Remarks by Angel Gurría, OECD Secretary-General, delivered at the annual meeting of senior officials from Centres of Government
Paris, 1 October, 2009
Ladies and Gentlemen,
Welcome to the OECD Annual Meeting of Senior Officials from Centres of Government.
I would like to start by expressing my gratitude to the French Government, and in particular to Mr Serge LASVIGNES, Secretary-General of the French Government, for hosting and chairing this meeting.
This network is becoming more and more important. The capacity of our governments is being tested like never before. Decision makers in OECD countries and beyond are being confronted by a combination of policy challenges of unprecedented size and complexity. We can only address them successfully if we act together and learn from each other.
So far, most governments have responded decisively to the crisis and their measures have started to bear fruit. Financial markets are stabilising. The strength of the recession is moderating and the recovery is spreading.
However, this doesn’t mean that the crisis is over. Governments are still facing a highly complex financial and economic outlook. In fact, we are still facing some strong head winds. Bank lending is still well below pre-crisis levels. The same goes for trade and investment flows. Balance sheets need to be repaired and public sector budgets have deteriorated sharply.
More importantly, the social implications of the crisis have not yet been fully felt. 15 million people lost their jobs in the OECD area since 2007 and unemployment is still growing. Unfortunately it may get worse before it gets better. In the OECD area as a whole, unemployment could reach 10% by the end of 2010. That would translate into nearly 57 million unemployed; many of them youngsters.
This calls for swift further action by the public sector, to prevent this human and social crisis from casting a long shadow on our recovery. Earlier this week, Employment Ministers gathered at the OECD to discuss the bold measures necessary to tackle high and persistent unemployment. It was a crucial meeting.
Ministers reached important agreements and common lines of action.
Another essential role for the public sector going forward will be to shape new rules for the private sector. To do this, governments will have to balance public responsibility and private interest. This will entail creating a more balanced regulatory framework that prevents excesses while not inhibiting entrepreneurship and innovation. We will need regulations that focus on changing the incentives under which the markets operate. And I am not referring only to the financial sector. We need to change incentives also to promote the much needed green investments for the “green growth” that our countries need to avoid an environmental disaster.
You have to keep this among your top priorities: climate change is a major challenge. Our recovery plans and new regulations must not promote the use of polluting fossil energies. The G20 agreement to phase out inefficient fossil fuels subsidies is a “quantum leap” on the right direction. Remember, you can be the founding fathers of “green governance”.
Governments will also be called to manage more actively the risks faced by society. Managing risks will entail normative judgements on who should bear risk. But governments will also have to communicate these choices clearly. Moreover, moral hazard needs to be avoided when governments are put in the position of insurers of last resort.
The perception that transparency and accountability mecha¬nisms were largely inadequate in mitigating or even preventing the financial crisis is questioning our government’s capacity. Calls for government transparency and accountability have gained increased support in the context of the public and private failures that contributed to the financial crisis, as well as the scale of government intervention and spending that the crisis has induced.
Finally, the current economic crisis has weakened profoundly the fiscal health of nearly all countries. It is understandable that governments have primarily focused on immediate and specific measures needed to address the crisis. At the same time, most countries are also facing long-term challenges that have the potential to threaten their fiscal sustainability. But we cannot forget that challenges such as aging populations and climate change are likely to have a larger impact on budgets over the longer term than the current financial crisis.
These are some of the main challenges that we perceive on the governance radar. I am sure that during these discussions you will come up with other crucial challenges that you are facing as Centres of Government. But the question is: how can you respond to these challenges more effectively? And this is what we will discuss in this meeting. Here is our perspective.
Responding to governance challenges: in search of a new balance
First, from now on it will be crucial that our decision makers get the facts right and take a strategic view on public policy responses. Some governments have done this better than others, but we all have some scope for improvement here.
The current crisis has revealed the urgent need for a better understanding and therefore more research on the speed, scope and mechanisms of globalisation; as well as the interdependencies of the financial sector, the real economy and the social consequences.
Equally essential will be the capacity to form strategic views on these challenges in order to develop public policy responses. It is therefore critical, at these challenging times, that Centres of Government mobilise the best and the brightest, inside governments and the public service, in the private sector, other stakeholders, and last but not least, international organisations.
Second, we must redefine the role of public policy. More insights and pragmatic judgements are needed about where markets can deliver and where the roles and responsibilities of governments lie. This is not a call for big government. Instead, it requires the creation of innovative and anticipatory government that can manage the benefits and cost of globalisation, nurture social fairness and deliver trust in society.
Third, it is imperative that we use this crisis as an opportunity to address structural challenges. While responding the crisis, Centres of Government must prevent all relevant actors from diverting their attention from long-term challenges. Structural policy should be seen as an integral part of any recovery strategy.
The crisis has great potential to act as a catalyst for reforms – “”never let a good crisis go unused”!
Fourth, it is essential to promote a fiscal consolidation through greater public sector efficiency. We all know that ambitious fiscal consolidation will be needed. Centres of Government will need to boost the efficiency of public spending with the least prejudice to future growth. At the same time, these efficiency measures will have to be tempered with increasing and shifting demands from citizens under economic pressure.
Last but not least, fostering innovation and creating an economic environment conductive to green growth will require an integrated all-of-government strategy. You have to build it. At OECD we are already working through our Green Growth Strategy to help you on this paramount task.
Ladies and gentlemen:
The quality of public policies is the result of many factors, many of them different from country to country. Nevertheless, the quality of political leadership and the quality of the public service are critical everywhere. You are at the interface between decision-making and the implementation of policy. You have participated, directly or indirectly, in designing, promoting and implementing reforms that will set the stage for recovery and shape the environment for the futures.
Clearly there is much work to be done and the COG is an excellent if not unique venue to assess the challenges before us. I wish you much success for the meeting and look forward to a fruitful exchange.
Thank you very much.