Skip to content

Gender-balance in Parliaments: An indispensable condition for more democratic and sustainable societies

8 March 2017
by Guest author

Kate Brooks and Eleonore Komai, OECD Directorate for Public Governance and Territorial Development (GOV)

The 2015 OECD Recommendation of the Council on Gender Equality in Public Life is unique and innovative as it covers executives but also parliaments and judiciaries with clear, timely and actionable guidelines. It represents an important commitment of member and partner countries that wish to join the OECD community towards the realisation of a whole-of-government approach for more gender-sensitive and inclusive public institutions. Notably, it calls on its Adherents to “consider measures to achieve gender balanced representation in decision making positions in public life by encouraging greater participation of women in government at all levels, as well as in parliaments, judiciaries and other public institutions”.

Women’s representation in parliaments remains a global issue. On average in 2016, women constituted 23% of parliamentarians over both upper and lower houses combined, with the Pacific, Arab States and Asia having the lowest representation (16.4%, 18.2%, and 19.2% respectively)[1]. However, it must be noted that many countries in these regions have made substantial progress over the past ten years.

Numbers do matter. Parliaments are powerful political institutions where most policies are voted on. They shape important aspects of people’s social, political and economic present and future lives. Parliaments should thus reflect the perspectives and interests of society in all its diversity. A truly inclusive society would have a truly inclusive legislature.

Amongst OECD countries, women’s representation in lower houses and unicameral legislatures is heterogeneous both in terms of percentage and progress. While Iceland reached 47.6% of female parliamentarians in 2016 (39.7% in 2013), some countries such as Chile lag behind with women’s parliamentarians accounting for 15.8% in 2016. In addition, Sweden, Finland, Norway, Denmark, the Netherlands, Germany, New-Zealand, Italy, Austria, Luxembourg, France and Greece have experienced a drop in women’s representation from 2013 to 2016.

For young women, adolescents and little girls to aspire to leadership roles in public life, they need to see women leaders. Specific measures, such as quotas, have been implemented to tackle the issue of gender balance in parliaments. Quotas aim to ensure that women represent at least a critical minority. They can take the form of reserved seats, legal candidate quotas or political party quotas and can be legislated or voluntary[2]. 10 of the 35 OECD countries reported having implemented legislated quotas in 2016. Effectiveness largely depends on context.

Share of female parliamentarians in OECD countries, 2013 and 2016
Percentage of women holding seats in lower houses and unicameral legislatures

Data is for 1st December 2016 and 1st December 2013. Bars in light blue represent countries with legislated quotas in 2016
Source: Inter-parliamentary Union (IPU) PARLINE database, Quota Project

It is important to point out that gender balance in parliaments, as an important step towards gender equality, is not sufficient in itself. Gender balance does not ensure equal participation or equal access to leadership and decision-making roles among others.

Barriers to women’s equal representation and access to political life – be they structural, functional or cultural – find commonalities among countries but are also specific to local settings. Strategies and efforts to tackle gender inequality within parliaments can start with global strategies and international commitments, but need to be supported by concrete measures and continuously adapted to specific realities and experiences. The OECD continues to work to support countries in addressing the remaining barriers to gender equality in public life. A toolkit to guide both members and non-members is currently in development.

Useful links

International Women’s Day at the OECD:

Friday, 14-17h, Seminar on gender equality before the law

OECD work on Gender equality

Women in government

OECD (2016), 2015 OECD Recommendation of the Council on Gender Equality in Public Life, OECD Publishing, Paris.

OECD (2014), Women, Government and Policy Making in OECD Countries: Fostering Diversity for Inclusive Growth, OECD Publishing, Paris.

[1] http://www.ipu.org/wmn-e/world.htm

[2] http://www.quotaproject.org/aboutQuotas.cfm

Gender equality in West Africa: Actions speak louder than words

8 March 2017

Julia Wanjiru, OECD Sahel and West Africa Club (SWAC) Secretariat

Respect of the fundamental rights of women and girls remains a serious, sometimes life-threatening, concern in many developing countries. Several decades of gender debates, special events and development goals dedicated to the empowerment of women, add up to only modest improvements on the ground.

Let’s look at a few examples from West Africa.

Child marriage. Seven West African countries rank among the top 20 countries in the world with the highest rates of child marriage. In Niger, three out of four girls marry before their 18th birthdays, contributing to the fact that Niger has the highest fertility rate in the world (7 children per woman in child-bearing age). Nigeria is among the top 20 countries with the highest absolute numbers of child marriages, with 1.2 million married girls. By depriving its girls of the chance to develop their potential, the region is collectively losing a huge amount of human capital.

Female genital mutilation/cutting (FGM/C). FGM/C remains a widespread practice in West Africa, even though its prevalence varies considerably from one country to the next—ranging from 2% in Niger to 97% in Guinea. Many initiatives are working against this practice and some countries have passed laws to formally forbid female circumcision (Guinea, Guinea-Bissau, etc.). However, law enforcement has trouble cracking down on these deeply rooted traditions and mentalities. According to WHO estimates, more than 3 million additional girls worldwide are cut each year—mostly by elderly women.

