Monthly Archives: October 2012

Co-ops are here to stay

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Simel Esim

By Simel Esim, Chief of the ILO’s Co-operatives Branch

 

 

 

 

There’s quite a buzz in Manchester Central (United Kingdom), where 10,000 men and women from co-operatives around the world have gathered to share their ideas and experiences.

The three-day Co-operatives United event marks the close of the UN International Year of Co-operatives and highlights the staying power of a movement that is gaining renewed attention worldwide.

Personally, I find it inspiring to be in the land of the Rochdale pioneers – 10 weavers and 20 others who in 1844 decided to band together to sell food items they could not otherwise afford, as the industrial revolution forced skilled workers into poverty. They started off with just a few items – butter, sugar, flour, oatmeal and candles. A decade later, the British movement had grown to nearly 1,000 co-operatives.

Their story, 168 years on, still rings true.

For three days, the followers of the pioneers from all sectors will be attending workshops and engaging in discussions.

Looking around, one may well ask what these people have in common. The co-ops are from various parts of the world; they come in all sizes and represent a wide array of sectors – from credit unions to consumer stores. But their members all engage in collective economic action, devising their own institutions to address their needs together.

Pauline Green, the President of the International Co-operative Alliance, has described the Manchester event as “the global culmination of a momentous year.” She is a formidable woman with a quick wit and a powerful presence, quite an accurate reflection of the movement she represents.

Throughout this extraordinary year of activities, I had the opportunity to meet co-operative members from different walks of life: Members of a women’s dairy co-operative in Indonesia who were asking for better trade policies that would allow them to flourish in the national market and even compete in regional ones; the Turkish pharmacy co-operatives that got together to provide a lower cost alternative to the monopoly of drug suppliers and distributors; the financial co-operatives that continued providing credit for small businesses when no other banks would.

Co-operatives are institutions that can bring out the best in humans. In these times of crisis and change, we all need such institutions, and they do appear to be making a comeback.

It is also important to stress that co-operatives are not just here in times of crisis but survive and thrive across time. They may not have the same ups and downs as other businesses – because of their connection to members’ needs and the local economies – but they have longevity and breadth.

If this International Year of Co-operatives has taught us one thing, it is that co-operatives are an alternative model of sustainable enterprise whose time has come back to stay. A billion co-operative members can’t be wrong.

Co-operatives are everywhere we look, from banks to farms, hotels and bakeries. It’s high time that we stop and take notice.

2012 is the International Year of Co-operatives 

Time for a Rethink

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Stephen Pursey

By Stephen Pursey, Director of the ILO Policy Integration Department

 

 

 

 

The Spanish philosopher, George Santayana, famously said that, “those who cannot remember the past are condemned to repeat it,” which is probably why the IMF’s latest report on the state of the world economy asks the question, “does the history of government debt give us any lessons of how to handle the current situation?”

Given the polarized and often confusing nature of the arguments about austerity versus stimulus, the answer to the question is surprisingly clear. It is a ‘yes’.

Back in the 1920s, the report reminds us, when the post-war British government pushed through tough austerity measures, growth suffered, debt rose, as did unemployment – despite the pain. The parallel with the Eurozone crisis is obvious.

After the near crash of the global financial system in 2008, governments initially increased spending and reduced taxes and in 2010 the recovery got going.  Then governments and the financial markets became jittery about the level of debt and switched from stimulus to austerity.

Like an echo from the British experience of the 1920s, since the second half of 2011, the IMF has had to reduce its forecasts for global growth in every update of its World Economic Outlook. Despite the pain, particularly in southern Europe, the targets for reducing the debts and deficits are being missed. The latest report predicting that growth in 2012 will be 3.3 per cent instead of 4 per cent means unemployment will continue to rise.

So what went wrong?  The IMF now says that the mistake is in the maths: Whereas governments thought that a one per cent cut in the deficit would reduce growth by half a per cent, it has actually led to a cut in growth of around three times as much. This is because cuts reduce growth faster than debt, which then has a negative ‘multiplier effect’ that slows growth even further.

History – and maths it seems – is always open to interpretation and the new message coming out of the IMF is being challenged by economists and political leaders who do not believe in the new arithmetic and who still see government debt as the main problem to be tackled.

By contrast, the reaction at the recent IMF/World Bank meeting in Tokyo, judging by comments in the press and in the blogosphere, is that the IMFs findings make sense, not least because a number of governments adopted austerity measures at the same time and the effects spilled over and were amplified.

