Home The Washington Diplomat May 2011 OECD at 50: Multilateral Powerhouse Sheds Image as Rich Man’s Club

OECD at 50: Multilateral Powerhouse Sheds Image as Rich Man’s Club

OECD at 50: Multilateral Powerhouse Sheds Image as Rich Man’s Club

If the influence of an international organization to shape global political and economic outcomes were measured by its name recognition, then the Organization for Economic Cooperation and Development (OECD) would not rank very high compared to more recognizable acronym counterparts such as the UN, IMF, NATO or WTO.

Nicola Bonucci, the OECD’s director of legal affairs, opened a recent symposium at George Washington University Law School on the body’s role in international economic law with a jesting reference to “this completely unknown organization called the OECD.” He cited a prominent international jurist who admitted not having heard of the OECD’s anti-bribery convention, one of its trademark legal instruments.


Photo: OECD
The Organization for Economic Cooperation and Development (OECD), led by Secretary-General Angel Gurría, right, holds a conference on the global economic outlook. Celebrating its 50th anniversary this year, the OECD’s mission to promote free market economies backed by democratic governance has taken on a newfound urgency since the international economic crisis.

The OECD’s influence may be subtle, but it’s very real — and increasingly relevant as it’s quietly risen to become an indispensable source of information for governments grappling with the complexities of globalization. Before the concepts of “soft power” and “smart power” came into vogue, the OECD was epitomizing these principles as a relatively low-profile body using peer review and pressure to learn from and synchronize successful policies among its like-minded members.

Although low profile, the group is sometimes viewed as decidedly highbrow. Often oversimplified as an exclusive club of the rich, the OECD is undeniably home to some of the world’s wealthiest industrialized democracies — with 34 members that range from Australia to France to South Korea to the United States. But it has also evolved to reflect a constantly changing world, most recently admitting members such as Estonia, Chile and Israel.

An OECD brochure admitted that the organization has been variously called “a think tank, a monitoring agency, a rich man’s club and an unacademic university.”

“It has elements of all, but none of these descriptions captures the essence of the OECD.”

That essence, the group says, is to promote free market economies backed by democratic institutions to improve the well being of all citizens. The Paris-based organization, which has a 2011 budget of nearly $490 million, is not a multilateral lending agency like the International Monetary Fund, although its work spans the economic spectrum and includes tackling issues such as the health of national housing markets and regional development aid.

According to the group’s website: “The OECD provides a forum in which governments can work together to share experiences and seek solutions to common problems. We work with governments to understand what drives economic, social and environmental change.”

This analysis ranges from measuring global trade and investment flows, to setting international standards on nuclear power plants or even the quality of cucumbers, to how much leisure time people should have, to evaluating national pension systems. “Along the way, we also set out to make life harder for the terrorists, tax dodgers, crooked businessmen and others whose actions undermine a fair and open society,” according to the group.

‘Minilateral’ Meeting of the Minds

The OECD can be thought of as “a restricted forum on virtually unrestricted topics,” in the words of Duke law professor and OECD expert James Salzman, who spoke at the George Washington University conference. “First and foremost, the OECD is a research and networking organization. That’s really fundamentally what it’s all about,” he said.

It’s an organization that embodies political scientist Anne-Marie Slaughter’s concept of “transgovernmentalism,” bringing together around 40,000 government officials and experts a year to provide the context for “transnational problem-solving and the harmonization of national law.”

At a time when many more widely recognized organizations struggle to achieve global consensus in the face of immense challenges and thinning resources (one need only think of climate change, Afghanistan, or the Doha trade talks as examples), the Paris-based OECD has emerged as a powerful example of what Moisés Naím calls “effective minilateralism” — that magic number to enact real international action.

At the George Washington symposium, held in cooperation with the American Society of International Law, Naím, a senior associate at the Carnegie Endowment for International Peace and former longtime editor-in-chief of Foreign Policy magazine, challenged the audience to think of recent examples in which the world came together to get something done. The list was brief.

Naím then listed failed attempts: Seattle, Doha, Kyoto, Copenhagen, Cancun, Seoul. At each of these summits, multilateralism lost traction and thereby some of its allure, given the lack of agreement. “There’s nothing more legitimizing than success,” Naím said, citing the G20 and OECD as vehicles that have recently boosted cooperation and delivered results while other all-inclusive inter-governmental forums got mired in disagreement.