Educational gaps. Huge strides have been made in getting more girls into schools, but when it comes to assessing educational outcomes, the results are much less impressive. The net school attendance rate for girls from 2011-2014 was about 50% for the poorest performing countries like Chad, Mali and Niger. These countries also have the lowest literacy rates for girls (15% in Niger and 34% in Mali—far below sub-Saharan Africa’s 2015 average of 69%). The gender gap is progressively closing, but no country in sub-Saharan Africa is projected to achieve gender parity in primary and secondary education.[1] The most persistent barriers to girls’ education are: early marriage and early motherhood, traditional seclusion practices, the favouring of boys when it comes to family investment in education and the gendered division of household labour.

Ensuring equal opportunities for women and men, girls and boys in Africa will take time, massive educational efforts and profound changes to existing ways of thinking. Those changes might be supported by more exposure to external influences; the diaspora and media sources like TV series and movies can help accelerate these changes.

The legal frameworks, policies and strategies are hard to find, but they do exist. Since the mid-2000s, almost every West African country has created a national gender policy or strategy. Regional organisations like ECOWAS, UEMOA, CILSS and the African Union have all adopted gender policies and they are increasingly mainstreaming gender issues in different policy sectors. But, in practice, gender is still considered mostly as an afterthought and gender policies are often not implemented effectively. Ministries in charge of gender issues have usually very large portfolios— ranging from youth, sports, CSO, employment and drug control. They are often understaffed, under-funded and not taken seriously. Budgets allocated to gender-specific issues within sectoral policies remain tiny; disaggregated gender data is missing. To make some decisive progress, strong political will must come from the very top level, including from key ministries such as economic affairs, budget and strategic planning.

The weak implementation of gender-focused policies is, however, not just a funding problem. There are many other obstacles and risk factors: strong individual and institutional resistance to gender initiatives, deep-rooted cultural issues and traditions, general under-representation of women in the public sphere, illiteracy, etc.

Much of the gender debate seems to take place in a bubble, with gender experts mostly preaching to the choir. We cannot make headway on gender equality by having discussions that are mostly made up of women and gender experts. Moreover, women’s affairs are often associated with charities and are promoted for example, by African first ladies and many other famous female ambassadors—sometimes very successfully but a large number of initiatives are also instrumentalised for political ends. How many of their male counterparts are active in promoting gender equality? As long as the gender debate remains solely a women’s issue, it won’t move far.

It should not be forgotten, that gender is not just a matter of achieving equal opportunities for women and men. Gender equality is an economic development issue. Here again, the message is not new, but it still has not been sufficiently brought to the attention of all policy-makers. How can a country voluntarily deprive itself of the human potential of half of its population? The economic cost is enormous.

To reduce gender inequality more effectively and achieve sustainable development, we need to get more men on board. We also need to invest more in the education of girls and boys. Everywhere in the world, education has been a key driver of gender equality. An educated girl is better equipped to defend her interests and choose the life she wants. Education can also raise boys’ awareness of gender issues and make them less prone to seeing gender equity as a loss of privileges for themselves. Men could become true allies in building a society based on equal rights and opportunities.

But education alone is not enough. How many educated women and men still face pressure from their communities to conform? Girls’ education, beyond a certain level, is still seen by many as a “waste of time.” A 30-year old unmarried woman is not a “respected woman,” no matter how successful she might be in her professional life; she is seen as having failed to fulfil her “true mission” to be a wife and mother.

In order to change these deeply rooted prejudices, more effort must be made to target opinion leaders and traditional chiefs who set the agendas within their communities. The chiefs could play a much more active role in helping their communities move away from gender stereotypes, or at least, to not deepen them.  For example, Muhammadu Sanusi II, the Emir of Kano in northern Nigeria (population around 15 million), just announced a proposal to outlaw forced marriage, make domestic violence illegal, and impose minimum financial conditions upon men who want to marry a second wife. The proposed law does not exactly promote gender equality, but Kano state is taking a concrete step forward in a way that will make a difference in the lives of millions of women and children.

This year, International Women’s Day will again be marked by declarations of good intentions and statements—including mine. What should count, though, is not the number of commitments we make, but the true progress we achieve on the ground. At the end of the day, African girls and women will need to tell their own stories, fight for their own rights and work to achieve equal representation. If men were ready to help them, things would move much faster.

Useful links

Maps & Facts:

Women in parliament: Senegal ranks 7th worldwide but West African women remain under-represented

Au Sahel, au-delà de la Journée des droits des femmes, des fillettes interdites d’enfance  [Girls robbed of their childhood in the Sahel] Laurent Bossard, Director, SWAC Secretariat in Le Monde

International Women’s Day at the OECD:

Friday, 14-17h, Seminar on gender equality before the law

OECD work on gender

[1] UNESCO (2015): Gender and EFA 2000-2015: achievements and challenges, http://unesdoc.unesco.org/images/0023/002348/234809E.pdf

 

Irrational me… Behavioural Economics hits its stride

7 March 2017
by Guest author

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

As humans we sometimes invest poorly, accept software updates without reading the fine print, choose the wrong business partners, commit heroic acts, are optimistic when we should be cautious and pessimistic when we should be sanguine. We occasionally buy things we don’t really need, eat fatty foods and some of us even still smoke. We fail to systematically pursue our direct self-interest (erring at times on the side of altruistic cooperation), don’t save enough for old age, confuse the nominal and real value of money, believe an overheated economy will never crash and when it does, lose confidence for too long that things will ever be right again. It’s easy to see why neoclassical economists have preferred a pared down paradigm of human motivation largely free of human psychology. Human rationality is bounded, as some politely put it. The good news may be that, although people do many things they regret, they often do so in predictable ways.

