Transcript Responding to the Global Economic Crisis

CANADIAN TEACHERS FEDERATION
PRESIDENT’S FORUM
Edmonton, 12-13 July 2010
FORCES FOR CHANGE:
EDUCATION FINANCE
Profiles of a crisis:
Phase 1: Early warnings 2006 - 7
Nouriel Roubini (as far back as September 2006 – forecast the end of
the real estate bubble)
Joseph Stiglitz
Amartya Sen
Paul Krugman
Poul Nyrup Rasmussen’s book: “In a Time of Greed” 2007
Profiles of a crisis:
Phase 2:
AUGUST 2007
Pressure builds: 2007 - 2008
DECEMBER 2007
Sub-prime mortgages
Structured financial products
Central banks start to ease
credit and money supply
AUGUST 2008
Where are the toxic products?
US Fed bails out Fannie Mae
and Freddie Mac
Inter bank lending freezes
15 SEPTEMBER 2008
Lehman Brothers collapses
16 SEPTEMBER 2008
THE PARTY STOPS !
US bails out AIG
Profiles of a crisis:
Phase 3:
Saving the financial sector
G20 Leaders
G20 Leaders
Washington, USA
London, UK
Nov. 2008
April 2009
Profiles of a crisis:
Phase 3: (2)
BAILOUTS
 AIG
 Banks
 Auto companies
STIMULUS PACKAGES
Monetary Stimulus
 Reducing cost of credit (interest rates)
 Increasing money supply (UK, US, Japan)
Fiscal Stimulus
Increase spending
 Cut taxes
IMF ESTIMATED IN JANUARY 2009 THAT 2% OF GLOBAL GDP
WAS NEEDED FOR RECOVERY
NATIONAL STIMULUS PLANS SHOULD BE
COORDINATED TO HAVE BEST IMPACT
PUBLIC SECTOR SPENDING, INCLUDING EDUCATION,
WILL HAVE TWICE THE IMPACT OF TAX CUTS
Profiles of a crisis:
Phase 4: Saving the real economy
G8
L’Aquila, Italy
G20 Leaders
July 2009
Pittsburgh, USA Sept. 2009
G20 Labour Ministers
Washington, USA
March 2010
Profiles of a crisis:
Phase 5: A rush to the exits
Greece, Spain, Portugal, Ireland, the Euro Zone sovereign debt crisis
OECD Ministerial CouncilParis
G20 Finance Ministers
Severe budget cuts
May 2010
Busan May 2010
Germany, France and UK
G8/G20 Leaders Muskoka/Toronto
Pascal LAMY, DG WTO:
“THE SHRINKING AGENDA”
June 2010
TRADITIONAL CAPITALISM
Stocks in companies
traded on regulated
stock markets
Corporate bonds
Government bonds
• companies raise capital
• finance for infrastructure
(roads, schools)
Banking system
Circulates credit
Shareholders
Employees
• Pension Funds
Personal and corporate taxation on
•revenues
• assets
• capital gains
• consumption (VAT)
Private/Commercial
property
Public sector
• Recurrent spending
• Debt service on capital/
infrastructure investments
CASINO CAPITALISM
PRIVATE EQUITY
Unlisted on stock
markets
STRUCTURED FINANCIAL
PRODUCTS
Off bank balance sheets
HEDGE FUNDS
Escape banking
Regulations
HUGE BONUSES !
OFFSHORE
MINIMIZE TAXES !
HAVENS
Corporate bonds replace
PROPERTY  SUB-PRIME MORTGAGES
Governments bonds
PPPs
MORE BONUSES
Often funded by private equity
for which a major source of finance
PENSION FUNDS
Buy a house (110% mortgage)
Raise your mortgage to finance:
house extensions; car; holiday; college fees
MORE COMMISSIONS
GLOBAL IMBALANCES
The United States No 1 economy
Coming out of « the lost decade »
 From balanced budget (Clinton)
Other OECD countries
 To record public deficits (Bush: taxcuts and Iraq war)
Big trade deficit
EU/Euro zone No 3 economy
Growth slowing
Higher unemployment
Developing countries
Africa, Asia/Pacific, Central/South
America, Caribbean
= Financial flows
Japan No 2 economy
Eg Australia: Commodities
Emerging economies
China
big trade surpluses
India, Brazil, Chile, South Africa
outsourcing
SWFs
Oil/gas producers
Russia, Gulf States, Nigeria,
Venezuela, Norway
Exchange rates
USD, Euro, Yuan
The next phase?
D. Strauss-Kahn, IMF, Vancouver, 22 June:
“A road along a cliff”
Heavy sovereign debts Double-dip recession
Consultation with Stephen Harper 18 June
Letter by US President Obama to G20 Leaders, 18 June
G20 Statement 26-27 June
The risk down the road:
DSK again in Vancouver, 22 June
“The taxpayers bailed out the banks once. They won’t do it a second time.”
IF banks and other financial actors (hedge funds, etc.) continue to speculate …
IF the financial sector is insufficiently regulated …
IF regulation lacks global coherence …
and
IF there is no reserve for a future bail-out
The global economy could reach ….
the end of the road
March 2009 – March 2010
Financial markets had recovered significantly
Upswing continued to March 2009
An indicator of global trade:
The BDI shows increasing signs of stress
June 23, 2010, 3:58 PM GMT
Don’t Panic, But The Baltic Dry Is Down Again
5 July 2010: 25,900,000 hits for "recession is over“
Radio Canada, 22/4/2010:
Rapport du FMI: la récession mondiale est terminée!!
