As Davos participants meet, there are huge uncertainties in economic prospects around the world. The IMF has significantly downgraded its growth forecasts. In Europe, which is currently at the centre of concern, growth has come to a standstill, even in Germany. In many of the peripheral countries, output is contracting. The rest of the world is not immune: there seems to be a general slowdown affecting many of the emerging countries also. Strong and sustained growth seems to be eluding the world economy. Moreover, where there is growth, most often it is not accompanied by vigorous job creation.
At the time of writing, there appears less consensus on how to move forward than there was in 2008 and 2009. The current Eurozone crisis has brought to the fore wholesale calls for more austerity in Europe in the short run to reduce public deficits and instill “confidence” in financial markets. But positive growth expectations are as important for “confidence” as deficit reduction. Without growth supporting policies, this scenario is more likely to create a deflationary spiral than a sustainable path to healthier economies and public finances.
The WEF Global Agenda Council on Employment and Social Protection has launched in Davos a call for a more growth-oriented and balanced approach – one that fulfills the G20’s own Pittsburgh commitment to “put quality jobs at the heart of the recovery”. Citizens, not just financial markets, need confidence – confidence for consumers and for firms to invest, and, above all, confidence for our youth so that they can look forward to quality jobs and careers in dynamic economies and just and open societies.
Employment can no longer be treated as a residual outcome of economic growth. Rather, employment growth is now necessary to bring about economic recovery. We also call for recognition that well-designed systems of social protection have acted as important shock absorbers in the crisis and need to be invested in and widened in the future.
From the different backgrounds of business, labour, civil society and academia, we present this call to move our economies onto a path of recovery and to develop a new social contract in the political economy that emerges from the crisis.
Kemal Dervis, Brookings Institution and John Evans, Trade Union Advisory Committee to the OECD Chair and Vice-Chair of the Global Agenda Council on Employment and Social Protection.
Pictured: People line up to enter a government job centre in Malaga, southern Spain. REUTERS/Jon Nazca