Indeed, as the OECD prepares to celebrate the 50th anniversary of its founding with a ministerial-level meeting of its governing council in late May that will be chaired by U.S. Secretary of State Hillary Clinton, the organization appears to be enjoying a resurgence. What was previously derided as a “rich man’s club” and a “talk shop” for arcane economic topics has emerged as a global go-to institution for sound information, advice and comparative analysis — especially in a time of global economic uncertainty.

In fact, the economic downturn has lent newfound muscle to the group’s mission, as evidenced by a smattering of its recent work. One OECD report, for instance, urged developing countries to press ahead with economic reforms by liberalizing labor markets and removing investment barriers to ensure a self-sustaining global recovery as stimulus funds dry out.

The group has also been involved in talks over Portugal’s financial bailout. (Incidentally, it also presciently warned the Portuguese government last year that it had to brace for even stronger austerity measures to rein in the budget deficit and stem capital flight.)

Shortly after the earthquake and tsunami in Japan, the OECD issued estimates of the economic impact of the disaster, and it will continue to work with Japanese authorities in the coming months to help formulate policy responses to the tragedy.

More Than a Leaning Tower

The OECD has emerged as a respected authority on economic matters, but its policy range is sweeping. Another example of the OECD’s stature is PISA, its tri-annual comparative assessment of industrialized countries’ education systems and their ability to prepare 15-year-olds for the challenges of a globalized world. The Program for International Student Assessment, as it is known in full, has been receiving more attention as developed countries concentrate on bolstering their secondary school systems to stay competitive, even in a climate of fiscal austerity (also see “Model Teachers” in the education section).

After the 2009 PISA results showed that certain provinces in China such as Shanghai — included in the assessment for the first time — had greatly outperformed the United States (which ranked near the OECD average), U.S. Secretary of Education Arne Duncan declared it a “massive wakeup call” and, quoting President Obama, “a Sputnik moment.”

Even at the height of the Wisconsin state budget protests in mid-March, the New York Times story “U.S. Urged to Raise Teachers’ Status” — based on the OECD- and Department of Education-sponsored International Summit on the Teaching Profession — was among the most popular articles on its website. The story focused on a report by Andreas Schleicher, the OECD official in charge of PISA, which said that the United States, to improve its public schools, “should raise the status of the teaching profession by recruiting more qualified candidates, training them better and paying them more.”

The United States is now considering engaging the OECD to do a state-by-state PISA analysis that would provide a domestic comparison of best practices. It’s a safe bet there will be more discussion of PISA results as the country moves to reform its education system. Though it may not immediately be associated with the OECD in the public’s mind, PISA stands as a testament that the OECD, far from being a “zombie” inter-governmental organization, as Naím said certain institutions have become, is increasing its relevance in a rapidly changing world.

Marshall Plan Origins

Though the modern OECD was formally created with the OECD Convention in September 1961, the organization traces its roots to a predecessor body, the Organization for European Economic Cooperation (OEEC), established in 1947 to administer the U.S.-backed Marshall Plan funds in Western European countries.

In the early days, though limited in purpose, the organization established some key principles that paved the way for its present-day success. Decisions are taken by unanimity, ensuring that all member countries take them seriously, and a decentralized structure provides technical working groups with sufficient autonomy to pursue innovative projects.

After Marshall Plan aid ended in 1952, the OEEC shifted gears to promote free trade and economic growth within Europe. With the European Economic Community’s founding in 1958, the OEEC risked becoming redundant, but was saved by statesmen (Charles de Gaulle, Harold Macmillan, Dwight Eisenhower, Konrad Adenauer) who recognized its value in promoting cooperation in the context of growing economic interdependence. The United States and Canada joined the newly formed OECD in 1961, followed by Japan in 1964.

Bonucci, the OECD legal affairs director, pointed out that the most important elements of the current organization could already be discerned in the deliberations of the “wise men” responsible for drafting the 50-year-old convention and managing the transition from OEEC to OECD.

