World Food Day 2015: Building Resilient Societies and Breaking the Cycle of Rural Poverty in the Sahel and West Africa Region

WFDOusman Tall, Sahel and West Africa Club (SWAC) Secretariat

The official programme marking World Food Day takes place today at the Universal Exposition in Milan, under the theme, “Social Protection and Agriculture: Breaking the Cycle of Rural Poverty”. This theme underscores the role of social protection in ensuring that food and other basic needs of the most vulnerable individuals and households are addressed. Furthermore, embedded in this theme is the assertion that social protection programmes tied to productive activities, such as agriculture, are the most sustainable approach to eradicating poverty and achieving food and nutrition security. This has considerable implications for Sub-Saharan Africa, where poverty is pervasive in rural areas.

Sub-Saharan Africa, especially the Sahel and West Africa region, is one of the poorest and most food-insecure regions in the world. Out of the 25 poorest countries in the world, 23 are in Sub-Saharan Africa with 11 of them in the Sahel and West Africa Region. It has the world’s fastest growing population, where 65% of countries are classified as low-income countries and over half of the population is living below the poverty line.[1] To address the high levels of food insecurity and poverty, a number of social protection initiatives have been put in place, including national social protection strategies in some countries. In 2014, the European Union alone assisted 1.7 million food-insecure people and 580 000 malnourished children in the Sahel.[2] This has provided a strong argument and a basis for a pro-smallholder agricultural intervention in rural areas in the Sahel and West Africa region.

Most Recent Food Insecurity Situations in the Sahel and West Africa Region (click for full size)

food-insecurity-sahel-west-africa

© Map produced by CILSS/Agrhymet. Source: Regional analysis of the Cadré harmonisé (CH), Bamako, 22-23 June 2015.

Linking social protection programmes with economic activities, productivity, ownership and long-term sustainability is important. Tackling risk and vulnerability and at the same time ensuring pro-poor growth through investments in social protection programmes lead to greater inclusive growth.[3] These should be the guiding principles in the design and implementation of social protection programmes. However, most social protection initiatives and interventions in the region are project-oriented, mainly addressing poverty and food insecurity during times of crisis. With the persistent nature and recurrence of crises in the region, there is a need to go beyond interventions during crises, to build the resilience of the most vulnerable populations in adapting – in a sustainable manner – to these emerging and recurrent crises.

Cognisant of this and at the invitation of the EU, stakeholders of the Sahel and West Africa region and their Technical and Financial Partners (TFPs) met in Brussels on 18 June 2012 to discuss the root causes of the recurrent food and nutrition crises in the region, which were weakening the livelihoods of the most vulnerable households. To tackle these problems, which are multiple and complex, the stakeholders agreed on a long-term collaborative effort that gave birth to the establishment of the Global Alliance for Resilience (AGIR) – Sahel and West Africa. AGIR is not a new policy or program, but a kind of framework or approach that seeks to channel the efforts of stakeholders in the region towards a common results-focused framework based on a shared definition of resilience: “The capacity of vulnerable households, families and communities and systems to face uncertainties and risk of shocks as well as to recover and adapt in a sustainable manner”.

Just ten days after the World Food Day Programme, the Sahel and West Africa Week will be celebrated at the 2015 Universal Exposition in Milan from 26-30 October. Organised by the Sahel and West Africa Club and its Members and partners, the Week will provide an opportunity for stakeholders to exchange best practices and shared solutions on issues such as food insecurity, malnutrition, poverty and resilience. AGIR stakeholders will meet to assess progress made since 2013 when 17 countries adopted the AGIR Regional Roadmap and committed themselves to its implementation. Consistent with the Roadmap, countries have organised national inclusive dialogues and are developing their own National Resilience Priorities (NRP-AGIR).

Through the NRP-AGIR, countries are fostering the improvement of social protection for the most vulnerable by strengthening food and nutrition programmes and improving their governance systems. They are also targeting income generating activities, especially through the agricultural value chains, in order to increase productivity and access to food for vulnerable segments of the population. These interventions are in recognition of the fact that the rural sector in the region is dominated by poor agricultural households that are faced with uncertainties as a result of numerous factors, ranging from socio-economic and political factors to natural disasters, such as flood, drought and pest infestation.

It is obvious that with the many uncertainties and the recurrent nature of crises in the region, livelihoods will continue to be affected, with individuals, households and communities becoming more vulnerable. To break this cycle, strengthening the resilience of the most vulnerable segments of the population should be at the core of every social protection programme in the region. This is a fundamental priority of the Alliance. AGIR recognises that the state has an essential obligation in providing a framework to build resilience, and that this requires long term strategic planning based on existing national policies and programmes.

