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Employment is a global problem that cannot be fully solved by individual countries in isolation. Policy measures at the national level influence trade and investment flows and employment rates in other countries. Economic growth and expansion of employment in one country enhance employment opportunities in other countries as well. Therefore, co ordination of policies is in the interests of the global community. A comprehensive and coordinated international effort is called for to improve the global climate for economic growth and job creation by evolving stable and supportive policies to regulate capital flows, foreign trade, debt, commodity pricing, immigration and labour movements, transfer of technology, investment, military spending and the arms trade. We set forth below a broad policy framework to stimulate global job growth with the aim of achieving full employment early in the twenty-first century.
- 1 World employment programme
- 2 Coordination of macro-economic policies
- 3 Shift investment from defense to education and training
- 4 Liberalize agricultural and textile exports
- 5 Improve access to markets
- 6 Debt repayments
- 7 Commodity prices
- 8 Technology transfer
- 9 Global employment model
- 10 Shift focus of technological development
- 11 Reference
World employment programme
Raising incomes and creating jobs in the developing countries is the best way to promote global economic growth and employment generation in the coming decades. The World Summit on Social Development should call for a comprehensive World Employment Programme to stimulate more rapid growth in developing countries as an engine for global economic expansion. The International Labour Organization has operated a programme for the past two decades, but solution of the employment problem requires an integrated approach that transcends the scope of any single international agency. The programme should establish specific objectives and co ordinate efforts to stimulate international investment, increase labour market flexibility, promote productive skills, diffuse technology, and eliminate protectionist trade policies that retard growth, increase trade between developing countries, and promote international cooperation on taxation systems to encourage more labour-oriented tax codes.
Coordination of macro-economic policies
The efforts of the industrial nations to achieve higher rates of economic growth and job creation are stymied by the need to maintain macro-economic stability at the same time. Due to the competition between OECD members to attract financial resources, rising interest rates or falling inflation rates in one country influence the inflow and outflow of financial resources from other members of the community. The efforts to curb inflation at the expense of slower economic growth and job creation need not be so rigorous, if OECD members more closely coordinated their policies to support macro-economic expansion. A modest, relatively uniform rise in inflation rates within the OECD would not then result in a significant movement of resources or fluctuation in exchange rates.
Shift investment from defense to education and training
Reduce global defense spending by an additional 50 per cent before the end of the decade to below a maximum threshold of $400 billion. Invest at least 10 per cent of the global savings from defense cuts in education and training.
Liberalize agricultural and textile exports
Utilize agriculture as an engine of industrialization, international trade and employment generation by reducing the barriers to a major expansion of agricultural production and exports from and between developing countries. More than two billion people in developing countries, representing about 35 per cent of the entire world's population, are dependent on agriculture as a primary source of livelihood. This compares with 45 million people in industrial countries, which represents less than 1 per cent of the world's population. Agriculture is the most heavily protected sector of world trade. In 1991 the industrial nations spent more than $180 billion on agricultural subsidies to support their farm populations, which is three times the total world overseas development assistance. These subsidies cost Western consumers another $135 billion annually in terms of higher food costs. Agricultural protectionism in the North not only places powerful constraints on exports from developing countries, but also directly interferes with the livelihood of one-third of the entire human race living in developing countries.
The elimination of the system of quotas and subsidies to Western farmers can dramatically reduce the budget deficits of industrial nations and bring down food prices, while stimulating large-scale expansion of agriculture, industrialization and job growth in developing countries. Existing trade barriers by the industrial nations to textile exports cost developing countries an estimated $50 billion annually. The complete elimination of these barriers could result in a doubling of textile exports by developing countries. This labour-intensive industry can be another engine for job creation in developing countries and rising demand for technology and capital goods from the industrial nations. The progressive reduction, leading to the eventual elimination, of barriers to trade in agricultural products and textiles is an important step that can substantially improve the employment opportunities of people in developing countries.
Improve access to markets
The most important structural change in the world economy over the past 35 years has been the five-fold increase in the world share of manufactured exports gained by the developing countries as a group, up from 4 per cent to 19 per cent, compared with a current market share of about 13 per cent each of the United States and for Japan. Although 54 per cent of these manufactures come from five top exporting countries, a large number of countries export more than $1 billion in this category annually. This has opened the door for self-reliant growth in many developing countries.
This growth could have been considerably more impressive but for constraints placed on it by both tariff and, particularly, non-tariff barriers. The latter have proliferated in recent decades and affected almost half of OECD imports during the 1980s. By the end of 1990, there were more than 200 export-constraint arrangements involving product groups of importance to developing countries. The incidence of anti-dumping cases against developing countries rose substantially in the late 1980s. The more recent effort by the industrial nations to impose 'fair labour standards' on exports from developing countries could well become another form of constraint, unless carefully formulated to focus on the basic rights of workers, rather than on arbitrary minimum wage levels. Efforts to accelerate the dismantling of both trade and non-trade barriers should be viewed as a central element of a global strategy to stimulate employment generation.
