The OECD at 50: Better Policies for Better Lives

The OECD at 50

Better Policies for Better Lives The OECD at 50 Better Policies for Better Lives

The OECD at 50

The OECD at 50: Better Policies for Better Lives was edited by Nicholas Bray, at the request of the OECD Chief of Staff and G20 Sherpa, Gabriela Ramos. He received wide support and input from numerous present and former members of the OECD Secretariat.

Elena Miteva, Advisor to the Secretary-General, provided constant support. The OECD Public Affairs and Communications Directorate contributed editorial input and assistance with the preparation of this book.

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The OECD at 50

Contents

12

Foreword Angel Gurría Secretary-General, OECD

14

Messages Nicolas Sarkozy President of the French Republic

15

Hillary Rodham Clinton United States Secretary of State

20

The OECD 50 years of economic co-operation

26

The OECD and Development: An imperative from the beginning

30

Working with partners Building a stronger, cleaner, fairer world economy

34

Global economic management and the role of the EDRC William White

37

44

The OECD: A view from the desk of the economics editor

56

The 1960s Economics, trade and statistics: Some early focus points for OECD work

64

Adapting economic policy discussions to evolving challenges Niels Thygesen

William Keegan

68

The origins Economic growth through effective co-operation

The 1970s Shifting the emphasis of economic policy

72

The birth of the International Energy Agency Etienne Davignon

47

The Marshall Plan: Building intergovernmental co-operation

78

John Llewellyn

Openness, fairness and transparency: 50 years of international investment policy at the OECD Manfred Schekulin

49

The OECD’s Nuclear Energy Agency: Promoting safety and preparing for future energy needs

80

The 1980s New challenges for economic co-operation

84

The international co-ordination of macroeconomic policy

Luis Echávarri

52

Transport and the OECD: Responding to the challenges of globalisation Jack Short

Val Koromzay

7

8

The OECD at 50

112

Entering the new millennium Enhanced engagement, institutional innovation, measuring progress

116

Promoting a fairer world economy: The OECD and the fight against harmful tax practices Gabriel Makhlouf

120

OECD and education: The power and potential of PISA Arne Duncan

124

MENA-OECD: Helping the countries of the Middle East and North Africa respond to their citizens’ needs Dr Soukeina Bouraoui

130

The OECD today and tomorrow Coping with the challenges of the next 50 years

135

Contributing to a deeper understanding of financial markets and their regulation Charles Dallara

86

WP3: High-level policy making in a stimulating forum Sir Andrew Crockett

90

136

Working with the OECD to create a better global business environment Tadahiro Asami

The OECD seen from the viewpoint of an international banking analyst Richard O’Brien

96

The 1990s A changing global context

103

The rise of globalisation: New challenges for the OECD Jean-Claude Paye

104

The reform years: Building a stronger, more agile OECD Donald Johnston

106

The OECD anti-bribery convention: A trailblazer in the fight against corruption Huguette Labelle

11215

10

The OECD at 50

141

The OECD and the IEA: Working together for economic security and green growth Nobuo Tanaka

146

Reinventing the MENA-OECD programme Rainer Geiger

150

Trade unions and the OECD: In the wake of the great recession Sharan Burrow and John Evans

152

The way forward: Streamlining policy discussions for more effective multilateral surveillance Kumiharu Shigehara

154

International partnerships

156

The OECD and the ILO: Intertwined histories Juan Somavia

158

The OECD and the IMF: A complementary partnership

163

Dominique Strauss-Kahn

161

The OECD and the FAO: Working together for food security and agriculture development

The OECD and UNESCO: Together in the service of knowledge Irina Bokova

167

The OECD and the WHO: Partners for more effective health policies Margaret Chan

Jacques Diouf

169

The OECD and the AfDB: Working together for African development Donald Kaberuka

171

The OECD and the ADB: Working together for Asia-Pacific development Haruhiko Kuroda

173

The OECD and IFAD: Working in partnership to eradicate rural poverty Kanayo F Nwanze

175

The OECD and the WTO: Working to advance trade and development Pascal Lamy

176

Congratulations on the 50th anniversary of the OECD

178

Index of advertisers

12

The OECD at 50

Foreword

Angel Gurría Secretary-General, OECD

T

he world has changed greatly since the OECD was created 50 years ago, and the OECD has changed with it. But one thing has remained constant: our objective to help governments design and implement better policies so that people may enjoy better lives.

Over the past half-century, the OECD has been a catalyst for change in many aspects of public policy. We encourage debate and a shared understanding of such critical global issues as economic growth, employment, financial markets, innovation, trade and investment, development, the environment, health and social welfare, as well as in the spheres of public and private governance. Our analyses and recommendations are independent and evidence-based, making our work valuable for member and partner countries alike.

The OECD’s raison d’être is to be a pathfinder, a policy advisor and a standard setter on a global scale. A ‘do’ tank. We have fulfilled this role by building on our fundamental values: objectivity, openness, integrity and boldness. The Anti-Bribery Convention, the Principles of Corporate Governance, the Guidelines for Multinational Enterprises, the Model Tax Convention, the Principles for Integrity in Public Procurement, the Jobs Strategy, the PISA evaluation of educational performance are telling accomplishments in the interests of a stronger, cleaner and fairer world economy.

Anniversaries are not only opportunities to reflect on lessons and achievements. They invite us to look ahead and gauge our ability to understand the trends changing the world economy and our capacity to fulfil our role in the years to come. As the world emerges from the grip of a major financial crisis, the economic, social and environmental challenges that we face are tremendous.

Our anniversary takes place at a defining moment, as the global community seeks deeper international co-operation and a new global governance architecture.

The G20, as the premier forum for economic discussions and action, facilitated unprecedented measures to stimulate the economy in the aftermath of the crisis. We are honoured that G20 leaders have called on the OECD to provide analysis and policy advice on structural issues, ranging

The OECD at 50

from employment, capital flows, taxation and combating corruption, to trade, investment and development. Our ability to support the G20 in its work is an important test of our relevance.

Participating in the task of global governance also presents us with a unique opportunity to increase our impact on a global scale. The integration of developing countries into the world economy, to the point where they now account for more than one-fifth of total trade, is a cause for celebration. But more work is needed to enable them to play a fuller role in building a better world. Their involvement in the substantive activities and standard-setting work of the OECD has become essential.

The OECD is adapting to this new reality, pursuing membership negotiations with Russia and enhancing its engagement with key emerging economies – Brazil, China, India, Indonesia and South Africa – while maintaining close relations with more than 100 developing countries.

A promising element of our strategy is to invite emerging economies to be a part of the process when we update our instruments, as was recently the case with the revision of our Guidelines for Multinational Enterprises and the Green Growth Strategy.

After the dramatic events we have witnessed since 2008, and as we move forward into the next half-century, it will not be sufficient simply to return to growth. Against a backdrop of climate change, entrenched unemployment and large fiscal deficits, we must identify and foster new sources of growth. The OECD Innovation Strategy, the Green Growth Strategy, the Skills Strategy, our gender agenda and our work on new measures of progress beyond GDP provide strong analytical foundations to overcome the effects of the crisis and achieve a more sustainable, balanced and lasting recovery. But we cannot solve any of the big challenges of today without emerging and developing countries and without development. This is why we are working on a new approach to development, which will reinforce collective action for inclusive growth and stability.

Our founders, 50 years ago, were convinced of the need for co-operation in order to achieve “peaceful and harmonious relations among the peoples of the world”. Today, the OECD is well equipped to foster a new era of co-operation with a new sense of global responsibility. As we seek to do this, we will remain true to the spirit of our founders and continue to put the well-being of people at the centre of our concerns.

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The OECD at 50

A message from

Nicolas Sarkozy President of the French Republic

F

or the past 50 years, France has hosted in its capital city the headquarters of the OECD. For half a century it has been an honour and a privilege for France to participate in the birth, development and opening up to new horizons of the OECD. I would like to pay tribute to the men and women who work in the Château de la Muette, the Organisation’s historical headquarters: they represent an unparalleled wealth of expertise that contributes to the intellectual stature of Paris. I would also like to pay tribute to the commitment and dynamism of the Secretary-General of the OECD, my friend Angel Gurría, in the service of the Organisation that he leads and of its member countries, who have recently reappointed him for a second term.

The OECD can be proud of what it has achieved in the past 50 years.

The crisis from which the world economy is gradually emerging gave a striking demonstration of the need for international co-operation in matters financial, economic and social. In so doing, it validated a concept that lies at the heart of the Organisation’s identity and that has driven its action over the past half-century. Let us not forget that it was in response to the need to get the countries of Europe working together after the Second World War, and so to speed up their reconstruction through the policies of co-operation backed by the Marshall Plan, that the OECD’s forerunner, the OEEC, was born in 1948.

The Organisation underwent a name change at the start of the 1960s, but there was no change in what still today constitutes its institutional “genome”: the promotion of international co-operation through the championing of “best practices”. The OECD is in a class of its own in the “galaxy” of international organisations, successfully orchestrating lively and fruitful intergovernmental co-operation by means of an institutional mechanism that has the force of a precision tool – the exchange of best practices among its member countries and partners – all the while anchoring this co-operation in a robust and rigorous corpus of doctrines and analyses. To put it another way, the Organisation is that rare amalgam between an intergovernmental forum for co-operation and an outstandingly productive “think tank” in the service of better policies for better lives – its credo.

Over the past 50 years the OECD has, nonetheless, radically transformed itself to take account of the emergence of new powers and, above all, new challenges. In 1989, following the fall of the Berlin Wall, the OECD forged new links with the countries recently liberated from the communist yoke. Today, the Organisation is opening its doors to the new economic powerhouses of Brazil, Russia, India, Indonesia, China and South Africa. France encourages this new openness, which will allow the OECD to find its place within a changing architecture of world governance. It will enable the Organisation, in particular, to obtain full recognition, including on the part of the emerging powers that are not (yet) among its members, of its principles, norms and standards, whose role is to provide a framework of rules of the game for a globalisation process that France wishes to be both harmonious and lasting.

I am in no doubt that the OECD possesses all the qualities needed to accomplish this ‘metamorphosis’, as is shown by its front-line contribution to the work of the G20 and its steadfast, proactive and greatly appreciated participation in the efforts to build a new system of world governance that lie at the heart of the French Presidency of the G20.

The OECD at 50

A message from

Hillary Rodham Clinton United States Secretary of State, Chair of the OECD’s 2011 Ministerial Council Meeting

T

he United States is honoured to chair the Organisation for Economic Co-operation and Development’s 2011 Ministerial Council Meeting and celebrate the 50th anniversary of one of the world’s most successful post-war institutions. The United States was a driving force behind the establishment of the Organisation for Economic Co-operation and Development.

When we ratified the OECD Convention in 1961, President Kennedy expected that it would “become one of the principal institutions through which we pursue the great aim of consolidating the Atlantic Community”. Over the years, the OECD has far exceeded these expectations and become a global institution with members and partners all over the world.

The OECD’s initial objectives – to boost employment, raise living standards, maintain financial stability and promote economic development – have withstood the test of time. Today, the OECD’s world-class statistical and economic analysis helps guide policy makers around the world, and the OECD’s unique system of peer reviews and policy forums enables members to compare policy experiences and identify best practices. It is truly indispensible and allows us to have a conversation and find common ground to meet some of today’s most pressing issues.

The United States values the important role that the OECD plays in helping create a level international playing field where businesses can flourish and economies can grow. The OECD’s new work on women’s economic empowerment will give countries the tools to increase economic opportunities for women and help remove obstacles to gender equality. And the OECD is innovating new ideas and programmes to generate jobs, grow economies and raise living standards.

The global economic environment has changed dramatically since the creation of the OECD. New economic powers have emerged, and the recent economic crisis has underscored the interconnectedness and increased complexity of today’s world. Sustained global growth requires all countries to participate, including the developing world. But the OECD is an enduring institution, finding new ways to participate, new ways to collaborate, and new ways to expand opportunity.

From our fellow charter members to the most recent entrants, we can look back on a half-century of achievement and look forward to another 50 years of partnerships and innovation that will help the OECD maintain its place as an effective, influential and essential international organisation.

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The OECD at 50

The OECD at 50

The OECD 50 years of economic co-operation

The United States values the important contributions that the OECD has made to promote economic growth and development around the world. As we celebrate the Organization’s 50th anniversary, we look forward to working with the OECD to help meet the challenges of the 21st century.

Barack Obama, President of the United States of America

During the last 50 years, the OECD has been a leading partner in creating a set of international rules and guidelines for a sustainable global economy. The financial crisis and its consequences have once again illustrated the need for market forces to be channelled by effective global rules and strong institutions to allow for sustainable development of trade, employment and growth.

I am certain that governments will be happy to continue to draw on the OECD’s analytical and strategic competence.

Angela Merkel, Chancellor of the Federal Republic of Germany

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The OECD at 50

The OECD’s mission:

Better policies for better lives The OECD’s vision:

A stronger, cleaner, fairer world The OECD’s values:

Objective – Our analyses and recommendations are independent and evidence-based.

Open – We encourage debate and a shared understanding of critical global issues.

Bold – We dare to challenge conventional wisdom, starting with our own.

Pioneering – We identify and address emerging and long-term challenges.

Ethical – Our credibility is built on trust, integrity and transparency.

OECD member countries, with year of membership Australia (1971) Austria (1961) Belgium (1961) Canada (1961) Chile (2010) Czech Republic (1995) Denmark (1961) Estonia (2010) Finland (1969) France (1961) Germany (1961) Greece (1961) Hungary (1996) Iceland (1961) Ireland (1961) Israel (2010) Italy (1962)

Japan (1964) Korea (1996) Luxembourg (1961) Mexico (1994) Netherlands (1961) New Zealand (1973) Norway (1961) Poland (1996) Portugal (1961) Slovak Republic (2000) Slovenia (2010) Spain (1961) Sweden (1961) Switzerland (1961) Turkey (1961) United Kingdom (1961) United States (1961)

The OECD at 50

I offer my sincere congratulations to the OECD for 50 years of contributing to global growth, co-operation and stability. The OECD has played a key role in promoting values such as economic best practice, trade liberalisation and sustainable development that are vital to the world’s economic future. I wish the OECD continuing success in the years and decades ahead.

Julia Gillard, Prime Minister of Australia

B

ehind these four letters – OECD – lies a powerful concept: in today’s globalised, interdependent world, multilateral co-operation is the only way to deal effectively with global issues. The Organisation for Economic Co-operation and Development provides a forum in which countries work together to share experiences and seek solutions to common problems. It works with both developed countries and emerging and developing countries, providing policy advice and analysis and co-ordinating joint initiatives.

Its mission, put simply, is to help governments develop better policies that will ensure better lives for people around the world. Over the past 50 years, it has amply demonstrated the effectiveness of co-operation based on constant reappraisal of policies through peer review among equals. ❱❱

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The OECD at 50

Improve policy making

The OECD is a global organisation. It is a meeting place for countries that believe in co-operation as the most effective way to solve economic problems and raise living standards.

It is a ‘do’ tank. Under a structure resembling a sort of permanent intergovernmental conference, member countries direct and supervise the OECD’s work through a governing Council of ambassadors. The SecretaryGeneral acts as Chair of the Council, heading a Secretariat that conducts analytical and policy work under its supervision and in response to the instructions of specialist Committees and working groups. These, in turn, bring together officials and experts from capitals to debate and decide on policy.

Member countries come to the OECD to learn from each other, improve policy making and develop international standards and rules to address global challenges. “The OECD helps our thinking by providing a catalogue of good practices that have worked elsewhere,” says Balázs Hidvéghi, Hungary’s Deputy State Secretary for International and EU Affairs. “It is a knowhow bank that we are part of and can turn to and adapt to our own circumstances and needs.”

As Chile’s former President, Michelle Bachelet, put it during a visit to Paris in 2009, shortly before Chile became a member in May 2010, the OECD is “the club of countries that promote and foster best practices.” Being a member of the OECD ❱❱

GDP OECD countries vs. the rest of the world as a percentage of total world GDP

63.1%

36.9%

1960

1990

1980

71.0%

29.0%

60.9%

39.1%

2000

OECD (OECD aggregate is an “evolving” time series

68.5%

31.5%

1970

67.9%

32.1%

68.0%

32.0%

2010*

Rest of the world

* Estimate

and has been constructed taking into account the effective membership date of the member

% of world GDP

countries, according to the official accession

in PPPs, volumes,

dates: 20 countries in 1960, 22 in 1970, 24 in 1980

reference period 2005

and 1990, 30 in 2000 and 34 in 2010.)

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The OECD at 50

Based on 50 years of profound economic experience and co-operation with its member states, I am confident the OECD will be able to continue providing well-grounded analysis and advice for the challenges we will be facing in the years ahead – especially the need to promote global welfare and social balance through economically, socially and ecologically sound and sustainable policies.

Werner Faymann, Federal Chancellor of Austria

means “being able to access information and learning from the most advanced countries in the world,” concurs Franc Križanic, the finance minister of Slovenia, which became a member of the OECD in July 2010.

Agreements and approaches forged within the Organisation have often been adopted by larger groupings of countries. Indeed, some consider that its intellectual input into policy negotiations in broader multilateral contexts is one of its richest contributions. Between 1986 and 1994, OECD work enabled countries participating in the General Agreement on Tariffs and Trade, or GATT, to negotiate substantive new regimes for agriculture and services under the Uruguay Round, which led to the creation of the World Trade Organization. According to Sir Nicholas Bayne, a former ambassador of the United Kingdom to the OECD, “thanks to the OECD’s contribution, the WTO in force from 1995 has embraced the whole range of international trade, including agriculture and services, which the old GATT was never able to do.”

Implement best practices Because of the pressing nature of the problems that it is mandated to address, the OECD emphasises the need to support governments, not just in the identification of best practices, but also in their implementation. To keep pace with rapid change in today’s global economy, it looks beyond specific sectors to the interactions between science and technology and their impact on society, and for ways to protect consumers while also promoting the benefits of innovation.

In 2010, it launched an Innovation Strategy setting out priorities for government action, from

empowering people to innovate and to unleash innovation in firms to improving the governance of policies for innovation. Coinciding with its 50th anniversary, it is working on a Green Growth Strategy to assist governments in devising the policies that will be needed to promote environment-friendly economic growth over coming decades. Both are specific contributions to identifying and building new sources of growth in the wake of the worst economic crisis in more than a generation.

Development has been a prime focus for the OECD since its foundation. It provides a home for the Development Assistance Committee, or DAC, in which major aid donors discuss and co-ordinate policies, and it works with developing countries to ensure that they are able to participate fully in the new prosperity that scientific and technological innovations can bring.

In 1962, inspired by President John F Kennedy’s call for a place where developed and developing nations could “meet to study in common the problems of economic development”, the OECD Development Centre was set up with an inclusive governance structure allowing nonOECD countries full membership. Over the years, it has brought together OECD members and developing and emerging economies, fostering debate and discussion of “best practices” and seeking creative policy solutions to emerging global issues and development challenges. In 1996, a report by the DAC entitled Shaping the 21st Century: The Contribution of Development Co-operation paved the way for the Millennium Development Goals by calling for quantifiable targets to advance the betterment of people’s lives throughout the world. ❱❱

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The OECD at 50

The OECD and development: An imperative from the beginning

H

elping new states and developing countries to prosper has been a

The OECD Development Centre,

An early topic of discussion in the DAC

founded in 1962, serves as a bridge

was how much governments, as opposed

moral and political imperative from

between OECD member countries

to private donors, should give. In 1969,

the OECD’s earliest days. Its founding

and developing economies. Offering a

the DAC adopted the concept of “Official

Convention clearly stated the scope

platform for dialogue on an equal footing,

Development Assistance”, or ODA. In the

of its mission: to promote economic

its main purpose was and remains to

same year, a World Bank commission

development and well-being, not

share “best practices” to the benefit of

proposed a target for official aid of

only in its member countries but for

all. Several countries that have recently

0.7 per cent of donor countries’ gross

the world at large.

joined the OECD, including Korea and

national product, or GNP.

The Development Assistance

Chile, first joined the Centre before

In 1996, a DAC report spelled out a set

Committee, or DAC, brings together

pursuing full OECD membership. As of

of international objectives for economic

donor governments and multilateral

March 2011, it had 41 member countries:

well-being, social development and

organisations. It was one of the first

25 OECD countries and 16 non-OECD

environmental protection, including

bodies to be incorporated into the

countries. All have an equal say in

reducing child mortality, achieving

newly created OECD in 1961.

guiding and monitoring its work.

universal primary education and

The OECD at 50

halving the proportion of people living

developing country governments can

in extreme poverty. These were to

plan their development programmes

become the basis for the internationally

effectively. It also stresses the need for

adopted Millennium Development Goals

recipient countries to work with donors

(MDGs), reaffirmed by a United Nations

to ensure that aid money is well spent.

summit in September 2010 as targets for

Its inclusive approach to engagement

development by 2015.

in development is evidenced by its

In 2001, an agreement among donor

central role in creating and supporting

countries ended a system whereby much

important international bodies such as

of ODA to the world’s least developed

the Working Party on Aid Effectiveness

countries was “tied” under arrangements

and the International Dialogue on

requiring recipients to buy aid-funded

Peacebuilding and Statebuilding.

The Millennium Development Goals 1. Eradicate extreme poverty and hunger 2. Achieve universal primary education 3. Promote gender equality and empower women 4. Reduce child mortality 5. Improve maternal health

goods and services from specific suppliers,

Building on its multidisciplinary

usually in the donor countries. In parallel,

expertise and accumulated knowledge,

the OECD consistently stressed the need

the OECD is developing more integrated

for strong institutions in developing

and comprehensive approaches to

countries as a basis for the effective use

“development beyond aid”. In line

of aid. In 2005, the Paris Declaration

with its commitment to promote

on Aid Effectiveness committed

the strengthening of public services

countries and organisations to do more

and infrastructures, for example, it

to harmonise their development co-

is helping developing countries to

operation programmes, aligning them

modernise their tax administrations

meet development challenges. The

with recipient country strategies and

and raise revenues to pay for public

Development Centre’s Perspectives on

managing them for effective results.

services such as education, healthcare

Global Development and its Economic

and communications. It is working

Outlooks on Africa, Latin America, and

progress towards the MDGs. In a context

with development agencies and fragile

South-east Asia are a useful source for

of increasing global interdependency,

states to stem conflicts and support

analysis of economic, social and political

policies put in place by any one country

good governance in these nations. And

developments in the world’s developing

in areas ranging from trade, investment

it is looking for ways to help women in

and emerging countries. Through

and agriculture to fisheries, taxation,

developing countries achieve their full

strengthened policy dialogue and

security, innovation, and migration can

potential in parity with men.

knowledge sharing with emerging and

Aid remains critical to ensure

have impacts far beyond that country’s

Over time, the OECD has developed

6. Combat HIV/AIDS, malaria and other diseases 7. Ensure environmental sustainability 8. Develop a global partnership for development

developing economies, the OECD aims to

borders. Multiple crises – financial,

an extensive knowledge base which

make its work accessible and relevant to

economic, food, energy, climate change

helps it to better understand and

countries at all stages of development. 

– have increased awareness of policy interlinkages and the need for integrated collective action to stimulate growth and achieve results. Aid efforts need to be reinforced by a multidimensional and more coherent approach to development.

With only a few countries consistently meeting the 0.7 per cent target for aid (now measured by most countries as a proportion of gross national income, or GNI), the OECD monitors aid flows and how they are balanced among countries and regions. It urges donor countries to live up to their commitments and to be transparent and predictable so that

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The OECD at 50

OECD Headquarters, 21 May 2008. As part of the Danish government’s MDG3 Global Call to Action, Gunilla Carlsson, Swedish Minister for International Development Co-operation (right), presents the MDG3 champion torch to Angel Gurría, OECD Secretary-General (left), with Ole Christoffersen, Danish Chargé d’Affaires ai.

As a decision-maker, I appreciate the OECD’s bold and elaborated socio-economic policy advice. Its norms and standards have been trendsetting and of high quality and should continue to be so in an ever more globalised economy.

The OECD’s 50th anniversary will in no way diminish its early wisdom. All to the contrary, its youthful dynamism is alive and well. Its goals of liberty, prosperity and co-operation are well rooted in today’s world.

The OECD has to keep up its reputation of being a reference point, a house of best practices and high quality standards in all fields of socio-economic policy making.

Its future mission should concentrate on contributing to a fair, clean and sustainable global development. At a time of flux and global change it should continue to invest in further inspiring strengthened global economic governance.

Yves Leterme, Prime Minister of Belgium

The OECD at 50

Emerging issues and new approaches Amid the complex challenges facing governments, the OECD’s role is to alert policy makers to emerging issues and offer new approaches to known challenges. It set up a Committee to examine global and national environmental challenges in 1970, more than a decade before the United Nations convened the World Commission on Environment and Development under Gro Harlem Brundtland in 1983. It began studying the impact of tax havens on public budgets in the 1980s, well before the G20 seized on the issue in 2008. It warned of the unsustainability of many countries’ pension arrangements years before most governments focused on the issue.

In 1992, it launched a programme of peer reviews to evaluate the environmental performances of its member countries with respect to domestic laws and international obligations, backing its analyses with a broad range of economic and environmental data and providing targeted recommendations designed to reinforce national policy initiatives.

Since 2000, it has been leading international reflection on new ways to measure progress, looking beyond such traditional but restricted measures as GDP. In order to encompass the diverse experiences and living conditions of citizens and support evidence-based policy making, it has designed new and better metrics relating to various aspects of societal progress, ranging from statistics on people’s full economic resources, including services they produce for their own use, to their life-satisfaction and expectations.

It has also developed new insights into the statistical needs of developing countries.

Pioneering international agreements Sometimes, policy issues require internationally co-ordinated policy responses – on trade, for example, and on some macroeconomic issues.

In other areas, policy goals can be achieved by countries acting singly or in small groups, informed by “best practice” in partner countries – labour market and education reform being two examples. Countries learn from each other, identifying best practices and finding solutions to common problems, while taking account of possible spill-over effects from one country or group of countries to another.

The OECD helps us shape our public policies and provides a forum in which we can learn from each other to ensure that all our citizens prosper.

David Johnston, Governor General of Canada

Many international agreements on the environment started out at the OECD, from the “polluter pays” principle in the 1970s to the frameworks used for carbon trading to counter climate change today. The OECD launched a study of the public policy implications of e-commerce in 1995 and elevated the issue at ministerial level in 1998, the year in which Google was incorporated. After the 11 September terrorist attacks on the United States, the OECD worked with governments to draw up new Guidelines for the Security of Information Systems and Networks that now underpin data-protection efforts around the world. Its chemicals safety-testing programme alone, under which governments agree on test methods and data-quality standards and share the workload of safety assessments, saves countries an estimated €150 million per year. A method to quantify harmful subsidies in agriculture that was developed by the OECD is now being extended to address the issues posed by subsidies for fossil fuel production and consumption.

The OECD does not give out loans or grants, but it nevertheless has strong disciplinary powers. It achieves results by convincing governments of the value of adopting policies that are in their own self-interest. Its main leverage is exerted through peer review and peer pressure. As experience with this method has grown, so has appreciation of its worth.

When international co-operation is required for policies to be effective, the OECD seeks agreement by consensus. This often takes time but it is generally time well spent, as consensus helps to ensure that agreements, once confirmed, are respected. In recent years, the OECD’s focus has been further extended to helping countries implement policies, addressing the challenges inherent in the political economy of reform. 

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The OECD at 50

The OECD at 50

Working with partners Building a stronger, cleaner, fairer world economy

Mol, Belgium, 7 July 1966. Thorkil Kristensen, OECD Secretary-General (left), His Majesty King Baudouin of the Belgians (centre right), and the President of the Eurochemic General Assembly Walter Schulte-Meermann (right) inaugurate EUROCHEMIC

Partnerships and co-operation are the DNA of good policy making. Soberonita: the Human Genome, sculpture by the Mexican artist “Sebastián”, Enrique Carbajal, displayed in the courtyard of the Château de la Muette, OECD Headquarters

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The OECD at 50

The OECD at 50

“I

like working with the OECD because you talk about market economy, not capitalism,” a senior Chinese official once observed to an OECD interlocutor. Rather than focusing on a specific analytical framework, the OECD takes an evidence-based approach to economic challenges. Its faith in international co-operation, as set out in the OECD Convention, is based on the idea that, while there is no ‘one-size-fits-all’ model, countries benefit best from an open and fair market-based economic environment.

Clearing away the obstacles and restrictions that distort markets has been a constant theme at the OECD. Macroeconomics is at the heart of its work, but its belief in the market economy is underpinned by a clear understanding of the need for sound regulatory frameworks that only well organised and effective governments can provide. As a key promoter of sound public governance, its work covers virtually the whole gamut of economic endeavour, from agriculture and fisheries to nanotechnology and nuclear power. It reaches out across the globe, through its contributions to the G20 process and through country-specific policy analysis and recommendations as well as a host of regional initiatives, ranging from the African Partnership Forum to co-operation with the Organization of American States and the Asia-Pacific Economic Co-operation (APEC) forum.

The OECD is an indispensable source of advice on good practices and an essential support for Chile in this new world where the keys to development are knowledge, information, technology and innovation.

Sebastián Piñera, President of Chile

Policy pathfinder Drawing on facts and real-life experience, the OECD works with governments to understand what drives economic, social and environmental change, serving as a ‘path finder’ for key policy issues. It measures productivity and global flows of trade and investment. It compiles, analyses and compares data to provide evidence for policy making and to predict future trends. It contributes to better international standards and practices on all sorts of things, from the safety of nuclear power plants and new chemical compounds to the quality of tomatoes and avocado pears. It produces statistics on all manner of topics, from the quality of children’s lives to the number of people killed in road accidents. ❱❱

Some OECD contributions to a cleaner world economy ●

●

The OECD Council Acts on Mutual

●

The Paris Convention on Third Party

●

The regularly revised OECD

Acceptance of Data are the key

Liability in the Field of Nuclear Energy

Environmental Data Compendium

tools for assessing the safety of

ensures cross-border compensation in

presents data linking pollution and

chemical products.

the event of a nuclear accident.

natural resources with activity in such

The 2007 OECD High Level Forum on

sectors as energy, transport, industry

co-ordinated by the OECD helps

Medicines for Neglected and Emerging

and agriculture. It shows the state of air,

governments assess chemical

Infectious Diseases helped put diseases

inland waters, wildlife, and so on for

products used in agriculture in order

that disproportionately affect developing

OECD countries and describes responses

to reduce health risks.

countries on the international agenda.

by government and enterprises.

