I would like to thank the Government of Argentina for the invitation to participate in this Summit of the Americas and to congratulate them on the choice of the theme for the Summit. Employment is the main link between the economic system and social development. The dynamic generation of decent work, in the sense that ILO gives to this term, is thus essential for the attainment of the Millennium Development Goals of the United Nations.
The experience of the vast majority of the countries in this hemisphere in relation to economic growth has been frustrating, but even more frustrating have been experiences relating to employment generation and poverty reduction. This regional experience, as that of many other countries in the world, indicates that economic growth is not sufficient to guarantee adequate social development. It is also essential to guarantee that the fruits of social development are adequately distributed.
As the United Nations recently indicated in its report, “The Inequality Predicament”, the low rate of employment generation, the growth of the informal workforce and the deterioration of income distribution are virtually universal problems. One fact illustrates this convincingly: 88% of the world’s population lives in countries where income distribution has deteriorated in the past quarter century. In Latin America and the Caribbean, this distributive deterioration is also expressed simply: 43% of the population in 2004 lived below the poverty level, according to ECLAC, a higher rate of poverty than that of 1980, even though income levels in 2004 were 8% higher than those in 1980. Indigenous peoples and Latin Americans of African descent have poverty rates that are on average double those of the white population, and the rural poverty rate is between two and three times higher than the urban.
These results indicate that the quality of economic growth, defined as its capacity to generate more and better jobs and to maintain or to improve income distribution, is as important as the very pace of growth. Economic and social policy can contribute to higher quality of growth in three different ways.
The first is through social policies which are strongly redistributive and adequately financed, including, among other instruments, through progressive taxation. As is widely recognized, the creation of human capital among the poor is an essential component of this strategy, but equally important is a policy of universal social protection based on solidarity, which would cover the informal labor force. The comparative experience of industrialized countries indicates that universal systems of social welfare are associated with better income distribution. This holds an important lesson for Latin America: while targeted poverty reduction programmes have been an important advance in social policy, these programmes should be gradually incorporated into universal social protection systems.
The second is through macroeconomic policy. Slow and highly unstable economic growth is certain to worsen labor and social conditions. For this reason, without minimizing the importance of price stability and a sound fiscal situation, employment generation and poverty reduction should be the explicit objectives of macroeconomic policy. This affirmation also applies to central banks, which by means of setting exchange and interest rates play a decisive role in employment generation.
The third is through structural policies which guarantee a development model which generates more and better jobs. One crucial issue in this regard is the pattern of international trade specialization. There is evidence that specialization based on manufacturing and services tends to generate more jobs than that based on natural resources. Some highly labor intensive sectors require special attention. And of course, progress towards the adoption of generalized policies of support to micro and small enterprises through financial and production assistance is an essential part of the solution. The promotion of different forms of economic solidarity, particularly cooperatives, can also contribute to the development of micro and small enterprises and to the “formalization” of informal employment.
Appropriate national policies are, without doubt, a key but not the only determinant of growth with equity. For developing countries, many components of the international economic system remain problematic and require proper attention. The excessive frequency of international financial crises has taken a high toll on developing countries in this hemisphere. Since the 1960s, developing countries have also made clear the injustice embodied in a trade system which retains excessive agricultural subsidies in the industrialized world, and high levels of protection against manufactured goods from developing countries. A system of international migration which favors the migration of skilled workers but restricts that of unskilled workers can be contributing to the inequality of global labor remunerations.
Lastly, and beyond these asymmetries between the developed and the developing worlds, I would like to stress that the virtually universal nature of the trend of deteriorating income distribution can be traced to the changes in the global economic sphere. We live today under an increasingly globalized economic system, but social policies remain the sole responsibility of national governments, whose field of action is also restricted by the same economic globalization. It would seem time to firmly place these themes on the international agenda, so both the benefits and the risks inherent in globalization can be shared in a more equitable manner.