Info Service on Finance and Development (Mar12/03)
We are pleased to provide you with a round up of some key discussions that took place at the joint session of the UN General Assembly Second Committee on economic and finance affairs and the ECOSOC in November 2011 at the UN Headquarters in New York.
1) Developing countries emphasize impacts of the economic recession, call for development-centered globalization
2) Top UN officials call for job creation to overcome recession and avoid a new crisis
3) Joseph Stiglitz on need for Global Economic Coordination Council, highlights problems with excessive focus on austerity in the global economy.
Below is the second article.
UN officials call for job creation to overcome recession and avoid a
Leading United Nations experts warn that governments must create jobs in the face of worldwide protest movements, and that investing in productive capacities must be a key mechanism by which “job-rich growth” must be channeled to overcome today’s economic recession and threats of a new financial crisis.
In a November 2011 joint meeting of the UN General Assembly Second Committee on economic and financial affairs and the Economic and Social Council (ECOSOC), investing in productive capacities for job-rich growth was addressed by the heads of the International Labour Organization (ILO), UN-Women, and the Department of Economic and Social Affairs (DESA).
Juan Somavía, Director-General of the ILO, asserted that governments must unite to create jobs or face the pressing danger posed by the massive movements organizing around the world.
“People around the world are losing faith in governments and public institutions,” he said, adding that the current system of globalization, “which places macroeconomic policies over socio-economic ones, must be restructured.” The current model has led to greater inequality, an imbalance between the real economy and the financial economy, and high levels of unemployment.
Somavía said that after a visit to the Occupy Wall Street protest movement in downtown New York City, it is clear that a fundamental problem needs to be addressed when banks are “too big to fail” and people are “too small to matter.”
The financial economy has taken resources away from the real one, he said, recalling that over the last 30 years, investment in the latter remains at about 20%, while money has poured into the financial sector. The precise problem is that the financial system cannot directly create jobs.
“Burdened by enormous debt, people around the world are rising up to demand work, a share of the wealth they have helped create, and basic levels of social security,” Somavía said. He underscored that politicians need to set aside their differences and unite to address the prevailing multiple global crises.
Moving forward calls for alternative models of globalization that will restructure the increasingly inadequate current policies. There is a need for a return to a technical, rather than an ideological, framework for growth, Somavía stressed, adding that the global economic and financial crisis stems from “idealizing deregulation.”
Noting that many politicians are going about business in a business as usual fashion, while using the crisis to seek votes for the next election, Somavía emphasized that governments must unite in cooperation. The present period should be seen as an opportunity, he said, adding that the policy space available for exercising creativity and innovation has never been bigger.
Developing ideas and policies that could reshape the world is a big challenge, but also a big opportunity, he said, stressing the importance of “looking through a different eye.”
He said the danger of dealing with crises is in the way policymakers and markets react in short-term bursts that lack clarity as to the direction in which economies are going in the long-term. A long-term clarity is essential if there is to be a coherent recovery.
Emerging countries have dealt with the current economic and financial crisis better than their developed counterparts due to their intellectual independence, Somavía said. In the last decade, Latin America and Asia have repaid their loans to the IMF and have demanded power over their own economic policies.
The policy leadership in power during the shaping of the current globalization model no longer exists, Somavía said, and the current policy leadership is also unclear. Given this leadership vacuum, the United Nations needs to play a more active role.
Due to the recovery of bank and stock market valuations soon after the Lehman Brothers collapse in 2008, there is a pervasive danger in the international return to business as usual financial policies. Governments should have imposed regulations and conditions when bailing out the banks,
Governments should have imposed conditions for saving the banks, he emphasized, pointing out that once they had recovered their valuations, they had gone back to their old ways. Despite that “missed opportunity,” a second chance has presented itself in the form of the current sovereign debt crisis.
Michelle Bachelet, Under-Secretary-General and Executive Director of the United Nations Entity for Gender Equality and the Empowerment of Women (UN-Women), introduced the Social Protection Floor Initiative, which was mobilized by a coalition led by the ILO and the World Health Organization (WHO).
The initiative is a part of a vision for a larger social protection system, said Bachelet, which aims to democratize access to social protection. The current state of social protection is one in which more than 5 billion people are not covered by adequate social security, and 1.4 billion people live on less than $1.25 per day. Access to sanitation and drinking water is severely lacking, she said, adding that “there is something deeply and structurally wrong with the way in which systems are run has led to the squandering of economic and human potential.”
Bachelet underscored that social protection is the essential missing piece in a fair and inclusive globalization. The report of the Social Protection Floor Initiative illustrated how social protection has helped stabilize aggregate demand in times of crisis while increasing resilience.
Bachelet said Latin America’s extensive experience with social protection has enabled the continent to recover better from the crisis. Social protection is a “win-win” investment, working both as a short-term stabilizer in times of crisis and providing long-term productivity gains. She admitted, however, that installing social protection is not easy. It requires the right funding and human resources, as well as cooperation of all types.