A wide-ranging pesticide programme

●

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The OECD at 50

OECD statistics are often based on data provided by countries, harmonised by the OECD to allow meaningful cross-country comparisons.

But it also generates new data in the context of specific projects. The Teaching and Learning International Survey, or TALIS, provides internationally comparable data on conditions affecting teachers in schools. The Programme for International Student Assessment, or PISA, produces comparable indicators every three years of 15-year-old school students’ abilities in reading, mathematics and science. Covering more than 70 countries, it serves as a yardstick

for education authorities to check their national systems’ performance and identify areas for improvement. By shifting the emphasis from quantity to quality, it has become a powerful tool for educational reform.

Working with business and unions The OECD works with business, through the Business and Industry Advisory Committee to the OECD, and with labour, through the Trade Union Advisory Committee. It looks at how much people pay in taxes and social security charges, and how pension systems will look after them in old age. ❱❱

Global economic management and the role of the EDRC

by William White

T

he Economic and Development Review Committee (EDRC) is the economic policy

Examinations of individual countries by the

the policies ultimately recommended by the

EDRC take place at one-day meetings at the

committee. Experience indicates that national

backbone of the OECD. Over decades, the

OECD in Paris. The agenda for each meeting

‘ownership’ provides the best guarantee that

staff of the OECD Secretariat have accumulated

is based on a draft paper prepared by OECD

policies proposed by the EDRC will actually

enormous expertise on a wide variety of

staff in close association with officials from the

be implemented. Evidently, ‘making reform

economic subjects. The job of the EDRC is to

country being examined. Representatives of

happen’ is every bit as important as having

tap into this knowledge base, along with insights

other countries involved with the OECD then

good policy suggestions in the first place.

provided by members of the committee, and

carry out a form of ‘peer review’, with a view

apply it to individual countries. Hopefully, the end

to guiding how the paper should be redrafted

has evolved materially since the committee

result is a set of policy recommendations tailored

prior to publication. Since the committee has

first met in 1961. Early on, the emphasis

to each country that will help ensure that the

no powers of either monetary or legal coercion,

was almost solely on macroeconomic

living standards of its people grow in a balanced

it is hoped that some combination of other

issues and projections for the country being

and sustainable way. Such a goal would seem

countries’ experiences, agreement on best

examined. There was a strong demand for

fully consistent with the global policy objectives

practice, and sound economic analysis will

such information, and no other organisation

recently agreed upon by the G20.

convince the examined country to sign up to

was publishing work of this kind. However, as

The subject matter of the EDRC reviews

The OECD at 50

The Czech Republic has always appreciated OECD analytical work and its policy recommendations. Most recently, my government has been drawing on it in designing a package of ambitious public finance, structural and institutional reforms.

Petr Nečas, Prime Minister of the Czech Republic

other public and private sector institutions also

examined. We are all aware of the growing

that each has a responsibility to ensure that

began to address macroeconomic issues, the

importance of emerging market economies in

international debts do not build up to

EDRC felt able to complement its original work

the global economy, and the EDRC process has

‘unsustainable’ levels. The inevitable crisis –

with chapters dedicated entirely to policies

changed to reflect this. Not only are many more

perhaps associated with increased

of structural reform. Looking ahead, we may

countries now being examined, but efforts are

protectionism – would harm everyone gravely.

conjecture that this shift in the balance of

being made to involve such countries in many

Perhaps, in this regard, the EDRC tradition of

interest between demand-side and supply-side

other aspects of the work of the OECD.

‘gentle peer persuasion’ may prove useful in

issues is likely to accelerate markedly.

Today, in many countries, high debt levels

These efforts are absolutely essential if the

convincing all concerned to do the right thing in

work of the EDRC is to retain its relevance, but

their own longer-term interests. At the least, it

mean that the scope for further monetary

they also pose significant challenges. How to

would be a useful complement to suggestions

and fiscal stimulus has now been entirely

get bigger without losing the benefits of being

for altered macroeconomic policies being made

exhausted. For the OECD, this implies not

a small club? How to involve, more intimately,

in forums such as the G20 and the IMF. Together

only a fundamental re-examination of the

countries at different stages of development,

with the efforts made by the EDRC to encourage

macroeconomic theories that led to our

and perhaps with different values, from long-

better structural policies worldwide, such an

economies’ current fragile state, but also of how

standing OECD members? And, not least,

outcome would imply that the committee had

structural reforms may still allow some optimism

how to maintain the traditional co-operative

made a not inconsiderable contribution to the

for the future. In this latter regard, the G20 has

spirit within the committee when global trade

better economic management of the global

now agreed that the OECD, with its unique

imbalances and exchange rate issues are

economy. This seems to be both the hope

knowledge base, has a crucial role to play.

driving a wedge between its members?

and the intention of all those now contributing

The subject matter of the EDRC

Yet, in the same breath as some speak of

to the work of the committee. 

examinations is not the only thing to have

challenges, others speak of opportunities. For

evolved over time. Equally important has been

example, the key to resolving global imbalances

William White is Chair of the OECD’s Economic

the number and character of the countries being

is for debtor and creditor countries to realise

and Development Review Committee.

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The OECD at 50

It interacts with other civil society bodies and parliamentary groups and maintains contacts with specific business sectors, for example with banks on financial markets, with the insurance and tourism industries and with major oil companies.

Its annual Going for Growth publication reviews individual countries’ policies on such matters as unemployment benefits, barriers to market entry, public ownership, market structure and price controls, and provides recommendations for structural reforms along with a checklist on how countries have responded to them. Its twice-yearly Economic Outlook analyses the global economic situation and short-term prospects, while regular country surveys go into greater depth at national level. Its annual Employment Outlook analyses labour-market developments in OECD countries and selected other countries and makes policy recommendations for boosting jobs and incomes. ❱❱

The OECD: A view from the desk of the economics editor

by William Keegan

O

ne way or another, the OECD has been

as well as the re-entry of Eastern Europe into the

OECD Factbook and that wonderful pocket-

a beneficent part of my professional life

club of market economies. The OECD also

book OECD in Figures. I know that everything

since I became economics correspondent of

played a vital role in transatlantic relations, as

is available ‘online’, but – call me old-fashioned

the Financial Times in 1967 – just in time for

well as in the rise of Asian economies.

– the wonderful thing about ‘hard copies’ is

the November 1967 devaluation of the pound.

My first visit to the OECD was in the early

that they give you context, and the chance of

I have always enjoyed, and benefited from,

1970s, when my mentor, friend and colleague

having access not only to the organisation

Samuel Brittan was on holiday and I was given

itself, but to the cornucopia of invaluable

the privilege of filling his treasured space with

less prone to the vagaries of fashion than

statistical material and analysis it produces.

an article entitled ‘The View from the Château

some other international organisations. If I

de La Muette’. After a period at the Bank of

have a reservation, it is that sometimes, while

information. Its emphasis on spreading the

England in 1976-77, I became Economics Editor

providing important contributions to study of

word about ‘best practice’ is particularly helpful

of The Observer. From that date on, I made

‘the supply side’, it has strayed from its

to policy makers around the world. Its

regular pilgrimages to the OECD for the annual

Keynesian roots. But I am delighted to say that

predecessor, the OEEC, was instrumental, via

ministerial meeting and the twice-yearly unveiling

it usually comes back to base. 

the Marshall Plan, in the post-war reconstruction

of the Economic Outlook.

The OECD is a fount of comparative

of Europe. Years later, membership of the

For an economic commentator such as

serendipitous discoveries en route.

I think that, on the whole, the OECD is

William Keegan is Senior Economics

organisation was not unimportant in the

myself, there is absolutely no substitute for the

Commentator and a former Economics Editor

emergence from fascism of Spain and Portugal,

Economic Outlook, the country studies, the

of UK newspaper The Observer.

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38

The OECD at 50

Identifying inequalities Enabling economies to provide more and better jobs, and helping young people make a successful transition from school to work, are at the core of its policy concerns. In the interests of stronger and fairer growth, the OECD is promoting active labour-market policies and effective redeployment services, while highlighting the importance of adequately funded and cost-effective reform programmes. At the same time, it is making a strong case for targeting the most disadvantaged groups, including young people without jobs for whom protracted unemployment can have longlasting effects on career prospects.

Innovative OECD analysis has shown that not only have social and economic inequalities been rising in many countries, but that this has resulted in inequalities of opportunities with a serious impact on economic performance as a whole.

To improve employment prospects in member and partner countries, the OECD is developing a Skills Strategy that will promote socially inclusive policies in favour of the skills that will be needed

in tomorrow’s economy. It is also making specific policy recommendations to help countries ensure that all citizens can benefit from economic growth.

Its biennial review of social indicators, Society at a Glance, provides policy makers with quantitative evidence on social well-being and trends across OECD countries and other major economies.

Global guidelines Because investment, competition, and markets are global, efforts to keep them fair and open have to be global too. The OECD has been working in favour of fair and open markets since it was created. The OECD Code of Liberalisation of Capital Movements, adopted in 1961, established obligations on participating countries to maintain free capital movements. The experience gained in this field is now proving useful in discussions on capital flows in the G20. Other agreements to encourage international investment and promote fair business dealings include the OECD Guidelines for Multinational Enterprises, first published in 1976 as part of an OECD Declaration on International

The OECD at 50

I am proud that Denmark provided the very first Secretary-General to the OECD, former Finance Minister Thorkil Kristensen. While his previous reputation was one of budget-cutting – his Danish nickname was Thorkil Belt-tightener – he set the OECD out on a solid journey of expansion, going from the initial 20 to the present 34 member states.

Lars Løkke Rasmussen, Prime Minister of Denmark

Investment and Multinational Enterprises, and regularly reviewed since then, most recently in 2011. Although not legally binding, the Guidelines include a mechanism through which citizens can submit complaints about business misconduct.

Drawn up at a time when multinational corporations were under a spotlight for their activities in developing countries, they provide a touchstone for companies’ commitment to ethical management and a global benchmark of corporate social responsibility.

The same commitment to fair and open markets underlies the 1997 OECD Convention on Combating Bribery of Foreign Public Officials in International Business Transactions, a legally binding treaty under which 38 governments, including all OECD countries and several emerging economies, have pledged to prosecute companies found guilty of paying bribes to government officials in order to win contracts. Corruption raises serious political and moral concerns in developed and developing countries alike. It distorts competition, raises costs, and wastes public money.

Focusing on the ‘supply-side’ of bribery – the person or company that offers, promises or gives a bribe – the Convention aims to limit unfair competition in international business transactions, and to contribute to good governance and economic development efforts.

Its unique strength is a rigorous peer review process, which includes a detailed evaluation of each country’s anti-bribery laws and policies, and like many initiatives and instruments of the OECD it is open for adherence by any country interested in the fight against corruption. By criminalising the act of paying a bribe, rather than the taking of bribes, the OECD Convention carries the fight against bribery to all four corners of the world.

Fair taxation Another long-standing OECD priority has been to remove the obstacles created by double taxation to the development of economic relations between countries. The OECD’s Model Tax Convention on Income and on Capital, first published in draft form in 1963 and most recently updated in 2008, provides a uniform means of resolving common problems in cross-border taxation. It serves as the basis for the negotiation, application, and interpretation of an estimated 3,700 bilateral tax treaties in force around the world, and its Commentaries have been cited by courts in virtually every OECD member country, as well as in many non-OECD countries.

One of the Model Tax Convention’s main principles is that the prices for tax purposes at which property and services should be transferred between members of a multinational enterprise should be those that would be used by independent firms in comparable transactions – the so-called ‘arm’s-length principle’. The OECD’s Transfer Pricing Guidelines for Multinational Enterprises and Tax Administrations, first published in 1979 and updated in 1995, have become the accepted standard around the globe for the determination of transfer prices. By minimising disputes between countries over taxing rights, they avoid double taxation that could cripple international trade, or no taxation, which hurts their treasuries.

Minimising tax burdens legally is one thing, but evading legal tax obligations is quite another.

The OECD is at the forefront of the fight against the misuse of tax havens by companies and individuals avoiding taxes due in their home countries. It also works with the Financial Action Task Force, grouping both OECD and non-OECD countries, to combat money-laundering and the ❱❱

39

The OECD at 50

financing of terrorism, while its Principles of Corporate Governance, first published in 1999 and subject to regular review, set out a comprehensive framework for the improvement and convergence of corporate governance practice. The OECD Forum on Tax Administration, bringing together tax commissioners from 43 countries, recently published a report showing how the Corporate Governance Principles can be applied in the tax area, making plain the responsibility of boards for financial and reputational risks associated with corporate tax strategies.

Stronger, cleaner, fairer The OECD’s main partners are governments, and in parallel with its work on integrity in the private sector it is also working with governments to define standards and practices of ethical integrity in public service and to prevent the conflicts of interest that can arise when an official has links to the private sector, either while still a member of the public service or after leaving such a post. Over the years, the OECD has evolved from looking at government policies to focusing as well on the policy process itself, seeking ways to make governments work better, both in terms of effectiveness in achieving expected outcomes and in transparency in their provision and financing.

In support of these objectives, the OECD was a front runner in identifying best practices in fiscal transparency and in developing the notion of budgeting for results.

Increasingly, its concern with governance reaches deeper than the national level to the sub-national institutions, where so much of the public activity that affects citizens’ day-to-day lives takes place.

In 2008-09, as the world economy found itself embroiled in financial and economic turmoil, the OECD developed a Strategic Response to the Crisis that was a useful basis for its participation in the G20 Summits. Today,

the OECD is one of the few organisations to accompany the G20 process in the preparatory phases of its work, as well as at the highest level. Taking its wide range of activities as a whole, its objective can be summed up as ‘helping governments build a stronger, cleaner and fairer world economy’: ● stronger, in promoting appropriate macroeconomic policies combined with effective regulation to underpin sustainable economic growth and shared prosperity; ● cleaner, in the twin sense of fostering clean environments to protect biodiversity and health, and also integrity in business dealings to combat corruption, tax evasion and fraud; ● fairer, in encouraging the equitable distribution of prosperity through well-functioning labour markets, effective education systems, evenhanded policies on migration and effective action to promote development. 

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The OECD at 50

The OECD at 50

The origins Economic growth through effective co-operation

A parade float at the Dutch Flower Festival, 1951

The Marshall Plan Speech, Harvard University, Cambridge, MA, 5 June 1947. General George C Marshall, US Secretary of State, on the occasion of his address to the graduating class

45

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The OECD at 50

The OECD has, since its creation, played a pivotal role in addressing the challenges faced by the world economy. Developing new skills, fostering innovation, designing ambitious rules of governance – these are some of the many areas where the European Union is proud of working hand in hand with the OECD in a constant search for delivering more and better jobs and growth.

José Manuel Barroso, President of the European Commission

The OEEC Charter, 1948

T

he origins of the OECD’s collaborative and consensual approach to economic co-operation date back to the late 1940s, when European leaders set out to rebuild their economies from the ruins of the Second World War. The OECD’s forerunner, the Organisation for European Economic Co-operation (OEEC), was created in 1948 to oversee the US-financed Marshall Plan for the reconstruction of Europe.

By making aid contingent upon the European countries’ planning and achieving an internationally compatible economic recovery, the Marshall Plan imposed co-operation on countries that had previously been at war.

By the late 1950s, the Marshall Plan had run its course. A new climate of co-operation in Continental Europe had led to the Treaty of Rome and the launch of the European Economic Community. In the US, however, times were tough.

Economic growth was weakening. Bankruptcies were rising to levels not seen since the Great Depression. Foreign trade restrictions and uncompetitive pricing of US goods were hampering US exports, and a dwindling US trade surplus was pushing the current account into deficit. Rather than disbanding the OEEC, Washington favoured building a successor organisation that would continue its policies of co-operation. ❱❱

The OECD at 50

The Marshall Plan: Building intergovernmental co-operation

by John Llewellyn

I

n the years after the Second World War,

to the graduating class of Harvard University

The poverty and starvation of the immediate

European countries were in a policy bind.

on 5 June 1947, the European Recovery Plan,

post-war years progressively disappeared. The

Weakened by conflict, their economies could

as it was officially known, set out to modernise

threat of communism sweeping continental

not grow without increasing imports. And rising

European government, industry and business

Europe receded. Thereafter, Western Europe

imports threatened to cause unsustainable

practices along the lines of efficient American

experienced an unprecedented two decades of

deficits in their balance of payments. But when

models and to lower trade barriers, with a view

sustained improvements in living standards and

their authorities responded by tightening policy,

to restoring a sense not only of hope among

social conditions, together with political stability.

a reduction in demand for imports translated into

European nations, but also of self-reliance.

a reduction in partner countries’ exports, thereby

Today, the Marshall Plan is remembered by

As the benefits of economic integration through the free movement of goods, services

spreading the slowdown. Amid a threatened

many primarily for its generosity: at its peak, in

and capital became apparent, Europe’s

failure to sustain economic recovery, Europe as a

1949, the US was transferring annually nearly

policy makers were encouraged to pursue

whole faced the risk of rising political discontent.

2.5 per cent of its GDP to Europe. But its

further easing of trade barriers, including tariff

principal contribution over its four-year life from

reductions, and to create institutions that

were rising. The spectre of Western Europe falling

In Italy and France, communist pressures

1948 to 1952 was to lay the intellectual, and

would co-ordinate the development of Europe’s

under the influence, if not the domination, of the

thereby the policy, foundations for the

economies. The European Commission

Soviet Union haunted leaders on both sides of

sustained future development of Europe, and

provided further impetus through its active

the Atlantic. It was in this environment that the

ultimately of a far wider circle of countries.

and dogged pursuit of the goal of creating a

US – not least to safeguard its own interests

Executed through the Organisation for

single European market. Europe’s Common

– conceived the Marshall Plan. Launched by

European Economic Co-operation (OEEC), the

Agricultural Policy, though criticised by many,

Secretary of State George Marshall in his address

Marshall Plan provided the incentive for a series

helped to prevent income differentials between

of internationally compatible recovery plans

rural and urban areas from widening to socially

based on two fundamental principles:

and politically unacceptable levels.

●●

●●

One country’s imports are another

In 1961, the US vision that gave rise to the

country’s exports, so that a recovery in

Marshall Plan led to the transformation of the

one, provided that it is sustained, induces

OEEC into the OECD, with the US and Canada

recovery in others; and

as members. In 1964, Japan was brought

Guaranteeing free trade among partner

into the OECD, and thereby into the ‘club’ of

countries is the best way to generate the

economies that espoused and practised the

confidence needed for investment on a

free international flow of goods, services and

sufficient scale to sustain growth in partner

capital. By the early 1990s and the demise of

economies collectively.

the Soviet Union, Western Europe had become a rich, prosperous, market-based economy

The policy succeeded. In the words of

approaching the size of the US. For the countries

historian Alan Milward, “…there developed in

of the former Soviet bloc, the European Union

the reconstruction period an institutionalised

was both an example and a powerful magnet.

pattern of economic interdependence in

Mirroring the role of the OEEC in earlier times,

Western Europe which was a better basis

the OECD supported their integration into the

for Western Europe’s economic and political

global economy by providing policy advice and

existence than the comprehensive regulation

examples of good economic practice. 

by treaty of major political issues which was ‘All Our Colours to the Mast’, Reijn Ddirksen (The Netherlands), 1950. First prize winner of the European Recovery Programme’s international Marshall Plan Poster Competition

attempted after 1918 and which failed”.

The four years of the Marshall Plan saw the fastest period of growth in European history.

John Llewellyn is a London-based economist.

Between 1978 and 1994, he held a number of senior positions at the OECD.

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The OECD at 50

OECD membership has equipped Estonia with new, powerful policydesign tools: comparative data and studies, best practices, tailor-made advice.

Belonging to the organisation strongly promoting open markets and democracy, the values I strongly believe in, is a great experience for Estonia.

Andrus Ansip, Prime Minister of Estonia

From the OEEC to the OECD In December 1959, the Presidents of France and the US, the Chancellor of the Federal Republic of Germany and the Prime Minister of the UK met in Paris to take the first steps towards this objective. In a communiqué, they announced their conviction that “virtually all of the industrialised part of the free world is now in a position to devote its energies in increased measure to new and important tasks of cooperative endeavour with the object of: “(a) furthering the development of the lessdeveloped countries; and “(b) pursuing trade policies directed to the sound use of economic resources and the maintenance of harmonious international relations, thus contributing

to growth and stability in the world economy and to a general improvement in the standard of living.”

Further meetings led to a Conference in May 1960 to discuss the reconstitution of the OEEC. Two months later, a full Ministerial meeting set up a Preparatory Committee under former Danish Finance Minister Thorkil Kristensen, as SecretaryGeneral Designate, to draft the Convention that would give birth to the new Organisation. On 14 December 1960, the US and Canada joined 18 European countries – Austria, Belgium, Denmark, France, Germany, Greece, Iceland, Ireland, Italy, Luxembourg, the Netherlands, Norway, Portugal, Spain, Sweden, Switzerland, Turkey and the UK – in signing the Convention on the Organisation for Economic Co-operation and Development.

In his State of the Union address on 30 January 1961, little more than a week after taking office, US President John F Kennedy spoke of the economic problems besetting the US and stressed the roles of both the future OECD and NATO in “sharing with our allies all efforts to provide for the common defense of the free world and the hopes for growth of the less-developed lands”.

In the months that followed, work continued on remodelling the Organisation, still under its old name of OEEC. Canada was the first to deposit its instrument of ratification of the Convention, ❱❱

The signing of the OECD Convention, Salon de l'Horloge, Quai d’Orsay, Paris, 14 December 1960

The OECD at 50

The OECD’s Nuclear Energy Agency: Promoting safety and preparing for future energy needs

by Luis Echávarri

T

he OECD’s involvement with nuclear energy dates back to its origins. The 1950s

As nuclear programmes developed in the

rating nuclear and radiological events to help

1970s, the treatment of radioactive waste

explain their significance to the public. The NEA

had already witnessed rising excitement about

became a pressing issue. A remarkable result

laid the foundations for the Information System

the potential of this emerging source of power.

of NEA work was the 1972 OECD Council

on Occupational Exposure (ISOE), launched in

On 17 December 1957, the Council of the

decision establishing a Multilateral Consultation

1992 as a forum dedicated to improving worker

OEEC – the predecessor of the OECD – created

and Surveillance Mechanism for Sea Dumping

protection at nuclear power plants. In 1993, it

the European Nuclear Energy Agency, with

of Radioactive Waste, which led to a total ban

launched the International Nuclear Emergency

16 member countries. More than half a century

on sea-dumping of waste in 1995. In 1975, the

Exercises (INEX), consisting of exercises based

later, and now with 29 members, the renamed

newly created Radioactive Waste Management

on nuclear accidents involving key decision-

OECD Nuclear Energy Agency (NEA) plays an

Committee initiated a comprehensive effort to

makers from a number of countries.

indispensable role in the international regulation

address the methodological, financial, technical

and governance of civil nuclear energy.

and social dimensions of the subject.

In many ways, the NEA’s history is linked

Monitoring the world’s uranium resources

At the start of the new millennium, NEA member countries began to reconsider the benefits of nuclear energy with an eye to the

to that of civil nuclear power itself. Developing

and levels of production and demand has

future. The Generation IV International Forum

nuclear science was its member countries’ initial

been a major endeavour since 1965. The NEA

(GIF) was launched in 2001 to carry out

goal. One of its early research centres, at Halden

publishes estimates, now in co-operation with

research and development to establish the

in Norway, remains active. The first international

the International Atomic Energy Agency (IAEA)

feasibility and performance capabilities of the

norms for the protection of workers and the

in a key biannual report. In 1983, the NEA

next generation of nuclear energy systems.

public against radiation, adopted in 1958, were

launched a similar series providing data on

The NEA was selected to serve as the GIF’s

based on a proposal by the Agency. In 1964, it

project costs of generating electricity, based on

technical secretariat. In 2007, confronted with

established a Data Bank which collects, tests

available technologies – nuclear, gas and coal.

the prospect of licensing new reactors, 10

and disseminates the basic tools – such as

The series has been updated periodically with

national nuclear regulatory authorities requested

computer codes and nuclear data – used to

the International Energy Agency since 1989.

the Agency to act as technical secretariat for

analyse, control and predict phenomena in the

Another widely recognised achievement has

nuclear field. The Agency’s name was changed

been the development of a body of nuclear law.

(MDEP) which they had set up to reach common

when Japan joined in 1972. Further impetus

The Agency pioneered the first convention on

criteria for design safety issues.

came when the US became a member in 1976.

nuclear civil liability, the Paris Convention, in

From the outset, nuclear safety was a key

the Multinational Design Evaluation Programme

Since March 2011, the drama at the

1960. In 2001, its cumulated knowledge was

Fukushima nuclear power plant in north-east

focus. Under the leadership of the Steering

translated into the creation of the International

Japan, sparked by a massive earthquake that

Committee for Nuclear Energy, which reports to

School of Nuclear Law. Its work has also

was followed by a tsunami, has once again

the OECD Council, the NEA Secretariat serves

evolved in other areas. Since 2009, it has been

prompted governments to reassess the safety

seven specialised technical committees. Two

working on ways to address a threatened

of nuclear installations and plans in some

key bodies are the Committee on the Safety of

shortage of medical radioisotopes.

countries for nuclear expansion. The NEA will

Nuclear Installations, set up in 1975, and the

Two major civil nuclear accidents, in 1979

accompany and support this process, drawing

Committee on Nuclear Regulatory Activities,

and 1986, radically changed the Agency’s

on its network of experts in member countries. As

which dates from 1989. Together with joint

priorities. The NEA reacted to the Three Mile

is demonstrated by the participation of major

projects and information-exchange programmes

Island accident in the US in 1979 by creating

non-OECD countries such as Russia, India and

through which countries pursue research or

the first international Incident Reporting System

China in key NEA activities, its relevance today

data sharing on a cost-sharing basis, these

in 1980. After the Chernobyl accident in 1986,

is as valid as it was five decades ago. 

committees facilitate technical co-operation

the NEA and the IAEA instated the International

among national nuclear safety authorities.

Nuclear and Radiological Event Scale (INES),

Luis Echávarri is Director-General of the NEA.

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The OECD at 50

Transport and the OECD: Responding to the challenges of globalisation

by Jack Short

T

ransport is too often taken for granted.

The dramatic improvements over the

The ECMT was a path-breaker, focusing on issues of key importance for the reconstruction

International Traffic Data and Safety Analysis Group (IRTAD) and associated database.

past 50 years in speeds, volumes moved,

of Europe after the Second World War. Its

service quality, safety and cleanliness often

recommendations and resolutions concerning

the ECMT was the first part of the OECD family

pass unnoticed. But these improvements are

railways, roads and inland waterways laid

to engage with the newly liberated countries

not accidental. They are the consequence of

the foundation for many improvements. Its

of Central and Eastern Europe. Such was the

sustained policy and practical efforts, nationally

economic roundtables, launched in the late

sensitivity that meetings had to be held outside

and internationally.

1960s, provided a unique opportunity for

OECD headquarters. Over the following decade,

academics and economists to examine the

starting with Poland and Hungary, more than 20

valuable contributions over its rich history.

challenges of transport economics. Later

of these countries joined the ECMT, providing a

The principal actor has been the European

on, its work with the OECD on sustainable

home for them as equals and a stepping-stone

Conference of Ministers of Transport (ECMT),

travel in cities contributed to a major rethink

for many to membership of the EU.

originally set up in 1953 as a political body for

on managing traffic in cities. And its work

European Transport Ministers and transformed

on accessibility paved the way for significant

began to be better understood, transport

in 2007 into the International Transport Forum

breakthroughs in this area.

bulked larger in policy debate. Whether in

In these efforts, the OECD family has made

– a global body for governments, industry and

In 1974, the OECD launched its Road

When the Berlin Wall fell in November 1989,

As the global nature of transport challenges

regard to road deaths, urban congestion,

civil society. There have also been significant

Transport Research Programme, or RTR,

security or investment policies, all countries had

contributions in the areas of maritime and road

to facilitate technical exchange on road

shared problems. In 2004, the Joint Transport

transport. And since transport has impacts

issues including building techniques and

Research Centre (JTRC) brought together the

in many other policy areas, there have been

engineering challenges. Over the years,

RTR and ECMT’s economic research under

contributions from other parts of the OECD

the RTR made numerous important

one roof with a common structure and new

family in such fields as the environment,

contributions to thinking and analysis on

synergies. In 2006, at a meeting of transport

energy, regional policy, investment, taxation,

road transport issues, through both its work

ministers in Dublin, governments agreed on the

competition and industrial policy.

on road safety and the creation of the

transformation of the ECMT into a global and strategic thinktank including both European and non-European countries.

Today, the International Transport Forum has 52 countries as its members. Together, they aim to shape the transport policy agenda on a global level and ensure that it contributes to economic growth, environmental protection, social inclusion and the preservation of human life and well-being. Without the services that transport delivers, globalisation would be meaningless. Thanks to the ITF, the OECD family now has a consolidated body dealing with the transport issues that are so vital for economic success and social integration. ď Ž Jack Short is the outgoing Secretary General of the International Transport Forum at the OECD.

s

t

The OECD at 50

The OECD has in the past been instrumental in increasing prosperity for my country and for the world as a whole. Forty-two years of OECD membership have helped Finland to develop national policies meeting the best international standards and disseminating the results of peer learning for application across all sectors of public policy.

I am confident that the Organisation will continue providing a forum for policy consultation and advice of high quality and effectiveness in order to help Finland to adapt to a changing world.

Mari Kiviniemi, Prime Minister of Finland

on 10 April 1961, followed by the US two days later. Other countries followed, and on 30 September 1961 the Convention took effect and the OEEC was reborn as the OECD.

From the Atlantic to the Pacific In its early years, the OECD firmly espoused economic growth as a means to improve prosperity. As long as inflation in the US could be kept at bay, experts felt, growth would continue and employment would remain stable.

In December 1961, Ministers of the 20 countries meeting for the first time as the Ministerial Council of the OECD announced a 50 per cent growth target for their countries’ combined Gross National Product for the decade to 1970.

Freed from the pressures of short-term political bargaining that had beset the OEEC, now that the focus of European political discussion had shifted to Brussels with the creation of the European Community, the newly formed OECD was able to take a longer-term approach to major issues. As the first head of what was then the OECD’s Directorate of Scientific Affairs, Alexander King, was to recall in his memoirs, the new Organisation “had no contentious political goals, nor any ambition to acquire them.

It operated without any rigid time constraints and thus could pursue longer-term issues beyond the reach of national parliaments”.

Japan joins the OECD, OECD Headquarters, 26 July 1963.

