Austerity is killing us -- now the world must invest to recover

Crosses in front of the Greek parliament on April 8, 2012, in Athens. Protesters gathered after a retired pharmacist killed himself.

Story highlights

  • Unemployment, fear and despair are unraveling people's lives
  • The failed policy of austerity has left a legacy of extreme levels of unemployment
  • Austerity has led to 10,000 suicides and up to a million cases of depression, research shows
  • Labor unions will this week call for 1 trillion euro investment into infrastructure

Unemployment, fear and despair are unraveling people's lives and would normally drive leaders to urgent action.

As the riots in Sweden underscore, even wealthy nations suffer rips in their social fabric wrought by the greed of profit and inequality.

Yet governments are making policies which are divorced from the very dignity of work that leads to stable economies and optimism.

Unemployment creates inequality and inequality is both social and economic poison.

Sharan Burrow, general secretary of the International Trade Union Confederation

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In the lead up to this year's OECD Ministerial Forum, OECD data shows that inequality has increased by more over the past three years to the end of 2010 than in the previous twelve.

Five years since the "great recession" started, the failed policy of austerity has left a legacy of extreme levels of unemployment, rising inequality, the marginalization of a generation of young people and the desperation of a growing informal sector where rules simply don't apply.

International organizations have failed.

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These same organizations preaching austerity at any cost did not prevent the economic crisis and they are still failing in the quest to regulate the greed and destruction of speculative capital.

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The very best prognosis is that we are entering the period of the "great stagnation." The IMF again in April revised global growth forecasts down to barely more than 3%, with Europe in recession.

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This is not enough for recovery.

Even the optimism for the emerging economies is dimmed with Brazil's growth projection falling to 3%.

Last week we saw stock markets flailing to stop free fall and China's export growth officially slowing.

The global economy is no more secure today than it was five years ago, but now it has a bitter crisis of unemployment and inequality.

This has been bought to us by corporate greed, ineffective governments and international institutions taking policy demands to heights that threaten economic dictatorship and perpetuate procyclical decline.

Only income-led growth will stabilize economies and effect inclusive growth. Yet leaders have no serious jobs plan, tax evasion is rampant and the distributional tools of collective bargaining and social protection are under attack.

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The numbers of unemployed are climbing again and an International Labour Organization estimated that near 75 million young people will be jobless in 2013. This means, in some countries, families will face two generations of unemployment. This is an economic and social time bomb.

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In Portugal, Francalina, a mother of two sons who left Portugal to find work in Brazil, told me of her despair.

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"How can we live when our pension is slashed like this? We spent our lives working and saving, but now it is very difficult. What sort of country is this?" she said to me.

"In the past we didn't need our country [to] help us in supporting our children. Today is harder than before because our children don't have hope or any independence. It's impossible for us.

"The Government must help support families. Our politicians know where to get financing but they won't do it, they tax working people, instead of taxing the rich," she said.

"We know we may have to wait two or three years, but we still need some light at the end of the tunnel."

Overall the ambitions of austerity to reduce the debt-to-GDP-ratio, which had surged in the aftermath of the financial shock in 2008, has failed.

Countries like the UK, Spain, Portugal and Greece, that have applied harsh austerity have a considerably higher increase in their debt-to-GDP ratio. The social consequences are severe.

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Cuts to government expenditure have caused more than 10,000 suicides and up to a million cases of depression across Europe and North America, according to Oxford University researchers who published The Body Economic.

The research shows that in the U.S., at least five million people lost access to healthcare since the outbreak of the crisis; in the UK more than 10,000 families have lost their home. The most dramatic situation is in Greece, where expenditures in health care has been cut by 40%.

Labor unions will launch renewed calls for investment in infrastructure this week at the OECD forum. They will ask for 1 trillion euro investment into infrastructure -- less than half of the public money handed to the banks, according to estimates across Europe and the U.S. They will also ask for climate action, progressive taxation measures, a cessation of the attacks on collective bargaining and a universal social protection floor.

Jobs, collective bargaining, a minimum wage on which people can live, social protection and essential services are the core elements of reducing inequality. But will leaders listen? Will they give Francalina the hope she needs?

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