They noted “a certain OEEC spirit has been created through constantly working together on terms of intimacy and frankness, [such that] people of different nationalities have come to recognize the economic interdependence of nations, and the need for … multilateral cooperation.”

Another striking feature that has endured, Bonucci said, is the “fairly unique” decision-making structure, with recommendations stemming from a long and vigorous discussion among the group’s policymaking bodies.

This process of “social learning” encouraged by a thorough, consensus-based decision-making process that emerged in the OEEC still defines the OECD, according to Bonucci, who noted that the debate over the new organization’s name also foretold its future vision.

Various names including the word “Europe” were rejected given that the geographic expansion to North America would render it inaccurate. The body’s founders vetoed the proposed label of the Organization for Economic Cooperation, calling it “inadequate and somewhat colorless.”

They were attracted to the word “development,” Bonucci explained, as it “affirms the active interest in the well being of less developed countries, both member and non-member,” while at the same time emphasizing the concern for economic growth of all member countries. The descriptor also better fit Spain and Portugal in the 1960s, members that were far from wealthy, thus “killing the argument of the OECD being a club of rich countries,” Bonucci said.

The choice proved prescient, given that the OECD has evolved, especially in the past two decades, into a global institution deeply engaged in the development of poorer countries. As both reflective of this change and a driver of it, the OECD has since 2006 been headed by former Mexican finance minister Angel Gurría, a dynamic personality whose aim is to make the body more relevant, open and inclusive.

Visibility Propelled By Forward Thinking

The topics covered in the OECD 50th anniversary forum, to be held May 24 to 25 in Paris, illustrate the 21st-century outlook that has helped make the organization a powerful player in the multilateral arena. From taking stock of green growth, to narrowing the gender gap, to new paradigms for development aid, the agenda shows how the institution is embracing a forward-looking approach in response to present-day problems — while “always pushing the envelope,” as Bonucci said.

To that end, the 2011 forum will present of the latest results of the Global Project on Measuring the Progress of Societies, an initiative begun in 2008 by the OECD along with multiple partners such as the World Bank, International Labor Organization and European Commission. The project seeks to develop new parameters for measuring a country’s well being that go beyond the traditional GDP benchmarks.

Another sign of the OECD’s growing clout is its sheer geographic expansion, both in terms of membership and cooperation with non-members. Interestingly though, during a multiday-visit to Washington in late March, Secretary-General Gurría repeatedly cited OECD member states’ declining share of world economic output (projected to be just 40 percent in 2040) as a rationale for broadening the organization’s engagement, even if this doesn’t necessarily mean enlargement.

Even so, the year 2010 saw the OECD expand its membership by four countries (Israel, Estonia, Chile, and Slovenia) — an unprecedented growth spurt in the group’s history. Negotiations with Russia are currently under way and may be completed after the country joins the World Trade Organization.

But as Gurría explained, although the OECD does in principle welcome new members, it is already interacting and consulting with countries and regions around the world, from the Middle East and North Africa (MENA) region to Guangdong province, China’s most populous area with 95 million people. In fact, Gurría pointed out that the OECD has just produced a “big, fat book with lots of data, very technical,” for Guangdong, one of 25 such regional studies conducted so far in non-member countries.

Since 2007, the OECD has also entered into “enhanced engagement” agreements with Brazil, China, India, Indonesia and South Africa, producing detailed analyses on issues such as investment, agricultural and anti-corruption policies.

It is this global engagement that Gurría defines as the key to the OECD’s continued relevance in a competitive international environment. Whether these rising powers eventually become members of the OECD is an open question, but not a prerequisite for their collaboration.

“For practical purposes they’re in, even if they’re not members,” Gurría said, noting that they are already members of OECD committees, working groups and task forces examining topics such as health, education, labor and green growth. This is the way it began with Chile, Israel and the other new members. “So you get closer and closer to the family, and then one day, it’s not even big news” when you join, he said.

As the OECD jockeys for recognition in a crowded arena of big-name acronyms, it’s clear the organization is much more than a rich man’s club or “talk shop” for economists, but rather a global agent of “effective minilateralism” that pushes forward, as the 50th anniversary slogan aptly puts it, “better policies for better lives.”

About the Author

Jacob Comenetz is a contributing writer for The Washington Diplomat.