Meeting the unequivocally dire needs of the unemployed and poverty-stricken around the globe has become an international priority among concerned citizens and policymakers. Images of hunger-stricken children and long unemployment lines pepper our daily thoughts and bring tears to our eyes, while many people can relate, since the economic crisis has impacted us all. Of course, it’s safe to say, some more than others.
Implementing and taking action on these serious concerns has become more evident globally, where policies that consider the importance of meeting the needs of those who suffer the most during economic downturns, are being put into place. Reform of policies that led to the current economic crisis and unfavorable market conditions, as supported by economists, has become a high priority for many governments.
Statistically, a World Bank analysis of the global economy shows a deepening global recession and a rapid deterioration in financing conditions. According to the World Bank’s annual Global Development Finance report (GDF), private capital flows will decline dramatically and many countries will not be able to meet their external financing needs. This year, GDP growth in developing countries might see a 4.7 per cent fall from last year’s 5.9 percent. Rich countries might see a fall of 4.5 per cent from last year’s GDP. The rebound in GDP might occur in 2010 - by 2% - followed by another rebound of 3.2% by 2011.
The World Bank’s Chief Economist and Senior Vice President, Development Economics, Justin Lin, speaking at the Annual Bank Conference on Development Economics underway in Seoul, called the developing world ‘the engine of future global growth’ and emphasized that it has a key role in global recovery. That is, if capital flows resume. He noted the grave development emergency that poor, vulnerable countries face as a result of the crisis.
According to Hans Timmer, Director of the World Bank’s Development Prospects Group, “To prevent further damage from a fresh wave of instability, the focus should be on financial sector reform and support for the poorest countries.”
And focusing on financial sector reform is just what the US is doing. Currently, in the United States the Obama administration is watching out for consumers’ pocket books in these hard economic times. He has addressed the fears of many consumers who want to avoid another economic crisis and the conditions that led to it. Many consumers are hoping that these economic reforms will help change the financial system to help them achieve financial and quality of life goals in a more consumer-friendly environment. Consumers, after all, want to know that they aren’t going to fall victim to predatory lending practices or sign on for services without being notified of all aspects of the service or product to avoid hidden fees and costs. Time will tell how soon consumers may feel the effect of these reforms.
How has the Obama administration proceeded? This week, President Obama proposed a set of reforms to the US financial system. In a White House address, he explained why the new consumer protections that have been presented are ‘essential.’ President Obama wants to build markets that work fairly and freely for businesses and consumers. He wants markets to reward those who play by the rules. He wants fair dealing and honest competition among businesses and he wants the kind of rules that encourage innovation to make the economy stronger, not just strengthen insider gains. These reforms are meant to protect many consumers at the checkout counters.
The new Consumer Financial Protection Agency (CFPA) has been set up to be a new regulator, with the sole purpose of looking out for ordinary consumers. The CFPA addresses the central role that banks held in the recessionary meltdown, as ascertained by economists, by seriously beefing up oversight. It would enforce laws that protect consumers from unfair business practices. According to Ed Mierzwinski, a consumer advocate for US Public Interest Research Groups (PIRG), an advocate for the public interest, “It’s one of the biggest things since deposit insurance. We’d have one regulator, not seven, for consumer protections."
According to Peter Eavis of the Wall Street Journal’s Heard on the Street, strong industry opponents have voiced their concerns since many banks earn “fat profit margins from products where borrowers aren’t made clearly aware of a loan’s potential costs. And some bank marketing is designed to attract borrowers likely to pay high fees for being behind on payments or over-limit.” He also suggests that banks will fight against the oversight and anything that will put them at a disadvantage to large foreign financial companies.
According to David Serchuk of Forbes, there is outrage among many business groups and chambers of commerce who call the Obama administration’s new consumer protections ‘regulatory overkill.’ They believe that it will limit credit to the poorest people and lead consumers to lighten up on their own due diligence.
As far as how foreign governments can tackle the problem, the World Bank GDF report offers a few suggestions. First, it highlights the importance of major governments staying away from beggar-thy-neighbor policies. These are policies that seek benefits for one country at the expense of others. It has also been called the “tragedy of the commons.” One example of this type of policy is when a country shifts demand away from imports onto domestically produced goods through tariffs and quotas in order to cure domestic depression and unemployment. Secondly, the World Bank also makes an urgent plea to recognize that poor countries that were already under strain from the effects of the food and fuel crisis should receive attention quickly. According to the report, since the developing countries are largely dependant on donors to reach their Millennium Development Goals due in 2015, “it is critical that international commitments on development aid and debt relief should be upheld and strengthened further. Poor countries face increasingly grave economic prospects if the dramatic deterioration in their capital inflows from exports, remittances, and FDI is not reversed in 2010.”
In terms of addressing global economic recovery and job creation to alleviate poverty and prevent a worsening of the situation, the International Labour Organization (ILO) adopted a Global Jobs Pact on June 19th to guide national and international policies in generating jobs and stimulating the economy. Following last week’s ILO summit on the global jobs crisis in Geneva, where keynote speakers included nine heads of state and governments, the pact was adopted unanimously. It is the most urgent and wide-ranging response to an economic crisis ever adopted by the ILO in the 90 years that it has been around.
The ILO’s Director-General Juan Somavia has said that the “ILO estimated that even if an economic recovery began to take hold this year or the next, a global crisis could linger for six to eight years. With 45 million new entrants to the global jobs market annually – most of them young women and men – the global economy would have to create some 300 million new jobs over the next five years just to go back to pre-crisis levels of unemployment.”
The Global Jobs Pact is described more as a portfolio of options based on successful examples rather than a one-size-fits-all solution. It urges measures that sustain enterprises and accelerate employment creation and jobs recovery combined with social protection systems (specifically for the most vulnerable, while integrating gender concerns on all measures). It also urges measures that retain persons in employment and is aimed at providing protection to working people and their families. It calls for the construction of a “stronger, more globally consistent supervisory and regulatory framework for the financial sector, so that it serves the real economy, promotes sustainable enterprises and decent work and better protects the savings and pensions of people.” Additionally, it urges cooperation to promote well-regulated trade and markets that benefit everyone in order to avoid protectionism while shifting toward an environmentally-friendly economy that is low-carbon and can help accelerate jobs recovery.
Daniel Funes de Rioja, Employer Vice-Chairperson, Committee of the Whole on Crisis Responses said, “The challenge to the ILO, trade unions and employers, and most particularly governments, is to now translate this commitment into measures at national level which generate real jobs, real incomes and contribute to economic recovery. Employers stand ready to play our part.”
Addressing concerns, Somavia says that the Pact is not about how much more governments can spend, but how they spend it. The ILO will immediately begin to provide assistance to any of the 183 member states interested in implementing measures under the Pact as well as work with multilateral agencies.
Among others who expressed encouraging words and support for the global jobs pact and the potential it has for meeting the unequivocally dire needs of the unemployed and poverty-stricken around the globe, Secretary General of the International Social Security Association (ISSA), Hans-Horst Konkolewsky had these words to say:
“The economic and financial crisis has prompted a major rethinking, as it has, hopefully, once and for all, demonstrated that social solidarity and social protection systems are indispensable for individuals, societies and economies,” Konkolewsky said.
“I congratulate the Director-General of the ILO for his initiative to forge a Global Jobs Pact that will guide national and multilateral decision-making in ensuring that recovery efforts are not only focused on economic indicators, but also on achieving productive and decent employment as well as universal access to adequate social protection,” Konkolewsky stated.
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