevertheless, to assuage such moral qualms, the late British economist Tony Atkinson suggested that all recipients of basic income should be asked for some acceptable form of social participation or community service.

In general, if labor organizations lobby for such universal programs (universal basic income, universal health care, free vocational training for all, et cetera), they can build a bridge across a labor movement that is currently divided — between formal and informal workers, between “insiders” and “outsiders.” Such measures of economic security may also make labor unions less hostile to the reform of labor laws like the stringent ones hurting the cause of new employment as in France, Italy, or India. It is interesting to note that in Europe, unlike in the United States, some of the extreme right-wing parties (like PiS in Poland or AfD in Germany) are avid supporters of the welfare state (of course, for non-immigrants), and the Italian populist Five Star Movement is supportive of a basic income proposal.

Moreover, in developing countries where poor or ethnically clustered voters are often lured by clientelistic arrangements with politicians (where patronage disbursements replace what should be generic claims or entitlements), universal programs energetically advocated by labor organizations can turn political attention to the shared rights of workers as citizens, rather than as clients to political patrons.

As informal workers are often self-employed, labor organizations must be particularly sensitive to their special needs, in terms of credit and marketing facilities, health and child care, and legal and insurance services. One of the most successful organizations for informal workers in India — SEWA, Self Employed Women’s Association, a trade union with over two million women participants — specializes in providing these facilities for participants. SEWA is also at the forefront of the fledgling movement for universal basic income in India. Similarly, there are special needs in the gig economy. Unions in Germany are, for example, trying to get more worker-friendly customer review sites for the gig workers dependent on them.

Since the average age of members in the old-style unions in many countries is relatively high, attempts are now being made to update the methods of labor mobilization — the latter through social media and networks being more effective than the traditional ways of working through scattered worksites. In the United Kingdom, where there are some signs of union morale reviving after decades of Thatcherite depredations, one can now hear many voices of consensual unionism, beyond the as-yet uncharted (in terms of concrete ideas of restructuring the public sector) union militancy of Corbyn and his followers. New labor leaders are trying to get the demographic group of the “millennial” generation on board, with online petitions and by paying attention to their sometimes more fragmented and individualistic concerns. Even the skilled and better-paid young workers concerned about their insecure contracts are now more receptive.

Labor organizations may consider moving away from the decentralized wage bargaining that prevails in, say, the United States and India, and toward a more Nordic-style confederate mode. This will not merely improve their collective bargaining power, but may allow them to take into account the larger macro-economic realities so that aggregative compromises between capital and labor in line with those realities are achievable. This may be viewed as more responsible unionism in the public eye. (A different feature of Nordic labor movements, that of wage compression, reducing the relative wage of skilled workers, may not, however, be feasible for countries that are facing serious “brain drain.”)

In South Asia for decades one source of fragmentation of the labor movement has been its capture by different national political parties, with different and highly contentious party-led unions. Outsider and mainly non-labor leaders dominating these unions often have their own political agenda, rather than the day-to-day workplace concerns of labor. In order to challenge this political domination in recent years some independent movements in new directions are discernible. For example, several independent trade unions in the formal and the informal sector in India have come together under what is called the New Trade Union Initiative (NTUI). In general, labor organizations everywhere have to ally with broader social movements, rallying for labor rights as part of general human rights and participating in civil disobedience movements when such rights are increasingly in jeopardy. Only as part of such general movements, US labor unions, for example, can try to overcome the various restrictions on solidaristic actions under which they currently operate.

As young people in developing countries long for regular formal sector jobs, devising ways to improve the prospects for such jobs will be vital for any labor movement. Some form of wage or payroll subsidies can encourage the hiring of more labor in the formal sector. This may be funded by redirecting some of the existing subsidies, explicit or implicit, or tax concessions for investment or fossil fuel subsidies of various kinds. These have the side effect of inducing more capital-intensive or energy-intensive methods of production. One can also imagine a tax credit to companies that invest in the skill-upgrading of their workers.

More than concentrating on wage bargaining, labor organizations should demand a greater say in the internal governance of firms. They should demand some influence on the firm’s decisions to outsource or relocate, apart from decisions about the continuous retraining of workers that the ever-changing technology now demands. This — along with a possible move toward profit-sharing, even on a small scale or trial basis — may revive workers’ interest in having a stake in the fortune of the firm. This would encourage more responsible behavior on the part of rank-and-file workers. (The profit share in each company may accrue to a public fund dedicated to worker welfare. [5]) The Gallup Organization had reported that about three-fourths of workers in the United States are “disengaged” at work, costing companies about $300 billion annually, apart from the toll on the worker’s physical and emotional health.

