Gabriela Ramos, Special Counsellor to the OECD Secretary-General and Sherpa to the G20
In 2016, surprisingly for many, Oxford Dictionaries chose as their Word of the Year “post-truth”, an adjective defined as: “relating to or denoting circumstances in which objective facts are less influential in shaping public opinion than appeals to emotion and personal belief”. This runs contrary to the main tenet of the OECD, the “house of best practices” whose works and analysis depend on high quality statistics and solid empirical evidence. So how did we get here, and what does it means for our democracies?
As the OECD’s G20 Sherpa, I witnessed the evolution of what was originally a financial crisis into an economic crisis, and more recently, after eight years of low growth and very slow recovery, into a political crisis defined by the lack of trust of people in the institutions that we built over so many decades. It is also clear that the values of openness, mutual assistance, and international integration on which the OECD was founded are being questioned.
One reason for this is that while we have told “the truth and nothing but the truth”, we have not told “the whole truth”. Like people gradually enclosing themselves in media silos and social networks that only give them news and views they are comfortable with, we have been happy to rely on economic models that work with comfortingly quantitative facts on GDP, income per capita, trade flows, resource allocation, productivity, and the like. These standard economic models did not anticipate the level of discontent that was created by the skewed outcomes that they were delivering, and that have prevailed for so many years.
Our “truths” did not capture very relevant dimensions that inform people’s decisions (including recent political decisions), and particularly those that are intangible or non- measurable concepts. This is why such important issues as justice, trust or social cohesion were just ignored in the models. Indeed, neoliberal economics taught us that people are rational, and that they will always take the best decisions according to the information they have to maximize utility. And that accumulation of rational decisions will deliver the best outcome on the aggregates. In this model there is no room for emotions or for concepts like fairness or resentment.
Populism, the backlash against globalisation, call it what you will, recognises these emotions. We should do so too, especially since we actually have the data and facts that gave rise to these feelings in the first place. I am referring to the increased inequalities of income and outcomes that almost all the OECD economies experienced even before the crisis and that the crisis made worse.
If we go beyond averages and GDP per capita and look at the distributional impact of our economic decisions for instance, the picture is devastating. Up to 40 percent of people in the lowest tenth of the income distribution in OECD countries (and 60% in my own country, Mexico) have not seen their situation improve in the last decades. On top of that, lower income groups accumulate disadvantages, as their initial condition does not allow them to access quality education and health care or fulfilling jobs, while their children are facing a sombre future with less chance of improving their lot. At the OECD we have confirmed this. Our data show that if you are born into a family whose parents did not reach higher education, you have four times less chance of reaching middle school. You may encounter more health problems, and have less fulfilling jobs and lower wages. You are trapped in a vicious circle of deprivation.
Even the loosely-defined middle classes in OECD countries are fearful for their future and that of their children. They too feel betrayed and are angry that despite working hard, saving and doing everything else that was supposed to guarantee a good life, they see the fruits of success being captured by a tiny elite while they are left behind. No wonder they are attracted to solutions that resonate with their emotions and seem to give them some hope.
What should an organisation like the OECD, committed to evidence-based policy advice, do in this context? First, we must speak out when there is a deliberate misrepresentation of the facts and realities. Even if the people delivering these lies are not aware of it, it does not discharge them from the responsibility to check the evidence. Presenting a view that is based on lies by omission or on purpose should be recognised as such and not go unchallenged in the “post-truth” environment.
Second, instead of defending our selection of facts, recognise that they were also biased, and that in many instances they represented preconceived notions of how the economy functions that have been proven wrong. To rebuild trust in the facts we produce to explain social and economic phenomena, we must ensure that they really represent the whole reality and provide workable solutions. We may need to start, as the Chief Statistician of the OECD has said, “to measure what we treasure and not treasure what we measure”.
Most of all we need to understand that economic challenges are not just economic. That is why the OECD’s New Approaches to Economic Challenges (NAEC) initiative promotes a multi-dimensional view of people’s well- being, with tangible and intangible elements (including emotions and perceptions) all worthy of consideration. The NAEC agenda is ambitious, calling for a new growth narrative that recognises the complexity of human behaviour and institutions, and calls on sociology, psychology, biology, history, and other disciplines to help write this narrative and build better models to inform economic decisions.
We thought there was only one truth, and we promoted it without considering that it may have had faults. We defined reality in certain ways and ignored critics to the models. We strongly, and mistakenly, believed markets were the whole answer.
I think that as economists and policymakers, we should remember that in The Wealth of Nations, Adam Smith was drawing conclusions from not just the methodology, but also the ethics and psychology he explored in The Theory of Moral Sentiments. We may need to enrich our models to ensure that the outcomes respond to people expectations, and help us to recover the most important ingredient in our societies, which is trust.
French daily Le Figaro recently included Gabriela Ramos in a feature on “The New Untouchables”, four women leading the fight against corruption and for democracy (in French)