Global Policy Forum

by Eric Pfanner

As the great and good of global business and politics gathered in the snowy heights of Davos, Switzerland, for the annual meeting of the World Economic Forum, the International Labor Organization issued a timely reminder Thursday of how the other half - or at least 180 million people - lives. Last year, the organization said, the world's unemployment ranks grew by 20 million, to 180 million, as the effects of a sluggish global economy trickled down from the United States to Europe, Africa, Asia and elsewhere.

"The world employment situation is deteriorating dramatically," said Juan Somavia, director-general of the ILO, a Geneva-based agency of the United Nations. "While tens of millions of people join the ranks of the unemployed or the working poor, uncertain prospects for a global economic recovery make a reversal of this trend unlikely in 2003."

Though the U.S. economy has been recovering slowly from a mild recession following the collapse of the stock-market bubble in early 2000 and other regions have shown growth, labor markets have continued to weaken. That is not unusual - recovery in employment usually trails an upturn in the business cycle. But the increasing linkage between global economies means the transmission effect is ever greater when one region, such as the United States, performs poorly. The ILO report, for instance, highlights a drop in Asian employment attributable to sluggish U.S. demand for exports from the region.

Hardest hit over the last year were the Caribbean and Latin America, where a deep recession in Argentina accompanied by political turmoil contributed to a regionwide rise in unemployment. In Argentina alone, the jobless rate rose to more than 20 percent.

In industrialized countries, unemployment rose to 6.9 percent last year from 6.1 percent in 2000, the report says. Italy and New Zealand were the only countries to escape the trend.

In addition to the actual unemployed, the number of working poor - those who survive on less than a dollar a day - rose to 550 million last year, matching a previous high set in 1998, at the time of the Asian economic crisis.

The agency recommends a variety of steps to try to create jobs, including increased spending by governments. In the United States, President George W. Bush has proposed a package of tax cuts in an effort to stimulate the economy, but some critics say the changes favor the wealthy. In the European Union, meanwhile, many governments are being forced to cut spending so they can stay within the limits on budget deficits required under monetary union.

The ILO report says developing countries could benefit from broader social safety nets, as well as diversifying their economies to limit the vulnerability to external shocks. The report also urges the reduction of trade barriers, such as developed countries' tariffs on industrial goods and agricultural subsidies that favor domestic producers.

Argentina Makes Debt Payment

The World Bank said Thursday that it had received a $796.5 million payment from Argentina that clears the way for new loans to help the country emerge from the worst economic crisis in its history, The Associated Press reported from Washington. The World Bank had refused to disburse any further loans after Argentina missed an Oct. 15 repayment deadline. President Eduardo Duhalde had declined to dip into the Argentina's scarce reserves to meet obligations coming due to the World Bank and other international institutions until his country had an agreement for the resumption of loans from the International Monetary Fund. That agreement was reached last week.

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