A Better Global Governance: What is at Stake? The OECD Perspective


Remarks by Angel Gurría, OECD Secretary-General, delivered at the China Institute of International Studies (CIIS)

16March 2012
Beijing, People’s Republic of China
(As prepared for delivery)

Mr. Qu Xing, Ladies and Gentlemen:

It is a great pleasure to be in China once again. It is also a great privilege to be at the China Institute of International Studies (CIIS), one of the greatest open doors from China to the world and vice-versa.

As you know, the OECD is becoming more global and more plural. For this reason it is very important for us to understand the cultures, the economic and social values, of our key partners. I am sure that our collaboration with CIIS will help us to better communicate and connect with this amazing country and its millenary culture. Thank you for the invitation.

I would like to take this opportunity to share with you some of the OECD’s perspectives on why this ever-changing world needs to improve its global governance. And I would like to start by framing our current international context.

The world is going through amazing transformations.

In the last ten years, the global economic outlook has changed dramatically. In contrast to previous periods of change, this time, the combined effect of several huge secular forces is forging what could well be the beginning of a New Global Economic Era.

There are at least three key forces which are driving this global transformation: 1) the process of shifting economic power from “the West” to emerging economies (what we have called shifting wealth); 2) the challenges posed by the global financial crisis to our economic thinking and paradigms; and 3) the increasingly global recognition of the urgent need for a more sustainable and inclusive growth model.

These three dynamics are changing our global economic landscape and, most importantly, the ideas with which many countries design and implement their economic and social policies. But they are also projecting the emergence of a new global economy and the need to create a new set of rules that can govern it.

This is a unique opportunity to build a more harmonious global economy; what we, at the OECD, call a stronger, cleaner and fairer global economy. And the only way we can seize this opportunity is by working together.

The global financial crisis, the Great East Japan Earthquake, the Arab Spring, the European sovereign debt and banking crises, and all the structural battles that call for permanent action, from fighting climate change to eradicating poverty, from reducing trade imbalances to promoting gender balance, are sending the same message, loud and clear:

We live in a remarkably interconnected world and the only way that we will foster human and social progress is by joining forces, by learning from each other, by aligning our policy responses, while recognising our different conditions and needs.

We need more inclusive and more effective global governance.

We need more inclusive global governance because there is no longer any country (or small group of countries) that enjoys global economic supremacy. We live in a multipolar world with a myriad of different countries and cultures, and each holds a key part of the puzzle. Emerging economies represent around 86% of the world’s population and 50% of the world’s GDP (in PPP terms). They are now the main source of global economic growth. We cannot build a better global economy without their contribution, without your contribution.

We also need more effective global governance to rise to the challenges posed by this interconnected world. The era of international talk-shops and protocollary summits for long speeches and short decisions is over. There is a lot at stake!

Let me focus on just a few of the challenges ahead of us:

1. Our capacity to boost growth and make it strong and sustainable is at stake.
The global financial and economic crisis has had a dramatic impact on the economic dynamism of many countries. In this recovery phase, OECD countries grew by an average 1.9% in 2011 and are expected to grow even less (by 1.6%) in 2012. Even as economies eventually recover their dynamism, the crisis could well reduce medium-term potential output by about 3% in the OECD area compared with levels that would have prevailed otherwise. Many emerging and developing economies have also experience similar economic power cuts. With limited fiscal and monetary policy margins, the governments’ main tools to promote stronger growth are structural reforms.

2. Our capacity to reduce unemployment and social tensions is also at stake.

We are facing “a global social crisis”. In fact, this is the title of the latest UN Report on the World Social Situation. In the past years, global unemployment increased sharply, from 178 million people in 2007 to 205 million in 2010.  The OECD’s unemployment rate stands at 8.2% and in many countries youth face 30, 40 or 50% unemployment rates. People are taking to the streets. Trust in governments is eroding in many countries. We need to work together to promote a stronger and job rich economic growth.

