By Angel Gurría, OECD Secretary-General, delivered at the meeting with the Economics and Security and the Political Committees of the NATO Parliamentary Assembly
27 February 2013
It is a great pleasure to welcome you back to the OECD for our annual meeting. I am very pleased that this year the Political Committee has joined the Economics and Security Committee, and that so many of you are here with us today. I welcome our growing interaction and would also be pleased to speak at one of your plenary meetings in the course of 2013 or 2014.
Expanding our long-lasting institutional partnership with the NATO Parliamentary Assembly is right in line with our effort to strengthen our collaboration with parliamentarians. Your experience and your views enrich our work, and I very much hope that our work can also add value to your deliberations and decisions.
Let me share with you our perspective on the global economic outlook and on some of the key challenges that we need to address to put an end to this crisis and build a better global economy.
The Current Economic Outlook: Cautious Optimism
You have already heard this morning about the global economic outlook. The good news is that it is better than when we met a year ago. The fear of catastrophe has receded. The so called “tail risks” have subsided, while the “upside risks” are getting stronger in an increasing number of countries. However, we should remain cautiously optimistic. We are not out of the woods yet.
A great part of this recovery is still uncertain. Balance sheets have been seriously unsettled, notably in the financial sectors, but also among consumers. Most of the major OECD economies are still facing multiple challenges of weakened public finances, unsustainable debt, low growth and high unemployment.
Emerging economies are growing at an average close to 5% and they have made important macroeconomic, financial and social progress. But most of these countries are still facing considerable structural problems: like very high levels of poverty, rising inequalities, low productivity, weak legal frameworks, embedded corruption, low participation in value added chains and low levels of interconnectivity.
High Time for Structural Reforms
Both OECD and emerging economies are in deep need of structural reforms. All our countries have much to gain from reforms to improve education attainment and performance, encourage innovation and entrepreneurship, enhance competition in product markets and services, and make labour markets more adaptable. And this is not just a long-term solution. OECD analysis has shown that structural reforms can deliver results faster and more efficiently than generally expected.
Structural reforms can promote new sources of growth. Structural changes to foster green-growth can trigger new investments in infrastructure, training and green jobs. Structural reforms can help us expand the Knowledge Based Capital of our economies and increase productivity. Structural reforms can help us better measure trade flows on the basis of Global Value Chains to increase our competitiveness and create more and better jobs. These are all areas where the OECD is working intensely. We say it’s high time to Go Structural!
But it’s also High Time to Go Social
In parallel, we urgently need to address the social crisis. The financial and economic crisis has had a tremendous impact on the social fabric of our nations. Income inequality in OECD countries is at its highest level for the past half century, and it continues to rise. This is an unsustainable path. We sounded the alarm in 2010 with our study on “Growing Unequal?” and we called for urgent action with “Divided We Stand” in 2012. It’s a fact: growth is not trickling down!
That’s why we are advancing powerful proposals for a more inclusive growth agenda though our Skills Strategy, our Gender Initiative, our Better Life Initiative and a new project on Inclusive Growth. Issues of equity are also at the heart of our on-going work on Base Erosion and Profit Shifting or “BEPS”, which will help us bring tax laws up-to-date with company practices and ensure that multinational corporations also pay their fair share of taxes. It’s time to build a balanced playing field!
It’s also time for a new and more inclusive paradigm!
We Need New Approaches to Economic Challenges
The crisis has given us a unique opportunity to revise and improve the economic systems that we have created and the institutional frameworks to make our markets work for all. This is essential to win back public trust in governments, parliaments, companies, banks, regulators, rating agencies, and international organisations.
As part of this effort to promote inclusive growth and restore confidence, we have also embarked on a highly ambitious multi-dimensional initiative called “New Approaches to Economic Challenges”, or NAEC. This initiative examines what lessons can be learned from the crisis and what policy implications 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.
How can this be done? You, as Members of Parliament, know very well that tackling the current challenges requires a good understanding of the relationships and trade-offs between different policies. We need to understand better the likely side-effects and spill-overs of different policy options, the sometimes unintended consequences of policy initiatives. What are, for example, the mutually reinforcing aspects, if any, of growth, inequality, and the environment?
What has emerged from our initial discussions is the limitation of existing analytical tools, policy frameworks, and governance arrangements to address the significant rise in interconnectedness and complexity. Interconnectedness has increased in multiple ways - across and within countries, between the financial sector and the real economy, and at a deeper level, among various global trends that have been building up for decades.
These trends include a further integration of large emerging markets in the world economy; technological change; increases in specialisation and international division of labour; population ageing, migration and other demographic shifts; and growing natural resource scarcity, climate change and environmental degradation. We have a lot of work ahead of us.
We count on the support of our member and partner countries to carry this initiative through. We believe that exchanging views with the broader public policy community, in particular you, as Members of Parliaments, is critical to the future success of policy making. It is also critical for our specific work on New Approaches to Economic Challenges.
The crisis has magnified the importance of our respective roles. Parliaments have become strategic to design and approve the needed reforms to restart growth and equip our economies with better frameworks and institutions. As Acemoglu and Robinson underline in their book Why Nations Fail: “prosperity and poverty are determined by the incentives created by institutions, and politics determine what institutions nations have”. At the same time international organisations are now central because the current challenges can only be addressed through inclusive multilateral cooperation.
I invite you to keep strengthening our relations to create better economies and happier societies. I hope that we can count on your participation at the annual OECD Forum that will take place on 28 and 29 May here in Paris. This forum is back-to-back with our Ministerial Council Meeting, which this year is themed “It’s all about the People - Jobs, Equality and Trust.” I also hope we can get together again at the next High-level Parliamentary Seminar on 17-18 June in Stockholm, Sweden. Our collaboration can change the world for good.
Let’s make it happen!
Thank you very much.