11 International Labour Office ILO response to globalization and the global crisis: the Global Jobs Pact Presentation by: Mohammed Mwamadzingo, Senior Economist, ILO Geneva. ACTRAV/ITC-ILO inter-regional course on Decent Work response to the Global Economic Crisis, Turin, November 2010

22 Outline of the presentation 1.What crisis? Crisis of globalization 2.Principles of the crisis 3.Outlook for ILO response: GJP 5.Update on ILO response

33 What crisis?

4 Crisis of globalization!

55 What crisis? But, what are the real causes of the crisis?  Poorly regulated financial system oExcessive risk-taking leading to sub-prime lending oToxic assets spreading through the system  Unbalanced globalization oExport-led growth model oLimited savings in the US oGrowing within-country income inequalities

66 II Principles of the crisis  The unbalanced model of globalization  Conscious effort to weaken the role of the state  Lack of regulation of the financial markets  Misguided policies pursued on the labour market  Failure of supervision role of international financial institutions = the rise and consolidation of neo-liberalism

7 II Principles of the crisis The rise and consolidation of neo-liberalism One of the underlying factors behind the resurgence of neo-liberalism in the late 1970s was the scourge of rising inflation and problems with the sustained balance of payments (Margaret Thatcher in UK, and Ronald Reagan in the US). The Washington Consensus (US Treasury, Western governments, right-wing universities-University of Chicago, the IFIs and the World Trade Organisation. Shift from state-led to a more market-driven development.

8 II Fundamental principles of the crisis The rise and consolidation of neo-liberalism Economic and social research was dominated by neoliberal policies since the 1980s Globalization and financialization was an important issue in research, but merely in a positive and uncritical manner Increasing shareholder value and short-run performance of companies and financial markets run supreme among management and governments.

9 II Fundamental principles of the crisis The rise and consolidation of neo-liberalism Example 1: 2003 Nobel prize in economics R. Engle and C. Granger received the Nobel Prize for their econometric model on “risk analysis of financial markets.” The model asserts that speculation on the financial markets helps stabilize the markets, thus calling for deregulation. In December 2007, Engle said “… I do not expect a recession in the US…”

10 II Fundamental principles of the crisis The rise and consolidation of neo-liberalism Example 2: Income and wealth distribution Until the 1970s, the theory of income distribution was an important subject in universities: equity considerations were important for sustainable development and functioning democracy. But the focus disappeared in the 1980s

11 II Fundamental principles of the crisis The rise and consolidation of neo-liberalism Example 2: Income and wealth distribution

12 Global economic growth, stronger than expected in the first half of 2010, will slow down in the following 12 months amid weakness in financial sector and other woes The combination of sovereign risk and a still weak financial sector in many advanced economies poses serious risks to the recovery Activity in emerging economies sustained by strong domestic demand and the recovery of global trade. Major economies in emerging Asia, including China, India and Indonesia remain in the lead, followed by Brazil in Latin America It could take up to 6 years for many countries to return to levels of GDP reached in 2007 Global economic growth, stronger than expected in the first half of 2010, will slow down in the following 12 months amid weakness in financial sector and other woes The combination of sovereign risk and a still weak financial sector in many advanced economies poses serious risks to the recovery Activity in emerging economies sustained by strong domestic demand and the recovery of global trade. Major economies in emerging Asia, including China, India and Indonesia remain in the lead, followed by Brazil in Latin America It could take up to 6 years for many countries to return to levels of GDP reached in 2007 III Outlook for

13 III Outlook for World GDP growth

14 Human cost of the crisis Over 210 million are currently unemployed, and increase of 30 million since Unemployment in advanced economies has increased by 3% since 2007 Increase long term unemployment Lower lifetime earnings Increased risks of heart attacks and other stress- related illness Human cost of the crisis Over 210 million are currently unemployed, and increase of 30 million since Unemployment in advanced economies has increased by 3% since 2007 Increase long term unemployment Lower lifetime earnings Increased risks of heart attacks and other stress- related illness III Outlook for

15 III III Outlook for Global employment pattern

16 III III Outlook for Global employment pattern

17 IV ILO response to the crisis and globalization The Global Jobs Pact The Global Jobs Pact was adopted by the 2009 International Labour Conference following strong support voiced during a three-day ILO Global Jobs Summit by heads of state and government, vice-presidents and ministers of labour, worker and employer representatives and other leaders The Global Jobs Pact is a framework for the period ahead and a resource of practical policies for the multilateral system, governments, workers and employers It was designed to guide national and international policies aimed at stimulating economic recovery, generating jobs and providing protection to working people and their families

