Address by Juan Somavia

Director-General of the International Labour Office

to the Center for American Progress

Washington, DC

12 December 2008

Thank you Sarah [Sarah Rosen Wartell is the Acting CEO of the Center for American Progress (CAP) and Executive Vice President for Management of American Progress], thank you to the Center for American Progress for organizing this meeting and thank you all for joining us for this discussion.

We live in challenging times but we are emboldened by the audacity of hope! For people like myself and Kemal Derviş [UNDP Administrator], the opportunity today for the United States of America to reposition itself in the discussions about how to shape a fair, sustainable and less volatile globalization, and to restore public trust in policy-makers, is awaited with great expectations.

But what may seem obvious to an ILO Director-General may not look quite the same from the vantage point of Washington DC or Chicago or Detroit or to middle-class working families all over the USA who are looking with increasing concern at the fragility of their own livelihoods and the communities they live in.

Future US policy could have a defining impact on not just the middle class of the USA but also on the aspirations of hundreds of millions of working women and men around the world for building a good life through decent and productive work.

And as such it will impact key issues of security, progress on controlling climate change and whether we can have an integrated world market economy.

Too many people are today struggling to get by in poverty here in the USA as well as in the poorest countries of the world. We need a global strategy that can help hundreds of millions of families living in poverty here and a round the world to move up new ladders of opportunity.

I believe it can be done and must be done.

To get this conversation started I would like to offer three policy directions:

First, the spread of the financial crisis into the real economy has become a jobs crisis and obliges us all to focus on protecting the vulnerable and on reactivating enterprises and decent jobs. The ILO’s Decent Work Agenda is highly relevant to both the content of the policies for recovery and to the challenge of developing national and international commitment to coherent policies, not just for recovery but for a fair and sustainable globalization.

Second, the global reach of the crisis requires global coordinated action, developed multilaterally, and underpinned by strong national dialogue on policy priorities.

Third, the deal maker, but also the deal breaker, for such a global strategy is the US. US leadership in a strong and more effective multilateralism is vital.

So first, as we all know in shocking daily detail, what began as a financial crisis has rapidly become a crisis of the real economy of production and jobs with serious social consequences all around the world. Although ending the credit freeze and building a new system for regulating financial markets is vital, a purely financial fix will not work. The G20 leaders must go beyond and look at the social consequences of the crisis.

The ILO has projected 20 million additional unemployed by the end of 2009. Social tensions will continue to increase.

The political fact is that governments are under pressure to answer the demands of increasingly alarmed voters who feel that their jobs may be next for the chop and from the unemployed, to create new jobs so that they can earn what their families need. Anger and tension is rising worldwide.

Those responsible seem to be getting away with the outrageously irresponsible behaviour that led to the crisis, while those with no responsibility are losing their homes, savings and jobs through absolutely no fault of their own, and have very little to fall back on.

To escape the vicious circle of cut backs in credit, production, employment, consumption, investment, we need a balanced set of economic, social and environmental policies to restart the virtuous circle of increased investment, productive employment, good working conditions, and rising people’s purchasing power.

In constructing a global package that embraces both financial rescue and reform alongside fiscal and other measures to revive the real economy we have the platform of the ILO’s Decent Work Agenda. It has four pillars: employment and enterprise, rights at work, social protection and sound labour relations.

It is about enhancing productivity and respect for working women and men.

It has global support having been endorsed in all regions up to and including the United Nations General Assembly and the G8.

It was recently given a further boost by the ILO’s International Labour Conference which adopted unanimously the Declaration on Social Justice for a Fair Globalization. In November, the tripartite leadership of the ILO Governing Body built on that Declaration to launch an agenda for action to protect people, support productive enterprises and safeguard jobs. It includes:

Ensuring the flow of credit, and stimulating demand through public and private expenditure and investment and wage measures;

protecting the dignity of people by extending social protection, training and retraining opportunities, and placement services, and enlarging emergency employment schemes and targeted income support, with particular focus on young women and men, workers in informal or precarious employment, migrant workers and the working poor;

supporting productive, profitable and sustainable enterprises to maximize employment and decent work, particularly for small enterprises and cooperatives;

the opportunity to improve the environment and tackle climate change by increasing employment-intensive investment in infrastructure should be seized;

ensuring that fundamental principles and rights at work are not undermined;

a strong role for the ILO in cooperation with other multilateral agencies, and a deepening of social dialogue and tripartism between governments, workers and employers to develop policy responses and build social cohesion; and

maintaining significant development aid at least at current levels, and providing additional support to low-income countries.

