New Growth Model John Evans, TUAC

2 Summary Purpose of the TUAC/ETUI/ITUC task force Summary of the policy approach Priorities: what is economic growth for? A fair and inclusive labour market A new approach to balanced growth? Regulating finance for the real economy Conclusions and next steps

3 Purpose of the TU taskforce To set out a progressive approach to post- crisis growth policies To provide a basis for engagement with policymakers and progressive economists An open source approach: building a network, sharing ideas and experiences To demonstrate that the international trade union movement has lively, interesting and practical ideas

The policy approach Market fundamentalism has failed Global problems demand global solutions: A critical role for the G20 Priority must be a return to full employment Austerity policies now back with a vengeance – and will almost certainly make things worse And action must be taken to rein in the excesses of financial markets: better regulation, transaction taxes Reversing the rise in income inequality is an economic necessity Unorthodox approaches being applied by countries outside OECD (eg. Brazil) may offer useful policy lessons. 4

Priorities What is the purpose of economic growth? A new approach to measurement beyond increases in GDP per head? The sustainable generation of demand Ensuring that workers see their wages rising in line with productivity. Development and poverty reduction Sustainability – in the widest sense: the environment, corporate governance, labour markets 5

Fair and inclusive labour markets OECD pre-crisis assessment: No single route to full employment Deregulated flexible labour markets versus Strong labour market institutions, redistributive taxation, strong welfare states, narrower income inequality 6

Rising inequality (gini coefficients) almost everywhere 7

The rich become super rich 8

Wages lose ground wage shares 2000=100 9

Rising capital share did not increase investment 10

The causes Financial globalization increases the mobility of capital at the expense of labour Weaker labour market institutions: less collective bargaining, more non-standard/temporary jobs Less progressive taxation Factors aggravated by global economic uncertainly and lack of jobs Source IILS –Raymond Torres 11

Solutions 1 social expenditure 12

But according to the ILO OECD countries need to spend 0.7% of their GDP to reduce Gini by 1% (in the 1980’s 0.6% were sufficient) Reducing inequalities to 1980’s would require additional spending by 5.4% of GDP In the case of the US, additional spending would reach 8.5% of GDP Source IILS Raymond Torres 13

Therefore the new model needs Well-designed labour market institutions –minimum wages – hiring and firing regulations –jobseeker programmes Core labour standards 14

A new approach to strong, balanced and equitable growth From austerity to growth Challenges in the United States Challenges in the eurozone Challenges in Japan A co-ordinated approach to global growth Fiscal and monetary policy Exchange rate adjustment and trade policy Financial reform 15

Financial reform Finance as the servant of the real economy, not the master Financial regulation to assure stability Financial reform to channel savings to productive investment Reform to reduce the economic and political power of finance Establish a global financial transaction tax 16

Conclusions Compelling need for a different approach Effective initial response to crisis now followed by a return to orthodoxy. Return to full employment is essential The financial sector must be tamed and economies rebalanced Global solutions needed to global problems Trade unions are an essential part of the solution 17

Next Steps Campaigning for a progressive economic alternative Seminars by unions across the globe Engage progressive economists and policy makers in each country Coordinate with social and political allies Debate with those who disagree Engage governments at the national and global levels. 18

19 Thank you exitingthecrisis.org