THE International Labour Organisation (ILO) has forecast that the world economy would be able to create about half of the 80 million jobs that would be required in the next two years to bring the unemployment level down to the pre-financial crisis level. Global recession triggered by the Eurozone debt crisis as well as rising US trade deficit has proved intractable in spite of various bailout packages as well as politically arduous conditions that have led to strikes by powerful public sector unions in Greece, Spain, and more recently Italy. The French-German bailout deal, with the minutiae still to be worked out, is premised on a three-pronged strategy: to strengthen the bailout fund by one trillion euros, to compel banks to write off 50 percent of the Greek debt and banks to raise more capital. China as a source of capital, will be proactively wooed by the Europeans though the French President Sarkozy did state that the success of the package is not contingent on Chinese support. Markets did rally in the aftermath of the deal, however speculation remains as to whether these measures are sufficient to turn the global economy around.
The latest ILO job forecast indicates that recovery is unlikely to be imminent. And what would be more disturbing for the US and the Eurozone countries is the assessment that most of these new jobs would be created in the developing world with only 2.5 million expected to be created in the developed countries. Social unrest, the ILO argues, will rise as a consequence. As is evident in recent months, violent social unrest in Eurozone debt-ridden countries like Greece, has been complemented by largely peaceful but massive protests in major US cities as well as in the UK against Wall Street, defined as major business houses, instead of Main Street, defined as the common man. The major grouse of the protesters on both sides of the Atlantic remains government action in favour of bailout packages. In the case of the Eurozone indebted countries, the charge is that the common man is expected to pay the price for their profligate governments while in the US and UK protests are against the industrial/banking sector that has begun to reward itself with huge bonuses after receiving large state injections from the taxpayers’ money. In this context, it is relevant to note that growth in China and India, even though it has slowed, is well above the global average and these economies would probably be the major recipients of increasing job opportunities.
But what about Pakistan one may well ask? Would we be one of the countries where jobs would be created? One does not have to be an economist to forecast that the jobless rate is most likely to rise in Pakistan in months and perhaps even years to come. The reason is well-known and acknowledged: the continuing energy crisis that continues to shut down industry for two days every week (with gas loadshedding expected to reach new heights in the current winter months) coupled with heavy government borrowing from the private commercial sector that is crowding out private sector borrowing are trends that show no inclination towards reversing. Additionally, the severely cash-strapped government is expected to curtail development expenditure, with obvious negative impact on national output, while sustaining its current expenditure. And within the components of current expenditure, Prime Minister Gilani’s refusal to increase electricity rates recently, with the objective of bringing the sector closer to full cost recovery, is expected to compromise the government’s ability to keep within the budgetary subsidy figure for Wapda/Pepco of 122.7 billion rupees and KESC’s 24.5 billion rupees. In short, current expenditure would rise further due to political constraints, and with the government refusing to curtail its own profligacy as well as failing to appoint heads of state-owned entities on merit (with the 300 billion rupee drain on the exchequer annually) inflation will rise and so would unemployment - the two indicators that are the barometers of any government’s political support.