Launch Lecture of the UNCTAD Trade and Development Report 2010 Employment, labour markets, and development Dr Heiner Flassbeck Director, Division on Globalization and Development Strategies, UNCTAD secretariat Professor Robert Wade Respondent, LSE Professor Stuart Corbridge Chair, LSE
TRADE AND DEVELOPMENT TRADE AND DEVELOPMENT REPORT, 2010 REPORT, 2010 Employment, Globalization and Development Employment, Globalization and Development London London 13 September 2010 13 September 2010 EMBARGO EMBARGO The contents of this Report must not be quoted or summarized The contents of this Report must not be quoted or summarized in the print, broadcast or electronic media before in the print, broadcast or electronic media before 14 September 2010 17:00 hours GMT 14 September 2010 17:00 hours GMT 2
After the crisis: an uneven and After the crisis: an uneven and fragile recovery fragile recovery 3
Global economic recovery remains fragile Global economic recovery remains fragile World output growth, 2004 to 2010 (forecast) World output growth, 2004 to 2010 (forecast) 10.0 8.0 6.0 1991–2003 Histogramms from Table 1.1 2004 4.0 2005 2.0 2006 2007 0.0 2008 -2.0 2009 2010 -4.0 -6.0 -8.0 World Developed South-East Europe Developing countries and CIS countries 4
Financial rescue packages prevented the Financial rescue packages prevented the collapse of financial markets collapse of financial markets GDP growth in developed economies, 2004 to 2010 (forecast) GDP growth in developed economies, 2004 to 2010 (forecast) 5.0 4.0 3.0 1991–2003 Histogramms from Table 1.1 2.0 2004 1.0 2005 2006 0.0 2007 -1.0 2008 -2.0 2009 2010 -3.0 -4.0 -5.0 -6.0 Japan United States European Union (EU-27) 5
Global recovery and rebalancing: current Global recovery and rebalancing: current situation and prospects situation and prospects • Developing countries at the vanguard of a potential Developing countries at the vanguard of a potential • recovery recovery • China, most decisive in fuelling domestic demand through China, most decisive in fuelling domestic demand through • stimulus measures stimulus measures • China, and to a lesser extent India and Brazil, are leading China, and to a lesser extent India and Brazil, are leading • the recovery, not only in their respective regions but also the recovery, not only in their respective regions but also in the world in the world • Renewed of risk appetite and widening interest rate Renewed of risk appetite and widening interest rate • differentials in favour of emerging economies could differentials in favour of emerging economies could generate upward pressure on their exchange rates and generate upward pressure on their exchange rates and may require currency market intervention may require currency market intervention 6
The recovery in developed countries The recovery in developed countries resembles pre- -crisis patterns crisis patterns resembles pre Current- - account balance, fiscal balance and real GDP growth, account balance, fiscal balance and real GDP growth, Current 2005- -2010 2010 2005 7
The recovery in developed countries The recovery in developed countries resembles pre- -crisis patterns crisis patterns resembles pre Current- - account balance, fiscal balance and real GDP growth, account balance, fiscal balance and real GDP growth, Current 2005- -2010 2010 2005 8
A weakening of global coordination and A weakening of global coordination and of the G- -20 process 20 process of the G Real effective exchange rate, Jan 2003 - - May 2010 May 2010 Real effective exchange rate, Jan 2003 • Chart 1.6 9
Deflation in in Japan Japan for the for the past past 20 20 years years Deflation Japan: National Disposable Income Billions USD 450000 450000 Real National Disposable Income Yen 400000 400000 National Disposable Income 350000 350000 300000 300000 250000 250000 2005 200000 200000 150000 150000 100000 100000 50000 50000 0 0 0 3 6 9 2 5 8 1 4 7 0 3 6 9 2 5 8 6 6 6 6 7 7 7 8 8 8 9 9 9 9 0 0 0 9 9 9 9 9 9 9 9 9 9 9 9 9 9 0 0 0 1 1 1 1 1 1 1 1 1 1 1 1 1 1 2 2 2 Real National Disposable Income National Disposable Income 10
Deflation looming in USA Deflation looming in USA USA: National Disposable Income Billions USD 14000 14000 Real National Disposable Income USD 12000 12000 National Disposable Income 10000 10000 8000 8000 2005 6000 6000 4000 4000 2000 2000 0 0 0 3 6 9 2 5 8 1 4 7 0 3 6 9 2 5 8 6 6 6 6 7 7 7 8 8 8 9 9 9 9 0 0 0 9 9 9 9 9 9 9 9 9 9 9 9 9 9 0 0 0 1 1 1 1 1 1 1 1 1 1 1 1 1 1 2 2 2 Real National Disposable Income National Disposable Income 11
