Death and taxis: Why the Green Growth and Sustainable Development Forum matters

GGSD Forum 2014
Click to go to the Forum website

The Electric Flats was the name given to a group of houses on the corner of the street in what’s now called North Lanarkshire, Scotland, where I grew up. It’s not that the rest of us didn’t have electricity (we even had indoor toilets) but the Electric Flats had a radiator in every room. Nowadays, you often see images of these blocks of 1960s and 70s social housing being dynamited to make way for something nicer. But at the time they were built, they were a great improvement on the picturesque slums the tenants had lived in before. Very few houses had central heating (look at how much clothing people wear indoors in old films) and when the first Scottish winter in their new flats arrived, the chosen few basked in the glow of modern home comfort. Then, as Glasgow writer James Kelman described it, it was as if somebody had thrown a giant switch and all the heating snapped off on the same day. The day the electricity bills arrived.

That’s the “fuel poverty” the February 2013 OECD survey of the UK economy mentions, so the problem obviously hasn’t gone away. It sounds incredible, given that GDP per capita has risen from less than $15,000 to over $35,000 in real terms since the Electric Flats were built. However, the expansion of the economy hasn’t benefited everybody equally and while many have done well, inequality is actually growing worldwide according to our latest figures. That’ll be the first thing discussed at the Green Growth and Sustainable Development Forum taking place at OECD headquarters on 13-14 November. This year’s theme is “Addressing the social implications of green growth”.

Looking at the agenda of big meetings like these, you can get the feeling that they’re abstract. But when I started writing this article, I was only going to use my neighbourhood as the intro, until I realised that that in fact you could use it as a microcosm of everything that’s being discussed at the Forum, and how it matters to “real” people in “real” life.

The inequality discussion looks at “multi-dimensional living standards and inclusive growth”, meaning not just income, but access to education, public services and so on. The next session looks at the impact of energy sector reform on households. The issues here vary considerably from one country to another. In OECD countries, the debate tends to focus on whether renewables can offer a reliable, reasonably-priced alternative to fossil fuels (and nuclear in countries such as Germany that are phasing out or reducing nuclear energy programmes). In a developing country, the issue may be building an energy infrastructure. The kind of energy supplied could also be an issue. The IEA, co-organising this session, calculate that developing countries spend over half a trillion dollars a year subsidising fossil fuel consumers.

The Forum includes “sustainable growth” in the title and other IEA work provides a grim example of why the vague-sounding “environmentally friendly” growth is, literally, vital. Research with the WHO on energy poverty reported in the 2010 World Energy Outlook shows that cooking will soon kill more people in developing countries than malaria, tuberculosis or HIV/AIDS. Indoor air pollution from burning biomass in inefficient stoves causes over 1.5 million premature deaths per year, over 4000 a day, especially young children. The IEA point out that 1.4 billion people don’t have access to electricity (other than costly batteries). That number will drop by 2030 thanks to general economic expansion, but only to 1.2 billion. Electricity also makes a whole range of other activities from studying to shopping in the evening easier.

Governments play a key role, which is why the Forum flyer says that the event is designed for “those with hands-on experience of shaping policy and advising policy makers in national and local government.” Here’s an example of how policy can make a difference. To go back to old films again, one standard shot of London used to be a double-decker bus poking its way across Westminster bridge in thick fog. The buses are still there, but the “pea soup” fogs like that of 1952 that caused 12,000 deaths (and even caused cinemas to cancel shows because you couldn’t see the screen) are a thing of the past, because the 1956 Clean Air Act made “smokeless” fuels mandatory in certain urban areas.

But let’s leave the big city behind and return home. Across the road from the Electric Flats was the Ravenscraig. It sounds like the setting of a romantic novel, but it was in fact one of the biggest steel works in Europe. It’s no longer there. It was shut down in 1992, then dismantled and sent to Malaysia. The environmental benefits of closing the Craig were immediate and long-lasting – no more sooty rims on flowers, no more racing pigeons dropping dead after flying too close to the smoke stacks… But what about the 800 or so men who worked there and the 10,000 other people whose jobs depended on the plant indirectly?