The strength of the Alliance lies in the fact that it is co-ordinated through the Food Crisis Prevention Network (RPCA). Created in 1984, the RPCA has acquired remarkable experience in not only managing but preventing crises in the region. The Network benefits from a strong level of regional ownership, operating under the political leadership of the Economic Community of West African States (ECOWAS) and the West African Economic and Monetary Union (UEMOA), with the co-facilitation of the Permanent Inter-State Committee for Drought Control in the Sahel (CILSS) and the SWAC Secretariat, and brings together all stakeholders working in the region. Through the Network, there is now broader co-operation among technical and financial partners, especially those working on food and nutrition security, poverty, social protection and resilience. At the occasion of World Food Day, the SWAC Secretariat, in collaboration with ECOWAS, UEMOA and CILSS, is launching today a film dedicated to the RPCA which raises awareness about the Network’s achievements and future challenges.

Finally, the AGIR objective of “zero hunger” (to completely eradicate hunger and malnutrition in the region) in 20 years is consistent with the 2030 Sustainable Development Goal 2: “End hunger, achieve food security and improved nutrition and promote sustainable agriculture.” To achieve this objective, there is a need for all stakeholders to reaffirm their commitment to the implementation of the AGIR Regional Roadmap, especially at a time when the Sustainable Development Agenda has been endorsed by Heads of States at the United Nations General Assembly. There is no better place for AGIR stakeholders to reaffirm their commitments than at the Universal Exposition in Milan during the Sahel and West Africa Week.

Useful links

[1] Food security in focus: Sub-Saharan Africa 2014. The Economist Intelligence Unit 2014

[2] ECHO Factsheet – Sahel: Food & Nutrition Crisis – May 2015

[3] Promoting Pro-Poor Growth: Social Protection-OECD 2009,

Making innovation work

Innovation imperativeDirk Pilat, Deputy Director, OECD Directorate for Science, Technology and Innovation

Today, innovation is central to advanced and emerging economies alike; in many OECD countries, firms invest as much in the knowledge-based assets that drive innovation, such as software, databases, research and development, firm-specific skills and organisational capital, as they do in physical capital, such as machinery, equipment or buildings. The use of information and communication technologies has become universal in only a few decades and new applications, for citizens and businesses alike, emerge daily. But while innovation is all around us, its impact on growth and wellbeing is not always very clear. Moreover, there are growing concerns about the disruptive power of innovation, notably its impact on jobs. Ensuring that innovation contributes to growth, jobs and greater wellbeing therefore remains a challenge, as does the application of innovation to policy challenges as diverse as climate change, health or the delivery of public sector services.

The new OECD report The Innovation Imperative – Contributing to Productivity, Growth and Well-being draws on work on innovation across the OECD and argues that policy makers can do better in marshalling the power of innovation. While firms make the bulk of the investments that drive innovation, government action is key to making innovation work for growth and wellbeing. Policy makers need to foster a sound environment for innovation across the economy; invest in the foundations for innovation, such as research, skills and knowledge infrastructure; help in overcoming critical barriers to innovation; and ensure that innovation ultimately contributes to growth and greater well-being.

One of the difficulties to making innovation work is that it relies on a mix of policies for innovation that go considerably beyond research and innovation alone. The precise mix will depend on the national and institutional context of each country, the level of economic and social development, and the prevailing barriers to innovation. It will also need to be adapted to the specific challenges of different sectors and policy areas, whether public or private, e.g. agriculture, energy, health, education or the public sector. A number of policy areas are particularly important across all of these:

Effective skills strategies: Innovation should ultimately contribute to increasing people’s well-being. It also rests on people that have the knowledge and skills to generate new ideas and technologies, bring them to the market, and implement them in the workplace, and that have the skills to adapt to structural changes across society. However, the OECD Survey of Adult Skills shows that two out of three workers do not have the skills to succeed in a technology-rich environment. A broad and inclusive education and skills strategy is therefore essential.

Development of a sound, open and competitive business environment that encourages investment in technology and in knowledge-based capital, that enables innovative firms to experiment with new ideas, technologies and business models, and that helps successful firms to grow and reach scale. However, policy – ranging from R&D tax credits to environmental regulations – too often favours incumbents, which reduces experimentation, delays the exit of less productive firms, and slows the reallocation of resources from less to more innovative firms. It also delays the introduction of breakthrough innovations in the economy, which is particularly problematic for areas in need of radical change, such as energy. Moreover, it tends to limit job creation: young firms account for over 40% of all new jobs in OECD economies and could probably create even more given the right policy framework.

