Thinking about the unthinkable

A few weeks ago I wrote about the notion of a “jobless recovery”, ie a recovery for the financial markets, but not for the real economy, nor for employment (see blog posting of 10 June). I concluded that a “jobless recovery just doesn’t make sense”.

Well, as we head into the Northern summer break, that is just what seems to be happening. Stock markets are up – in many cases to the best level in over 6 months. Banking institutions like Goldman Sachs have announced – believe it or not – record profits, and have paid back their bail-out money to the government. Bonus payments to high fliers are back up too – despite castigation from political leaders including President Obama of the US, and Chancellor Merkel of Germany. This week French Finance Minister Christine Lagarde said banks that have started paying guaranteed bonuses again are an “absolute disgrace” and should be reined in by governments at the next G20 Summit in September (www.FT.com, 22 July 2009).

Meanwhile, announcements of job cuts and lay-offs come out daily in country after country, affecting local communities across the planet.

Writing in the New York Times a week ago, Paul Krugman stated: ’the American economy remains in dire straits, with one worker in six unemployed or underemployed’, even as Goldman Sachs announces a record quarterly profit and a return to outsize bonuses (Paul Krugman: “The Joy of Sachs”, NY Times, 16 July 2009, www.NYTimes.com). Krugman writes that rescuing the financial system without reforming it will only make another crisis more likely.

Six months ago, Trade Union leaders at the Council of Global Union, the ITUC and TUAC felt that the crisis was the occasion to push for a resetting of balances – a better balance between employee bargaining power and financiers, a better balance between resources for the public and private sectors, a start on the tough issues of global imbalances in trade and financial flows.

What we are seeing instead is a return to the very behaviour that led to the crisis in the first place. The industrial and financial landscape has been shaken up, but is settling back into a new configuration with the same underlying structure.

“Jobless recovery” seemed unthinkable. But it may be upon us – at least until the next crisis.

ILO Jobs Pact; ITUC updates on the crisis

The ILO Jobs Pact adopted in Geneva on 16 June 2009 provides guidance for unions to negotiate with governments and employers to maintain and create employment. The Jobs Pact can be found at http://www.ilo.org/wcmsp5/groups/public/---ed_norm/---relconf/documents/meetingdocument/wcms_108456.pdf. The Pact emphasizes the importance of training and skills developments and support for quality public services.

The Pact was also recognized at the recent G8 +20 Summit in Italy, and the ILO is invited to attend the third G20 Leaders Summit in Pittsburgh, 23-24 September.
The ITUC is keeping all national affiliates informed on the Jobs Pact as well as key international efforts to address the consequences of the financial and economic crisis. Details of the latest ITUC circular describing key events and developments at agencies like the IMF and the Financial Stability Board (FSB) can be found at http://www.ituc-csi.org/IMG/pdf/No_37_-_Global_Crisis.pdf. (It is available in English, French and Spanish). For the ITUC evaluation of the recent UN Summit on the Financial and Economic Crisis and its Impact on Development go to http://download.ei-ie.org/Docs/WebDepot/Trade%20Union%20Evaluation%20on%20the%20Outcome%20of%20the%20UN%20Conference%20on%20the%20Economic%20Crisis.doc.

EFA “further off track than we thought”

The new Global Monitoring Report on Education for All will show that “we are much further off track than we thought in achieving Education for All”, the report’s Director told meetings at UNESCO in Paris last week.

Kevin Watkins, Director of the report was speaking to a meeting of the UNESCO/World Economic Forum Partnerships for Education. Kevin said that there was systemic bias in reporting by governments of their progress towards attainment of the EFA targets. Many governments overstate the presence of children in schools, he said.

UNESCO’s analysis corresponds to evidence from EI member organisations. Children may be registered in school, but the statistics do not show those who rarely attend, if at all. Added to this are two other major issues which lie behind the statistics showing progress toward EFA targets. In many countries class sizes are way too large – shockingly so in some cases. And the young people recruited as teachers may not be at all qualified. This is why EI stresses the need for quality education for all.