Toru Haguiwara, Ambassador to France (left), and Thorkil Kristensen, OECD Secretary-General

In 1964, Japan was brought into the Organisation and thereby into the ‘Western’ world of international trade, investment and financial flows. Other countries followed: Finland in 1969, Australia in 1971 and New Zealand in 1973. For many years, the OECD was perceived as a club for the wealthy nations of the West, even though its membership included such countries as Turkey, Spain and Portugal, which were not rich at the time. During the Cold War era, it was viewed as the ‘economic arm’ of NATO, its initial membership having broadly coincided with that of the North Atlantic Treaty Organization formed in 1949. Yugoslavia, which had already participated in some OEEC activities, enjoyed a special status as an associate member until its dissolution. 

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The OECD at 50

The OECD at 50

The 1960s Economics, trade and statistics: Some early focus points for OECD work

US President John F Kennedy (left); Thorkil Kristensen, OEEC Secretary-General and OECD Secretary-General designate; Washington DC, 20 February 1961

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The OECD at 50

In a rapidly changing world, I am certain that the OECD will continue to promote the distribution of knowledge, innovation and best practices, thus empowering our societies in creating a better and more just world for all.

George A Papandreou, Prime Minister of Greece

T

he forecasting of short-term economic trends, the assessment of their implications for policy, and the analysis of individual countries’ economic performance were among the prime functions of the OECD from its early days. The OEEC had carried out regular studies of its member countries’ economies. The OECD

continued, producing regular surveys whose texts were approved by all members, including the country under review. Initially heavily macroeconomic in focus, these filled an important gap. National governments and central banks also issued reports on their own economies, but these were often too detailed for an international readership. No other international organisations or private financial institutions were at that time issuing similar succinct publications.

The OECD’s influential Economic Policy Committee, composed of senior officials from capitals, was charged with the co-ordination of member countries’ economic policies. A key demonstration of the OECD’s role as a discussion forum was this Committee’s Working Party No 3 on Policies for the Promotion of Better International Payments Equilibrium. Better known as WP3, one of this group’s early achievements, based on input from what was then the OECD’s Department of Economics and Statistics, was to agree on a uniform method of calculating balance of payments statistics. ❱❱

Some OECD indicators ●

●

Health: the OECD is a world leader in

developments in the migration

generosity of unemployment and

this field with its annual health data

sphere. Its annual International

related welfare benefits, trade-union

and indicators published in Health

Migration Outlook is a reference for

membership, collective bargaining

at a Glance. It is developing a global

all those interested in international

arrangements, minimum wages

standard, jointly with the WHO and

migration trends and policies. It is

and the strictness of employment-

Eurostat, for health accounting.

also helping to develop a database

Pensions: The OECD has developed

covering details of skills levels, age,

models for assessing the sustainability

gender and labour-market outcomes

devoted much effort to building a set of

and adequacy of retirement income

of immigrants in developed, emerging

comparable social indicators whose

provision in OECD countries, whose

and developing countries.

main results are published in Society at

Labour-market policies: Comparable

a Glance. This work has recently been

Glance. It is working with the World

time-series data regarding public

extended to encompass comparable

Bank and regional development banks

spending on so-called ‘active’ and

measures of well-being and life

to develop models that can be applied

‘passive’ measures are available online,

satisfaction in order to complement

to non-OECD country pension systems.

and summary indicators are published

the use of GDP as a measure of

International migration: The OECD’s

in the annual OECD Employment Outlook.

economic performance.

results are published in Pensions at a

●

database on stocks and flows of

●

●

Other labour-market indicators:

protection rules. ●

●

Social indicators: The OECD has

Environment: The OECD was the

international migrants is backed

The OECD has developed a wide range

first international body to assemble,

by its system of monitoring policy

of indicators on such topics as the

harmonise, and publish comprehensive

The OECD at 50

data on environmental conditions

provides an assessment of global

bring into focus the role of legal

and trends in a large grouping

agricultural market prospects in the

and social institutions in shaping

of nations. Its Environmental Data

medium term, covering production,

gender equality, with the aim of

Compendium is a consistent bestseller

consumption, trade, stocks and prices

empowering women to play a full

and helps decision makers with their policy discussions. ●

of agricultural commodities. ●

SMEs and entrepreneurship:

social and economic role. ●

Public governance: The OECD’s

Agriculture: Developed in the run-up

The OECD has played a key role in

Government at a Glance database

to the Uruguay Round of trade

promoting the international

and publication contain

negotiations and subsequently

convergence of statistical concepts

internationally comparative

extended to include key emerging

on SMEs and entrepreneurship in

indicators covering the entire

economies, the OECD’s Producer

order to develop the statistical and

‘production chain’ of government

Support Estimates, or PSEs, are the

empirical basis for informed policy

activities and their results.

only internationally recognised,

making. Its Structural and

comparable and timely indicators of

Demographic Business Statistics

Regional Database provides

government intervention in

database provides information at a

comparable statistics and indicators

agriculture. They are updated and

detailed sectoral level including:

on about 2,000 regions in OECD

published annually in Agricultural

turnover, value-added, production,

member countries and other

Policies in OECD Countries and in

operating surplus, employment, labour

economies. The OECD Metrodatabase

Emerging Economies, or in alternate

costs and investment.

provides more detailed statistics

Gender: As part of the OECD’s

on 90 large metropolitan regions

work supporting and strengthening

in OECD countries, showing how

gender equality in developing

urban regions have evolved over

countries, the SIGI Index has helped

the past decade.

years in Agricultural Policies in OECD Countries: At a Glance.

The OECD-FAO Agricultural Outlook, which is also published annually,

●

●

Regional development: The OECD

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62

The OECD at 50

Social policy has a key role in sustainable economic growth. PISA challenges us to improve education. Restructuring of the civil service improves efficiency. Recommendations from the OECD are evidence-based and governments should use them wisely.

Jóhanna Sigurðardóttir, Prime Minister of Iceland

A key monetary forum Originally set up as a parallel body to the Group of 10 leading industrial countries with the task of assessing the economic and external payments situations of G10 members needing IMF balance-of-payments rescue packages, WP3 has developed into a core forum in which policy makers gain insight into each other’s thinking on key monetary issues.

It brings together top finance ministry and central bank officials from a limited number of countries to discuss economic policy and balance-of-payments issues, such as growth, inflation, deficits, capital flows and exchange rates. It makes no decisions and controls no expenditure. But it is valued by participants

as a place where they can talk freely because they are not in ‘negotiating mode’ and thus less constrained in what they say.

Reflecting transatlantic and intra-European tensions in the period leading up to the OECD’s birth, trade was another early focus of the work of WP3. A Trade Committee was set up as one of more than a dozen such bodies forming its operating framework.

The committee’s mandate included a specific call for “confrontation of the general trade policies and practices… having in mind the need for maintaining a system of multilateral trade which would enable Members to exchange goods and services freely with each other and with other countries under

CERI: The OECD’s education vanguard

T

he year 1968 was dominated, in

before policy makers began to focus on

the Future?, inspired both OECD and

many countries, by a search for new

the concept in the 1990s. It called for

non-OECD countries to widen the

approaches and for social and political

the reorganisation of schools to allow

horizons of educational planning. Work

change. Education was at the forefront,

disabled students to study where possible

on the future of universities in 2030 did

as younger generations took ownership

alongside their contemporaries, showing

the same for higher education.

of new horizons of hope. It was in

how this could be done.

this febrile context that the OECD’s

It broke new ground in understanding

In Understanding the Brain, CERI brought together neuroscientists and

Centre for Educational Research and

how information and communications

educators to explore the burgeoning field

Innovation, or CERI, was created, with

technologies might transform the

of brain research and create synergies

a mission to address the bigger picture

teaching of reading, writing, science

between disciplines that normally

through studies bringing in different

and mathematics, well before

remain worlds apart.

disciplines and stakeholders.

governments made ICT a priority for

Taking a transversal approach to complex issues, CERI was soon helping

modernising education.

Its six scenarios of what schooling

More recently, it has been analysing learners’ experiences of the digital age and how teachers are trained to

to redefine the educational agenda. It

might look like in 2020, outlined in

address growing cultural diversity

began looking at lifelong learning well

the 2001 publication What Schools for

in OECD countries.

The OECD at 50

OECD’s First Ministerial Council, OECD Headquarters, 16-17 November 1961. The Hon Donald Fleming, Chair, Finance Minister, Canada (left), and Thorkil Kristensen, OECD Secretary-General

conditions of reasonable overall equilibrium in international balance of payments”.

Freeing trade In the early 1960s, when bargaining with developing countries in the framework of the GATT got dragged down by the differing agendas of participants, the Trade Committee emerged as a forum in which member countries could discuss and prepare their positions. A review of government procurement practices in 1964, showing the negative effects on trade of national tendencies to favour domestic suppliers, led to the principle that procurement rules should not discriminate against foreign suppliers. Proposals for liberalisation in a 1976 Draft Instrument on Government Purchasing Policies, Procedures and Practices became a key element in the 1973-79 Tokyo Round of trade negotiations. Later, ❱❱

The OECD can do much to promote recovery. If it can become a catalyst for new global co-operation, and if, through this, economies based on the creation of value and genuine work can regain strength in our countries, then we have good reason for hope.

Viktor Orbán, Prime Minister of Hungary

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The OECD at 50

OECD work on services led negotiators to address regulatory barriers to investment as well as to cross-border trade. Concepts developed at the OECD were embodied in the General Agreement on Trade in Services.

Objective data Agriculture is yet another area in which the OECD had an important influence early on.

By collecting data on how much government support really costs, and proposing new approaches to deal with emerging problems, the OECD contributed to a shift away from production as the principal measure of policy success. Its work on Producer Support Estimates, or PSEs, showing how much public support goes to farmers, was central to the 1986-94 Uruguay Round of trade negotiations.

Today, it works with governments to devise policies and practices to meet expanding demand for food without destroying the planet’s resources.

The OECD also broke new ground in analysing and evaluating the contribution of scientific research to growth. In 1963, the OECD Working Party of National Experts on Science and Technology Indicators met in Frascati, Italy, to discuss and agree on a Proposed Standard Practice for Surveys of Research and Development. Revised several times since and now known as the ‘Frascati Manual’, it provides globally accepted definitions for the measurement of resources devoted to research and development that are of fundamental importance for the understanding of the role of science and technology in economic growth. 

Adapting economic policy discussions to evolving challenges

by Niels Thygesen

T

he OECD got off to a promising start in

help of outside experts, OECD reports set

the 1960s, not least because the US

The 1970s posed massive challenges for

new standards of methodology in analysing

national authorities and for the international

made intensive use of the new organisation.

stabilisation policies, particularly the so-called

organisations serving them. At the OECD,

The Kennedy Administration was very

Heller Report and its supporting studies of

early efforts to mitigate the impact of the

interested in the European policy experience.

1968-69, which developed the crucial concept

energy crisis led to the establishment in

Was the rapid rate of growth still primarily a

of cyclically adjusted or structural budget

1974 of the International Energy Agency.

catching-up phenomenon, or was there

balances. Even in this early period, the OECD

In 1975, a prestigious working group on

something to be learnt from aspects of

was not solely preoccupied with the problems

macroeconomic policy chaired by Paul

European economic policies? Often chaired

of its members, the industrial countries.

W McCracken, a former chair of the US

by senior US officials, working groups were

Economic development in the rest of the

Council of Economic Advisors under

set up to study labour-market, competition

world was high on the agenda in terms of

President Nixon, extended the horizon in its

and regulatory policies, the efficiency of

enhancing official development assistance, but

recommendations, advocating gradualism in

fiscal and monetary policies, and Europe’s

also in research through the new Development

policy adjustments and stressing international

fragmented capital markets.

Centre, an initiative of Thorkil Kristensen,

interdependencies. Soon afterwards, under

Secretary-General of the first decade and

the leadership of then Special Advisor to the

between national officials, the Economic Policy

himself a development economist. The

Secretary-General Stephen Marris, the

Committee and the EPC’s Working Party No

Economic and Development Review Committee

OECD Secretariat began mobilising expertise

3 on the international balance-of-payments

(EDRC) began to prepare Economic Surveys of

to define ‘positive adjustment policies’

adjustment process came to be seen as

the economic performance and policies in each

to address ‘stagflation’, in recognition of

indispensable forums. Sometimes with the

member country from October 1961.

the importance of the supply side and

To improve the exchange of information

The OECD at 50

Over the past 50 years, Ireland has been transformed into a progressive, outward-looking trading nation. We look forward to continuing on this path in partnership with the OECD. Enda Kenny, Prime Minister of Ireland

the structural reforms needed to raise the

a mission to the capital. The resulting policy

of national circumstances. Both of these

economic growth potential.

recommendations are subject to agreement

characterisations contain an element of

between the authorities of the addressee

truth, but their incompatibility suggests that

analysis of experience in member states with

country and their peers in other countries, with

the OECD practice may represent a good

the many dimensions of structural reform has

whom a draft report is reviewed. The EDRC is

compromise. This judgement is supported

become the hallmark of OECD work on

a prime example of this peer review process.

by the fact that busy national policy officials

Over the past three decades, comparative

economic policy. The prime example remains

The emphasis on comparative analysis and

remain keen to participate in OECD work,

the Jobs Study of 1994, updated and

the use of benchmarking in assessing the

and an important role for the organisation

modified on several occasions since,

impact of structural policies make it difficult for

in monitoring policies from a longer-term

increasingly as a joint effort by the Economics

a country to avoid critical recommendations

perspective has been found in the context of

Department and the Directorate for

when both performance and past efforts to

the G20’s mutual assessment process.

Employment, Labour and Social Affairs. This

improve policies in a particular area are weak.

cross-country study of what works in

This is appreciated by governments, even

relevance should give the OECD confidence

labour-market policies, together with similar

when they do not see early opportunities for

that it has retained its capacity to adapt to

major efforts in such areas as product-market

implementing recommendations – as long as

new challenges at the end of its first half-

regulation and competition policy, has formed

care is taken to formulate them in a way that

century. This should become increasingly

the basis for policy recommendations in

is seen as constructive.

evident as the preoccupation with short-term

country surveys and the annual Going for

Clearly, there are risks as well as virtues

This latest example of recognised

policies fades with the recovery from crisis,

Growth publication, which provides succinct

in a peer process of the type the OECD has

and as the determinants of economic growth

comparative analysis.

developed. Those familiar with the crisper style

once more top the international agenda. 

The effectiveness of combining rigorous

of IMF surveillance may find that the messages

empirical analysis on a cross-country basis

in OECD publications are diluted because

Niels Thygesen participated in various OECD

is enhanced by close, yet arm’s-length,

of the perceived need to bring national

working parties on behalf of the Danish

co-operation with member-state governments.

authorities on board. Those familiar with a

government between 1962 and 1968 and

The OECD provides a unique forum for

politically more tightly controlled framework,

was on the staff of the OECD Secretariat

discussion among national policy officials, on

such as that of the European Union, may

from 1971 to 1973. He was Chair of the

the basis of documentation provided by the

see OECD policy recommendations as overly

Economic and Development Review

Secretariat after detailed discussions during

standardised and insufficiently respectful

Committee from 2000 to 2008.

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The OECD at 50

The OECD at 50

The 1970s Shifting the emphasis of economic policy

OECD's 10th Anniversary, OECD Headquarters, 14 December 1970. French President Georges Pompidou, with Emile Van Lennep, OECD Secretary-General, meets members of the Staff Association

69

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The OECD at 50

The OECD at 50

I am honoured to congratulate the OECD on its 50th anniversary.

Our membership in the OECD is of great pride to Israel. We consider our accession a goal well-achieved, given the Organisation’s contribution to both the world economy and to Israel. We aspire to assist the OECD in improving the well-being of its citizens, specifically with respect to innovation, entrepreneurship and technological development.

Benjamin Netanyahu, Prime Minister of Israel

F

or much of the 1960s, both monetary policy and fiscal policy had been considered by economists and policy makers as tools of demand management. A 1968 report by a group of independent experts supported the active use of fiscal policy to maintain the reasonably full levels of employment that had been achieved without inflation in most OECD countries. During this time, however, the Bretton Woods System of fixed exchange rates, supported by the convertibility of the dollar into gold at a fixed price, began to come under pressure. Expansionary fiscal policies associated with the Vietnam War and Great Society initiatives had ignited inflation in the United States. With the fixed peg for the dollar still in place, the result was a growing overvaluation of the dollar against other countries’ currencies, measured in terms of what it could actually buy.

It was amid these gathering storm clouds that, in 1969, Emile van Lennep, a former senior Treasury official and central banker from the Netherlands, took over from Thorkil Kristensen as Secretary-General. A fundamental rethink of how to conduct macroeconomic policy soon began. By 1970, inflation had risen to five per cent annually, more than double the average rate in the early 1960s. OECD analytical work provided support for a shift in emphasis on the part of policy makers in capitals from almost total reliance on fiscal policy to a more balanced use of both fiscal and monetary instruments for economic stabilisation.

An OECD report issued in 1970, entitled Inflation: the Present Problem, called for cautious demand-management policies, more direct

price-incomes policies, and a more positive policy approach through the whole range of government activities, including trade liberalisation, domestic competition policy, and other measures to ease structural problems and to even out demand pressures. In a speech soon after taking office, Emile van Lennep called for a “horizontal” approach in international economic co-operation, arguing that the OECD should deal with “interconnected and interdependent” problems relating to the overall management of the economies of its member countries.

Floating exchange rates Shocks of one sort or another kept coming. On 15 August 1971, President Richard Nixon, reacting to a severe recession and weakening trade account, devalued the dollar and announced that it would no longer be convertible into gold. The first reaction of the major OECD countries was to try to re-establish a system of fixed parities.

The OECD, through its Working Party No 3, was heavily involved, together with the IMF through the G10, in hammering out a new matrix of fixed parities. Embodied in the Smithsonian agreement, this re-established a fixed-rate regime that struggled on for two years, until in 1973 the Bretton Woods arrangements that had steered the world economy for nearly 30 years finally broke down.

The system of floating rates that succeeded Bretton Woods was not immediately greeted with enthusiasm. In OECD countries, many people worried that it would lead to chaos. In the event, ❱❱

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The OECD at 50

it worked better than they had feared. There was a lot of volatility in exchange rates and, perhaps more tellingly, floating did not automatically eliminate “global imbalances”, which continued to be a central theme of international policy discussions.

In the short term, however, floating exchange rates provided an important safety valve in the economic upheaval set off by higher oil prices. In October 1973, Arab oil-exporting countries raised the price of crude oil and imposed an oil embargo on the US and some other Western countries.

By early 1974, the price of a barrel of crude had risen fourfold from its level four months earlier. The US Secretary of State, Henry Kissinger, called for a counterweight to the Arab-led oil cartel. In November 1974, the US and 15 other OECD countries created the International Energy Agency within the framework of the OECD. ❱❱

First solar energy plant, Odeillo Font-Romeu, France, 1977

The birth of the International Energy Agency

by Etienne Davignon

I

n 1974, at the height of the first oil

appeared that this would only be efficient if an

return to normality was achieved when, thanks

crisis, members of the OECD decided in

institutional structure was put into place.

to an initiative from the Saudi oil minister,

Washington to set up a permanent mechanism

What emerged was the proposal for the

Sheikh Yamani, I was invited to attend a

for oil sharing. I was appointed to lead the

creation of the International Energy Agency,

Committee of high officials. The French

under a treaty setting up a governing board

Government had decided not to participate,

composed of senior officials from energy

treaty that set up the IEA and then, in the

so the exercise was conducted outside the

ministries of OECD member states, a council

early years of its development, becoming the

framework of the OECD. It was quickly agreed

of energy ministers, and a secretariat headed

first chairman of its governing board, was a

that the objective could only be reached

by a director general. This structure would

particularly rewarding honour that I am glad to

in a credible fashion if it were based on an

function as an agency of the OECD, with the

have been able to share with the remarkable

international treaty making the eventual

Secretary-General of the OECD being an

heads of the various delegations from the

obligations compulsory.

invited participant in both bodies, but it would

Agency’s member states. 

Our work concentrated on devising an oil-

session of OPEC ministers in Vienna.

My involvement, firstly in preparing the

be funded by a special budget. As France was

sharing agreement that would come into force

not participating, the European Union could not

Viscount Etienne Davignon was chairman of the

if certain criteria were met. At the same time,

be represented, but the European Commission

governing board of the IEA from 1974 to 1977,

a monitoring and analysis system was seen to

would participate as an observer.

when he became a member of the European

be necessary. Based on experience gathered during the preparatory phase, it quickly

During the initial period, tensions with the oil-producing countries ran high. However, a

Commission. He was vice-president of the European Commission from 1981 until 1985.

M_07

The OECD at 50

‘Stagflation’ and structural adjustment The oil crisis aggravated the ‘stagflation’ that would persist throughout the decade, stunning Keynesian-bred economists who had thought inflation and recession mutually exclusive, and raising doubts among OECD countries about the wisdom of further liberalisation. True to its commitment to open markets, however, the OECD dissuaded members from pursuing protectionism, obtaining from them instead an undertaking not to impose new tariffs or quotas on imports – the so-called OECD Trade Pledge later invoked in the Tokyo Round of trade negotiations. Gradually, the OECD shifted its policy emphasis towards structural adjustment in dealing with the economic difficulties that followed the first oil crisis.

OECD analysis contributed to a realisation among governments that focusing exclusively on nominal interest rates or real economic variables in the operation of monetary policy could be counterproductive. From the mid 1970s, a growing number of central banks adopted annual numerical targets for the growth of one or more monetary aggregates. The OECD moved away from a ‘demand-side’ philosophy – the conviction that economic growth is fostered by manipulating taxes and interest rates to control demand and keep unemployment low – to a ‘supply-side’

Italy believes in economic freedom as a pillar of democracy and an essential value of an ever-broadening free world.

Congratulations to the OECD that, in 50 years, marked the path from poverty to welfare, from the Marshall Plan to today’s global challenges.

Silvio Berlusconi, Prime Minister of Italy

approach, in which lower taxes encourage people to invest, rather than spend, their incomes.

In 1978, building on work done over the previous few years, leading OECD countries agreed to curb competition for export business based on official subsidies through cheap financing. A “gentlemen’s agreement” between governments set a floor on interest rates on loans to purchasers and imposed limits to the insurance guarantees provided to exporters against the risk of non-payment.

Constantly reviewed and updated since then, the Arrangement on Officially Supported Export Credits, as the pact became known, is designed to create a “level playing field” whereby competition between exporters is based on price and quality, rather than on the financial terms. Over the years, it has played an important role in ensuring fair competition in international trade.

Ambitious policy co-ordination In the late 1970s, the re-emergence of persistent current-account deficits in the United States and surpluses in Japan and Germany once again became a subject of widespread concern. A key focus of OECD work, amid the emergence of the G7 as a key forum for economic policy discussion, was to define and agree on appropriate policy mixes among the major economies that would assure growth and price stability across the OECD, while preventing the emergence of large current-account imbalances. Japan and Germany, as current-account surplus countries, were ❱❱

International Energy Conference, Washington DC, 11 February 1974, which led to the creation of the IEA. Henry Kissinger, US Secretary of State (left); Emile Van Lennep, OECD SecretaryGeneral; Masayoshi Oshira, Foreign Affairs Minister, Japan

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The OECD at 50

The OECD is sometimes called the “global think tank”, with its corps of specialists not only on economics but also on development, social affairs, education and the environment. It has made solid contributions to the international agendas of the day.

Naoto Kan, Prime Minister of Japan

pressured to contribute to the growth of the world economy as “locomotives”. The United States and other deficit countries were asked to adopt restrictive demand-management policies with a view to moderating economic expansion and, thereby, controlling inflation.

The most ambitious attempt at economic policy co-ordination was the Concerted Reflation Action Programme elaborated between 1977 and 1978 in the OECD’s Economic Policy Committee and taken up and confirmed by G7 leaders at their 1978 Bonn summit. This called for fiscal expansion in Europe, in particular on the part of Germany, and in Japan, matched by tighter monetary policy in the US together with oil-price decontrol.

The Bonn agreement was greeted as a triumph of co-ordinated action, providing economic leadership in which countries would undertake policies that were not directly in their own self-interest because all would benefit from the package as a whole. Years later, hindsight suggests that such judgements may have been overly enthusiastic. The US did begin to decontrol oil prices, but only slowly. Not until President Ronald Reagan came into office in 1981 were price controls eliminated completely, by which

Openness, fairness and transparency: 50 years of international investment policy at the oecd

by Manfred Schekulin

I

nternational investment supports economic

and of Current Invisible Operations. For 50

a common expression. Another is the National

development, generates jobs, underpins

years, the Codes have been the only legally

Treatment Instrument by which the concept

two-thirds of global trade, and facilitates the

binding multilateral instruments for promoting

of post-establishment national treatment was

creation and diffusion of innovative ideas and

progressive liberalisation, non-discrimination

multilateralised, at a time when just a couple

technologies. Experience has shown that

among parties and transparency.

of bilateral investment treaties (BITs) had been

the best way to attract investment is through

Ever since, the OECD has played a leading

open, fair and transparent policies. Conversely,

role supporting international dialogue and policy

protectionism and discrimination tend to

on international investment issues. One major

discourage investment.

negotiated (using a model that had also been developed, back in 1962, at the OECD).

Today, the concepts developed in these

step came in 1976 with the adoption of the

instruments form the basis for a global

When the OECD was established, it

OECD Declaration on International Investment

network of more than 3,000 BITs and regional

was given a mandate to help its members

and Multinational Enterprises. Among the legal

agreements containing investment provisions.

promote the freedom of capital movements.

instruments that constitute it are the OECD

The instruments themselves continue to

From the beginning, this objective found

Guidelines for Multinational Enterprises, the first

be used vigorously, with the help of regular

its expression in two legal instruments, the

international agreement to promote responsible

revisions and updates, testifying to the

Codes of Liberalisation of Capital Movements

business conduct, well before ‘CSR’ became

soundness of their original construction.

The OECD at 50

time the price of a barrel of crude had fallen sharply from its late 1970s peak.

The OECD, during this period, was increasingly stressing the need for structural adjustment in industry, employment, agriculture and regional and regulatory policies. In 1979, the OECD established a programme of work on Positive Adjustment Policies. A Special Group of the OECD Economic Policy Committee chaired by Hans Tietmeyer, then a senior official in the German Finance Ministry and later President of the Bundesbank, reviewed the macroeconomic, structural and international implications of industrial, regional, manpower and other microeconomic policies. 

First meeting of Environment Ministers, OECD Headquarters, 13-14 November 1974. Gro Harlem Brundtland, Chair, Minister for the Environment, Norway (left), and Emile van Lennep, OECD Secretary-General

50 governments from around the world to

rapidly. New and more complex patterns of

highlighted the critical relationship between

exchange information and experiences on

production and consumption are emerging.

private investment flows and development, and

investment policies. Co-operation requires

Non-OECD countries are attracting a larger

the need for developing countries to attract

common understanding of policy measures

share of world investment. And multinational

and generate more private investment in order

and objectives. The FoI roundtables foster this

enterprises from non-adhering countries have

to reach their development objectives and the

understanding by developing standards that

grown in importance.

Millennium Development Goals. The OECD

reflect partners’ expectations and good-policy

responded by inviting interested governments

practices. These standards – for example,

and the fight against global warming, if they

to participate in the development of a practical

regarding the treatment of sovereign wealth

are to be successful, will depend on

tool to assess their investment policies.

funds – promote openness, transparency and

significant increases in international capital

non-discrimination and responsible conduct by

flows even when compared to pre-crisis

both governments and investors.

levels. As the number of investment

In 2002, the Monterrey Consensus

Some 60 countries followed this invitation.

The resulting Policy Framework for Investment

The shift to the low-carbon economy

The financial and economic crisis and

agreements proliferates, concerns are rising

approach for improving investment conditions

the loss in confidence in open markets, the

about the high costs and perceived lack of

ever developed. It focuses less on what

need to address climate change, and

transparency and predictability of arbitral

governments should do and more on ‘how to

reaffirmed international commitments to

procedures based on them.

get there’. Since it was endorsed in 2006, it

development goals have prompted renewed

has come to be seen as the ‘gold standard’ of

calls from governments, the private sector

favour of multilateral investment rules and

international investment policy, used by dozens

and social partners for high standards of

standards. By building on the experience

of countries and regional initiatives around the

business conduct. The latest update of the

gained over the last 50 years and its tradition

world to improve their investment climate and

OECD Guidelines for Multinationals, recently

of constant innovation and ‘staying ahead of

get the most out of investment inflows.

concluded, will ensure the Guidelines’

the curve’, the OECD will be uniquely suited to

continued role as the leading intergovernmental

tackle the challenges ahead of us. 

(PFI) is the most comprehensive and systematic

More recently, the Freedom of Investment (FoI) process, an intergovernmental forum hosted by the OECD Investment Committee, has brought together on a regular basis some

This may yet lead to a reassessment in

instrument in this area.

The landscape for international investment and multinational enterprises is changing

Manfred Schekulin is Chair of the OECD’s Investment Committee.

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The OECD at 50

The OECD at 50

The 1980s New challenges for economic co-operation

French President François Mitterrand, accompanied by Jean-Claude Paye, OECD Secretary-General (left), receives OECD ministers. ElysÊe Palace, Paris, 17 April 1986

81

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The OECD at 50

Some important OECD codes and guidelines ●●

The Code of Liberalisation of Capital

adopted in 1972, include the ‘Polluter

Movements, adopted in 1961,

Pays Principle’, a non-subsidisation

of Privacy and Transborder Flows of

established legally binding obligations

approach to assigning the costs of

Personal Data, adopted in 1980 and now

to maintain free capital movements.

pollution control.

undergoing review to take account of

The linked Code of Liberalisation of

●●

●●

The OECD Guidelines on the Protection

The OECD Guidelines for Multinational

changing technologies, markets and user

Current Invisible Operations established

Enterprises, adopted in 1976 and updated

behaviour, are the global reference for

obligations in cross-border trade in

several times since (most recently in

reconciling the protection of personal

services, including financial services.

May 2011), set out a code of good

data with the free flow of information.

The OECD Guiding Principles Concerning

behaviour for multinational

the International Economic Aspects of

companies backed by the moral

Acceptance of Data in the Assessment

Environmental Policies, which were

authority of OECD governments.

of Chemicals (of which the first was

●●

●●

The OECD Council Acts on the Mutual

The OECD at 50

Recognising the OECD’s five decades of valuable contribution to the international community, I commend its efforts to disseminate the Green Growth paradigm initiated by Korea as a new source of growth, a vivid example of the OECD's pursuit of ‘better policies for better lives’.

