Abstract
The 2008 global financial crisis caused major anxiety about the stability of the neoliberal economic regime. This affected the financial and banking systems and also raised the spectre of mass unemployment and social unrest. A ‘post-crisis’ world was widely proclaimed in 2010. This was premature; by 2012 Europe was embroiled in a sovereign debt crisis and the US economy showed few signs of real recovery. A second recession seemed likely and austerity emerged as the standard response. Austerity, ‘the quality or state of being austere’ and ‘enforced or extreme economy’, became a buzzword. In practice, austerity means an economic and social policy based on balanced budgets to be achieved by reduced government spending, especially on employment and social policies, an approach entirely consistent with the neoliberal paradigm that has dominated policy-making for several decades. Yet the depth of the crisis provided an opportunity for rethinking the neoliberal policy package that had replaced the Keynesian welfare state, established after the Second World War. Cognizant of the fact that the development of alternatives to dominant paradigms may have many sources, this article probes the policy advice provided by two global organizations – the OECD and the ILO. As well as tracing the austerity motif, the article seeks to identify the extent to which alternatives were canvassed at the global social policy level.
Prospecting for policy change
The depth of the 2008 financial crisis signals the possibility of rethinking the neoliberal economic strategy that has guided policy-making in most of the world. Of course, crises merely create the opportunity for replacing one policy paradigm, which is also an economic and capital accumulation strategy 1 by another, they do not guarantee it. The severity of the crisis itself has been a contested issue as dominant interests argue, to borrow a useful distinction made by Jessop (2012: 24–26), that the crisis is in the system and not of the system. If the former, then the solution can be depicted as lying within the boundaries of existing arrangements and policy which can be adjusted and costs displaced onto non-elite groups through, for example, austerity policies. If the latter, and the crisis is interpreted to be one produced by contradictions of the existing paradigm and accumulation strategy which has become exhausted and untenable, then calls for more fundamental change may prevail. Which of these interpretations of the nature of the crisis prevails is in part a discursive issue.
The crisis began in the financial sector but its impact in the labour market through increased and persistent unemployment and underemployment is most likely to trigger social discontent, and thus contribute to policy change. Certainly, in responding to the crisis, states proved sensitive to the unemployment effects of the crisis and adjusted both economic and social policy to mitigate the effects on labour markets and workers, and offset the danger of social instability. In doing so, the crisis and state responses raised the possibility of policy change across the spectrum and seemed to open a window of opportunity for a more fundamental paradigmatic shift.
The neoliberal account of unemployment, as represented in the OECD Jobs Study (OECD, 1994), held it to be a product of a malfunctioning labour market. If the problems could be ascribed solely inside the labour markets, so too would the solutions. Thus reducing structures and ‘rigidities’ that hindered the free operation of the labour market – trade unions, social policies, employment protection and labour standards – were recommended, along with measures to produce attitude changes and, sometimes, enhanced human capital for individuals who could not function adequately in even a ‘properly functioning labour market’. The efficacy of this analysis and the recommendations based on it were challenged long before the crisis of 2008 (see inter alia McBride and Williams, 2001).
Although has not been abandoned, the crisis revealed neoliberal labour theory to be untenable. Macroeconomic factors beyond the labour market were responsible for unemployment. Keynesian scholars had long considered structural labour market factors to play at most a marginal role (Tobin, 1987). In practice, with the onset of the crisis, governments of all political complexions gave a nod to the ghost of John Maynard Keynes by announcing ‘stimulus’ policies to create jobs and avert another Great Depression. Yet this was an ad hoc response and was not based on a theoretically coherent alternative to neoliberalism. Nor was the de facto response of stimulus maintained once a recovery seemed to be taking place. ‘Exit strategies’ (to austerity from stimulus) were implemented even under the threat of further economic difficulties with the European sovereign debt crisis in 2011–2012.
Thus the crisis provides an occasion to revisit accounts of policy change (Campbell, 2002; Hall, 1993; Real-Dato, 2009; Weyland, 2008) and to focus on the global organizational forces that might be capable of stimulating change through the development of alternative ideas, as well as elements that may hinder their adoption and implementation. Specifically, this article is concerned with the processes that may precede change, the extent of advocated change, and whether proposed policy change involves incremental adjustments, major policy alterations without changing the goals, or paradigmatic change involving different goals as well as instruments. Making use of Kuhn’s (1962) concept of scientific paradigms and the depiction of paradigm change or shift, Peter Hall’s (1993: 278–279) study of UK economic policy identified three orders of policy change. In the first, the goals and instruments remained constant but the settings of particular policies were adjusted. Second order change involved changes to both instruments and settings, but the goals remained the same. In third order change, those rare occasions when the entire policy paradigm shifted, the goals, instruments and settings were transformed. Although ideational change is central to this model, the phenomenon of paradigm shift cannot be analysed exclusively at the level of ideas. Theoretically informed policy is a weapon in the hands of social forces: ‘Theory is always for someone and some purpose’ (Cox, 1981).