Evidence from German works councils suggests a generally positive effect on productivity if the firm has profit-sharing and collective bargaining arrangements. They help in building trustful industrial relations and check employer opportunism. Employee representation in decision-making is strongest in Germany, but it is also important in some other west European countries, and outside Europe in Canada and South Korea. Even though collective bargaining coverage strengthens the impact of employee representation, even in other cases such representation can act as an antidote when union density is declining. In general, pride in where you work may also weaken your ties to birth-based identities, which visibly distinguish you from others and can be easily exploited by demagogues.

There is a long tradition of thinking on worker-owned or managed enterprises, with much of this thinking more wishful than actualized or sustained. The main economic constraints on the formation and sustenance of worker-controlled enterprises relate to the difficulty of getting credit in the commercial loan market and of bearing the inevitable production and market risks. Social-democratic parties and trade unions can lobby for credit subsidy, public insurance cover, and time-bound short-term commitments for government priority in procurement from such enterprises. These solutions would be particularly helpful when a private equity investor gives up a low-profit but otherwise viable enterprise, threatening massive job losses and decline in local communities. On a smaller scale, all over the developing world there are now many successful cases of self-help groups and women’s cooperatives — large unions could give them some cover against risks and coordination problems.

Finally, if political parties are to win workers back from the pied pipers of populism, they have to be aware that many blue-collar workers today are resentful about their cultural distance from the footloose cosmopolitan professional liberal elite who seem to dominate the opinion-making circles of social (or centrist) democratic parties. [6] Differentiated often by occupation, assortative marriage patterns, residence in gentrified cities, et cetera, the latter is now a class apart with distinct attitudes and sympathies.

In Arlie Russell Hochschild’s book Strangers in Their Own Land (2016), her white working-class respondents in Louisiana complain that all demographic groups other than theirs receive sympathy from liberals. [7] Similar sentiments are routinely expressed in India by majoritarian Hindus, that liberals are busy “appeasing” the minority Muslims and have no time for them, or in Turkey by majoritarian Muslims against secular liberals, supposedly appeasing Kurds and insurgents.

In such situations, trade unions may try to bridge the cultural gulf, instead of serving only as narrow wage-bargaining platforms or lobbies. They may take an active role in the local cultural life, involving the neighborhood community and religious organizations, as they used to do in some European and Latin American countries. This is one way unions enabled workers to tame and transcend their parochial nativist passions and prejudices against minorities and immigrants. All over the world today, young people are seeking community and shared purpose. In the absence of leadership, or alternative cultural visions or purposive programs (like, say, paid community service on civic programs of various kinds), they are straying into absolutist mission-led ventures like the alt-right in the United States or Germany, jihadists among Muslims, or Hindu militants in India. Labor movements have to play a constructive role in this cultural void.

A return to community norms and cultural visions, without encouraging exclusivity and barriers is, of course, a delicate task. Take the larger imagined political community of the nation. Workers may legitimately feel pride in their national autonomy and cultural history, but one has to be careful that such pride does not derive its oxygen from the majoritarian ethnicity, marginalizing minorities or demonizing foreign countries or cultures. Larry Summers, once a zealot for financial globalization, is now advocating “responsible nationalism.” In international economic relations, the “responsible” bit here suggests the need for caution in the various ways nation-states may race to the bottom (like counter-productive trade wars). In politics and culture, others have advocated “civic nationalism,” which combines pride in one’s cultural distinctiveness (and maybe soccer teams) without giving up on some shared universal humanitarian values, including tolerance for diversity (as evident sometimes in the composition of those soccer teams).

One of those universal values may relate to some “procedural” aspects of liberal democracy, as opposed to the “participatory” aspects. Enthusiasts for the latter often complain about the dominance of unelected elite experts or an insulated technocracy (and a suspected “deep state”). One clearly has to strike a balance between the need for evidence- and knowledge-based governance in many complex situations and the need for frequent exercises in popular accountability.

