Record fall in GDP
Ireland’s anti-corruption laws
Israel joins Anti-Bribery convention
India backs export credit pledge
Plus ça change...
Gross domestic product in the OECD area fell by 1.5% in real terms in the fourth quarter of 2008 compared with the preceding period, the largest quarterly fall since OECD records began in 1960, according to preliminary estimates. In the United States GDP fell by 1% in the fourth quarter of 2008, following a 0.1% decrease in the previous quarter. Japan's GDP declined by 3.3%, following a 0.6% decrease in the previous quarter. GDP in the euro area was down 1.5%, following a 0.2% fall in the previous quarter.
The worst financial and economic crisis in decades has been met by a co-ordinated global response to kick start growth and better regulate financial markets. But what about the long term, and preparing for when the crisis is over? What kind of policies and rules of the game will help the world’s economies sustain their recoveries and prevent the causes of the latest downturn from happening again?These are the tough questions the OECD has set its sights on answering in its two-strand response to the turmoil. The work focuses, on the one hand, on financial and commodity market regulation, taxation, competition and corporate governance, including issues such as pensions and, on the other hand, fiscal and monetary policies, employment and public investment and other measures for underpinning recovery and growth. To bolster activity, social policies for employment and equity are being scrutinised too. Attention is also focusing on how governments might wean their economies back off their emergency action plans once economic health is restored. Sustainable growth means focusing on action for climate change and world development too.
Mr Somavia (left) and Mr GurríaILO Director-General Juan Somavia referred to the OECD and the ILO as “kindred spirits in the multilateral system” that must build policy alliances, and warned that “if the multilateral system cannot respond to the crisis together, it will become part of the problem, and not what it should be, the way forward to solutions”. The OECD and the ILO already collaborate in a number of areas, including labour issues and corporate social responsibility, notably with the OECD Guidelines for Multinational Enterprises and the ILO Tripartite Declaration of Principles concerning Multinational Enterprises.
In a recent online opinion poll, the OECD Observer asked readers “are you confident that governments can help avoid a global depression?”. Of nearly 1,000 responses, some 47% answered no, 32% said yes, and 21% preferred to wait and see. Though not a scientific poll, and while the OECD does not foresee a depression (see Economic Outlook focus), the responses nonetheless point to the importance of winning public trust in the current crisis. See www.oecdobserver.org
The latest composite leading indicators (CLIs for October 2008) continue to point to a weakening outlook for all G7 economies. Moreover, the outlook has significantly deteriorated in the major non-OECD economies of China, India and Russia.Meanwhile, annual inflation in the OECD area rose by 3.7% in the year to October 2008, compared with 4.5% in the year to September 2008. Month-on-month, prices fell 0.3% in October, after remaining stable in September. Excluding food and energy, consumer prices rose by 2.2% in the year to October, compared with 2.4% in September. Consumer prices for energy were up by 12.3% in the year to October, compared with 18.9% in September and consumer prices for food by 6.5% compared with 6.8% in September.
G7 merchandise trade import volumes fell by 1.4% in the second quarter of 2008 compared with the previous quarter, while the volume of exports declined by 0.3%. On a year-on-year basis, import volume growth, at only 0.3% for the second quarter 2008, continued a decline that started in the second quarter of 2006. Exports grew by 4.9%.Unemployment in the OECD area stood at 6.2% in October 2008, 0.1 percentage points higher than the previous month and 0.6 percentage points higher than a year earlier. In the euro area, the unemployment rate was 7.7% in October 2008, 0.4 percentage points higher than a year earlier. For the US the rate in November was 6.7%, a full 2 percentage points higher than a year earlier. For Japan, the rate was 3.7% in October 2008, 0.3 percentage points lower than a year earlier.
For more on these and other economic stories, go to www.oecd.org/statistics
Turkey compares well with other developed countries in terms of biodiversity and its low per head greenhouse gas emissions, but the latest OECD Environmental Performance Review of Turkey notes a “thin” environmental infrastructure and points to pressure on air quality, water and waste management, soil erosion and resource conservation. See www.oecd.org/turkey and www.oecd.org/env
Governments and industry must do more to crack down on fraud and waste in government contracts, such as building new schools and roads, that cost taxpayers billions of dollars every year, according to new OECD Principles for Enhancing Integrity in Public Procurement, released in October. See www.oecd.org/gov/ethics
Ireland should improve its anti-corruption laws and, in particular, should urgently expand corporate liability for acts of foreign bribery, according to a review of Ireland’s enforcement of the OECD Anti- Bribery Convention.
Israel has officially joined the OECD Working Group on Bribery, an important step in its OECD membership bid. Israel becomes the 38th signatory and first Middle- Eastern country to join the OECD’s Anti-Bribery Convention.
Meanwhile, OECD has launched the Anti-Bribery and Business Integrity in Africa initiative a partnership with the African Development Bank (AFDB). For details, see www.oecd.org/corruption
India has joined major exporters pledging ongoing credit support for developing country imports during the financial crisis, along with 35 exporting countries, including 29 OECD countries, Brazil, Estonia, Israel, Romania, Russia and Slovenia. See www.oecd.org/trade
Governments should crack down on tax evasion to raise tax revenues as part of broader efforts to help maintain the flow of aid to developing countries during the global economic downturn, Secretary-General Angel Gurría stated in a speech at the UN International Conference on Financing for Development. See 29 November, www.oecd.org/speeches
The economic downturn will hit the IT industry hard in 2009, according to the latest OECD estimates. The IT Outlook 2008 says that the IT industry is likely to have grown by 4% at most in 2008 and with the global economy worsening, and business and consumer confidence falling, growth will languish in 2009.Spending on software and IT services, including outsourcing, by governments and business is likely to continue growing, while Internet-related investments in infrastructure will remain solid. But slower demand from banking, insurance and retail will affect overall growth. The semiconductor industry is set to fall 6% in 2009, and telecommunications companies could also struggle.
Learning by doing“It is not about embracing some new ideology, but about being pragmatic in an economic situation we have never known before.”
President Nicolas Sarkozy of France in Le Figaro, 21 November 2008“The EU’s initial response was inadequate, but it is always through crisis that the EU becomes a little less inadequate further down the road”
Former EU commissioner, Mario Monti, in Financial Times, 21 November 2008“We humans do not learn easily. We try and fail and try again.”
Prof Tom Burke of E3G, writing on climate change in The Independent, 4 January 2009
“The new possibilities opened up by computers and telecommunications are a source of potential danger. The electronic revolution has spawned a new generation of specialists with a perfect grasp of both computers and financial engineering who can devise made-to-measure derivative products or combinations of financial instruments at very low marginal cost. (…); (…) The possible existence of hidden liabilities thus puts creditors, employees and shareholders alike at risk.
“New financial instruments : Managing the Menagerie”, No 157, April-May 1989
©OECD Observer No 270/271 December 2008-January 2009