Video Message by Angel Gurría, OECD Secretary-General, delivered at The European House – Ambrosetti: The Outlook for Financial Markets
Recording: 1 March 2013 – 11h00
Event: 8-9 March 2013
Ladies and Gentlemen:
It is a great pleasure to participate in this year’s Financial Markets Workshop of The European House Ambrosetti. This is a great opportunity to address some of the most pressing economic and financial challenges of our lifetime with some of the economic profession’s sharpest minds. Thank you for this invitation.
This workshop is very timely. The global economy is not out of the woods yet. The outlook is certainly improving, but the recovery remains weak. It is indeed good news that the “fiscal cliff” in the United States has been partly and temporarily overcome, and that the worst of the European sovereign debt crisis is now behind us. Searching for Key Drivers and Policies for Growth is therefore a most pressing challenge.
So is tackling the job market legacy of the crisis. Unemployment is still unacceptably high in the OECD area, where many countries face a genuine risk of seeing a considerable share of youth losing attachment to the labour market. This is a major threat.
We urgently need to find the drivers of more vigorous, inclusive and sustainable growth. Macroeconomic policies have been stretched to their limit in many countries. We now need to turn to structural policies not only to boost long-term growth and welfare, but also to stimulate growth and employment in the short-term while facilitating fiscal consolidation. Yes, supply-side policies are not just about the longer haul, they can bear fruit in the short-term!
The OECD is working with governments to identify a set of policy priorities for structural change. Our latest Going for Growth study identifies areas where reforms can have the greatest and fastest impact. It recommends tailor-made reforms to lower barriers to job creation, promote hiring and labour mobility, and increase incentives for the unemployed to take up work.
Let me point to three key new areas where structural reforms have enormous potential for driving growth in the years to come:
The first is what we call Knowledge-based Capital (KBC). I’m talking about the growing universe of software, databases, patents, designs, digital networks and organisational know-how. KBC is rapidly replacing physical capital as a main driver of growth. For example, it is estimated that the use of geo-location data, such as GPS, and location-based services could generate almost 500 billion US dollars in consumer value by 2020.
To fully unleash new investments in KBC we have to get the framework conditions right – by enlarging our concept of innovation beyond conventional R&D, by striking the right balance between intellectual property rights and competition and by improving conditions for entrepreneurs to market their ideas.
The second major driver of growth in the coming years will be Green Growth. The implementation of Green Growth reforms can address economic and environmental challenges while opening up new sources of growth: through greater efficiency in the use of energy and natural resources; new innovation demands and opportunities; new markets; growing investor confidence; and the creation of a large number of green jobs in new technologies and infrastructure.
The “greening effort” in our economies will trigger large investments in the coming years. According to the International Energy Agency (IEA), meeting the growing demand for energy in a way that supports the 50% reduction of energy related CO2 emissions by 2050 will require investments of close to 316 trillion US dollars. This means it’s time for green entrepreneurship!
The third key area where structural reform could help produce new growth synergies in the next decades is the field of Global Value Chains and Trade in Value Added (TiVA). By changing the way we measure international trade, we show how countries can benefit from these flows. With this purpose in mind, the OECD and the WTO are creating a new way to measure trade flows, disentangling them in value added terms. This will help countries identify where income and jobs are created, and make best use of their industrial and export policies. This is a very complex process, but we estimate that once it is operating it will help unlock trade negotiations and trigger new waves of trade, growth and employment.
My dear friends:
This crisis has had a tremendous impact on the world economy. In many countries it has taken a huge toll on their economy and society. In the OECD area alone we need to create about 14 million jobs simply to restore pre-crisis employment levels.
We urgently need to find new sources of growth. But we cannot go back to the growth models of the past decades. We need to promote a new type of growth, one with stronger rules for efficient but responsible markets; one that enhances environmental progress; one that promotes social inclusion. This is what the OECD has been working on during the past five years. And this is what we, together, will create for the next fifty.
Thank you very much.