Remarks by Angel Gurría,
17 March 2017
(As prepared for delivery)
Dear Minister, Ladies and Gentlemen:
I am delighted to be in Baden Baden to present the 2017 issue of Going for Growth on the occasion of the meeting of G20 Finance Ministers and Central Bank Governors, as I have done for the past five years.
Going for Growth is the OECD’s flagship publication on structural policies. Its purpose is to help policymakers set reform agendas for the wellbeing of their citizens and to achieve strong, sustainable, balanced and inclusive growth.
This year’s Going for Growth comes at a critical time. Global growth continues to stumble along at just 3%. Trade growth is even slower. Productivity growth is low. In many countries we are seeing the signs of a low growth trap. Meanwhile, poor growth outcomes combined with rising inequality, falling trust and stagnant incomes have contributed to a backlash against globalisation in a number of OECD and G20 countries, bringing a rise in populist and protectionist politics.
All this is contributing to political and economic headwinds, which along with “reform fatigue”, have accompanied a steady slowdown in the pace of reforms observed since the immediate post-crisis years.
Yet, it is precisely because of this context that ambitious reforms are needed, to escape the low-growth trap, prepare for rapid technological changes, harness new sources of growth, and make growth more inclusive and sustainable. This study helps governments to do just that.
In looking back at reform achievements over the past two years, one encouraging development has been the increase in the number of actions taken to lift employment. These efforts are paying off. Employment rates among youth have risen well over 10 per cent on average across the OECD in the past 2 to 3 years, despite subdued growth. In countries such as Germany, Japan and Korea, access to childcare and early childhood education has been expanded, and this is helping women to join and stay in the labour market. This is good for growth. And this is good for inclusiveness.
Those examples illustrate the need for crafting policy packages whose individual components are synergetic and mutually reinforcing, bolstering growth, productivity and inclusiveness at the same time.
We need policies aimed at addressing the productivity slowdown : policies that help create an environment that encourages firms to innovate, but also that promote the arrival of new firms and the redeployment of resources from poorly performing firms to high-productivity ones. For this to happen, poorly performing firms should either improve or be allowed to exit the market. Since the crisis, the share of non-viable – or so-called zombie – firms has risen from 4% to nearly 6% of total businesses across OECD countries. And since they are trapping valuable resources this is lowering productivity, by close to 1% in countries where zombie firms are most prevalent. So, reducing barriers to firm entry and exit is needed to revive business dynamism and productivity.
But to ensure that all can benefit, additional measures are needed to help workers cope with the turnover in jobs. This is one reason why reform packages are so important for growth to be more inclusive. For example, our analysis has shown that spending more public money to help laid-off workers to find a new job is far more effective in countries where regulatory barriers to firm entry are low. This is because job opportunities are more abundant in places where new firms can enter the market more easily.
Ladies and Gentlemen,
We live in a rapidly changing, highly complex and interdependent world. We are facing pressing economic challenges and increasing social demands for swift action. In such a context we need to develop reform strategies that are sufficiently comprehensive to create synergies across policy areas but also across countries. There is a lot we can learn from each other. The case for international cooperation and collective approaches through fora such as the G20 in the areas of intangible capital, taxation, competition law enforcement and regulatory harmonisation is now compelling.