Innovation, growth and equity

(Chair's conclusions now available; see link below)
Deputy Prime Minister of Spain and Chair of the 2007 OECD Ministerial Council
“Innovation: Advancing the OECD Agenda for Growth and Equity”: that is the theme of this year’s annual Ministerial Council on 15-16 May, and it reflects what many governments believe are clear priorities. (Chair's conclusions now available!)
Achieving durable and sustainable economic growth is undoubtedly a major objective of OECD countries, but equity issues also count. Their intrinsic importance may be a matter of political debate, but equity has a bearing on the economic agenda, insofar as it can influence social support for pro-growth policies.Economic theory increasingly stresses the importance of innovation as a driver of growth, as opposed to just capital accumulation. Innovation contributes to boosting per capita income, not only through its direct effect on welfare, but also through its indirect effects— innovation deepens the knowledge pool, which in turn facilitates further advances and welfare improvements. Its notable positive spin-off effects on growth make innovation one of the few areas where there is general agreement on the necessity of public action. The Ministerial Council meeting will explore the most appropriate means for harnessing these effects to increase society’s welfare.Growth and equity relate to other items on the ministerial agenda, including the role that the OECD should play in the wider world. In its near-five decades of existence, this organisation has significantly contributed to the extension of the market economy and good governance worldwide; its influence will continue to be prominent in the international arena. But, just as other international organisations are rethinking their roles in a changing world, it is also appropriate for the OECD to do so. For instance, we must examine the most relevant issues and challenges in international trade, against the backdrop of the ongoing Doha Round negotiations. Thanks to its abundant know-how on trade, the OECD should play a role in this area, while respecting the remit of the World Trade Organization.Also important is the issue of the OECD’s enlargement, granting entry to new members and reinforcing the ties with other countries and regions. Several countries have conveyed their interest in joining the organisation, while there is a clear need to intensify collaboration with emerging countries and other regions of the world. Our discussion will build on the work carried out in the OECD in response to the enlargement mandate issued by the Ministerial Council in 2006, and should contribute to enhance the organisation’s influence on the international scene.Ministers will also address an often neglected topic at this year’s conference: the political economy of reform. In other words, how can governments overcome the practical difficulties encountered when trying to implement reforms, including those aimed at growth and equity. It is well known that structural economic transformations, while raising welfare in the medium and long-term, sometimes entail short-term losses to society and practically always work to the prejudice of some groups of citizens. This can generate political obstacles to reform, which hamper or even prevent important measures from being adopted. A successful reform strategy should deal with these practical impediments to change; the sequencing of reforms, the crafting of an adequate communication strategy and the possible compensation to losing groups will be some salient matters to ponder. The essence of the OECD output will continue to consist of policy recommendations, but the consideration of political economy issues will undoubtedly represent a valuable complement to the organisation’s core mandate. The Ministerial Council has set itself an ambitious and far-reaching agenda, which I am sure will help Secretary-General Angel Gurría continue the dynamic he has set in motion at the OECD. Now we must see it through to a successful conclusion. OECD Observer N°261, May 2007

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