Sustained public investment in an efficient system of knowledge creation and diffusion. Public investment in research is essential for innovation; most of the key technologies in use today, including the Internet and genomics, have their roots in public research. While such investment has held up reasonably well during the crisis, it is now declining in many OECD countries as these engage in fiscal consolidation and focus more on short-term benefits. As the world faces long-term challenges like climate change and ageing, now is not the time for policies for innovation to be driven solely by short-term benefits.

More balanced support for business innovation: OECD governments have increased their emphasis on R&D tax incentives in recent years, and these now amount to almost 40 billion USD across the OECD. Such incentives often do not meet the needs of young, innovative firms and risk amplifying cross-border tax planning by multinational firms. Better design can help, but governments also need to strengthen support through competitive and transparent grants as a complement to tax incentives. These are more suited to the needs of young innovative firms, can foster cooperation across the innovation system, and can be directed towards areas were government support can have the highest impact.

Increased access and participation in the digital economy. Digital technologies offer a large potential for innovation, growth and greater well-being and can affect also every part of economy and society. However, policy action is needed to preserve the open Internet, address privacy and security concerns, and ensure access and competition. Digitally enabled innovation also requires new infrastructure such as broadband, spectrum and new Internet addresses.

Sound governance and implementation, including a commitment to learning from experience. The impact of policies for innovation depends heavily on their governance and implementation, including the trust in government action and the commitment to learn from experience. Policies for innovation operate in a complex, global, dynamic and uncertain environment, where government action will not always get it right. A commitment to monitoring and evaluation of policies, and to learning from experience and adjusting policies over time, can help ensure that government action is efficient and reaches its objectives at the least possible cost.

Clearly, there is no magic bullet to strengthen innovation performance. However, concentrating policies on these areas for action will help governments in fostering more innovative, productive and prosperous societies, help increase well-being, and strengthen the global economy in the process.

Useful links

Data Driven Innovation: Big Data for Growth and Well-Being

OECD Science, Technology and Industry Outlook 2014

OECD Reviews of Innovation Policy offer a comprehensive assessment of the innovation system of individual OECD member and partner countries, focusing on the role of government. They provide concrete recommendations on how to improve policies which impact on innovation performance, including R&D policies. Each review identifies good practices from which other countries can learn.

The time-travelling policy maker

The hyperbolic discounter
The Hyperbolic Discounter

Bill Below, OECD Directorate for Public Governance and Territorial Development (GOV)

Are policy makers stuck in time? That may explain why incremental issues that cumulate and creep slowly across the temporal dimension pose such huge challenges. Politicians are clearly more comfortable in the here and now. Harder to deal with are slow-moving emergencies such as climate change, growing inequality and state pension reform, to name but a few. Rather than being the wolf at the door, these issues are the termites in the floor. Without action, the floor will collapse—guaranteed.

“Political short-termism”, “policy myopia”, “policy short-sightedness”… these are the terms of present-centric policy thinking, a phenomenon in which policy makers fail to use present opportunities to mitigate future harms. It’s all part of the freaky world of intertemporal policy trade-offs.

So why do we have such underdeveloped intertemporal policy chops? Neuroeconomists suggest that we may be born that way.

Situated in the ventral striatum, within the basal ganglia of the brain, is the nucleus accumbens or NAc, sometimes called the brain’s reward centre. A study published last month shows that interaction of the NAc with the hippocampus is critical in shaping decisions that involve time trade-offs. Compared with controls, rats with a disrupted hippocampal-NAc interaction lost their ability to select delayed food rewards.

Should we start examining the hippocampal-NAc interaction in the brains of policy makers? Probably not. But it does evoke the physiological and evolutionary function of intertemporal trade-offs. The fact we are still here as a species seems to suggest that we get it right at least some of the time.

Policy makers have company. Children, drug addicts and the poor also tend to be bad at intertemporal trade-offs, the latter because they have little choice but to deal with continuous and immediate crises.

Each group (along with the rest of us) exhibits what behavioural economics calls “present-biased preference”—the discounting of the future such that an immediate reward is preferred to the detriment of a more desirable future reward or outcome. A common symptom of present-biased preference is procrastination. We are “time inconsistent” the behavioural economists tell us, which means at different points in time we want different things. Economists even slice us into temporally and preferentially distinct selves. Freaky indeed.

But individual wiring may be just one factor in policy myopia.

In his speech to the UN last year, Yoshihiko Noda, the former Prime Minister of Japan, suggested that the very nature of our democratic system “comprised of representatives serving people living now” necessarily skews policy towards a present bias and “invites politics that burden silent future generations and puts problems off.”

Economist William Nordhaus predicted that “A perfect democracy with retrospective evaluation of (the economic performance of) parties will make decisions based against future generations” (Nordhaus, 1975).

