Commission for Social Development

Forty-First Session  

National and International Cooperation

for Social Development

Presentation by the

International Labour Organization

John Langmore

Director

Liaison Office to the United Nations

Wednesday, 12 February 2003

            I would like to congratulate the Secretary-General and the Division of Social Policy and Development for the quality of the report on national and international cooperation for social development. Addressing five separate subjects was an extraordinarily difficult task which Johan Scholvinck, Gloria Kan, Sergei Zelenev and their colleagues have undertaken with distinction.

            I will comment on only one of those issues, employment strategy, and do so with an easy mind because decent work for all who want it is one of the highest priorities for achieving the Millennium Development Goals and also for improving the security, freedom, justice and vitality of all peoples and societies.  

At the end of 2002, 180 million people were openly unemployed. In addition about 550 million workers were unable to earn enough to keep their families above the US $1 a day poverty line. Over the next eight years there will be some 400 million new, young job seekers.

            Yet for more than a quarter of a century the conventional strategy adopted by developed and developing countries alike, and required by the international public and private financial institutions as a condition for lending, involved relegating employment growth to a subsidiary place after control of inflation and the current account balance. The superficial mantra that inflation was most damaging to the poor was ritually repeated to justify policies that tightly constrained economic and employment growth. Since the mid nineties a broader view has gathered strength giving greater attention to the importance of employment growth and poverty reduction. For example, the European Union adopted the European Employment Strategy in 1997.

The ILO estimates that the rate of economic growth per capita that would be necessary to halve both unemployment and the number of working poor by 2010 globally would be over 2 per cent compared with the average of 1 per cent during the nineties. This suggests that major changes of strategy are required.   

            An essential component of such a change is a more sophisticated balance between economic goals allowing for simultaneous reduction of unemployment and low inflation. In the current situation, where national inflation rates are generally low and in which there is a serious risk of deflation in Japan for example and perhaps in other developed countries, employment growth-enhancing policies are essential.

In addition, one of the major factors causing the lost decade for development in the eighties and the relatively slow growth of most countries for much of the nineties was the high level of real interest rates. The current reduction in US and Japanese interest rates to cope with the economic slowdown is a positive element in the external financial environment for all countries. European and in turn developing countries would benefit from a relaxation of the European Central Bank’s preoccupation with the acceptability of their policies to financial markets, and instead greater consideration of their impact on economic and employment growth.

It is scarcely possible to overestimate the importance of the availability of credit at manageable interest rates to entrepreneurs in small and medium enterprise. Any country seeking growth of productive work could well examine the scope for easing access to credit and reducing interest rates.

Not only the stance of fiscal policy but also its composition is influential. Yet some countries are still being required to act pro-cyclically and to reduce expenditure during depressions in order to qualify for loans. More pragmatic fiscal policies would be appropriate in both developed and developing countries. The arbitrary deficit limits set by the ‘Stability Pact’ of the European Union should be re-evaluated and could well be abandoned. Employment growth can be encouraged cost-effectively by well chosen expenditure increases (rather than by tax cuts) aimed directly at equitable improvements in services for all, especially education, training, health and housing, and at income maintenance for the unemployed.

            An additional arm of macroeconomic policy that is commonly neglected is social dialogue leading to the negotiation of a national economic and social strategy by the social partners – business, unions, government and civil society. It can also be a significant means of increasing participation in political processes, so contributing to the accountability and transparency of governments.

Education, health services, childcare and care for the aged are themselves important sources of employment. Services account for well over 60 per cent of world GDP. From 1980 to 1998 the services share of world GDP rose by five per cent and that growth was more rapid in developing than in developed countries.

As incomes rise, the demand for human services increases more than proportionately, and human services are labour-intensive – they are face to face. The best hope for increasing income-generating work everywhere is to move towards meeting the demand for education, health, personal care for the old, the young and the disabled that are often provided through the public and not for profit sectors; and through expansion of private sector services such as retailing and finance, travel and eating out, personal, professional and technical services and sport and culture.  

The clearest reason for hoping that policies such as these will be introduced is that they are generally what electorates want. Almost everyone would like decent work for all, and no one likes the waste and threat of unemployment and alienation in their society. The MDGs are a close approximation of the wishes of electorates everywhere.

Moving beyond stoicism about unemployment to a strong commitment to the goal of decent work for all and action to implement this is possible. The constraints are not as severe as many current policy advisors would have us believe. Perhaps the importance of increasing employment could be a sufficiently strong motive for increasing finance for development