Enter behavioural economics. The incorporation of behavioural, social and cognitive dimensions into economic thinking has grown in recent times as economists strive to improve their models, forecasts and policies. Much of the impetus for this trend can traced back to the ground-breaking (and Nobel Prize-winning) work of cognitive decision-making theorists such as Herbert Simon, Daniel Kahneman and Amos Tversky in the second half of the last century. That cognitive psychologists should receive the Nobel Prize in Economics is perhaps emblematic of this relatively new phase in economic thinking. In the intervening years, demonstrating the ways in which we humans are not always good utility maximizers has proven to be a rich vein of exploration.

Behavioural Insights and Public Policy: Lessons from around the world”, recently published by the OECD, demonstrates the extent to which the floodgates have opened, allowing cognitive and behavioural psychology as well as other social sciences to take their place at the policy table. Behaviourally informed policy, or Behavioural Insights (BI), makes use of insights from these disciplines while applying inductive scientific methodology to policy making and implementation. In other words, experimentation. In a context in which governments are seeking more efficient outcomes without resorting to additional rules and sanctions, these developments seem timely.

For a long time, policy makers have concentrated on what they want citizens to do, less on how citizens actually behave. The place for insights into human behaviour has been slim and often considered to be outside the purview of policy makers. After all, the blunt instruments of fines and enforcement were always there to ensure compliance to rules and policies. They still are, but today, an increasing number of policy makers are willing to consider a more nuanced approach; one in which likely human behaviours, and insights based on experimental data, inform the policy making process. It’s not so revolutionary. In product markets, scenarios of human behaviour play an essential role in design. When designers get it right, the result is a better fit between user and product, along with a slew of additional benefits such as ease of use, increased productivity, greater satisfaction and, in marketing terms, heightened preference. Just like products, policies are intended to elicit a human response. To ignore behavioural insights is to pass by some important opportunities to tap into existing human motivations. As any black belt will tell you, brute strength will only get you so far. The experienced judoka uses her opponent’s own energy, channelling it to achieve the desired result more efficiently. Policies that strive to capture citizen self-motivation tend to enjoy similar efficiency.

Take the example of tax compliance. Efforts to increase compliance typically consist of threats and interest penalties in addition to audits and enforcement. But the behavioural approach might begin with an open-ended question such as ‘Can the way in which we communicate with non-payers influence their willingness to comply?’ This in turn could be tested by drafting a number of different messages reflecting relevant behavioural insights, sending them out to the targeted population and measuring the results. Indeed, the government of Ontario, Canada, wanted to reduce the number of employers filing their tax returns late. Using findings from behavioural science, the government modified the standard collection letter to include concrete details of where, how, and when to file one’s overdue annual return. The outcome of the intervention was a 4.2 and 6.1 percentage point increase in tax filing relative to the unmodified letter in 2014 and 2015, respectively. In other words, a behaviourally informed “light touch” (in this case, a single paragraph added to an existing letter) outperformed costlier and more heavy-handed approaches in a significant number of cases.

The OECD’s Behavioural Insights group, partnering with the London School of Economics, the European Nudging Network (TEN) and Harvard University spin-off and non-profit ideas42, has collected 129 cases from 14 countries in North and South America, Europe, Asia and Oceania. Case studies are drawn from a number of sectors, including financial products, energy, environment, health and safety, tax, public service delivery and more. The cases offer a glimpse into a wide variety of policy issues and suggest the versatility and power of the behavioural approach. It’s a fascinating snapshot of BI as it enters the mainstream and provides a richly documented “idea book” that will surely spark new thinking.

Yet, according to the authors, if behavioural insights are to realise their full potential, standards must be set in order to gain the trust of public bodies and offset the perception of potential ethical issues. Experimentation and the use of academic findings are fundamental to behavioural practitioners in public policy. Scientific credibility, in turn, depends on reliable data and statistically significant samples that can stand up to public scrutiny and scale up as needed. Despite these challenges—and as Behavioural Insights and Public Policy shows—the behavioural revolution that began more than forty years ago is today making a measurable difference in policy effectiveness around the world.  It suggests that a behaviourally-oriented policy approach might be one of the most rational choices a government can make.

Useful links

Behavioural Insights and Public Policy: Lessons from Around the World

OECD work on Behavioural Insights

OECD work on Regulatory Policy

Economics’ massive magnet Professor K. Vela Velupillai discusses the theories behind behavioural economics on OECD Insights

Single bidding in Europe is back, and you should be worried

1 March 2017
by Guest author

In the run-up to the OECD Global Anti-Corruption & Integrity Forum on 30-31 March 2017, Jeroen Michels and Patrycja Breskvar of the OECD Directorate for Public Governance look at the danger of distorted competition in Europe today.