Hall (1993: 280) argued that the replacement of one paradigm by another is as much a sociological or political phenomenon as a scientific one. Kuhn had highlighted the discovery of ‘anomalies’, results that the prevailing paradigm could not explain. If initially these would be brushed aside, a sufficient accumulation of anomalies might result in the displacement of the dominant paradigm by a rival that could better explain the anomalies. The outcome depends on the alignment of political and social forces. Yet the battle of ideas has importance in its own right. On the global scale Deacon (2012: 81) reminds us of the relevance of ‘discourse or hegemonic struggle through which different interests and actors jostle to be in the driver’s seat of ideas and world views’.
In shaping debates about the crisis it is clear that various forces, often summarized as powering, puzzling and persuasion, are operative and interact with each other (Skogstad and Schmidt, 2011: 16). Utting et al. (2012: 4) draw attention to structural power derived from implementing the existing policy paradigm. For neoliberalism this would include financialization, export-led growth and flexibilization of labour markets, all of which might constrain the options governments perceive are available to them in a crisis. Similarly, established elites that benefited from neoliberalism continue to enjoy instrumental power (including access to decision-makers) and discursive power (the ability to ideologically frame the crisis in terms of causes and solutions). Jessop (2012: 27) notes: ‘Powerful narratives without powerful bases from which to implement them are less effective than … accounts that are pursued consistently by the powerful through the de facto exercise of power.’ This means that debates over alternatives hardly take place on a level playing field. In short, power matters, but this should not be seen as separate from efforts to persuade others of the superiority of one set of ideas over another, rather power relations are a component part of that activity.
Such a battle of ideas can lead to continuity and reinforcement of dominant paradigms or to their replacement. Conceptualizing economic ideas as ‘institutional blueprints during periods of uncertainty, as weapons in distributional struggles, and as “cognitive locks” ’, Blyth (2001: 2) considers that times of uncertainty, such as economic crises, are not resolved purely by structural forces. Ideas matter, and path dependence can be an ideational as well as an institutional phenomenon. Thus dominant ideas define what is possible and, until successfully challenged and displaced, are likely to resemble or build upon the status quo even if such ideas and the policies and based on them literally make ‘no sense’ (Blyth, 2001: 24).
There are operational difficulties in applying this approach to change. As Schmidt (2011: 39) observed, it can be difficult to know when paradigms have shifted and to understand why and how this has occurred. 2 This is true whether paradigm change is envisaged as an ‘episodic rupture’ or as an ‘evolutionary process’ (Skogstad and Schmidt, 2011: 10). Indeed, counterposing the two options in this way confines the more dramatic episodic rupture to a excessively narrow range of cases. Even the well-recognized shift from Keynesianism to neoliberalism was a protracted affair in most countries with uncertain outcomes for a decade.
Four years into the current crisis may therefore be too early to judge the ultimate outcome. Yet there is value in trying to establish the degree to which the neoliberal paradigm is being challenged. To do this we need to define its broad parameters and that of a likely alternative. 3
Premised on the goal of market-led economic growth, the neoliberal paradigm sets out to achieves this through the following: 4
Capital mobility;
Free trade;
A reduced role for state accomplished by privatization and deregulation, and spending and tax cuts;
Balanced budgets;
Acceptance of market-driven inequality; and
Flexibilization of labour markets.
For paradigm change to occur it must significantly alter this package and the interconnection of the individual components and identify an alternate goal or set of goals. The Keynesian economic paradigm that preceded neoliberalism set full employment as its primary goal and drew on an alternative set of components and instruments. Thus an alternative paradigm modelled after Keynesianism might promote:
Controls on capital mobility;
Managed rather than free trade;
A stronger public sector through stricter regulation of market processes, and higher taxes and spending;
A more pragmatic view of budget deficits;
A return to policies of greater equality and social justice; and
Intervention in the labour market to establish social and employment protection.
The crisis has theoretically provided an opportunity for completely new paradigms to emerge with new sets of goals and mixes of policies. Also possible are lower orders of change, which adjust the settings of neoliberal policies, settling for more or less of this or that ingredient, but without replacing the framework. The distinction between fundamental or paradigmatic change, or change of a lower order, has parallels in more specific analyses of neoliberalism. Jessop (n.d.: 2) offers a useful distinction between ‘major departures from the overall neoliberal project’ and ‘flanking measures to make that project more sustainable in the long run’. In the latter case, states may turn to policies based on non-market logics in order to ameliorate the most negative effects of neoliberalism and prevent the unravelling of entire project.
The earlier crises of neoliberalism did not lead to any alternative capable of displacing it; one of its strengths has been its ability to be reconstituted through the crises that it produces (Peck and Tickell, 2002: 392), or through the ability of its adherents to take advantage of crises (Klein, 2007). According to Peck et al. (2009: 112) its dynamics may paradoxically lead to an intensification of neoliberal ‘logics, forces, and relations such that some modalities of neoliberal rule are reconstituted by default’. In 2009 demand stimulus and pro-growth and pro-employment policies were in fashion, by 2010 the search for exit strategies from stimulus spending through austerity had begun, a sequence of events consistent with that view.
