Jobs that are sustainable and just will create balanced growth to reduce global inequality and improve resilience in the face of future economic crises, said Minister of Economic Affairs for the Netherlands Maria van der Hoeven, the keynote speaker at a CAP event last Friday. A panel of experts followed minister van der Hoeven’s speech that included Deputy Undersecretary for International Affairs at the Bureau of International Labor Affairs for the U. S. Department of Labor Sandra Polaski; Executive Vice President for Limited Brands Samuel P. Fried; Managing Director for Realizing Rights, The Ethical Globalization Initiative Heather Grady; and Senior Advisor to the International Labour Organization Director General Philippe Egger. Sabina Dewan, Associate Director of International Economic Policy at CAP, gave introductory remarks, and Richard Samans, Senior Fellow at CAP, moderated.
Many critics blame the economic crisis on globalization’s narrow focus on short-term gains. But globalization does not necessarily lead to a race to the bottom, Minister van der Hoeven noted. Globalization has helped reduce overall poverty, but an increasingly integrated world comes with uneven patterns of growth and prosperity and the market doesn’t necessarily equal less poverty everywhere.
In an economic crisis job losses are higher in areas that lack education, investment, and the capital needed to fuel job growth. Minister van der Hoeven explained that “We need joint efforts of both developed and developing countries” as well as the private sector to ease this inequality. And the private sector, in addition to the public sector, has a critical role to play in this regard. Without corporate responsibility, any efforts on the part of developed countries will be nothing more than a donor or aid program.
Often, it falls to the private sector to enforce labor standards and function ethically to fill existing governance gaps, Fried said. The private sector therefore supports strong public rule of law and good labor institutions and worker protections. But by making brand equity—or the effect of a consumer’s knowledge about a brand on marketing—and both worker and consumer fairness the top priority, “good globalization can be a race to the top,” Fried said.
For their part, developed countries have a responsibility to share and improve wealth distribution and help developing countries promote worker protections and social safety nets. This in turn has a positive impact on developed country economies.
Polaski provided an overview of the first-ever Group of 20 Labor Ministers meeting hosted by the U.S. Department of Labor. The meeting was a success and generated a number of recommendations for labor and social policy in five areas: job creation, strengthening social protection, placing employment at the center of economic policy, the quality of jobs, and being prepared for future labor market challenges and opportunities.
Polaski also noted that all countries should develop social protection plans regardless of income level because these policies provide households with enough income security to allow them to take advantage of economic opportunities that arise. Social protection schemes can thus initiate a virtuous cycle of development even in low-income countries. Having access to a social safety net further means that poor households do not have to keep all of their income on hand to meet basic needs such as food. Instead, they can make investments in future productivity such as keeping their children in school.
Grady said global trade policy also needs to evolve from telling developing countries that their economic advantage is a plethora of cheap labor—this is neither helpful nor sustainable. Developed countries and the private sector must support micro- and small businesses and access to capital, and respect labor rights throughout the value chain from the fields to the finished product, not just on the factory floor. Grady stressed that workers’ negotiating power and voice should be strengthened by providing “decent work and just jobs and social protection” for all workers.
But realistically, more investment in social protection alone cannot reverse poverty unless we address its roots, said Egger. Income growth is often below 1 percent in developing countries and the notion that the next generation’s children will live better than the one before is no longer a reality.
Therefore, we need a broader functioning market to enable households to improve their living standards, Egger said, adding that, “globalization with a social dimension…and more effective employment policies” is how we can assure all boats are lifted.
Sabina Dewan, Associate Director of International Economic Policy, Center for American Progress
Maria van der Hoeven, Minister of Economic Affairs, Netherlands
Sandra Polaski, Deputy Undersecretary for International Affairs at the Bureau of International Labor Affairs, United States Department of Labor
Samuel P. Fried, Executive Vice President, Limited Brands
Heather Grady, Managing Director for Realizing Rights, The Ethical Globalization Initiative
Philippe Egger, Senior Advisor to the International Labour Organization Director General
Richard Samans, Managing Director, World Economic Forum; Senior Fellow, Center for American Progress