But if the system is biased, what can politicians do? The spectre of electoral retribution is never far from the politician’s mind, and he or she will invest only within a zone of electoral safety. The OECD’s Regulatory Outlook (forthcoming) points to the conflict between election cycles and policy cycles, making it hard for politicians to focus on longer-term regulatory projects. The “rush to regulate” is one of the ways regulation stays rooted in the present, as politicians are pressured by current events and catastrophes to find regulatory solutions. But also, the benefits of regulatory policies tend to be dispersed and generally only evident in the medium term, where political signals are weaker, while groups that stand to lose are always brashly vocal in their opposition. Even policy makers who want to promote long-term social, economic or environmental policies (and there is reason to believe they are the majority), regularly face enormous electoral pressure to deliver short-term results.

But present bias is not destiny – necessarily.

In the intertemporal policy sphere, present costs tend to be more salient than future rewards, but not in every case. Perceived direct causal links between present action and future outcomes can overcome present-biased preferences and facilitate the task of the would-be intertemporal policy maker. If I believe that rising sea levels and storm surges will impinge on my family’s future well-being, and that by voting for stricter CO2 reduction objectives I can avoid or mitigate that outcome, then I will be motivated to make certain trade-offs. It may be difficult, however, for some to imagine that adjustments in the way they live today can have an impact on global temperatures tomorrow. Education can go a long way in helping citizens (and perhaps some politicians) understand important causal linkages. In the US, for example, Next Generation Science Standards encompassing global climate change science, are being widely implemented in elementary to high school curricula. Call them the seeds of tomorrow’s intertemporal policies.

But causal links can be blurred, by the length and complexity of causal chains or by deliberate intent. Special interest groups that seek to delegitimize broadly established climate science, attempt, among other things, to blur causal lines while appealing to our present-bias by evoking would-be short-term pain (job losses, high energy bills and business closures, etc.) should we attempt to limit the use of fossil fuels.

Indeed, research suggests that special interests may play a primary role in short-sighted policy decisions (Jacobs, 2011). It’s easy to understand why, with short-term financial objectives dominating business cycles and the prevalence of special interest groups in electoral and policy-making processes. The OECD’s Financing Democracy (forthcoming) points to the enormous challenges that remain in political finance reform.

Emphasis on biased political processes downplays the importance of citizens as agents of change. If short-term thinking is hard-wired into the electoral process, a shift towards long-term thinking in voter attitudes can force representatives out of their bias.

But also, citizens increasingly have an additional role to play, beyond voting, in shaping policy. The Regulatory Outlook reports that a growing number of countries are mandating stakeholder consultation in the creation and assessment of policies. This is based on the principle that policies best serve the public good when input is gathered from those subject to them—citizens, businesses, civil society, NGOs, public sector organisations… Ideally, citizen-consultants can evaluate policy for its impact on, or effectiveness in addressing long-term outcomes.

But can we ourselves be counted on to be reliable custodians of the interests of our future selves and those beyond us? Do we need, as author Jonathan Boston suggested, a High Commissioner for Future Generations or equivalent to give a voice to silent future stakeholders? And how might one go about embedding the interests of future stakeholders in a democratic process?

Whatever the answers may be, now-distant consequences of unmitigated issues will eventually show up on our doorstep and we will be obliged to respond with all of our courage, stamina, resources and intelligence.

Or we can get our intertemporal game on earlier when our options are immensely better.

Useful links

W.D. Nordhaus, The Political Business Cycle, The Review of Economic Studies, Vol. XLII (2), No. 130, April 1975, pp. 169-190

A. Jacobs, Governing For The Long Term, Cambridge University Press, 2011

Answering the Queen’s question: New approaches to economic challenges

NAEC main messagesLord Robert Skidelsky, Emeritus Professor of Political Economy, University of Warwick, based on remarks made at the launch of the OECD Initiative on New Approaches to Economic Challenges (NAEC) on September 18th

“Why did no one see it coming?” asked Queen Elizabeth II of Great Britain, shortly after the world economy collapsed in 2008. In addressing the question to a group of economists, the Queen was spot on. As OECD Chief of Staff Gabriela Ramos said, “The crisis struck at the core of tightly held economic ideas, modules and policy”. I would go further. Crisis struck because of tightly held economic ideas, models and policies. The policy models used pre-2008 were wrong or seriously flawed; this contributed to the collapse, chiefly by omission. The OECD’s New Approaches to Economic Challenges (NAEC) report recognises this, arguing that the challenge is for economists to develop a better sense of how economies work; and for economic policy to develop policies which reflect this understanding.