Let’s imagine for a moment, you are taking part in an online auction for a piece of designer furniture and you are the only bidder – it’s your lucky day, right? Now imagine you wanted to take part in the bidding, but somehow the auction was set up to undermine your participation. You have little chance now of bringing that Philippe Starck chair home. Frustrated? Of course!
Now consider this: single bidding and rigged procurement processes appear to be back in Europe.

The threat of distorted competition in Europe is emerging – according to Tenders Electronic Daily (TED), 30% of calls for tender across Europe received only one bid in 2015, double the amount from a decade ago. Considering that European governments’ procurement expenses accounted for around €1.9trl in 2015, the equivalent of one fifth of GDP, the risk of bid-rigging and collusion poses real economic implications. Incidents of hampered competition, such as the case of Britain’s Nuclear Decommissioning Authority, who bent the assessment of tender requirements in order to back up the Cavendish Fluor Partnership in a £7bn tender, raise serious concerns, as do the problematic practices observed in Slovenia over the 2015 Christmas period, whereby single-bids were the case in 50% of procurement contracts announced. As a recent Economist article accurately points out, the newest members to the EU appear to struggle the most with reduced competition in procurement. Croatia is the dubious winner here, with 43% of government contracts unchallenged in 2015, Hungary, Slovakia and Romania are just some of the close runners-up.

Just as you felt the blow of hampered competition in your attempt to buy a coveted Philippe Starck chair, society as a whole pays the ultimate price for collusive activity and rigged bids.  Not only does unfair competition restrict the access of buyers and suppliers which is a major hindrance on the path to a prosperous economy, it also results in poorer quality of goods and services obtained by the public sector. This undermines public trust in government operations and has negative effects on the whole policy-making process.

When addressing the issue of bid-rigging, resources such as the Recommendation on Fighting Bid Rigging in Public Procurement, the OECD Competition Assessment Toolkit, the OECD Recommendation on Public Integrity and the OECD Public Procurement Toolbox are resources to explore. Supporting the implementation of the OECD Recommendation on Public Procurement, the OECD Public Procurement Toolbox is an online knowledge sharing platform aimed at policy makers and public procurement practitioners and organises content by principles, country cases and assessment. A constantly evolving toolbox, its content can be modified according to the needs of the public procurement community.

Passionate about this issue? Then get out of your designer chair and come join the debate at the 2017 OECD Global Anti-Corruption & Integrity Forum on 30-31 March 2017 in Paris. This global multi-stakeholder event brings together public and private sectors, civil society and academia in order to present the latest insights on anti-corruption & integrity.

Useful links

  • Check out the Forum agenda for sessions that interest you.

The public sentiment runs deep. Over half of the citizens in developed countries distrust their government and a yawning trust gap is emerging between the elite and mass populations. Among the key factors cited by citizens to explain the prevailing distrust are “wrong incentives driving policies” and “corruption/fraud”. Economic growth is at stake and the toll on society is already significant.

Rolf Alter, Director of the OECD Public Governance and Territorial Development Directorate @raltergov on OECD Insights Read the full article

While one corruption scandal follows another, committed integrity defenders are relying more and more on behavioral sciences to design compliance systems and anti-corruption policy measures – Are we hardwired for corruption or for integrity? Read the full article

 

Complexity: A new approach to economic challenges

28 February 2017
by Guest author

William Hynes, OECD New Approaches to Economic Challenges (NAEC) initiative

The OECD launched its “New Approaches to Economic Challenges” (NAEC) initiative in 2012 to reflect on the lessons for economic analysis and policymaking from the financial crisis and Great Recession. European Central Bank Governor Jean-Claude Trichet said that: “as a policy-maker during the crisis, I found the available models of limited help. In fact, I would go further: in the face of the crisis, we felt abandoned by conventional tools”. But even before the crisis Greg Mankiw from Harvard University lamented thatmacroeconomic research of the past three decades has had only minor impact on the practical analysis of monetary or fiscal policy”.

NAEC examined the shortcomings of analytical models, and it promotes new policy tools and data. It questions traditional ideas and methods and challenges group-think and silo approaches by inviting comment and criticism from outside the Organisation, and by soliciting input from social sciences such as sociology, psychology, and history to enrich the policy discussions.

While the financial crisis struck at the core of traditional economic theory and models, it became apparent in 2016 that the failure of economic thinking and acting was far deeper and more destabilising than we thought, so part of NAEC’s mandate is to develop an agenda for inclusive and sustainable growth.

This is all the more urgent given the backlash against globalisation, increased inequalities of income and opportunities, and the negative impact of growth on the environment. We need to develop what Eric Beinhocker calls a “new narrative of growth”, one that puts people at the centre of economic policy. Therefore NAEC is helping to focus on redistribution, a concept neglected in economic analysis for many years, and helping to ensure that policy decisions improve the lives of those at the bottom of the income distribution.

It is also helping to consider the well-being of people as a multidimensional concept, which implies reconsidering important elements of the economic narrative, such as justice and social cohesion. NAEC does so by thinking “out of the box”, emphasizing the need to empower people, regions and firms to fulfil their full potential. This is at the core of the Productivity-Inclusiveness Nexus that considers how to expand the productive assets of an economy by investing in the skills of its people; and that provides a level playing field for firms to compete, including in lagging regions.

