Discontent worldwide is reaching dangerous levels. In three-quarters of the 82 countries with available information, a majority of individuals are getting increasingly pessimistic about their future quality of life and standard of living. This all points in one direction: mounting frustration with a lack of jobs and decent work.
More than 200 million people are officially unemployed worldwide, including nearly 80 million young women and men eager to secure their first job. Both figures are at their highest points ever, but this is only the tip of the iceberg. The number of workers in vulnerable employment – 1.5 billion (around half of the world’s labour force) – and persons working but surviving on less than US$2.00 per day – 1.2 billion – is on the rise again.
The bottom line is this: the current growth model that has evolved since the early 1980s has become economically inefficient, socially unstable, environmentally damaging and politically unsustainable. It no longer commands legitimacy. People are rightly demanding more fairness in every aspect of their lives. This no doubt contributed to mass uprisings in North Africa and the Middle East as well as significant protests in a number of industrialized countries and other regions.
Yet as the economic recovery unfolds, in many places it seems as if the crisis never happened. Policy regressing to business as usual ignores the fact that it was precisely those ways of doing business that almost bankrupted the world economy.
Global productive investment as a percentage of GDP – the source of job creation – has stagnated. Instead, we have a continuously rising share of profits coming from financial operations with negligible employment creation. Global wage growth has been cut in half, trailing productivity increases. Income gaps between the top 10 per cent and the bottom 90 per cent are widening, with the middle class squeezed in between.
There are limits to how much inequality a society’s social fabric can bear. There are many signs that the limits are fast approaching or have been breached.
On a personal note, having witnessed the social devastations of the policy responses imposed by the International Monetary Fund during the debt and financial crises of the 1980s and 1990s in Latin America and Asia, I am deeply troubled to see Europe, the cradle of social cohesion, apply these very same policies with the negative economic and social consequences that are inherent to them.
So what would efficient, socially responsible growth look like?
To begin with, the needs of productive enterprises and workers in the real economy must dislodge financial interests and the bonus culture from the global economy’s driver’s seat. This will not be easy, given the entrenched power interests of banks that have convinced governments that they are “too big to fail” while pushing for austerity policies that wreak havoc in the lives of families and small enterprises seen as “too small to matter”. We need socially responsible fiscal consolidation in which lenders also bear a part of the cost.
There is an urgent need to improve on the market outcomes and gains from international trade and investment. This can be achieved through increased integration between macroeconomic policies and labour market and social policies—for example, by making employment creation a targeted macroeconomic objective alongside low inflation and sustainable public budgets.
This would mean more productive and job-creating investment; expanding the real economy and reducing the space for unproductive financial operations; facilitating hiring, especially in small enterprises; providing for a fiscally sound social protection floor to the 80 per cent of the world population who lack social security; and facilitating the application of fundamental rights at work, in particular freedom of association and collective bargaining.
There is much evidence that these approaches work. Countries – mostly emerging economies and some developed ones – that have applied a combination of these policies are coming out of the crisis faster than those that have stuck to the old recipes. The G20 Leaders rightly want to promote a strong, sustainable and balanced growth. I would add “equitable” to the mix. The forthcoming Summit under French leadership and the planned meeting of their Labour Ministers can open the way for policies that connect growth with people’s aspirations everywhere for a fair chance at a decent job.
In short, we need a new era of growth with social justice inspired by a practical vision of sustainable development—an era where people’s needs are at the heart of policy-making, the benefits of globalization are shared equitably, and voice, participation and democracy can flourish. At the 100th Session of the ILO’s tripartite International Labour Conference which begins this week, government, employer and worker delegates will consider how they, as representatives of the real economy, can assume their responsibility in meeting these challenges.