To put the matter concretely, we have to determine under what combination of policies and institutions the macro economy will exhibit good performance, defined as cyclical stability, high employment, decent growth rates, stable prices, and human and planetary well-being. I would like to discuss questions which have occurred to me since 2008 along with some observations from the latest NAEC report, which gives much food for thought..

First, money and banking. Monetary policy is not mentioned by NAEC. Orthodox macro policy before the slump consisted of “one target, one instrument”. The target was the inflation rate; the instrument was interest rates. This was clearly inadequate. But we haven’t yet sorted out what should be the proper aims of monetary policy, what is properly monetary and what is properly fiscal, what is macro and what is micro. For example, bank regulation is micro, but it increasingly counts as part of macro policy. Perhaps we should call macro any micro event or institution which has macro effects.

The NAEC report calls for “Better integration of financial sector”. What does this mean? Does it mean “better able to serve the needs of the real economy”? If so, what reforms are needed? I’m disappointed that NAEC didn’t challenge the orthodox view that financial innovation is good. What it does is to make the economy more financial – that is, enable more and more people to earn their living making money out of money. We have to ask further questions on money, starting with whether the central bank can control the credit system to avoid boom and bust. And if not, what is the alternative? What has been the impact of quantitative easing (QE)? The Eurozone is gaily embarking on a massive monetary expansion, when most of the evidence suggests very limited effect for reasons Keynes would readily have recognised.

There is a cluster of issues around fiscal policy. The NAEC report talks of “promoting fiscal soundness and fostering the counter-cyclicality of macroeconomic policies”. What is meant by “fiscal soundness”? Does it mean balancing the budget? What is meant by balancing the budget? Which budget? All governments are embarked on deficit reduction. We are rarely told which deficit they are planning to reduce. Are there safe upper limits to public deficits and debts? What are the best ways of financing public borrowing -bonds, QE, Treasury bills-and under what circumstances?

Can the public accounts be differently presented to bring out the capital/current account distinction? Should governments have off-budget accounts, for instance a National Investment Bank?

Forecasts of inflation, output gaps, multipliers have been fairly consistently wrong ever since the crisis struck. The whole question of forecasting needs a serious look. Forecasts are highly model dependent. If the model is wrong the forecast will be wrong – or wronger than normal.

Jobs. What is Europe’s natural rate of unemployment? How is it estimated? If, as in Europe today we have zero inflation and unemployment at 10%, is this Europe’s natural rate? Or has the term lost any useful meaning?

Where are the jobs in the future to come from? The NAEC report doesn’t mention the impact of automation on jobs. It talks about need to enhance human skills and capital, which is simply conventional wisdom. Are humans destined to “race with machines” or “race against machines” to quote the question raised by Brynjolffson and McAfee.

Economic growth. NAEC wants both “economic growth and well-being” and “economic growth and environmental sustainability”, in other words all the good things in life simultaneously. And so say all of us. But we can’t have them. Continuation of the kind of growth we have had in the past will certainly be inimical to the well-being of humans, and of course of the planet. Growthmanship, and its associated consumerist culture, needs to be challenged much more vigorously.

Distribution and inequality. NAEC writes of “Increasing evidence that large income inequality undermines growth and well-being, by reducing investment in skills by low-income households”. It says that taxation systems need to be reformed to ensure they are “progressive enough”. But what is progressive enough? And what changes in politics will be needed to bring about more progressivity to offset the rise in inequality? Where is the political support to come from?

The woeful state of economics. NAEC says disappointingly little about this. It says economics should draw insight from sociology, psychology, geography, and history. I completely agree, except that philosophy is omitted and history put last. A reading of Aristotle would be a sound corrective to all those who place their faith in financial innovation and consumerism. A knowledge of history would correct the bias of economics to a priori theorising beautifully expressed by the 19th century French economist Jean-Baptiste Say: “What useful purpose can be served by the study of absurd opinions and doctrines that have long ago been exploded, and deserved to be? It is mere useless pedantry to attempt to revive them. The most perfect a science becomes the shorter becomes it history…” We are still waiting for the perfection which will abolish the need for history.

Useful links

The webcast of the NAEC launch is available here

How much is enough? Money and the good life Edward Skidelsky and Robert Skidelsky

Keynes: The return of the master Robert Skidelsky

The OECD Initiative on New Approaches to Economic Challenges (NAEC)

New Approaches to Economic Challenges from the OECD

NAEC main messagesMathilde Mesnard, Coordinator of the OECD Initiative on New Approaches to Economic Challenges (NAEC)

New economic and policy thinking is required today more than ever. On September 18th, the OECD Secretary-General launched a discussion on the New Approaches to Economic Challenges (NAEC) Synthesis report with OECD Chief Economist Catherine Mann, Lord Robert Skidelsky and Jean Pisani-Ferry. The launch event was in the best tradition of NAEC seminars with hard questions being asked about the report and the OECD’s policy approaches.