Emphasizing the essential importance of political will, Bachelet said key lessons learned include the need for policy coherence. There can be no solution to unemployment without addressing education, which relies on health, which in turn is linked to sanitation and housing, among other fields. The intrinsic connections between each of these areas requires a holistic approach to development, one where interlinkages between sectors and target goals are placed at the center, rather than as an addendum.
The notion underlying social protection is that everyone deserves access to basic services and no one should live below a certain income level, Bachelet said, stressing her own belief that basic social protection is better than nothing. Acknowledging that financial stability is important and that many countries would not be able to launch comprehensive protection schemes without the requisite financing, she said basic protection focused on indentifying priorities which could act as starting points. Schemes should promote and empower, not create dependency. Bachelet highlighted that social protection is essentially about “unlocking capacities in all areas of citizenship.”
Reiterating the need for political will, particularly in light of the tough economic choices currently facing politicians, Bachelet stressed the need for sustainable schemes, saying that if applied properly, they were not only affordable, but would eventually start paying for themselves. She called for the universal adoption of social protection for all, saying policy should be based on each country’s unique situation and national characteristics. After the initial application, further increases should be envisaged as the economy grows. “The floor cannot become a ceiling,” she stressed.
Responding to a question from the representative of Bangladesh, Bachelet said the report was fully intended to be a tool for all decision makers and decision-making bodies. Its recommendations could be applied in different regions and every country needed to find “its own path and its own velocity.”
In response to questions from the representative of France, concerning the report’s impact at the G20 level, Bachelet said she was working closely with the G20’s French Presidency, and they were taking the importance of the social protection floor into account.
Asked by Nepal’s representative how the report dealt with the capacity constraints of poorer countries, Bachelet explained that the report introduces a concept, not a recipe, and that individual States should establish their methods and priorities. Capacity is important, and while the report has given a lot of thought to the least developed countries, it is not specific because the basic concept of social protection is universal.
Assistant Secretary-General for Economic Development of the Department of Economic and Social Affairs (DESA), Jomo Kwame Sundaram, said young people are being significantly affected by the crisis and the problem of underemployment, which has become much more serious in developing countries.
Sundaram said that economic growth, even years before the current crisis, has been “job poor,” which symbolized growth in data but not in creating jobs. Despite the fall in developed countries gross national income levels, people have not experienced a significant decline in lifestyle due to the availability of cheap credit, he said, adding that the United States Federal Reserve, for example, maintains a policy of relatively easy credit, which had led to the subprime mortgage crisis. As a consequence the world faced a major debt challenge.
Underscoring the need for innovative thinking, he said sustained investment was an absolute requirement for economic recovery.
“There is no way to reduce poverty or sustain growth without creating jobs. Promoting renewable energy is a key way to deal with global warming and must be supported by a certain degree of cross-subsidization. To meet the energy needs of poor people, it will be necessary to promote renewable energy on a subsidized level. It is also important to supply ‘green’ energy that will not contribute to global warming,” stressed Sundaram. There is no way to lift people’s living standards without increasing the generation of renewable energy, he said, which in turn would solve two major global problems, that of energy poverty and global warming.
Responding to a question about the ongoing food crisis, Sundaram noted that the French Presidency of the G20 has opened up the question of food price volatility, and that a debate has begun in the G20 between those emphasizing the impact of market fundamentals and those underlining that the financialization of commodity futures and options markets has played a large role in causing the volatility.
Several representatives spoke on behalf of key country groupings at the conclusion of the plenary session.
The representative of Nepal, speaking on behalf of the group of Least Developed Countries (LDCs), said that although trade plays a crucial role in promoting sustained economic development in LDCs, their collective share in the world merchandise trade was just 1%. Doubling that share by 2020, in accordance with the Istanbul Programme of Action, would require strong international measures, including the granting of market access, building human, institutional and regulatory capacity, and removing trade-distorting measures, including subsidies.
Jamaica’s representative, speaking on behalf of the Caribbean Community (CARICOM), said the growing tendency towards regional specialization and less diversification can inhibit long-term growth prospects, and that challenge is particularly acute for developing countries. It is clear that trade is integral to national development, he said, adding that CARICOM has proceeded in good faith towards progressive trade liberalization and supports an open, inclusive, transparent and rule-based multilateral trading system. However, CARICOM countries are averse to liberalization that does not truly promote development needs by allowing full participation in the multilateral trading system.
Australia’s representative, speaking on behalf of the Cairns Group of 19 agricultural exporting countries, said that the Group, as a unique mixture of both developed and developing countries, is determined to secure reform of agricultural trade, which is fundamental to development and food security. Trade should play a role in economic growth, and in so doing trade reform must address food security.
The Russian Federation’s representative said her country is actively supporting the creation of predictable and stable commodity markets, adding that it took a positive view of the intellectual contribution of the United Nations Conference on Trade and Development in analysing international trade, and in stressing that member states must focus on helping developing and least developed countries to join the global economy.
Nigeria’s representative noted that international trade remained “hostage” to the narrow interests of the global rich, notwithstanding the determination by the majority of countries and people to resolve outstanding obstacles. Pointing out that African economies were essentially commodity-driven, he said that despite “spirited efforts to move forward, the continent remained the commodity basket for overseas factories.” +