Co-ops are here to stay

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. Continue reading

Time for a Rethink

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?

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.