What I told President Sarkozy at our G20 meeting today
I am a trade unionist from South Africa, a country with the highest rate of unemployment when compared to other middle-income countries. South Africa currently has a high rate of inequalities, with 50% of its citizens living in poverty.
I come from the richest continent in terms of mineral wealth, yet the poorest continent where 59.9% of Sub Saharan citizens live on less than $1 a day. The recession of 2008/9 has simply worsened this situation and the current threat of a double recession spells disaster to the citizens of my country and continent.
Employment creation must be placed at the centre of macro-economic policies and fiscal policy must be adjusted to support growth and employment creation. We are arguing that another bout of recession must not be at the expense of the working class and the poor. We do not want to see a further decline in the labour share in the GDP of nations or a rising Gini co-efficient during the recovery phase.
We are worried that many countries have adopted austerity measures that have simply meant deepening of inequalities, poverty and unemployment. Our governments continue to use the G20 to justify why they are not shifting policies. The IMF, with its one-sided assessments, is also not assisting in this regard.
Many emerging markets and developing countries continue to operate under the yoke of inflation-targeting. They believe that whatever the consequence for job-creation and industrial development, as long as inflation is down all is fine. They continue to refuse to change. We appeal that government must target employment creation, poverty reduction and elimination of inequalities within and between nations of the world.
As we speak, there are incipient upward inflationary pressures arising from rising food, fuel and administered prices. On the other hand jobs continue to be lost, our central banks keep interest rates at relatively high levels and some want to increase them, as the crisis deepens, because they are afraid of missing inflation targets.
We call for the G20 to consider opening space for developing countries to build downstream industries and to broaden opportunities for job-creation in manufacturing and agriculture. Without promoting active industrial development, however, we do not see any prospects of fighting unemployment and defeating poverty and inequalities in these countries.
We expect the G20 to come out strongly on the need to implement taxes to curb the excessive growth of the financial sector at the expense of the productive sector. We want to put forward two proposals.
A Financial Transactions Tax, which will discourage excessive speculation and limit disruptions on the productive economy that are brought by financial markets, and a Financial Activity Tax, which will be levied on the size of excess profits and excess salaries within the financial sector, to ensure that the financial sector does not balloon excessively beyond what could be sustained by real production, and that resources that could be directed towards job-creation are not wasted on financial speculation.
In this context, we propose that the G20 considers the implementation of a tax on short-term cross-border flows, to limit excessive appreciation of currencies, especially in developing countries. An important part of the income-led recovery that we are calling for is the need to preserve and build industrial capacity in developing countries.
What we have witnessed is that hot money continues to flow into these economies, strengthening currencies, dislocating manufacturing capacities, and leading to massive job losses through an influx of imports and a decline in revenues. In many countries, such as mine, we have lost almost 10% of the workforce.
Under these circumstances one would expect that the currency would weaken to balance the economy. This has not happened; in fact the currency has strengthened, thereby increasing the risk of a permanent damage to employment and industrial capacity.
Lastly, the economic crisis has no doubt pushed vast populations into despair. There is an increase in poverty levels which are unbearable. Yet, part of the problem with rising food prices is the speculation in financial markets over essential food items. We want this practice to be limited. It must be used solely to enhance decision-making processes of food producers, e.g. farmers, when they decide when and whether to invest. However, this role of financial markets has long been overtaken by speculators. We propose that a heavy tax be imposed on speculation on essential food.