Lee Myung-bak, President of the Republic of Korea

A

major reorientation of fiscal policy under President Reagan resulted in large budget deficits in the US. These, coupled with the restrictive monetary policy followed by the Federal Reserve to control inflation, brought about high interest rates and an appreciation of the dollar. A growing US current-account deficit continued to be matched by persistent surpluses in Japan and Germany. The international consensus was that the US should reduce fiscal deficits, thereby reducing pressure on domestic interest rates and inducing a weakening of the dollar. Such action, together with a shift in domestic savings and investment balances resulting from fiscal consolidation, could be expected to shrink the external deficits of the US. But it was less clear what Japan and Germany should do. Views were divided within the OECD as to whether they should expand fiscal policy

adopted in 1981), save countries

adopted in 1997, groups 38 countries in

and industry almost as much as

a concerted campaign against cross-

members spend each year on all

border business corruption.

of the OECD Part I Budget. ●●

●●

marketplace and serve as a reference to foster mobile commerce. ●●

The OECD Principles of Corporate

The 2005 OECD Guiding Principles for

Governance, first issued in 1999 and

The OECD Transfer Pricing Guidelines

Regulatory Quality and Performance have

revised in 2004, were adopted by the

for Multinational Enterprises and Tax

often been the basis for the design of

World Bank in its work and recognised

Administrations, originally approved in

national policies to improve regulation.

as one of 12 key standards for

1995 and revised and expanded since,

These principles are currently being

international financial stability by the

provide guidance on applying the ‘arm’s-

expanded to take into account lessons

length principle’ to the valuation, for tax

from recent years.

purposes, of cross-border transactions ●●

and tighten monetary policy – the so-called “reverse fiscal/monetary policy mix” – or concentrate on structural reforms to strengthen domestic growth potential and, in the case of Japan, also accelerate domestic market opening. ❱❱

Financial Stability Forum. ●●

The 2009 OECD Guidelines for

The OECD Guidelines for Consumer

Fighting Bid Rigging in Public Procurement

between associated enterprises.

Protection in the Context of Electronic

help procurement officials to detect

The OECD Convention on Combating

Commerce, adopted in 1999 and now

possible bid-rigging conspiracies, and

Bribery of Foreign Public Officials in

undergoing review, have helped

to design procurement processes that

International Business Transactions,

develop a sound e-commerce

reduce the risks of bid-rigging.

●●

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The OECD at 50

More than ever before, the dual objective of improving economic and social well-being demands careful balancing both in policy design and in implementation, given that the market by itself has never produced solidarity.

continued to produce medium-term scenarios and associated policy packages designed to promote international balance. As early as 1983, however, Martin Feldstein, who as Chairman of President Reagan’s Council of Economic Advisors also chaired the OECD’s Economic Policy Committee, was dismissive of “concerted action” scenarios.

Jean-Claude Juncker, Prime Minister of Luxembourg

Global imbalances

Steadily, the idea that the purpose of international policy discussion was to find ways of coordinating macroeconomic settings lost ground to an alternative view that the real priority for economic policy was “getting one’s own house in order”. The OECD Secretariat

It was in this complex environment that Jean-Claude Paye, a senior French civil servant, took over from Emile van Lennep in 1984 at the helm of the OECD. Just over a decade earlier, as a Senior Aide to Raymond Barre, then Vice-President of the European Commission with responsibility for economic and financial affairs (and later French Prime Minister), he had enjoyed a ringside view of the turbulent end of

The international co-ordination of macroeconomic policy

by Val Koromzay

F

ollowing the collapse of the Bretton Woods

There thus developed a view that

US was stuck in stagflation and its external

system and the move to floating exchange

macroeconomic policies needed to be

balance of payments was weakening fast,

rates in 1973, it became apparent that one

co-ordinated to ensure balanced growth.

while necessary domestic adjustment to high

of the presumptions of those who favoured

Throughout the 1970s and well into the

and rising oil prices was blocked by oil-price

floating was not being realised. Balance-of-

1980s, there were serious attempts among

controls. Domestic demand in Europe and

payments imbalances, far from disappearing,

the major OECD countries to construct policy

Japan, meanwhile, was being undermined by

were actually intensifying. These imbalances

‘packages’ responding to this intuition. One

high oil prices, although Germany was

were to dominate OECD discussions on

aspect, still generally accepted, was the idea

benefiting from export-led growth, thanks to

economic policy until well into the 1980s.

that foreign-exchange intervention to deal

its strong market position in OPEC countries.

with unwanted turbulence is more likely to

An OECD vision for a co-ordinated policy

was a lack of international co-operation. At

be effective if undertaken in a co-ordinated

package, calling for fiscal expansion in

the time, most OECD countries were using

fashion by a number of central banks,

Germany and Japan, tighter monetary policy

monetary and fiscal policies in complementary

rather than just by that of the country under

and oil-price decontrol in the US, and

ways to promote full employment through

pressure. But deeper issues of co-ordination

complementary adjustments in other G7

demand management. The ‘policy mix’ in each

of monetary, fiscal and other instruments also

countries, was intensively discussed by the

country might be appropriate on purely domestic

ranked high in OECD discussions.

Economic Policy Committee. Thanks to close

The source of the problem, as then analysed,

grounds, but if policy mixes differed significantly

One of the most significant attempts at

links between the Bureau of the EPC and

among the major OECD countries, international

co-ordination was launched in preparation for

the G7 Summit preparatory group, it was

imbalances could arise and intensify.

the 1978 G7 Bonn summit. At the time, the

broadly endorsed by the G7.

The OECD at 50

the Bretton Woods arrangements. Monetary issues and global imbalances in the wake of a second oil crisis in the early 1980s were to dominate his first few years at the OECD. On the monetary front, both the political and the intellectual ground had shifted. With the opening-up of capital accounts in all OECD countries, it had become apparent that the financing of current-account imbalances was easier, at least for major countries, than had previously been supposed. Equally, it was becoming clear that markets focused increasingly on the soundness of domestic policies when ❱❱

OECD Ministerial Council, OECD Headquarters, 17-18 April 1986.

Kurt Furgler, Swiss Federal Counsellor, Head of the Federal Department of Public Economy (left); Jermu Laine, Finnish Minister of Foreign Trade; Turgut Ozal, Turkish Prime Minister, Chair of the meeting

the EPC’s Working Party No 3 in 1987,

‘imbalance’ is between a group of ‘emergent

was hailed as a major success for international

At the time, the Bonn summit agreement

assessing the tolerance margins for current

economies’, spearheaded by China and a

co-operation in macroeconomic policy-

account imbalances in a world of free capital

number of other countries that are growing at

setting. History is, perhaps, less kind. A

movements. The group’s then chairman,

rapid rates, and the ‘advanced economies’,

senior German official who participated in

Geoffrey Littler of the UK, summarised

which are mostly stagnating. The forum for

the discussions has suggested privately that

discussion of this paper by saying: “It

discussion is, appropriately, the G20, which

its net effect was to delay a German fiscal

thus seems that there is no brick wall of

includes the major players in a way that no

expansion that was needed on domestic

impossibility as regards the financing

OECD committee does.

grounds, just because Germany needed to

of external imbalances.”

get the US to agree to oil-price decontrol.

On the US side, oil-price decontrol was

In parallel, OECD countries were

One lesson from OECD experience may be relevant here: policy co-ordination

fundamentally changing their thinking

is difficult and it requires a high degree of

indeed initiated, but very slowly. It was finally

about macroeconomic policy generally.

mutual trust. While it can be argued that

completed in 1981 by President Reagan, but

Instead of a vague notion of fiscal/monetary

the intensive interactions in key OECD

by then oil prices had fallen from their highs in

co-ordination to stabilise demand, many

committees such as the EPC are essentially

the late 1970s. Tighter monetary policy was

moved to a regime of central bank

about building trust, this process has its

introduced when President Carter appointed

independence subject to clear mandates.

limits. Domestic politics will often overrule

Paul Volcker as chairman of the Federal

Central banks were made responsible for

those who aspire to ‘evidence-based’ policy

Reserve in 1980. But this was a decision that

controlling inflation, while fiscal policy was

outcomes. Given that the G20, as a forum,

had little to do with the Bonn commitment.

above all to be concerned with the long-term

has less experience in concertation than the

sustainability of public finances, with

OECD, nailing down a co-ordinated approach

co-ordination waned during the 1980s and

‘automatic stabilisers’ dealing with demand

to global macroeconomic management is

died altogether over the following two

fluctuations. This paradigm, which makes the

likely to remain a difficult challenge. 

decades. Views about ‘imbalances’ had

co-ordination of macroeconomic policies

begun to change, in a process where the

seem fruitless, worked well until the global

Val Koromzay joined the OECD Secretariat

OECD clearly played a role. In association

financial crisis erupted in 2008.

staff in 1981 and was Director of the Country

Enthusiasm for macroeconomic policy

with Andrew Dean and Bixio Barenco of the OECD Secretariat, I prepared a paper for

In the wake of the crisis, there is renewed interest in policy co-ordination. Today’s

Studies Branch of the Economics Department from 1998 to 2008.

85

86

The OECD at 50

OECD Ministerial Council, OECD Headquarters, 18-19 May 1988.

Anita Gradin, Minister for Foreign Trade (left) and Kjell-Olof Feldt, Finance Minister, Sweden; with Jean-Claude Paye, OECD Secretary-General

assessing a specific country facing problems, with the current account playing a lesser role.

One effect of this shift in policy focus was a closer attention to budgeting as the core of the public management agenda. The OECD began to be recognised during these years as a key international centre for budget research and innovation, backed by its Working Party of Senior Budget Officials, established in 1980 and composed of budget directors and other senior officials from OECD member countries. This group meets annually to address key budgeting concerns and relevant policy options, and today has counterparts in all regions of the globe. ❱❱

WP3: High-level policy making in a stimulating forum

by Sir Andrew Crockett

W

P3, or the OECD Economic Policy

second-order. They certainly didn’t seem so at

were undertaken in the much more limited

Committee’s Working Party No 3

the time. Indeed, they resonate with many

group of the G5 finance deputies. Subsequent

issues that remain with us today.

history shows that, sadly, no lasting

on Policies for the Promotion of Better International Payments Equilibrium, was the

In the mid 1980s, a key focus of WP3

consensus was reached on a framework for

first forum, back in the early 1960s, to concern

discussions was the US payments deficit and

itself explicitly with international economic

how it could be corrected. Stephen Marris,

policy coordination – or ‘co-operation” in the

as Special Advisor to the Secretary-General

retrenchment following the ‘great inflation’ of

favoured official terminology. Its focus lay in

of the OECD, had worried about this for quite

the 1970s. A frequent topic of WP3 discussions

concerns about the working of the international

some time. He eventually left Paris for the

in this period was how the monetary policies

adjustment process.

Institute for International Economics, where he

being followed by the major countries to

sensitised a wider audience to the problem in

combat inflation might affect exchange rates

1980s, when I was responsible for the

his Deficits and the Dollar, concerned about a

and the international adjustment process.

World Economic Outlook project at the IMF.

hard landing for the US and world economies.

Similar debates are taking place today, with the

I continued to attend after moving to the Bank

The deficits don’t seem all that large by

primary policy concern being whether and how

of England, and had the honour to be elected

comparison with those of today, but they were

easy monetary policies in the major industrial

Chairman in 1993. Viewed from the optic of

worrying enough to lead to the Plaza and

countries complicate the environment for policy

the recent financial crisis and the subsequent

Louvre accords. Much of the analysis that lay

making elsewhere.

‘great recession’, some of WP3’s concerns in

behind these agreements was hammered out

the 1980s and 1990s may be thought

in WP3, although the negotiations themselves

I first started going to WP3 in the early

dealing with a recurrence of imbalances.

The 1980s were also a period of

By the early 1990s, exchange rates had returned to a more justifiable pattern and

The OECD at 50

An unwavering belief in shared values, such as sustainable development, free trade and a profound commitment to human development, will continue to be at the core of Mexico’s membership of the OECD. As the OECD strengthens its relationship with other emerging economies, these countries will benefit from the Organisation’s collective experience, while also enriching our own internal debate and deepening our understanding of the global economy.

Felipe Calderón Hinojosa, President of Mexico

central banks had succeeded in restoring

While historic political changes were going

many meetings that I attended in more than

a much more satisfactory measure of price

on in Europe, the world was undergoing the

20 years on the international economic policy

stability. The attention of WP3 shifted to the

recession of 1992-93. I well remember the

circuit. The papers prepared by the OECD

economic consequences of the historic

first WP3 meeting following the election of

Secretariat were brief and pithy. The participants

events unfolding in Eastern Europe. German

the Clinton Administration in the US. The

– deputies of finance ministers and central bank

reunification occurred in 1990 – which,

US delegation comprised Alan Blinder from

governors – were close to the heart of policy-

incidentally, temporarily deprived WP3 of Hans

the Council of Economic Advisers and Larry

making, and could speak authoritatively and

Tietmeyer, recalled to government service

Summers from the Treasury, as well as

spontaneously. Nobody read prepared remarks,

by Helmut Kohl to advise on the process.

the irrepressible, sometimes irascible, but

and few even spoke from detailed notes.

Reunification posed enormous monetary and

ultimately lovable Ted Truman, longtime head

fiscal issues. It was an open secret that many

of the Fed’s international finance division.

hitch with WP3 is not so much the policy issues

in the Bundesbank opposed monetary union

They provided us with an elegant textbook

– after all, these discussions were going on in

between the East and West German marks

outline of the new Administration’s economic

multiple other forums as well. It is the individuals,

at par, but others – including, I believe, Hans

strategy: stimulate now to underpin recovery;

and the sense of camaraderie that builds up

Tietmeyer himself – recognised the political

consolidate later. All very familiar in 2010-11.

as economists responsible for policy issues

imperative of the parity rate.

Regardless of the reasons for this choice,

As it happened, Congress didn’t buy the

In the end, what I remember of a two-decade

put their trade at the service of public policy.

stimulus part of the proposal, but everything

With members such as Larry Summers, Hans

reunification had major implications well

worked out more-or-less OK anyway. Later,

Tietmeyer, Tommaso Padoa-Schioppa, Toyoo

beyond Germany. The fiscal pressures it

the Clinton administration cited international

Gyohten, Bill White and Jean-Claude Trichet, a

created required a highly restrictive monetary

pressure and approval to gain Congressional

WP3 discussion was a rewarding intellectual, as

policy by the Bundesbank to hold inflation in

support for its budget-cutting strategy.

well as policy-making, experience. 

check. The resulting high interest rates nearly

Unfortunately for me, my tenure as WP3

broke the European Monetary System (EMS)

Chairman was cut short after only one

Sir Andrew Crockett is Special Adviser to the

and led both Britain and Sweden to stand

meeting, when I was asked to take Alexandre

Chairman of JPMorgan Chase and Co. He was

aside from eventual monetary union. As might

Lamfalussy’s place as head of the Bank for

General Manager of the Bank for International

be imagined, WP3 was a forum for intense

International Settlements. Sessions of WP3 were

Settlements from 1994 to 2003 and Chairman of

discussion of these issues.

among the most stimulating and enjoyable of the

the Financial Stability Forum from 1999 to 2003.

87

90

The OECD at 50

The OECD seen from the viewpoint of an international banking analyst

by Richard O’Brien

F

rom the mid 1970s until the late 1990s,

developing country debt crises and petrodollar

to the end, when a number of Asian delegates

I was a regular participant in the informal

recycling. The meetings were usually held in one

made clear that they were less keen on rushing

bankers’ meetings hosted by the Financial

of the elegant meeting rooms of the Château de

into as close a relationship as the Secretariat

Markets Committee before it met in formal

la Muette, and they followed a consistent format.

had seemed to hope, especially if it might involve

session the following day to discuss the state

Ahead of time, a briefing paper with some

greater commitment to standard regulations.

of world financial markets. The Committee

key questions was sent to us all. On the day,

was then best known for its excellent Financial

the invited analysts and bankers gave their

called to attend a planned press briefing

Markets Trends publication, a three-times-

reactions. Discussions tended to follow a

were kept waiting for a good half-hour while

a-year little dark-red book available only in

consistent pattern, with the analysts first off

a compromise was thrashed out. I had been

hard copy. For international banking analysts

the block, doubtless keen to show their fine

chairing a breakout group and, to my surprise,

like myself, it was a key source of data and

analytical minds and often invited by the chair

I was asked to face the press, despite my non-

commentary alongside the publications of

to get things going. Then the bankers would

official status. In my mind there was a great story

the Bank for International Settlements and

contribute, either with fairly formal statements

here about the inability to reach agreement, but

individual central banks.

or warming up into lively debate. If things

we were instructed to put as much of a positive

Those were times of rapid change: the

On the evening of the second day, journalists

got dull, a little dig from the floor at the dollar

spin as possible on the very useful and positive

growth of syndicated bank lending, of the

could be guaranteed to get a rise from the

discussions that we had had, without being able

Euromarkets, the Herstatt Bank collapse and

US Treasury delegation.

to say much of substance. There was little in the

Basel I (the Cooke capital ratios), of floating

The value for all was the open and fairly

exchange rates and floating interest rates, of

free debate between central bankers and the

and the journalists could well have been forgiven

private market over the difficult challenges

for thinking that their time had been wasted. Yet

of international financial markets at the time.

behind our blandness were hidden some of the

Why were banks lending at ever lower spreads

trickier issues of the day.

to countries that were getting ever more

press briefing that was of interest to the media,

Today, we have moved on from the old-style

indebted? How long could this go on? When

club approach to a Twitter world where informal

the bubble burst in the early 1980s, debates

channels help both sides to read between the

shifted to how long reschedulings would take,

lines of official statements and formal balance

when markets might recover, and who was

sheets. In those pre-Twitter days, however, these

going to run into trouble next. This was also

informal meetings provided an important link

the era of deregulation: Big Bang in the UK

across the divide between the market regulators

and May Day in New York – though usually

and the regulated, enabling both sides to forge

attendance was from commercial investment

valuable personal contacts that helped them in

bankers rather than the exchanges.

their efforts to work out just what was going on

On the basis of this regular attendance,

in the rapidly globalising world. 

some of us were also invited to contribute to other OECD sessions. I recall a two-day Informal

Richard O’Brien is a founding partner of

Workshop with Dynamic Asian Economies

Outsights, a London-based strategic

in February 1990, focused on regulation but

management consultancy. From 1973 to

where the underlying longer-term issue was

1995, he was successively Senior Economist

these countries’ eventual future links with – and

at Rothschild Intercontinental Bank and

possibly even membership of – the OECD. The

Chief Economist and Executive Director

meeting was running along very well until close

at American Express Bank.

The OECD at 50

OECD Environment Ministerial, 18-20 July 1985. Dr Peter Winsemius, Netherlands Minister of Housing, Physical Planning and Environment (left), and Shigeru Ishimoto, Minister of State for the Environment, Japan

For a while, the OECD’s Working Party No 3 continued to worry about current-account imbalances. In 1985, in conjunction with the G10, it orchestrated the ‘Plaza Accord’ which sought to bring down an overvalued dollar by concerted intervention coupled with fiscal expansion in Japan and, to a lesser degree, in Germany. This worked reasonably well for a while – until two years later another ‘package‘ had to be implemented via the Louvre accord to shore up a dollar that was seen as having weakened too much. From then on, reflecting the changed environment, there were no further serious efforts to construct co-ordinated policy packages in OECD countries. Instead, macro-policy discussions in OECD focused, with generally positive results, on the design of frameworks that would deliver, in each country, sensible fiscal policies that were sustainable over time, while building on inflation-targeting to fine-tune the implementation of monetary policy.

Push for deregulation During the 1980s, moves towards the full liberalisation of capital movements in OECD countries gathered pace. In parallel, the OECD started to push for deregulation in major economic areas such as telecommunications, first by calling for increased competition at the level of basic equipment such as telephone handsets, and then by pushing for the privatisation of stateowned telecommunications operators. The sharp falls in calling costs that consumers in many countries have enjoyed in the past few decades are one of the most tangible examples of the benefits to ordinary citizens of work at the OECD. Also at this time, the OECD began to show greater interest in learning from experiences outside its membership, notably the so-called ‘Tigers’ of South-East Asia, whose economies were growing at rates far faster than those of OECD countries. OECD officials travelled to Hong Kong, Malaysia, Singapore and other Asian destinations. Encouraged in particular by Japan, OECD ministers rewarded their cautious

overtures with a mandate to open an informal dialogue with the ‘Dynamic Asian Economies’.

The first such meeting, in January 1989, took place “in an extremely favourable atmosphere, and achieved great results”, according to a report from Japan’s Ministry of Foreign Affairs. Months later, however, the fall of the Berlin Wall in November 1989 opened a dramatic new chapter in the history of the world economy – and of the OECD. Though the Asian Tigers were not forgotten, attention at the OECD rapidly switched to the countries of Central and Eastern Europe. 

The OECD has served the world and the Netherlands well, setting standards on issues such as fair business practices and corporate governance. We will continue to profit from the OECD’s work on global challenges, such as restoring public finances, employment and multinational entrepreneurship.

Mark Rutte, Prime Minister of the Netherlands

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The OECD at 50

The 1990s A changing global context

Poland joins the OECD, OECD Headquarters, 11 July 1996.

Donald Johnston, OECD Secretary-General (left); Grzegorz Kolodko, Deputy Prime Minister, Finance Minister

Fall of the Berlin Wall, 1989

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The OECD at 50

Nelson Mandela is released from prison after 27 years. Paarl, South Africa, 11 February 1990

The OECD at 50

The OECD is one of the most influential economic forums to which New Zealand belongs. Participation grants us access to a think tank whose analysis can inform our own policy development, as well as provide us with a voice on the global stage with which to help shape the international economic environment.

John Key, Prime Minister of New Zealand

T

he demise of the Soviet Union and the rise of globalisation rendered characterisations in terms of political blocs less pertinent. OECD countries took a strategic decision to engage the Organisation fully in the transition to democracy and a market economy that was under way in the Czech Republic, Hungary, Poland, the Slovak Republic, the Russian Federation, South East Europe, the Baltic countries and the Commonwealth of Independent States (CIS). Through a series of country programmes with ‘Partners in Transition’, the OECD helped to ease their conversion to market economies, paving the way, in some cases, for membership of the OECD and/or the European Union. In a context in which many of these countries were aiming at European integration, the fact that the OECD’s recommendations were based on the comparative analysis of policy experiences, but refrained from the traditional conditionality, helped to encourage implementation and a sense of ownership in the reform process.

During this period, the OECD also began drawing the attention of policy makers to the relevance of entrepreneurship and small and medium-sized enterprises (SMEs) as drivers of growth, job creation and social cohesion. In 1993, a working party on SMEs was created as the first high-level international forum for SME policy makers. Later renamed the Working Party on SMEs and Entrepreneurship, to reflect increased recognition of the importance of entrepreneurial behaviour in economies around the world, its work to promote entrepreneurship and advance the performance of small businesses through best-practice policies has proved of particular interest in emerging economies, including those of the former Soviet bloc.

Signature of the OECD Partnership Agreements (Czech Republic, Slovak Republic, Hungary and Poland), OECD Headquarters, 4 July 1991. Jean-Claude Paye, OECD Secretary-General (left); Mihaly Kupa, Finance Minister, Hungary; Leszek Balceroricz, Deputy Prime Minister, Finance Minister, Poland; Wim Kok, Netherlands Deputy Prime Minister and Minister of Finance, OECD Ministerial Council Chair; Béla Kadar, Minister, International Economic Relations, Hungary; Alfred Biec, Under Secretary of State, Poland; Salvatore Zecchini, OECD Assistant Secretary-General

Bridging the knowledge gap In 1994, building on its participation in the North American Free Trade Agreement, or NAFTA, Mexico concluded negotiations to join the OECD and quickly began playing an active role in the Organisation’s affairs. Korea had also made known its interest in membership, as had some other Asian economies. In central and eastern Europe, the OECD organised seminars and sent experts from its member countries to advise officials in these countries. It invited them to send representatives to meetings of its committees in Paris, giving them direct access to OECD counterparts in areas as diverse as trade, financial markets, agriculture, technology, social policy, labour markets and education. ❱❱

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As a small, open economy, Norway has benefited greatly from the sharp, policy-relevant analyses of the OECD. We have often followed the advice, and done quite well.

Jens Stoltenberg, Prime Minister of Norway

OECD member, a goal that it achieved in May 1996, shortly after the Czech Republic and just before Poland. A few years later, Hungary was one of the first OECD countries to undergo a fullscale OECD review of its regulatory environment, including an in-depth analysis of its competition policy arrangements. In many ways, the process was a coming of age in terms of Hungary’s OECD membership, says Mr. Kovács. “We took it very seriously,” he recalls. “It was a reputation issue.”

Unemployment on the rise Hungary was one of several countries that took full advantage early on of the learning opportunities that the OECD offered. In 1990, Hungary’s newly elected parliament had passed a Competition Act modelled on the laws of Western countries. But passing a law was one thing, and putting it to effective use was quite another. “We had to learn how to implement it,” recalls Csaba Kovács, head of the Hungarian Competition Authority’s policy section. “If you misunderstood important concepts, enforcement might go in the wrong direction.”

To bridge their knowledge gap, he and his colleagues eagerly participated in OECD training sessions and seminars, and later as observers in meetings in Paris of the OECD’s Competition Committee. By dint of hard work, they began to get a grip on the issues, simultaneously pushing forward Hungary’s aspirations to become an

While all this was going on, OECD countries also had other worries. Concerns about high and increasing unemployment were addressed by The OECD Jobs Study: Facts, Analysis, Strategies, published in 1994, and the OECD Jobs Strategy that resulted from it. Focusing on the difficulties of many OECD economies in adapting to technological change and increased competition, the OECD advocated broad and deep structural reforms in product and labour markets, innovation and entrepreneurship, and education, training and strong support systems complemented by appropriate macroeconomic policies. And it warned that any attempt to soften or thwart the pace of change through protectionism, or other measures to restrict competition, would not tackle the underlying causes of unemployment, but rather reduce living standards.

The 1994 OECD Jobs Study: Recommendations ●● Set appropriate macroeconomic policy; ●● Enhance the creation and diffusion of technological know-how; ●● Increase working-time flexibility; ●● Nurture an entrepreneurial climate; ●● Increase wage and labour cost flexibility; ●● Reform employment security provisions; ●● Expand and enhance active labourmarket policies; ●● Improve labour-force skills and competences; ●● Reform unemployment and related benefit systems. ❱❱

OECD Ministerial Council, OECD Headquarters, 2-3 June 1993.

Senator Hon Peter Cook, Australian Trade Minister (left); Hon Lloyd Bentsen, US Secretary of the Treasury; Hon John S Dawkins, Australian Treasurer, Chair of the meeting; Hon Ronald Brown, US Secretary of Commerce

The OECD at 50

The rise of globalisation: New challenges for the OECD

by Jean-Claude Paye

A

quarter of a century ago, addressing a

reforms in most countries. Nothing is fixed in

seminar marking the OECD’s 25th

stone, however, and it is entirely appropriate

on Investment, or MAI, eventually ran

anniversary, I spoke of a world facing rapid

that the Jobs Strategy should now be

foul of widespread fears of globalisation.

and far-reaching change. Events soon proved

re-examined once again in the light of the

But it is significant that moves are now

this an understatement. The stock market

economic crisis of the past few years.

afoot, within the framework of the OECD’s

crash of October 1987 prompted a wave of

Looking back from the vantage point of the

The proposed Multilateral Agreement

Investment Committee, to revisit the idea of

uncertainty and doubt in developed economies.

OECD’s 50th anniversary, I am reminded of the

a global accord on cross-border investment.

By early 1989, when the OECD opened a

words of Toyoo Gyohten – who, as Japan’s

Globalisation is now recognised as here to stay,

dialogue with the dynamic economies of

Vice-Minister of Finance for International Affairs,

and the OECD has a fundamental role to play

Asia – Hong Kong, Malaysia, Singapore,

was chairman of the OECD’s Working Party

in helping to prevent misunderstandings and

South Korea, Chinese Taipei and Thailand –

No 3 from 1988 to 1990 – when I congratulated

tensions and to establish the rules required so

globalisation, though still poorly understood,

him for never having missed a meeting of this

that it operates to the benefit of all.

was well and truly under way.

important body. “There's a good reason for

That means ensuring a place for all major

that,” he responded. "It's the only place where I

world economies around the OECD table. It

in train another wave of change. Germany was

am in reflection mode and not negotiation

also means continuing to adjust its agenda

reunified and the Cold War was over. By the

mode.” ln those words, Toyoo Gyohten summed

and its analytical frameworks to the changing

early 1990s, with OECD assistance, the former

up what for me was and remains the most

realities of today’s world – one where the

Soviet satellite states of central and eastern

important function of the OECD: to serve as a

interests of developed and developing

Europe were working hard to reintegrate

forum in which governments can reflect together

countries are more intertwined than ever, as

themselves into the world economy. Mexico

on common problems and how best to address

shown by the discussions taking place in

had signalled its wish to join the OECD, which it

them, in a win-win situation, without seeking to

the G20. And it means improving its working

did in near-record time, followed by Korea.

extract concessions from their partners.

practices to ensure that discussions are not

Months later, the fall of the Berlin Wall set

True to its vocation, the OECD throughout

In the early 1990s, fears about globalisation

clogged by the demands of every member,

this period played a groundbreaking role in

were already giving rise to protectionist

big or small, to have its say merely to reiterate

helping governments and policy makers

pressures. The OECD addressed these

things that have already been said. My hope,

respond to the challenges posed by

challenges head on – for example, through a

in particular, is that the European Union

globalisation. Faced with rising unemployment

conference in March 1995 on the damaging

members will demonstrate their capacity to

in its member countries, the OECD began to

effects of bribery on trade and investment,

speak with one voice in the variety of

place greater emphasis in its analyses and

which led to the negotiation and adoption of

domains covered by the OECD.

recommendations on microeconomic policies

the OECD Convention banning the corruption

and the need for structural reforms. We looked

of foreign public officials in international

that it will decisively contribute to making

at the impact of government subsidies to

business deals. That same year, OECD

globalisation a win-win process for an

industry. ln 1992, we launched a review of

governments gave the Organisation a mandate

expanded membership and the rest of the

ways to raise employment and improve

to negotiate a level playing field for cross-

world. The tensions, worries and frustrations

worker training, which two years later resulted

border investment, as a potential underpinning

that affect the many people who feel pulled

in the OECD Jobs Study.

for improved prosperity worldwide.

down by globalisation remind me of

My birthday wish for the Organisation is

The rising importance of China and India

Raymond Barre’s words as vice-president

not always welcome. The Jobs Study, to

was not lost on OECD countries either. In July

of the European Commission four decades

name but one example, raised hackles in

1995, I made the first official visit of an OECD

ago: “I am, of course, for liberalising trade,

many OECD countries when it was launched

Secretary-General to Beijing and in January

but in an orderly fashion.” 

in 1994. Two years later, the Jobs Strategy

1996 to New Delhi. In May 1996, as Donald

that emerged from this work was highly

Johnston succeeded me, Russia announced its

Jean-Claude Paye was Secretary-General of

praised and triggered a process of important

wish to become a member of the OECD.

the OECD from 1984 to 1996.