OECD Chief of Staff and G20 Sherpa Gabriela Ramos put several questions to the panellists about the current state of economic policy and the progress made since the economic crisis. We very much welcomed the perspectives of all the speakers. Jean Pisani-Ferry talked about the difficulties of incorporating risk into policy-making. He also suggested that policymakers base what they do on particular theories shorn of nuances and assumptions which are accepted by the research community. This often means that policy is based on over-simplification.

Catherine Mann questioned how far the agenda on complexity could be taken forward at the OECD. To help answer this, a NAEC workshop is being held at the OECD on Complexity of the Economy: Research and Policy Implications on 26-27 October. It will explore complexity research in finance, sustainability and macroeconomics as well as complex systems methods and data analysis.

We were encouraged by Lord Robert Skidelsky’s remark that the latest NAEC report gives much food for thought. We also welcome his positive remarks on our inequality work and attempts to inform our policy advice by looking to insights from other disciplines, in particular history. Indeed we have made a special effort to learn lessons from the OECD’s own history to inform NAEC. Lord Skidelsky observed several omissions in the NAEC report. Yet the NAEC Synthesis report was a continuation of two reports submitted to the Ministerial Conference Meeting in 2014 – the first Synthesis and NAEC: The Financial Stream.

Skidelsky mentions that NAEC does not examine monetary policy. This issue was addressed at length in the 2014 Synthesis. The report argued that monetary policy contributed to excessive policy accommodation in the lead-up to the crisis. It called for further investigation into the effects of unconventional monetary policy noting that while successful, the long–run effects as well as the short-term effects of an eventual tapering of these measures needed to be closely monitored. A major lesson of the crisis is that both fiscal and monetary policies alone are not sufficient instruments, even more so when interest rates are close to the zero lower bound.

He stated that NAEC did not challenge the wisdom of financial innovation. Yet numerous OECD Secretariat papers in the NAEC process identified poor micro-prudential regulation, excessive leverage and too-big-to-fail business models as prime reasons for the financial crisis. The crisis emphasised the limits to regulatory capacities in the financial sector, and how fragmented regulatory frameworks generated information and implementation gaps. We have questioned not only the merits of financial deregulation but also financial innovation arguing that the rents were extracted to a very large extent for the financial sector itself.

More recently with NAEC work on finance and inclusive growth, we have argued that if the financial sector grows too large, it can undermine growth and increase inequality. We have pointed to the need to ensure that the financial sector contributes to strong and equitable growth by avoiding credit overexpansion and by improving the structure of finance. Yet the launch event clearly indicated that the financial crisis exposed weak understanding of the inner workings of banks and financial institutions in the OECD. Analysis of financial markets and capital flows could also be strengthened.

Skidelsky asks another fundamental question, where are the jobs in the future going to come from? Dirk Pilat, Deputy Director of the OECD Science, Technology and Innovation Directorate responded during the debate that this issue is very much an issue on the table at the OECD, and at the heart of current discussions on productivity and inclusive growth. In fact a Labour Ministerial Meeting will take place early next year on this very subject. New production technologies and automation have always been disruptive with new jobs being created while others are lost all the time. The question remains if there is something new in terms of the amount of disruption caused by the next production revolution.

All speakers debated the merits and demerits of siloed approaches to research and policy-making. Gillian Tett from the Financial Times will address the OECD community in a NAEC seminar on October 12th outlining her new book The Silo Effect. Tett examines how silos can prevent us from seeing risks because we are so consumed with our own area of expertise that we are unaware of information from allied silos and thus fail to see the big picture. She also outlines how the effect of silos could be mitigated by keeping boundaries of teams fluid, rethinking how incentives can stifle collaboration beyond a team, and ensuring the broadest information flows. NAEC can help counter the Silo Effect – we should strive to create more joint teams; promote and support horizontal projects and further cross-committee discussion among the various OECD Committees.

The discussion of the report underlined the importance of creating a space for debate and fresh-thinking at the OECD on the fundamental issues facing economists and policy-makers. It also spurred continued efforts in searching for for new approaches to economic challenges.

Useful links

  

How Tajik weddings helped me understand Wall Street

Silo EffectGillian TettFinancial Times US Managing Editor and 2014 British Press Awards Columnist of the Year

The Silo Effect first sprung to life during the Great Financial Crisis of 2008. But it is not a book about finance. Far from it. Instead, it asks a basic question: Why do humans working in modern institutions collectively act in ways that sometimes seem stupid? Why do normally clever people fail to see risks and opportunities that are subsequently blindingly obvious? Why, as Daniel Kahneman, the psychologist, put it, are we sometimes so “blind to our own blindness”?