3. Our capacity to tackle rising inequalities is at stake.

Globalisation cannot benefit just a fortunate few. Economic growth is not trickling down. Disparities have reached record levels: in OECD countries, the average income of the richest 10% of the population is about nine times that of the poorest 10% – a ratio of 9 to 1. But disparities have also been growing in emerging economies and developing countries. Countries like China, India and South Africa for example, are also facing this problem. But in other countries such as Brazil, Chile and Mexico inequality has actually come down in the recent years although it remains high. We need to work together to build more inclusive and equitable economies.

4. Our capacity to combat climate change is at stake.

Without more ambitious policies, Green House Gas (GHG) emissions will increase by another 50% by 2050. Atmospheric concentration of GHG would reach almost 685 parts per million (ppm) CO2-equivalents, well over the 450 ppm required to have some chance of keeping the global average temperature increase below 2°C. Global average temperature is likely to rise above this mark by 2050, and by 3 to 6°C above pre-industrial levels by the end of the century. This would cause dramatic natural changes with catastrophic or irreversible outcomes. We need to promote a greener type of growth.

5. Our capacity to eradicate world poverty is at stake.

The global crisis has had a strong impact on our efforts to curb global poverty. The UN  estimates that “between 47 and 84 million people fell into, or were trapped in, extreme poverty because of the crisis”.  The number of people living under less than 2 dollars a day was still around 2.5 billion in 2008. 

Today, the number of hungry people is still close to 1 billion.  Now poverty is also growing in some OECD countries. Our joint efforts to tackle poverty cannot falter.

6. Our capacity to keep markets open is at stake.

The slow recovery is increasing the temptations for countries to protect their key sectors. If these pressures continue, this trend could have disastrous consequences. The WTO estimates that “the cost to the world economy of high intensity protectionism would be in the order of 800 billion dollars.”  We urgently need a new deal on global trade to keep protectionism at bay and maintain our commitment to open markets.

These are, in my view, some of the most important global challenges. If we manage to build more inclusive and effective global governance we will be able to address them and build a stronger, cleaner and fairer global economy. But we will need a new architecture and strong leadership to promote greater awareness of common problems; to facilitate the deeper understanding of the specific needs and demands of countries at different levels of development; to learn and share the experiences of different countries; and to identify best practices to solve common problems.

The OECD, G20 and China can provide it.

There are at least three crucial actors that can make a significant contribution to the construction of this new inclusive and effective global governance architecture:

The OECD is becoming an increasingly important source of analysis and consensus for a new global governance architecture. After 50 years of existence, our Organisation is becoming a platform for even more inclusive dialogue and peer-learning. We are enlarging our membership and strengthening our relations with key partners. We are also supporting the G20 in an increasing number of areas.

And we are launching an unprecedented initiative to renew our economic thinking, helping us refocus our policy advice and learn from other alternative economic and development models.

The G20 is also making a historical contribution. It has included middle income and developing economies in international economic decision-making; it has put together the largest coordinated global response the world has given to a financial crisis; it has taken decisive steps to rebuild the international financial and economic architecture; it has reached important consensus around a Multi-Year Action Plan on Development; and it is now making efforts to take a global quantum leap on green growth, under the Presidency of Mexico. This is remarkable, but the G20 now has to do more. The big challenge ahead is to build on the achievements to date and to deliver decisions on major global challenges, like the ones I just mentioned.

A third key actor is China. China is becoming an increasingly important player in the world economy. An ongoing OECD study on long trends estimates that China will surpass the US to become the world’s largest economy in the early-2020s. This is of course not the first time in history that China is in this position. As Angus Maddison used to say: China is in fact a re-emerging economy. But this is especially relevant in terms of China’s current role in helping create more inclusive and effective global governance.

The contribution of China to global fora and governance is crucial. But the great potential of this contribution depends on our capacity to understand each other and to learn from each other to address common challenges and meet shared objectives.

Ladies and Gentlemen.

It is through mutual respect that we can learn more from each other and build trust. A much needed trust to make our global governance more inclusive and more effective. Together, let’s work on better policies for better lives.

Thank you very much.



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