International organizations and policy expertise
Many actors may feature in shaping alternatives. These include social movements, economic interests, non-governmental organizations, political parties, intellectuals, dissident bueaucrats and states themselves (see Utting et al., 2012). Within this context, policy-oriented international organizations potentially become important players. Social policy remains largely in the portfolios of national governments, but ideas about social and economic policies often derive from international organizations and epistemic communities (Deacon, 2012: 81). 5 Some international organizations function both as policy experts and as authorities coercing states to follow particular paths. Others rely on more subtle forms of pressure to encourage compliance, whether through non-binding agreements or periodic, publicly available assessments.
With this in mind we focus on the role of two international organizations, the ILO and OECD, in developing and disseminating post-crisis ideas and policy recommendations. There are good reasons for selecting these two. Neither the ILO nor the OECD wields coercive instruments. They provide research-based policy recommendations to member states and encourage compliance through moral suasion. Both incorporate labour and business representation. Thus key economic actors, as well as states, have a voice. Both have a mandated focus on employment policy. Despite differences, both organizations recognize their mutual expertise, leading them to reaffirm their coordination of policy work through a Memorandum of Understanding (MOU) in June 2011. In practice, this reflected at the informal level with ongoing and long-standing cooperation between staff of the two organizations (confidential interview with ILO official, Geneva 21 September 2012).
The OECD is one of the most important sites for developing, standardizing and disseminating transnational policy ideas (Mahon and McBride, 2008, 2009). It has long been active in social policy (Armingeon and Beyeler, 2004) and related spheres (McBride et al., 2008). Moreover, the OECD’s self-image emphasizes ‘its ability to help governments solve the complex problems by addressing the multiplicity of dimensions that characterize today’s global challenges’ (OECD Annual Report, 2008, cited in Woodward, 2009: 127). In the transition from Keynesianism to neoliberalism it was an early entrant with an influential report titled Towards Full Employment and Price Stability (McCracken, 1977).
Class-based representation is structured through the Business and Industry Advisory Committee (BIAC) and the Trade Union Advisory Committee (TUAC). This reflects the era in which the OECD was founded. Its inclusion however makes the OECD potentially more sensitive to employment issues than other international organizations where such representation is lacking. Moreover, the OECD has reached out selectively to civil society and NGOs, with the result that ‘a more heterogeneous set of civil society actors’ now have input (Woodward, 2008: 91). Whether this leads to actual policy influence in IOs is more problematic (O’Brien et al., 2000; Woodward, 2008). Whatever their influence, however, BIAC and TUAC confer privileged access to business and labour. Their presence is ‘institutionalized and widespread’ (Woodward, 2009: 56). Debates on global social policies also occur internally. The Economics Department has tended to hold to a firmly neoliberal line whilst the Directorate for Employment, Labour and Social Affairs (DELSA) seemed to be shifting towards a more ‘inclusive’ liberalism in social policy (Mahon, 2008). The crisis of the neoliberal paradigm created an opportunity for intensified dialogue within the OECD on social policy issues.
The International Labour Organization (ILO) was founded in 1919 in the immediate aftermath of war and revolution. It was designed to ‘address workers’ interests within the confines of the modern capitalist labour market’ (Vosko, 2000: 20). The organization is tripartite, with representatives of business, labour and government, and is committed to social dialogue between them. The ILO positions itself as an organization responsible for the development and dissemination of expert knowledge and common standards achieved through voluntary agreements. It seems a good candidate to devise global social policy responses to the global financial, economic and employment crisis. During the Great Depression of the 1930s the ILO did take on such a role and challenged the prevailing economic orthodoxy by pushing for internationally coordinated public works schemes to create jobs (Endres and Fleming, 1996; Hughes and Haworth, n.d.). Its record in recent decades has been less impressive, due to failure to resist US pressures to adopt the Washington Consensus, encroachment from more robust international organizations like the World Bank and International Monetary Fund, and taking refuge in populist formulae 6 (Standing, 2010). The crisis offered an opportunity to recover some of its former role as a generator of alternative responses.
This article primarily draws on the various working papers, special issue reports, annual reports, speeches of senior officials to key policy actors and each organization’s official response to the crisis between September 2008 and April 2012, supplemented by a small number of key-informant confidential interviews. 7 We ask: to what extent have the organizations offered alternatives to the neoliberal order?
The OECD response
Immediately after the financial crisis, the OECD supported massive capital investment by the US government into domestic financial institutions (Gurría, 2008a) and argued that the crisis required action on its root causes, identified as the development of new financial instruments, growing demand for high-risk assets, inadequate corporate governance and regulation (Gurría, 2008b). OECD Secretary General Gurría argued that while the OECD supported capital investment into financial markets, the ultimate goal was recapitalization through reverse auctions, a process he called the ‘writing back of previous “write downs” ’. Gurría was optimistic that once more accurate values could be assigned to bad assets, long-term buyers such as pension plans would begin buying and thereby reduce dependence on state funds (Gurría, 2008c). Once the emergency measures had done their job the OECD’s normal position against government intervention into financial markets could be reasserted. Far from advocating an alternative, the OECD’s position was adjusting the current instruments – what Hall has referred to as first order change.