It was a question I often asked myself in 2007 and 2008. Back then, I was working as a journalist in London, running the markets team of the Financial Times. When the financial crisis erupted, we threw ourselves into trying to understand why the disaster had come about. There were lots of potential reasons. Before 2008 bankers had taken some crazy risks with mortgages and other financial assets, creating a gigantic bubble. Regulators had failed to spot the dangers, because they misunderstood how the modern financial system worked. Central bankers and other policymakers had given the wrong economic incentives to financiers. Consumers had been dangerously complacent, running up huge credit card debts and mortgage loans without asking whether they could be repaid. Ratings agencies misread risks. And so on.

But as I dug into the story of the Great Financial Crisis as a journalist (and later wrote a book about it, Fool’s Gold) I became convinced that there was another reason for the disaster: the modern financial system was surprisingly fragmented, in terms of how people organized themselves, interacted with each other, and imagined the world. In theory, pundits often like to say that globalization and the Internet are creating a seamless, interlinked world, where markets, economies, and people are connected more closely than ever before. In some senses, integration is under way. But as I dug into the 2008 crisis I also saw a world where different teams of financial traders at the big banks did not know what each other was doing, even inside the same (supposedly integrated) institution. I heard how government officials were hamstrung by the fact that the big regulatory agencies and central banks were crazily fragmented, not just in terms of their bureaucratic structures, but also their worldview. Politicians were no better. Nor were the credit rating agencies, or parts of the media. Indeed, almost everywhere I looked in the financial crisis it seemed that tunnel vision and tribalism had contributed to the disaster. People were trapped inside their little specialist departments, social groups, teams, or pockets of knowledge. Or, it might be said, inside their silos.

That was striking. But as the 2008 crisis slowly ebbed from view, I realized that this silo effect—as I came to call it—was not just a problem at banks. On the contrary, it crops up in almost every corner of modern life. In 2010 I moved from London to New York, to run the American operations of the Financial Times, and when I looked at the corporate and government world from that perch, I saw a fragmented pattern there too. The silo syndrome cropped up at gigantic companies such as BP, Microsoft, and (later on) at General Motors. It plagued the White House and Washington agencies, not to mention large multilateral groups such as the World Bank and International Monetary Fund – and, I daresay, the Organisation for Economic Cooperation and Development too.

Large universities were often beset with tribalism. So were many media groups. The paradox of the modern age, I realized, is that we live in a world that is closely integrated in some ways; but fragmented in others. Shocks are increasingly contagious. But we continue to behave and think in tiny silos.

So this book sets out to answer two questions: Why do silos arise? And is there anything we can do to master our silos, before these silos master us? I tackle this partly from the perspective of someone who has spent two decades working as a financial journalist, observing global business, economics, and politics. That career has trained me to use stories to illustrate my ideas. So in this book you will hear eight different tales about the silo effect, ranging from Michael Bloomberg’s City Hall in New York to the Bank of England in London, Cleveland Clinic hospital in Ohio, UBS bank in Switzerland, Facebook in California, Sony in Tokyo, BlueMountain hedge fund in New York, and the Chicago police. Some of these narratives illustrate how foolishly people can behave when they are mastered by silos. Others, however, show how institutions and individuals can master their silos. Some of these are stories of failure. But there are also tales of success.

But there is a second strand to this book. Before I became a journalist (in 1993), I did a PhD in the field of cultural anthropology, or the study of human culture, at Cambridge University. As part of this academic work, I conducted fieldwork, first in Tibet, and then down on the southern rim of the former Soviet Union, in Soviet Tajikistan, where I partly lived between 1989 and 1991 in a small village. My research was focused on marriage practices, which I studied as a tool to understand how the Tajik had retained their Islamic identity in a (supposedly atheist) communist state.

When I first became a financial journalist, I was often wary about revealing my peculiar past. The type of academic qualifications that usually command respect on Wall Street, or the City of London, are MBAs or advanced degrees in economics, finance, astrophysics, or another quantitative science. Knowing about the wedding customs of the Tajiks does not seem an obvious training to write about the global economy or banking system. But if there is one thing that the Great Financial Crisis showed it is that finance and economics are not just about numbers. Culture matters too. The way that people organize institutions, define social networks, and classify the world has a crucial impact on how the government, business, and economy function (or sometimes do not function, as in 2008). Studying these cultural aspects is thus important. And this is where anthropology can help. What anthropologists have to say is not just relevant for far-flung non-Western cultures, but can shed light on Western cultures. The methods I used to analyze Tajik weddings, in other words, can be helpful in making sense of Wall Street bankers or government bureaucrats. The lens of anthropology is also useful if you want to make sense of silos. After all, silos are cultural phenomena, which arise out of the systems we use to classify and organize the world. Telling stories about the silo effect as an anthropologist- cum-journalist can thus shed light on the problem. These tales may even offer some answers about how to deal with silos, not just for bankers, but government bureaucrats, business leaders, politicians, philanthropists, academics, journalists – and perhaps OECD officials too. Or that, at least, is my hope.

