PSI blog on the Financial Crisis

WB report: Global Economic Prospects 2010

The World Bank (WB) released on 21 January the 2010 edition of its Global Economic Prospects publication.

 

According to the report the global economic recovery that is now underway will slow later this year as the impact of fiscal stimulus wanes. Financial markets remain troubled and private sector demand lags amid high unemployment.

 

The report warns that while the worst of the financial crisis may be over, the global recovery is fragile. It predicts that the fallout from the crisis will change the landscape for finance and growth over the next 10 years.

 

The WB's full report (180 pages) is available on-line on the WB website, in English only. Click here.

Unemployment to rise until 2011, according to OECD forecasts

Unemployment across the OECD is predicted to continue to rise well into 2010 and to fall only modestly in 2011 from its peak of over 9% of the labour force. GDP growth for the OECD zone is projected to be -3.5% in 2009 and +1.9% in 2010. The OECD instructs governments to undertake tough fiscal consolidation measures before 2011, including cuts in public services, “long overdue” reforms of healthcare and pensions and regressive tax reforms.

The key message of the OECD Economic Outlook No. 86 is that the economic recovery now spreading across the OECD “is still too timid to halt the continuing rise in unemployment”. OECD-wide unemployment is predicted to continue to rise well into 2010 and to fall only modestly in 2011 from its peak of over 9% of the labour force. The jobless rate is expected to peak in the first half of 2010 in the US, but for the Euro zone only in 2011 will unemployment finally start to fall.

Read more here.

The Triple Crisis and the Global Aid Architecture

The global economy is passing through a period of profound change. The immediate concern is with the financial crisis, originating in the North. The South is affected via reduced demand and lower prices for their exports, reduced private financial flows, and falling remittances. This is the first crisis.

Simultaneously, climate change remains unchecked, with the growth in greenhouse gas emissions exceeding previous estimates. This is the second crisis.

Finally, malnutrition and hunger are on the rise, propelled by the recent inflation in global food prices. This constitutes the third crisis.

These three crises interact to undermine the prosperity of present and future generations. Each has implications for international aid and underlines the need for concerted action.

Access the working paper here.

Job Crisis Takes toll on Union Membership

With the economy hemorrhaging jobs—more than 3.3 million jobs lost in 2009—the latest figures from the Bureau of Labor Statistics (BLS) show union membership in 2009 dropped slightly, from 12.4 percent of the workforce to 12.3 percent.

Nationwide, union membership dropped by 771,000, to 15.3 million in 2009, according to the BLS.
The recession eliminated jobs across the private sector, but was felt most deeply in manufacturing, transportation and construction—the nation’s economic backbone and heavily unionized sectors of the economy.

The loss in union membership, says AFL-CIO President Richard Trumka, is another indicator of the terrible toll the economic crisis is taking on the nation’s middle class—not just union members.

Full article on the AFL-CIO Now Blog here.

German public sector unions start warning strikes

Unions in Germany have decided to carry out a series of warning strikes in the public sector this week after a round of wage negotiations ended in failure.

Unions are seeking a five percent pay rise for some 2 million public sector workers, for whom the financial crisis has meant a severe loss of purchasing power.

"We've called on our members to take a stand," said Jan Jurczyk, a spokesman from PSI affiliate Verdi.
The public sector held a major role in tackling the crisis and considers that the requested increase is further justified by the amounts German taxpayers have been asked to pay for saving public and private banks. PSI has sent a letter of solidarity to Verdi (see below).

The wage negotiations will reconvene on 10 February.

Download PW_solidarity_msg_strike_Feb_2010

Migrant spending a great stimulus to economy during crisis

The massive inflow of almost 300,000 migrants and temporary workers last year was one of the biggest contributors to Australia's superior economic performance during the global recession.

Their spending delivered a stimulus at least as big as the government's first cash splash, and the flexibility of a temporary migrant labour force that now holds about 7.5 per cent of all jobs helped the economy to ride out the downturn with a relatively little rise in unemployment.

