Alternatives to austerity? Post-crisis policy advice from global institutions

Abstract

The 2008 global financial crisis caused major anxiety about the stability of the neoliberal economic regime. This affected the financial and banking systems and also raised the spectre of mass unemployment and social unrest. A 'post-crisis' world was widely proclaimed in 2010. This was premature; by 2012 Europe was embroiled in a sovereign debt crisis and the US economy showed few signs of real recovery. A second recession seemed likely and austerity emerged as the standard response. Austerity, 'the quality or state of being austere' and 'enforced or extreme economy', became a buzzword. In practice, austerity means an economic and social policy based on balanced budgets to be achieved by reduced government spending, especially on employment and social policies, an approach entirely consistent with the neoliberal paradigm that has dominated policymaking for several decades. Yet the depth of the crisis provided an opportunity for rethinking the neoliberal policy package that had replaced the Keynesian welfare state, established after the Second World War. Cognizant of the fact that the development of alternatives to dominant paradigms may have many sources, this article probes the policy advice provided by two global organizations -the OECD and the ILO. As well as tracing the austerity motif, the article seeks to identify the extent to which alternatives were canvassed at the global social policy level.

International organisations: policy agendas and transfer mechanisms in global labour governance

“…The ILO had spent the 2000s decade formulating an approach to counter laissez-faire globalisation, and in the aftermath of the subprime crisis it developed an alternative to the austerity approach that was going to dominate the response from rich economies. For instance, The ILO Jobs Pact from 2009 supported macroeconomic stimuli, active labour market policies and income support for the unemployed (McBride and Merolli, 2013).…”

Reviewing the 2018 OECD Jobs Strategy – anything new under the sun?

“…Continuity rather than discontinuity also characterised the OECD's position during the protracted economic crisis that began in 2007/2008. A detailed analysis of the OECD's response is beyond the scope of this article but it can be noted that while in the early stage of the crisis the OECD acknowledged the need for fiscal stimulus, it was emphasised that there should also be a speedy return to orthodox economics in the form of balanced and sustainable budgets (McBride and Merolli, 2013;OECD, 2009b;OECD, 2009a). Theoretically, of course, budgets can be balanced at various levels of expenditure and revenue, leaving it open to individual states to decide whether they should be high taxation/high spending or low taxation/low spending jurisdictions.…”

The OECD and the aftermath of the crisis: Another missed opportunity?

“…economic paradigm to emerge from the apparent failures of neoliberalism, within the OECD there was no substantive change to the mix of policy reform recommendations (McBride and Merolli, 2013). The literature on paradigm shifts reminds us change is slow and organizations and their actors can get locked into particular ways of thinking that lead them to draw up conclusions that as Blyth ( 2001) argues make 'no sense' (p. 24).…”