However, the challenges are too complex and interconnected for conventional models and analyses. As Andy Haldane argues, the global economy is increasingly characterised by discontinuities, tipping points, multiple equilibria, radical uncertainties and the other characteristics of complex systems. This is why a key theme of NAEC has been the complexity and interconnectedness of the economy, exemplified by the Productivity-Inclusiveness Nexus.

The contributors to this series argue that complexity and systems thinking can improve understanding of issues such as financial crises, sustainability of growth, competitiveness, innovation, and urban planning. Recognising the complexity of the economy implies that greater attention should be paid to interactions, unintended consequences, stability, resilience, policy buffers and safeguards.

Working with the European Commission and the Institute for New Economic Thinking (INET) Oxford, the NAEC initiative demonstrated in a number of workshops that complexity economics is a promising approach for delivering new insights into major public policy challenges and an exciting research agenda going forward.

The workshops offered a timely opportunity for policy-makers, academics and researchers to discuss the policy applications emerging from the study of complexity. The NAEC Roundtable in December 2016 discussed whether economics was close to a tipping point – a transition to a new behavioural complexity paradigm. There is wide agreement among economists on the limitations and the shortcomings of the rational expectations paradigm and much discussion on how to move forward.

The first phase of NAEC’s complexity work has made the case for further and deeper examination of complexity. Going forward, it will be important to demonstrate the value of complexity, systems thinking and agent-based models in a number of areas including financial networks, urban systems and the other issues highlighted in this series. The challenge is to demonstrate the value of the approach.

Complexity offers an opportunity for addressing long-held concerns about economic assumptions, theories and models. For the OECD, it also holds out the potential for creating better policies for better lives.

Useful links

The OECD organised a Workshop on Complexity and Policy, 29-30 September 2016, at OECD HQ, Paris, along with the European Commission and INET. Watch the webcast: 29/09 morning29/09 afternoon30/09 morning

The OECD as the cradle of the Club of Rome

22 February 2017
by Guest author

Matthias Schmelzer, University of Jena, based on a newly published article on the origins of the Club of Rome within the OECD.

The Club of Rome’s first report, The limits to growth, appeared in 1972 and was ultimately published in thirty languages and sold over thirty million copies worldwide. It made many people aware for the first time that with continuing growth the world would eventually run out of resources. Today, 45 years later, its electrifying conclusions, which modelled the ‘overshoot and collapse’ of the global system by the mid twenty-first century, still provoke intense debates.

The report also brought international fame to the newly founded Club of Rome, which has since become a key reference point in the public memory of the 1970s and environmental discourses more generally. It boasts considerable authority as a private, non-state, and global group of experts concerned about the fate of humanity, and a wise warden for the ecological survival of planet Earth. However, this extraordinary public and academic attention has largely overlooked the constitutive entanglements with the OECD that characterise the Club’s foundation and early history.

This OECD–Club of Rome nexus needs explaining. The OECD, founded in 1961 as the successor of the Organisation for European Economic Co-operation (OEEC) that had overseen the Marshall Plan aid, soon became, in the words of one of its Directors, “a kind of temple of growth for industrialised countries; growth for growth’s sake was what mattered”. By the late 1960s, however, faced by increasing popular anxiety about unsustainable growth in Western societies, scientists and bureaucrats within the OECD launched a debate on “the problems of modern society”. The driving forces of this growth-critical and ecologically oriented debate were two of the most powerful men within the Organisation: the head of the OECD since its foundation in 1961, Secretary-General Thorkil Kristensen, and the Organisation’s long-time science director and unofficial intellectual leader, Alexander King. The topic assumed such importance that it was central to discussions at the OECD’s ministerial meetings in 1969 and 1970.

However, Kristensen, King, and their associates around the science directorate and the Committee for Science Policy were frustrated by governments’ inability to deal with long-term and interrelated ecological problems and thus looked for allies outside the OECD. They got together with Italian industrialist and global visionary Aurelio Peccei, at that time an executive of Fiat and the managing director of both Olivetti and Italconsult, and in 1968 this elite group of engineers, scientists, and businessmen, founded the Club of Rome. They were fundamentally sceptical about the potential of existing political institutions to catalyse the controversial global debate they deemed necessary, because they regarded these institutions as the “guardians of the status quo and hence the enemies of change”. They saw themselves “faced with the extraordinary arrogance of the economist, the naivety of the natural scientist, the ignorance of the politician, and the bloody-mindedness of the bureaucrat”, all unable to tackle the ensemble of problems they had identified.

Thus, they built a transnational network to advance their view of planetary crisis both through the OECD (thus targeting key economists and ministers from member countries) and through the Club of Rome, whose reports forcefully shaped public debates. This network blurred the lines between the “official” OECD and the “private” Club, not only in terms of overlapping membership but also in terms of discourses. While the Club functioned as a “detonator”, its core members used international organisations “as transmission belts”, as Peccei explicitly put it, and thus acquired a strong leverage.

