Where’s the world economy heading, and what should the G20 do?
As world leaders head for Cannes for the G20 summit, the ILO has warned of another global recession and increasing global unrest. And unions have demanded that governments tackle the ‘crisis before the crisis’ of rampant inequality between and within nations. That would mean ‘putting people before bankers,’ taking on the finance sector so that jobs become the top priority for world leaders, not money for rich bankers. It means job creation and climate action, along with financial regulation including a Financial Transactions Tax. The ILO also say that wage moderation doesn’t lead to job creation, and calls for a comprehensive income-led recovery strategy. This would also help stimulate investment while reducing excessive income inequalities.
Meeting alongside the G20, the ‘Labour 20’ Summit in Cannes will bring together union leaders from G20 countries, including the TUC’s Brendan Barber, for crisis talks on the economy and on attacks on labour rights. The global union statement issued ahead of the summit calls for:
- a co-ordinated jobs target and immediate measures of job-intensive infrastructure programmes, green jobs investment and labour market programmes to raise skills;
- reduced income inequality and strengthened workers’ rights;
- a new social protection floor to protect the vulnerable and prop up the economy; and
- a reformed financial sector and a financial transactions tax.
International Trade Union Confederation (ITUC) General Secretary Sharan Burrow said unemployment is the largest single threat to recovery and has reached record levels with over 200 million people out of work and many more working in insecure jobs. Meanwhile, the financial system continues to be bailed out by governments who fail to take the necessary action to reform their destabilising and highly risky lending practices. She wrote in the Huffington Post that:
When we see the banks get bailed out, with seemingly no consequences, while ordinary people pay the price with job and wage cuts through austerity measures — who could blame a person for wondering where the loyalties of their elected leaders really lie?
We need a new political contract. The G20 leaders’ meeting in Cannes next week is a chance for leaders to set a new direction for their governments and to reestablish a fractured trust with their citizens.
Meanwhile, in what it’s own press release calls ‘a grim analysis’ the ILO says the global economy is on the verge of a new and deeper jobs recession. On current trends, it will take at least five years to return employment in advanced economies to pre-crisis levels, one year later than projected last year. 80 million jobs need to be created over the next two years to return to pre-crisis employment rates. However, the recent slowdown in growth suggests that the world economy is likely to create only half of the jobs needed. Raymond Torres, whose International Institute for Labour Studies issued the World of Work 2011 report, says:
We have reached the moment of truth. We have a brief window of opportunity to avoid a major double-dip in employment.
The report also features a new ‘social unrest’ index that shows levels of discontent over the lack of jobs and anger over perceptions that the burden of the crisis is not being shared fairly. It notes that in over 45 of the 118 countries examined, the risk of social unrest is rising. This is especially the case in advanced economies, notably the EU, the Arab region and to a lesser extent Asia. By contrast, there is a stagnant or lower risk of social unrest in Sub-Saharan Africa and Latin America. 69 of the 118 countries show an increase in the percentage of people reporting a worsening of living standards in 2010 compared to 2006.
The ILO also found that the share of profit in GDP increased in 83 per cent of the countries analyzed between 2000 and 2009. Productive investment, however, stagnated globally during the same period. In advanced countries, the growth in corporate profits among non-financial firms was translated into a substantial increase in dividend payouts (from 29 per cent of profits in 2000 to 36 per cent in 2009) and financial investment (from 81.2 per cent of GDP in 1995 to 132.2 per cent in 2007). The crisis reversed slightly these trends, which resumed in 2010.