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Jozef Pacolet

Reinforcing our ambitions How to overcome the present financial and economic crisis Leuven - Belgium, 7 September 2009. Jozef Pacolet.

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Jozef Pacolet

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  1. Reinforcing our ambitionsHow to overcome the present financial and economic crisisLeuven - Belgium, 7 September 2009 Jozef Pacolet Organised by the Higher Institute of Labour Studies (HIVA-K.U.Leuven) – Katholieke Universiteit Leuven, Belgiumfor and in collaboration with the European Centre for Workers’ Questions (EZA)and in association with the Athenian Policy Forum (APF)This measure is funded by the European Community

  2. Overcoming the Financial and Economic Crisis by Reinforcing our Ambitions: Scope of the HIVA Position Paper and Conference Jozef PacoletHIVA, Katholieke Universiteit Leuven(jozef.pacolet@hiva.kuleuven.ac.be) EZA - HIVA Conference , 7 September 2009. Leuven, Convent of Chièvres, Grand Beguinage

  3. Content • A financial crisis became an economic, employment and fiscal crisis: some figures • Fears • Banking crisis further avoided but at an immense cost and return of ‘business as usual’ • Industrial change and persistence of unemployment • Decade lost in rebalancing public finances • Weaknesses of social protection: do we need a stress test? • Ways out of the crisis • Restoring financial regulation • Reinventing industrial and economic policies • Reinforcing labour market policies • Rediscovering Keynesian fiscal policy • Reinforcing the welfare state and social protection • Some additional choices made and to be made • Conferences in Prague and Munich • Learning from the experts and policy makers on HIVA-EZA conference of today • What emerges from our own reading: some additional points of interest • What results from the network experience of member organizations in the 12 other countries: starts on 6 th September/ regional conferences in November 2009/January 2010 • Closing conference on ‘The state of the welfare state anno 2002 and 15 years later: before and after (?) the great economic and financial crisis’ in April 2010

  4. 1. The financial crisis

  5. four-bears-large.gif

  6. 1bis Policies • Failure of the (financial) market system and deregulation, but also failure of the state (deregulation, no proper oversight and control) • But rapid and efficient policy response: monetary, liquidity, capital adequacy of financial institutions, protection of the depositors, even in G20 measures against tax evasion in the so called tax havens • Rapid return of financial sector to business as usual • But increased political interest for correcting the financial sector (bonuses, profits) • Need for maintaining competition in financial sector at the benefit of savers and those in need of credit (households, firms, government) • Do we trust our pensions to this financial industry in distress?

  7. 2. The economic decline: set back of 7 years but we remain rich economies Source figures: European Commission, Economic Forecast Spring 2009

  8. 1.1

  9. 3. Massive unemployment: set back of a decade, and a prospect for another decade of massive unemployment? Source figures: European Commission, Economic Forecast Spring 2009

  10. Job destruction and creation in Belgium after the 1973 crisis

  11. 2 and 3 bis Policies • Importance of industrial policy, avoiding regional and national competition and protectionism • Reinforcing the internal market and competition • Importance of maintaining industrial tissue and jobs (temporary unemployment systems make sense) • Many labour market measures are focusing on improving skills, matching skills and jobs, improve employment services, stimulating entrepreneurship, groups at risk, tax wedge (EES) • But should avoid social dumping • Reinforcing the ambition for obtaining full employment • Increasing the activity level (the 70% to be reached in 2010 is no relevant standard for 2060 • The recipe of the past of early retirement is no option for today and the future • Does the ‘don’t’ of the EC for labour time reduction still holds?

  12. 4. Public deficit: automatic and active deficit spending Source figures: European Commission, Economic Forecast Spring 2009

  13. 4bis. Rediscovering Keynesian policies and the benefits of the welfare state • Automatic stabilisers and active fiscal policies • Too little compared with the USA • Support private consumption • Support public consumption by public employment: opportunity for some countries to close the caring gap and job creation gap behind it • Should they be targeted? • For the moment supporting mostly consumption, should be oriented more to active labour market policies • Oriented to needs for the future (climate, energy, greying of the population) • Should be limited in time: opportunity to reassess fiscal revenues (fight against tax evasion but also tax avoidance, reinforce taxation of capital income, avoid fiscal and social competition and dumping) • Should be opportunity to assess the efficiency of public sector • The case of the pay-as-you-go pension system versus funded pensions

  14. 5. Reinforcing our ambitions: rediscovering the merits of the social market economy or ‘Rhineland Model’ • Mixed economy of competitive market economy and social corrections • Need for state regulation, control and correction • Benefits of a strong social security system developed along the line of a social insurance: labour movement should reinforce her ambition • Is not possible without obtaining full employment and high levels of activity degree, now and in the future: we should reinforce our ambition • But it will include difficult decisions: even in rich economies and even more in times of economic crises, there are ‘no free lunches’

  15. ‘To summarise: the world is currently undergoing an economic shock every bit as big as the Great Depression shock of 1929-30. Looking just at the US leads one to overlook how alarming the current situation is even in comparison with 1929-30. • The good news, of course, is that the policy response is very different. The question now is whether that policy response will work. For the answer, stay tuned for our next column’ A Tale of two depressions, Barry EichengreenKevin H. O’Rourke,4 June 2009, see VOX website:http://www.voxeu.org/index.php?q=node/3421 • ‘World industrial production, trade, and stock markets are now showing signs of recovery. Still – today's crisis remains dramatic by the standards of the Great Depression’. A Tale of two depressions, 1 September 2009

  16. To reinforce your ambition also stay tuned to http://www.hiva.be http://www.hiva.be/agenda_detail.php?id=291&option=detail http://www.eza.org/ http://www.eza.org/index.php?id=865&type=0&L=2 And the upcoming regional and closing conference

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