The personal overlap between the OECD and the Club of Rome in its initial phase is remarkable. Not only were three of the four persons that founded the Club working in or with the OECD (King, the Austrian systems analyst, astrophysicist, and OECD expert; Erich Jantsch; and the Swiss director of the Geneva branch of the Battelle Memorial Institute and Vice-Chairman of the OECD’s science committee Hugo Thiemann). Besides the Italian industrialist Peccei and the German industrial designer Eduard Pestel, who secured the funding from the Volkswagen Foundation for the first report, all the crucial personalities in the formative period of the Club of Rome were closely connected to the OECD. Almost the entire core group of the Club of Rome, its “executive committee” – which has been characterised as the true “motor” of the Club of Rome, and who signed Limits to growth – also had positions within the OECD.

This transnational group of experts at the interface of national governments, international organisations, and the Club of Rome formed a unique circle of elite environmentally conscious planners. Even though claiming to speak for the entire globe, they represented a very narrow fraction of the global population, in part because of their organisational base in the OECD, often dubbed the “Club of the Rich”. They were all highly-educated and largely white men and thus reproduced the tradition of upper-class gentlemen’s clubs, and all came from countries in the global North (mostly European, some US and Japan). With close ties to elite universities, transnational business, and international organisations, they acted from economic positions of privilege and power. Furthermore, the entire network had academic backgrounds in the natural sciences (in particular chemistry and physics) or engineering, with only a few trained in economics, and none in the social sciences or humanities. Finally, almost all had spent at least part of their career as national government experts or administrators.

All these factors influenced the perspective and politics of the network at the heart of the OECD–Club of Rome nexus. A more profound appreciation of the gestation, midwifery, entanglements, transfers, and tensions that characterise this nexus opens up a more complex understanding of both organisations and the actors driving them. It puts in perspective the public perception of the Club of Rome as a private, non-governmental, and global think tank by analysing its origins within an all-male elite group of engineers, scientists, and businessmen, and its intimate interrelationships and personal overlaps with the OECD, an intergovernmental organisation representing the industrialised capitalist countries. This social positioning fundamentally shaped the network’s outlook, most importantly with regard to its systemic analysis of interrelated global problems in a computer-engineering perspective, the technocratic outlook from the perspective of the global North, and top-down management approach.

How did the cradle of the Club of Rome react when its offshoot published its first report in 1972? After all, Limits to growth was consciously set up as a “detonator” to give a jolt to established governments and international organisations. At first, it did indeed impress and unsettle the OECD. But once the public debate took off, the views expressed in Limits deepened the internal fractures within the OECD and provoked hostile reactions, leading to a revitalisation of the strong pro-growth position.

The strongest force behind the backlash against the critiques of growth came with the onset of economic turmoil, soaring energy prices, and stagflation from 1973-74 onwards. While the energy shortages and their effects on industrialised countries were largely interpreted by the public as proof of the Club of Rome’s predictions, within the OECD these developments did not strengthen the faction critical of growth. On the contrary, the debate on the “problems of modern society” was choked by a combination of changing member-state interests, an attempt by the top level of the Secretariat to better position the OECD, and a shift of influence within the Organisation.

The growth critique sparked a bitter controversy between the macro-economic branch of the Organisation and the science experts and environmental scientists around King, which the latter lost when the OECD refocused on trade, energy, and growth. In particular, the publication of the Club of Rome’s first report polarised the debate to such a degree that not only the OECD but Western policy-making circles more generally returned to the promotion of quantitative growth. While the Club of Rome was born in the corridors of the OECD, its first report effectively ended these intimate relationships.

Useful links

Matthias Schmelzer (2016), The Hegemony of Growth. The OECD and the Making of the Economic Growth Paradigm, Cambridge University Press

The OECD Interfutures project (1979)

 

Towards an empowering state: turning inclusive growth into a global reality

20 February 2017
by Guest author

Gabriela Ramos, Special Counsellor to the OECD Secretary-General and Sherpa to the G20. With thanks to Shaun Reidy, Acting Coordinator of the OECD Inclusive Growth Initiative.

This article is part of Inclusive growth: The state of the debate 2017 being published today by the UK All-Party Parliamentary Group on Inclusive Growth, that brings together reformers across politics, business, trade unions, finance, churches, faith groups and civil society, to forge a new consensus on inclusive growth and identify the practical next steps for reform.

We live in turbulent times. Nine years on from the eruption of the financial crisis, we remain stuck in a low growth trap. To make matters worse, the great upheaval in our economies has now transmuted into a profound political crisis in many countries.

The economic hardship of the last nine years has created many casualties, but chief among them has been trust – the glue that holds our societies together. Trust between different groups of people, and trust in institutions has plunged to record lows, with public belief in governments in the OECD standing at just 42% in 2016.[i] This has now spilled over into the social realm, stoking fear and provoking the rejection of global interconnectedness, trade, migration and technological progress.

Everywhere we look, globalisation is being called into question and the potential consequences of the rise of protectionist measures could scarcely be greater. The origins of this loss of faith in international integration are numerous and vary considerably from country to country, but there is a common thread running throughout: a growing sense that the global economy is delivering only for the lucky few.

International elites have categorically failed to deal with this. The benefits of globalisation and rapid technological change were understood in an overly simplistic economic framework that relied too heavily on averages and representative agent models, blurring the outcomes for different income groups.

Simplistic assumptions of how the economy operates prevented us from advancing better policies. Trade and investment became an end in itself, and the efficiency of markets became the ultimate goal of economic policy. We neglected the differentiated outcomes of policies for different income groups, and by relying on incomplete metrics – like GDP per capita alone – we ignored the distributional outcomes of the policies we undertook.