The urgent question now is: Can the G20 work out how to coordinate a shift in policy to stop the slide and get the recovery going again?

Related story from the ILO Newsroom: ILO calls on G20 to live up to its promise to tackle the crisis 

Is Ireland a case of socially responsible adjustment?

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Philippe Egger

By Philippe Egger, Director of the ILO Bureau of Programming and Management

 

 

 

 

With all eyes on the unfolding Eurozone crisis and its dramatic social consequences, are there any lessons to learn from Ireland?

Ireland is a stark illustration of people paying in jobs, income and social duress for the cost of financial profligacy. But its handling of the crisis also holds some lessons for other members of the Eurozone seeking to regain competitiveness with a degree of fairness.

Ireland was one of the countries hardest hit by the Eurozone crisis. The 2008 bursting of the real estate and banking bubble was followed by an explosion of sovereign debt when the government rescued banks and took on defaulting loans at a cost of some 40 per cent of GDP. The fall in prices and drying up of credit pushed the economy into recession.

Employment and unemployment relative to GDP, quarterly data, rebased 2004 = 100. Source: ILO Statistics (Quarterly employment and unemployment) and OECD (Quarterly GDP)

The government tackled the crisis aggressively, setting the short-term priority of balancing a budget laden with bad bank loans, and pursuing a policy of “internal devaluation”, aimed at regaining competitiveness through a significant decline in prices, including wage costs. Early signs of a weak rise in exports suggest that this is having some effect.

But the social cost has been staggering.

A total of 360,000 jobs were shed between 2007 and the first quarter of 2012— a 17 per cent drop. Unemployment rose 3.3 times to 309,000 compared to 2004, reaching 14.8 per cent of the labour force. Wages and domestic demand fell, while poverty and inequality increased.

Ireland did, however, take a series of measures aimed at mitigating the painful side effects of the recovery efforts.

In particular, there are three areas where lessons can be drawn from the Irish experience.

  • The minimum wage, which is higher than the Eurozone average, has not been lowered;
  • Social dialogue led to a 2010 agreement to stop cutting public sector pay and to end compulsory redundancies;
  • And, while two-thirds of fiscal adjustments have come from expenditure cuts, new resources are being channelled to training, orientation and employment services for the unemployed.

These measures may inspire other crisis-hit countries in Europe looking for  ideas on how to ease  the pain inflicted by the crisis and the austerity measures aimed at battling it.

Helping Youth Get Jobs: A Sound Investment

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Guy Ryder

By Guy Ryder, Director-General of the International Labour Organization

 

 

 

Global youth unemployment has become a reservoir of wasted talent and a tinderbox of frustration.

With 75 million young people jobless around the world, tackling this crisis must be a key priority.

It’s no easy task. Youth unemployment is the sharpest edge of the global labour crisis and it’s also the toughest nut to crack. But it’s a challenge we must meet head on.

We have tried for quite some time to make the case about learning from countries that have youth guarantee schemes, and we should turn up the volume on this one.

The idea is to guarantee that a young person who is out of education and out of work is given a job or training, as well as counselling and guidance.

This is not a utopia. Such programmes have proved quite successful in Nordic countries as well as in Germany and Austria.

In these times of crisis, governments are obviously concerned about the additional spending, but they should bear in mind the far higher cost that would come from young unemployed people permanently losing touch with the labour market.

Youth guarantee schemes are affordable. Our research shows that they would cost less than half of one per cent of GDP in Eurozone countries. It’s a sound investment on which one can get very good returns very rapidly. In Sweden, for example, almost 50 per cent of young jobseekers got work or training as a result of the guarantee; in Norway, the success rate is even higher.

There’s also a lot to be learned from Germany’s dual education system, which combines a workplace apprenticeship and vocational training. This is not something that can be replicated wholesale elsewhere, but there are certainly lessons to be learned, elements that can be applied successfully.

And we need to give more weight to active labour market policies. Job placement, public employment services, investments in skills – all of these areas are tremendously underexploited.

All the evidence shows that if a young person is out of work for a year or more at the beginning of their career, that will affect them throughout their working life. There’s no way back for most of them.

The first thing to do is to get jobs moving globally and making sure young people get a good start in their working lives.

There is an expense and a loss of production in keeping people out of work, so let’s attack the problem at the source. We must act urgently, we must act now.

 

This blog entry was also published in The Huffington Post on October 1 2012

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