Remarks by Angel Gurría, OECD Secretary-General, delivered at SEGIB Seminar: "The Shift of Power, Global Governance and New Multilateralism"
3 October 2011, Madrid, Spain
Ladies and gentlemen,
It is a great pleasure for me to participate in this Madrid seminar on “The Shift of Power, Global Governance and New Multilateralism"
I welcome this invitation from SEGIB and the UNDP as a great opportunity to share with you, our Latin American diplomats, some ideas on building a new global governance, on the role of the G20, on emerging economies and the development agenda. After all, you have a fundamental role to play in constructing a new architecture for international relations.
The world is calling for a new multilateralism
Three years after the collapse of Lehman Brothers, the world economy is going through another very anxious moment. The recovery from the 2008-2009 crisis has been complicated. Growth in the advanced countries of the OECD is slowing. And that slowdown is being transmitted to developing economies, in the context of ever greater volatility in financial markets and uncertainty on the part of businesses and consumers.
Among the causes, we may point to the European sovereign debt crisis, the effects of the triple shock in Japan, and problems in reaching political consensus in the United States. The most serious aspect is that in the face of these challenges, governments today are in a much worse situation than they were three years ago, with soaring levels of unemployment and limited monetary and fiscal instruments at their disposal for promoting recovery and employment.
To all this, we must add the complexity of an increasingly integrated and multipolar world. The dynamism of emerging economies and many developing countries in recent years has sparked an impressive shift in economic power and in growth expectations from west to east and from north to south.
According to the OECD study "Shifting Wealth", developing countries accounted for 40% of world GDP in 2000. Today they represent 49% and by 2030 they will represent 57% (in purchasing power parity). The contribution of these countries to growth of the international economy over the last five years was 65% of the total.
And this is not just a shift of economic power, as Mohamed El-Erian tells us. It is also a shift in expectations: for the first time, adults in the developed world are thinking that their children will have a lower standard of living than them, while in the developing world people think their children will live better.
This does not mean that economic performance in emerging markets has become disconnected from what happens in developed countries. On the contrary, this lengthy crisis has demonstrated that our economies are highly interdependent, that our challenges are global ones, and that they require multilateral responses.
How to address these global challenges?
The era of the sovereign, independent nation state is over. As Javier Solana put it recently in his article The New Grammar of Power, "interdependence exposes everyone around the world in an unprecedented way" . Countries are exposed to threats that they can only partly control.
This crisis revealed with blinding clarity the enormous risk of living in an integrated global economy with fragmented international governance. It is true. We cannot integrate our economies without integrating or at least coordinating our acts of government, institutions and policies, as the financial crisis of the euro zone has so amply demonstrated.
That means that we will need new approaches to international cooperation that reflect the degree of global integration, that are sensitive to the importance of emerging economies and to the realities of the developing world, that base their decisions on new economic thinking, and that have the capacity to generate political consensus, international standards, and binding decisions.
The G20: a new phase, a new role
The rise of the G20 has been one of the most important developments in this respect. It is indeed a historic event, the importance of which we sometimes overlook. The incorporation of emerging and developing economies into the decisions of global economic governance is today a tangible reality, and this is crucial.
Despite the enormous complexity of building consensus and striking new balances between developed and developing countries, the G20 has achieved some important successes – from preventing the collapse of the international financial system in 2008 to more concrete achievements such as introducing decisive measures to put an end to banking secrecy, creating the Framework for Strong, Sustainable and Balanced Growth or designing the Seoul Development Consensus for Shared Growth.
The OECD has been supporting the work of the G20 in this field and others. With the French presidency of the G20, we have contributed in areas such as the fight against corruption, food price volatility, labour and employment markets, financing for SMEs, and reform of the international monetary system.
Yet the G20 still faces some big challenges: like the need to fulfil its commitments in order to consolidate its credibility. Chatham House and the CIGI have underlined the need to strengthen the Mutual Evaluation Process and to boost transparency in the rotation of its presidency.
The leap from informal or ad hoc multilateralism to an institutionalized multilateralism that is more structured and based on a more solid framework is another challenge that is frequently cited. The G20 has to go “beyond its crisis fire-fighting role”, says Ricardo Lagos . For the OECD, this transformation is crucial.
The time has come to address structural challenges
What are those challenges? Allow me to mention a few: 1) correcting external payments imbalances; 2) reforming the international financial system; 3) the unfinished development agenda; 4) combating corruption; 5) promoting green growth; 6) innovation and the development of new skills; 7) incorporating women into economic activity; and 8) international migration.
The OECD is working intensely on all these fronts, in coordination with emerging economies and other international organizations. In recent years we have launched major initiatives such as our Green Growth Strategy, our Innovation Strategy and our Skills Strategy. We recently launched a Development Strategy to extend our expertise and work for identifying best policies toward this supreme objective of development, the great pending task of humanity.
Our progress is being stymied. Various studies estimate that between 47 and 84 million people have fallen into poverty, or remain trapped there, because of this crisis . The epidemic of unemployment and underemployment now gripping the world is threatening the future of entire generations, undermining the progress of our economies over several decades, and putting at risk our achievement of the Millennium Development Goals.
Latin America can make a very important contribution
Not only because the region is a laboratory for development policies, including some very successful ones, but also because it is steadily becoming more important economically and politically, with some exceptions.
Latin America has built a stable macroeconomic base with prudent fiscal stances, flexible exchange rates, controlled inflation, independent monetary authorities and well-capitalized banking systems. In general, it stood up well to the crisis and is now recovering solidly, with growth averaging 6.1% in 2010 and around 4.2% in 2011 – double the OECD rate.
The region has recently been receiving record flows of foreign direct investment, which are likely to increase given the lack of growth in developed countries, and at the same time it is experiencing a major oil production surge. It is not surprising, then, that some predict this will be the decade of Latin America, as suggested by the title of a book by Luis Alberto Moreno, President of the IDB.
Latin America has a historic opportunity to take a leap toward development. But it must not rest on its laurels.
The region still faces great challenges. Its productivity has been stagnating for the last 15 years. Its education is lagging behind. Its socioeconomic disparities are still the highest in the world. In fact, 10 of the most unequal countries are today to be found in Latin America.
The time has come to generate vigorous endogenous growth that is inclusive and respectful of the environment. To make this possible, education levels will have to be raised, the business climate will have to be improved, productivity will have to be boosted, and entrepreneurial capacity will have to be promoted. To the extent these things can be achieved, the region's influence in global governance will rise and the world will be better off for it.
Ladies and Gentlemen,
As Daniel Price stated in a recent article, the 1.0 version of the G. 20, operating in crisis-response mode, was effective and impressive. Now we are moving to version 2.0, with the focus shifting to more structural matters with a longer-term focus. This new version of the G20 will yield incremental, not seismic results.
The great challenge for international governance today is to generate the necessary leadership and the objective technical analysis to produce consensus for taking binding decisions, based on mutual learning and shared sovereignty. The OECD is ready to support this process, and I'm sure that you are too.
Thank you very much.