For some reason, huge numbers of them bought taxis, and the local train station had as many cabs as a major international airport until the implacable law of supply and demand that destroyed their salaried jobs destroyed their business too. The unemployment rate is still 20% above the Scottish average. A joint session at the Forum with the ILO will look specifically at what kind of skills policies can ensure this kind of thing doesn’t happen, and the Forum will examine the labour market implications of green growth more generally.

In North Lanarkshire, other indicators of “inclusiveness” like life expectancy are worse too, so let’s hope that the Forum organisers are right when they claim that “Green growth’s combination of strong economies and a clean environment could increase the well-being of all citizens” and that the Forum helps those attending to make sure that “the right policy mix is applied.”

Useful links

OECD work on green growth and sustainable development

Sustainable Development: Linking economy, society, environment OECD Insights

Making obsolescence obsolete: design to reduce waste

Imagine throwing away 21,000 of these
Imagine throwing away 21,000 of these

Today’s post is by Maroussia Klep of the OECD Environment Directorate

Let’s be honest, waste reduction doesn’t have much of a ring to it. To many, it’s a complex policy issue without much hope if consumers keep throwing their cans away in the street. Yet, designers are taking a different view, looking at reducing waste from a business angle.

The amount of material being extracted and wasted today is scary. In recent decades, the high consumption levels in developed countries, combined with rapid industrialisation in emerging economies, have led to unprecedented levels of demand for raw materials. In just thirty years, the quantity of materials extracted for consumption has increased by 60%. Even more worrying is that a fifth of these materials end up as waste. This represents over 12 billion tonnes of waste per year; the equivalent in weight of more than 21,000 Airbus A380s. Considering that the global economy is expected to quadruple by 2050, and that the world population keeps increasing, one might wonder how, and for how long our planet will be able to keep providing supplies.

In this context, one solution to avoid a collapse of natural resources is to break the link between economic growth and material extraction. A number of OECD countries have already demonstrated that this works: they manage to increase production, while at the same time reducing resource exploitation. These efforts are conducive to a “circular economy” approach. This new model aims to move away from the traditional, linear economic model, under which materials are extracted, consumed, and finally thrown away. With a circular economy, old products are re-used and remanufactured into new ones for as long as possible in order to preserve existing resources and to minimise extraction. When products finally reach their end of life, material is recovered and fed back into the economy, instead of being discarded. If this approach is handled efficiently, the notion of waste could one day become obsolete!

Designers have an important role to play in supporting a circular economy. In addition to studying the aesthetic and practicality of a product, they now have to cope with the threat of resource scarcity, and to somehow create an opportunity from it. In order to encourage re-use and recycling of a product or parts of it, designers can make used products easy to disassemble for example. Think of the quantity of valuable material lost in your old phone abandoned in the cupboard! Designers can also promote the use of recyclable materials in production. In Japan, a green tea company changed the design of its bottles to make them thinner and transparent instead of green-coloured, which facilitated recycling, and reduced costs. The global fashion retailer H&M also jumped on board recently: a few months ago, they launched their first trousers and skirts made out of textiles fibres recycled from used clothing collected from consumers.

These examples show that good design can be good for business – by reducing the quantity of materials purchased and used in production – and, at the same time, diminish pressure on the environment.

Policy makers can encourage and support firms and designers in many ways. First, in order to make the most efficient use of materials, designers need data and guidance on the availability and recyclability of resources. OECD work on Sustainable Materials Management and on Material Flow Analysis support these efforts, by promulgating measures aimed at preventing and reducing waste generation and managing residues in an environmentally sound manner. In addition, policy makers can promote the use of certain materials by setting requirements for green public procurement and product standards. Instruments such as taxes and standards can also be used to encourage recycling and material recovery. Finally, policy makers should ensure the good functioning of recycling markets, and encourage the entry of efficient recycling operators in order to make it a profitable business.

