November 2001 IMFC Statements

IMFC Ottawa Meeting

Statement by Mr. Juan Somavia,
Director-General of the International Labour Office to the
Fourth Meeting of the International Monetary and Financial Committee

Ottawa, November 17, 2001

We meet in Ottawa with a sense or urgency. A chain of events is unfolding, posing threats to the livelihood and security of many people and their families throughout the world. Moments of crisis need a steady political hand and creative leadership. As never before, the need for good governance of the global economy is starkly before us. So the ILO welcomes Managing Director Kohler's call for a 'coordinated international response' and President Wolfensohn's appeal to the international community for 'real collaboration aimed at averting global recession.'

The ILO stands ready as a team player in that effort. We believe that agreement on a global stimulus package is necessary to expand demand and reactivate economies.

My constituents, and very particularly representatives of employer and worker organizations, live in the daily rough and tumble of the real economy. Labour and social ministries are in the frontline of public action to deal with the human consequences of economic problems. They are now staring into the face of a possible global recession in a period of unprecedented interdependence. Whether from advanced, emerging, developing or countries in transition, their message is clear: we need a productive response out of the crisis. It is difficult to see this happening unless the relevant international organizations in the economic and social policy fields work together.

They are feeling the impact of closures and layoffs, of the credit squeeze on companies and the income squeeze on workers. All of this is particularly crushing on small businesses. While absent from most headlines, the truth isthat the economic backbone of most communities-small firms—are in trouble. ILO constituents want to see and support responsible economic and social policies that help enterprises and people and their families get through hard times. From their perspective, investors are waiting for consumers to start spending again. And consumers are worried about losing their jobs and incomes. So employment creation and social protection need to be at the core of policy responses.

The ILO has estimated that there will be at least 24 million fewer jobs over the next year as a result of the projected decline in growth. This reflects the combined effects of lay-offs and jobs that will now not be created. In the global hotel and tourism industry alone nearly 9 million jobs are at risk. These are but projections. The challenge before us is to prevent them from happening.

Many industrialized countries have already embarked on prompt counter-cyclical measures. They have the means to do so. A number of developing countries are also in a position to adopt expansionary macroeconomic policies to counteract the effects of the global downturn. They should be allowed and encouraged to do so. As the Fund itself has noted, 'economic fundamentals in many countries have in many respects improved in recent years and from an economic perspective, this leaves the world somewhat less vulnerable than it might otherwise be.'

The developing world as a whole needs a supportive environment to follow the same path as advanced countries. That means access to the resource base that makes expansionary policy options viable. Debt relief and rescheduling, increased liquidity, ODA and other external flows all have key roles. Governance issues are critical to stimulating virtuous circles of increased investment. All of these considerations make the success of the International Conference on Financing for Development crucial.

The biggest danger in the current context would be to apply expansionary policies in the North and more austerity and restrictive structural adjustment in the South. There is no political space for belt-tightening in many developing countries. Avoiding this danger is as much a matter of self-interest for the North as of solidarity with the people of the South.

We propose working together on a Global Stimulus package that, through coordinated international action, exploits all potential avenues to support global effective demand. This is essential for shoring up investor and business confidence worldwide and for preventing a downward spiral in trade and investment flows from which all would lose. And this must be done without compromising sound macro-economic policies, in the context of each country's realities.

From the perspective of ILO constituents, this package should be governed by the overriding objective of preserving the highest possible level of real economic activity, employment and social protection. This is vital for minimizing the social cost of the current global downturn. All existing multilateral and bilateral assistance facilities should be fully mobilized and additional innovative sources of funding seriously considered. Action has to be taken to restore confidence in private international capital markets, and to engage them in reviving the supply of funds to developing countries. Additional financing would be necessary to tide over shocks to both current and capital accounts.

We need an integrated socio-economic policy response that does not destroy valuable productive capacity through unnecessarily sacrificing viable enterprises facing temporary difficulties. And those suffering lay-offs or living in the abyss of the informal economy need proper social protection mechanisms and safety nets. The full potential of stimulating domestic demand and developing internal markets should be tapped. In this connection, government expenditures should give high priority to quick-disbursing programmes with a high impact on job-creation for the most needy; to support women and men's entrepreneurial initiatives; to create a supportive environment for small firms to thrive and to increase domestic consumption.

Urgent, immediate measures need to be put in a larger development context. We are suffering the combined effect of the unresolved problems of persistent poverty, widening inequality and a process of globalization whose benefits are not reaching enough people. This week the ILO Governing Body decided to establish a World Commission on the Social Dimension of Globalization to address these issues.

Even before recent events we were already facing a major global deficit in decent work. In the course of the prosperous 1990s, global unemployment grew from 100 to 160 million people in official statistics. Today, there are about one billion women and men who are unemployed, underemployed or working poor. Some eighty percent of the working age population do not have access to basic social protection. For the three billion women and men living on less than $2 a day before September 11th, life was already fairly miserable.

All of this represents a major crisis of human security. And the biggest security risk, affecting the largest numbers of people worldwide, are unemployment and the resulting poverty. We have not yet found the right mix of policy prescriptions to meet the demands of so many people for opportunities to earn a living and take care of themselves and their families.

If we manage to deal creatively with the present challenge we would also be laying down the foundations of a much improved system for governance of globalization, one that is inclusive and responsive to the preoccupations and aspirations of multiple constituents. The goal of Decent Work for all encompasses employment, social protection, fundamental rights at work and social dialogue. It is key to poverty reduction. It maximises the linkages between global economic growth and the generation of decent livelihoods and promotes the empowerment that fundamental rights at work provide. The present recessionary conjuncture reminds us that social protection and safety nets constitute much needed automatic stabilizers in the global economy. The stronger capacity to implement employment generation policies in both good and bad times also contributes significantly to dampening macroeconomic uncertainty and individual income insecurity. Similarly, the extension of social dialogue will unlock the door to more equitable and creative ways of coping with economic crises and stave off social instability.

Decent work is an agenda which responds to the Millennium Development Goals; to make our world fairer, safer, better. And it is one of the most important strategies we have to enhance human security and to provide a sustainable long-term foundation for peace.