Economics Department: Dominating dissemination
Unsurprisingly, the OECD’s Economics Department dominated the organization’s response to the crisis. Along with working papers, the Economics Department produces the OECD Economic Outlook twice annually. The report is an analysis of trends in member countries and provides forecasts on growth and price stability. Although the December 2008 Economic Outlook took account of the financial crisis, it was not until the Interim Economic Outlook published in March 2009 that the impact of fiscal stimulus measures adopted by member states to facilitate short-term growth was assessed. The tone was supportive of fiscal stimulus, even in cases where there was still room to adjust monetary policy. However, even at this early point, limits to spending and a clear plan to scale back spending as the economy recovered were central to the OECD’s advice to member states (OECD, 2009a).
The official response
The OECD’s Strategic Response focused on two key areas: finance, competition and governance and sustainable long-term growth. Market liberalization remained at the heart of the OECD plan. The organization warned against the ‘risk of over-reaction through ill-conceived and overly costly regulation’ while simultaneously acknowledging the need for regulation to avoid such crises. Moreover, its plan included keeping markets open and fostering exit from public ownership. The need for fiscal stimulus was acknowledged. In relation to social and employment policy, the report anticipated that the recession would put budgets under pressure and promoted achieving balances and sustainable budgets in the long-term and keeping short-term spending ‘timely, targeted and temporary’ (OECD, 2009b).
As early as June 2009, the OECD advocated fiscal consolidation. The Economic Outlook 87 acknowledged that many countries were still implementing their response to the crisis, but considered the time had come for the immediate winding down of stimulus spending and a return to ‘fiscal consolidation’ (OECD, 2009c) with a suggested goal of 1% of GDP for three to seven years, in addition to the savings established by terminating stimulus spending. These goals were to be met largely through spending cuts, although it allowed some room for tax increases where necessary. Corporate tax increases were to be avoided. The 2009 Going for Growth report further warned against extending unemployment benefits and stressed that any extension should be temporary, so that beneficiaries rapidly moved back into the labour market. Far from developing an alternative paradigm, OECD recommendations seem designed to reconstitute the existing one as early as possible.
By mid-2010, the focus of the reports had clearly and directly shifted to fiscal consolidation. For example the working paper and policy note on Counter-cyclical Economic Policy in OECD drew lessons from the 2008 crisis itself and argued that states needed to have fiscal policy room to react to future crises (Sutherland et al., 2010). Similarly, in Consequence of the Crisis on Government Debt, the authors contended that debt accumulated from stimulus spending during previous banking crises had limited governments’ ability to respond to the crisis at hand (Furceri and Zdzienicka, 2010).[spell] Further, in early 2012 the OECD Economics Department released a series of six working papers and two policy notes dedicated to achieving stable and effective fiscal consolidation (Barrell et al., 2012; Blöchliger et al., 2012; Hagemann, 2012; Merola and Sutherland, 2012; Molnar, 2012; OECD, 2012a, 2012b; Sutherland et al., 2012). By the end of 2010, the position of the OECD was clear and consistent – the time for extraordinary measures had ended and the time for austerity had begun: ‘many countries will have to face up to severe macroeconomic imbalances during the recovery period and beyond’ (OECD, 2010a). At the same time, structural reforms had resumed a key place in discussion and advocacy.
The 2012 Going for Growth report positioned fiscal consolidation and structural reform as the two interdependent approaches states needed to take. Structural reform would include public efficiency, privatization of public services, reducing public subsidies, reforming disability and health compensation, eliminating early retirement schemes, reducing employment benefits and ending short-work schemes (OECD, 2012c). Other OECD research concluded that economic downturns have an effect on unemployment and structural unemployment rates, their results suggested ‘that structural unemployment in countries with flexible labour and product markets is likely to be relatively untouched by economic downturns’ (Furceri and Mourougane, 2009: 3). Unsurprisingly, less stringent employment protection, especially for workers with permanent contracts, was favoured. Similarly, in Labour Markets and the Crisis, the Economics Department emphasized the importance of ‘willingness to work’ conditions on social assistance and unemployment and the need to avoid early retirement plans or expansion of long-term disability benefits. All this is entirely consistent with pre-crisis thinking.
DELSA response: A missed opportunity?
While the Economics Department produced dozens of reports and working papers directly relating to the crisis throughout 2009–2012, the contribution of the Directorate for Employment, Labour and Social Affairs (DELSA) was limited to the annual Employment Outlook report and a handful of working papers and policy briefs. Much like the Economic Outlook, the Employment Outlook provides projections for employment and labour market statistics for OECD countries, as well as special chapters on policy recommendations and timely topics. The 2009 report advocated active labour market policy and retraining programmes but was less supportive of work-share programmes, despite their popularity throughout member states at the time. Since its view was that the benefits of such programmes are short-run, ‘it is important that these schemes be temporary and well-targeted to firms for whom the demand is only depressed temporarily and to workers at high risk of long-term unemployment’ (OECD, 2009e: 14, emphasis in original). While ambiguous on work-share programmes, the report came out strongly against any plans to introduce early retirement or expand long-term sickness and disability programmes, calling such schemes ‘abject failures’ in the past. The report did allow some room for public employment schemes, but again argued that such benefits need to be temporary to ‘guard against them becoming a disguised form of subsidised permanent unemployment’. The 2010 Employment Outlook reflected the general OECD preference for the winding down of fiscal stimulus. While the report Moving Beyond the Jobs Crisis acknowledged the limitations of the Reassessed OECD Jobs Strategy of 2006 in providing guidance for structural reform during a deep recession, it also argued that any exceptional policies pursued needed to be temporary in order to prevent long-term market distortions. Similarly, the 2011 Employment Outlook found that the social safety net programmes that were expanded during the crisis were often successful, but ultimately the report reinforced the view that any such extensions needed to be temporary and decisions to extend benefits needed to consider the long-term impact on the public purse (OECD, 2011).