Of course, recycling and re-use efforts are undermined if consumers treat nature like a big garbage dump. Not only continents but even our oceans are starting to resemble giant dustbins. Awareness campaigns and communication efforts towards consumers are thus essential for closing the loop, and require joint efforts by corporations and municipalities. Those are but a few examples whereby public bodies can stimulate efforts by the private sector on the preservation of resources.

We live in interesting times. The planet is being exploited as never before, and there is no sign that global consumption will stop rising. On the other hand, some new trends provide hope. Businesses are starting to worry about the shortage of critical resources and are joining efforts by policy makers to move towards a circular economy. Amidst this paradox, a new, unexpected actor comes on stage: designers. By connecting financial and environmental interests from the point of production, design has indeed the potential to help reduce much damaging waste.

Useful links

OECD work on resource productivity and waste

OECD work on green growth and sustainable development

Want to improve your problem-solving skills? Try metacognition

Critical mathsToday’s post is by Anne-Lise Prigent the editor in charge of education publications at OECD Publishing

French poet Paul Valéry once expressed his love for mathematics: “I worship this most beautiful subject of all and I don’t care that my love remains unrequited.” Unrequited love, or, all too often, a big stumbling block that inspires fear and defiance, mathematics are usually not seen as an excuse to have fun. Yet, maths need not go hand in hand with anxiety.

Maths can help us acquire life skills that are essential. In today’s unpredictable world, all of life is problem solving. Our societies will need a critical mass of innovators who can not only communicate and collaborate but also think creatively and critically. Are students developing these high-order skills in maths class? Are they learning to solve complex, unfamiliar and non-routine tasks?

A new OECD publication, Critical Maths for Innovative Societies: The Role of Metacognitive Pedagogies, shows that the time has come to introduce innovative instructional methods. The man behind the project is Stéphan Vincent-Lancrin, who worked with authors Zemira Mevarech and Bracha Kramarski. Faithful to the spirit of CERI (the OECD’s Centre for Educational Research and Innovation), Vincent-Lancrin rooted the report in CERI’s thorough knowledge of learning (The Nature of Learning, Innovative Learning Environments). How do we learn? Not by having cold sweats at the sight of an equation assuredly. Emotions play a key role in learning – our cognitive and emotional systems are intertwined in our brain. But do we ever learn how to learn?

College professors often point out that their students never learnt how to learn. Derek Cabrera was surprised to find that even the “cream of the crop of our education system” was not good at dealing with novel problems in unstructured assignments. As PISA shows, across OECD countries, about one in five students is able to solve only straightforward problems – if any – provided that they refer to familiar situations. Too often, we teach students what to think but not how to think.

Yet, there is an engine we can use for that and it is called metacognition, which means “thinking about your thinking”, and regulating it. Metacognitive pedagogies improve academic achievement: content knowledge and understanding, and the ability to handle routine and unfamiliar problems. And they also boost affective outcomes, reducing anxiety and improving motivation. Struggling students greatly benefit from these pedagogies, but not at the expense of higher achievers.

Metacognition is about taking ownership of your learning and maximising it. “It turns you from being a consumer of learning to being a researcher, a co-producer, an explorer and that’s a much more exciting, exhilarating world. You discover how to learn better” Stephen Heppell argues. He also points out that metacognition makes students “do 20% better – you get an extra Friday every week”.

How does it work? Among metacognitive pedagogies, the IMPROVE method is the most widely studied: Introducing the whole class to the new material, concepts, problems or procedures by modelling the activation of metacognitive processes. Metacognitive self-directed questioning applied in small groups or individualised settings. Practising by employing the metacognitive questioning. Reviewing the new materials by the teacher and the students, using the metacognitive questioning. Obtaining mastery on higher and lower cognitive processes. Verifying the acquisition of cognitive and metacognitive skills based on the use of feedback-corrective processes. Enrichment and remedial activities.

It helps learners build their own scaffolding: “What is the problem all about?”, “Have I solved problems like that before?”, “What strategies can I use?”, “Am I stuck, why? What additional information do I need? Can I solve the problem differently?”. The key is to ask ourselves questions that help us change our perspective and connect the dots in new ways.