To be sure, our recommendations were

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The OECD at 50

In addition to calling for reform in the wages and labour markets, working time and retirement age and for the reform of employment security provisions and unemployment benefits, the OECD Jobs Strategy urged governments to be more proactive in taking measures to improve workers’ skills and competencies and promote innovation. While there was initially some controversy over some of its policy orientations, an assessment in 1998 of its impact concluded that many of its countryspecific recommendations had been adopted and were useful in reducing unemployment.

The pertinence of OECD analysis and policy recommendations was confirmed by the growing list of candidates for OECD membership. In December 1995, the Czech Republic became the first of the former Soviet-bloc countries to join,

followed by Hungary and then Poland. In parallel, the OECD was making overtures to China, first under Jean-Claude Paye and then under his successor, Donald Johnston, a former Canadian government minister and President of the Liberal Party of Canada, who took over in 1996 as the OECD’s first non-European Secretary-General.

Korea became the Organisation’s second Asian member in December 1996, and in 1997 Russia formally made known its desire to join.

Economic growth, social stability, good governance Drawing inspiration from what he described as “a triangular paradigm whereby progress is dependent on balancing economic growth and social stability through the exercise of good governance”, Donald Johnston launched the OECD ❱❱

The reform years: Building a stronger, more agile OECD

by Donald Johnston

I

n 2001, the OECD was the first international

much of the following decade, the Organisation

shared between two Deputy Secretaries-

organisation to establish its financial

was in a continuing state of reform.

General. Within this new framework, other

statements in accordance with the International

Looking back, I am proud of the way in

changes followed in almost all areas.

Public Sector Accounting Standards (IPSAS)

which staff coped with this period of change

and to have them audited by external

and continued to show their dedication to

overhauled and the substantive work of the

accountants. Seen from today’s perspective,

the Organisation. These were turbulent, even

Secretariat was reviewed and re-prioritised.

such an innovation might seem mundane.

traumatic, times. Severe budget cuts in the first

External communications were streamlined.

But in the context of the time, in which

three years of my first mandate reduced our

In 1996, printing, publications and media

intergovernmental organisations were under

resources by approximately 18 per cent. Over

relations were all dealt with separately, without

critical public review, it was a major step. Today,

the following years, further cuts and repeated

a common sense of direction and without a

transparency and integrity are core values of

job uncertainty at the end of each year, plus the

common logo representing the Organisation.

which the OECD can be proud.

upheaval of adapting to new ways of working,

Today, the OECD has a coherent, integrated,

added to the burden on staff.

across-the-house strategy. During my mandate,

Under the leadership of Angel Gurría, the OECD enjoys well-merited recognition and

The first major administrative change that

The structure of the Secretariat was

we introduced a number of significant flagship

stability. It has become a partner in the work

I introduced was the appointment of an

publications. We also launched the OECD

of the G20, and it benefits from modern

Executive Director in charge of Human

Forum, held in conjunction with the OECD’s

structures and working conditions and a

Resource Management, Budget and

annual Ministerial meeting, and now an

world-class conference facility. Achieving these

Finance, Information and Communication

important annual event where governments,

advances was no easy task, however. From

Technology (ICT) and General Operations –

business and civil society exchange ideas

1996, when I began my first mandate, and for

responsibilities that previously had been

and influence policy makers.

The OECD at 50

Together with the 50th anniversary of the OECD, Poland celebrates the 15th jubilee of our membership of this Organisation. What Poland values most about the OECD is the opportunity it provides to discuss crucial economic problems of the contemporary world, to jointly seek solutions and co-ordinate economic policies for the benefit of member states’ citizens. Were it not for our membership of the OECD, we would not be where we are today.

Donald Tusk, Prime Minister of Poland

Education was given its own Directorate,

and continues to be a significant forum for

education, as well as governance. The OECD’s

which now runs the OECD’s very successful

Ministers and policy makers to exchange

Corporate Governance roundtables, organised

and well-known Programme for International

views in an informal context.

in co-operation with the World Bank and

Student Assessment (PISA). Other important

Most important of all, however, in terms of

held on a regular basis in Russia, South East

steps included the creation of a Centre for

the OECD’s contribution to global economic

Europe, Latin America and Asia, won active

Entrepreneurship, to address aspects

governance, has been the decision by OECD

engagement on the part of regulators, business

of entrepreneurship from across the house,

member countries to engage with major non-

and government officials.

and of a Committee on Statistics. The

OECD economies – in the hope that they are on

OECD’s statistics are the raw material upon

a path to membership. Not only Russia, which

the OECD has been transformed from an

which the high-quality analytical work of

is now negotiating to become a member, but

organisation that focused inwardly on its

this and other organisations, governments

China, Brazil, India and other emerging giants

member countries’ policies to one that works

and academia depend.

must sit at the OECD table if this Organisation is

actively with more than 70 countries outside its

to be effective in addressing global issues and

membership across the range of its activities.

helping to shape globalisation.

Today, Chile, Estonia, Israel and Slovenia

We also set up a separate Centre for Tax Policy and Administration. It has been, is, and will continue to be the world’s centre of

Here, too, the change has been dramatic.

As a result of these and other changes,

have all become members, and the hope is

expertise on international taxation matters.

In 1996, the so-called ‘Outreach Programme’

that Russia will join them soon. In parallel, the

The International Futures Programme and

was fragmented into no less than four units.

OECD has established close links under its

the Development Centre were brought into

In response, we created the Centre for Co-

Enhanced Engagement programme with Brazil,

alignment with the core programmes and

operation with Non-Members to play a central

China, India, Indonesia and South Africa. Half

objectives of the Organisation as a whole.

role in co-ordinating programme development.

a century on from its foundation, its role and

Regional programmes, meanwhile, such as

potential have been recognised and validated

areas where the OECD makes a valuable

for South East Europe (SEE) or the Middle

by the G20. Over the next half-century, there

contribution. Sustainable development was

East and North Africa region (MENA), played

will be plenty more new frontiers. The OECD

introduced to the work programme in the

a major part in bringing the OECD closer to

is well placed and well equipped to tackle the

late 1990s and it has evolved as a core

other economies around the world, as did

challenges that they will pose. 

activity, with emphasis today on “green

its global forums held in different parts of the

growth”. The Round Table on Sustainable

world, dealing with issues such as investment,

Donald Johnston was Secretary-General of the

Development was created at the same time

taxation, competition, agriculture and

OECD from 1996 to 2006.

Health policy and ICT are other important

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The OECD at 50

The OECD anti-bribery convention: A trailblazer in the fight against corruption

by Huguette Labelle

T

he OECD was one of the first international

This problem was caused not just by public

organisations to recognise that corruption

officials extorting bribes, but by the willingness

also ratify the UN Convention against

is a major threat to economic prosperity and

of foreign companies to win business through

Corruption – a natural step forward to

stability. In the past 15 years, it has pushed its

bribery. In the early 1990s, far from punishing

furthering global anti-corruption goals.

members to agree to strong binding rules to

foreign bribery, the tax systems in 14 OECD

criminalise bribery of foreign officials and limit

countries actually counted many bribe

and the OECD has tackled it on many fronts.

financial tax havens. More important still, it has

payments as deductible business expenses.

It has complemented the anti-bribery

followed up to ensure enforcement.

Only the US had criminalised foreign bribery, in

Convention with further recommendations,

a law dating back to 1977.

such as no-bribe rules for export agencies

Today, the OECD provides both leadership and the technical means for its members

Transparency International (TI) argued that

the Convention. All G20 countries should

Corruption comes in different guises,

in 2006, and business guidelines.

to meet these standards. It has established

anti-corruption efforts also had to tackle those

principles of corporate governance,

who offer the bribes. As most multinational

frameworks for action in areas such as

guidelines for public servants and rules for

companies came from OECD countries, the

public procurement or lobbying. It has issued

export credit agencies. In tackling foreign

OECD was well placed to tackle foreign bribery.

practical tools for multinational companies

bribery, it is setting new directions for the

It was also quick to call for co-ordinated action.

and public servants who want to avoid

anti-corruption movement.

The argument that good governance

In 1994, the OECD set up its Working Group on Bribery, which over the next three

It has developed several other

corruption and conflicts of interest.

The OECD has also promoted its anti-

was a prerequisite for development began

years turned its initial recommendations

corruption values and standards on a

to gain consensus only in the 1990s. By the

into the Convention on Combating Bribery

global stage, through its efforts to promote

end of the decade, the realisation had also

of Foreign Public Officials in International

good governance in the administration

dawned that bribery in international business

Business. The Convention was adopted on 21

of development aid to the promotion of

subverts world trade and investment, denying

November 1997, and now counts 38 countries

transparency in offshore financial centres. Its

companies a level playing field.

as its signatories. Together, they account for

ranking of tax havens, combined with the threat

approximately 65 per cent of world exports.

of “blacklisting”, was a powerful force for

Once the Convention was signed,

have a key role to play in preventing these flows

publishing annual reports on the Convention’s

and in building a system that allows countries

enforcement in 2005, when only four countries

to recover stolen assets. In this and many

had instigated more than one foreign bribery

other areas, the OECD makes an important

prosecution. Since then, enforcement has

contribution to the work of the G20.

increased but there are still too many OECD

The OECD and TI have enjoyed fruitful

countries that have instigated few, if any,

co-operation in raising awareness of, and

cases. Promoting the Convention is one of

promoting solutions to, corruption. In

TI’s highest priorities.

recognising the progress achieved by the

OECD countries should lead by example,

OECD Headquarters, 17 December 1997.

Madeleine Albright, US Secretary of State, at the signing of the OECD Convention on Combating Bribery of Foreign Public Officials in International Business Transactions

launching a debate on illicit financial flows. It will

enforcement became key. TI started

OECD in the fight against corruption, it is

and encourage other major players to join

important to keep the momentum going, and

them in fighting bribery. In 2010, one-third

to resist calls in favour of ways of doing

of world exports came from countries that

business that lack integrity. 

are not party to the OECD Convention. Major exporters should join the OECD’s efforts

Huguette Labelle is the Chair of

and commit to enforcing the provisions of

Transparency International.

The OECD at 50

on a path of active commitment to a cleaner and fairer global economy. Under his leadership, the OECD revised its Guidelines for Multinational Enterprises, setting out recommendations for companies in the areas of corporate social and environmental responsibility. It initiated work on the harmful effects of tax havens, and drew up the Principles of Corporate Governance that have now won acceptance as the world standard in this area. It championed the international harmonisation of competition policy, and achieved a major breakthrough in the international fight against corruption with the OECD Convention on Combating Bribery of Foreign Public Officials in International Business Transactions, as well as Principles for Managing Ethics in the Public Service. It also initiated work on sustainable development, and launched an integrated programme in 1999 on regional development policy that included urban and rural dimensions.

Inevitably, there were setbacks. Soon after Korea joined the OECD, it was hit by the 1997 ‘Asian crisis’. A run on the won led to a plunge in Korea’s currency reserves. But the crisis also revealed flaws in Korea’s system of corporate governance and other key structural aspects of its economy. Drawing on OECD analysis and policy recommendations, Korea acted to introduce global standards and best practices in important areas of its economy, thereby laying the basis for recovery.

A decade later, in December 2009, Korea’s return to prosperity was symbolically confirmed when it joined the OECD’s Development Assistance Committee, or DAC, as its 24th member. In doing so, it became the first country to graduate from being a receiver of aid to an official donor within the OECD.

Engaging with civil society In 1998, the OECD fell foul of an international campaign by anti-globalisation lobby groups against plans for a multilateral treaty governing conditions for cross-border investment, the proposed Multilateral Agreement on Investment, or MAI. Countries not represented in the debates, as well as several civil society organisations, did not share the approach taken by the MAI negotiations.

Plans for the MAI were shelved, but the lessons of the experience were not lost on the OECD. It responded by engaging actively with civil society.

A founding member, Portugal welcomes the achievements made by the OECD since 1960. Its facts-based approach and peer knowledge make the OECD an indispensable player in a global world.

José Sócrates, Prime Minister of Portugal

The OECD soon had an opportunity to build on this new commitment by playing an innovative role as honest broker in the controversy over the use in farming of genetically engineered hybrid varieties capable of producing higher crop yields, but accused by critics of having the potential to cause environmental damage. On a Saturday morning in November 1999, Donald Johnston presided over a groundbreaking consultative meeting on the topic at the OECD’s Headquarters.

Diplomats and OECD experts listened agog as one activist after another, from organisations ranging from Britain’s Royal Society for the Protection of Birds to the Society of Friends, better known as the Quakers, aired their concerns about the potentially harmful effects of genetically modified organisms, or GMOs. In more ways than one, that meeting heralded the birth of a new, more open OECD. 

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The OECD at 50

Entering the new millennium Enhanced engagement, institutional innovation, measuring progress

OECD Conference Centre, 27 May 2010.

Public session to invite accession countries to join the OECD

G20 meeting, Pittsburgh, 24 September 2009.

US President Barack Obama receives Angel GurrĂ­a, OECD Secretary-General

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Slovakia joined the OECD just at the Millennium 2000 – as a symbolic milestone of the country’s democratic and economic development after the fall of communism. OECD membership meant international recognition of Slovakia’s transition efforts. It has become a real step towards better policies for the better lives of citizens.

Now we would like to share our own experience and knowledge in assisting other countries on their path to democracy, prosperity and stability. Our ‘mantra’ is that economic growth and prosperity have to go in line with deep respect for human rights and ethics. Such an approach, in Slovakia’s view, is the right way to better policies for the better lives of people around the world.

Iveta Radičová, Prime Minister of the Slovak Republic

The OECD at 50

T

he new millennium began on a positive note. A full-scale international conference on genetically modified organisms (GMOs) was successfully organised in Edinburgh in early 2000. A follow-up conference in Bangkok the following year earned plaudits from the NGO community for the OECD’s neutral handling of this contentious issue. In between, the OECD launched the first of its annual Forums as an opportunity for public debate on global issues in June 2000, and in December 2000 the Slovak Republic completed its accession negotiations, becoming the Organisation’s 30th member.

True, the US was running a large currentaccount deficit, posing the threat of a potential sharp weakening of the dollar. But developments elsewhere in the world, including the rise of China as a supplier of cheap exported goods, were helping to keep the world economy on a steady low-inflation growth track. Despite higher oil prices and a weakening in equity markets, the winter 2000 edition of the OECD’s twiceyearly Economic Outlook concluded that “economic prospects remain relatively bright”.

Redefining the OECD’s role Still, this was no time for complacency. New countries were preparing to join the European Union, prompting parallel requests for their admission to the OECD. At the same time, the OECD was under pressure to redefine its role in

G20 Pittsburgh Summit, 2009

OECD Headquarters, 1 October, 2000. Donald J Johnston, OECD Secretary-General (left), and Vicente Fox, President-elect of Mexico

the era of globalisation. Questions were being raised regarding the future composition of the Organisation’s membership and the shape of its relations with non-member countries. In addition to European countries, dynamic economies in Asia and Latin America were lining up to join.

The major OECD countries, meanwhile, were increasingly aware of the need for closer links with emerging giants such as Brazil, China and India.

At the level of committees and working groups and through the establishment of OECD bodies with different membership, the Organisation was already giving room to these new players in its work and debates. However, this was not yet reflected at a political level. In 2004, lengthy discussions among representatives of OECD ❱❱

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The OECD at 50

countries, chaired by Japan’s then Ambassador to the OECD, Seiichiro Noboru, gave birth to a report that condensed long-standing views that the OECD needed to engage more broadly with ‘significant players’ outside its membership, building on its peer-learning and peer-influencing capabilities and its rule-making capacities rooted in evidence-based analysis.

These conclusions coincided with SecretaryGeneral Johnston’s views on the need to work more closely with the so-called BRICs. However, drawing up new guidelines for the Organisation’s relations with partner countries proved easier than implementing them. It required the strong leadership of the new Secretary-General, who was elected in 2005, to agree on a clear path for a new wave of accession and to settle a strategic programme on Enhanced Engagement with major emerging economies.

In November 2005, following a finely tuned, merit-based process of selection, Angel Gurría, a veteran of Mexico’s public service who, more than a decade earlier, had actively participated in Mexico’s negotiations for OECD membership, was appointed Secretary-General as of June 2006.

Previously Mexico’s Foreign Minister and then Finance Minister, Gurría had a strong reputation in his own country for his role in seeing it through a change in government, exceptionally without a resulting economic crisis. As the first OECD Secretary-General from what in many ways is still a developing nation, his appointment, marked by a focus on impact, openness and political relevance, opened yet another major new chapter in the life of the Organisation. ❱❱ OECD Ministerial Council Meeting, OECD Conference Centre, 27 May 2010

Promoting a fairer world economy: The OECD and the fight against harmful tax practices

by Gabriel Makhlouf

T

ax avoidance has worried tax collectors

on investment and financing decisions and

encouraging reform. Underlying its new

since taxes were first invented. For

the consequences for national tax bases”.

approach was a realisation that it would be

most of history, governments responded by

Two years later, the OECD’s Committee on

more fruitful to encourage positive change –

legislating against what they saw as abuses

Fiscal Affairs (CFA) produced a report on tax

and healthy, rather than harmful, tax

of their laws. By the mid 1990s, however, it

havens and preferential tax regimes in both

competition – than spend time and resources

became clear that governments could not rely

OECD and non-OECD countries and territories.

‘counteracting’ harmful practices.

on unilateral action – or even action through

It was approved by the OECD’s governing

bilateral tax treaties – in a new world of frontier-

Council, with abstentions by Luxembourg and

jurisdictions complained that they were being

less finance and tax competition. That’s when

Switzerland, and endorsed by G7 Finance

unfairly pilloried. Others worried that their

the OECD began to focus on a problem that

Ministers as part of a wider programme to

burgeoning financial sectors might suffer

had become one of the more challenging

strengthen the global financial system.

as a result of this tag. Many of the smallest

aspects of globalisation.

Governments were losing tax revenues as

Initially, the CFA’s focus was on OECD

The list provoked mixed reactions. Some

jurisdictions complained that they were being

countries’ preferential regimes, but the

bullied by the OECD to adopt principles that

companies and individuals took advantage of

issues posed by tax havens soon became

two OECD countries had not endorsed. The

low- or zero-tax opportunities offered by foreign

a central part of its work. In June 2000, the

CFA embarked on an intensive process of

or offshore jurisdictions seeking to win financial

CFA produced a list of jurisdictions that it

engagement, facilitated in many cases by the

business. In May 1996, OECD countries called

identified as tax havens and, in a change

Commonwealth Secretariat.

on the OECD to “develop measures to counter

to the original plan, made known its wish

the distorting effects of harmful tax competition

to engage with them with a view to

Looking back, I would identify three important developments that helped to ensure

The OECD at 50

the long-term success of the CFA’s work in

into commitments”. The Group was also

fact that this agreement was drawn up by a

this area. The first, and probably the most

charged with examining ways to promote a

group of OECD and non-OECD countries,

significant, came in March 2000, three months

more inclusive global dialogue on tax issues.

some of which had originally been classified

before the June 2000 list was published,

A similar conference was arranged in Tokyo

as tax havens, was a vindication of the change

when the CFA published a report on improving

in February 2001 for the Pacific region,

in approach adopted by the CFA in 2000.

access to bank information for tax purposes,

co-sponsored by the OECD and the Pacific

Constructive engagement and co-operation

which had the unanimous support of all OECD

Islands Forum, and meetings with countries

were producing far better results than

countries. This report noted that “ideally

from other regions were also held at this time.

‘defensive measures’ could have delivered.

all member countries should permit tax

These discussions put in place a platform for

authorities to have access to bank information,

better understanding between OECD and

significant strides over the past 10 years

directly or indirectly, for all tax purposes so

non-OECD countries, leading to the creation

to meet the challenges posed by harmful

that tax authorities can fully discharge their

of a Global Forum for Transparency and

tax competition. The world is a better place

revenue raising responsibilities and engage in

Exchange of Information for Tax Purposes.

for what we have achieved, and we are

effective exchange of information”.

The second development came in January

The third important event came with the

The international community has made

now better placed to meet the challenges

development of a model Tax Information

that remain. History will rightly focus on the

2001, when Owen Arthur, Prime Minister of

Exchange Agreement (TIEA). Lack of effective

many Tax Information Exchange Agreements

Barbados, hosted a conference of OECD and

exchange of information had been one of

that were committed to in the run-up to the

non-OECD countries to discuss the harmful

the key criteria in determining harmful tax

G20 summit in London in April 2009. But

tax competition initiative. The conference

practices. The Global Forum set up a working

the seeds for that success were planted

set up a Working Group of jurisdictions

group of OECD and non-OECD jurisdictions

at the start of the millennium, as the OECD

from the Commonwealth and the OECD,

tasked with developing a legal instrument to

faced up to one of the many challenges

under the joint chairmanship of Mr Arthur

enable effective exchange of information. In

posed by globalisation. 

and Tony Hinton, Australia’s Ambassador

April 2002, the group published an agreement

to the OECD, to find “a mutually acceptable

setting out two models for bilateral TIEAs,

Gabriel Makhlouf is Deputy Chief Executive

political process by which the principles (of

which formed a basis for bilateral agreements

of the New Zealand Treasury. He was chair

transparency, non-discrimination and effective

now involving more than 50 jurisdictions.

of the OECD’s Committee on Fiscal Affairs

exchange of information) could be turned

Secondly, and perhaps more importantly, the

from 2000 to 2004.

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The OECD at 50

OECD Forum, 12-13 May 2004. Kim Dae-Jung, former President of Korea, Nobel Peace Prize (left), and Mary Robinson, former President of Ireland, former UN High Commissioner for Human Rights

Revisiting the role of government

T

he economic, financial and social

public expenditures, which in most cases

information. There are signs of this

crisis of 2008-09 shook many

includes streamlining the state. Where

everywhere: citizen engagement in

assumptions. Hard lessons were learnt

and how should government intervene,

service design and delivery; opening

about the limits of regulation, the

and where can it step back?

once-closed meetings to non-government

misalignment of incentives, and the

The OECD, in publications such

participants; publishing databases and

need for better risk management. Some

as Government at a Glance, provides

guaranteeing access to information;

redefinition of the balance between state

information and statistics helping

transferring revenues to sub-national

and market, and a search for new ways

governments to assess not only the

governments; and mandating the

to boost citizens’ trust in both, became

size and composition of their public

provision of services to civil society

imperatives. The crisis offered a window

services, but more importantly their

groups or businesses.

of opportunity to rethink the role of

performance in meeting the rapidly

governments and to reform public sectors.

changing needs of citizens and business.

player, but many others are available

The OECD is identifying innovative

to represent and serve the public.

economies. By most standard measures,

solutions to key challenges such as

Faced with greater competition and

governments have significantly expanded

how to manage public budgets

scrutiny, the public sector must learn

their footprint over the past 50 years.

sustainably; how to make regulations

to act as a mediator, co-coordinator,

In 1960, general government outlays of

to support rather than hamper growth;

policy maker and regulator in concert

member states averaged less than 30 per

how central and local governments

with other centres of power, including

cent of GDP. Today, the average is more than

can work coherently together to increase

international and sub-national levels

40 per cent, boosted recently by massive

the effectiveness of public policies; and

of government, the media, the private

expenditure packages during the crisis.

how to involve civil society to reduce

sector and civil society. OECD work

public spending without adversely

in this area responds to the need for

affecting the quality of services.

the public sector to be more innovative

Governments loom large in national

Decisive action by governments halted financial market freefall and avoided economic catastrophe, underlining

New thinking about the role of the

Central government is an important

and agile in responding to new

the role of governments as the critical

state is more about governance than

challenges. Building strategic capacities

anchor of national economies. Equally,

government. Strong government in

for foresight and risk management is

however, the ensuing fiscal pressures in

complex industrialised societies is

essential for a better balance between

many countries increased the need to cut

based on sharing authority, ideas and

governments and markets.

The OECD at 50

At the centre of globalisation In May 2006, in a speech to OECD Ministers at a handover ceremony in the gilded halls of France’s Foreign Ministry, where decades earlier the founding Conventions of the OEEC and OECD had both been signed, Gurría expounded on his view of the need for a more global OECD, open to broader perspectives, setting out what would be the leitmotif of his leadership: “the pursuit of relevance” in order to put the OECD “at the centre of the globalisation process”.

He also proposed health, water and migration as key elements of the OECD policy agenda, and signalled increasing worries about global imbalances.

As he spoke, storm clouds were already gathering over the world economy. In July 2006, negotiations in the Doha Round of trade talks were suspended, prompting fears of a possible resurgence of protectionism. Japan was still in the grip of deflation, and signs were emerging of inflationary pressures and labour-market tensions in the US. Interest in international co-operation was waning.

When the OECD issued an updated Jobs Strategy taking stock of progress in July 2006, its authors were still able to point to lower average unemployment rates across OECD countries.

More women were participants in the labour force, and in many countries older people were staying in work longer. Later in the year, in the autumn edition of its Economic Outlook, the OECD was still cautiously hopeful that the world economy was heading for a rebalancing of growth, rather than a major slowdown. But in signalling once again the need for reforms in social security and health systems and in labour markets, it also warned – with prescience, as it turned out – that house prices might have reached unsustainable highs in a number of countries, including the US and Spain, raising the possibility that overheated housing markets could threaten economic stability.

Other warning signs were also beginning to emerge. In 2002, an OECD study of the economic implications of social and economic inequality ❱❱

Wealth of nations is not a final end; it is a means to higher ends – the eradication of poverty and building of good societies.

Danilo Türk, President of Slovenia

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The OECD at 50

had found no evidence that income inequality might, as some had suggested, be conducive to growth. Now, new analysis of conditions in several countries was showing that not only were inequalities rising in many countries, but that this was stifling upward mobility between generations and holding economic performance back.

Enhanced engagement

OECD Development Assistance Committee, OECD Headquarters, 25-26 April 2001.

Anita Bay Bundegaard, Minister for Development Co-operation, Denmark (left); Baroness Amos, Minister, Spokesperson, House of Lords on International Development, UK; Heidemarie Wieczorek-Zeul, Minister for Economic Co-operation and Development, Germany; and Eveline Herfkens, Minister for Development Co-operation, Netherlands

In May 2007, ministers from OECD countries met to formalise their strategy for ensuring a central role for the Organisation in the new environment of globalisation. In addition to inviting five countries – Chile, Estonia, Israel, the Russian Federation and Slovenia – to open membership talks, they announced their intention of seeking “enhanced engagement” with the five major emerging economies:

OECD and education: The power and potential of PISA

by Arne Duncan

C

omparative international assessments

the major evening news networks, featured the

with educational achievement serving as a

of educational performance have

new findings. And that was just in the US.

new proxy for prosperity in the future. In

been around for nearly half a century. Yet in

What accounts for the newfound

this new knowledge economy, policy makers

the last decade, the results of international

importance of international assessments of

and the public need to know how their

assessments of student achievement have

educational performance? And why has PISA in

nation’s students compare with those in

assumed much greater importance. The

particular garnered so much attention?

other countries. It is no surprise that that

OECD’s Programme for International Student

For starters, the world has changed. A

the OECD’s mammoth – if inaptly named –

Assessment (PISA) has especially helped to

half-century ago, young American workers

compendium of educational data,

expand the role that international assessments

competed with peers down the street, not those

Education at a Glance, is one of its

play in nations across the globe.

halfway across the globe. Young adults could

bestselling publications.

When the US government co-sponsored the

drop out of high school and still land a well-paid

While other international assessments excel

release of the 2009 PISA results in Washington

job in a blue-collar occupation. International

at evaluating student learning of curriculum

DC in December 2010, media attention and

competition in the job market has exploded

and content, PISA specialises in assessing

public interest in the findings was intense – far

because, as New York Times columnist Thomas

mathematic, scientific and reading ‘literacy’ or

surpassing the attention accorded the 2006

Friedman has said, the world has “flattened”.

applied knowledge – namely, the ability not just

PISA results several years earlier. More than

Companies can now digitise, automate and

to reproduce information, but to extrapolate

200 print stories – including the front pages

outsource work to the most competitive

and apply it in unfamiliar settings.

of the New York Times and The Wall Street

individuals, companies, and countries.

Journal – covered the 2009 PISA results. Three hundred broadcast stories, including most of

Education, in short, has now become the universal engine of economic growth,

In several respects, PISA seems uniquely well-suited to assessing the critical thinking skills and higher-order competencies that

The OECD at 50

Brazil, China, India, Indonesia and South Africa.

Through a process that was open to eventual future membership, they were henceforth to be associated systematically with OECD policy discussions. “These countries are now the ‘locomotives’ of the world’s growth,” Gurría commented in an editorial in the OECD Observer.

“Our members believe that while the policies and activities of these countries have an impact on the OECD, our experience of good policy practices could benefit them.”

The OECD’s role in forging stronger links with the major emerging economies was strengthened the following month at the G7/G8 Summit in Heiligendamm, which Secretary-General Gurría attended at the invitation of Chancellor Angela Merkel. Summit participants agreed to establish a dialogue on global issues with the Group of Five

important emerging economies, Brazil, China, India, Mexico and South Africa, the so-called Heiligendamm Process, and asked the OECD to serve as a platform for this dialogue. From then on, the OECD was to be involved in G8 debates, providing analytical support in four areas: innovation; investment; development, focusing specifically on Africa; and joint access to knowhow to improve energy efficiency and technology co-operation, with the aim of contributing to reducing carbon dioxide emissions.

Sub-primes and crises Confidence in at least some of the major OECD economies’ policy practices was soon to take a serious hit. Encouraged by banks taking advantage of a lax monetary and fiscal environment, borrowers in developed countries ❱❱

students need to flourish in the labour market

To cite one example, the OECD’s Strong

of the 21st century – skills such as problem-

Performers study found that socioeconomically

message of optimism to convey: it shows that

solving, adaptability, effective communication,

disadvantaged students in Canada are much

big improvements are possible in education.

creativity and teamwork. Policy makers in

less at risk of poor educational performance

A number of nations, such as Singapore and

many nations are eager to see if students

than their counterparts in the US. In addition,

Poland, have achieved large increases in

are acquiring these higher-order skills. Since

Canadian 15-year-olds outperform their US

student achievement in recent decades.