In addition to the Employment Outlook, the only other notable crisis-related reports released by DELSA was a working paper on minimum income transfer (Immervoll, 2010) and another on short-term work schemes during the crisis (Hijzen and Venn, 2011). While both found such schemes had some success, attention was given to the pressure placed on social safety nets and stressed the importance of additional financial and operational capacity in order to ‘meet their objectives of poverty alleviation and activation’ (Immervoll, 2010: 48). DELSA also released two relevant policy briefs. Both noted the importance of governments responding to the immediate needs of the unemployed and informal workers, the responses were framed around the labour market activation and limited non-market based solutions to workers that were not captured otherwise (OECD, 2009f, 2009g).
DELSA’s reports and working papers did provide some advice in relation to possible expansion of the social safety net. However, the OECD response was dominated by the Economics Department. DELSA’s relative silence is surprising since throughout 2009 states were looking for social, employment and labour market policy alternatives to address the crisis. It failed to provide an alternative to neoliberalism.
The ILO response
The ILO argued for an infusion of cash into financial markets to prevent the collapse of banks and financial companies, for investments in labour market and social protection systems, and for greater regulation of financial markets. The first of these is simply an emergency measure designed to prevent collapse of the financial system. The others – greater regulation of finance and increased labour security (rather than flexibility) – address two of the features of neoliberalism identified above. Both had been objects of ILO criticism since before the crisis: We were in a crisis before the financial crisis erupted. It is a crisis of continuing and now increasing massive poverty worldwide and growing social inequalities in advanced, emerging and developing countries. (Somavia, 2008: 2)
The ILO positioned the crisis of 2008 within a context of systemic problems and used it to highlight its earlier Decent Work Agenda, which became a central feature of ILO documents leading up to the ILO’s official response to the financial crisis, the Global Jobs Pact in June 2009. The Decent Work Agenda outlined four strategic objectives; creating jobs; guaranteeing rights at work; expanding social protection; and promoting social dialogue. Some of these could form part of an alternative to neoliberalism, but were generally framed alongside other elements of the dominant paradigm, including free trade and capital mobility. Whatever role free trade and capital mobility may have played in the Keynesian era, it is clear that the policy constraints they impose in the era of neoliberal globalization are qualitatively different.
In this context, Hughes and Haworth (2011: 43) point out that the ILO is prevented from being too radical by virtue of its origins, its structure (tripartite and based on social dialogue) and its traditions. However, its role has been to ‘challenge policy settings and outcomes’ within the capitalist system. Its post-crisis role is consistent with those traditions. It responded rapidly, based on expert research on employment and labour market matters, and built upon its earlier identification of a looming crisis. As a result, the ILO gained prestige and enhanced recognition from the G20, being invited to participate at the ‘top table’ and, together with other international organizations, provide background papers for G20 deliberations (Hughes and Haworth, 2011).
Leading up to the ILO Jobs Pact
The post-crisis World of Work 8 report (November 2008) assessed rising levels of income inequality in the pre-crisis years. Income inequality was not portrayed as inherently negative but rather became problematic when it reached ‘excessive levels’ because it could result in political resistance against ‘pro-growth and pro-free trade policies, such as lower tariff barriers or phasing out subsidies for specific industries, particularly when the benefits of an open market are expected to reach only a minority’ (ILO and IILS, 2008: 26). The report did call for pro-employment policy, in a context of suggesting policies intended to ameliorate the most destructive aspects of neoliberalism. This is consistent with Jessop’s (2007) concept of flanking mechanisms rather than a paradigm shift proposal.
Similarly, The Financial and Economic Crisis: A Decent Work Response warned against the use of import duty increases, trading caps or ‘buy national’ clauses. Thus the free trade pillar of neoliberalism remained at the centre of ILO thinking. Instead, emphasis was placed on investment to redirect industries towards more sustainable models like the green economy. Social policy initiatives were proposed, including the extension of employment benefits and conditional cash benefits because, ‘if social protection is designed in a way that takes into account work incentives, it can boost the quality of growth through its pro-poor elements’ (ILO, 2009a: 46). Again, this is an effort to make social policy contribute to neoliberal concerns with work disincentives rather than propose an alternative that moves beyond them. Finally, the report concluded with recommendations for ‘social dialogue’ between government, labour and business in developing appropriate stimulus plans for the local context.