In doing this, we inevitably make mistakes. And that’s good. Mistakes are data that help us perform better later. And co-operative learning makes these pedagogies even more efficient. Students using IMPROVE interact, share rich explanations, evaluate their peers’ solutions, correct mistakes, and learn. Communication in control groups may be dull – or altogether absent, but groups using IMPROVE discover a new, friendlier way of learning maths. They learn to learn and think creatively.

Now, are these pedagogies used in classrooms today? Not so much. Singapore – who excelled in PISA and TIMSS – is an interesting exception. Teachers there are trained to use metacognitive pedagogies explicitly in class. Singapore adopted metacognition in its mathematics curriculum for all school grade levels at the start of the 2000s.

From kindergarten to higher education, metacognitive pedagogies are effective across all levels. And they can easily be used in other domains (e.g. science) since the metacognitive questioning is generic. As Stéphan Vincent-Lancrin points out in the podcast below, there is a message for policy makers here. “If you want (…) less anxiety, more communication, a better understanding of maths, better reasoning etc., there are some interesting pedagogies which have already been tested.”

Metacognitive pedagogies are particularly effective for complex, unfamiliar and non-routine tasks, but they also work for routine tasks. However, it is time maths textbooks caught the 21st century train: 90% of the problems featured in these textbooks are routine problems.

It would also be interesting to explore whether metacognitive pedagogies could help decrease the gender gap. PISA 2012 revealed worrying gender differences in students’ attitudes towards mathematics. Girls report less openness to problem solving than boys, less perseverance, less belief in their own skills, and higher levels of maths anxiety – even when they perform as well as boys in maths.

Those who develop metacognitive skills will use them all their lives. As Howard Gardner puts it, “Those with flexible minds, with open minds, are at a distinct advantage overall. (…) So are those who know how their own mind works and can marshal that metacognition knowledge in cases where the course to pursue is not clear (…) The search of truth going forward must become ever more metacognitive. We can no longer trust our eyes or the spoken words of the nightly news (…) we must try to understand the truths about truth.”

A good example of this is the astonishing story of “the British amateur who debunked the mathematics of happiness”. Nick Brown, a first-term, first-year, part-time master’s student in his 50s, managed to prove America’s academic establishment wrong. How did he do that? He used metacognition: “the maths you need to understand the Losada system is hard but the maths you need to understand that this cannot possibly be true is relatively straightforward”, he argues. In the same way, the Wright brothers – two bicycle mechanics – invented the first airplane when they understood that aviation pioneer Lilienthal had got his maths wrong – although the scientific world had accepted his findings.

A sound judgment and perseverance. Resilience. As you walk through the valley of maths, have no fear. The grace of an algorithm can go a long way. And as you ponder the beauty of space geometry, mark Leibniz’s words: “Music is the pleasure that human minds experience with counting without realizing that they are counting” (Marcus du Sautoy). Counting on, Leibniz invented the calculus (not that Newton would agree, as both – curious – minds seem to have converged in their intellectual prowess). Moving on, let your metacognitive strides swing you past some pretty hefty hurdles – melodiously, mathematically.

Critical maths: entretien avec Stéphan Vincent-Lancrin en français

Critical maths: interview with Stéphan Vincent-Lancrin

Useful links

Maths education for innovative societies by Stéphan Vincent-Lancrin on the OECD educationtoday blog

PISA 2012 Results: Creative Problem Solving (Volume V) – Students’ Skills in Tackling Real-Life Problems

Smarter, greener, healthier and more productive: The new old

A more cheerful outlook
A more cheerful outlook

Today’s post is by Tobias Vogt and Fanny Kluge from the Laboratory of Survival and Longevity at the Max Planck Institute for Demographic Research, Rostock, Germany

