Ending global poverty dependent on employment based growth

The World Bank has always focused on poverty reduction; it is their stated mission to ‘help reduce poverty’. But actually ending it, with a target date, was never their explicit goal, until now. In Washington, at their annual spring meeting last week, the World Bank, with the support of the International Monetary Fund, committed to ending extreme global poverty by 2030. This is no small feat and they should be lauded for taking the leap.

Yet the remedies recommended in Washington were logical but peripheral to the problem. World Bank President Dr. Jim Yong Kim and IMF Managing Director Christine Lagarde stressed a focus on climate change, education, and health as a way of lifting the poor out of poverty. While these approaches are necessary components of poverty alleviation, what wasn’t addressed are the jobs needed to enable to the poor to expand their purchasing power and to take ownership of their own economic mobility.

Regardless of the well-intentioned commitments by international financial institutions in the past, roughly one billion people are still living on a meager $1.25 per day. That number won’t change by 2015. Furthermore, both Bank and IMF heads recognize that global warming will only worsen this already-dire situation.

The answer won’t be found in Washington but in the very economies these spring meetings are intended to serve. Timed to run concurrent with Washington’s World Bank and IMF meetings, a meeting of government, business and civil society representatives also met to focus on that very conundrum: jobs.

Selected because if its role as an emerging economy still struggling with a substantial poverty problem, the first-ever “Just Jobs Index” was launched in India last week to identify which countries are doing the best in providing employment opportunities, income and employment security, safety at work and healthy work conditions, and equality of treatment and opportunity. The Index, released by the Just Jobs Network (a project of the Center for American Progress), ranked Iceland, Netherlands, Norway, Australia and Denmark as the top five performers on these fronts.

There is a clear economic benefit to focusing, first and foremost, on equitable employment as these countries have done. Your country is more peaceful (all of these countries ranked high on the Global Peace Index as well), which means you’re spending less on violence containment. And your country is more resilient, noted by Iceland’s relatively resilient rebound after their 2008 financial crisis.

The Bank-IMF implicit assumption, then, that more growth will equal more jobs must be reconsidered. It’s not primarily about making it easier to do business, making trade freer, and making markets more friendly. Developing economies may be growing by six percent annually, but so too are global income inequality rates, and rapidly, indicating that the prized GDP-measured economic growth is not serving everyone equally.

It is perfectly possible to have economic growth without the creation of new jobs or improvement in working conditions. “Jobless growth” in many countries around the world, even in the years preceding the 2008 Great recession, widened the chasm between the rich and the poor that ignited the political and social upheaval of the Arab Spring and the wave of Occupy Wall Street protests.

The United States produced only 2.5 million jobs in the eight years before the financial crash despite growth averaging close to 3 percent for that period. This relatively weak jobless growth meant that people depended on easy credit and heavy leverage to fuel consumption rather than relying on stable jobs and rising wages. This pattern ultimately proved unsustainable, resulting in the 2008 financial crash and the ensuing economic recession. The same is true for India. Greater capital intensification in organized manufacturing fueled economic growth, but it came at the expense of employment generation at the pace needed to absorb the country’s surplus labor.

What is needed, instead, is an emphasis on employment-based growth that provides more people with the opportunity, incentive, and the ability to create a better life for themselves and their families. The creation of more and better employment will, in turn, stimulate inclusive, stable and sustainable economic growth.

If Kim and Lagarde want to merge their financial community’s traditional trickle-down economics model with the new model emerging out of Delhi, they could, for example, flesh out a jobs agenda that will be necessary for preventing climate catastrophe.

We need people around the world to make the green technologies and infrastructure necessary for us to transition to a carbon light or carbon neutral economy. Not only could it employ and empower many of the world’s poor, it would democratize energy, freeing up power from the hold many utility companies have over dependent and disadvantaged communities.

In sum, the financial institutions’ focus on generating economic growth without ensuring the concomitant increase in jobs, and the inequality this generates, is partly to blame for the waning public support for global economic integration. International trade and the free market economy have failed to generate equitable growth because strategies focused on raising domestic product without ensuring that integration also creates jobs that give people a chance to make a living, be productive members of the economy, and realize their dreams and aspirations. Now is the time to change that modus operandi, because the Bank’s goal for 2030 won’t be possible without first doing so.


Shank is director of foreign policy at the Friends Committee on National Legislation. Dewan is the director of globalization and international employment at the Center for American Progress.network.