Development

Global governance as part of crisis prevention

 

by Angel Gurría, OECD Secretary-General
A speech delivered at the Conference of Foreign Affairs Committee and Development Committee Chairpersons of the European Union Member Countries
Helsinki, Finland
28 September 2006

I am pleased for this opportunity to address such a distinguished audience of parliamentarians from the different Member States of the European Union. In my remarks this morning, I will focus on the role of global governance in crisis prevention. But first of all, let me say what I understand by “global governance”1. For me, it is simply a co-operative approach to problem solving and to managing global processes. And this is precisely what the OECD does and has been doing ever since it was created. I will say more on this in a moment. I would also like to focus mostly on conflict prevention and on security concerns, rather than on crises caused by natural disasters.

Why focus on conflict prevention?

The basic message is clear – security is a precondition for sustainable economic, social and political development. And security means conflict prevention.

Conflicts have at their heart, a broad range of causes – ethnic, religious and historical hostilities to name just a few. Trans-national crime and corruption, terrorism, proliferation, and arms and drug trafficking all pose threats to people, nations and international security. Globalisation has transformed relationships among and within states. It has brought unprecedented levels of prosperity. Millions have been able to escape poverty. National and cultural barriers have diminished dramatically in importance and relationships – business, educational and personal - have thrived. Still, globalisation has provided new opportunities for these threats to societies to grow. Security has emerged as a vital concern for development in a world where one third of the poor live in still fragile states.

Conflicts cause huge human and financial costs (the average cost of a civil war is estimated to be USD 54 billion  that could otherwise be spent towards achieving development goals). The benefits of conflict prevention far outweigh the costs of inaction – USD 1 spent on conflict prevention saves USD 4 in post-conflict reconstruction according to one estimate2. This is just one of the reasons why we need to put more emphasis on conflict prevention whether it is in international organisations, governments, or parliaments.

Let me talk about the OECD as an example of achieving economic development and security through cooperation.

The OECD is often referred to as the living legacy of the Marshall Plan, having evolved from the Organisation for European Economic Co-operation (OEEC), which was created to administer the Marshall Plan in 1948.
The Marshall Plan was the cradle of economic development and security in post-war Europe. It was established within a continent ravaged by bloody conflict. It contributed approximately 14 billion US dollars to rebuilding Europe. But too many people make the mistake of thinking that the Marshall Plan was primarily about money. In fact, more financial assistance was given to Europe before the Marshall Plan. The genius of the Marshall Plan was found in the foresight of those who realised that lasting peace, prosperity and security may be defended through military strength, but can only be secured through economic development and co-operation, indeed through economic interdependence brought about by institutional frameworks, not bricks and mortar. The OEEC, under the flag of the Marshall Plan, brought together countries that had been both allies and bitter enemies. And by giving them the reason and the framework to work together, it helped lay the foundation for one of the most significant and dramatic achievements of the past century, the integration of Europe – an achievement which now provides inspiration to countries and regions around the world.

We continue to carry forward the true legacy of the Marshall Plan – that is, that with the right combination of international co-operation and development of the most effective policies we can build successful and secure economies and societies. We have seen growing regional co-operation in Asia and the Pacific, in Southeast Asia, in North and South America, and in the Middle East and North Africa. We have seen the countries of Africa beginning to take control of their own destiny in forming the New Economic Partnership for African Development (NEPAD). And we have the Stability Pact for the Balkans, where the OECD is an active partner.  This is a striking contrast to the conflict situation some year ago. 

The OECD itself is playing an active role around the world in bringing to countries and regions something that is complementary to the main providers of financial assistance – the same thing we offer our member countries:  policy advice, development of policy reform agendas, monitoring implementation, and creating regional and global networks. In other words, we support the development of policy and institutional frameworks for modern economies and societies.

So what should we do?

We must help countries respond to and meet the needs and aspirations of their citizens. They need to create political stability, adopt sound economic policies, attract foreign and domestic investment, promote entrepreneurship, and develop human capital through improved education and health. This requires governance which is effective, efficient and not corrupt.  This is a tall order.  But fortunately, there are a number of success stories to point the way, and with the fading of the great political/ideological battles of the past century, countries are much more willing to put aside rhetoric and be practical, and to find out what will work best for them. This is how we can promote peace and security – through greater prosperity and governments that are responsive to the needs of their people.

How can we do it?

First, the essential factor is that the leadership of countries must be committed to adopting and implementing the necessary policy reforms. This is true for both developing and industrialised countries, as we continue to struggle with the political economy of reform.  Without this, even the most generous levels of assistance will have little or no positive effect.  This was the primary message of the Monterrey Consensus, and it has found a receptive audience around the world.  While we should expect high standards, we must also recognise how difficult it is to implement far reaching reform, particularly if they are opposed by powerful interests.  In OECD countries, this is our greatest challenge, and we sometimes fail.  But our overall record of achievement has been quite good and offers useful lessons to countries trying to embark on a similar path.

Second, developed countries must be committed to support the development of less advanced economies. They must provide the policy advice and assistance to promote needed programmes and reforms, and to support developing countries' efforts to create the physical and human infrastructure necessary to promote economic growth. 

Institutions like the OECD, World Bank, IMF, WTO and of course the UN (including UNDP, UNEP, UNESCO, etc.) must work together with bilateral donors to deliver the maximum benefit from our collective effort. (The Development Assistance Committee (DAC), part of the OECD family, is where the donors meet and coordinate for more and better results of the development assistance flows.) Regional Development Banks also play a role.

