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A global mandate for the next 40 years
by Donald J. Johnston, Secretary-General of the OECD
In terms of maximising economic growth and wealth creation, the OECD has performed remarkably well, and perhaps better than our founders could have expected. What do the social indicators tell us? Frankly, on this front, we have not been as successful.
This is the 40th anniversary edition of the OECD Observer, it being created shortly after the OECD itself. It is timely to recall the aims of the OECD set forth in Article 1 of its founding Convention, and to do a general stocktaking as to where we have met those aims and where we have fallen short.
The aims are:
(a) to achieve the highest sustainable economic growth and employment and a rising standard of living in member countries, while maintaining financial stability, and thus to contribute to the development of the world economy;
(b) to contribute to sound economic expansion in member as well non-member countries in the process of economic development; and
(c) to contribute to the expansion of world trade on a multilateral, non-discriminatory basis in accordance with international obligations.
When I arrived at the OECD in 1996, I presented member countries with my vision of the OECD as an instrument for governments, to help them achieve balance in the triangular paradigm of economic growth, social stability and political stability. All three of these must be achieved through good governance in order to deliver the economic and social progress for which the OECD was created. Improving economic and social well-being, as required by the Convention, means keeping in harmony and balance the three different poles of the paradigm. Each society finds its own balance within that vision, based on the particularities of its own social, economic and cultural values, but the loss of that equilibrium will bring progress to a stop and, in the extreme, give rise to violent revolutions, as history has proven time and again.
Are we closer to equilibrium or to a halt in that progress? How well has the OECD fulfilled its role of maintaining that balance the face of the pressures of globalisation?
In terms of maximising economic growth and wealth creation, the OECD has performed remarkably well, and perhaps better than our founders could have expected. But of course that is only one dimension of the paradigm, and so only one measure of success. What do the social indicators tell us?
Frankly, on this front, we have not been as successful. True, OECD citizens are now healthier and have a longer life expectancy than ever before. They have more access to education on the whole as well. But when it comes to spreading the benefits of wealth creation, we have done far less well. So far, the rising tide has not lifted all boats and we are some way away from Rousseau’s dream of riches for everyone. This is true both within our countries and worldwide. OECD wealth has grown manyfold in 40 years. But while this testifies to the vitality of markets, we have yet to make them work for everyone. After all, what is the value of wealth creation if so much of humanity continues to exist in appalling poverty and squalor?
The work of the OECD is far from over. We have shown our strengths over the years. We have brought many improvements in member governments’ policies which impact directly on the capacity of societies to provide a broad distribution of wealth. We have demonstrated that high employment in productive jobs is the best means of stimulating national income distribution, on condition that it is supported by effective education and training, efficient and accessible health systems, and adequate social safety nets for those unable to participate in the labour market for reasons of age or disability. In each one of these areas the OECD has been successful in helping its member countries define best practices and in carrying out high quality professional analyses in support of policy recommendations.
Markets are fundamental, but if there is one clear reminder of recent times, it is the importance of government. The invisible hand of the marketplace is all very well as long as good governance and frameworks are in place to keep the hand honest as well as efficient. Without public trust, our economic model becomes fragile and vulnerable. Strong, though not interfering, democratic government has reaffirmed itself as a vital partner in our economic and social future.
Securing and building on the achievements of the OECD remain very much “work in progress” within our members, but more importantly in developing countries. With Doha, Monterrey, the G-8 Summit and Johannesburg, we appear to have launched a well-intentioned, if not well-financed, war against global poverty. The OECD’s members account for most of the world’s wealth, trade and development aid. Far from standing on the sidelines, we have a natural duty to take a lead in this most crucial of wars. We will do so!!
Our economic and fact-based expertise, our advice, our capacity to bring different cultures and stakeholders together in a non-adversarial, business-like setting to deal with differences and make progress on thorny issues, are attributes that the world must invest in. Our business is not just improving public policy, or fixing problems, but building the foundations of our global village, through measures such as regulatory reform, tax co-operation, anti-corruption, technology databanks, trade, the social, economic and environmental pillars of sustainable development, development aid and so on.
The OECD must exploit its historical legacy in the Marshall Plan to carry on the positive, constructive action it has begun around the world. This is not a fresh, new challenge; a paragraph in the preamble to the Convention of the OECD reads as follows:
“Recognising that the economic recovery and progress of Europe to which their [the founding member countries of the OECD] participation in the Organisation for European Economic Co-operation [the predecessor of the OECD] has made a major contribution, have opened new perspectives for strengthening that tradition and applying it to new tasks and broader objectives;. . .”
Could the historical mandate of the organisation be any clearer? We have achieved much in the OECD, but the job has only begun.
Increasing the interdependence of national economies as we have done is fundamental to global peace and security. I see the future of the OECD as spreading its messages and its practices throughout the entire global village. We are already working in the Balkans, as part of the Stability Pact, and working specifically on the Investment Compact. We must intensify our co-operation with the countries of the Middle East, Africa (as we are doing with the New Economic Partnership for African Development), and indeed, in all areas where conflict has divided nations and people. It is in the arena of 21st century globalisation that the virtues of economic co-operation and development, as defined in the OECD Convention, will become clearer than ever.
Europe, Japan and North America have all seen their share of bloodshed. The OECD has not only succeeded in binding these once bitterly divided continents together, but has been the catalyst of their development and progress, and, to a great extent, balance in the paradigm. Peace has been a prerequisite of this achievement.
The OECD has a mandate of immeasurable importance for the global community. Together in partnership with other international organisations, governments and civil society, we must fulfil it.