We have since learned that this was not the right choice – and we have learned it the hard way. . Policies have affected different groups in very different ways. The initiative I lead at the OECD on Inclusive Growth has charted how rising income inequalities have been blighting people’s opportunities, wasting their potential contribution to productive activity and limiting their ability to lead meaningful lives.

The numbers make for stark reading. Here in the UK, the average income of the richest 10% has gone from being eight times that of the poorest 10% in the late-1980s, up to almost ten times greater today. The situation is markedly worse at the very top, with the highest 1% of earners in the UK taking home around 20% of pre-tax national income in the last three decades.[ii]

Our report All on Board: Making Inclusive Growth Happen has set out how this reflects a more general trend seen across the OECD, where those at the top of the income distribution have pulled away from those at the bottom. We see this particularly in the period after the crisis, where across the OECD, the top 10% of income earners have managed to recover their pre-2008 income levels, while those in the middle and at the bottom have seen incomes fall and stagnate. The picture is even more troubling in terms of wealth, where the richest 10% in the OECD own around half of all household assets, whilst the bottom 40% own barely 3%. At the very top of the distribution, the Top 1%, holds a staggering 19% of total wealth.[iii]

All too often, wealth and income inequality stand in a symbiotic relationship with the intangible social trappings of success, such as cultural capital and access to parental networks. Together, they influence the key formative outcomes in children’s lives, helping to turn the unequal outcomes of one generation into the unequal opportunities of the next, affecting everything from employment to health status.

Nowhere is the damage more keenly felt than in education. OECD data shows that the children of poorer parents struggle to keep up with the social and cultural capital of their wealthier class-mates. From that initial disadvantage, many go on to lower educational attainment, with children whose parents did not complete secondary school having only a 15% chance of making it to university against a 60% chance for peers with at least one parent who had attained tertiary education.[iv] More troubling still is the fact that the very same children at a disadvantage in the education system typically go on to receive smaller salaries and, most worryingly of all, to lead shorter lives.

This is profoundly unjust. But it is not only those at the bottom who suffer when inequalities scale new heights – we all do. Of course, inequality has always been with us and it has often been presented as an engine for growth. When it derives purely from differences in efforts and investment, such an argument may have some merit, but with the levels of inequality we see today that is demonstrably not the case.

As OECD’s work on the Productivity-Inclusiveness Nexus spells out, when the poorest are unable to fulfil their potential, we all lose out on the visionary leaders, the innovators, and the economic growth that could have come to pass. Moreover, recent OECD research has highlighted how rising inequality knocked 6 to 10 percentage points of GDP growth between 1990 and 2010 across a range of OECD countries including the UK, Mexico, Finland, Italy, and the United States.[v]

With the ongoing global and technological transformation of our economies these issues are likely to be brought into starker relief. Digitalisation has the potential to unleash untold benefits for all of human kind, but if it is not managed properly, it could exacerbate inequalities by creating greater job insecurity and cementing ‘winner takes all’ dynamics in our most rapidly growing markets.

Already, since the early 90s, around half of the jobs created in the OECD have been in more insecure temporary, part-time or self-employed work. Over roughly the same period, the power of multinational firms at the global frontier to exploit their greater access to knowledge-based capital, digital technology, finance, cheap labour and low-tax jurisdictions have been able to lock-in their productive advantages. In the manufacturing sector for instance, since the early 2000s, labour productivity of OECD firms at the technological frontier has increased at an average annual rate of 3.5%, compared to just 0.5% for non-frontier firms.[vi]

Given the extent of these social and economic costs, it is hardly surprising that rising inequality has translated into growing political disaffection, anti-market sentiment and disenchantment with globalisation. In such a context, we desperately need to take action to promote inclusive growth and restore public confidence in the power of policy makers to improve people’s lives.

So what can we do to redress this situation and regain trust?

To start with, we need to listen to people. It is not enough to talk about a ‘post-truth’ environment. Or to say that people haven’t paid attention to facts and evidence. It is we that have not listened. We have to be honest with ourselves and acknowledge that the “truths” in our economic models have failed to capture much of what matters to people.

In short, we need to put people, and their multidimensional well-being, back at the centre. The OECD’s Inclusive Growth and New Approaches to Economic Challenges (NAEC) Initiatives are at the forefront of efforts to put people at the centre, to create social and economic models that provide a more accurate representation of the world around us. Today, advances in computing power are also opening up new tools to support our work, with possibilities for integrating complex systems dynamics and behavioural insights into our approaches with agent-based modelling and network analysis.

Yet, we also must recognise that economics does not have a monopoly on truth. In many countries, we have seen the bottom 40% left behind and their potential wasted. Only by recognising that mistakes have been made can we begin to build a new socio-economic narrative that goes beyond the old tropes of growth first, redistribution later; and beyond aggregate economic measures like GDP.

The false certainty provided by an all too literal interpretation of models needs to be balanced by a humbler, more grounded approach to economics that draws on the lessons of other disciplines like physics, biology, psychology, sociology, philosophy and history, to feed a richer, more nuanced policy discussion.