Kevin Watkins said the financing gap was also much greater than previously thought. Calculations of the cost of achieving EFA from a decade ago were still being used but were not realistic. It had been assumed that the cost of getting all children out of school into education would be of the order 11 billion US$, and that aid would provide around 7 billion, leaving a financing gap about 4 billion US$. But reworking the figures, the real financing gap was more like 15 to 16 billion US dollars, he said, noting that these were preliminary figures as work on the report was still underway.

The financial crisis will exacerbate the problem of education funding. As financial flows to developing countries slow to a trickle, government revenues drop and official development assistance falls. Kevin Watkins said the G20 should put stronger emphasis on the stabilisation of education finance.

This was sobering information from a credible source. Unfortunately, it tends to confirm the warnings given out by EI. Setting of the Millennium Development Goal of primary education for all by the year 2015 was seen as a more serious commitment by the entire international community, compared with earlier efforts, such as the Jomtien Declaration of 1990. But as we near the year 2010 – two thirds of the way to 2015 – there is still a long way to go to achieve Quality Education for All.

The G8 (+20) and education

The G8 Leaders were joined by 20 other Heads of government and 10 Heads of international organizations when they met in L’Aquila, Italy last week (8-10 July). In recent years the G8 has invited other leaders for specific sessions, but this was a record number of non-G8 governments – a reflection of the multiple crises confronting the planet, and recognition that the major economies have to engage others.

The G8 dealt with wide range of issues: the financial crisis, climate change, food security, rising unemployment, trade, nuclear proliferation, among others – and adopted a declaration running to 40 pages – including a page on education.

Under the heading “Advancing towards education for all”, the G8 picked up EI’s key message: “Investing in education and skills development is crucial for a sustainable recovery from the current economic crisis and for long term development. We reaffirm the right to education for all”. They re-inserted a line from earlier communiqués (which had been omitted last year): “we reaffirm that no country seriously committed to EFA will be thwarted in the achievement of this goal by lack of resources.” Significantly, they welcomed “the creation of an international Task Force on “Teachers for EFA”, aiming to address the “teacher gap””.

But as the Global Campaign for Education (GCE) pointed out “despite warm words on education, [the G8] offers little in the way of immediate commitments and resources to education systems squeezed by the financial crisis” [Link: “G8 yet to make the grade” http://www.campaignforeducation.org/en/home/].

On unemployment, TUAC made a similar point: “the commitments on employment and social protection are positive, as is the more extensive role given to the International Labour Organisation (ILO) and the recognition of the relevance of the tripartite “Global Jobs Pact”. But there are no explicit commitments to making the necessary resources available for achieving employment and social protection goals” [Link: “L’Aquila G8 says ILO jobs pact has worldwide relevance – unions say this now requires resources” http://www.tuac.org/en/public/e-docs/00/00/05/17/document_news.phtml]. As TUAC said, the 40 page declaration covered a vast range of issues but failed to prioritise the actions needed to move out of the triple crisis of jobs, climate and development. “Attention must now turn to the G20 Pittsburgh Summit in September, which unions are demanding must be a Summit focused on jobs, reducing inequality and eradicating poverty”, say Global Unions.

Footnote: G8 2009 Chair Silvio Berlusconi of Italy omitted any references to education in his final communiqué – probably a reflection of his attitude to education at the national level.

A 2nd stimulus for the US ?

Increasingly there is talk in the United Sates of a second stimulus package. Already other major economies, including China and Japan, have done so. The US package of almost $800 billion announced by President Obama and approved by the Congress as ARRA in February has prevented the worst, including in the nation’s public schools, where 500,000 teaching and school support posts were at risk. But as Paul Krugman pointed out in the New York Times this week, the Federal package is offset by State and local budget cuts across the country. Unlike the Federal government, States have to balance their budgets. As revenue drops precipitously, so does spending which means less stimulus nation-wide.