From May 2009 the ILO began to release a series of policy-oriented working papers on the crisis. The first, A Common Economic Crisis but Contradictory Responses: The European Experience 2008–09, argued that emphasis should be placed on government expenditures over tax cuts and discouraged tax cuts to business and high-level earners, as they are more likely to save extra income rather than spend it. Further, the report argued for infrastructure programmes, increases to unemployment benefits and the expansion of programmes which target the most disadvantaged. It noted that the recession would last longer than the IMF, OECD and World Bank had projected and that employment levels would remain depressed even during the rebound. Countries should consider these factors when deciding on the time frame for fiscal stimulus. The ILO clearly favoured deficit financed spending during the immediate period with the expectation that once employment levels had rebounded, the focus would return to balanced budgets and paying down debt. The main difference with the OECD was timing, and also the measure the ILO was using to assess whether the crisis was over (employment rates versus GDP growth).
ILO Jobs Pact
In launching the Global Jobs Pact, ILO Director-General Juan Somavia argued that fiscal stimulus was the only solution to the crisis: The synchronized global downturn makes it impossible in the short-term for any country to export its way out of the crisis. On the contrary, if all countries stimulate their domestic activity, primarily through employment and social protection, two direct ways to support aggregate demand, then global growth and trade will recover sooner. (Somavia, 2009: 2)
The Global Jobs Pact constitutes the ILO’s official response to the financial crisis. Reflecting the fact that the ILO member states vary in terms of economic development, the Pact is left sufficiently open in terms of policy options, so it could be adapted to local conditions. A follow-up report described the Jobs Pact as ‘the Decent Work Agenda applied in the context of crisis’ (ILO, 2009b). The goals emphasized retaining employment and investment into small and medium enterprises (SMEs) as key drivers of employment growth, and skills training for both new workers and re-entry into employment. Finally, it included strengthening social protection through income support and pension security.
With sustainable jobs as its priority, the Pact suggested the following options: macroeconomic stimulus packages; investment into active labour market policy and the public agencies which support the unemployed, and vocational and entrepreneurial skills programmes; investment into workers’ skills development; job-loss prevention schemes (i.e. work-share); improving access to credit for SMEs; supporting cooperatives; using public employment schemes to reduce unemployment in the short-term; regulatory reform conducive to job creation; and investment into research and development. The Pact also identified investment into social policy, suggesting the following options: cash transfer schemes for the poor; a social protection floor; extension of unemployment benefits; programmes to encourage long-term unemployed to stay connected to the labour market; minimum benefits guarantees for pensions; coverage for temporary and non-regular workers; and regular reviews of minimum wages.
While elements of the Jobs Pact are clearly at odds with the neoliberal project, these aspects are designed to address residual negative outcomes that cannot be met through market-driven solutions. Even within employment policy recommendations, the ILO’s recommendations are similar to the OECD’s, arguing for investment into skills development and programmes that maintain connection to the labour market. An ILO official (confidential interview, Geneva, 12 September 2012) pointed out that while the organizations’ staff tended to see things in similar ways there were differences. One was that the OECD tended to view labour market reform in more market-oriented ways than the ILO, but ‘we’re talking about a spectrum here’. Differences were attributed to different mandates of the organizations with the ILO being more focused on social justice, and to the ILO’s tripartite structure which meant workers’ organizations and their interests were represented. In addition, the government representatives at the ILO tended to be those with labour, employment and social affairs portfolios, whereas the OECD was multifaceted, but with ministries of finance being more influential.
ILO Jobs Pact policy briefs
Starting in November 2010 the ILO began to publish Jobs Pact Policy Briefs. Each brief overviewed a specific policy option a country might adopt to tackle the global jobs crisis. To date, 18 have been published, along three identifiable clusters: employment policy; equality and workers rights; and support for enterprise. The range of policy suggestions included expanding public infrastructure projects (ILO, 2010b), public employment programmes (ILO, 2010c), work-share programmes and new hire subsidies (ILO, 2010d, 2010e, 2010f, 2010g). Inclusiveness is the focus of a second cluster of briefs which target specific subgroups, including migrant labour, people with disabilities, people with HIV/AIDS, women, youth and those in the informal markets (ILO, 2010i, 2010j, 2010k, 2010l, 2010m, 2010n). Each of these briefs noted that the crisis provides an opportunity to use stimulus spending money to fund inclusive employment. The third cluster of briefs focus on supporting enterprise in order to stimulate job creation through the green economy (ILO, 2010o), credit and tax incentives for SMEs (ILO, 2010p) and aversion to trade restrictions (ILO, 2010q). Considering the briefs as a whole package, while the ILO promoted practices that were clearly designed as an alternative to the status quo through an emphasis on social justice and expansion of the public sector, it also remained dedicated to promoting traditional neoliberal practices such as tax cuts to stimulate business growth and free trade.
