Keynote Address by Angel Gurría, OECD Secretary-General, delivered at “Les Tables Rondes de l’Arbois”
Aix-En-Provence, France, 10 April 2013
(As prepared for delivery)
Good morning Ladies and Gentlemen:
It’s great to be here in Aix-en-Provence to address the Fifth Tables Rondes de l’Arbois. Let me begin by thanking the organisers, and particularly Professor Kirman and Professor Nahon, for inviting me to this important event. For the past five years, the Tables Rondes de l’Arbois have provided an excellent occasion to convene leading thinkers from around the globe to debate the most pressing questions of our time.
I very much appreciate the opportunity to share with you my views about the current crisis, not only as one of the greatest challenges we face, but also as a unique opportunity. As every major crisis, the current one brings with it the beginning of a new reality. It is our responsibility to make sure this new reality is better than what we had before.
Paraphrasing Mexican writer Carlos Fuentes, a catastrophe is no longer catastrophic when it produces an offspring that redeems and transcends it and allows us to learn from it. This is how the OECD must address this crisis, as a call for action!
We must first gauge the dimension of this crisis.
We are undoubtedly going through the worst financial and economic crisis we have ever known. The meltdown was a natural outcome of vast and reckless risk-taking and leveraging, weak regulation and supervision of financial systems, and complacency among policymakers. All this led to massive global imbalances, excessive and irresponsible credit growth and asset price bubbles.
This was the perfect recipe for disaster, and disaster came. The crisis, now in its fifth year, has left behind many scars, including a daunting social legacy, that go beyond the weakening of public finances in many OECD countries and the highly critical financial positions of private-sector businesses.
The toll is heavy. In the OECD area, debt-to-GDP ratios are projected to average 111% in 2013, or about 40 percentage points higher than before the crisis. Global unemployment is set to continue rising. According to the ILO, the ranks of the unemployed will increase by 5 million in 2013, to over 202 million people. In the OECD countries, nearly 49 million were jobless in January 2013, or 14 million more than in July 2008.
Moreover, the toll on youth is unprecedented. Worldwide, over 75 million youth are looking for work. In the OECD countries, nearly 8 million young people are neither in employment nor in education or training (NEETs). What began as a financial crisis became an economic crisis, which has been transformed into a social crisis.
An improving but still fragile economic outlook.
Fortunately, the spring of 2013 has brought some encouraging signs. Overall, the outlook is now improving for the major economies. According to our most recent Interim Economic Outlook Assessment, released on 28 March, the United States and Japan are both expected to rebound in the first half of 2013. And, while in Europe the recovery will take longer to materialise, growth in Germany is set to pick up strongly over the first half of 2013.
Even in the euro area periphery, the pace of contraction should ease. Growth among non-OECD countries, meanwhile, remains strong.
This is quite an improvement, but it is certainly no cause for complacency. But the recent situation in Cyprus underscores the need for steadfast action to build the banking union and strengthen the institutional underpinnings of the Euro area. In Japan, bold measures are being taken to put an end to years of sustained deflation. And in the United States, the fiscal cliff has been largely, though not entirely, resolved.
Moreover, medium-term prospects remain fragile, as confidence is still weak and societies are faced with hardship. This has led to calls for “less austerity”. But with limited space for further macroeconomic support, the focus of economic policy must now shift towards the supply side.
At the OECD we are convinced that the only way forward, and the most intelligent way forward, is through the implementation of smart structural reforms. Carefully designed reforms can help countries consolidate the recovery and generate new sources of growth.
But what kind of growth do we want?
We must ask ourselves one key question: what kind of growth do we want? Growth, however, is not an end in itself, but a means to an end. The end is better lives for all citizens. With this objective in mind, at the OECD we are helping countries move towards a stronger, cleaner and fairer type of growth.
We need stronger, more resilient growth, driven by innovation and entrepreneurship, not by speculation and overconsumption. For example, many countries still have considerable space to reduce restrictive regulations that limit competition in product markets and hold back investment. Other countries face serious deficiencies in their education and training systems that undermine performance and fail to deliver the skills that are demanded by firms. In many cases, regulations are crucial for making financial markets and banking sectors more accountable. The agenda for reform in all these areas is vast, and so are the payoffs!
We also need a cleaner type of growth, one that fosters economic development while ensuring that natural assets are used smartly. This is what the OECD is promoting as green growth through our Green Growth Strategy. We are helping governments change their economic paradigm: shifting their growth engines to place greater focus on environmentally-friendly activities; re-directing investment to low carbon sectors; greening their participation in Global Value Chains; and designing reforms that don’t lock in inefficient polluting energies.
As you know very well in this Environmental Technopolis, the planet could not survive a return to growth driven by pollution-generating forms of energy. The time has come to change the industrial metabolism of our economies. To achieve this, we have taken first steps towards developing a set of green growth indicators to monitor progress on Green Growth and Green Economy. We have also built a Green Growth Knowledge Platform (GGKP) to support research in the many areas where knowledge gaps persist and, crucially, to learn from each other and share best practices more effectively.
And finally, we also need a fairer type of growth, one that creates opportunities for all and shares the benefits of prosperity more evenly. We have enough evidence to prove that the benefits of growth are simply not trickling down: during the three decades prior to this crisis, wage gaps widened and household income inequality increased in most OECD countries. Today, the average income of the richest 10% of the population in the OECD is about 9 times that of the poorest 10%. And even for those countries where inequalities have decreased, like Chile and Mexico, the ratio is 27 to 1; for Brazil it is still 50 to 1.
The time has come for more inclusive economic policies. Reforming tax systems can increase both equity and economic growth. Targeted education policies, which focus on skills, are also central in promoting inclusiveness and in building a fairer tomorrow.
Our analysis shows that investment in skills is the most powerful tool to fight inequality.
Skills have become the global currency of twenty-first century economies. To help countries make strides in this area, the OECD has launched a Skills Strategy and tailors recommendations to particular needs in individual countries, thereby helping youth acquire the skills required by the labour market.
Lastly, as part of our efforts to promote inclusive and sustainable growth, we have also embarked on an ambitious, multifaceted initiative called “New Approaches to Economic Challenges”, or NAEC. This initiative examines the lessons that can be learned from the crisis and the policy implications that can be derived from these lessons.
The main goal is to enrich our analytical framework, while identifying a renewed strategic policy agenda for inclusive growth and well-being. NAEC offers us the opportunity for more systematic, cross-cutting and deeper reflection.
Ladies and Gentlemen:
We are witnessing amazing global changes. And this is a great opportunity to improve the world. This crisis should allow us to move to a new order in which emerging economies and developing countries have more say; from a world of environmental degradation to one that embraces resource sustainability; from a deregulatory logic to a trustable financial governance that brings banks back to their original purpose of serving society. In short, we need a new era of economics as a tool to produce inclusion and social well-being.
I am sure we can move in this direction. It very simply depends on us and our capacity to rethink our theories, our concepts, our policies. It will also depend on more inclusive multilateral co-operation and new leadership from our governments and from our societies. The OECD believes in this change and is ready to double its efforts to collaborate with other institutions, and with people like you, and make this happen.
Thank you very much.