Something old, something new: The ILO response to the 2008 financial and economic crisis

Abstract

In October 2008, rumblings in the financial markets finally erupted in a week of steady and unprecedented losses on the New York Stock Exchange. The ensuing contagion and ultimate descent into a protracted global downturn would expose a failed system of global economic governance. The international institutions, and in particular those longstanding critics of the Washington Consensus of privatization and deregulation, rightly seized on the occasion to rethink exactly how and for whom the global economy should work. As it did for reform of some excesses and lax oversight of the financial sector, so too would the crisis create opportunities to increase spending on job creation and social protection, long shrinking as states sought to lower taxes and create accommodating business environments. By 2009, governments were mobilizing trillions of dollars to lubricate lending markets and shore up failing banks, but also to support public works, extend unemployment and other social protection benefits. For its part, the International Labout Organization (ILO) would cast the episode as a global jobs crisis, naturally, which only coordinated international action could address (ILO, 2009). But in addition to prescriptions for remedying depressed labour demand, it would also undertake an unprecedented push for the expansion of social protection. Immediately following the crisis, the ILO’s work was guided by two objectives. The first was to keep the initial expansionary reaction afloat in many industrialized nations where formal protection systems existed and had been active in providing cover from the fallout. The second was to introduce new coverage for exposed populations, often inside developing countries where social protection systems were too selective, weak or altogether non-existent. For the latter, the ILO’s initial approach appeared to sequence the construction of social security systems, recommending investments in establishing coverage breadth – even if it meant delivering only limited benefits to larger numbers of people – before going on to address concerns about the size of transfers and their ultimate impact on poverty (ILO, 2009a)1. The roll-out of ‘at least basic’ income security and essential health care for all represented the social protection floor, ensuring all of those in need have access to support often coming in the form of non-contributory cash benefits. This sequenced, or progressive, approach had several advantages. First, it seemed to make good sense that the construction of social protection floors would serve to build up the requisite institutions and administrative capacities of governments needed to deliver social protection benefits, whatever their size. Second, by first covering all those in need,