Shared values, of course, require some trust in shared information. In a world of virulent disinformation and fake news, with social media amplifying anger and resentments, labor organizations should also be active in lobbying for — and, if necessary, supplying — links to public information services, to news provided by demonstrably independent agencies that could over time earn the trust of the majority.

Labor and religious organizations could find common cause around the delivery of social services and protecting the environment. In fact religious and charitable organizations often try to make up for the lack of social services at the local level from government agencies run by unionized public sector employees. Coordination may be more productive here. In Egypt, Indonesia, or India, Muslim or Hindu faith-based organizations became popular by providing much-needed basic educational and health services for the local poor [8], while unionized government workers in those sectors had become corrupt, inept, or truant. Public sector unions are important, but they must prioritize their most vulnerable constituents, coordinate with other providers, and work to protect both their workers and their needy customers.

In addition, in carrying out policies like affirmative action for under-privileged groups more open attitudes about poor workers from the ethnic majority communities along with more sensitivity to the new fissures may assuage the resentment about liberals caring only for the minorities and immigrants. Labor organizations can try to accommodate such policies of economic justice and relieve some identity-based tension by making all this a part of a common goal of humanitarian uplift and citizenship, rather than a sectarian agenda of catering to some particular social groups. This is very important in persuading people like Hochschild’s respondents who keep complaining that the blacks and Latinos are “cutting lines,” or the less successful members of even dominant caste groups in India who are currently agitating for preferential treatment in public jobs on par with the historically marginalized castes. Balancing the interests of the aggrieved sections of the majority and the chronically oppressed minorities is difficult but doable, if done with some finesse and openness to compromise (unions in the United States like SEIU and UNITE HERE have started on this).

There have also been conflicts between environmentalists and workers on the issue of jobs. But a reallocation of jobs toward renewable energy industries, which happen to be more labor-intensive than the ones preserved by the current fossil-fuel subsidies, is eminently possible. Working with local cultural and religious organizations, it may also be feasible to raise environmental awareness as part of the long-term interest of workers, since most of the current and future victims of environmental degradation on the local commons and global climate change are the poor.

Labor organizations and related social movements could thus channel the economic anxiety of workers in civic directions, diverting them from the colorful ethnic-nationalist narratives that demagogues use to mobilize this anxiety. They could be sensitive to the genuine communitarian needs and the cultural neglect that workers feel in their relation to cosmopolitan liberal leaders.

It’s unquestionably a steep uphill task to revive the strength of today’s beleaguered labor organizations. But considering the importance of resisting the twin menace of rising inequality and intolerance, what could be more important?

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Pranab Bardhan is Professor of Graduate School at the Department of Economics, University of California, Berkeley.He is the author of 14 books, two of the most recent of them being Awakening Giants, Feet of Clay: Assessing the Economic Rise of China and India (Princeton University Press) and Globalization, Democracy and Corruption (Frontpage Publications).

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[1] For a chart on labor share movements over the last three decades, see IMF Outlook, April 2017, Figure 3-1.

[2] See Dani Rodrik, The Globalization Paradox (2011).

[3] See Michael Clemens, https://www.cgdev.org/blog/cultivating-new-bargain-migration-three-recommendations-global-compact

[4] See Bardhan in Project Syndicate, June 22, 2016.

[5] This has some affinity to an idea in what used to be called the Rehn-Meidner model initiated by two Swedish trade union economists in 1951.

[6] Even though Trump and Brexit voters are in general less educated and more rural than their opposition, it is, however, important to point out that the issue of cultural distance is more general than that of an educational (or residential) gap. In Germany the voters of the right-wing AfD and in India those for Modi’s party BJP are often urban middle-class and educationally no less advanced compared to the supporters of other traditional parties.

[7] Hochschild quotes a gospel singer and avid Rush Limbaugh fan saying, “Oh, liberals think that Bible-believing Southerners are ignorant, backward, rednecks, losers. They think we’re racist, sexist, homophobic, and maybe fat.” A Tea Party enthusiast claims, “People think we’re not good people if we don’t feel sorry for blacks and immigrants and Syrian refugees. […] But I am a good person and I don’t feel sorry for them.”

[8] Tariq Thachil in his book, Elite Parties, Poor Voters (2014), shows with survey data and fieldwork in India how even elite parties often win over poor voters by privately providing them with basic social services via grassroots affiliates.


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