Aftermath of the Global Jobs Pact
The Global Jobs Pact and ILO clearly favoured longer-term state spending, even if it meant deficits, but its adoption came at a time when other international organizations and national governments were ready to wind down special programmes. Reports from the ILO continually warned against untimely withdrawal of stimulus (Fiorio and Saget, 2010; ILO, 2009b, 2009c, 2010b; Muqtada, 2010; Somavia, 2010a, 2010b, 2011). The Director-General stressed the importance of focusing efforts on the ‘real’ economy in order to ensure a jobs-rich recovery. This emphasis was reiterated in the World of Work reports (ILO and IILS, 2009, 2010, 2011). In the 2009 report, the ILO argued that not enough had been done to address the underlying causes of the crisis through reregulation of the financial markets. In December 2010, the ILO released a new annual report, World Social Security report, with the first issue focusing on the financial crisis. Like the World of Work reports, it warned against early withdrawal of stimulus spending and against deep spending cuts to social policy as governments attempt to balance their budgets (Social Protection Sector, 2010). While the ILO clearly favoured continued stimulus spending, it framed the policy position as part of a long-term goal of balanced budgets and economic growth. Although it drew on elements of Keynesian economics, taken together with the ILO’s other policy recommendations, which focused on skills training and pro-work social policy in a far from full-employment context, it did not represent a radical alternative to neoliberalism.
Joint responses
The ILO and OECD developed independent responses to the financial crisis and also worked in collaboration. Indeed, in the fall of 2008, both organizations were calling for multilateralism to address the crisis. OECD Secretary General Gurría called on the ILO to work with the OECD noting, ‘The crisis has made our two organisations’ work on labour markets and social policies even more important’. ILO Director-General Juan Somavia referred to the OECD and the ILO as ‘kindred spirits in the multilateral system’. However, joint pieces, between the ILO and OECD, or between them and other international organizations like the WTO, World Bank or IMF, were limited. Although it was not until June 2011 that the ILO and OECD signed a formal Memorandum of Understanding to help coordinate their efforts on the crisis and other shared projects of interest, staff contacts had been regular and extensive prior to this (confidential interview, ILO official, Geneva, 12 September 2012).
The G20 lacks staff and a permanent secretariat and is disposed to mobilize assistance from international organizations, whilst making it clear that they want consensus reports. In November 2010, the ILO, OECD, World Bank and WTO submitted a joint report to the G20 Summit leaders at the request of G20 member states. Given that the instructions of the G20 stated, ‘Open markets play a pivotal role in supporting growth and job creation … We ask the OECD, the ILO, World Bank, and the WTO to report on the benefits of trade liberalization for employment and growth’, the report unsurprisingly supported trade liberalization. Yet it did make some provisos, namely that states need to respond to the negative effects of trade liberalization and help workers adjust accordingly. The report supported active labour market policy and investment into the social and physical infrastructure that supports competitiveness as appropriate responses for governments. Far from providing an alternative, the recommendations fell within the broad parameters of the neoliberal package of free trade and flexibilization of labour markets.
The ILO worked on two additional reports, with the WTO and IMF respectively, but it was not until November 2011, shortly after signing their MOU, that the OECD and ILO produced a joint report for the G20 meeting. Their submission consisted of one joint statistical update (ILO and OECD, 2011a) and three additional policy reports presented by the ILO in collaboration with the OECD (ILO and OECD, 2011b, 2011c, 2011d). All four documents call attention to the impact of the financial crisis on jobs. The report on a social protection floor calls on OECD members to expand social services in their own countries to ensure full coverage for all citizens, as well as supporting the establishment of a floor in developing economies. Clearly such proposals have the potential to ameliorate the effects of neoliberal economic policies but, as Deacon (2012) reminds us, the global social floor proposal remains focused only on the poor and is well short of the kind of welfare state rebuilding that would represent a paradigm shift. The report youth calls on members to expand investment in education and labour market support for youth. The recommendations include adjusting minimum wages, wage subsidies for youth and policies to reduce the space for informal work, where youth tend to find employment. The reports reflect areas of consensus between the ILO and OECD. Notably, while the reports are generally vague, they do not address the issues of fiscal consolidation, perhaps because the two organizations have diverged on timing.
For its part, the ILO sees advantages in being at the table where its views can be considered before broader decisions are made. It also recognizes that working with other international organizations, and taking into account the need to persuade governments of the need to take action, constrains the advice that can be given (Confidential interview with ILO official, Geneva, 21 September 2012).
Conclusion
When the crisis struck, the ILO seemed best positioned to respond quickly. Its Decent Work Agenda was easily adapted to the new context. In contrast, the OECD was in an awkward position in 2008/2009. Many of its customary recommendations – deregulation, privatization and scaling back of employment benefits – did not fit with solutions to the crisis and were considered by many to be responsible for it. Indeed, while acknowledging the need for state intervention of financial markets and stimulus spending initiatives, the OECD consistently refers to these as ‘unconventional’ methods – a sign that no significant rethink was taking place. Rather than providing an alternative the OECD recommended temporary adjustments to current instruments, flanking mechanisms to bolster the old paradigm. There was no flexibility about certain key tenets of the pre-crisis paradigm – states might consider short-term capital investments into the banking system and expansion of certain employment programmes, but the OECD continued to advocate the capital mobility, free trade and market-driven policy solutions. Even support for ‘flanking’ policies that states were engaging in, like work-share and stimulus spending, was limited and quickly abandoned by the end of 2010.