Macroeconomic aspects of job Macroeconomic aspects of job creation and unemployment creation and unemployment 12
Macroeconomic trends are trends are key key to to employment employment Macroeconomic Growth of Growth of employment employment and real GDP in and real GDP in developed developed countries, 1970 countries, 1970- -2009 2009 • Chart 3.3 • Chart 3.3 13
Macroeconomic trends are trends are key key to to employment employment Macroeconomic Growth of Growth of employment employment and real GDP in and real GDP in developing developing countries, 1970 countries, 1970- -2009 2009 • Chart 3.3 • Chart 3.3 14
Neglected role of domestic demand growth Neglected role of domestic demand growth for employment creation for employment creation • High rates of unemployment are often attributed to • High rates of unemployment are often attributed to rigidities in the labour market but there is no empirical rigidities in the labour market but there is no empirical foundation for this proposition foundation for this proposition • Employment creation is closely associated with output • Employment creation is closely associated with output growth and fixed capital formation growth and fixed capital formation • Due to strong global competition and an increasing • Due to strong global competition and an increasing reliance on external demand, there is a tendency to reliance on external demand, there is a tendency to keep labour costs as low as possible keep labour costs as low as possible • If wages grow at a slower rate than productivity, the • If wages grow at a slower rate than productivity, the supply potential may end up growing faster than supply potential may end up growing faster than domestic demand, thereby discouraging innovation domestic demand, thereby discouraging innovation and productive investment and productive investment 15
Declining trend of the share of wages in Declining trend of the share of wages in national income national income Share of compensation of of compensation of employees employees in national in national income income, , selected selected country country Share groups, 1980 - groups, 1980 - 2008 2008 • Chart 5.1 • Chart 5.1 16
Controlling inflation more effectively through Controlling inflation more effectively through an incomes policy an incomes policy Annual growth growth rates of unit labour rates of unit labour costs costs and inflation rates, 1970 and inflation rates, 1970- -2008 2008 Annual • Chart 5.3 • Chart 5.3 17
Controlling inflation more effectively through Controlling inflation more effectively through an incomes policy an incomes policy Annual growth growth rates of unit labour rates of unit labour costs costs and inflation rates, 1970 and inflation rates, 1970- -2008 2008 Annual • Chart 5.3 • Chart 5.3 18
Experiences with with heterodox heterodox policies policies Experiences Real interest interest rates and real GDP rates and real GDP growth growth rates, rates, selected selected countries countries Africa Africa, , Real 1990- -2009 2009 1990 • Chart 5.2 • Chart 5.2 19
Experiences with with heterodox heterodox policies policies Experiences Real interest interest rates and real GDP rates and real GDP growth growth rates, rates, selected selected countries countries Asia Asia, , Real 1990- -2009 2009 1990 • Chart 5.2 • Chart 5.2 20
Experiences with with heterodox heterodox policies policies Experiences Real interest interest rates and real GDP rates and real GDP growth growth rates, rates, selected selected countries countries Asia Asia, , Real 1990- -2009 2009 1990 • Chart 5.2 • Chart 5.2 21
The link link between between wages wages and and employment employment The France and Germany compared compared France and Germany Labour productivity productivity, real , real wages wages and unit labour and unit labour costs costs, , Labour 1999 1999- -2009 2009 • Box 3.1 • Box 3.1 22
The link link between between wages wages and and employment employment The France and Germany compared compared France and Germany Private consumption consumption and exports in France and Germany, and exports in France and Germany, Private 1999 1999- -2009 2009 • Box 3.1 • Box 3.1 23
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