18 IV ILO response to the crisis and globalization The Global Jobs Pact The GJP consists of five parts:- Decent work response to the crisis; Principles for promoting recovery and development; Decent work responses, consisting of: –accelerating employment creation, jobs recovery and sustaining enterprises, –building social protection systems and protecting people, –strengthening respect for international labour standards, –social dialogue: bargaining collectively, identifying priorities, stimulating action ; The way forward: shaping a fair and sustainable globalization; and ILO action

19 IV ILO response to the crisis and globalization The Global Jobs Pact Part I: Decent work response to the crisis ILO’s Decent Work Agenda forms the framework for crisis response. The world must do better after the crisis

20 IV ILO response to the crisis and globalization The Global Jobs Pact Part II: Principles for promoting recovery and development Priority to employment and building social protection Support to vulnerable groups (women, youth, low-wage, low- skilled, informal economy and migrant workers); Maintaining employment and facilitating job transitions; Avoiding protectionist solutions, including wage deflation and undercutting labour standards; Social dialogue, tripartism and collective bargaining; Economic, social and environmental sustainability; Sustainable enterprises and employment; Policy coherence.

21 IV ILO response to the crisis and globalization The Global Jobs Pact Part III: Decent Work responses Active Labour Market Policies - Full and productive employment and decent work should be at the heart of crisis responses, including macroeconomic stimulus packages Building social protection – Sustainable social protection can prevent increased poverty, address social hardship, stabilize economy and promote employability Rights - International labour standards create and support rights at work Dialogue - Strengthen respect for, and use of, mechanisms of social dialogue, including collective bargaining, as an invaluable mechanism for design of policies and building commitment of employers and workers to joint action with governments

22 IV ILO response to the crisis and globalization The Global Jobs Pact Part IV: Shaping a fair and sustainable globalization Policy coherence priorities for ILO Global policy priorities Counteracting threat to development and poverty reduction

23 Part V: ILO Actions –Produce and use labour market information for decision making and monitoring progress; –Prioritize employment and social protection in national crisis response and development strategies –Collecting and disseminating information on countries’ crisis response and recovery packages; –Assessing the actions taken and those required for the future, working with other relevant organizations; –Strengthening partnerships with other UN agencies regional development banks and other international financial institutions; –Strengthening country-level diagnostic and policy advisory capacity; and –Prioritizing crisis response in Decent Work Country Programmes IV ILO response to the crisis and globalization The Global Jobs Pact

24 Update: How has the Office given effect to the Pact? ILO Governing Body discussions: Employment and Social Committee: Strategy to give effect to the Global Jobs Pact Working Party on the Social Dimension of Globalization Committee on Sectoral and Technical Meetings and Related Issues Committee on Technical Cooperation Reports prepared for the G20 Leader’s Summits V Update on ILO response to the crisis

25 Update: How has the Office given effect to the Pact? Three key elements of the Office strategy: (i) Technical support to countries and regions in the four pillars of the Decent Work Agenda (ii) Research and analysis, knowledge sharing and capacity building (iii) International policy dialogue Special office arrangements V Update on ILO response to the crisis

26 Summary and conclusions ILO first discussed the global crisis in November 2008 (Governing Body) ILO adopted the Global Jobs Pact in June 2009 (International Labour Conference) Mechanisms to assist countries wishing to apply the Pact (nine countries, integrated application) The Pact has received strong support through UN Economic and Social Council, G20 Leaders’ Summit, regional meetings and institutions (UNDP, IMF, World Bank)

27 Summary and conclusions Concerned by the new phase of the crisis: highly differentiated pace of recovery, high unemployment Preventing crises requires not only the regulation of domestic financial systems, but also a consistent set of pro-employment macroeconomic policies To achieve sustainable recovery, we need to replace the model of profit-led globalization of the last three decades with an income and wage-led recovery strategy.

28 Way forward We must use the financial and economic crisis for a greater transition to a new and better world: - rethink domestic and global development paradigms and their accompanying processes - re-launch sustainable growth and development - be aware that the road to recovery and a fair globalization is not without potholes Thank you all for your attention