The challenges ahead

Secretary-General of the OECD

2010 started with the devastating earthquake in Haiti that killed well over 100,000 people and nearly destroyed a country. We stand in solidarity and sympathy with the people of Haiti, whose tragedy brought back memories of the tsunami just before New Year 2004. Nothing can replace the loved ones lost.

If there is a positive side, it is in the massive coming together of people and countries from around the world to help Haiti face the emergency and start rebuilding this poor yet vibrant country. Such co-operation embodies the spirit of the OECD, which is playing its part to help Haiti back on its feet by monitoring emergency aid flows and lending support to ensure adequate planning, coherent policies and effective public investments.

Looking beyond the response to this great tragedy, there are other important tests for the year ahead. The financial storm of 2008-09 may have passed, but the world economy is still leaning against the wind, with fiscal deficits in the OECD area ballooning to around 8% of GDP and a gross public debt likely to outstrip GDP by 2011.

The outlook points to a relatively modest recovery. Bank balance sheets have improved, but lending remains hesitant. Most of the growth in demand will come from public spending, as household and business spending remains weak. Unemployment will peak over 9% and reach double digits in some countries, straining finances and deepening the social crisis. And while world trade has started growing again, it remains below its pre-downturn level. At least inflation will be low, despite firm energy prices.

The crisis has left some scars, and there is much work to do to make the world economy stronger, cleaner and fairer. As I mentioned in my new year’s wishes, we can feel proud of our achievements in 2009. But we should not rest on our laurels and have to keep working hard in 2010.

The crisis has worsened prospects for developing countries, where 90 million more people faced poverty last year, and more migrants moved to already overcrowded, vulnerable cities. We have to step up and strengthen our work on development, and we have to address a deepening social and employment crisis in many of our own member countries. With OECD-wide unemployment edging towards 57 million this year, labour activation policies and measures to relieve disparities must be stepped up. Delivering quality yet cost-effective healthcare for all will also pose challenges, and a major meeting of OECD health ministers next October will examine the way forward.

The OECD will also continue to focus on strengthening our anti-bribery instruments and corporate governance frameworks, developing the ideas we started with the G8 on a “global standard” for market economies and advancing the important international collaborative work to devise new measures of progress for the 21st century.

We will continue to examine the causes of the crisis too, so that governments can prepare their exit strategies for the exceptional measures taken during the crisis. We should also support reforms, particularly in financial markets, where OECD experts show that improving prudential regulation to enhance stability can be compatible with increased competition. Such evidence will help policymakers build the new regulatory environments needed to win back public confidence and bolster growth.

This will also help get finance flowing again to small and medium enterprises, as these are essential pillars driving innovation. The crisis has shown that a different kind of economic growth is needed, and innovation is fundamental to achieving it. The OECD Innovation Strategy, to be presented at the OECD Ministerial Council Meeting in May 2010, will be a timely boost. After all, innovation is vital for the greener recovery we need to help reduce carbon emissions and spur sustainable growth. A key priority at the OECD will be to carry forward our 2009 mandate to develop a green growth strategy for the future.

Halting climate change is vital for this. The agreement reached at the UN climate change conference in Copenhagen last December was far from perfect, and the OECD is working to support international efforts towards a more substantial outcome at the COP16 meeting in Mexico later this year.

The OECD is delighted to enter 2010 reinforced by the arrival of a new member, with Chile set to become the 31st OECD country, having signed an accession agreement on 11 January. Chile’s participation will enrich our work and our voice on the global stage. In the months ahead we will continue accession talks with four other candidate countries and pursue our enhanced engagement strategy with key emerging economies. Building a more diverse, dynamic and relevant organisation is the right way to begin celebrating our 50th anniversary, starting in December 2010.

By working together to address tough challenges, we can make a difference in 2010.

©OECD Observer No 276-277 December 2009-January 2010

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