Ageing populations are a threat to the sustainability of modern societies. This is a dominant line of thought in the political, public and scientific discussion that warns us about the consequences of demographic change. It refers to the concern that the needs of an increasing share of older people have to be met by a decreasing number of younger members of our societies. These warnings must be taken seriously if current conditions prevail. The changes in the age structure will bring major challenges to public finances and the demand for an adjustment of current social policies, in particular, in countries with large public welfare programs for the elderly. Yet, the demographic future may not look as bleak as we generally think. The greying of a population may even embrace certain advantages simply because of the natural transformation of the age structure. This thought was the starting point for a, so far rare, project that focused on the potentials and chances of demographic change. In this case study (downloadable from PLoS One) we focused on Germany as the second oldest country worldwide in terms of its population’s median age of 44.3 years and identified five different areas that may benefit if observed trends of the past continue into the future.

To understand the anticipated challenges as well as the opportunities of demographic change one has to keep in mind that they only result from a change in the age structure of a population. If we depict the current age composition in Germany or in most industrialized countries, it looks rather more like a tree than the usual population pyramid. Yet, this illustration will also only be a snapshot as the over-represented older age groups will become smaller and eventually disappear in the coming decades. Despite ongoing low fertility and a general population decline, this will result in a more stable age structure after 2040 than in the decades when the large baby boom cohorts reach retirement age. In the last decades the share of Germans above age 65 rose by 2 to 3 percentage points. Between 2020 and 2040 this share of Germans will increase by 10 percentage points from 23% to 33%. In the following two decades it will remain stable at this high level and go up slightly.

One major concern of this population structure is that fewer and older individuals are expected to be less productive. This assumption ignores the fact that certain productivity determinants among older individuals like education and health will not remain constant but change over time.

During the last decades participation rates in higher education have increased from cohort to cohort which is reflected in the share of individuals in the labor force with tertiary education. In 2008, every fifth individual in the age groups 25-29 and over age 50 attained tertiary education. These shares will rise considerably. After 2050, every third individual in the respective age groups will have a tertiary education. If current labor force participation rates among these groups remain as they are, this would mean that 46% of the German labor force will hold a higher education degree compared to 28% today.

These changes in educational levels are accompanied by an improvement in individual health. Over the last 30 years, the age at which Germans report worsening subjective health has become later and later. If we forecast this trend into the future we find that not only average life expectancy as such will increase but also the number of years we live in good health. Already today Germans can expect to spend up to 60% of their life in good health. By 2050, this share will increase to 80%, which suggests that most of the years of gained life expectancy may not necessarily be years of bad health. Of course, this scenario is based on past developments and neglects potential future health threats like the consequences of increasing obesity levels and rising cognitive impairments at older ages. Nevertheless, fears of productivity losses may be partially absorbed by the improvements in individual health and education.

A smaller and older population may not only be more productive than expected but even cause less environmental pollution. When we observe individual consumption patterns and their ecological consequences, we find that over the life course younger individuals travel and consume more and, thus, cause higher CO2 emissions than individuals at retirement age. This implies that if today’s consumption behavior prevails, older and smaller populations may generate substantial CO2 reductions. We found that the change in population size and consumption preferences led to a 30% increase in emissions between 1950 and 2020. In the following decades, emissions could decline even to pre-1950s levels.

Apart from the challenges and opportunities on the population level, demographic change will certainly influence our individual lives and our family relationships. On average, we will live longer in good health and need care later, but there will be fewer younger individuals in our family network to support their elderly parents or other relatives. Whether changes in time use can make up for these missing individuals is questionable. We find that if the current work and leisure patterns prevail, individuals will spend slightly more time on leisure and housework and the share of work time drops from 14.5% to 11.9%. Whether the young really spend the additional time they have with the elderly remains to be seen. One important question in this respect is also how valuable the elderly will be in terms of resources they can provide. The wealth they pass on to the next generation will have to be shared with a smaller number of siblings and thus younger family members might be better off.

Certainly this study does not solve the challenges we face in the future, but it sheds some light on potential opportunities that aging populations create. During the coming decades societal frameworks will change and individuals will adapt their behavior to new expectations. The magnitude of the future effects is thus unknown, but we should start to discuss this potential, and favorable adaptations in our society. The future is not too bright, but also not as dark as sometimes argued and we do have the potential to change it.