PISA was first launched in 2000, the number

peers in mathematics, science, and reading

of OECD member countries and partner

– suggesting that it is possible to combine

its international comparisons of student

countries/non-national education systems

equity and excellence.

achievement will continue to fuel healthy

taking the PISA tests has more than doubled, from 32 to around 70.

These data constitute a wake-up call to

Yet above all, PISA has an important

In the years ahead, I hope that PISA and

competition, to improve education and hold

American educators, one that I welcome. PISA

educators accountable. Neither I nor President

shows that high-performing countries not only

Barack Obama is content to have US students

data on student skills and school systems

dramatically boost student achievement, but

perform in the middle of the pack on PISA,

help to identify the characteristics of high-

often do so while closing achievement gaps

compared with their OECD counterparts.

performing education systems – which is one

at the same time. And the practices of high-

reason I asked the OECD to prepare its recent

performing countries show clearly that America

improving education is not a zero-sum game

study, Strong Performers and Successful

in particular, has to do much more to elevate

in which one nation’s gain comes at another

Reformers in Education: Lessons from PISA

the teaching profession, from the recruitment

nation’s expense. In a global economy where

for the United States.

and training of teachers to their evaluation and

innovation is borderless, boosting educational

professional development.

achievement and attainment is ultimately a

At the same time, PISA’s rich comparative

Each nation, of course, has unique characteristics to its education system.

The OECD’s Strong Performers study

Yet it is also worth remembering that

win-win game that raises living standards and

No nation can easily copy wholesale the

highlights the strengths of the US system,

practices of other countries. But the findings

too, including the convergence between the

drives economic growth in all nations.

of PISA suggest that education systems

practices of high-performing countries and

grow the economic pie for all, not carve it up

in high-performing countries share many

many of the reforms that state and local leaders

into finite pieces. PISA can help reinforce that

characteristics, too – helping to point the way

are now undertaking in adopting Common Core

virtuous cycle as the pathway to prosperity. 

to how other nations can elevate student

standards, in the Race to the Top programme,

achievement and attainment at home.

and in our new School Turnaround grants.

OECD’s aim, and our aim in the US, is to

Arne Duncan is the US Secretary of Education.

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The OECD at 50

Official visit of the Secretary-General to the Russian Federation, Moscow, 25-26 April 2011. Russian President Dmitry Medvedev (left); Angel Gurría, OECD Secretary-General

‘Fair Overall Conditions for a Social and Open Global Economy’, Berlin, 5 February 2009. Juan Somavia, ILO Director-General (left); Pascal Lamy, WTO Director-General; Chancellor Angela Merkel, Germany; Angel Gurría, OECD Secretary-General; Robert Zoellick, President, World Bank; Dominique Strauss-Kahn, IMF Managing Director

were taking out loans to finance the purchase of ever riskier assets. In September 2007, as the sub-primes problem in the US was beginning to emerge, Britain suffered its first run on a bank in 150 years, with the crisis at Northern Rock.

A year later, with the collapse of the Wall Street investment bank Lehman Bros, the full force of the financial crisis broke.

With the gravity of the situation now all too clear, the results of the OECD’s study of inequality added fuel to the flames.In October 2008, an OECD publication with the title Growing Unequal? showed not only that on average, in 2005, the richest 10 per cent of the population in OECD countries had nine times more income than the poorest 10 per cent, but that the gap had been growing in many nations. Releasing the results against the backdrop of a global financial crisis, Gurría issued a stark warning of the potential consequences.

“Growing inequality raises political challenges because it breeds social resentment, it questions the ultimate role of democracy and generates political instability (and) it also fuels populist, protectionist and anti-globalisation sentiments,” he declared. “People will no longer support open trade and free markets if they feel that they are losing out while a small group of winners is getting richer and richer.”

Amid the crisis, the risks of protectionism and populist economic measures were clearly immense.

True to its aim of seeking to provide governments ❱❱

The OECD at 50

Spain has been part of the OECD since its creation: this is, therefore, also our 50th anniversary as a member of an organisation whose contribution has been key for Spain's integration in the global economy, as well as for the continued improvement of our public policies. The OECD has played a leading role in combating the crisis and faces the extraordinary challenge of building a global governance for a fairer and more sustainable world economy.

José Luis Rodríguez Zapatero, Prime Minister of Spain

Private-sector development: Working with developing economies for economic reform

T

he Republic of Moldova, with an annual gross domestic product per

Other projects, such as the SME

conceptual frameworks and instruments

Policy Index, provide regular reviews of

that it has developed over its 50 years

capita of less than USD 2,000, is the

policies in Moldova and elsewhere in

of existence. In doing so, it replicates the

poorest country in Europe. It is also

South East Europe, based on OECD

powerful use of policy dialogue between

one of the countries targeted by the

instruments and best practices.

OECD countries by setting up regional

OECD’s Private Sector Development

Such exchanges are profitable for

working groups, which play a similar

initiative, which aims to help developing

both sides. Policy makers in emerging

role in these economies to that of the

economies draw on the policy experience

economies can benefit from 50 years

Committees that are the backbone of

of OECD countries.

of policy experiments in the world’s

the work of the OECD.

For countries such as Moldova,

most advanced economies. OECD

In Moldova, the Investment Reform

instruments developed by the OECD

governments, meanwhile, have the

Index helped to identify gaps between

help to identify gaps and set priorities

opportunity to better understand the

the performance of its economy and that

for economic reform. One of these is

impact and relevance of specific policies

of peers in South East Europe. Moldova

the Investment Reform Index, covering

in different contexts. The OECD’s Private

has also benefited from a number of

10 economies in South East Europe.

Sector Development division has similar

projects focusing specifically on national

Drawing on the OECD’s Policy Framework

initiatives in the Middle-East and North

challenges. One such project, launched in

for Investment, it assesses policy in

Africa and the Eurasia region. It is

2009 with support from the Netherlands,

eight areas that are critical for investors:

also developing co-operation with

seeks to assist the development of

investment policy and promotion; human

countries in Latin America.

micro-, small and medium-sized

capital development; trade policy and

In all these economies, the OECD’s

companies. The OECD has established

facilitation; access to finance; regulatory

role is not one of advocating specific

a close partnership with Moldova’s

reform and parliamentary processes;

practices. Instead, it opens the door to a

SME agency to facilitate the transfer of

infrastructure for investment; tax policy

wealth of accumulated knowledge, giving

best practices and implementation of

analysis; and SME policy.

developing economies access to the

the recommendations.

123

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The OECD at 50

Palacio de La Moncloa, Madrid, 8 September 2008.

Angel Gurría, OECD Secretary-General and Spanish Prime Minister José Luis Rodríguez Zapatero (right)

MENA-OECD: Helping the countries of the Middle East and North Africa respond to their citizens’ needs

by Dr Soukeina Bouraoui

A

s more and more countries in the

The OECD’s work on gender in the

public institutions is critical in this defining

Middle East and North Africa move to

MENA-OECD Governance Programme is of

moment for the region. This is why we agreed

democratic governance structures, regional

great relevance today, as Arab societies still

to sit in the Steering Group of the Programme

and national policy dialogue on the role of

need to fully include the gender dimension in

as chair of the Gender Focus Group, and to

women is vital. The MENA-OECD Governance

their policy making. We consider gender to

participate in technical events and institutional

Programme and, in particular, its Focus Group

be a cross-cutting theme, as shown by our

meetings. By our presence, we hope to give

on Gender provide policy makers and activists

contribution to the chapter on ‘Addressing

testimony to the important role that civil society

with a valuable forum to network, discuss and

Gender in Public Management’ in the Report

organisations play in the programme, and in

learn from each other.

on Progress in Public Management Reform

the region in general.

The Centre of Arab Women for Training

in MENA Countries. In June 2010, I took part

We at CAWTAR believe that the programme

& Research (CAWTAR) has been involved in

in a fact-finding mission to the United Arab

should continue supporting the MENA

the MENA-OECD Governance Programme

Emirates for the Legal Review and Conformity

region through policy analysis and advice,

since 2008. CAWTAR has participated in

Assessment that constituted the first component

peer dialogue and sharing of good practices

activities on gender governance and regulatory

of the UAE Gender Public Policies Report. This

between practitioners and civil society

reform, and in special meetings on the role

experience, and the drafting of the assessment

representatives from MENA and OECD

of women in the public and private sectors,

that followed, confirmed my strong belief in

countries. In this way, it can assist in the

all within the context of the MENA-OECD

the importance of regional co-operation and

implementation of policy reforms, to empower

Governance Programme. We played an active

exchange of knowledge and good practices.

women in their everyday lives as well as

role in the creation of the Gender Focus

The MENA-OECD Programme plays a crucial

enhancing their role in the public sector. 

Group and its launch in Cairo on 18 May

role in helping MENA countries to produce and

2009. We have contributed to data gathering

implement policies that truly respond to the

Dr Soukeina Bouraoui is the Executive Director

and policy analysis on gender issues in many

needs of their citizens and businesses. The work

of The Centre of Arab Women for Training &

areas of public governance.

to support more transparent and accountable

Research (CAWTAR).

The OECD at 50

with the best possible policy advice, the OECD contributed analysis and recommendations to the discussions of G20 leaders meeting in Washington in November 2008 and London in April 2009. Its support was particularly important in helping to avoid trade and investment protectionist measures and in cracking down on tax havens. G20 impetus led to the establishment of a peer-review process, today involving more than 100 countries in the Global Forum for Tax Transparency and Exchange of Information.

Strategic response Finessing the recommendations of its Strategic Response to the Financial and Economic Crisis over succeeding months, the OECD argued in favour of sustainable policies that would balance short-term recovery needs with longerterm priorities including fiscal consolidation, the maintenance by developed countries of their commitments to support development, and measures to tackle climate change. Its Environmental Outlook to 2030, published in 2008, had already identified a range of policy options to help fight global warming, conserve biodiversity, protect water resources and limit health impacts of pollution. Now, as the economic crisis weighed, too, on international climate talks, the OECD stressed the potential benefits of economic instruments such as ‘green’ taxes and pricing mechanisms for carbon emissions, other pollutants and the use of natural resources.

Economic recovery proved elusive, however, as did consensus on action to tackle climate change. By 2009, major OECD countries were facing a jobs crisis, with young jobseekers particularly hard hit. Reporting in its 2009 Employment Outlook on the measures that countries were taking in response, the OECD recommended ‘active’ policies that would help the unemployed keep links to the labour market through re-employment measures, job-search requirements and training, in addition to ensuring adequate income support.

Simultaneously, it cautioned governments against yielding to popular concerns about the impact of migration on employment by brutally cutting back on migration flows. Instead, the 2009 edition of its annual International Migration Outlook urged countries to adapt their migration

systems so that they “can respond efficiently to labour-market needs, can reduce irregular migration and employment – or redirect it into legal channels – and can ensure better outcomes for new immigrants and for their children”.

Working with the G20 In September 2009, US President Barack Obama invited OECD Secretary-General Gurría to participate in the G20 Pittsburgh Summit, and to appoint a Sherpa to the G20 – his Chief of Staff – for the preparations in this process. At the same time, G20 Finance Ministers’ meetings welcomed the participation of the Chief Economist of the OECD at their deputies’ level. From then on, working with the Chairs of successive Summits, including Canada, Korea, and France, the OECD became a regular player in the G20 process. Its inclusion marked a new stage in its involvement in the international policy response to the crisis.

Participation in the G20 consolidates the OECD’s involvement in debates on global issues, and its ability to propose solutions and make its work count at the highest political level. It also leverages the Organisation’s institutional flexibility and ability to incorporate, on an equal footing, countries that are relevant partners in its discussions. While the OECD had been working ❱❱

US President George W Bush visits the OECD, OECD Headquarters, 13 June 2008. US President George W Bush (left) with Angel Gurría, OECD Secretary-General

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The OECD at 50

to develop global standards in the area of tax transparency and exchange of information for more than 10 years, it took a political decision by the G20 leaders to push this work to a higher level.

Today, the Global Forum on Transparency and Exchange of Information for Tax Purposes, hosted by the OECD but including a total of more than 100 countries, is working co-operatively to ensure the effective implementation of these standards.

The OECD has contributed in many other fields. During the US Presidency of the G20, it contributed through its structural analysis to the launching and ongoing development of the G20 Framework for Strong, Sustainable and Balanced Growth. It also helped to advance the agenda in the fields of employment, trade and investment, anti-corruption and fossil fuels. During the Canadian presidency, the OECD focused on sovereign debt problems and continued to

OECD policy tools relating to SMEs and entrepreneurship ●●

The 2000 Ministerial Declaration,

access to financing for new and small

A 2008 follow-up report identified

Bologna Charter on SME Policies,

firms from creation to all stages of

possible actions based on the findings

provided a coherent approach to

their development, with a particular

of case studies carried out in five

the design of SME policies aimed at

emphasis on innovative firms.

industries – the automotive sector,

The 2006 Athens Action Plan for

scientific and precision instruments,

social development in OECD countries

Removing Barriers to SME Access

software, film production and

and the rest of the world.

to International Markets provided

The 2004 Ministerial Declaration on

recommendations on how public

Fostering the Growth of Innovative

authorities can intervene, efficiently

the Global Crisis on SME and

and Internationally Competitive SMEs

and cost-effectively, to reduce or

Entrepreneurship Financing and

committed Ministers to co-operate

remove the barriers SMEs face in

Policy Responses studied how

in reducing barriers to SME access to

accessing international markets.

governments were responding to

The 2007 OECD Tokyo Statement

the problems facing entrepreneurs

SME needs when formulating new

on Strengthening the Role of SMEs

seeking access to finance.

legislation and regulations; and

in Global Value Chains focused on

to examine issues related to SME

how governments, the business

meeting in Bologna agreed on a plan

financing and support to innovation.

community and international

for developing and implementing good

The 2006 OECD Brasília Action

organisations can facilitate SMEs’

practices and policies over the next 10

Statement for SME and

gainful participation in global value

years, including the development of

Entrepreneurship Financing set out

chains through policies, practices

a global monitoring tool on SME and

recommendations for facilitating

and targeted support programmes.

entrepreneurship financing data.

stimulating economic growth and

●●

international markets; to consider

●●

●●

●●

distribution, and tourism. ●●

●●

A 2009 report on The Impact of

Participants in a 2010 high-level

The OECD at 50

provide support for the anti-protectionism agenda. At the Seoul Summit, it provided policy advice and data to support the elaboration of the Multi-Year Action Plan on Development. During the French Presidency, the agenda of work includes the international monetary system and capital flows, agricultural policies and food security, consumer protection and economic issues. Its contribution in the area of structural policies is particularly important, as structural reform will be a major source of enhanced productivity and growth, going forward. One of the benefits of OECD participation in the G20 process has been enhanced co-operation with other international organisations, one of the key objectives of Secretary-General Gurría.

Stimulating growth while reducing deficits True to its concerns to foster better living conditions for citizens, the OECD focused particularly on employment issues, and notably on rising unemployment among young people, urging governments to make more effort to provide appropriate training arrangements, job-search assistance and apprenticeship opportunities. Building on work under its Programme for the International Assessment of Adult Competencies, or PIAAC, the first results of which are due to be published in 2013, it began to lay the groundwork for a wide-ranging overview of skills demand and supply. At a meeting of Education Ministers in Paris in November 2010, Gurría announced the forthcoming launch of the OECD’s Skills Strategy, based on a wide-ranging review of skills levels in individual countries and areas where gaps need to be closed.

Addressing OECD staff the following month, he succinctly summed up the challenges facing both governments and the OECD. Governments, he declared, were being called upon to pull off “an apparently irreconcilable policy trick” of stimulating growth while reducing fiscal deficits.

The OECD’s task, in response, was to provide innovative thinking and support for effective multilateralism and bold action. More than ever before, he said, its relevance lay in its ability to help governments respond to globalisation: by helping them, in short, “to improve the well-being of our citizens; to make multilateral co-operation work; to build a better global economy”. 

Palacio de La Moneda, Santiago, Chile, 11 January 2010.

OECD formally invites Chile to accede to the OECD Convention. Angel Gurría, OECD Secretary-General (left); HE Ms Michelle Bachelet, President of Chile; Andrés Velasco, Finance Minister, Chile.

Sweden has been a member and active partner of the OECD right from the start. In today's changing and increasingly interdependent world, we need these types of global arenas where we can come together and seek common answers. I foresee that the OECD will keep playing an important role in developing policies, establishing best practices and finding the right solutions to challenges ahead.

Fredrik Reinfeldt, Prime Minister of Sweden

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The OECD at 50

The OECD at 50

The OECD today and tomorrow Coping with the challenges of the next 50 years

China Development Forum, Beijing, 21-26 March 2008.

Angel GurrĂ­a, OECD Secretary-General (left) and Chinese Prime Minister Wen Jiabao

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The OECD at 50

The OECD at 50

A

s 2010 came to a close, the OECD’s enlargement strategy had borne its first fruits with the accession of four new members: Chile, Slovenia, Israel and Estonia. Today, its 34 member countries span the globe, from North and South America to Europe and the Asia-Pacific region. Membership negotiations with Russia are advancing and relations with Brazil, China, India, Indonesia and South Africa are gradually, but steadily, strengthening under the ‘enhanced engagement’ programme. Together, these 40 countries account for around 80 per cent of world trade.

At a ceremony at the Elysée Palace in December 2010 to mark the 50th anniversary of the signing of the OECD’s founding Convention, French President Nicolas Sarkozy hailed the OECD’s past and future role in helping governments to deliver better lives for citizens. Over the years, he said, the OECD had been in the vanguard of efforts to improve regulation, fight corruption and co-ordinate development efforts.

Foreshadowing France’s presidency of the G20 during 2011, the OECD’s anniversary year, he listed a catalogue of areas in which the OECD is working with the G20, from employment and tax policy to financial market regulation and anti-corruption.

Global Handshake, OECD Conference Centre, 27 May 2010.

Andrus Ansip, Prime Minister of Estonia (left); Felipe Larrain, Minister of Finance of Chile; Benjamin Netanyahu, Prime Minister of Israel; Silvio Berlusconi, Prime Minister of Italy; Borut Pahor, Prime Minister of Slovenia; and Angel Gurría, OECD Secretary-General

OECD Social Policy Ministerial final press conference, OECD Conference Centre, 3 May 2011. Jenny Macklin, Australian Minister for Families, Housing, Community Services and Indigenous Affairs (left); Angel Gurría, OECD Secretary-General; and Ursula von der Leyen, German Federal Minister of Labour and Social Affairs

Through its contribution to the work of the G20, he emphasised, the OECD has a “major role” to play in bringing new order to the world economy. Its vocation in the 21st century, he declared, must be to serve as a “club of exemplary practices”. ❱❱

Endang Rahayu Sedyaningsih, Health Minister of Indonesia at the OECD, with Angel Gurría, OECD Secretary-General, 7 October 2010

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The OECD at 50

GDP Average growth rate (%) for main OECD countries (G7)

France

Canada 12

12

10

10

8

8

6

4.1

4

3.0

4.1

4

2.4

2 0

5.7

6

5.3

2.1

2.3 2

1970s

1980s

1990s

2000s

1960s

12

10

10

8

8 6

6

1.9

2

2000s

2.6

2.3 0.8

1970s

1980s

1990s

2000s

2

1.4 0.5

0

1960s

1970s

1980s

1990s

2000s

UK

Japan 12

10.1

8 6

1990s

3.8

4

3.1

1960s

1980s

5.8

4.4 4

1970s

Italy

12

10

1.4

0 1960s

Germany

0

1.8

5.2

US

12

12

10

10

8

8

6

6

4

4

4.7

4.4 4 2

2.9

2.4

2.5

2

1.4

2.2

1.7

3.2

3.0

3.2 1.8

2

0.7 0

1960s

1970s

1980s

1990s

2000s

0

1960s

1970s

1980s

1990s

2000s

0

1960s

1970s

1980s

1990s

2000s

The OECD at 50

The 50th anniversary provides an opportunity to reflect on the Organisation’s past contributions, present role and future mission – in short, on how the OECD can build the foundations to continue to promote better policies for better lives over the next 50 years.

The pace of change in recent years has been so rapid that today’s global economy bears little resemblance to that of 50 years ago. For many years, OECD countries accounted for around 70 per cent of global GDP. Today, this share has shrunk to around 60 per cent and it is set to fall

further. Against the background of the recent crisis, the emergence of the G20 as a major forum for economic discussions illustrates this trend.

Evidence-based advice The OECD’s 50th anniversary celebration coincides with the start of Secretary-General Angel Gurría’s second mandate. In his acceptance speech, he explained that he believed that the raison d’être of the Organisation was to be a source of evidence-based advice for governments and a standard-setter to address global challenges. ❱❱

Contributing to a deeper understanding of financial markets and their regulation

by Charles Dallara

F

or half a century, the OECD has offered

Its country economic surveys included

role of international forums such as the G20

governments guidance on ways to raise

in-depth studies of the financial regulatory

in co-ordinating policy responses across

the productive potential of their economies.

and supervisory landscape in member

major economies. It has also helped to

Fundamental to this has been its work

countries, identifying weaknesses and making

build the case for greater co-ordination and

demonstrating the economic and social

recommendations as to how countries

centralisation of European financial regulatory

benefits of open and competitive markets and

could best manage and resolve the crisis.

and supervisory institutions.

the potential advantages of market-based

It identified pragmatic reforms capable, if

solutions to public policy problems.

implemented, of reducing the impact and

an essential responsibility to safeguard the

likelihood of future crises.

stability of the financial system. But this must

In the early phase of the global financial

Governments and central banks have

crisis, it quickly recognised that disruptions in

Arguably, an important contributor to

be done without unduly stifling innovation or

the housing and credit markets in the US and

the crisis was the disconnect between the

significantly reducing the access to finance

other advanced economies could lead to a

rapid increase in the integration of the global

that firms need to facilitate their growth. Over

deep slump and spread to other economies.

financial system in recent years and the largely

the past two decades, financial innovation

Scaling up its analysis of financial and banking

national focus of financial regulation and

and global integration have broadened the

issues, it issued reports on topics ranging

supervision. Inconsistent frameworks created

options for individuals and businesses in

from sovereign debt exposures in the

arbitrage opportunities in the lead-up to the

managing their financial affairs, while helping

European banking sector to reforms of

crisis. The cross-border activities of some

to widen access to finance at lower cost. The

international capital rules and how countries

large banks were inadequately supervised

OECD has earned a deserved reputation as a

should exit from crisis-related support

and, when the crisis hit, there were inadequate

thought-leader in international economic public

measures for financial institutions.

mechanisms for dealing with the potential

policy, by consistently producing high-quality

failure of large cross-border banks.

analytical and statistical publications. It will do

A particular strength of the OECD is its expertise in cross-country economic

The OECD has strongly and consistently

the world a great service if it can continue in,

analysis. Amid the crisis, it made clear the

pushed the case for reform to the global –

and build, this mission for another 50 years. 

interdependence of countries’ financial

as well as regional – financial supervisory

systems and the need for co-ordinated

architecture. Its Secretary-General, Angel

Charles Dallara is Managing Director of the

and mutually consistent policy responses.

Gurría, has been a powerful advocate of the

Institute of International Finance.

135

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The OECD at 50

He noted that international co-operation was more essential than ever. The list of global challenges requiring co-ordinated policy action was getting longer, and in most cases, this action was becoming more urgent. He also emphasised that the world was undergoing major change in the way it was governed and the only way to remain relevant in the next 50 years would be to continue to deliver high-quality and substantive contributions to global debates, incorporating the perspectives of countries that were key for this new global governance, but which were not yet members of the OECD, as part of an overriding strategy to provide better policies for better lives for citizens worldwide. ❱❱

Working with the OECD to create a better global business environment

by Tadahiro Asami

R

epresenting 49 national business and

while maintaining sovereignty over its work,

top priorities to maintain the Organisation’s

employers’ organisations from OECD

more able to produce policy guidance that

policy relevance, particularly given the rise

member and non-member economies, as well

reflects what is happening in the real world,

in prominence of the G20.

as 29 international sector-specific associations,

the real economy. This past half-century of

I congratulate full-heartedly the OECD on 50

experience has proven that this mechanism

increased its global relevance by strengthening

years of remarkable success.

works well, serving effective policy dialogue

ties with business communities from non-

between business and the OECD.

OECD countries, welcoming eight business

BIAC, the Business and Industry Advisory Committee to the OECD, will also turn 50

BIAC has contributed much towards

In line with the OECD’s outreach, BIAC has

organisations as observers from Argentina,

during 2011-12, having been initiated during

the OECD’s work in promoting open and

Brazil, India (two organisations), Latvia,

1961 and officially constituted on 9 March 1962.

competitive markets, level playing fields, and

Morocco, Russia and South Africa. We continue

The working relationship between the OECD

sound regulation and governance; fighting

this outreach as a high priority in our work.

and BIAC was defined in 1962 when the

trade and investment protectionism; and

OECD Council officially recognised BIAC as

enabling businesses to compete and succeed

BIAC congratulates the Organisation for its

being representative of the OECD business

in an increasingly complex global marketplace.

many accomplishments and is proud of being

community. This OECD/BIAC relationship has

BIAC has also developed relations with

a partner and ‘member of the family’ since

served both organisations for their mutual

business communities in non-OECD countries,

the beginning. BIAC stands ready to continue

benefit, and has proven effective and resilient.

thereby promoting the engagement of these

working constructively with the OECD to improve

It has also helped to make the OECD unique

countries in the OECD process.

the policy space for open market activities, and

among international organisations.

BIAC provides direct links with the private-

Building on our common history and

As the OECD celebrates its 50th anniversary,

thus stimulate economic growth. 

looking ahead to the next 50 years, BIAC

sector employers it represents, thereby

sees an increased role for the OECD in the

Tadahiro Asami is the Secretary General

decisively influencing the quality of services that

global economic architecture. Enlargement

of the Business and Industry Advisory

the OECD provides. This makes the OECD,

and global outreach of the OECD are the

Committee to the OECD.

The OECD at 50

Common global challenges In his 2011 Strategic Orientations paper, SecretaryGeneral Gurría confirmed this focus on common global challenges, outlining a twopronged strategy to respond to the economic, environmental and social realities of our time: ●● First, the OECD needs to continue to provide concrete and well-targeted policy options that can be effectively implemented by governments. This relates to the Organisation’s role as a platform for mutual learning, as advisor, as a ‘hub’ of best practices, as pathfinder and as standardssetter. Its ability to help countries design, formulate and implement policies is the litmus test of its impact and relevance. The MENA-OECD Initiative on Governance and Investment for Development in the Middle East and North Africa, and the SIGMA programme, in which the OECD works with the European Union for the improvement of rules-based governance in EU candidate and neighbourhood countries, are good examples in this respect. The past five years have witnessed a strong effort by the OECD to assist its member countries in advancing specific

reforms. This has included specific support to member countries at their request in the areas of competition and regulation (in Mexico), social policies (Korea), general economic issues (Hungary) and many more. ●● Second, the Organisation will continue to work on behalf of member and partner countries to design and promote the highest standards for the world economy.

This requires closer co-operation with partner countries, and in particular with the major emerging economies.

Looking ahead, governments face many challenges that call for international cooperation. Some are already the focus of international discussion: climate change, poverty, nuclear safety, jobs, the availability of drinkable water and adequate food supplies, the management of migration flows, trade and the strengthening of effective governance in fragile states. Others, though less clearly discernible, are equally important: the risks posed by mega-terrorism and new infectious diseases, for example, and the social and economic implications of space-based technological applications. ❱❱

BIAC General Assembly in Budapest, 8 March 2011. Tadahiro Asami, BIAC Secretary-General (left); Charles P. Heeter, BIAC Chairman, and Angel Gurría, OECD Secretary-General, at the presentation of the 50th Anniversary BIAC publication

139

The OECD at 50

The OECD and the IEA: Working together for economic security and green growth

by Nobuo Tanaka

F

or 50 years, the OECD has worked

have evolved, so has the understanding of

energy poverty, the Agency will continue to

vigorously with governments to resolve

energy security. Risks are no longer seen as

analyse and make recommendations on ways

pressing economic, social and environmental

limited to oil. IEA member countries have

to promote free markets, develop new

issues. An important milestone was the

asked the Agency to focus more work on gas

technologies and identify sources of financing.

founding during the 1974 oil crisis of the

and electricity. The emphasis is now on

Resulting policies, if implemented, can foster

International Energy Agency (IEA). Its

comprehensive security, ensuring global access

economic growth and ensure access to energy

establishment as an autonomous agency

to the reliable, affordable and clean sources of

– thus tackling a key element of poverty.

representing the major energy-consuming

energy that are essential in supporting the

nations within the framework of the OECD

larger economic goals of the OECD.

reflects the dynamism and flexibility of the

Green growth seeks to promote

Despite such efforts, we will achieve these goals only if countries work more closely together. This leads to the fourth joint

OECD structure in responding to global events

economic growth and development through

priority, increased engagement with non-

and economic and political concerns.

environmentally friendly methods. The IEA is

member countries. Economic and energy

As the OECD looks forward to its next 50

active in many aspects of green growth, and

challenges are increasingly global. When

years at the centre of international economic

has supported and contributed to the OECD

the IEA was formed, its member countries

policy, its agenda ranges from regulation and

Green Growth Strategy. Not only will green

accounted for more than half of world energy

governance to public finances, supporting new

growth help countries to mitigate the negative

consumption – this is no longer the case.

sources of growth, and working to ensure that

impacts of climate change, but green growth

Most growth in energy supply and demand

the jobs of tomorrow can be filled by people of

strategies will also strengthen energy security

is taking place outside the OECD – and this

all ages. The IEA mandate is more specific, but

by helping to diversify sources of energy

trend is expected to continue. To implement

the IEA and the OECD share many fundamental

and, in some cases, to reduce reliance on

sustainable energy policies, both OECD and

goals. Four areas of work stand out as offering

imports. The IEA has developed scenarios to

non-OECD countries must be involved. The

significant opportunity for continued close

identify which mix of existing and new energy

IEA has a dedicated team and a number of

co-operation and joint focus:

technologies will enable member countries to

initiatives focused on outreach to non-member

●●

economic security;

attain their greenhouse gas emission targets to

countries all over the world, especially major

●●

green growth;

mitigate climate change. Other recent work has

emerging economies and energy producers.

●●

tackling poverty;

focused on identifying obstacles to financing

Co-operation with China, India, Russia,

●●

increased engagement with

clean energy, promoting best policy practices,

south-east Asia, and the oil-exporting countries

non-member countries.

and developing energy technology roadmaps.

of OPEC – through the consumer-producer

Some of this has fed directly into the OECD’s

dialogue – has been particularly productive.

