Working Out of Crisis:
Aligning Finance with Decent Work and a Fair Globalization
A Roundtable Side Event
Convened by the UN-NGLS, ILO and Realizing Rights
International Conference on Financing for Development
1 December 2008 (10am-1pm), Sheraton Hotel, Doha
Background Note
The global financial crisis—coming on the heels of a devastating global food crisis
and a growing climate crisis—is already having severe consequences on enterprises,
workers and families around the world. The ILO projects that world unemployment
could increase by 20 million by the end of 2009 and the number of the working poor
living on less than two dollars a day could rise by more than 100 million. These
predictions will worsen if the effects of the current economic contraction and looming
recession are not confronted quickly and in a way that addresses the interests of
working people, not just capital.
One immediate priority is to restore credit flows through consistent and coordinated
action by monetary authorities before serious damage is done to the productive
capacity and social fabric of countries around the world. Emergency measures have
been taken—but we must reach beyond rescuing the financial system: We need an
economic rescue plan for working people and the real economy. In order to ensure a
sustainable recovery and shape a fairer globalization, such a plan must be part of a
broader economic governance reform strategy that places the globally endorsed goal
of "full employment and decent work for all" at its heart.
This Roundtable with eminent personalities from government, international
organizations, civil society and business will examine the core elements of this
strategy.
Placing a socioeconomic "floor" under the downswing
While attention is focussed on rescuing banks and finance companies with massive
injections of public money, it is equally vital that systems of social protection are
maintained and enhanced, and that productive enterprises are able to stay afloat.
Those who had no responsibility for the crisis—but are losing jobs, income, or access
to capital—must be supported.
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Unemployment insurance systems not only give time for working women and men to
seek a new job, they also serve to maintain an adequate level of domestic consumer
demand and thus support business sales. Small enterprises are most vulnerable in a
recession especially one involving a credit freeze. Access to affordable credit is also
vital if large numbers of small businesses are not to be pushed into bankruptcy with
severe effects on jobs and incomes.
Public infrastructure investments should be scaled up and designed to ensure
maximum employment opportunities. Assessing these in terms of how well they will
generate economic activity and social/environmental goods—rather than distributing
political favours—is essential. Central governments may need to underwrite stronger
credit markets for local authorities to bolster employment guarantee schemes which,
by offering work to informal economy workers, help maintain local economic activity
and contribute to building essential infrastructure such as roads and irrigation.
Better international tax cooperation to avoid loopholes and official development
assistance, in particular to least developed countries, would be important components
for generating sufficient national financial resources to invest in a socioeconomic
floor.
Rewarding real value and work
It is essential to reorient incentives structures to reward real value creation and work.
High levels of profits and salaries within the finance sector have become the norm,
but these are fundamentally divorced from productivity growth in the real economy.
One consequence of this inflation of financial "market expectations" has been to put
great pressure on productive companies' quarterly results, encouraging short-term
tactics to bolster earnings rather than medium- to longer-term investment strategies.
This excessive "financialization" of the economy has siphoned off resources from the
productive economy while changing the nature and strategic outlook of enterprises. It
has contributed to the prevalence of stagnant or declining real wages, fast growing
inequalities in the income share between labour and capital, greater job insecurity and
socio-economic instability. When a crisis hits, labour costs are the first to be shaved in
an effort to reduce costs.
A new system of rules and incentives is required to reward and encourage long-term
investment in productive enterprises, skilled workforces and the transition to a green
economy, while ensuring that workers and communities get a fair share from
productivity growth. The way in which high yielding derivative instruments pass on
or disguise risk must also be urgently reconsidered. These measures are essential to
restore confidence in the financial system, from both an ethical and economic
common sense perspective. The Financing for Development process cannot afford to
ignore these imperatives.
Creating policy coherence around full productive employment and decent work
With a renewed sense of opportunities based on global political changes, world
leaders must take more seriously the need for a new paradigm of quality growth based
on expanding opportunities for decent work. Making growth more "employmentfriendly" implies changes in fiscal, monetary and trade policies that aim to boost
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public and private investments in employment-intensive sectors and productive
capacities, while finding a better balance between export growth and growth of
domestic markets. ILO research suggests that two thirds of overall growth in all
regions is accounted for by consumption growth, which in turn is fuelled by the wage
incomes of the growing middle classes. A "bottom-up" growth dynamism must be
encouraged by expanding domestic markets and the number of middle class wage
earners through decent work opportunities.
Making finance work for people and the real economy will require placing the goal of
"full and productive employment and decent work for all" as a central policy
objective at national and international levels. This goal was endorsed by Heads of
State and Government at the 2005 UN World Summit to support a "fair
globalization"1. It provides a foundation to promote effective reform of the system of
global economic governance. Evaluating how policies impact jobs and livelihoods
represents a powerful accountability measure to democratize the world of finance.
Far-reaching change cannot result only from institutional reengineering by
technocrats in international organizations and government ministries. A global
movement involving broad coalitions of State and non-State actors is essential to
bring to bear the political pressure needed to move from agreement in principle to
practical policy and institutional reforms.
Contacts:
Hamish Jenkins, Programme Officer, United Nations Non-Governmental Liaison
Service (UN-NGLS), Palais des Nations, CH-1211 Geneva 10, Switzerland
telephone +41 22 917 1447, email hamish.jenkins@unctad.org, website (www.unngls.org)
Aurelio Parisotto, Senior Economist, Policy Integration and Statistics
Department, ILO, 4 route de Morillons, CH-1211 Geneva 22, Switzerland,
telephone +41-22/799 6927, fax +41-22/799 8044, e-mail
<parisotto@ilo.org>, website (www.ilo.org)
Heather Grady, Director of Policy and Strategy and the Trade and Decent Work
Program, Realizing Rights: The Ethical Globalization Initiative, 271 Madison
Avenue, Suite 1007, New York, NY 10016, United States, telephone +1 212-8958088, email <heather.grady@eginitiative.org>, website
(www.realizingrights.org)
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Para 47 of the 2005 World Summit Outcome Document
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