Useful links

Ageing (Un)equally? OECD Forum 2014

Working better with age OECD review of policies to improve labour market prospects for older workers

OECD health data

Calculate this country’s GDP

national accountsLast week, the media reported on the questions Oxford University asked candidates as part of their entrance interview. The questions aren’t designed to test knowledge of facts, but to give students a chance to show how they think about solving problems, whether they can see links between one subject taught at school and another, and so on. One of the questions in history was “How much of the past can you count?”. The idea, as interviewer Stephen Tuck told the Daily Mail, is to provoke a discussion about “all sorts of issues relating to historical evidence. For which periods and places and aspects of the past is data readily available?”. It’s a question you could ask in economics too: how much of a country can you count? And one that the newly updated Understanding National Accounts from the OECD answers.

Governments have always wanted to have data on who and what they govern – a population census is part of the Christmas story for instance – and, as we mentioned in this post, the origins of the modern system of counting a country can be traced back to the 17th century and William Petty’s Political Arithmetick. Petty developed and applied his techniques in England’s first colony, surveying land in Ireland that was to be given to Oliver Cromwell’s troops. His statistical methods were rudimentary, often involving estimation based on exports, deaths and the number 30: a 30% increase in exports means the population increased by 30%; multiply the number of deaths by 30 to find out the size of the population. His components of national accounts though contain much that is still familiar – land, real estate and other personal property, ships…

How though do you count all this? Samuel Beckett, one of the Anglo-Irish descendants of Cromwell’s invaders, tackles this problem in Malone Dies, when the eponymous hero decides, on his deathbed, to make a list of everything he possesses. He’s overwhelmed by the complexity of the task and can’t figure out what to include and how. (Is a pair of shoes one or two items? And what about the laces?). In fact he doesn’t get much further than the pencil and notebook he was going to use to make his inventory and gives up.

OECD statisticians are made of sterner stuff, and know exactly what they’re including and why. Petty would recognise our colleagues’ claim to provide “information on the economic interactions taking place between different sectors of the economy (households, corporations, government, non-profit institutions and the rest of the world) to allow for macroeconomic analysis and evidence-based decision making”.

Given the military origins of his Arithmetick, he’d also be pleased to see the main change in the new system of calculations introduced in 2008: “…expenditure on research and development and weapons systems (warships, submarines, military aircraft, tanks, etc.) are now included in gross fixed capital formation, i.e. investment. This is recognition that expenditure on these items provides long-lasting services to businesses, non-profit institutions, and the governments who use them. This increases the level of GDP across time, but the impact on GDP growth rates will generally be minor.”

Understanding National Accounts was first published in 2006 to give experts and non-experts a practical summary of how to calculate the accounts, but also an understanding of the principles and data sources behind them. Most countries have now adopted the 2008 methodology, but the new edition reflects three other developments too.

First, the financial crisis highlighted the need to better explain how strong movements in economic activity are actually reflected in national accounts. Second, national accounts can be a source for tracking households’ material well-being in line with the emphasis on “better lives”, beyond the traditional objective of economic growth and GDP, exemplified by the OECD Better Lives Initiative,. Finally, the data on trade in value added now being compiled in parallel to core national accounts shed a new light on the interconnectedness of economies.

Obviously somebody reading about national accounts already has some interest in economics, but one of the strengths of the book is that it takes nothing for granted, and explains every technical term clearly and simply, even familiar ones like “the bizarre title “Gross Domestic Product”, or GDP”. Likewise, to explain the difference between GDP and gross national income (GNI), it uses a simple example: “The earnings of workers living in Germany but working in neighbouring parts of Switzerland or Luxembourg have to be added to the German GDP to obtain its GNI. Conversely, the earnings of the seasonal or regular workers living in France or Poland and working across the border in Germany have to be deducted from the German GDP to obtain the German GNI.”