Economic security is a key area of mutual focus. The IEA’s founding purpose of promoting

green growth efforts, highlighting the synergies between the two organisations.

To remain at the heart of global dialogue in the world economy and, more specifically, in the

These work programmes are important with

energy sector, the OECD and the IEA must work

supply of resources remains its core business.

regard to the third area, tackling poverty. Access

closely with non-OECD countries. Through such

This fits within the broader role of the OECD to

to modern energy services is increasingly

engagement, we can continue to find solutions

encourage economic growth and well-being.

recognised as critical to both social and

to shared concerns and new challenges. In so

economic development. Today, 1.4 billion people

doing, both organisations will have even more

creation of the IEA. Its initial role was to help

have no access to electricity. Based on current

to celebrate when the OECD reaches its 100th

countries co-ordinate a collective response to

trends, 1.2 billion will still lack access in 2030.

anniversary in 50 years’ time. 

potential major oil-supply disruptions through

This is simply not good enough, as highlighted

measures including, in particular, the release of

in the IEA’s flagship publication, the World

Nobuo Tanaka is Executive Director of the

emergency oil stocks to the market. As markets

Energy Outlook. To work towards eradicating

International Energy Agency.

energy security through a reliable and affordable

Energy security was the driver behind the

141

142

The OECD at 50

Consumer prices Average inflation rates (%) in main OECD countries (G7) France

Canada 14

14

12

12

10

10

7.3

8

6 4

2.7

2 0

1960s

1970s

1980s

2.2

2.1

1990s

2000s

2 0

14

14

12

12

10

10

8

8

6

2.9

2.5

1960s

2.5

1970s

1980s

1990s

4

1.6 2000s

1970s

1980s

1.7

1990s

2000s

12.2 11.1

4.1

3.8

2.3

2 0

1960s

1970s

1980s

1990s

2000s

UK

Japan 14

US

14

14

12.5

12 10

8.9

8 6

1960s

1.9

6

4.9

2 0

3.8

Italy

Germany

4

7.3

6.5

6 4

8.8

8

12

12

10

10

8

8

7.0

6

5.4

4

4

2.5

2

3.8

0

1.8

0 1960s

1970s

1980s

1990s

-0.3

2000s

5.5

4

3.3

2

1.2

7.1

6

2

3.0

2.4

2.6

0 1960s

1970s

1980s

1990s

2000s

1960s

1970s

1980s

1990s

2000s

144

The OECD at 50

Over the past 50 years, our social and economic relations have fundamentally changed: the OECD’s values and methods have not. Respecting and learning from each other is more pertinent than ever.

Johann Schneider-Ammann, Economic Affairs Minister of Switzerland

Persistent imbalances At a global level, concerns about persistent trade and current-account imbalances and capital flows, from advanced economies to fast-growing emerging economies, rank high on the G20 agenda. In 2010, a report by the OECD Development Centre entitled Shifting Wealth highlighted the increasing share of emerging economies in global output. As economic recovery advances at different speeds in different

regions, and as the more advanced economies continue to face very high deficits, high unemployment and slow growth, the importance of these countries will continue to increase. For emerging economies, inflationary pressures, equality challenges and building effective social safety nets are high on the economic agenda.

These, and other down-to-earth issues that directly affect the lives of citizens, also need to be addressed. In many countries, the cost of paying for pensions and healthcare for rising numbers of old people threatens to strain public finances, while putting downward pressure on growth.

Living longer in better health will need to go hand-in-hand with working longer, and this in turn will call for far-reaching changes in both government policies and workplace attitudes.

Social inequities and poverty must be tackled, for example by opening up education and training opportunities for all. Gender inequalities and prejudices must likewise be overcome, in order to enable all citizens to fulfil their potential in tomorrow’s global economy. ❱❱

OECD 9th Global Forum on Competition, 18-19 February 2010

Measuring the progress of societies: A challenge for the 21st century

H

ow do you measure progress? In recent years, a growing gap has

The OECD has been leading

Money isn’t everything. In measuring

international reflection on this challenge.

progress, we need to consider people’s

emerged between the image conveyed

In 2004, it held its first World Forum on

satisfaction, feelings and expectations.

by official statistics and ordinary

‘Statistics, Knowledge and Policies’ in

How comfortable is their housing? How

people’s perceptions about the state

Palermo. Two more forums took place in

clean and safe is their local environment?

of their own lives. The financial and

Istanbul in 2007, which led to the launch

Are they able to participate in political

economic crisis has reinforced concerns

of the OECD-hosted Global Project on

and social activities. Do public

that official statistics fail to give a true

Measuring the Progress of Societies,

institutions respond to their demands?

account of what really matters to people.

and in Busan in 2009. Thanks to these

Addressing such concerns is crucial, not

and other efforts, measuring well-being

make an important new contribution to

just for the credibility and accountability

and progress is now at the forefront of

this debate, with the publication of a set

of public policies, but for the very

national and international statistical

of key well-being indicators for developed

functioning of our democracies.

and political agendas.

and emerging economies. Its new report,

In a few months’ time, the OECD will

The OECD at 50

How’s Life?, will look at such issues as

full economic resources. Not only people’s

that can be adapted to different levels

people’s health in different countries,

income, but their assets and spending

of development.

their education and competencies, the

on day-to-day consumption need to be

quality of their daily work activities,

included in the equation. To what extent

efforts is not just measurement per se, but

the state of their environment, their

do people benefit from services provided

to strengthen the evidence base for policy

personal security, the richness of their

by the public sector, such as health and

making. Better measures of well-being

community ties, and whether people are

education? What is the value of services

can improve our understanding of the

satisfied with their lives.

produced by households for their own

factors driving societal progress. Better

use, such as the care that they provide to

assessments of countries’ comparative

children and the elderly?

performance in various fields can lead to

But it will also examine how sustainable such achievements are over time. Today’s well-being, if attained

Such questions aren’t just a matter

The ultimate objective of all these

better strategies to tackle deficiencies.

at the expense of potentially poorer

for rich countries. Improved well-being

living conditions tomorrow, is of only

is a goal for all countries, and improving

has developed a rich set of

temporary value. Achieving sustainable

the measurement of progress should

recommendations on policies that can

progress means preserving a broad range

also help governments to address the

best support economic growth. The

of assets – environmental, human and

challenges facing developing countries.

task that we face today is to develop an

social – and enhancing their returns.

With this in mind, the OECD is working

equally rich menu of recommendations

with other international organisations

on policies to support societal progress:

to develop indicators of well-being

better policies for better lives.

Measuring well-being and progress also requires a clearer view of people’s

Over the past 50 years, the OECD

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The OECD at 50

The OECD brings together the governments of countries committed to democracy and the market economy from around the world to support sustainable economic growth, boost employment, raise living standards, maintain financial stability, assist other countries’ economic development and contribute to growth in world trade.

The Organisation provides a setting where governments compare policy experiences, seek answers to common problems, identify good practice and co-ordinate domestic and international policies.

Ali Babacan, Deputy Prime Minister of Turkey

Reinventing the MENA-OECD programme

by Rainer Geiger

T

he sweeping political changes now under way in the Middle East and North Africa

Despite this vast potential, many MENA

by more open and democratic political

countries still suffer significant weaknesses,

processes. For OECD countries, the benefits

provide an opportunity to step up co-operation

including high unemployment, lack of access

of partnership with a region that is both a

between the countries of the region and OECD

to finance for innovative economic activities,

major source of energy supply and outward

governments. The new leaders that emerge will

poor education systems and, above all,

investment and a significant market for

soon need to address the economic and

significant weaknesses in the institutional

imports are obvious. MENA countries,

political shortcomings that have been causing

environment. The financial sector of most

meanwhile, can draw advantage from OECD

pressure for reform. They will face the same

MENA countries is characterised by a

experience, analysis and advice, including

challenges as their predecessors in improving

relatively low level of integration into

through the development of convergent and

public-sector efficiency and attracting

international financial markets. During the

even joint-policy instruments. Greater policy

investments that deliver real benefits to large

recent financial crisis, some suffered a

convergence on both sides of the

parts of the population.

contraction of credit, a fall of exports and the

Mediterranean will be of great benefit to all.

The MENA region has many strengths.

It accounts for 70 per cent of proven global oil

suspension of some infrastructure projects.

The MENA-OECD programme of

The Initiative on Governance and Investment for Development, as the programme is officially

reserves and 50 per cent of gas reserves. It

co-operation, launched by the countries of

known, is based on two mutually supportive

also has a high potential for renewable energy,

the region in 2004 with the support of

components: investment and public

in particular solar power generation. Thanks

OECD governments, provides a structure for

governance. Investment is a driving force

to the accumulated assets of sovereign

dialogue, exchange of experience and policy

for growth and employment, while public-

wealth funds, oil producers in the region are

advice. It has already born valuable fruits, and

sector efficiency and integrity are keys to a

significant investors worldwide.

its effectiveness will be strengthened further

favourable business environment.

The OECD at 50

Towards green growth To protect and conserve the ecosystems on which societies depend for their well-being, people will have to learn to work and live differently.

Governments, meanwhile, will have to work together in balancing the economic, social, political and ethical imperatives raised by new and complex technologies. Countering climate change, biodiversity loss and other forms of environmental degradation will mean taking a path radically different from that taken by the countries that industrialised in the 19th and 20th centuries. In a process that will affect all sectors of the economy, from manufacturing and urban planning to farming and tourism, innovation will hold the key to environmentally and

socially sustainable ‘green’ growth. Laying the foundations for global macroeconomic stability will require bold structural reforms in advanced and emerging economies alike.

Innovation in such areas as renewable energy and improved efficiency in the use ❱❱

Launch of the OECD Economic Survey of France, 11 April 2011.

Christine Lagarde, French Minister of Finance, with Angel Gurría, OECD Secretary-General

progress in public-sector efficiency and

of the region’s inhabitants. High-quality

complementary regional and country-specific

integrity, e-government, green growth and

education and training are vital for national

approaches. On the country-specific side,

territorial development. A number of countries

economies to become more productive

it has led to the elaboration of national

have implemented significant reforms of

and globally competitive.

reform agendas and, more recently, to the

investment policies. Egypt and Morocco have

assessment of national business-climate

reached a level of quality in their investment

application of legal rules are essential for

development strategies. On the regional side,

relations that enabled them to adhere to the

economic development, and new momentum

oversight is exercised by a Steering Group,

OECD instruments on international investment

needs to be created for fighting corruption

composed of participating countries and

and multinational enterprises.

as part of a strategy to restore confidence

The MENA-OECD initiative combines

representatives of the private sector and intergovernmental organisations.

Tax reforms have progressed in some

Transparency, predictability and effective

in public institutions and the integrity of

countries, with improvements in tax

business transactions. Continued efforts

administration and the streamlining of

are needed to modernise commercial law

sought co-operation with regional bodies,

tax incentives. In Iraq, a special country

systems throughout the region, provide for

including the Arab League, the Islamic

programme provides institutional support to the

regulatory quality and ensure the integrity of

Development Bank and the Arab Centre for the

national investment promotion agency, as well

public administration.

Development of the Rule of Law and Integrity

as to the national programme for integrity in

The dynamics of change in the MENA

(ACRLI). Joint activities have been developed

public administration and fighting corruption.

region bring great opportunities for progress

As new political forces and institutions

at the economic and social levels as well as

From its beginning, participants have

with the World Bank on the Business Climate Development Strategy and the relevant

emerge, co-operation needs to enter new

for better governance. The MENA-OECD

indicators, UNIDO on matchmaking between

domains. The MENA-OECD programme will

programme of co-operation can help ensure

foreign investors and domestic enterprises

have to rethink and refocus its activities in

that these opportunities are fully realised. 

and UNDP on integrity programmes and

order to reach beyond established elites for

a regional network for transparency and

the benefit of large parts of the population.

Rainer Geiger is a former Deputy Director

fighting corruption (ACTINET).

Action is needed to develop business

of Financial and Enterprise Affairs at the

opportunities, and at the same time to focus

OECD and architect of the MENA

on ways to enhance the skills and employability

Investment Programme.

The record so far is positive. On the governance side, achievements include

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The OECD at 50

Unemployment Average unemployment rates (%) in main OECD countries (G7) Canada

France 12

12 10

9.4

9.6

8

7.0

6.7 6

6

5.0

4

2

2

1960s

1970s

1980s

1990s

2000s

Germany

0

3.3 1.5

1960s

1970s

12

10

10

8.5 7.5

6

8.4

2000s

6

5.2

4.7 3.8

4

2

2

1.4 N/A 1960s

1970s

7.9

8

4

1980s

1990s

2000s

Japan

0

1960s

1970s

1980s

1990s

12

10

10

8

8

US 12

9.9

10

8.2

6

6 4

2.5

1960s

1.7

1970s

1990s

2000s

0

5.8

5.5

1990s

2000s

4.8 4

3.1

2

2

1980s

7.3 6.2

6

4.6 4

3.0

8

5.5

4.7

1.3

2000s

UK

12

0

1990s

10.3

8

2

1980s

Italy

12

0

8.4

7.8

8

4

0

9.8

10

1960s

1970s

1980s

1990s

2000s

0

1960s

1970s

1980s

The OECD at 50

MENA-OECD Ministerial Conference in Marrakech, Morocco, 23 November 2009

of energy and materials can be a long-term driver for economic growth. The OECD’s Green Growth Strategy, drawing on the full multidisciplinary skill base of the Organisation and on input from economic, environmental, social, and technological and development agencies within member countries, will shape the way that countries work in the coming years. The Strategy rests on an understanding that green growth is about fostering economic growth and development while ensuring that natural assets continue to provide the ecosystem services on which our well-being relies. Green growth will henceforth become a mainstream element in OECD work, through country reviews designed to enable cross-country assessment of best practices combined with issue-specific and sector-specific studies to provide policy guidance in such areas as development co-operation, innovation, agriculture, energy, water and biodiversity.

Going forward, the Organisation has identified green growth as its leitmotif for future thinking and direction. Strategic priorities include â?ąâ?ą

OECD welcomes its first class of Student Ambassadors

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The OECD at 50

OECD Headquarters, 21 October 2010. President of Chile, Sebastián Piñera (left) and OECD Secretary-General Angel Gurría

Trade unions and the OECD: In the wake of the great recession

by Sharan Burrow and John Evans

T

he OECD’s 50th anniversary falls at a

the reduction of unemployment as a policy

difficult moment. Member countries

priority. Beyond the OECD, if employment and

In addition to having the potential to be

are struggling to emerge from the worst

social protection are not addressed, social

multi-disciplinary, one of its assets is that it

financial crisis and global recession since

unrest will grow. If financial regulation is not

has advisory structures for business and

the Second World War. For most working

implemented, with real constraints on

labour – BIAC and TUAC. Over recent years,

families, an economic recovery has yet to be

speculative activity in food and other

TUAC has brought around 250 union

felt. OECD unemployment rates remain 50 per

commodities, global inequity, deprivation

representatives each year to debate with

cent higher than in 2008. The shift announced

and poverty will escalate.

the OECD in different Committees. At the

by governments to fiscal consolidation and

To complement the G20, the global

The OECD seeks to fulfil these roles.

2010 Ministerial Council, trade union

austerity policies, before the recovery is self-

economy needs a forum where the interaction

speakers were able to address our concerns

sustaining, risks raising unemployment further.

of economic and social policy issues can be

directly to governments.

Thrust into prominence in the near

addressed, using evidence-based analysis,

Trade unions from the non-OECD G20

financial meltdown of 2008, the G20 has

to guide governments out of the current

countries and beyond have fed into position

emerged as a policy co-ordination forum that in

morass. It also needs a forum to debate the

statements to the G20 meetings. At times,

its first two years was successful in avoiding

best options for confronting challenges such

OECD governments have been able to go

some of the errors of the 1930s. However, it

as ensuring green growth and combating

beyond analysis and define the rules of a

needs to step up co-ordination and to treat

climate change.

stronger and cleaner economy through

The OECD at 50

The OECD is one of the world’s major international economic organisations, and a force for good in building the intellectual and political case for open markets.

The UK was one of the founding members of the OECD in 1961. The past 50 years has seen enormous growth in living standards in all regions of the world, and the OECD has played a major role in fostering, supporting and sustaining that growth.

I believe the OECD has a vital to role to play in today’s world economy. Through its engagement with the world’s emerging as well as developed economies, the OECD has the experience and the commitment to deliver on its declared aim: to promote ‘better policies for better lives’ in its member states and in the wider world.

David Cameron, Prime Minister of the United Kingdom

Guidelines and other instruments. The

especially in deregulated labour markets such

Task Force to define the parameters of a new

OECD Guidelines for Multinational Enterprises

as the US. Even the IMF now accepts that

growth model. Its report, which we hope will

are one such tool whose full potential is yet

this growing inequality contributed to the

be a contribution to the OECD’s work on

to be exploited.

debt-funded bubbles in asset prices and

new sources of growth, concludes that the

thereby, ultimately, to the crisis.

global financial and economic crisis

However, the scale of the recent economic disaster raises questions about the policies

Following the crisis, it has been striking

necessitates a fundamental review of the

that led to the crisis. OECD Secretary-General

that the more regulated labour markets of

Angel Gurría has said that the crisis reflected

the Nordic area and Germany have fared best

massive failures of markets, of governance and

in terms of unemployment, while the more

have been undermined by the collapse of

of regulation. He is right. The crisis should be

‘flexible’ US labour market has been

the banking sector, but it now appears that

provoking a serious rethink in all these areas.

dominated by brutal lay-offs of workers by

policy makers are retreating to the comforting

In the area of financial market regulation and

firms with a reluctance to hire back not

nostrums of economic orthodoxy. This would

green growth, new paradigms are appearing.

seen in any post-war cycle. Despite this,

be a strategic error. Returning to policies that

Across other policy areas, however, the

OECD Economic Surveys continue to call

failed in the boom cannot be expected to return

scenario looks much like ‘business as usual’.

for the weakening of employment protection

the global economy to growth following a very

legislation, decentralisation of collective

deep recession. While wishing the Organisation

2006 recognised that strong labour institutions

bargaining and the encouragement of workers

a happy anniversary, TUAC, the ITUC and our

– notably collective bargaining – can, if

to ‘price themselves into jobs’.

partners will be seeking to ensure that policy

The restated OECD Jobs Strategy of

combined with well-co-ordinated systems of

The lessons of recent experience need to be

prevailing economic policy paradigm.

Faith in unconstrained markets should

makers in the OECD take this message to heart

industrial relations, produce positive

learnt, and a new model of labour markets

employment outcomes and fairer distribution of

developed that promotes quality employment

during this year and beyond. 

income. In 2008, the OECD published a labour

based on rising productivity, skills and with

Sharan Burrow is General Secretary of the

market report, Growing Unequal, that showed

decent social protection. To provide a forum

International Trade Union Confederation and

a rise in inequality across almost all OECD

for debate, TUAC, working with the ITUC and

John Evans is General Secretary of the Trade

countries over the past two decades, and

the European Trade Union Institute, created a

Union Advisory Committee to the OECD.

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The OECD at 50

The way forward: Streamlining policy discussions for more effective multilateral surveillance

by Kumiharu Shigehara

T

he OECD stands out from other

these recommendations is variable. As the

players in the global economy, and the OECD

international organisations for the

OECD celebrates its 50th anniversary, one of its

needs to take this into account.

variety of its Committees and subsidiary

biggest challenges is to adapt its frameworks

bodies specialised in structural, as well as

to the new reality of the global economy.

macroeconomic, policy areas. These are

For years, compared with the IMF, the OECD

When G20 leaders called at their Seoul Summit in November 2010 for enhanced economic surveillance, they specifically

regularly attended by officials from capitals,

had the advantage of smaller size and relative

urged the IMF “to focus on systemic risks

bringing members of the OECD Secretariat

homogeneity of membership. In recent years, it

and vulnerabilities wherever they may lie”.

and national policy makers and experts into

has become larger and more diverse, but its

Closer co-operation between the IMF and

close contact. Multidisciplinary activities

weight in the world economy has declined. In

the OECD would make enhanced surveillance

involving various OECD Directorates and

1975, OECD countries represented 65 per cent

even more effective – providing that the

Committees help to bridge differences between

of world GDP. By 2015, the OECD share is

OECD can succeed in strengthening its

government departments in capitals. In this

projected to decline to 50 per cent.

surveillance process. To achieve that, it will

way, the OECD contributes positively to the

The G20, by contrast, represents 85 per

need to ensure a higher level of participation

design and implementation of coherent

cent of world GDP, with the same number

in many of its meetings, based on a

macroeconomic and structural policies.

of members as the OECD when it was first

streamlined approach to participation.

Surveillance at the OECD is essentially

created. It includes countries in the Asia-

The OECD’s Working Party No 3

a peer review process based on analytical

Pacific region, the Middle East, Africa and

on Policies for the Promotion of Better

reports and policy recommendations prepared

Latin America, but not many of the European

International Payments Equilibrium, or WP3

by the Secretariat. But the level of national

countries that are members of the OECD.

– traditionally the most important peer review

representation in the meetings that discuss

Emerging economies have become significant

group for international macroeconomic

The OECD at 50

innovation, employment and skills, education, anti-corruption and integrity, social policies, gender equality, measuring the progress of societies, and development. At the OECD’s 50th Anniversary Ministerial meeting, participants are due to define the building blocks for a broad development strategy offering the Organisation’s experience and analysis, its policy advice and its best practices in the form of an open and inclusive knowledge-sharing platform for countries at different stages of development.

This strategy will include promoting innovative

OECD Headquarters, 1st March 2011. (Left to right and rear to front) Richard Boucher, Deputy Secretary-General of the OECD; Lesetja Kganyago, former Deputy Finance Minister; Pravin Gordhan, South African Minister of Finance; Gabriela Ramos, OECD Chief of Staff and G20 Sherpa

and sustainable sources of growth, mobilising domestic resources for development, and governance and innovation for development.

Half a century of experience in consensusbuilding through fact-based analysis, peer learning and peer review has made the OECD particularly suited for tackling such important issues. In these five decades, the OECD has shown how international co-operation between countries with often differing visions can translate into policy convergence, reducing friction and allowing for more ambitious accomplishments to raise the quality of life worldwide. Multilateral co-operation is more essential than ever in pursuit of this overarching goal: to serve and support countries, governments, parliaments, stakeholders and citizens in the development of better policies for better lives. 

co-operation – is a case in point. WP3 was

dinner hosted by Pierre-Paul Schweitzer as the

non-member economies, I wrote to China’s

particularly active in influencing international

IMF managing director (his term was 1963-73)

finance minister and central bank governor

policy making during the first quarter-century

in honour of Van Lennep on his first working

inviting them to send their deputies from time to

of its existence. During this period, there were

visit to the IMF as OECD Secretary-General,

time to WP3 meetings. Since then, China has

four chairmen – Emile van Lennep (1961-69),

Schweitzer gave a speech in which he said the

attended WP3 meetings on several occasions.

Otmar Emminger (1969-77), Michiya

OECD “had done for years the work that the IMF

Now the time has come to open these

Matsukawa (1977-79) and Kit McMahon

should have done, particularly in Working Party

meetings to other key non-OECD countries.

(1980-85) – and their strong leadership

3”. Van Lennep added that “to the majority of

contributed greatly to the WP3’s activities.

(Schweitzer's) staff, this was the bitter truth”.

Policy issues relating to sterling crises under

Today, WP3 continues to operate as an

The OECD has a strong Secretariat equipped with professional staff of high quality, versed in the interplay of macroeconomic and

the Bretton Woods system; the demise

exclusive club whose meetings are attended

structural forces and policies. It could, if G20

of the system and the start of generalised

by deputy finance ministers and deputy

leaders so desire, perform a similar function

floating of major currencies; the first oil crisis

central governors involved in macroeconomic

for the G20. But only the strong political will

and recycling of oil money; the emergence

policy making in capitals. But its membership

of key players at global leadership levels

of persistent current account imbalances

remains essentially G10-based, with heavy

will succeed in carrying through the radical

between the US as a deficit country and

representation of European countries. To allow

reform of international institutions that is

Japan and Germany as surplus countries

the WP3 to retain its effectiveness, its structure

needed to make them more relevant to

after the second oil shock; and the Latin

should be streamlined to keep the total

new global circumstances. 

American debt crisis that occurred in the early

number of participants within single figures.

1980s were subjects of heated debate at the

Similar subsidiary bodies, in which participation

Kumiharu Shigehara was Deputy Secretary-

WP3 under their chairmanship.

is limited to a small number of key players,

General of the OECD from 1997 to 1999.

should be envisaged in other areas. Such an

He served in the OECD’s Economics

when Emile van Lennep was WP3 chairman

Interesting descriptions about the period

approach would contribute to the efficient

Department in various capacities during

are found in his book Working for the World

functioning of plenary Committee meetings and

the 1970s and 1980s before taking up the

Economy, where he wrote: “(T)he American

make the entire process of OECD multilateral

post of Chief Economist of the Bank of Japan

Treasury also felt that Working Party 3 exerted a

surveillance more effective.

in 1989. From 1992 to 1997, he was Chief

much more powerful influence on British policies

In 1998, as deputy secretary-general

than the IMF ever could.” He also wrote that at a

responsible for OECD relationships with

Economist and Head of the Economics Department at the OECD.

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The OECD at 50

The OECD at 50

International partnerships

155

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The OECD at 50

The OECD and the ILO: Intertwined histories

by Juan Somavia

A

s the world emerged from the

setting the objectives for the Organisation in

immediately endorsed by the former trade-

catastrophe of the Second World War,

contributing to securing peace and prosperity.

union leader UK Foreign Secretary Ernest

visionary statesmen and women started to

Likewise the roots of today’s OECD lie in the

Bevin, among others. The Organisation for

design the post-war international architecture.

Marshall Plan launched by the former general,

European Economic Co-operation (OEEC)

For the ILO this led to its 1944 Conference in

US Secretary of State George Marshall, in

followed within months of the famous speech.

Philadelphia which adopted a new Declaration

his famous 5 June 1947 Harvard speech and

Alongside its aims of economic reconstruction

The OECD at 50

and co-operation was the goal of achieving

– features that are once again being shown

of Understanding, we have agreed to

conditions for the better utilisation of labour.

to be invaluable, especially when social,

work together on a wide range of shared

The OEEC evolved and enlarged into the

economic and political tensions run high.

concerns support to the G20; employment

OECD, taking with it the preoccupation of

Further deepening the already extensive

and social protection, including decent

avoiding the mass unemployment of the

co-operation between the ILO and the OECD

work opportunities for all; international

1920s and 1930s.

can make a major contribution to strong,

labour migration; multinational enterprises

sustainable and balanced growth, with

and investment policies in developing and

that the goals of our two organisations, as set

quality jobs at the heart of the recovery.

emerging economies; financial issues

out in the Declaration of Philadelphia, for the

Unemployment is stubbornly high in the

(including inclusion and microfinance);

ILO, and in the OECD’s founding Convention,

‘old world’, with job creation only just

adequacy and sustainability of pension

are very similar. The founding articles of the

beginning to exceed job destruction. And, in

systems; multilateral responses to financial,

IMF and the World Bank, as well as the UN

many countries, employment participation

economic, employment and social crises;

itself, also have very similar commitments

has fallen as discouraged workers give up

development-policy issues, poverty reduction

to more and better jobs as a basic goal of

the fruitless search for non-existent jobs.

and MDGs achievement; local and regional

economic and social policies. They all date

In the emerging and developing world there

development, including support to sustainable

from this era of post-war reconstruction and

is also a continuing jobs crisis, but it is one

enterprise; the effects of a long-term shift

display a degree of integrated policy thinking

of not creating enough decent jobs to keep

towards a low-carbon economy, in particular

With these shared roots it is not surprising

that regrettably was gradually eroded and almost totally lost by the 1980s.

But the wheels of history keep turning and now, once again, governments are looking for much greater co-operation and collaboration between international agencies in support of their shared objectives. The realisation that the world economy could again fall into a Great Depression as a result of a massive financial crash focused policy makers’ minds and, as a result, we got a Great Recession

It is the connection between economic and social policies that lies at the heart of the work of our two organisations and on which we can fruitfully intertwine our futures and live up to the legacy of our histories.

instead. Now the challenge is to recapture for a new era the policy coherence that the

up with the growth of the working-age

the impact on the labour market; statistical

founding parents of the international system

population and, at the same time, reduce the

analysis, including by the development of

aimed to create around full employment and

still large numbers living in poverty and the

data and indicators on the measurement

rising standards of living for all.

informal labour market.

of economic performance and social

In the world of multilateralism, the ILO and

We read much about large external

progress; chemical safety and occupational

the OECD have one special feature that

economic imbalances and the threat they

radiation protection; and tourism policy

makes us especially relevant to this task.

pose to recovery. But we hear much less

and statistical issues.

This is the institutionalised participation of

about the underlying internal social imbalances

trade unions and employers organisations

that are an even greater risk to sustainable

pleased to see the depth of international

in our policy making processes. The Trade

growth and development, as we see today in

co-operation 50 years after the foundation

Union and the Business and Industry Advisory

many Arab countries.

of the OECD. The ILO is equally pleased

Committees of the OECD are systematically

It is the connection between economic

I believe that our founders would be

to work with the OECD on the challenging

consulted on a wide range of issues on

and social policies that lies at the heart of the

agendas before us. We have moved on from

which governments are developing policies.

work of our two organisations and on which

statements of ambition to practical action. But

At the ILO, states are represented at our

we can fruitfully intertwine our futures and

it is important to remember how fundamental

annual conference by four delegates – two

live up to the legacy of our histories. For the

achieving those ambitions is to the needs and

for government and one each from workers

ILO, recognition of international labour

aspirations of the world’s citizens. 

and employers’ organisations. Our Governing

standards and fundamental principles and

Body is similarly tripartite. I firmly believe this

rights at work is essential.

makes our deliberations more balanced and well-tuned to the realities of the world of work

The list of themes for collaboration is extensive. In a recently updated Memorandum

Juan Somavia is Director-General of the International Labour Organization, which was founded in 1919.

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The OECD at 50

The OECD and the IMF: A complementary partnership

by Dominique Strauss-Kahn

I

n this uneven phase of economic recovery, global co-operation remains imperative.