The tripartite ILO of employers, unions and employment and labour ministers represents the real economy in the multilateral system. If we are to have balanced policies for a sustainable recovery and a fair globalization that voice has to be heard in the discussions on responding to the crisis and shaping a new architecture for the system.

Second, given the scale, pace and depth of the slowdown we need to act globally in a coordinated way to stop serious damage. The sum of the parts can be greater than the whole if we maximise the multiplier effect of concerted stimulus. But the converse is also true.

Piecemeal national action is less effective because it can leak into increased deficits and eventually resort to beggar thy neighbour policies and protectionism of the past.

Global concern about jobs is a unifying factor for a coordinated approach. The Decent Work Agenda has global support. This in turn can enable politicians to build consensus and trust by showing that they are responding to people’s anxieties.

The threat to jobs is worldwide. All the leaders of the G20 know that when they return from their meetings they will have to bring answers to the fears of working families as well as finance markets. They will ask what did you do for us? Confidence will only return to finance markets when it returns to working families.

Although different countries will need different packages and have more or less fiscal space, the total stimulus needs to be of the order of 2 per cent of global output. Coordinated action would set in motion a coherent multiplier effect that Keynes taught us about more than 60 years ago. The dangers of short term “shoot from the hip” financial packages without well-thought through impacts are evident.

The longer we wait and the less coordinated the action, the bigger the stimulus needed to counteract the deflation set in motion by the credit freeze and the larger the danger of building a future inflationary backlash.

Third, building an international consensus for action on finance, the economy, jobs and sustainable development into the medium and long term will require leadership. Today the USA is well placed to bring the many interests together. The renewal of your leadership held the world spellbound for months and the result has created a political capital that could prove far more valuable than the paper capital that has recently disappeared in the meltdown referred to in the title for this encounter.

It is important not to lose sight that there was a crisis before the crisis. For too many globalization has become unfair, unstable and unsustainable, which creates the backlash. The next phase of globalization must be built on much stronger foundations of global values, including respect for the dignity of work and of workers and a better balance between capital and labour with job creation and sustainable enterprises as key policy drivers.

The ILO’s Decent Work Agenda can be a foundation for a global new deal. The core of that new deal focuses on jobs for working families worldwide as a way to reach the Millennium Development Goals. A global response to people’s demands.

Let me conclude by saying that Rick Samans’ CAP Issues Brief argues very well the importance for the USA of a global new deal. The core of that new deal focuses on the recovery of US middle-class working families, as part of a global drive to secure an institutional framework that expands decent work opportunities globally.

The identification and remedying if compliance gaps through action to build capacity in the fields of labour statistics, labour inspection, standards follow-up and social security are priorities. US leadership on these specific and actionable policies could catalyse a major drive to strengthen the ILO as a social pillar of a fairer globalization with potentially significant impacts for negotiations in other policy fields such as trade and finance.

This approach leads us away from the race to the bottom that excessive deregulation engenders. It also creates a foundation for open economies in which to quote our new Declaration “the violation of fundamental principles and rights at work cannot be invoked or otherwise used as a legitimate comparative advantage and that labour standards should not be used for protectionist trade purposes”.

That is a text which was agreed upon unanimously not just by the world’s governments but by the representatives of the world’s employers and unions too.

Why is US leadership so important?

The multilateral system works best when US leadership gives it strength and conviction. Furthermore it is US leadership that can make the breakthrough to coordinated action for recovery and more coherent policies linking finance, trade, jobs and social development.

The USA will find strong support for such balanced agenda of international economic policy based on a constructive programme of international cooperation that benefits all countries. It is a way of implementing that beautiful aspiration of the American Declaration of Independence for “life, liberty and the pursuit of happiness.” Decent work, after all is a pretty good road to happiness.