Useful links

Gillian Tett will be visiting the OECD on October 12 as part of the New Approaches to Economic Challenges seminar series

Say goodbye to the 9-to-5

There are few traditional offices left in the wild
There are few traditional offices jobs left in the wild

In the United States it’s called “the 9-to-5”; in France it’s métro, boulot, dodo –“subway, work, sleep”; in Japan it’s personified as the “salaryman” and his female equivalent, the “office lady”. Whatever it’s called, the traditional job seems to be something we all identify with.

So it was a surprising to read earlier this year that most jobs are anything but permanent, routine and predictable. According to the International Labour Organisation (ILO), only around one in four workers worldwide have what most of us think of as a traditional job – stable and full-time with predictable earnings and working for a single employer. The rest? They’re all “employed on temporary or short-term contracts, working informally often without any contract, are self-employed or are in unpaid family jobs,” as The Guardian reported.

To be sure, there are major variations. For example, even though there are signs of a slight shift towards higher rates of formal employment, very few people in poor and developing countries have formal jobs. In Sub-Saharan Africa and Southeast Asia, fewer than one in five workers are working 9-to-5, says the ILO.

By contrast, traditional jobs are much more widespread in the wealthy OECD countries. But that, too, is showing signs of change. While part-time and temporary work and self-employment still only accounts for about one in three jobs in OECD countries, it makes up a much bigger share of new jobs. Between 1990 and the crisis, around half of all new employment in OECD countries involved these sorts of jobs.

Part-time and temporary work doesn’t always have a very good reputation – often for good reasons – but it undoubtedly meets the needs of some workers. Women, who still bear the brunt of household chores and parenting duties, are much more likely to work part-time than men. Among women who work, about 40% are part-timers against 28% for working men. Young people, too, are a big presence in non-traditional jobs. Among temporary workers, close to half are aged under 30. Some may be tempted by the gig economy; others are probably finding it impossible to break into the permanent workforce.

The growth of non-traditional jobs is affecting not just workers and their families. Its impact can also be seen in society and the economy, and not least in income inequality. The main reason for this is that part-time and temporary jobs are helping to drive a trend towards job “polarisation” or a hollowing-out of the workforce. In other words, old-style jobs are vanishing in the solid middle of the workforce – middle incomes, mid-level skills – while non-traditional jobs are increasingly prevalent among both low and high-skill workers. So, goodbye full-time accountants, hello part-time cleaners and freelance designers.

This squeeze on the middle would tend to widen the income gap in any case. But its impact is exacerbated by the fact that, for low-paid workers, non-traditional jobs tend to pay less – hour for hour – than traditional jobs. Indeed, about 60% of so-called “working poor” households rely mainly on income from non-standard workers.

And lower pay isn’t the only problem facing low-skill temps and part-timers. As the OECD’s recent report on inequality, In It Together, notes, non-traditional workers “tend to receive less training and, in addition, those on temporary contracts have more job strain and have less job security than workers in standard jobs.” Non-traditional work is also rather less of a “stepping stone” to a traditional job than many people think, especially for part-timers and the self-employed.

And there’s a cost for businesses, too, from the decline of traditional jobs: As the OECD’s Stefano Scarpetta told the FT recently, the rise of temping “is not even good for the firms themselves nor for the economy, because this reduces the build-up of human capital on the job.”

Still, despite the drawbacks, it seems clear that growing numbers of people are going to be temping, working part-time or self-employed in the future. In response, countries will need to find ways of better supporting such workers to ensure they don’t slip beneath the poverty line. That may mean changes to taxes and benefits and more support in areas like training and job search to ensure that non-traditional workers can maximise their earnings and job prospects.

Useful links

OECD Policy Brief: Adapting to the changing face of work

OECD work on employment and income inequality

In It Together: Why Less Inequality Benefits All (OECD, 2015)

OECD Employment Outlook 2015

How good is your job? Measuring and assessing job quality” – OECD Employment Outlook 2014

Where do you stand on the income scale? Find out with the OECD’s Compare Your Income web tool.