Once you’ve read the main text, you can test your knowledge using a series of exercises (the answers are provided). It’s true that “Calculate the GDP of this economy” is for the bold and the brave, but maybe all national accountants recognise themselves in Petty’s birth horoscope: “Jupiter in Cancer makes him fat at heart”, even if they’d prefer to avoid a second opinion that “vomits would be excellent good for him”.

Useful links

OECD Statistics Directorate

OECD data portal

Is GDP a satisfactory measure of growth? François Lequiller, co-author of Understanding National Accounts talks to the OECD Observer

A long-term view on inequality

Different time, same problem?

Today’s posting is published on international Blog Action Day, which this year is focusing on income inequality.

A time-traveller from 200 years ago would find our world almost unrecognisable. Our technologies and lifestyles would seem almost magical – motorcars, air travel, our obsession with smartphones. The visitor from the past would also notice enormous social shifts: Today, we live longer; most of us can read; many of us have a say in who governs us; and, in much of the world, women and men are treated pretty much equally.

Still, there’s one thing that mightn’t surprise our visitor too much: Even though poverty is not what it once was, humanity is still divided between haves and the have-nots.

But is the world today really more unequal than in 1820, a time when emperors still sat on the throne in China, when monarchs ruled much of Europe and when mass industrialisation was still in its infancy? If you’re hoping for a simple yes or no, prepare to be disappointed. As the OECD’s recently released How Was Life? report shows, the world today is both more unequal and about as unequal as it was back in 1820. It all depends on how you look at it.

People typically think of inequality in the context of where they live – a rich guy passes in his Lamborghini, reminding you that you’ll probably never be able to afford one yourself. Economists call this “within-country inequality,” and it actually hasn’t changed very much since 1820.

But, from a global perspective there are at least a couple of other ways to think about inequality. One is in terms of “between-country” inequality – in other words, the gap between rich and poor countries. The other is to treat the entire planet as a single country – in other words, to look at the gap between rich and poor people worldwide, regardless of where they live.

Over the course of the past couple of centuries, probably the most striking change in inequality has been the emergence of rich and poor nations. As Angus Maddison discussed in The World Economy: A Millennial Perspective, back in 1820 countries in North America, Western Europe and Australasia, as well as Japan, had only about double the income of the rest of the world.

But then, in the 19th century, the world experienced what’s sometimes called “the great divergence,” when Western Europe and North America, in particular, began dramatically to pull away. As The Economist noted recently, in 1820, Britain was only about five times richer than the world’s poorest nation; today, the United States is about 25 times richer than the world’s poorest nation.

This divergence is sharply reflected in the How was Life? figures for between-country inequality. Back in 1820, the Gini figure for inequality between countries was just 16, which is extremely low. (Remember, 0 equals absolute equality on the Gini scale*, where everyone has the same income, and 100 equals absolute inequality, where one person bags all the income.) Today, by contrast, between-country inequality stands at 54.

What about if we treat the entire world as a single country? Here, it’s clear that inequality has risen, but more slowly than between countries: For 1820, it’s estimated that world inequality was 49 on the Gini scale; today it’s put at around 66.

What explains these trends? It’s hard to distil two centuries of history, but one factor looks to have played a significant and recurring role – globalisation. Throughout much of the 19th century, the world economy became increasingly globalised, but that process halted with the outbreak of the World War I and receded further with the split between the capitalist and communist zones before re-emerging in the 1980s.

There are reasons to think that the long period of de-globalisation in the 20th century was reflected in global income inequality, and, in particular, in an unusual pattern in global income distribution. Typically, we’d expect to see a “bell curve” – lots of people with incomes around the average and, at either end of the curve, some people with extremely low incomes and a few with extremely high incomes. But in the mid-20th century, we see the emergence of a curve with two “bumps”.


Source: How Was Life? (OECD, 2014)

It seems likely that these two bumps reflect the divisions of the post-World War II economy: On one side is the “rest of the world,” which included many communist states that actively pursued narrow income gaps; on the other is the “wealthy West,” which enjoyed increasing prosperity while also pursuing policies to narrow inequality.

