Costa Rica: Globalisation and Social Policy

An argument often heard is that in times of globalisation, countries no longer have such wide macroeconomic policy options. It is certainly true that the scope for national macroeconomic policies is increasingly dependent on international economic factors and on the degree of international policy coordination in the global economy. However, a number of country experiences clearly show that integration in global markets is compatible with successful social policy, provided there are adequate national social security systems, functioning systems of social dialogue and relatively low income inequality¹. Several European economies provide good examples, but the same can be true in developing countries too. For example, in the 1980s Costa Rica, a small open economy, implemented an unorthodox stabilization plan. It relied on a social compensation plan which included maintaining public employment, and a business rescue plan to protect jobs and wage indexation while cutting other government expenditure. This resulted in a fiscal surplus, which was soon strengthened by rising revenues as a recession was avoided. 

Source: Report of the Director-General: Reducing the decent work deficit - a global challenge (Geneva, ILO, 89th Session, June 2001)