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Monday, October 27, 2008

Restoring Trust: Time to Rescue the Real Economy

By Juan Somavia
Director General of the ILO

GENEVA - The current crisis has hit the financial sector hard.
But what about people and the real economy?

Though we don't know how long and how serious the financial
crisis will be, we do know that if we fail to act decisively, the impact
on the lives, working conditions and hopes of millions of people will be
strong, global and systemic.

The current search for better financial regulation and a global
surveillance mechanism of checks and balances is a welcome step. But we
must reach beyond the financial system. This is not simply a crisis on
Wall Street; it is a crisis on all streets.

We need an economic rescue plan for working people and the real
economy, with rules and policies that deliver decent work and productive
enterprises. We must better link productivity to salaries and growth to
employment. People must have trust that the economy is working for

This message is urgent. The International Labour Organization
has completed a first estimate of how this crisis is going to impact the
day-to-day lives of people at all levels of society.

We project that world unemployment could increase by 20 million
by the end of 2009-surpassing the 200 million mark of global unemployed
for the first time. People working in such sectors as construction,
automotive, tourism, finance, services and real estate will be hit
hardest first.

What*s more, the number of working poor living on less than a
dollar a day could rise by some 40 million-and those living on two
dollars a day could rise by more than 100 million.

And grim as these numbers are, they could prove to be
underestimates if the effect of the current economic contraction and
looming recession are not quickly confronted.

Above all, we must focus on people, on enterprise, on the real
economy. What does that mean? Four things:

First, get credit flowing. Emergency measures have been and are
being taken.

Second, support those who are most vulnerable. That means a
variety of measures including pension protection, unemployment insurance
and credit for small and medium enterprises, which are a primary source
of jobs today.

Third, decisive public policies and smart regulation that
rewards hard work and enterprise once again. We are battered by the
whirlwind of a financial system that lost its moral compass. We have
to come back to the basic legitimate function of finance, which is to
promote the real economy-to lend so that entrepreneurs can invest,
innovate, produce jobs and products. Let*s get back to what finance
is meant to do - to finance the real economy.

Fourth, and critically, we must address the underlying
challenges. Long before the current financial crisis, we were already
in a crisis of massive global poverty and growing social inequality,
rising informality and precarious work-a process of globalization that
had brought considerable benefits but for many had become unbalanced,
unfair and unsustainable.

We need to get the balance right and concentrate on rescuing
people and production. It*s about saving the real economy.

Let*s remember that people judge their lives and their futures
mainly through their life at work. Now more than ever, we must focus on
making sure the policies and support are in place to meet people*s
core demand for a fair chance at a decent job.

In order to keep economies and societies open, relevant
international organizations must come together to develop a new
multilateral framework for a fair and sustainable globalization.

Trade talks are stalled, financial markets are on the brink,
climate change continues, any reconstruction will have to find ways to
integrate financial, economic, social, labor and environmental policies
within a sustainable development approach.

We cannot respond to the sub-prime crisis with sub-prime
policies. This is the time to think and act in bold and innovative ways
to confront the huge challenges before us.

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