Beginning in the 1980s, the bumps begin to fade. In a globalising economy, the wealth gap between countries began to narrow as places like China entered the global economy. By contrast, the wealth gap within countries began to rise. In part, that was a result of the collapse of the Soviet Union and the Eastern bloc. But it also reflects rising inequality in OECD countries. Since the 1980s, they, like many other countries, have faced tough choices over how to prosper in an increasingly global economy. In some cases, policies that have been good for competitiveness have not been all that great for equality.

* At the risk of upsetting statisticians, we’re using what the World Bank’s Branko Milanovic calls “Gini points” (a scale of 0 to 100), rather than the more traditional Gini coefficient scale of 0 to 1.

Useful links

Income inequality since 1820,” by Michail Moatsos, Joery Baten, Peter Foldvari, Bas van Leeuwen and Jan Luiten van Zanden (from How Was Life?, OECD 2014)

Mapping the history of wellbeing – Sue Kendall introduces How Was Life?

OECD work on inequality

Behold the power of fungus… and biodiversity offsets

Korean friendship bell with Ganoderma fungus motif
Korean friendship bell with Ganoderma fungus motif

The Convention on Biological Diversity (COP 12) is taking place in Pyeongchang, Korea, until 17 October 2014. Today’s post is from Naazia Ebrahim of the OECD Environment Directorate

When you think of biodiversity conservation, you probably think of the classic images: the polar bear, the lion, the elephant, the giraffe. The ecological community likes to call them charismatic megafauna, with only a hint of satire.

But did you know that the only thing that can neutralise the deadliest, antibiotic-resistant superbug on this planet is a fungus? Now, note that it was discovered in the soil of a Canadian national park, and it rather makes the argument (well, the anthropogenic argument) for conservation of biodiversity in all its shapes and forms by itself. Behold the power of a fungus!

Unfortunately, most biodiversity has been having a rough time of it lately.

As we have all heard recently, WWF’s 2014 Living Planet Report has reported a 52% decline in mammals, birds, reptiles, amphibians and fish overall from 1970 to 2010, while IUCN’s Red List indicates that a quarter of mammals, over a tenth of birds, and 41% of amphibians are at risk of extinction. The decline is worse in the tropics, and particularly in Latin America, where species populations have dropped by 83% since 1970. Significantly scaled up efforts will be needed if we are to reach the 2011-2020 Aichi Biodiversity Targets – agreed upon at the 2010 conference of the Convention on Biological Diversity – in time. And this is true not only for conservation, but also for the sustainable use of biodiversity and natural resources.

Here at the OECD, we’re looking at how to scale up finance for biodiversity, and how instruments for conservation and sustainable use of biodiversity can be designed and implemented in more effective ways. One instrument, biodiversity offsets, has recently been gaining much attention from government and business alike. Based on the polluter pays approach, biodiversity offsets operate under a “no-net-loss” principle, and have the potential to reduce the costs of achieving environmental objectives.

To be sure, there are difficulties. The most obvious one is that biodiversity is not like carbon: one unit emitted here does not equal one unit saved there. Biodiversity is highly specific, and often highly localised; there are many ecosystems that wouldn’t necessarily exist if ecological conditions changed slightly. So project developers need to be particularly careful at building in safeguards; offsets must be a last resort after avoidance and mitigation; offset design must adhere to strict requirements for ecological equivalence; and monitoring and verification must be extremely robust.

As we work through establishing good practice insights, we hope that biodiversity offsets will be able to provide developers with an additional tool to reduce their adverse impacts on biodiversity in a cost-effective way. That really would be a win-win – and one that would make all superbug-fighting fungi happy.

Useful links

The OECD held a workshop on biodiversity offsets in November 2013, with representation from governments, industry, and civil society. Keep an eye out for our publication, forthcoming in early 2015.

Preliminary OECD Policy Highlights on Biodiversity Offsets

Chapter on Biodiversity Offsets from Scaling up Finance Mechanisms for Biodiversity