BBC News, 23/5/2010:
Is the recession definitely over now?
OECD has predicted a jobless recovery
Unemployment increased steeply in
Industrialized countries
OECD does not project much improvement in
employment in 2010 - 2011
TUAC trade union advisory committee to the OECD CSC commission syndicale consultative auprès de l’OCDE
Global Economic Prospects for 2010 – according to the IMF
The World Bank: 6 July 2010
Global economy is showing signs of recovery, but
 Many are still being left behind
 43 poor countries are suffering effects of the global
recession
 They face $11.6bn shortfall in core spending for health,
education, etc
The World Bank: 6 July 2010
The crisis is jeopardizing years of progress in
fighting poverty
 64 million more people will fall into extreme poverty
in 2010
 30-50 thousand more babies may die in Africa this
year
 1 billion people could go chronically hungry this year
The World Bank: 6 July 2010
The poorest countries have been hit hard in 2009
The crisis increased poverty rates in comparison to what they would have
been without the crisis. This is the case for all these four countries.
Source World Bank
While the global focus on food prices has waned, domestic staple food
prices in several countries have experienced double digit increases in
2009, particularly in Sub-Saharan Africa.
Source World Bank
THE ILO:
THE FINANCIAL AND
ECONOMIC CRISIS:
A DECENT WORK
RESPONSE
Dominique Strauss-Kahn, London 23 November
“Exit too soon, and you kill the recovery. Exit too late, and
you sow the seeds for the next crisis”
“Exiting too early is costlier than exiting too late”
“The old growth model is dead”
“The old model under which households in the USA and
elsewhere propelled the global economy with their voracious
appetite for consumption, is dead – or at least on its last legs”
“This shift would be helped by stronger social security
systems and higher spending on health and education”
Repeated in Peru 22 June 2010.
PARADIGM CHANGE
From: Global imbalances
Inequity
Casino capitalism
To:
Decent work
Just transition to green jobs
Equity
Health and education
A paradigm for sustainable recovery
THE UNWANTED PARADIGM
Monetary easing of Oct – Dec 2008 created liquidity
Stimulus packages were financed by banks
Back to:
A new cycle of massive profit-taking
So: “Bank bonuses make a come-back”
The Wall Street Journal, 14 Oct 2009:
23 firms will pay $140 billion this year – back to 2007 levels
A new round of speculation – until the bubble bursts again
And this time, no more room for monetary easing
or fiscal stimulus !
THE BIG THREAT TO
PUBLIC EDUCATION
Declining public revenues
“Exit strategies” to
reduce deficits
EDUCATION FINANCE IN CANADA
Chart E.
Share of Consolidated Provincial/Territorial and Local Government Spending in
Canada Allocated to Elementary-Secondary Education Drops to Lowest Level in
Two Decades in 2007-08e
15%
14 .6%
14 .4%
14 .2%
14 .3%
14 .1%
14%
14 .0%
14 .1%
14 .1%
13 .9%
13 .9%
13 .4%
13%
13 .1%
12 .7% 9
12 .9%
12 .8%
12 .7%
12 .5% 12 .5%
12 .2%
12%
11 .8%
11%
0%
1989-90 1991-92 1993-94 1995-96 1997-98 1999-00 2001-02 2003-04 2005-06 2007-08
1988-89 1990-91 1992-93 1994-95 1996-97 1998-99 2000-01 2002-03 2004-05 2006-07
CTF-FCE Research
EDUCATION FINANCE IN CANADA
Chart D.
Shares of Consolidated Provincial/Territorial and Local Government Spending
Allocated to Elementary-Secondary Education in 2007-08e
15.0%
14.0%
13.0%
14 .0 %
13 .8 % 13 .7 %
12 .8 % 12 .8 %
12 .5 %
12 .1 % 12 .0 %
12.0%
C anada = 1 1.8%
11 .5 %
11 .3 % 11 .2 %
11.0%
10 .7 %
10.0%
9.7%
9.0%
8.0%
Sask. Nun. Man. Ont. Alta.
CTF-FCE Research
N.L. P.E.I. N.W.T. N.B. N.S. B.C.
Yn.
Que.
FOUR KEY MESSAGES
1. DEFEND AND DEVELOP QUALITY PUBLIC SERVICES
2. CLOSE THE FINANCING GAP FOR EFA
3. PROMOTE A “SURGE” IN VOCATIONAL EDUCATION
AND TRAINING
4. ETABLISH A NEW GLOBAL PARTNERSHIP FOR
TEACHER EDUCATION AND PROFESSIONAL
DEVELOPMENT
REASSERTING VALUES
VALUES
EI’s VISION FOR EDUCATION AND SOCIETY
Education is a public good not a commodity.
Education is central in our societies in many ways;
• social and economic;
• building and defending democracy;
• individual fulfillment;
• community development;
Education should promote
• equity
• non-discrimination
• understanding among peoples
Quality education requires quality teachers
Education unions should be key actors
Education is a human right.
CTF PRESIDENT’S FORUM
Edmonton, July 12, 2010
 Gracias
 Merci
Bob Harris
Education International
[email protected]
 Thank you
www.ei-ie.org/handsup
Blog:
http://fundingeducation.blogspot.com/