World leaders must address the "ethical vacuum" at the heart of globalization or face the danger that the widening gap between rich and poor will lead to further conflict, political upheaval and war, the International Labor Organization said yesterday.

Its year-long commission on globalization has concluded that the deep-seated and persistent imbalances in the workings of the global economy are unsustainable.

Wealth is being created, but too many countries and people are not sharing its benefits.

Without fairer rules governing trade flows, immigration and labor standards, billions will continue to miss out on the rising global prosperity, prompting a fresh wave of international instability.

"Global governance is in crisis," the report said. "We are at a critical juncture and we need urgently to rethink our current policies and institutions. The economy is becoming increasingly global, while social and political institutions remain largely local, national or regional."

Properly managed globalization could be a force for good: the faster growth spurred by integrating world markets has the potential to lift millions out of poverty.

"Wisely managed, it can deliver unprecedented material progress, generate more productive and better jobs for all, and contribute significantly to reducing world poverty."

But to achieve this will require world leaders' political will to change the current path of globalization

"Wealth is being created, but too many countries and people are not sharing its benefits."

Some of the poorest states suffer from too little not too much integration with world markets, the ILO's director general, Juan Somavia, said.

"Globalization has passed over the heads of African countries."

The panel, which was chaired by the presidents of Tanzania and Finland and included the Nobel prize winning economist Joseph Stiglitz, interviewed citizens, politicians and business leaders from around the world.

It found widespread concern about the current direction of globalization"Its advantages are too distant for many while its risks are all too real," the report said.

"Corruption is widespread. Open societies are threatened by global terrorism, and the future of open markets is increasingly in question."

Globalization had created winners and losers both within and between countries. Unemployment worldwide had reached 185m, according to the ILO, the highest recorded. And the richest 1% of the US population raked in 17% of the country's income, the highest level of income inequality since the 1920s.

On the positive side, the rapid rise in global communications brought the reality of life in the poorest communities on to the TV screens of the rich, prompting growing concern in the west about fairer trade rules and global labor standards.

"A truly global conscience is beginning to emerge, sensitive to the inequities of poverty, gender discrimination, child labor and environmental degradation wherever they occur."

The report recommended that western leaders tackle the skewed rules of global trade which shut exports from some of the poorest countries out of rich countries' markets and promote a minimum level of social protection worldwide.

More aid money had to be found to finance the UN's ambitious millennium development aim to halve global poverty by 2015.

"The choice is clear," the report said.

"We can correct the global governance deficit in the world today, ensure accountability and adopt coherent policies that forge a path for globalization that is fair and just, both within and between countries; or we can prevaricate and risk a slide into further spirals of insecurity, political turbulence, conflicts and wars."

© Guardian Newspapers Limited 2004

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