The government came under pressure from unions to wind back the migration program, with claims that migrants were taking “local” jobs.

Read the article on “The Australian” website here.

The impact of the crisis on the real economy

The Centre for European Policy Studies (CEPS) has published a new paper called "The Impact of the Crisis on the Real Economy".

The recent financial crisis was caused by a combination of asset price bubbles, mainly in the real estate sector, and a credit bubble that led to excessive leverage. A recurrent theme of this paper is that an appropriate assessment of the crisis should be made in light of the bubble that preceded it. Accordingly, the current situation should be compared to a ‘no-bubble’ benchmark rather than the pre-crisis period. Furthermore, the fall in GDP may be a flawed measure of the severity of the crisis if we aim to assess the true impact of the crisis on the wider public: the latter is more affected by job stability and consumption paths than GDP statistics.

Download the paper on the Centre for European Policy Studies website here.

SEIU: Meanwhile, a Few Thousand Blocks Off Wall Street

Since the financial crisis began, national news outlets have reported on the big rallies that have sprung up in cities across the country. Five thousand people in Chicago. A thousand in DC. Thousands of taxpayers coming together in California, and even on the doorsteps of the Wall Street banks in New York.

But what you don't see on your television are the hundreds of taxpayer-led rallies that are happening where news cameras rarely go. In places like Bloomington, IL and Lansing, MI, citizens are organizing together to speak out against the damage big banks have done to our economy. These are people Jamie Dimon will never meet, living in places that Lloyd Blankfein will never visit - but the impact Wall Street's reckless behavior has had on their lives couldn't be more direct.

Read the full article on the SEIU blog here.

A Bit Rich: Calculating the real value to society of different professions

Hospital cleaners are worth more to society than bankers, a study suggests.

The think tank the New Economics Foundation (NEF) has carried out a research that calculates the value to society of a number of different jobs and advocates a fundamental rethink of how the value of work is recognised and rewarded. The study uses some of the principles and valuation techniques of Social Return on Investment analysis to quantify the social, environmental and economic value that certain roles produce – or in some cases undermine.

The research says hospital cleaners create £10 of value for every £1 they are paid.
It claims bankers are a drain on the country because of the damage they caused to the global economy.

They reportedly destroy £7 of value for every £1 they earn. Meanwhile, senior advertising executives are said to "create stress".

The study says they are responsible for campaigns which create dissatisfaction and misery, and encourage over-consumption.

And tax accountants damage the country by devising schemes to cut the amount of money available to the government, the research suggests.

By contrast, child minders and waste recyclers are also doing jobs that create net wealth to the country.

The Foundation has used a new form of job evaluation to calculate the total contribution various jobs make to society, including for the first time the impact on communities and environment.

Click here to access the article concerning this report published by the BBC.

Download a PDF version of the study on the NEF website here.

ECLAC report: Latin American and Caribbean Exports Fell 24% in 2009 Due to Crisis

The signs of economic recovery during the last quarter of 2009 portend greater regional trade this year.

The value of total exports from Latin America and the Caribbean in 2009 fell 24% with regard to the previous year due to the global crisis, according to new estimates released by the Economic Commission for Latin America and the Caribbean (ECLAC).

According to the study International Trade in Latin America and the Caribbean 2009: Crisis and Recovery, the value of imports also decreased 25%. Although both exports and imports diminished significantly, the drop is milder than that experienced during the first semester of 2009 (-31% and -29%, respectively), implying a better outlook for 2010.

The 24% contraction in the value of the region's exports represents a combined 15% drop in value and 9% in volume.

"This simultaneous decrease in price and volume is unprecedented in recent history. The last similar situation took place in 1937," states the document.

The economic recovery in the last quarter of 2009 is due, among other reasons, to the partial rise in the price of several commodities, such as copper, zinc, oil, wheat and soya, and the strong demand from China as of the second quarter of last year.

Here is a summary of the report (in Spanish).

The report is available on the ECLAC website (in Spanish only) here.