Remarks by Angel Gurría
17 September 2019 - OECD, Paris
(As prepared for delivery)
Ladies and Gentlemen,
I am delighted to be here with you this afternoon for this important NAEC Group Conference, focusing on how systems thinking, anticipation and resilience can help us address global challenges. I would like to thank you all for participating.
The OECD helps governments tackle the many policy issues they face. But I would argue that unless we adopt a systems approach, unless we employ systems thinking, we will fail to understand the world we are living in. Let me explain why.
This is a world where the eruption of a volcano in Iceland means that agricultural workers in Kenya will lose their jobs. This is because planes cannot fly and transport the flowers that they grow to the Netherlands for distribution to other countries. We live in a world made up of complex systems. Systems of systems interacting with each other, and changing each other, as well as the links between them.
The global economy has a greater number of links than ever before: heterogeneous, global production networks of 50 million firms with billions of physical links interact with 2 billion households, 3.3 billion workers and trillions of consumed products, through a web of trillions of contracts!
Such interconnectedness, in turn, gives rise to complexity, and this can be good or bad. Take financial markets for example: Before the 2008 crisis, the dominant view was that interconnectedness enabled risk diversification and strengthened financial stability both at the national and global level. This view was in line with policies encouraging the liberalisation of capital flows and the deregulation of derivative markets. After 2008, interconnectedness has been associated with the risk of financial contagion.
However, within mainstream economics, the understanding of why and when interconnectedness may increase stability or instability has remained fragmented.
The NAEC Initiative is succeeding in catalysing a debate across the OECD and beyond about how to revise, update and improve our policy thinking and acting, as well as the methods and techniques that underpin them. It is succeeding in improving the scientific basis of policy and applying the insights of complexity science to help us understand the main features of the most important systems we have to deal with.
If we are to tackle these issues, governments must change the ways in which they make and implement policies. A systems approach helps policymakers consider all the angles.
Take digitalisation, the economic and social dimensions are clear. What is the impact on GDP and how it’s measured? Who is employed, self-employed or unemployed in the gig economy? What impact is constant exposure to social media having on children and young people, and should governments be concerned?
However, the digital economy is also an environmental issue. The Internet already uses 10% of global electricity, and accounts for more CO2 emissions than air travel, and this could double by 2030. It is important that all these systemic linkages are part of the policy discussion.
Unfortunately, bad things will still happen, and this brings us to another aspect of systems; resilience. A complexity approach helps us to consider not just how systems interact with each other, but how different aspects of a same system may have to be balanced against each other. Resilience and efficiency for example.
Planting fast-growing species makes economic sense and is efficient. But add climate change to the mix and you have heavy rainfall, promoting a flourishing of the undergrowth, followed by droughts, drying it out for the next blaze. Your forest may be economically efficient for a while, but it is not resilient.
Traditionally, the OECD tended to use the term resilience to refer to ‘a capacity to resist downturns’. Today, NAEC is helping us develop approaches to resilience that emphasise the characteristics and capabilities that allow a system to recover from – and adapt to – disruption. This defines resilience as the ability of a system to perform four functions with respect to adverse events: planning and preparation; absorption; recovery; and adaptation.
The goal therefore is to cope with uncertainty - be ready for whatever happens, even if it cannot be anticipated and has never happened before.
Mindful of this challenge, the OECD and NAEC have developed several partnerships to take this important work forward and to promote systemic thinking.
I am therefore pleased to announce the first fruits of our promising strategic partnership with the International Institute for Applied Systems Analysis (IIASA). No one in the world today has a better understanding of how systems work. IIASA helps us to understand the systemic and dynamic linkages in environmental, social, and economic trends and the impact that different policy measures will have on them.
This partnership has already yielded a first joint report, Systemic thinking for policy making – the potential of systems analysis for addressing global policy challenges in the 21st century. Engaging over 70 authors from IIASA and the OECD, across directorates and topic areas, this report draws on innovative methodologies, models and tools for research and policy analysis. It demonstrates the potential of systems analysis and systems-based strategies to address critical global issues and guide policy options.
The report addresses a variety of areas in which systems thinking has great potential. These include the systems approaches to development pathways, and integrated analysis of the climate, biodiversity, transport, water and energy. There are also integrated approaches to employment, well-being, education, and innovation.
Focusing on the resilience of systems, NAEC has also developed a close collaboration with Igor Linkov and Benjamin Trump of the U.S. Army Corps of Engineers. This has resulted in the report: Resilience-based Strategies and Policies to Address Systemic Threats.
Beyond these two collaborations, and inspired by them, one lesson NAEC emphasises is that growth is not an end in itself and the economy does not exist in a bubble isolated from the hopes, histories, desires and frustrations of the people it is supposed to serve. The economy is political. It is social. It is historical. It is cultural!
Ladies and Gentlemen:
Mindful of the complexity and diversity of the global economy, systems thinking can help us understand the issues, anticipate the consequences of our decisions and build resilience. Let’s use it to shape a brighter future for our economies, our societies and our citizens.
The OECD remains committed to working with you in designing, developing and delivering better policies for better lives. Thank you.