If we want to save open markets and globalisation, we need to re-write the rules of the economic system to make them work for everyone. We also need to bring back that much neglected concept, fairness, to the heart of the policy debate.

The role of the State is absolutely key to this discussion. We need to redefine and reimagine its role, to ensure that it is prepared for contemporary opportunities and challenges and is set up to empower people.

To begin with, we need a new approach to welfare that goes beyond just mitigating risk. The work of behavioural economists like Amos Tversky and Daniel Kahneman has shown us that people are not ‘risk averse’ so much as ‘loss averse’. If we are to create entrepreneurial societies that encourage everyone to fulfil their productive potential, we need to deploy this insight via welfare policy to reduce the consequences of failure.

To be sure, providing people with a social safety net is vital, but it is not enough. We need to move beyond this approach, to create an empowering State that serves its citizens as a launch pad by furnishing them with capacity enhancing assets.

Such a State would also seek to prevent disadvantage cascading down generations. It would recognise that its role was not simply to remove barriers to opportunities, but also to furnish people with the capacity to seize them. Crucially, it must see redistribution and social expenditure in vital areas like education and healthcare not as operating costs, but as investment in our most valuable assets – people.

In practice, this would mean deploying a coherent approach to intervention across individual’s life-cycles to provide high-quality early years education, comprehensive training throughout adult life, income and skills support to help people transition between jobs and perhaps even a universal basic income. But it wouldn’t stop there, because, when all is said and done, there is more to life than money. The key role of the State should be to support people helping them to have meaningful lives.

However we also need to face up to the big global challenges of dealing with concentration of wealth, international tax and competition issues, the mobility of tax bases, labour rights and regulatory standards. We need to ensure that globalisation is based on international rules that are respected. We have to create trade agreements that are comprehensive and, crucially, also inclusive. We must hold global firms to higher standards of responsible business conduct. OECD work on taxes, responsible business conduct, due diligence and anti-corruption will be key to ensuring better functioning global rules.

To restore the faith and trust of people in the role of governments, a priority for an empowering State must be to focus on the bottom 40%, who risk being trapped in a cycle of deprivation and lack of opportunity. We need to deploy targeted policies to help these groups access quality education, healthcare and the benefits of innovation, finance, and entrepreneurship.

Of course, giving people the chance to make the most of these opportunities is reliant on a thriving business sector. The State has a role to play to ‘crowd in’ financing in young and innovative sectors and in investing in basic R&D that will see positive spill-overs into countless other domains. We also need policies which support the diffusion of innovation through the economy, ensuring a level playing field for incumbents and challenger firms, enabling small companies to access finance, technology and high-quality skills.

Adopting such an approach will require some changes to the way we design and implement policies, with particular care taken to avoid the entrenchement of vested interests. One aspect of this will be ensuring that policy recommendations take regional and local circumstances into account. Regions and cities have a key role to play by adapting economy-wide policies to the characteristics of local communities, as well as by promoting local policies that reduce or remove the barriers limiting access to opportunities.

There is also a dire need to overcome traditional ‘silo-based’ approaches to policy making. This will require a renewed ‘whole-of-government’ push, where different government departments, agencies and ministries work together to deliver joined-up solutions as part of a coherent systemic approach.

The challenge before us is clear. Succeeding in our endeavours will demand a new approach, where political parties, and leaders from civil society and business come together to recognise that the long-term prosperity of a society depends on the success of its individual parts.

Together we can make inclusive growth a reality.

[i] Gallup World poll 2016

[ii] OECD Income Distribution Database

[iii] OECD Statistical Database

[iv] OECD (2016, forthcoming), calculations from PIAAC

[v] OECD (2015), In it Together

[vi] OECD (2015) The Future of Productivity, OECD Publishing, Paris

Useful links

As well as Gabriela Ramos’s article, Inclusive growth: The state of the debate 2017 contains the following:

Welcome to the future of the political economy Rt Hon. Liam Byrne MP, Chair of the APPG on Inclusive Growth and Labour Member of Parliament for Birmingham Hodge Hill

Inclusive growth, the challenge of our times Professor Colin Hay, Co-Director of the Sheffield Political Economy Research Institute (SPERI)

Inclusive growth, a new agenda George Freeman MP, Conservative Member of Parliament for Mid Norfolk; Chairman of the Prime Minister’s Policy Board and Chairman of the Conservative Policy Forum

Inclusive growth: Turning aspiration into action Richard Samans, Member of the Managing Board, World Economic Forum

Globalisation and inclusive growth: the challenges for government and business Rt Hon. Dame Caroline Spelman MP, Vice-Chair of the APPG on Inclusive Growth and Conservative Member of Parliament for Meriden

The difference between economic growth, and economic growth for all Alison McGovern MP, Vice-Chair of the APPG on Inclusive Growth, Labour Member of Parliament for Wirral South

Social policy: a vital partner in any inclusive growth strategy Dr Hannah Lambie-Mumford, Research Fellow, Sheffield Political Economy Research Institute (SPERI)

We need to rethink economic policy to bring prosperity to the whole country Michael Jacobs, Director of the IPPR Commission on Economic Justice

Inclusive growth at city region level: a perspective from Greater Manchester Professor Ruth Lupton, Head of the Inclusive Growth Analysis Unit, The University of Manchester