Global downturn hits

Forecasts for what lies ahead for the global economy point to more difficult times on the horizon and therefore ongoing struggles for workers, trade unions and social allies. The World Bank projects the global economy will shrink by an alarming three per cent this year. The sharp and steep deceleration of worldwide economic activity from growth rates of 1.9 per cent in 2008 and 3.8 per cent at the cycle's peak in 2007 has led to the most widespread economic dislocation since the Great Depression as households and businesses throttle back on consumption and investment.

Despite energy and commodity prices reversing course from their historic highs reached last year, workers and families continue to struggle with badly strained budgets. Downward pressures on purchasing power have accelerated as companies attempt to retrench workers, cut hours and reduce compensation, which further undermines demand and exacerbates insecurities. While impacts vary across regions and companies, ultimately all workers in the sector are affected directly or indirectly. A high degree of uncertainty exists on how severe and prolonged the downturn will be, with deflationary trends already present in some countries.

While governments have injected massive amounts of capital into banks and the financial sector, loans for many enterprises and households remain difficult to access or have been blocked altogether. The financial crisis has meant cash-strapped families can't afford to buy cars while lenders restrict credit lines for working capital and deny loans to companies. This comes at a time when companies' working capital needs increase as inventories accumulate, payment schedules stretch out and capital turnover slows. The combined effects of the downturn and the credit freeze have strained the solvency of companies and contributed to potentially many more bankruptcies, putting countless numbers of workers and their families in jeopardy.