OECD countries seem poised for a modest, uneasy, yet much-welcome recovery. However, the recession has left deep scars that will be visible for many years to come. The crisis has lowered living standards and employment on a durable basis, and at the same time, endangered the sustainability of public finances in many OECD countries. Yet there is still time to minimise these scars through appropriate policy action.
OECD countries have taken a wide range of measures in response to the crisis, notably in the areas of infrastructure investment, taxes, the labour market, regulatory reforms and trade policy. This chapter assesses the expected effects of these measures on long-run income levels, and examines structural policy challenges to deliver strong and sustainable growth going forward. The main conclusions are that OECD countries have so far avoided major mistakes – in particular concerning trade and labour market policies – but some risks remain. The crisis has in general reinforced the need for structural reforms. These reforms could help to speed up the ongoing recovery, strengthen public finances while protecting long-term growth and, in some cases, contribute to the resolution of global current account imbalances.
Against the background of a stronger need for reform in the wake of the crisis, this chapter assesses the progress that each country has made over the past five years in a broad range of structural policy areas where government action could boostlong-term growth. Two-thirds of OECD countries have sought to address at least one of the five policy weaknesses that were identified over the period. However, such reforms have been mostly incremental rather than radical in nature, and have seldom fully addressed the underlying policy deficiencies. Reforms have also been more frequent where they were expected to deliver immediate benefits – such as for increased spending on active labour market policies or tax cuts – than where they might have hurt the short-term interests of specific groups – such as with incumbent investors, farmers and permanent workers under competition policy, agricultural policy and job protection reforms.
The country notes in this year’s edition of Going for Growth have two special features. One addresses the current crisis and recovery context, and the other marks the coming-of age of the Going for Growth exercise. Another novelty is that this edition follows up not only on policy priorities that were made last year, but also on all of the priorities that were made since the beginning of the Going for Growth exercise.
Part II: Taking Stock of Structural Policies in OECD Countries
This issue of Going for Growth contains special topical chapters on intergenerational social mobility, prudential regulation and competition in banking, as well as an application of the Going for Growth methodology to Brazil, China, India, Indonesia and South Africa.
This chapter assesses recent cross-country patterns in intergenerational social mobility and examines the role that public policies play in affecting mobility. Intergenerational earning, wage and educational mobility vary widely across OECD countries. Mobility in earnings, wages and education across generations is relatively low in France, southern European countries, the United Kingdom and the United States. By contrast, such mobility tends to be higher in Australia, Canada and the Nordic countries.
Chapter 6: Getting it Right: Prudential Regulation and Competition in Banking
Stability and competition are both desirable features of a well-functioning banking sector. The importance of banking sector stability has been highlighted by the recent financial crisis, while gains from competition, in terms of efficient financial intermediation and access of firms and households to finance, are well established. Based on indicators of different aspects of prudential regulation for banking prior to the crisis, this chapter finds little evidence that the two objectives of stability and competition conflict with each other, with one exception being the anti-competitive effect of stringent entry and ownership regulations. A stronger banking supervisor even seems to strengthen competition, as it is found to potentially reduce the cost of credit faced by borrowers.
Chapter 7: Going For Growth in Brazil, China, India, Indonesia and South Africa
Taken together, the “BIICS” (Brazil, China, India, Indonesia and South Africa) have been an important engine for world growth through this crisis, and they account for a growing share of global output. However, further reforms will be needed to ensure catch-up to OECD GDP per capita levels over the long term. This Chapter uses the OECD’s Going for Growth framework, as well as other available evidence linking policies to economic performance, to identify key structural policy challenges in the BIICS for the years ahead. While such challenges vary from country to country, common areas for reform include strengthening policies in the areas of education, product market regulation and labour markets, as well as improving more basic market institutions.
Video: Deputy Secretary-General and Chief Economist, Pier Carlo Padoan, discusses Going for Growth in emerging economies
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