Remarks by Angel Gurría, OECD Secretary-General, delivered at the OECD International Parliamentary Seminar
5 February 2014, Paris, France,
(As prepared for delivery)
Good morning Ladies and Gentlemen,
Let me welcome you all to the OECD. I’m glad to see so many of you here today. We have a record turnout for our 2nd OECD Parliamentary Days, which is a sign that the OECD Parliamentary Network is going in the right direction!
This year we decided to combine our seminar with the annual visit of the NATO Parliamentary Assembly, with whom we have a longstanding relationship, and I want to especially welcome you back to the OECD.
I want to use most of my time this morning to exchange views and ideas with you, so I will limit my remarks to a few key points.
Six years into the crisis, where do we stand?
There are several encouraging signs that the slow recovery we have been experiencing is finally gaining some steam. Recent leading indicators have confirmed the improved outlook for the US economy. We expect U.S. growth to accelerate towards 3% in 2014, after almost 2% in 2013. Activity is also slowly picking up in Europe and Japan, while China and other emerging market economies are set to maintain relatively high growth rates.
Despite these generally positive news, the global economy remains in low gear compared to the pre-crisis period and certainly lower than would be expected at this stage of the economic cycle.
Furthermore, the other legacies of the crisis - high unemployment, growing inequality and a decline in public trust - remain firmly anchored in our countries.
OECD-wide unemployment should decrease slightly this year, though there are still over 13 million more people unemployed than in 2008. The OECD-wide unemployment rate is only expected to fall below 8% around mid-2014, while in Europe it will remain above 12%. Young people and the low-skilled have been hit the hardest. Youth unemployment remains at dramatic levels in many countries, with rates exceeding 55 per cent in Greece and Spain and over 35 per cent in Italy and Portugal.
The jobs crisis goes hand in hand with rising inequality. Today, in OECD countries, the average income of the richest 10% of the population is approximately nine times that of the poorest, up from seven to one 25 years ago. Even in traditionally egalitarian countries – such as Germany, Denmark and Sweden – the income gap between rich and poor is widening – from 5 to 1 in the 1980s to about 6 or 7 to 1 today, while in Chile and Mexico it stands at around 27 to 1.
Public trust in institutions has also taken a beating as a result of the crisis. As shown in our recent publication, How’s Life?, today only 40% of citizens in the OECD trust their national governments – the lowest level since 2006. And in countries most affected by the crisis, only between one and three citizens out of ten trust their governments, a ratio that has more than halved since the start of the crisis. And it is not just governments that have been hit. Banks, companies, parliaments, international organisations have also seen a drastic drop in trust and even people’s trust in each other has suffered!
The pending reform agenda
The global outlook is also overshadowed by various uncertainties that could set back the still fragile recovery. High government debt burdens, an unfinished agenda to reform the banking sector in the euro area and the expected normalisation of global monetary conditions pose challenges for the recovery. Policymakers are to some extent to the very source of this uncertainty. We need consistent, effective and durable policy action to get the cylinders of the growth engine up and running again.
To tackle these challenges, we need to work on several fronts simultaneously. And we need to do so considering the interlinkages between different policies and their impact on the various dimensions of well-being.
Let me focus on two key areas the OECD is working on: inclusive and green growth and taxation.
1. Inclusive and green growth:
The OECD’s vision for inclusive growth combines strong economic growth with improvements in living standards and outcomes that matter for people’s quality of life – good health, jobs and skills, a clean environment, and community support.
Inclusive growth means fostering the best use of all resources for growth – natural and physical capital, all countries and regions, and all citizens: senior citizens and young people, men and women.
To make headway on all these fronts, we need comprehensive structural reforms to help maximise opportunity, education and training, fair taxation and incentives, and programmes to empower all groups of society to fulfil their potential. We need to continue efforts to promote competition, foster innovation, and allow the knowledge-based economy to permeate through the different sectors of the economy. Long-term challenges such as ageing should also be turned into opportunities - benefiting from the wisdom and experience of the elderly -, while addressing the growing costs of health care and diseases, such as dementia.
The OECD is also working with governments to improve the effectiveness of active labour market policies and activation strategies to reduce the curse of unemployment. Our Action Plan for Youth provides a comprehensive range of measures to address youth unemployment, especially long-term unemployment. Our evidence-based PISA and PIAAC initiatives together with our Skills Strategy are also contributing to improving education and training systems worldwide. Countries that invest more in knowledge and relevant skills will be more internationally competitive, more innovative, and create more quality employment.
If done right, these reforms have the power to both boost economic growth and to address significant social challenges that are the result of years of unequal access and unequal distribution of growth dividends.
We also need to go further in making growth greener and tackling climate change. We are on a collision course with nature. As we approach the Conference of the Parties in late 2015 in Paris (via Warsaw and Lima), we need to take further action now to put us on a pathway to achieve zero net greenhouse emissions globally in the second half of this century. As well as protecting the well-being of future generations, the investment needed to reduce our reliance on fossil fuel can give a huge boost to growth.
To achieve all these goals, governments need to maintain their finances in order. In addition to the consolidation efforts under way in many countries, at the OECD we have been working for some time to put an end to tax evasion by wealthy individuals and rein in tax avoidance by multinational companies. Governments cannot function effectively if their revenues are syphoned off by unscrupulous individuals or corporations.
The OECD has proposed a roadmap to help governments address tax avoidance and aggressive tax planning by corporations, the Action Plan on Base Erosion and Profit Shifting. Countries have already started working together along the lines of this action plan supported and mandated by the G8 and the G20 and we highly appreciate the support of national and supranational parliaments on this project.
Another challenge is the fight against offshore tax evasion. With the support of national governments as well as that of the G20, we are now progressing towards a new, more ambitious, single global standard for automatic exchange of tax information. Following our recent Global Forum in Indonesia, the challenge is now to put our commitments into action and implement a truly global standard for an increasingly borderless world, which we hope to achieve by July this year.
All these initiatives will help public institutions regain the trust of citizens. But more needs to be done in this area. Elected politicians must be accountable, and not just at the ballot box. Corporations need to better manage environmental and social risks. And financial markets need to be rendered more stable, ensuring that they meet their main function of financing productive economic activity and overseeing company boardrooms.
At the OECD, we are convinced that better data, better analysis and ultimately better policies are critical to addressing this trust deficit. But to ensure that better policies lead to better lives, we also need to take a close look at the policy making process itself. We need open, transparent and accountable governments. Citizens need to be able to access information and actively participate. And we need to guard against undue influence of vested interests often manifested through lobbying and political finance. These are core elements that will be addressed by the OECD’s trust strategy.
New Approaches are needed
What we need, ladies and gentlemen, is to revisit models and theories to question conventional wisdoms and “established truths”. That’s why we are working on a project called New Approaches to Economic Challenges. It is an organisation-wide reflection on the roots and lessons from the crisis with the aim to catalyse a process of continuous improvement of the OECD analytical framework and policy advice. We are hoping to define more effective policy options for governments to achieve the ultimate goal to improve the well-being of their citizens.
You will now hear in more detail about many of the issues I touched on in my remarks. I very much look forward to your comments and questions and to an interesting and fruitful discussion.
Thank you very much!