In this regard, I do not want to emphasise that the absolute level of assistance is not the only and not even the primary indicator of the commitment of countries and institutions to support development.  We have to put more emphasis on the quality and effectiveness of aid – something we are now doing in the OECD in follow up to the Paris Declaration. We have also started, but need to make more progress, on better coordinating aid programmes.  Too often we find overlap or duplication or just a multitude of projects imposing too great an administrative burden upon the receiving countries.

Finally, we are putting greater emphasis on security and development assistance – that is, how can aid help create stable and secure conditions necessary for development and how can assistance agencies work together with host governments to help rebuild countries ravaged by war. Here the OECD/DAC efforts3 have focused on the role of Security System Reform in stabilising conflict-prone or fragile states, and on creating a conducive environment for political, economic and social development. Our Guidelines provide donors with a new direction and understanding of the security-development nexus, and lead them to question how their programmes are designed, implemented and evaluated. This work is widely recognised as the international point of reference, and it has had a significant impact on policy development. For example, the DAC guidelines have acted as a catalyst for comprehensive European Union  policies on Security System Reform4. 
 
Third, with even the best conceived policies and a suitable infrastructure, developing countries need markets for their goods and services, if they are to raise their standard of living. A number of developing countries have already used the global market to spur growth and dramatically reduce poverty levels.  (Korea and now China and India are among the most impressive examples.)  But much more potential for trade and investment must be realised if we are to raise standards of living in poorer countries.  And the OECD countries have a major responsibility in this regard. I want to highlight here the Policy Framework for Investment - a tool developed by the OECD that provides a non-prescriptive checklist for countries to assess their efforts in creating a sound environment for investment.

We must therefore open our markets further. Successful conclusion of the Doha Round will depend largely upon OECD countries’ willingness to reform their agricultural policies. While these are difficult domestic political issues, the broader issue of trade liberalisation and having a rules-based world trading system is also a critical issue for the world economy – and for our own prosperity and security. In many ways Doha is the low hanging fruit. Reducing poverty, solving problems in the Middle East and finding a cure for AIDS are much more difficult issues to solve. So let's conclude the Doha Round.

We know that Europe rose from the ashes of war because of the positive interplay of economic development and security, and the recognition that the prosperity of each country depends upon the prosperity of trading partners.  The future lies in creating wealth through such relationships, with good governance ensuring that markets are strong, and opportunities are available to all. 

Post-conflict reconstruction

Before concluding, I want to touch very briefly on the issue of post-conflict reconstruction. Unfortunately not all conflicts can be prevented, in which case the international community must focus its efforts on reconstruction. This is also an area where the OECD can help. And my message here is very simple – the OECD stands ready to assist countries with their reconstruction efforts.  We have already done some work in the case of Afghanistan and now more recently in Lebanon and Iraq through our MENA initiative.

The OECD is well equipped to provide objective advice to the authorities around the globe on institution building and structural reforms.  This advice is based on the accumulated knowledge of the Organisation in a range of macroeconomic and structural policy areas.  The OECD can offer a multilateral, comparative analysis based on the best practices of its member countries.  Post-conflict economies can benefit from a variety of well-tested policy options rather than a single, ready-made solution.
Policy dialogue, persuasion and decision making based on consensus are the OECD’s modus operandi and constitute a unique capacity to help forge a partnership among countries with a long history of difficult relations. The OECD also has a strong track record in delivering policy advice and technical co-operation to transition countries, to emerging economies and to the Middle East and North Africa. 
A global economy, liberalised trade and investment, supported by the right domestic policy mixes, should mean that no one would be left behind.  Global or regional stability and security will seem to emerge as a natural, almost spontaneous, by-product from nations working together to promote economic development and interdependence. But it is neither natural nor spontaneous.  We have to build it step by step. We at the OECD stand ready to do our part of the job.
Thank you.

Footnotes:

1. Thomas G. Weiss and Ramesh Thakur in “The UN and Global Governance: An Idea and its Prospects” (Indiana University Press, forthcoming) define global governance as “the complex of formal and informal institutions, mechanisms, relationships, and processes between and among states, markets, citizens and organizations, both inter- and non-governmental, through which collective interests on the global plane are articulated, rights and obligations are established, and differences are mediated”.

2. Spending to Save: Is conflict Prevention Cost Effective? Centre for International Co-operation and Security, Department of Peace Studies, University of Bradford, UK (2005).  In addition, there is a significant chance that a country that has suffered a conflict will revert into conflict within a 10 year period; see further Breaking the Conflict Trap: Civil War and Development Policy, World Bank Report (2003).

3. OECD DAC Network on Conflict Peace and Development Cooperation.

4. The EU adopted a policy framework for engagement in Security Sector Reform (SSR) in June 2006 which integrated the European Commission Communication “A Concept for European Community Support for Security Sector Reform” [COM(2006) 253 final] with the Concept for European Security and Defence Policy (ESDP) support to Security Sector Reform.  The EU principles for support to SSR are based on the DAC principles.  But much remains to be done to affect changes in development practice, and the EU and OECD Members States have worked extensively with the DAC to address this challenge.

 

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Secretary-General's official visit to Finland (27 September - 1 October 2006)

 

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