By Cliff Montgomery – May 18th, 2011
The twisted economic policies of America and other wealthy countries “are pushing us to the brink of social, economic and political unsustainability,” recently declared a top representative of international labor.
In April, Juan Somavia–Director-General of the United Nations’ International Labour Organization’s Monetary and Financial Committee and Development Committee–issued an impressive statement on the vital part social justice plays in a working economy and sound society.
Below, The American Spark quotes major parts of Somavia’s statement:
“The consequences of years of unbalanced growth, exacerbated by the global financial crisis, are increasingly apparent in rising social tensions in many parts of the world. I am extremely concerned that current policies are not addressing deep seated imbalances and inequalities within and between countries.
“The present form of globalization–dominated by a financial services sector that is ill-serving the global public interest–is unsustainable economically, socially and politically.
“As ILO Director-General I have a duty to warn the International Monetary and Financial Committee and Development Committee that persistent weak growth in opportunities for decent work and widening social gaps threaten to undermine the still fragile recovery of the global economy.
“I rejoin the Managing Director of the IMF when he cautions ‘In too many countries, the lack of economic opportunity can lead to unproductive activities, political instability, and even conflict. Just look at how the dangerous cocktail of unemployment and inequality—combined with political tension—is playing out in the Middle East and North Africa.’
Jobs and Rights Key to Sustainable Growth and Development
“On 2 February 2011, in a statement on the situation in Egypt, I recalled that ‘for many years, the ILO has been pointing to the gravity of the decent work deficit in Egypt and a number of other countries in the region, where unemployment, underemployment and informal work have remained among the highest in the world.’
“I [further] pointed out that ‘the failure to address this situation effectively, with all of its consequences for poverty and unbalanced development, together with limitations on basic freedoms, has triggered this historic outpouring of popular demands.’ […]
“At the joint invitation of the Minister of Finance, Mr Samir Radwan, and the Minister of Manpower and Migration, Mr. Ahmed El Borai, I subsequently visited Egypt from 11 to 13 March 2011, meeting the Prime Minister, Mr. Essam Sharaf and senior government officials, as well as representatives of the independent trade unions, youth leaders of the revolution and civil society actors.
“I welcomed the Declaration by Minister El Borai which guarantees that all trade unions will be registered and can freely pursue their legitimate activities. I stated on that occasion that ‘the fact that the ministers of finance and labour are inviting the ILO to work together indicates the important policy convergence of the issues on which they are requesting our contribution: freedom of association, wages, social protection and employment, especially for youth.’
“The ILO is similarly engaged in other countries in North Africa and the Middle East.
“I am convinced that if countries are to grow on a more equitable, sustained and balanced basis, the macroeconomic policies will also have to target jobs creation on a priority basis. This is the central policy challenge we face in 2011 worldwide.
“The harsh reality is that the tools of conventional economic analysis, such as GDP growth, are failing to capture the underlying imbalances in societies not only in North Africa but in many other parts of the world. Restrictions on freedom of association, high un- and under-employment, wide income and social gaps are indications that issues of central importance to people’s lives are being neglected.
” ‘Financial stability’ is an ephemeral goal if it is bought at the price of social instability.
“It is time to re-conceive adjustment policies as policies that adjust to people’s needs and aspirations for decent work and a better life for themselves and their children. All too often policies are putting the burden of adjustment on to working families, when onerous public and private debt originated in the disastrous lending practices of major financial institutions.
“Such policies are pushing us to the brink of social, economic and political unsustainability. […]
“By 2007, the top 1 per cent of earners in the United States accounted for 23.7 per cent of total income in the country. Moreover, between 1976 and 2007: ‘the share of an even wealthier group – the top 0.1 per cent – has more than quadrupled from 2.3 per cent to 12.6 per cent over this period.’
Enriching the Policy Toolbox
“The uneven recovery described in the IMF’s latest World Economic Outlook poses major policy challenges for many countries and for the coordination of mutually reinforcing policies globally. Large fiscal deficits and growing public debt will have to be reduced, but the major cause of these problems–collapsing tax revenues as a result of recession–will only be addressed fully by private sector recovery which in too many countries is weak and dependent on continued public policy support.
“The dilemma of balancing a credible medium-term fiscal consolidation with short-run support for a still weak recovery is particularly acute in countries that were hit hardest by the successive waves of disruption in international financial markets that followed the bursting of the credit bubble in 2008.
“[Such] considerations underscore the importance of effective institutions of social dialogue and collective bargaining for ensuring stable growth in output and employment. It is also relevant to note that a high level of social protection in the form of employment protection laws, collective wage agreements, and unemployment insurance has played a significant role in dampening the extent of contraction of effective demand in the aftermath of the financial crisis.”
