The South African Civil Society Information Service

Low Wages and High Unemployment are Paralyzing the Global Economy

16 Oct 2012

Worldwide the strategy for becoming more competitive in the global economy is to lower wages for an export economy. The problem that has arisen is that almost every country has done the same thing. Heiner Flassbeck is Director of the Division on Globalization and Development Strategies of the United Nations Conference on Trade and Development (UNCTAD). He has just released UNCTAD's 2012 annual report. It is essentially a report about inequality. It's not just that inequality is unfair -- Flassbeck's report argues that lower wages are actually the root cause of the global recession.

Fleissbeck argues, "We're stuck. Monetary policy has run out of instruments and of weapons, so to say, to fight the slump. Fiscal policy is blocked politically, and in wages, in terms of wages, the labor market was going in the wrong direction. So there's no surprise that we cannot get out of recovery. Unfortunately, and this is a big problem that we have—most of my colleague economists still stick to the idea of a self-regulating, self-stabilizing labor market. As long as they do, we will not understand what is really going on."

Find part two of this interview here: "The labor market is not self-regulating; governments must support worker's fight for higher wages."

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