The debt problem is a major obstacle to the development and welfare of at least 60 heavily indebted, developing countries, including two-thirds of the world's poorest nations. Most of these countries suffered a decline in per capita income over the past decade and are now in arrears with more than 20 per cent of their debt obligations. The debt burden discourages new foreign investment and lending to these countries and prevents them from stimulating economic growth through additional domestic savings and investment. International debt relief has helped ten, mostly middle-income; debtor countries significantly reduce their commercial debt. Past actions to relieve the debt burden on low-income countries have been relatively small in relation to the amount of debt, which has continued to rise under the combined impact of accumulated interest arrears on old loans, falling export commodity prices, and new compensatory loans, frequently given on expensive terms. Unrealistic pressure to repay debt undermines debtors' capacity for constructive initiative. Past experience has shown that mere debt rescheduling in these countries does not solve the problem and may in fact aggravate it.
The extent of the problem is reflected in the heavily discounted prices of the debts of countries with low and lower-middle incomes in the secondary market and in negotiated buy-outs of the debt owed to commercial creditors. In 1993, the average market price of the debt was about 30 cents on the dollar. This market discount was a major factor in the decision to scale down the debt of Latin American countries by an average of 15 per cent and of Egypt and Poland by 50 per cent. The aggregate debt of the 61 debt-affected countries with low and lower-middle income is roughly equal to that of the half-dozen mostly middle-income countries assisted under the Brady Plan. Scaling down the debt of these poor countries by an average of 70 per cent would be appropriate in view of their economic plight, though the actual reduction would have to be negotiated on a case by case basis. In order to be of sufficient magnitude, debt reduction should be applied to all three major classes of creditors: bilateral official creditors, private sector lenders and international organizations. Debt reduction should be linked to each country's specific programmes for poverty eradication and meeting the minimum needs of the people.
The problem of debt is closely linked to that of international commodity prices. The majority of developing countries are dependent on the export of primary products for their welfare and growth. These products account for 80–90 per cent of the exports of African countries, and 65 per cent in the case of Latin American nations. The extreme price volatility of commodity markets is especially damaging to low-income countries, which, regardless of the price, are forced to sell their products to meet minimum needs and pay debts. The obligation of the poorest developing countries to repay debts forces them to produce and export excessive quantities of basic commodities, which has been a principal cause of falling commodity prices. The more these countries export, the faster prices fall, making it impossible to generate sufficient funds for debt repayment by this means, which is often the only source of foreign exchange available to them. Distress sales by the poorest countries force even financially stronger countries to drop their prices in order to maintain market share, which encourages buyers to postpone purchases in expectation of still-lower prices.
The growth of agricultural incomes in developing countries is critically important to global job creation and economic growth. The expansion of agricultural exports under the new GATT agreement is likely to exacerbate the falling commodity price syndrome to the great detriment of the entire world economy, unless effective mechanisms are introduced to stabilize international commodity prices. Of the many efforts in the past, some were tried and failed; many were proposed but never implemented. The recent success of coffee-producing countries in lifting prices from a disastrously low level has been an exception to the rule. Collective and coordinated international action is essential to address this problem. Despite past failures, new efforts must be made to revive international commodity agreements, preferably covering both producing and consuming countries. This will be possible only if developing countries first arrive at a consensus approach among themselves, including the economic costs and benefits, and a financing plan. Financing for international commodity stocks could be supplied partly by producer countries in the form of building national stocks under collective supervision. Partly, it could come from bank commercial loans against commodity collateral, loans from regional development banks, the World Bank and IMF's Buffer Stock Facility, which has remained almost unused.
Accelerate transfer of technology to and between developing countries. One or more profit-making commercial organizations should be established as a public sector joint venture of developing countries to promote the commercial transfer of technology to, within and between developing countries and to channel the profits from this activity toward research in these countries.
Global employment model
Our efforts to promote employment are constrained by a lack of detailed knowledge of how global labour markets actually work. We still do not understand the impact of technology, trade, macro-economic policies, multinational corporations, shifting patterns of foreign investment and many other factors on job creation, and our ignorance severely hampers effective policy formulation and coordination. An international research programme should be organized under the ILO to construct a truly global employment model that monitors the impact of technological developments, expanding world trade, plant closings, movement of industry to low-wage countries, agriculture-led industrialization, economic growth, immigration policies, refugee movements and other factors affecting employment opportunities around the world.
Shift focus of technological development
The number of jobs created or destroyed by technology depends on the priority given to various objectives in the process of technological development. Presently, there is an in-built bias in technological R & D towards replacing human labour with capital and energy, even when similar levels of quality and efficiency could be achieved by alternative means. A conscious shift of focus could lead to the development of more labour-intensive production processes.
This article is an excerpt from chapter 4 of the ICPF's report.