MercoPress. South Atlantic News Agency

IMF warns no financial crisis is over with a “wasteland of unemployment”

IMF Managing Director Dominique Strauss-Khan and ILO Director General Juan Somavia

The global recession has created a “wasteland of unemployment” that is likely to leave scars on society for years to come, unless action is taken to address the jobs crisis, IMF Managing Director Dominique Strauss-Kahn warned.

The heads of the International Monetary Fund (IMF) and the International Labour Organization (ILO), along with other leaders, called Monday for a broad international commitment to a jobs-focused policy response to the global economic downturn.

At a historic conference in Oslo, hosted by Prime Minister Jens Stoltenberg of Norway and co-sponsored by the IMF and ILO, leaders from government, labor, business, and academia met to tackle the sharp increase in unemployment and underemployment since the global financial crisis.

“The crisis of unemployment is the worst one facing the world right now,” said Spanish Prime Minister José Luis Rodríguez Zapatero.

“The rules of the game have changed,” Strauss-Kahn said in his opening remarks. “The global economy after the crisis is not the same as before the crisis. So, in a nutshell, we need to think differently. Why? Because the future of millions of people is at stake; because the future of our world—prosperity and peace—is at stake.”

The conference brought together senior government leaders, including President Ellen Johnson Sirleaf of Liberia. A large delegation of labor leaders was led by International Trade Union Confederation General Secretary Sharan Burrow. Speakers also included Finance Minister Christine Lagarde of France and U.K. Secretary of State for Labor Iain Duncan Smith.

Strauss-Kahn said he hoped the conference would identify a new way to think about what the planet can do, together, to build a better world. “If successful, maybe in four or five years-time, we will be able to say “I was in Oslo” where it all began”.

Lagarde said the world needed a “job-charged” recovery that continued coordination between major economies through the Group of Twenty.

Sirleaf warned of the destabilizing effects of large-scale unemployment in fragile developing countries, saying social cohesion in Liberia could be damaged.

“When growth is not fair, it becomes unsustainable,” said ILO Director-General Juan Somavia. “This has been the overriding lesson of the crisis. High levels of employment creation should be a key macroeconomic objective alongside low inflation and sustainable budgets. We need to steer globalization in the right direction.

Strauss-Kahn spoke of the damaging effects of the crisis. “Today, as you know, the labor market is in dire straits. The Great Recession has left behind a wasteland of unemployment, and this devastation threatens the livelihood, security, and dignity of millions of people across the world,” Strauss-Kahn said in his opening remarks.

But he said the human costs of the crisis were the real tragedy, especially for young people. “The crisis hit them especially hard. We must not underestimate the daunting prospect we face: a lost generation, disconnected from the labor market, with a progressive loss of skills and motivation.”

And unemployment left long-lasting scars. “If you lose your job,” Strauss-Kahn added, “you are more likely to suffer from health problems, or even die younger. If you lose your job, your children are likely to do worse in school. If you lose your job, you are less likely to have faith in public institutions and democracy.’

Youth (ages 15–24) currently represent one-quarter of the world’s labor force, at 619 million. Despite a number of years of rapid economic growth, youth unemployment has remained stubbornly high, rising to 13% in 2009, or 81 million.

Strauss-Kahn said the gathering had helped to define the steps that must be taken to bring millions back into the workforce. “Tackling the jobs crisis is not only critical for a meaningful global economic recovery, but also for social cohesion and peace,” he said.

The IMF and ILO agreed at the conference to work together on policy development in two specific areas:

• First, they agreed to explore the concept of a social protection floor for people living in poverty and in vulnerable situations, within the context of a medium- to long-term framework of sustainable macroeconomic policies and strategies for development.

• Second, the two institutions will focus on policies to promote employment-creating growth.

There was also agreement on the central role that effective social dialogue can play in building the consensus needed to tackle the difficult adjustment challenges created by the crisis, and to ensure that the social consequences of crisis and its aftermath are taken fully into account.

Speakers pointed to the key roles of social protection and the need for increased job creation to help those who could not find work. But Duncan Smith said it was also important to reexamine the retirement age, which in many cases was now too early.

Strauss-Kahn said it was the first time that the IMF and ILO had worked together in this way. The two organizations sometimes had different points of view but had the same goal: to build a better world for all.

Speakers emphasized that the global crisis would not be over until unemployment decreases. “We must not expect that growth alone will automatically create the jobs we need--and set job creation as priority using all the available policy tools. We need to make the financial system an effective support of the real economy. We need to take advantage of the cooperation between the IMF and ILO to boost international cooperation,” Strauss-Kahn said.