x Abu Dhabi, UAEWednesday 26 July 2017

Summit to make the future work

Both the IMF and the World Bank take a bashing as delegates seek new economic order to replace the 'Washington concensus'.

The French president, Nicolas Sarkozy, speaks to the International Labour Organisation's 183-member states at a mini-summit on the global economic crisis on June 16 2009.
The French president, Nicolas Sarkozy, speaks to the International Labour Organisation's 183-member states at a mini-summit on the global economic crisis on June 16 2009.

GENEVA // This week the International Labour Organisation (ILO), a UN agency that deals with the promotion of social justice and human and labour rights, held a summit to deal with the jobs crisis and come up with solutions, among which is endorsing a Global Jobs Pact. In the corridors of the Palais des Nations building, the United Nations' European headquarters, the talk was all about changing the economic order and moving away from the "Washington consensus" of free markets and financial speculation, and reforming these international financial institutions.

IMF- and World Bank-bashing has been the order of the day at the summit, with everyone from presidents of countries to workers to non-governmental organisations taking a swing. The Washington consensus generally refers to the World Bank and IMF's policies towards developing countries. The meeting ends today. Another term that echoed across the conference yesterday was the Kenyan word "Harambi (pulling together)". When Kenyan vice president Stephen Kalonzo Musyoka told a panel discussion that his government had put Harambi at the top of their agenda, thinking out of the box and using extraordinary ways to tackle the crisis, Charles Hodson, the panel moderator and CNN anchor, was quick to suggest that Harambi is what the summit was all about. "Can't we adopt this for this conference?"

But as some 4,000 representatives from more than 150 countries discussed strategies of tackling a crisis precipitated by financial speculation in the West and resulted in the loss of millions of jobs world wide, perhaps the most profound statement came from the French president, Nicolas Sarkozy: "For those who think this is a temporary crisis, it's a suicidal approach. We can't wait ... we have waited too long. We must act now," he warned, adding that financial speculators are already back at work with oil prices on the rise.

Mr Sarkozy said the world cannot be governed by the markets or laws of supply and demand. "If there is no global regulation, globalisation will not survive the law of the jungle. There cannot be freedom and liberty without rules." The French president, whose presence at the meeting led to tight security in the complex, said: "The crisis has given us a licence to imagine. There is no time to retreat, no time to lose."

He hoped that action would be taken on the decisions made at the April G20 summit in London where, among other measures, the IMF said it would move away from imposing conditions on standby credit facilities, a move widely lauded by finance ministers of developing countries. That was the central question here: How quickly will the IMF move on its promise? ILO officials say many countries are patiently waiting for the IMF to deliver on the assurances given at the G20.

Alicia Barcena, the executive secretary of the Economic Commission for Latin America and the Caribbean, didn't mince her words as her time came for IMF bashing. "Why should the IMF interfere in our social and development policies? The IMF is the lender of last resort and should not impose conditions that lead to problems in social systems, education and health. They must stop this prescriptive lending."

Brazilian President Luiz Inacio Lula da Silva was also outspoken in his comments, deviating from a prepared text to slam the financial agencies, saying that after the financial crisis, the Washington consensus is over. "We need to build a new world based on equitable distribution of wealth," he said. The focus of the summit was the creation of a Global Jobs Pact (GJP), proposed by the ILO for ratification at the main ILO annual conference, which is running simultaneously, from June 3 to 19. Lula, as the president is known, welcoming the GJP, said the international community cannot allow more jobs to be lost in poor countries.

"G20 leaders promised not to bail out banks and financial institutions, but protect jobs and create jobs. We need to build a new [economic] model that's equitable," he added. The GJP calls for high levels of employment and a living wage for all. It also calls for an open economy that delivers opportunities and fairness alongside a sustainable environment and low carbon growth. It stresses the importance of social protections with strong and affordable social security systems and workers rights.

Lula condemned US-based credit rating agencies, saying that while they go around warning other countries, "they could not stop the risk in their own countries". "We cannot live in a financial system that speculates on paper, this is unproductive and doesn't create jobs." Lula was referring to US financial institutions and the subprime lending that triggered the crisis. Perhaps the silver lining in this crisis is that India, China and the Arab states have been not as affected as many other countries.

In India and China's case, their large domestic markets have insulated them from external problems, unlike Singapore, which is dependent on the outside world for almost everything, from commodities to labour, and which has suffered tremendously lately. The Arab states, probably the biggest employer of foreign workers in the world, has strong financial reserves that are sustaining infrastructure development and other economic activity. The exception, however, is Dubai, where there has been a contraction in construction activity.

Thus remittances from workers from India, Bangladesh, Pakistan, the Philippines, Indonesia and Sri Lanka, among others, hasn't dropped as much as expected. Remittances are a crucial element in these countries' developments. While the Global Jobs Pact is expected to be endorsed at the end on June 19 of the 98th session of the ILO, which is running concurrent to the Jobs Crisis Summit, the nine heads of state included the presidents of France, Brazil and Argentina who attended the summit all endorsed the pact and said that's the way forward.

Most analysts here believe with strong political backing for the pact even from the developed world, the GJP is seen as a powerful tool to halt job losses across the world. fsamath@thenational.ae