One in every three young people in the world is either unemployed or working yet living in poverty. Between 2010 and 2013, developing country economies grew almost twice as fast as the wages workers earn.
Mainstream macroeconomic prescriptions are leading to jobless growth and rising inequality. But some developing countries have taken another path, supporting the kind of profitable manufacturing that has the potential to catalyse the creation of decent and dignified jobs.
Global rules deny developing countries access to the policies that rich countries once used to industrialise; but a growing number of countries is pushing back against these rules. If they match these efforts with regional cooperation to protect workers’ rights, they can make sure that economic growth delivers the much more important goal of ensuring that everyone lives a decent and dignified life.
Economic policy used to be focused on how governments could support economic transformation and job creation. But since the 1980s, it has focused on increasing GDP growth through liberalisation, privatisation and deregulation. For years, policy makers have had very little to say about jobs.
Many countries have followed these prescriptions to the letter; in the absence of manufacturing, people have to rely on vulnerable work in services and agriculture.
Vietnam is one of the outliers; active government involvement in the economy means that the country has a diverse and growing manufacturing sector. But new rules prevent the government from using policies that could help firms move into higher-value activities. New trade deals are likely to lead to a major shift in Vietnam’s economy, away from producing machines and motorbikes and towards mass production of cheap clothes and shoes. This shift is likely to expose Vietnamese workers to the same commercial ressures as garment workers face in Bangladesh. Pressure to supply clothes cheap, fast and flexibly means that factory owners cut costs wherever they can. By joining global value chains, Bangladesh has pursued a model of economic development that depends on the exploitation of millions of women, forced to work in terrible conditions for little pay.
According to the IMF, the failure to protect labour rights is responsible for two thirds of the increase in inequality in developing countries between 1980 and 2015. Against a backdrop of rising global concern about inequality, it is increasingly urgent that developing country governments promote the kind of economic transformation that can generate decent and dignified jobs – especially for the women who make up the majority of the workforce in the world’s factories. Far from undermining growth, higher wages have the potential to reinforce industrial policy by increasing demand for manufactured goods.