Towards a greener, fairer OECD

OECD General Secretary Angel Gurria (r) talks to European Council President Herman Van Rompuy Keystone

The Organisation for Economic Co-operation and Development (OECD) – which had a tax spat with Switzerland two years ago - is marking its 50 years in Paris this week.

The body, which caused controversy when it put Switzerland on its “grey list” of uncooperative tax havens, says it is now moving its focus from opening up markets to more social and green issues.

“For a decade we have paid homage to opening up the markets like a religion as if it was the only thing that brought joy. What was the result? The biggest economic crisis of our lifetimes,” OECD Secretary General Angel Gurria told the media on Tuesday. “Maybe we should start to view the principle of regulation with a little more respect.”

The 50th anniversary week, which runs until May 26 and includes ministerial meetings and a special ceremony, is taking the theme: “better politics for a better life”.

Ministers want to find solutions for problems such as sovereign debt, unemployment and the worldwide imbalance of trade. Also on the agenda: a strategy for “green growth”.

“The OECD is not immune to change and it has to change,” Stefan Wolter, managing director of the Swiss Coordination Centre for Research in Education, told swissinfo.ch. “It is also in competition with other international organisations.”

This also means using publicity to gain funds from member states, Wolter says. Such organisations need to market themselves. “It involves very big sums of money and is also partly about ensuring the survival of these organisations. This change in values is an expression of our times.”

In 2007 OECD nations started to open up towards the concerns of developing and transition countries and allowed in new members such as Slovenia and Estonia.

The OECD was founded in 1961, following on from the Organisation for European Economic Co-operation (OEEC), formed to administer aid under the Marshall Plan for reconstruction of Europe after the Second World War.

Founding member

It now has 34 member states and publishes around 250 documents – country reports and comparisons – each year. The organisation has 2,500 employees and an annual budget of €320 million (SFr397 million).

Switzerland was one of the founding members, but until two years ago there was little public awareness of the OECD and its work.

This all changed in March 2009 when Bern announced that it would comply with OECD norms on tax matters after international pressure. It meant the end of the distinction between tax fraud and tax evasion and an effective chipping away at the country’s cherished banking secrecy.

The announcement followed on from the OECD effectively putting Switzerland on the grey list of countries failing to comply with its directives on tax evasion.

Politicians on the political right in Switzerland criticised the OECD as a kind of international “financial police”, which was poking its nose into international matters in a sovereign country.

But Wolter points out that the area in which the OECD can act with “almost legal powers” is very small.

Knowledge transfer

“The wrong image most probably comes from the fact that the OECD’s work doesn’t find its way into the media. The largest part of its work is made up of knowledge and information exchange between the member states. This practically covers the whole palette of government activity.”

OECD regulations and standards should first and foremost ensure that “the economies in the member states develop as well as possible,” added Wolter.

In OECD logic, Swiss banking secrecy distorts the market, taking away taxes from some countries and thus hinders their economic development, he explained.

The OECD carries out regular surveys of its member countries which Wolter says allows them to see “who is doing something good and who can learn something from somebody else. The OECD is also a learning organisation”.

He says the studies and their resulting recommendations are a positive service because they are from a neutral body which gives marks to a country’s national economic players.

“In a country in which politicians do not trust their own government because it makes data seem better than it is and claims that the economic situation is totally fine, they have to rely on a neutral, outside organisation that comes in and assesses the government’s efforts.”

Warnings and plans

The opening ceremony of the OECD 50th anniversary was also a time to issue warnings about the difficult economic situation.

OECD Secretary General Angel Gurria reminded attendees of the high unemployment in many of the 34 member states, especially among young people. “The crisis is not yet over,” he said.

Herman Van Rompuy, president of the European Council, said that the Euro would not be left to fail. He warned that the risks linked to Greek restructuring were huge.

Gurria said that the OECD wanted to help improve peoples’ lives. On Tuesday it launched the Better Life Index, a new, interactive index that will let people measure and compare their lives in a way that goes beyond traditional GDP numbers.

The OECD is also aiming to step up cooperation with developing countries, especially in North Africa and the Middle East, added Gurria.

OECD and its view on Switzerland

The OECD says economic growth will remain “firm” in 2011, driven by strong domestic demand. It is forecasting that growth will be 2.7% in 2011 and 2.5% in 2012, higher than previously predicted.

Monetary policy rates will have to rise gradually from 2011 onwards, the organisation says, to damp inflationary pressures from domestic demand growth, but most importantly to avoid overheating in the housing market.

It adds that implementing the recent government plans to address the “too big to fail” problem would reduce the risks from a potential failure of the two big banks UBS and Credit Suisse.

The OECD says real GDP growth continued to be robust in the first half of 2011, mainly driven by strong domestic demand, linked to short- and long-term interest rates, which have been stimulating marked growth of bank lending, especially mortgages.

Labour market performance remains positive, further stimulating consumption growth.

Employment growth should also remain positive as suggested by steadily increasing job vacancies.

(Adapted from German by Isobel Leybold-Johnson)