Introductory Comments by Jose M. Salazar in Retreat to Follow-Up on - PDF document

1 Introductory Comments by Jose M. Salazar in Retreat to Follow-Up on the Conclusions of the Recurrent Item Discussion on Employment Geneva, 20 July, 2010 SEIZING THE MOMENT: OVERVIEW OF THE OUTCOME OF THE RECURRENT ITEM DISCUSSION ON EMPLOYMENT AND OBJECTIVE OF THE RETREAT UNDERSTANDING THE MOMENT As we gather here for this retreat in the summer of 2010, I think it is important to begin with some thoughts on the moment we are living. There are 5 issues I would like to raise in understanding the moment, all of them provide the context in which we operate, in which our constituents operate, and I think they are key to put us in a certain mindset. 1) The first issue is the shift in the center of gravity of economic power from the G8 to the G20. This is a major tectonic shift. Brazil, India, China, Russia, the BRICs, have emerged as major players. A number of multinational companies from these countries are now in FORTUNE 500. 4 of the 10 largest banks in the world are now Chinese, and they dwarf some of the better known banks in the West. China’s demand for commodities and food is having a major impact in the exports of many developing countries. This shift in the center of gravity of economic power has led to a shift in the center of gravity of political power. The existence of the G20 is the most obvious implication, but by no means the only reflection of this. China is now a major player in investment, trade, development and aid in Africa. And will soon emerge as a powerhouse of South-South cooperation. The West is no longer the power it used to be. The center of gravity of the world has moved east. 2) The second issue to understand the moment is technology. I remember reading books on the first, second or third industrial revolutions. I have lost count in which industrial revolution we are now, or how we should call it. But the point is there are new products, new materials, new industries, new ways of doing things are everywhere, and the pace of change has accelerated. You don’t have to be a Marxist to realize how forces of production are changing modes of production and therefore the world of work. The National Academy of Engineering of the United States identifies 14 fields of engineering that are going to revolutionize the world in the next decades. From new carbon sequestration methods to making solar energy economical, to life prolonging medicines,

2 to new biotechnologies for the production of food, to new methods of personalized learning. All of these new technologies are going to continue to have major impacts in the world of work thorough multiple channels, they will continue to change the nature of technology and competition for enterprises, methods of organizing production, methods of acquiring and deploying skills. As always with technological change, they will destroy jobs and create new job opportunities, they will continue to drive skills-biased technical change and exert pressures towards inequality, unless major broad-based investment in education and skills are done by countries. I think the ILO has to be not simply aware of these changes but on top of them, leading their understanding and their impacts in the world of work in developed and developing countries. I do not think we are doing this enough at the moment. 3) The third issue is of course the economic and jobs crisis, the great recession. The Office has produced a lot of research on this, our constituents have discussed it for hours, days and weeks. We know it has had and continues to have major impacts in labour markets. We know that it is by no means over. The sovereign debt threat defined a new phase of uncertainty suggesting the possibility of a double dip recession. We know that there is great diversity in recovery patterns, many countries do not feel they have a crisis any more. Others do not seem to be able to emerge from it. Globally, whatever recovery there is is very fragile and many countries face the prospect of a jobless recovery. In countries that used to be the engines for world demand the private sector is over- indebted and the process of deleveraging will take years. The crisis was also associated with major global imbalances that result in deflationary pressures. Some countries are structurally too dependent on exports. Others, were structurally too dependent on capital inflows or debt-accumulation. We need to link this with the deflationary pressures involved and their impacts on labour markets. In the ILO we continue to develop our policy messages around the crisis, adapting them to the changing conditions. We have put in place a series of knowledge projects/products to better understand the impacts of the crisis and of the policy responses. We have substantially adjusted working methods to respond to the crisis, including in the context of the DG’s special arrangements. However, we have not really changed our work methods sufficiently, and I have the feeling we are slow to respond. Our constituents said it in the RI Committee. They like the approach we have developed to give effect to the GJP, but they do not see the full time teams, they do not see sufficient results in the integrated application of the GJP yet. (I am beginning to lose sleep over this one, there will be a session where we are going to talk more about this).

3 The fundamental contextual issue is that the crisis is with us and will be with us for a number of years. And how to make our response more effective, drawing lessons, and evaluating the impact of our work around crisis is very much the central imperative of the moment. 4) The fourth, and closely related issue, is the change in economic paradigms and the fiscal challenge. The crisis has destroyed or it ought to have destroyed many tenets of the orthodoxy: a. the notion of the perfect efficiency of markets; b. the belief that macroeconomic stability and de-regulation are the top priorities for the state to create an enabling environment for growth; c. the idea that infrastructure in developing countries can satisfactorily be developed by the private sector alone; d. the tendency to prescribe pro-cyclical macroeconomic policies; e. the long standing practice of subordinating or sacrificing social policies and programs to the imperatives of austerity; f. the idea that the best state is the one that gets out of the way; g. the notion that the financialization of the economy was for the best of all possible worlds, and others. With all of this, the crisis has opened a space for policy innovation, and if one gets too excited one could even argue that the crisis has opened a space for new paradigms. But I want to echo a concern and a message expressed very persuasively by Trevor Manuel to the UNDP regional meeting for Africa that I attended, along with Mpenga, last week in Accra. Trevor Manuel said that the crisis ought to spell the end of orthodoxy, but he warned about the dangers, and argued that in fact, we should not take this for granted. One reason is that there seems to be no alternative on the table. He warned that if nobody puts a new vision on the table the orthodoxy is going to come back. More ominously, he said that when governments and policy- makers panic, the panic triggers the default mode, and the default mode is the orthodoxy. This is what seems to have happened in the Toronto G20 meeting. He appealed to the UNDP regional team for Africa to fill in the policy space or to construct the policy room, to make sure policy makers can explain the rationale of