Remarks by Angel Gurría, OECD Secretary-General, delivered at the G20 Finance Ministers, Central Bank Governors Meeting
Washington DC, 19 April 2013
(As prepared for delivery)
Ladies and Gentlemen,
In many of my past interventions in this group, I insisted on structural reforms as a powerful instrument in your toolbox to achieve, individually and collectively, a stronger, more sustainable and balanced world economy.
In the previous session, I made the case for finding the optimal mix between fiscal, monetary and structural policies. While monetary and fiscal policies can help to keep sustain demand in the near term and facilitate the phasing-in of structural reforms, structural policies provide the foundation for better growth in the future, not only in the long term, but also in the medium run.
At the OECD, we identify a triple-dividend of structural reforms:
- Removing bottlenecks and obstacles to growth through an ambitious package of measures could boost GDP by more than 10% of GDP in some G-20 countries over a 10-year horizon.
- This would make the fiscal situation easier by boosting revenues and reducing pressures on social spending.
- Structural measures have the potential to facilitate economic rebalancing, for instance in making competitive adjustments in the euro-area and avoiding persistent global imbalances.
Needless to say therefore that we welcome the increasing emphasis laid by the G20, in its Action Plans for Growth and Jobs, on structural policy commitments, as well as on their monitoring and assessment. But we need to deliver.
The OECD assessment: Progress with the implementation of structural reforms
G-20 countries made 136 structural reform commitments, including financial reforms, in the Los Cabos Action Plan. How is implementation?
Good progress is being made generally. An OECD assessment jointly with the World Bank shows that nearly one in five commitments has been fully implemented. Implementation is underway in the vast majority of other areas. Progress is most advanced for tax and labour market reforms. Implementation is going more slowly for product market reforms, financial regulation and to improve human capital.
Most of the G-20 structural commitments are designed to contribute to strong, sustainable and balance growth. Most commitments are aimed primarily at boosting growth, although measures to increase financial stability also play an important role. In almost one-third of commitments, measures are “win-win”, meeting both growth and other sustainability or social objectives.
Many G-20 commitments are tackling priority policies issues. Using the structural reform priorities identified in our annual for Going for Growth report as a benchmark, there is a good deal of overlap between the OECD assessment and countries’ own reform commitments. However, many product and labour market reform priorities identified by the OECD are not taken up by countries as priorities notwithstanding the evidence of their contribution to productivity and growth.
The OECD/World Bank analysis also looks at the “quality” of the commitments themselves. Commitments need to be specific enough to be assesseable, measurable and to lend themselves to an appropriate tracking and monitoring. We suggest that many of the structural reform commitments at Los Cabos were clear and allow progress and contributions to strong, sustainable and balanced growth to be assessed. However, a sizeable minority of commitments do not meet this high standard and some countries stated objectives that were too loose or presented wide-ranging national strategies. This makes it hard to assess and to compare different commitments.
The OECD strongly welcomes therefore the proposals of the Framework Working Group chairs to streamline, clarify and strengthen the commitments made at St Petersburg and to clarify their contribution to strong, sustainable and balanced growth. These should reinforce the message about leaders’ commitment to action and the visibility of their commitments. They should help to instil confidence that is lacking.
The joint meeting between Ministers of Finance and Ministers of Labour: an important opportunity.
Let me conclude by emphasizing – again – the magnitude of the job crisis. With 14 million jobs needed to restore pre-crisis employment level, we still need to have a thorough discussion about mutually reinforcing action that could be taken on the macroeconomic, labour market and social policy fronts to support stronger, sustainable and balanced growth and better employment outcomes. The joint meeting of the G20 Finance and Labour Ministers to be held mid-July could provide such an opportunity.
It could be an occasion for your colleagues from labour ministries to explain - for instance - how they could help improve prospects for strong and sustainable economic growth by undertaking labour market reforms that would restart job creation and reduce pressure on social spending and unemployment benefits.
Symmetrically, you, Ministers of Finance, could also commit to tax policies that would be more employment-friendly, including by broadening the tax base and moving away from taxing labour as well as by reducing marginal labour income taxes on low and middle income workers. You might want to consider ways to consolidate the fiscal situation tackling long-term fiscal imbalances such as overly-generous welfare entitlements rather than by reducing expenditures in areas that will be more harmful for employment outcomes in the short and longer term.
The job crisis provides a clear example of how structural and macroeconomic policies can mutually reinforce each other. We look forward to a fruitful dialogue between labour and finance ministers. The OECD stands ready to support you in this endeavour.