G20 leaders remain committed to “acting

must continue working together, leveraging

together to generate strong, sustainable,

their respective expertise towards shared

The fruits of international co-operation were

balanced growth�. Achieving that objective,

goals of promoting a more stable international

abundant after the first few G20 summits,

however, will require heavy lifting in the

economic and financial system.

providing a model for modern multilateralism.

area of structural reforms. These must be

But the low-hanging fruits are gone and the

accompanied by the right international mix

between our two institutions. The Organisation

hard work, with mostly long-term pay-offs,

of macroeconomic policies to safeguard the

for European Economic Co-operation (OEEC)

is before us.

uneven recovery. The OECD and the IMF

and the Bretton Woods institutions were

There is a long history of co-operation

The OECD at 50

created after the Second World War with a common mandate to prevent the recurrence of instability by promoting international economic co-operation. The reconstruction of post-war Europe was achieved thanks to close collaboration, notably between the OEEC, which was instrumental in the implementation of the Marshall Plan, and the IMF, which provided large loans to European

As it reaches its 50th birthday, the OECD remains one of the pillars of the institutional framework of multilateralism, contributing essential input on structural issues to complement the work of other IFIs in the pursuit of our members’ shared objectives.

countries. These initiatives helped to harness the productive drive of the private sector, with remarkable results.

The OECD succeeded the OEEC in

safety nets in surplus countries could reduce

The global economic benefits generated

precautionary savings, raise living standards

in the IMF’s “upside scenario” of the MAP

1961 with a mandate of supporting growth

and contribute to a rebalancing of current-

rest crucially on the expected gains from

and stability, complementing the IMF’s

account balances between surplus and

steady implementation of structural reforms

surveillance and crisis resolution work geared

deficit countries.

informed by extensive OECD analysis.

to promoting sound macro policies and

The G20’s Framework for strong,

Reflecting this, the OECD was asked by

policy co-operation. Since then, the IMF has

sustainable and balanced growth and its

the G20 to prepare a stand-alone report on

maintained continuous interaction with the

Mutual Assessment Process (MAP) present

structural reform policies and their potential

OECD over the years.

an ideal platform for productive collaboration

benefits, to complement the integrated

between the OECD and the IMF. IMF staff

macroeconomic analysis of global rebalancing

provides a unique forum for governments to

analyse whether G20 policy frameworks

developed by the IMF.

discuss domestic policies and their impact

are globally consistent, assess the upside

on other countries, feeding directly into

potential that strengthened collaborative

choices that take strong political leadership,

IMF analysis. The Development Assistance

action could provide, and facilitate the

in part because the gestation period and

Committee (DAC) plays a key role in bringing

G20 peer review process, working in close

pay-off take much longer than most political

together donor governments and multilateral

collaboration with the OECD and other

cycles. The stakes are high, particularly

institutions, including the IMF, to improve

International Financial Institutions (IFIs) in their

for the millions of people around the world

the effectiveness of international aid to poor

areas of comparative advantage.

who are unemployed and for low-income

The OECD’s Economic Policy Committee

countries. More generally, OECD data and

The OECD’s Going for Growth structural

Structural reforms involve tough policy

countries where small differences in the

analysis have been used extensively by

surveillance process, identifying strategic

rate of global growth can mean more or

Fund staff in advanced economy surveillance,

reform priorities for both OECD countries

less food on the table, and even life or

while the same can be said for IMF analysis

and several non-OECD countries, including

death. Global rebalancing of demand while

at the OECD.

most G20 nations, is central to the G20’s

achieving stronger growth will be difficult, if not

Framework. While these priorities vary

impossible, without the right structural reforms

as ever. Renewed financial instability, high

according to the circumstances of individual

and without collaboration.

unemployment in advanced economies, and

countries, the following broader priorities

capital inflow pressures in emerging markets

have been identified:

remind us of the harsh reality: we still face

●●

Today, this collaboration is as important

As it reaches its 50th birthday, the OECD remains one of the pillars of the institutional

implementing pro-competition reforms to

framework of multilateralism, contributing

fundamental weaknesses in the financial

raise labour productivity, including reforming

essential input on structural issues to

sector and structural challenges in the public

education and tax systems;

complement the work of other IFIs in the

removing impediments to labour utilisation,

pursuit of our members’ shared objectives.

rebalancing of global demand remains elusive.

including focusing on the design of benefits,

With multilateralism at a critical juncture,

Fixing these problems will require structural

taxes on labour, labour regulations, and

we can play an important role in galvanising

reforms in virtually every country.

housing policies;

global resolve to address together the major

●●

tackling public infrastructure deficiencies;

challenges ahead. 

●●

enhancing government efficiency,

finances of advanced economies, while the

Improving the efficiency of public spending, reviewing public subsidies and implementing

●●

taxes on negative externalities such as pollution can reduce the adverse growth impact of fiscal adjustment. Better social

●●

particularly in healthcare and education;

Dominique Strauss-Kahn is Managing Director

and promoting innovation and

of the International Monetary Fund, which was

financial deepening.

founded in 1944.

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The OECD at 50

The OECD and the FAO: Working together for food security and agriculture development

by Jacques Diouf

T

he OECD has an illustrious 50-year

agriculture and food, specifically in economic

statistics and statistical methodologies. The

history, not least in the field of agriculture

policies, trade and environment, and forward-

bastion of OECD’s policy monitoring system,

and food, where its role has been fundamental

looking assessments of emerging issues such

the Producer Support Estimate (PSE), was

in reshaping the policies of its member

as bioenergy policies. The OECD’s growing

first developed at FAO in 1973. While since

countries. Its first 25 years were marked by

membership, now including emerging countries

refined, it remains core to the OECD’s

heated discussions surrounding the growth of

such as Mexico and Chile, and the extension

important policy work.

highly distortive domestic and trade policies

of its work to eastern European countries as

by its member countries, which were blamed

well as to major countries such as Argentina,

recently began working with OECD staff and

for creating havoc in the international trading

Brazil and China, have provided policy

selected African countries on the Monitoring

system in agriculture. Through its monitoring

outreach worldwide.

African Food and Agricultural Policies project,

and policy analysis work, the OECD has

FAO’s collaboration with OECD extends

Building on this shared experience, FAO

sponsored by the Bill and Melinda Gates

provided one of the most effective forums for

back to its beginning, as both organisations

Foundation, to build a monitoring system

wrestling these policies down and for providing

are participants at each other’s meetings

to provide consistent and comparable

frameworks for best policy practice.

and engage in meaningful dialogue on issues

information on food and agricultural policies,

affecting agriculture and food by sharing

market-development gaps and public

work programmes and information including

expenditures in order to help support

Through its committee structure, consensus has been built in a wide range of areas affecting

improved policy dialogue at national, regional and international levels.

Since 2005, the OECD-FAO Agricultural Outlook, produced collaboratively by the two organisations, has become a leading publication in the field of forward-looking agricultural commodity market assessments of emerging issues. Recently, the G20 asked both FAO and the OECD to lead in the development of a paper on Price Volatility for its discussion in Paris this year. Growing collaboration between the two organisations is providing leadership in information for more effective governance of global agricultural markets. This is a fundamental contribution to the welfare of the world’s population, and in particular to the improvement of food security and overall agricultural development.  Jacques Diouf is Director-General of the Food and Agriculture Organization of the United Nations, which was established in 1945.

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The OECD at 50

The OECD and UNESCO: Together in the service of knowledge

by Irina Bokova

C

o-operation between UNESCO and the OECD has grown continuously over the

past 50 years. Our partnership has benefited from geographical proximity – the headquarters of both organisations are in Paris. Above all, both organisations share the conviction that knowledge is vital for development and peace.

Understanding and comparing are the first steps to effective action. Education and the sciences, along with statistical analysis, are strategic domains because they lay the foundation for successful future work. This is becoming more and more clear every day, as globalisation brings people and societies ever closer together.

For 65 years, education has been the priority of priorities for UNESCO. We help governments to create the conditions for quality education for all by expanding access to education and improving its content. Working with the OECD, we have developed Guidelines for Quality Provision in Cross-border Higher Education valid for the member countries of both our organisations. This work was the subject of a joint publication in 2005 and has become the reference text in this area. We are now proceeding jointly to review its implementation.

Given the importance technical and professional

common reference points. We are both driven

support for our joint efforts. Sharing know-how

training for employment, we are strengthening

by the wisdom that informed choices can

is the first step towards mutual understanding

our co-operation in this area as well. We worked

only be made on the basis of reliable and

and development. I look forward to many

together on the PISA survey to extend it to

comparable national indicators.

more years of co-operation to that end. Happy

emerging countries, such as Brazil.

The OECD and the UNESCO Institute

We work together every day to demonstrate

birthday, OECD! 

the power of knowledge to bring people

for Statistics are long-standing partners. We

together. Institutional relations are all the closer

Irina Bokova is the Director-General of the

collect and share statistical data in the areas

thanks to the shared determination shown by

United Nations Educational, Scientific, and

of education and in science and technology

the men and women who make up our staff.

Cultural Organization, which was founded

for our member countries. We work together

I am most grateful to the Secretary-General

in 1945 and became an agency of the

to improve existing methods and to develop

of the OECD, Angel Gurría, for his unwavering

United Nations in 1946.

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The OECD at 50

The OECD and the WHO: Partners for more effective health policies

by Margaret Chan

I

ssues of health and economic development

Effectiveness and the Accra Agenda for Action,

intersect in multiple, often complex ways.

has decisively influenced aid architecture and

addressed by the OECD through the economic

the delivery of development assistance.

analysis of health policies. The importance

Rising income levels, when evenly distributed within a population and supported by measures

All of these difficult issues are being

The WHO has collaborated in many of

of such analysis has greatly increased in the

for social protection, improve a nation’s

these processes and directly benefited from

current climate of austerity, where decision-

health. Improved health contributes to long-

the results of others. In particular, well-

makers are looking for trade-offs among

term economic growth, and health spending

designed comparative studies between

competing policy objectives. As the OECD

contributes to economic stability. A well-

countries have helped to identify policy

notes, and the WHO fully agrees, improving

performing health sector is both a major source

options and define best practices, especially

the efficiency of health systems is a far better

of employment and a force for economic

concerning ways to get the best health

option that cutting budgets and services.

vitality. This intersection of health and economic

outcomes from the money spent.

concerns also has a strong ethical dimension:

The OECD is celebrating its 50th

The OECD’s strong emphasis on more efficient healthcare spending translates into

people should not be denied health care for

anniversary at a time when public health faces

practical advice in areas ranging from smart

unfair reasons, including their inability to pay.

unique challenges. The financial crisis hit the

procurement and reimbursement policies

world with a jolt, illustrating the fragility of

to incentive schemes for improving quality,

rigorous methodology have given economic

recent dramatic gains in health development.

reducing unnecessary procedures and

weight to the formulation of sound public

The big question now is: can these gains be

avoiding mistakes.

health policy. Its economic analyses have

sustained in an era of austerity?

For decades, the OECD’s expertise and

been particularly forceful in encouraging policy

As documented in many OECD studies

Evidence demonstrating the economic value of prevention is especially needed at a time when

change in OECD countries. In the developing

and reports, healthcare costs are increasing

all eyes in the public-health community are on

world, the OECD’s convening power, which

in nearly every country. Public expectations

the soaring costs of chronic non-communicable

brought us the Paris Declaration on Aid

for quality healthcare are rising. So are the

diseases. Equally welcome is the emphasis on

ambitions of health officials as more and

more effective use of information technology to

more governments seek to strengthen

monitor results and meet the growing demand

social safety nets, extending financial

for transparency and accountability.

protection to the sick and poor.

Demands are also rising as the

Above all, OECD policy guidance helps to ensure that spending on health brings

prevalence of obesity and lifestyle-related

maximum value in terms of improved

non-communicable diseases, such

health outcomes, especially for poor and

as cardiovascular disease, cancer

disadvantaged groups. This is another objective

and diabetes, continues to increase.

fully shared by the WHO – and another clear

Demographic ageing and a worldwide

sign that the excellent collaboration between

shortage of healthcare workers make

our two organisations will continue, bringing

these demands even more acutely felt.

better health through smarter policies. 

Public health now finds itself caught in a cross-current of expectations and ambitions

Margaret Chan is the Director-General of

set against rising demands and costs, at a

the World Health Organization, which

time when funds are stagnant or shrinking.

was established in 1948.

167

The OECD at 50

AFRICAN DEVELOPMENT BANK GROUP

The OECD and the AfDB: Working together for African development

by Donald Kaberuka

A

s the OECD celebrates its 50th anniversary, it is pertinent to observe the

Equally, I want to recognise the work we

The African Economic Outlook, jointly

have done together in supporting countries

produced by the AfDB and the OECD, has

critical role that the organisation has played in

coming out of conflict, as well as establishing

been a vehicle for high-quality policy analysis,

thought leadership, and in co-ordinating major

best practices for fragile states. The OECD-

as was the jointly organised International Forum

elements of the increasingly complex global

AfDB joint initiative to support business integrity

on African Perspectives. On behalf of the AfDB,

economy. Highlighting one area key to our work

and anti-bribery efforts in Africa has assisted

I commend the OECD on its 50th anniversary

at the African Development Bank – resource

several African countries in their fight against

and look forward to the further deepening of

mobilisation – whether it is the Paris Declaration

corruption and improved corporate integrity

our collaboration in the years ahead. 

on Aid Effectiveness, or the co-ordination of

and accountability. The representation of the

work on domestic resource mobilisation and

AfDB on the OECD GenderNet has contributed

Donald Kaberuka is President of the African

tax administration, the contribution of the

in generating experience for the Bank in its

Development Bank Group, which was

OECD has been key.

work on mainstreaming gender.

established in 1964.

169

The OECD at 50

The OECD and the ADB: Working together for Asia-Pacific development

by Haruhiko Kuroda

T

hroughout its 50 years of existence, the OECD has made significant

The OECD has been a valuable partner for the ADB in providing insights, advice

in co-ordinated and systematic actions in the fight against corruption.

contributions to the development and

and analysis to ADB developing member

An agreement signed in March 2005

well-being of Asia and the Pacific. Today,

countries on a vast range of economic issues.

reaffirmed our shared commitment to

the region has gained an eminent role

The ADB’s strategic priorities – inclusive

collaboration in several priority areas, including

in the world economy, and an increasingly

and environmentally sustainable growth and

aid effectiveness and corporate governance,

important voice in international policy

regional integration – complement the OECD’s

as well as anti-corruption policies. The ADB is

discussions. However, despite its rapid

objectives and activities in our region.

an active partner with the OECD in facilitating

growth, the Asia-Pacific region lags far

Partnership between our institutions and

and monitoring the implementation of the Paris

behind the industrial economies in per

harmonisation among development institutions

Declaration of Aid Effectiveness. The ADB has

capita income and remains home to

are critical to achieving relevant, effective

been a full member of the OECD Development

two-thirds of the world’s poor. A recent study

development policies and programmes for Asia

Assistance Committee’s Working Party on

by the Asian Development Bank suggested

and the Pacific. In 1999, we jointly established

Aid Effectiveness since its inception and has

that it will take decades for developing Asia

the ADB/OECD Anti-Corruption Initiative for

engaged over many years in most areas of its

to catch up with the development indicators

Asia-Pacific – a network for officials from ADB

work. We have ramped up our collaboration

already achieved by the OECD.

member countries and jurisdictions to engage

to organise and prepare for the forthcoming Fourth High-Level Forum on Aid Effectiveness, due to take place in Korea later this year.

The ADB recognises the vital role that the OECD plays in the development community and in the Asia-Pacific region. Along with being a forum for governments to share experiences and seek solutions to common problems, the OECD offers assistance with measurement methodologies, indicators, best practices, internationally agreed instruments, decisions and recommendations in areas where multilateral agreement is necessary for individual countries to make progress in a globalised economy.

On behalf of the ADB, it is a great pleasure to congratulate the OECD on its 50th anniversary. We value our partnership highly and look forward to many more years of fruitful collaboration.  Haruhiko Kuroda is the President of the Asian Development Bank, which was established in 1966.

171

The OECD at 50

Enabling poor rural people to overcome poverty

The OECD and IFAD: Working in partnership to eradicate rural poverty

by Kanayo F Nwanze

T

he logo of the International Fund for

communities and greater food security to the

Agricultural Development (IFAD)

world in the decades ahead.

features three ears of wheat – one of which

If these women and men had reliable access

represents the OECD countries. This makes

to financial services, markets, technology, land

the OECD a key member of the IFAD family,

and other natural resources – in other words, if

so we take particular pleasure in celebrating

they could run their farms as small businesses

its 50th anniversary.

– they could grow and sell more food, earn

Less than two decades after its

We need to link efforts to increase the food supply with generating work opportunities

more income and determine the direction of

in East Asia, particularly China, account for

founding, the OECD joined in forming IFAD

their own lives. If today’s restless generation of

much of the decline. With sustained efforts and

in collaboration with the nations of the

young people could see such opportunities,

innovation, we can see similar progress spread

Organization of the Petroleum Exporting

many of them would view small-scale farming

to every continent on earth.

Countries (OPEC) and other developing

as a stimulating path to a rewarding life.

countries (the other two ears of wheat in our

Since 1978, IFAD has invested over

IFAD and the OECD also share the goal of making aid more effective, and we have already

logo). IFAD was established in 1977 as a

$12.5 billion in grants and low-interest loans

come a long way towards achieving it. OECD

specialised agency of the United Nations and

to developing countries, empowering more

institutions such as the Working Party on Aid

an international financial institution to fight rural

than 370 million people to break out of poverty.

Effectiveness and the working group on

poverty in developing nations. The OECD, with

Despite the progress, there are still more than

Managing for Development Results are key tools

its mission focused on the economic and social

one billion people living impoverished lives in

in making our aid work harder – which allows it

well-being of people around the world, has

rural areas of developing countries. The moment

to spread further and help more people.

always been a supportive partner.

is ripe for linking efforts to sustainably increase

Co-operation across borders is more urgent

We look forward to continued collaboration

the supply of affordable food in developing

between our two organisations as we work

than ever. Concerns over rising food prices

countries with the need to generate decent

towards our joint objectives. In saluting

and hunger have re-emerged at the top of the

work opportunities for their women, men and

the OECD on its half-centenary, we

international agenda, just as the clock ticks

young people. That is the shortest road to

welcome its support for our efforts to help

down to the 2015 deadline for achievement

eradicating extreme poverty and hunger.

farmers in developing countries feed their

of the Millennium Development Goals. At the

IFAD and the OECD have collaborated in

families, communities and nations. Let us

same time, a huge generation of young people

many forums towards that objective, including

commemorate this milestone by imagining,

is on the brink of adulthood in rural areas of

the DAC Network on Poverty Reduction and

50 years into the future, the observance of the

developing nations, searching for opportunity.

the Global Forum on Agriculture. There has

100th anniversary of the OECD – celebrated

been close co-operation between IFAD, the

with a look back at the successful efforts that

farms. These farms are a vital link in the chain

OECD and other key international organisations

led to the eradication of extreme poverty and

of global food security. Already they feed almost

on price volatility and food security issues in the

hunger around the world. 

a third of the world’s population and produce

context of the G20.

Many of them have grown up on smallholder

most of the food consumed in developing

Progress is real: over the past decade,

Kanayo Nwanze is President of the International

nations. Yet smallholder farmers have long

the rate of extreme poverty in rural areas of

Fund for Agricultural Development, a

been seen as the faceless poor, not as skilled

developing countries – people living on less

specialised agency of the United Nations that

individuals whose innovation, dynamism and

than $1.25 a day – has dropped from

was established as an international financial

hard work can bring prosperity to their

48 per cent to 34 per cent. Dramatic gains

institution in 1977.

173

174

The OECD at 50

The OECD at 50

The OECD and the WTO: Working to advance trade and development

by Pascal Lamy

D

ifferent agendas, different perceptions and

monitoring of trade-related development funds.

goods crossing borders many times, there is

different ways of doing things sometimes

It was in this respect that the OECD made such

a tendency to double- and even triple-count

an important contribution to this programme.

exports. Working with the OECD and with many

make it hard for international organisations to work together, in spite of their shared

The OECD’s analysis of Aid for Trade flows

other partners worldwide, we at the WTO are

objectives of creating a more prosperous and

provides both qualitative and quantitative

seeking to devise a statistical process which

peaceful planet. And yet, as I reflect on the 50th

information. The qualitative assessment is based

would permit us to calculate trade on a value-

anniversary of the OECD and the many years I

on partner and donor countries’ providing self-

added basis, a far truer indication of trade flows.

have worked with the Organisation, what strikes

assessments of the programme. The quantitative

me most is how responsive it has been to

evaluation comes from close monitoring of

meeting of trade ministers who hold forth on

working with partners in building an international

global Aid for Trade flows. Results to date are

developments in the trading system. Wisely,

infrastructure that delivers for governments and

encouraging: Aid for Trade commitments grew

the organisation has expanded the list of

the people they represent.

by 10 per cent in 2006 and 2007, and by 35 per

invitees beyond OECD members to include

cent in 2008 to $41.7 billion.

ministers from many developing countries that

Our work at the World Trade Organization (WTO) intersects with that of the OECD across

Another important area in which the WTO

Each spring, the OECD holds its annual

are playing an ever wider role in world trade.

a wide array of issues. Whether in trade-related

and the OECD have worked well together is

These meetings are a mandatory occasion for

development assistance, monitoring trade

in monitoring post-crisis trade and investment

WTO Directors-General. They provide a forum

barriers or providing a forum for trade ministers

developments. Governments have been vigilant

for discussion. Over the past decade, they have

to advance the Doha Round negotiations, our

in fighting the implementation of trade-and-

also provided ministers with an opportunity

organisations have worked together to provide

investment restrictive measures since the onset

to try and advance the Doha Round. Meeting

valuable services for our members.

of the crisis. Together with UNCTAD, our two

bilaterally or in groups, ministers and their

organisations have provided G20 countries with

officials have sought to bridge their differences

available to developing countries as they seek to

a series of reports giving a clear picture of the

or propose new solutions to long-entrenched

alleviate poverty and raise living standards. Their

state of play. In these reports, we have been

problems. They have also met collectively, on an

ratio of trade to GDP has more than doubled in

able to inform the G20 that trade restrictions

informal basis, to assess how best to proceed.

the past 40 years, to the point where it is much

imposed to date have covered only a tiny

These meetings have made an important

larger than that of developed countries, and their

fraction of world imports, while restrictions on

contribution to moving the Doha Round forward.

dependence on trade is growing.

investment flows have been negligible. This

Trade is one of the most effective tools

And, yet, many developing countries lack the

In short, the Secretariats of our two

scrutiny has helped to deter governments

organisations work productively together on

capacity to fully engage in trade and the global

from putting in place policies which could have

many matters, from statistics and trade finance

economy. Enhancing that capacity is the central

deepened and widened the economic crisis.

to economic research and communications.

objective of the global Aid for Trade Programme,

Trade today is measured in gross numbers,

Angel Gurría and I have a strong and productive

to which the OECD has been an important

but given the integrated nature of global

working relationship. As the OECD celebrates

contributor. If aid programmes have not always

production and supply chains, many economists

its 50th birthday, I salute the organisation, its

delivered all they could for developing countries,

– including those at the WTO and the OECD –

staff and its members, and wish them the best

one important reason has been a failure to

believe that the gross formula for tabulating

for the next 50 years. 

monitor the flow of funds effectively. As we set

imports and exports does not accurately

about crafting the Aid for Trade programme,

reflect the true value of merchandise as it

Pascal Lamy is Director-General of the World

governments rightly insisted on effective

crosses borders. With inputs and semi-finished

Trade Organization, which was founded in 1995.

175

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The OECD at 50

Congratulations on the 50th anniversary of the OECD The OECD’s involvement in environmental policy coincides with the estabishment of the UN Environment Programme (UNEP) in 1972. Over the years, it has delivered important analysis and policy directions for mainstreaming sustainability. Today, as part of the global interest in green growth and a transition to a low-carbon, resource-efficient Green Economy, it is rapidly evolving its work to a new and transformative level. On the Road to Rio and the UN Conference on Sustainable Development 2012, the OECD and UNEP are allies in the drive to make this the decisive and defining milestone for meeting the challenges, but also delivering the opportunities, for a truly sustainable 21st century.

Achim Steiner, UN Under-Secretary-General and Executive Director, UN Environment Programme Congratulations to the OECD on 50 years of service and dedication to developing effective policies that promote economic development for the improvement and well-being of people around the world! The International Institute for Sustainable Development (IISD) is proud of our close association with the OECD. We forward to our future collaborations in the spirit of co-operation that truly defines the OECD.

Franz Tattenbach, CEO and President of the International Institute for Sustainable Development I commend the OECD for its thought-leadership on economic problems. Its current focus on green growth is a clear example of this commitment. The World Business Council for Sustainable Development is delighted to sponsor the 2011-12 Round Table on Sustainable Development. As a forum outside formal negotiating processes, the Round Table will enable participants to discuss solutions to green growth free of bureaucratic obstacles. In an increasingly resource-constrained and populous world, governments and companies need to tackle green growth challenges together.

BjĂśrn Stigson, President, World Business Council for Sustainable Development Never since the creation of the OECD 50 years ago has the world undergone so deep a crisis. Now, more than ever, to stay on course for sustainable and equitable growth the world needs a centre for reflection that can propose common strategies, and a driving force for new forms of co-operative coordination among the key actors of global development. If the OECD, with its well-tried working methods, its competent staff and its high-quality leadership, did not already exist, it would need to be invented.

Michel Camdessus, former Governor of Banque de France and former Managing Director of the IMF The OECD provides a great example of what can be achieved through international co-operation, and has been a force for peaceful progress and development over its 50 years. In pursuing its mission, it has long supported the move towards global accounting standards. We at the IASB, now completing our first decade of operation, greatly appreciate that support and the encouragement we have received from the OECD, as well as its close co-operation in addressing the many areas of shared interest.

Sir David Tweedie, Chair of the International Accounting Standards Board

The OECD at 50

The OECD has made a stalwart contribution to our understanding of economic policy and how it affects development. In areas as far apart as education, migration and energy policy, it has encouraged co-operation between economies. UNCTAD, which focuses on the developing world, has benefited enormously from collaboration with the OECD. Recently, we were jointly tasked by the G20 to monitor the investment policy environment in light of the 2008-09 financial and economic crisis. We hope that the OECD will maintain its strong research agenda and look forward to building our relationship.

Supachai Panitchpakdi, Secretary-General of the UN Conference on Trade and Development The OECD has been a close and supportive partner of the European Training Foundation since its launch in 1995.

OECD reviews of education policy in different countries have inspired and informed our work. We have been proud to contribute our knowledge of vocational education and training (VET) policy to OECD education reviews, especially of ETF partner countries. Our partner countries have also benefited from the OECD’s groundbreaking education policy work, such as PISA. In the framework of the Inter-Agency Co-operation Group, knowledge-sharing has covered many policy areas and regions, but I would particularly mention our fruitful co-operation for entrepreneurship learning in the Western Balkans, Turkey, and the Southern and Eastern Mediterranean. We wish the OECD a happy anniversary and look forward to continuing close co-operation.

Madlen Serban, Director of the European Training Foundation To the OECD, always experimenting with new ideas and transformational innovations for the betterment of the global economy, pressing the world to get rid of old paradigms, but helping it adapt to the new paradigm of growth, development and governance: all the best with your noble endeavours.

Han Seung-soo, Chair of the Board of Directors of Korea’s Global Green Growth Institute and former Prime Minister of the Republic of Korea As the premier multilateral body for global financial issues, the OECD will play a key role in shaping the future of global finance. It is one of the few organisations able to address issues of taxation and development with a global perspective and a global approach. Global Financial Integrity applauds its new focus on tax and development, its strong voice in the G20, and the peer review process involving countries participating in its Global Forum on Transparency and Exchange of Information for Tax Purposes. We look forward to seeing the OECD expand its policy work and engagement with low-income countries during the next 50 years.

Raymond Baker, Director of Global Financial Integrity Worldwide challenges imperil humanity’s prosperity and security. Constructive efforts to confront these challenges have been a hallmark of the OECD in half a century of international collaboration, commitment and accomplishment. The OECD has made countless contributions, establishing guidelines, standards and state-of-the-art peer review processes, as well as providing impartial and articulate policy recommendations.

At CIGI, we have appreciated working with the OECD, sharing policy research and analysis with the aim of increasing the effectiveness of the G20 leaders’ summits. We encourage the OECD to continue in its traditions: it is an indispensable institution.

Thomas A Bernes, Executive Director, The Centre for International Governance Innovation

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The OECD at 50

Index of advertisers Accenture................................................................................................................................................................ 50 Allianz Global Investors AG .................................................................................................................................. 92 Amicorp Group....................................................................................................................................................... 42 Andrade Gutierrez ................................................................................................................................................... 4 Arion Bank .............................................................................................................................................................. 91 Bank Hapoalim ...................................................................................................................................................... 94 BASF......................................................................................................................................................................... 66 BBVA ...................................................................................................................................................................... 108 BNP Paribas........................................................................................................................................................... 172 Carrefour ................................................................................................................................................................. 25 Center for Retirement Research at Boston College ......................................................................................... 166 Chevron ..................................................................................................................................................................... 2 China International Capital Corporation Limited ............................................................................................... 6 EDF ........................................................................................................................................................................... 74 ENI ........................................................................................................................................................................... 73 Ernst & Young LLP .................................................................................................................................................. 40 Fidal International ............................................................................................................................................... 168 Göteborg Energi AB ................................................................................................................................................ 76 INSEAD .................................................................................................................................................................... 36 International Bureau of Fiscal Documentation ............................................................................................... 107 Malta Enterprise .................................................................................................................................................. 128 Masisa ................................................................................................................................................................... 143 McGraw-Hill Companies ..................................................................................................................................... 180 Merck Sharp & Dohme .......................................................................................................................................... 60 Moody’s Corporation ........................................................................................................................................... 137 Natura Cosméticos SA ........................................................................................................................................ 140 Novartis ................................................................................................................................................................. 110 PricewaterhouseCoopers .................................................................................................................................... 138 SNR Schouten Training BV ..................................................................................................................................... 9 Standard Chartered Bank ................................................................................................................................... 100 Syngenta ............................................................................................................................................................... 164 TD Bank Financial Group...................................................................................................................................... 16 UIC ........................................................................................................................................................................... 54 United Arab Emirates Securities and Commodities Authority ..................................................................... 160 University of St Gallen, Institute for Economy and the Environment ......................................................... 162 Vale .......................................................................................................................................................................... 88 Valeo Group ............................................................................................................................................................ 53 Vertex Pharmaceuticals Incorporated ................................................................................................................ 11 Wageningen University and Research .............................................................................................................. 170 Westinghouse Electric Company ....................................................................................................................... 179 Zurich Financial Services ..................................................................................................................................... 22

WES