Towards a smarter, fairer future

Secretary-General of the OECD

©OECD Observer

The global economy is into its fifth year of growth. The expansion enjoyed in the OECD area has benefited from the dynamism of large non-member economies, especially in Asia. Globalisation has helped these countries raise living standards and reduce poverty. Indeed, the participation of China, India and other non-OECD nations in global economic flows has been increasing at a remarkable pace, now representing around half of total world GDP (measured by purchasing power parities), about 40% of world exports and nearly half of the world’s energy consumption. They have become massive outward investors, too.
Despite its successes, there is widespread distrust of globalisation throughout the world, and sometimes even a backlash against it, as demonstrated by renewed protectionist moves and difficulties in the Doha trade round. Globalisation to many is associated with widening inequalities, uncertainty and job insecurity. Other challenges that require global answers continue to face us. These include climate change, endemic poverty and resource depletion, including water and energy.Winning back faith in globalisation is one of the most important challenges of our time. To galvanise support, we must overcome some of the difficulties and ensure that the benefits are more evenly shared, both within and between countries around the world. The OECD is well-placed to make a contribution to this effort.We know that reaping the benefits of globalisation requires a permanent reallocation of human and capital resources across all sectors of our economies, intensifying the need for timely reform. It requires better dialogue among countries and between governments and their citizens.Within all of this, we believe in a renewed relationship between growth, innovation and equity, which could help light the way ahead. These are the core themes of this year’s Ministerial Council Meeting and the parallel OECD Forum in May.Innovation has driven much of the rise in living standards for centuries and now its impact on growth is reinforced by globalisation. Increased competition and access to new ideas and technologies are at the root of this new innovation process. And at the same time, the emergence of new competitors adds pressures for OECD countries to adjust and innovate.In short, innovation is a crucial source of competitiveness, economic development and social advancement. Globalisation is itself a product of innovation. Improved communications, financial integration and global connectivity and awareness have made our economies more interdependent, with our cultures flourishing through an intensified exchange of goods, services, ideas, values and expertise.Innovation has moved to the centre of corporate strategies too. From world-leading firms to small businesses, it can make a competitive difference. It is estimated that nearly half the US GDP is linked to intellectual property. And with the need for R&D, many policymakers perceive the association between universities and corporations as the space where the future lies. The EU has set a target of increasing R&D to 3% of GDP by 2010. And China, according to OECD estimates, is now among the world’s largest investors in R&D. While many citizens are worried about the possible impact of globalisation on living standards and job security, the actual impact can be enhanced by the proper execution of good policies. Examples are policies aimed at reducing the barriers to business start-ups or improving workers’ skills. While we all know that innovation is key to addressing global challenges such as climate change, on the other hand it could also reinforce global inequities, simply because it is so highly concentrated in a few well-off countries. This affects the global distribution of income and opportunities. People talk about digital divides, but there is also an innovation divide. Far too many people are deprived of its benefits and risk being marginalised. Wider inequalities can harm globalisation, but with access to innovation, there is hope. We must harness this process to help us resolve development challenges. We have the know-how and the technology to do so.Innovation needs open markets in which to flourish, but it also needs innovative government policies. Talent is an indispensable ingredient for innovation. A brain-drain, which may be a tolerable cost in OECD countries, debilitates poor ones. We have to strengthen our work with developing economies to help them expand and improve their education systems and build their economies so they can profit from their own talent.Providing technology is also part of the equation. The “One Laptop per Child” project is a dramatic example of a simple but far-reaching initiative.The dynamic relationship between innovation, growth and equity has clear potential for human progress. Harnessing this potential will help us craft a smarter, more prosperous and fairer future.©OECD Observer N°261, May 2007

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