The ILO partially capitalized on the opportunity presented by the crisis. Certainly, its prescience about the coming crisis enabled it to respond quickly with detailed research that was found useful by global economic governance entities, especially the G20. 9 Its organizational reputation was enhanced and it was called upon for advice to a greater extent than formerly. Partly this was because it was a vehicle for including labour perspectives at a time when social instability was widely feared. Whilst more critical of the prevailing neoliberal paradigm than the OECD, it did not provide a coherent set of alternatives to it. Although elements of the Decent Work Agenda and the ILO Jobs Pact provide recommendations that challenge the neoliberal paradigm, the ILO’s hard policy recommendations amounted to flanking mechanisms, intended to ameliorate the worst consequences of the crisis, but lacking a clear alternative. Similarly, the OECD’s DELSA did not appear to develop a coherent response. As the austerity motif became more dominant, the reports and speeches from the ILO became more defensive and warned against withdrawing stimulus too quickly. The OECD initially was forced to acknowledge the lack of fit between the crisis and its standard recommendations. It emphasized that the 2008 crisis was unique and thus required extraordinary measures. However, as markets began to normalize, the OECD advocated a return to orthodoxy.
This article has sought to determine the extent to which the crisis shaped the policy advice of two international organizations with interests in global social policy. Its focus is on the role of ideas and the extent to which they change and persist over time, especially in a context of exogenous shock. Through its impact on employment the crisis led to emergency responses by states designed to offset economic collapse and a crisis of social cohesion and social policy. The ILO and OECD were selected as global organizations to examine for signs of policy alternatives. Both have aspirations to be centres of expertise in social policy. Neither has the power to compel compliance with its policy recommendations. Both therefore depend on capacity to develop ‘authority’ or influence based on expertise. Both incorporate, albeit in different ways, structured representation from business and labour as well as states. In the distant past both had played roles in paradigm change. Through their direct link to the real economy, based on labour and business representation, both are equipped to respond to the pain and suffering experienced by workers and employers confronted by a recession and crisis of significant scale. It is not unreasonable to expect such organizations to be receptive to or, if enough of their member governments and social constituents were supportive, even in the forefront of efforts to craft alternatives to the policy paradigm that led to the crisis. The qualifier, however, points to the role of power in defining the nature of crisis and the limits of change.
There are differences between the two organizations both before and during the crisis. The ILO was more inclined to retain stimulus spending for a longer period. Yet there is also a common pattern in that after a brief period of advocacy of a more activist state both organizations tended to revert to familiar territory in terms of policy recommendations. This is indicative, perhaps, of thinking ‘inside the box’ rather than outside it. Taking the components of neoliberalism as a package – privatization and deregulation, capital mobility, free trade, inflation control, reduced role for the state accomplished by spending and tax cuts, balanced budgets, acceptance of market-driven inequality – there was little evidence of a sustained challenge to these doctrines from either organization. This certainly suggests that Blyth’s (2001) conclusion that continuity and reinforcement of dominant paradigms are as likely a result of crisis as is their replacement, has merit.
Even when the OECD’s customary line clearly could not respond to the reality of the crisis the approach was to adjust and tweak the policies, an example of what Hall has classified as first order change. In those moments the OECD conceded the need for non-market driven solutions, like the recapitalization of banks, as an emergency stabilization measure and not a move towards an alternative economic model. Further, rather than engaging in contestation and debate, DELSA’s response to the crisis was minimal and largely in line with neoliberal ideology. Similarly, while the ILO’s recommendations focused more directly on how social policy and stimulus spending could be used to support workers during the crisis, it failed to tie these into a larger discursive shift in terms of the goals of the dominant paradigm. Despite the window of opportunity the crisis provided, the ILO’s recommendations would result in at most second order change by Hall’s account. Important as that might be, we have suggested that the ILO’s origins, structure and political traditions limit its capacity to go further. Indeed, much in line with Jessop’s concept of the flanking mechanisms, the responses from both organizations amounted at most to addressing the symptoms associated with neoliberalism, rather than the root causes of the problem. Neither organization was able to break the ‘cognitive locks’ and harness the opportunity that the crisis provided. 10 Once the initial shock was over there was a move back to the pre-crisis orthodoxy in the case of the OECD, and the ILO’s position stopped short of a fundamental rethinking of the dominant paradigm.
Both the similarities between the organizations and their differences can probably be explained in terms of the power relations reviewed in the first section of the article. Both are embedded in an architecture of policy advice that, as long as the major players within the international system such as the G20 members are united on this point, is aimed at stabilization rather than transformation. This limits the alternatives canvassed and provided. To the extent the ILO is more reformist and critical than the OECD, this seems due to its mandate, and degree of structured representation of labour and interactions with labour, employment and social ministries rather than finance ministries and central banks.
Footnotes
Acknowledgements
The paper was first presented at the International Sociology Association, RC 19 Conference, Seoul, 25-27 August 2011. We would like to thank our discussant on that occasion, Alexandra Kaasch, other audience participants, plus the three anonymous referees for the journal for their very helpful comments. Stephen McBride is grateful for funding from SSHRC (Standard Grant number: 410-2010-0837) and the Canada Research Chairs program.