Does Austerity Work?

By: Dr. Mike Campbell

The International Labour Organization is based in Geneva, Switzerland and is a UN specialised agency. It primary mandate is to promote employee rights at work; foster and strengthen discussion of work-related issues and encourage “decent work opportunities”. It is also, via its Administrative Tribunal, the body which many international civil servants can turn to when a UN body under its jurisdiction fails to live up to its obligations, but that, as they say, is another story.

ILO has issued a stark warning about the prospects for employment around the world in the aftermath of the global financial crisis and the current, almost universal climate of austerity budgets and their implicit cuts. In its most recent report, the organization notes: “It is unlikely that the world economy will grow at a sufficient pace over the next couple of years to both close the existing jobs deficit and provide employment for the more than 80 million people expected to enter the labour market during this period".

In an interview with the BBC, Raymond Torres of ILO and one of the reports authors, was very dismissive of austerity measures: "Austerity on its own doesn't work, it is counter-productive. Instead of promoting growth and confidence, it reduces confidence and growth. Instead of reducing deficits, it keeps high deficit all the time. What is needed is a growth and employment strategy. This is what successful countries like Austria, Australia, Uruguay have done."

The heads of government of the EU are likely to take issue with this opinion, insisting that the measures are essential to foster economic confidence and that the deficits have been reduced – public debt, of course, is another issue. The ILO report suggests that job creation is likely to remain subdued until 2016 unless policies are revised.

The report did note that employment rates in developing countries were now above their pre-crisis levels; tending to suggest that these markets were now primed for increased first world demand.

It is pretty clear that debt reduction strategies (both deficit and public debt) must be implemented to put major economies on a sustainable footing. However, it is just as apparent that a “cold turkey” approach could result in social tensions; reduced living standards and worsening unemployment – anyone for a sensible, balanced approach which marries debt reduction to modest economic growth; or is that just a tad too obvious?

Dr. Mike Campbell
Dr. Mike Campbell is a British scientist and freelance writer. Mike got his doctorate in Ghent, Belgium and has worked in Belgium, France, Monaco and Austria since leaving the UK. As a writer, he specialises in business, science, medicine and environmental subjects.