At the Annual Representative Assembly of the NEA in San Diego last week, delegates highlighted the differences between States. As NEA met, the host State, California, was locked in a budget impasse with a $24 billion deficit and no agreement between the State Congress and Governor Schwarzenegger on how to proceed. School districts may be getting no more than “IOUs” from their State government.

Driving out from San Diego across the State, there are signs everywhere of boom and bust – mile upon mile of new housing developments, shopping malls, commercial buildings – all constructed since 2000 with easy, unregulated credit. But the credit bust that followed the boom is no longer just the problem of States like California and Florida. It affects the entire US economy and beyond.

Economists give the theoretical way out. It was the conventional wisdom among economists for over 50 years that the world could not suffer another Great Depression like that of the 1930s because “we know what to do now”. That is only partially true.

Good policies have not only to be adopted but also to be implemented. In the case of the US, there will be vigorous opposition to a 2nd stimulus package, opposition driven partly by ideology, and partly by genuine concern over the rising national debt. Meanwhile as we have seen, compensating for the dramatic drop in State and local government revenues with federal money while generating real fiscal stimulus, is extraordinarily difficult.

Taking the problem of policy implementation to the global level, which is really necessary in a globalized economy, adds a whole new degree of complexity. That was evident at the G8 in Italy last week (it was described as the G8 + 5 + 1 + 5 – more on this tomorrow). The national and global imbalances underlying the financial and economic crisis have not gone away. Yet the world does not have a global governance system capable of dealing with them.

For my presentation to the NEA’s Global Education Summit in San Diego on 27 June, go to
http://download.ei-ie.org/Docs/WebDepot/NEA%20Responding%20to%20the%20Global%20Economic%20Crisis%20-%2027%20June%2009.pptx
and
http://download.ei-ie.org/Docs/WebDepot/NEA%20GES%20Script%20for%20PP%20financial%20crisis%20%20-%2027%20June%2009.doc

UN Summit on financial crisis fails to rise to the challenge

The United Nations is the only universal institution bringing together all the nations of the earth. It has a priori more legitimacy than the G20. The disappointment in the UN’s efforts to address the financial crisis, and especially its impact on developing countries, are therefore all the more disappointing.

The UN conference on the world financial and economic crisis and its impact on development provided for continued discussion, but in no way measured up to the extreme gravity of the situation, civil society participants said as the conference ended on June 26.

Gemma Abada, ITUC representative to the UN in New York said: “the titanic is sinking and governments are thinking about the arrangement of the deck chairs”. There is a major gap between the penetrating analysis and recommendations of Nobel Prize winner economist (and former World bank Chief Economist) Prof. Joe Stiglitz, and the outcomes approved by governments. Preparations for the conference had been in disarray with competing drafts for an “outcome document”. The conference was deferred at the last moment from the first to the last week of June. Finally, it was attended by 140 out of the UN’s 192 member states, and only one head of government (from Ecuador). The document made some references to the need to achieve the MDGs and to defend education and health (points that were strangely missing in the General Assembly President first draft). But as Gemma Adaba of the ITUC said, the declaration was “so unclear on decisive action”.

The UN Secretary General has exhorted member states to take decisive action. But they have been found to be wanting. The Pittsburgh G20 summit on 24-25 September will be “crunch time” for global coordination of an effective response to the crisis. The UN General Assembly will open its general debate in New York on 22 September and G20 leaders are expected to attend a high level session of the Assembly on 26 September. So there is the prospect of moving from decisive action at the US-hosted G20 Summit in Pittsburgh to broader legitimacy for global action at the UN. Such decisive action is a year overdue, for the full extent of the global crisis became apparent in September 2008. Whether the leaders of G20 and other nations will at last rise to the occasion remains to be seen.

Links:
The Outcome document is available in English, French and Spanish at the following website:
http://www.un.org/ga/search/view_doc.asp?symbol=A/CONF.214/3&referer=http://www.un.org/ga/econcrisissummit/&Lang=E
Recent headlines: Financing for Development Civil society engagement http://www.ffdngo.org/