Then, within two years a corner was turned, and 15 years of nearly uninterrupted expansion followed, driven by structural reforms, the spread of markets, booming global trade and investment, information technology and confidence. World GDP rose by 75%, and a billion people were lifted out of poverty. That period of growth ended abruptly for many countries in 2008 with a financial crisis that turned into an economic and employment crisis, causing suffering for millions of citizens.
Today policymakers are still wrestling with the pressing problems of reducing debt, restoring growth and boosting jobs and skills. At the same time they must confront the sustainability challenges, which have intensified since the first Rio summit. How can policymakers square the circle?
The economic situation is hardly favourable. The OECD Economic Outlook issued in May suggests modest growth in the US and Japan, but sees risks coming from the ongoing euro crisis and a slowdown in China. Uncertainty prevails and the world economy is not yet in the clear. That means unemployment, with dire prospects and poverty for millions of people.
A new departure is needed. This summed up the public mood at the G20 Leaders Summit in Los Cabos, Mexico and also at the OECD Ministerial Council Meeting (MCM) and Forum in Paris in May.
Political summits are not just about major breakthroughs, and steady progress was made at the G20 in consolidating joint efforts towards a lasting recovery. In Los Cabos, leaders strengthened their policy commitments and actions with a new accountability framework, the Los Cabos Growth and Jobs Action Plan. The summit was also a further positive step for the G20 as a forum where key global economic issues like the euro crisis can be discussed in an open and constructive manner. The OECD will continue to play its part by contributing to the Los Cabos Growth and Jobs Action Plan, and to ongoing work on trade, governance, tax and development, as well as on financial education and incorporating green growth into reform agendas.
While decisive action to overcome the crisis is on the top of the policy agenda in many countries, we are still on a collision course with nature. At the Rio+20 Summit, some agreements were struck between business and civil society groups, reflecting a shared conviction of the need for greener growth, though this time there were no major political steps on climate change or biodiversity. This may in part reflect uncertainty about reforms and how they might affect growth and well-being. We need to overcome this deadlock.
In this context, the recently launched OECD initiative on New Approaches to Economic, Social and Environmental Challenges (NAEC) aims at strengthening the synergies between the different policy objectives and looking at the trade-offs. At the OECD MCM in May, inspired by the theme of “All on Board: Policies for Inclusive Growth and Jobs”, ministers expressed strong support for this NAEC initiative, and encouraged us to continue analysing the causes of the crisis and adjust our analysis and practical recommendations. The goal is to enrich our analytical framework, while identifying pillars for a strategic OECD policy agenda for inclusive growth. This means examining issues such as under-pricing risk, trade-offs between growth and inequality, and pro-growth policies and the environment. Ministers also welcomed a report on knowledge-based capital as a source of growth, and committed to support OECD strategies on green growth, innovation, skills, gender and global development.
Small wonder then that the NAEC initiative resonates so loudly with the public. For the 1,300 people from government, business and civil society who came together for the OECD Forum on 22–23 May, there was a clear common message: improve governance and structures for better policies, tackle inequality within societies and between men and women, address the causes of indignation, invest in new sources of growth and new jobs and skills, promote integrity, unleash people’s creativity and put well-being first. Fittingly, the second edition of the OECD Better Life Index, which incorporates more environmental indicators and adds Brazil and Russia to the countries covered, was successfully launched at the event.
Today, as 20 years ago, good policymaking can be the ultimate game-changer for unblocking progress. And it is important to consider the long-term trends that will influence policy decisions and action. The OECD’s aim is to help countries move towards inclusive growth, and ensure that the next upturn can be sustained by reducing social, economic and environmental imbalances, and by improving governance and confidence. It is up to governments to get their policies right and the OECD stands ready to help. Change may not come overnight, but as Tolstoy wrote, “time and patience are the strongest warriors”.
©OECD Observer No 292, Q3 2012