Economy

Beyond the Crisis: New Approaches to Current and Future Economic Challenges - NAEC Seminar

 

Remarks by Angel Gurría

Secretary-General, OECD

Santiago, 25 November 2015

(As prepared for delivery)

 

 

Ladies and Gentlemen,

 

It is a real pleasure to join you today in discussing one of the most important initiatives of the OECD, the "New Approaches to Economic Challenges" (NAEC). We undertook this initiative in response to the crisis, with the purpose of doing some soul-searching, learning from the past, and updating our analytical frameworks in order to address the present and, above all, the future.

 

 

The global economic context

 

The crisis has been with us for seven years now, and the world economy shows little sign of recovery. Our countries are once again going through a phase of great uncertainty, with growth rates that are hardly budging at all in the euro zone, a significant slowing in the emerging economies and Japan, and renewed bouts of financial market volatility. Here in Chile, we see the effects of a regional setting marked by slower growth, a fall in external demand, and the collapse of commodity prices. In fact, the four cylinders of the growth engine – investment, credit, trade, and emerging economies – are still firing at half speed. This makes it very hard for our economies, our governments, and our societies to cope with the legacy bequeathed to us by the crisis: (i) low growth, (ii) high unemployment, (iii) rising inequalities, and (iv) loss of trust in our institutions.

 

For several years, OECD countries were buoyed by strong emerging markets like China and Brazil. Today, those markets too are facing tough times that have slowed the pace of recovery. At a time when geopolitical uncertainty is rising – witness the refugee crisis in Europe, the old and new points of conflict in the Middle East, and the terrorist threat that manifested itself so recently in Paris, headquarters of the OECD, or in Beirut, in Bamako and in Mali, or the Russian aircraft that exploded over the Sinai – we find ourselves submerged in a state of generalised turbulence. That was my message to the G-20 last week.

 

With the public coffers exhausted, investment at insufficient levels, and interest rates near zero, it is hard to conceive of policies capable of reviving the economy. Even before the crisis, imbalances already showed that we were heading in the wrong direction: economic inequalities were widening, the fundamentals of the financial system were not right, and climate change was a looming reality.

 

It is no wonder, then, that confidence is at such a low ebb. People do not want "more of the same". They want a new start; they want new approaches to economic challenges.

 

 

NAEC: beyond the crisis

 

It was this state of affairs that inspired us, in 2012, to launch the NAEC initiative. We realised that "business as usual" was not an option, and that we had to transform our way of thinking and acting with respect to the economy. To that end, we have devoted three years to an in-depth re-examination of our analytical methods, our data, and the policy advice that we offer.

 

The crisis has cast doubt on economic ideas, models and policies that we hitherto held dear and unquestionable. Through NAEC, we are reviewing those models and concepts, seeking new solutions that will not only be feasible and realistic but will also take account of the complex and multidimensional nature of public policies. Working through our Strategic Foresight team we are also discussing future scenarios for identifying potential challenges and determining whether we have the capacity to address them. Let me share with you some of our most pertinent findings.

 

  • On financial markets, steps have been taken to shore up the banking system and improve regulatory frameworks, as well as to reduce the risks associated with institutions that are too big or too connected to fail. But concerns about the "shadow banking" system continue to mount, and there is still much to do to strengthen the system as a whole.

 

  • At the macroeconomic level, for years now we have resorted to unconventional monetary policies, the consequences of which – we must admit – remain unclear. Despite low oil prices, low interest rates and currencies that have weakened against the dollar, and although we have put our foot on the fiscal accelerator, our economies have responded sluggishly. We need to understand the reasons for this behaviour and adapt our analytical tools accordingly. In Europe all these advantages should in theory be boosting growth by at least an additional 1%. Why is this not happening?

 

  • We must also be more receptive to emerging technologies – big data, robotics and 3-D printing – and we need to assess how digitalisation is transforming economies, rich and poor, within a world economy that is increasingly integrated through global value chains. Do we understand all the implications that the dizzying pace of technological change holds for our societies in terms of employment, for example?

 

For all these reasons, our NAEC agenda projects beyond the crisis. We need NAEC to help keep us up-to-date and to remain relevant, to ask hard questions about complex challenges, and to help us better understand not only the past but also the present and the future.

 

 

Putting people at the centre of the economy

 

One of the main outcomes of the NAEC initiative, capitalising on the important work that the OECD has been doing in the area of social issues and quality of life, has been to place inclusive growth at the heart of our activity – a new type of growth, focused on people's well-being and the planet's sustainability, and one that will require us to change our ways of thinking and acting.

 

To promote more inclusive growth, we need to design structural policies that pay attention to equity and fairness, not at the end of the chain, but from the very outset. For example, taxation systems must be reformed to make them more effective and at the same time more progressive.

 

Gender policy is an essential consideration, one that is key for promoting access to quality education from early childhood, and for offering a broader range of opportunities and skills – emotional and social as well as cognitive skills – to the most disadvantaged groups (women, young people, seniors, migrants, persons with disabilities, or simply people with few gifts and little training).

 

Productivity, together with inequality, probably remains the most pressing and important issue facing our societies. But we must understand that higher productivity is only a necessary, and not a sufficient, condition for raising living standards. That productivity must be inclusive. This will be the main theme of our next ministerial meeting, which Chile will chair next June.

 

This new approach to productivity must also be sustainable and respectful of the environment, ensuring that "green" and "growth" go hand-in-hand. Next week's Paris Climate Conference (COP21) will provide one of the last opportunities to shift the course of history and reverse climate change. We are on a collision course with nature and our carbon account is regressing inexorably.

 

The international community recently reached agreement on a set of Sustainable Development Goals (SDGs). These are universal goals, and they must have a transforming effect. The work we have done in the context of the NAEC initiative will contribute to implementing the SDGs. We will also be placing our statistical, monitoring and sector analytical capacities at the service of the international community in order to ensure successful implementation of the objectives that we set for ourselves in New York.

 

Dear friends,

 

We need to find new ways of addressing our current challenges and to seize the opportunities that the future offers us. The year 2015 has been crucial for moving forward the development agenda, and we hope that in the coming days, in Paris, we will reach an effective agreement for combating climate change. With the ideas and the tools emerging from the NAEC initiative, we hope to continue our progress on the design, development, and implementation of better policies for better lives.

 

Thank you.