“A temple of growth”: The OECD and economic growth as its organisational ideology

HegemonyToday’s post is from Matthias Schmelzer of the University of Zürich, who has just published The Hegemony of Growth. The OECD and the Making of the Economic Growth Paradigm.

One of the OECD’s major tasks is to “redefine the growth narrative”, as stated repeatedly by Secretary-General Angel Gurría when specifying his mandate at the helm of the Organisation and at many high-level events since. For example, at the Ministerial Meeting in June 2016, the industrialised countries’ think tank lamented that the world economy is stuck in a “low-growth trap”, but faced with growing inequality, decreasing levels of well-being and climate change, Gurría also claimed that the OECD was inventing a new “growth narrative” aimed at overcoming the focus on GDP by promoting qualitative, inclusive, and green growth.

However, is this search for a new growth narrative really new? Taking a close look at the Organisation’s long history since the 1940s reveals that this is an ongoing quest full of arguments, episodes and dynamics well-worth studying if one wants to understand the OECD’s current difficulties in coming to terms with the predicament of growth.

The OECD is the international organisation most closely associated with economic growth: growth is its defining policy goal, it is the first aim in the OECD Convention, which prompts countries “to achieve the highest sustainable economic growth,” and growth has until nowadays been discussed centre-stage at all important meetings. One is thus tempted to interpret the focus on economic growth as the organisational ideology of the OECD, which was described by one of its most influential directors in the 1960s as “a kind of temple of growth for industrialized countries.”

In my new book I analyse the history of the OECD and its predecessor, the Organisation for European Economic Co-operation (OEEC), in order to understand, how economic growth became the primary goal pursued through policymaking in modern societies. I researched the archives of this organisation and of some of its key member countries, read texts by key protagonists on growth theory, growth debates and the critique of economic growth, and discussed my arguments with colleagues around Europe, North America, and Japan.

The book that resulted is both profoundly historical – retelling in detail the making and remaking of the growth paradigm in the second half of the twentieth century – and topical for current discussions. It argues that the pursuit of economic growth is not a self-evident goal of industrialised countries’ policies, but rather the result of a very specific ensemble of discourses, economic theory, and statistical standards that came to dominate policymaking in industrialised countries under certain social and historical conditions in the second half of the twentieth century.

Already at the Organisation’s first Ministerial meeting in November 1961, the OECD set a growth target – to increase the combined GDP of its member countries by 50 percent within a decade. It is important to note, however, that “sustainable growth” in the OECD Convention – even if often otherwise stated – does not refer to “sustainability” in the modern sense. Since the Brundtland Commission’s famous 1987 report, sustainable development is understood as “development that meets the needs of the present without compromising the ability of future generations to meet their own needs” and aims at balancing economic, social and environmental issues. Within the context of the OECD, however, “sustainability” was understood in a strictly economic sense, meaning growth that is non-inflationary and does not destabilise the balance of payments.

Environmental concerns entered the OECD from the late 1960s onwards. In fact, it was a group of scientist and civil servants around the OECD’s science directorate that first launched a global debate about the “problems of modern society” and then founded the Club of Rome, whose 1972 report “Limits to Growth” became a hallmark of growth criticism. The OECD’s history since then can partly be interpreted as a continuous effort to redefine growth to account for the apparent failures of GDP statistics and growth-oriented policies.

However, while in the following almost five decades growth has been reframed as “sustainable”, “qualitative”, “inclusive” and “green”, the OECD’s major advice stayed in the quantitative framework. The OECD still advocates to “make growth the number one priority.” Symptomatic for modern states, this can at least partly be attributed to the Organisation’s silo structure, in which social and environmental concerns are not integrated into the key debates in the economics department. In this vein, a recent study by the London-based Institute for Human Rights and Business (IHRB) and the Heinrich-Böll-Foundation argued that the OECD’s advice on infrastructure investment – all geared towards increasing growth – thwarts the climate goals agreed to in Paris last November.

In fact, recent years, in particular in the context of reflections on the underlying causes of the world economic crisis, have seen an ongoing controversy within the OECD about the status and understanding of economic growth that culminated in the “New Approaches to Economic Challenges” (NAEC) initiative. In March 2016, I was invited to present the book in the context of the OECD’s NAEC seminar, resulting after a comment by former OECD director Ron Gass in an interesting discussion that revolved around what is currently labelled the “triangle” within the OECD – the relationship between the economy, society and nature.

This controversy, a critical analysis of the OECD’s history suggests, is complicated by the fact growth is the organisational ideology that defines not only the OECD’s core tasks but also its identity. Based on its longstanding history of promoting – but also questioning and further developing the growth paradigm – and also due to its functions – a think tank, ideational artist, forum – the OECD is in a particularly privileged position in taking a lead role to really advance towards a post-growth narrative for the early industrialised world. In this vein, the OECD could contribute to developing a societal narrative that leaves the policy focus on growth behind, because growth is a means to other ends – a means that, while arguably advantageous for a certain historical period, might become an obstacle for another.

Useful links

In The Hegemony of Growth. The OECD and the Making of the Economic Growth Paradigm, (Cambridge University Press, 2016) Matthias Schmelzer presents a critical examination of the historical trajectory of the OECD since the 1940s, setting it in the context post-war reconstruction, the Cold War, decolonization, and industrial crisis. The book has received three renowned prizes, including one from the International Economic History Association (IEHA)

OECD History Project at the University of Zürich, Switzerland

NAEC Seminar with Matthias Schmelzer

Hegemony NAEC seminar

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  1. Ron Gass - 09/07/2016 Reply

    hello Matthias, Good to hear from you. I like your last para. You may be right that
    without economic growth the OECD is like a chicken without a head. However, now that economic growth is seen as a means, the debate about ends cannot be avoided,even by economists! “Better Lives” is a good first step, but it impiies a sort of “social individualism”. Public policies have to be systemic, so the goal of
    Inclusive Society begins to tackle the fundamental challenge:what sort of society do We the People want for future generations?That is essentially a political and philosophical question, but if policies don’t come to grips with it, the the new technological revolution will mould society. We are preparing a Seminar on that question. If you give me your e-mail address I will send you the Issues Paper I have prepared. Best wishes, Ron Gass

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