Mama mia! Three more countries quit Euro

Shock waves reverberated around the airwaves yesterday when it emerged that Andorra, the Czech Republic and Montenegro were pulling out of this weekend’s Eurovision Song Contest. This came as a further blow to the beleaguered competition, following Hungary’s  decision earlier this year not to take part at all.

Markets reacted calmly for once, with the 10-year Czech bond actually gaining slightly in early trading, but there’s no cause for complacency.

First though, a few words of explanation. In our increasingly globalised world, geography means less and less, and not just for firms but for multilateral organisations too. We’re no longer surprised to discover that Turkey is in the North Atlantic according to the people who make maps for NATO or that Israel is in Europe according to soccer’s ruling body FIFA, so why not Morocco and Azerbaijan for Eurovision?

In fact, the “Euro” of the title refers to a body of the European Broadcasting Union, and in this case covers countries that are associated with Eurovision’s pooled media services. News broadcasts around the world rely on the group’s networks to get the stories from the journalists on the ground to the studios, and many countries such as Libya that are eligible for the song contest have never participated.

The “Song” in the name is much harder to justify, indeed critics say it should always be in quotes. The ESC’s defenders say this is unfair to past winners such as La, La La, Boom Bang-A-Bang, Ding-A-Dong, or Diggi-Loo Diggi Ley, and point out that the Contest has provided the springboard to international success for nearly two groups, following ABBA’s 1974 win with Waterloo.

Why are so many pulling out? The answer is the recession. True, sending a man in a glittery leather suit to a concert hall doesn’t cost much in terms of TV budgets. But Eurovision is a rules-based organisation and the winning country has to stage the next competition. This year’s host city, Oslo is paying 25 million euro, compared with around 33 million in Moscow last time.

An OECD study  found that such events could act as a catalyst for local development, thanks to improved environment, infrastructure and amenities, global exposure, increased visitor economy and tourism, trade and investment promotion, employment and social and business development.

So why are participants so scared of winning the Eurovision Song Contest? Judging from the experiences analysed by the OECD, it’s because there is little time to plan or integrate the event in local development strategies, and practically none of the audience actually come to the real event anyway.

People watch it on TV and can vote for the songs they like. This means that countries with large diasporas have a better chance of winning since they get votes from the places their migrants have settled in. Could this be another victim of the crisis?

The OECD expects the numbers of legal migrants to fall due to the recession. During a conference to mark the First European Day for Border Guards, Frontex, the European border agency said that a third fewer people were detected attempting to cross external land and sea borders of member states in 2009.   

Useful links

OECD LEED Programme (Local Economic and Employment Development)

OECD Communications Outlook 2009

The OECD is organising a conference on the evolution of news delivery on 21 June 

OECD Insights on International Migration

A Bank account should be a human right

“Financial literacy is the new civil rights of today” says John Hope Bryant, Founder, Chairman and CEO of Operation HOPE.   Speaker at this week’s OECD Forum, Bryant insists that understanding the fundamentals of finance is a must for everyone. Fighting poverty and unemployment cannot be successful if we don’t give people that knowledge. Check out his contribution to OECD’s educationtoday

Useful links:  OECD work on financial literacy

OECD Forum 2010: Trade, jobs and innovation

Neanderthals had big brains. Several species of primates used tools and had elaborate social systems. But we invented shopping, and that meant we conquered the Earth, not them.

There, in a nutshell is the explanation of Homo sapiens’ amazing success, according to Matt Ridley’s latest book, The Rational Optimist . Or in a seashell. Archaeological evidence from around 80,000 years ago suggests that our ancestors stopped relying on whatever they could collect or kill in their own territory and started swapping local produce for imports from other areas, including luxury goods such as ornamental shells (although of course these may have had significant symbolic value).

As Ridley points out, this means that a single human had access to objects he or she couldn’t find or make. But they didn’t just swap steaks for necklaces. They were also trading services, and more importantly, knowledge. Even if all the members of the group didn’t understand a particular piece of knowledge, they all benefited.

As knowledge grew, so did specialisation. For example after the invention of agriculture, surplus production could be distributed by a new breed of specialist – the trader. Trade in turn encouraged innovation – from better alphabets and arithmetic in its early days, to insurance later on, to today’s global telecommunications networks.

Trade then, has always encouraged and disseminated innovation. What gets traded is changing though. As several panellists pointed out in this session, today finished products have only a minor share in world trade. With the globalisation of value chains, most trade is in intermediate goods – circuit boards, semi-finished products and the like needed to make other things. Unfortunately, trade statistics do not reflect the value added at each point along the chain.

This is one reason many people are worried about the rise of the emerging economies. They only see the “made in China” label, and while it’s true that the final product was assembled there, it was probably designed elsewhere and may contain parts and software from a dozen countries or more.

This multinational sourcing and specialisation means we all have access to far more goods, far more cheaply than ever before. But it also means that some traditional business can no longer compete. The panellists agreed that protectionism wasn’t the solution, for at least two reasons. Other countries would retaliate, and the country imposing the “protection” would actually handicap its own businesses by making inputs more expensive.

So the best way to strengthen employment and foster innovation is to open up to the world economy. But also to make sure that workers and firms have the capacities to take advantage of new markets and ways of doing things. This means investment in “capacity building”, a term that covers R&D and training, as well as physical infrastructures like ports or railways, and the less tangible, but no less important aspects such as business organisation and financial and legal institutions.     

The overall conclusion seemed to be that governments had resisted protectionism during the recessession, but that the temptation could re-emerge if recovery was slower than expected.

Useful links

OECD work on trade

How imports improve productivity and competitiveness

Trade, policy and the economic crisis

Why open markets matter

OECD Forum 2010: Preserving scarce resources

Green growth has been one of the big issues of this year’s OECD Forum, but a session on Thursday afternoon has been taking an even more focused look at the environment. Under the heading “Preserving scarce resources”, speakers have been discussing some of the many ways in which resources like water, clean air and forests can be protected.

As several speakers have stated, most of us are not really aware of just how much of these resources we’re using. “We wear our water,” says John J. Harris, Chairman and CEO of Nestlé Waters, who has pointed out that it takes roughly 1,200 litres of water to produce a cotton shirt. According to Mr. Harris, the only part of our water usage that is not negotiable is the roughly 1.5 litres we need to drink each day to survive; after that, he says, we need to think a lot more about making better use of all the rest of the water we use both directly and indirectly.

The scale of the environmental challenge facing humanity has been underlined by several speakers. Thomas Kaissl, who leads the Green Economy Programme at WWF International, has commented that there’s a real lack of urgency in discussing these issues. For 20 years, he says, the international community has been drawing up all sorts of certification and standards, but the threats facing the environment have only grown – we urgently need to close “the gap between paper and practice”, he believes. Otherwise, he says, humanity will be like the frog in the pot who fails to realise the danger he’s in as the water comes slowly to the boil. Echoing that, moderator Simon Upton, Director of the OECD’s Environment department, has been wondering aloud how big a crisis would be needed to alert humanity to the need for action.  

Solutions? The need to encourage citizens to become active in forcing governments to take green issues seriously has been mentioned by several speakers, especially those from NGOs. There’s also been much talk about market solutions that put a price on environmental resources so as to reflect their true value. “The default value of many things we hold dear is zero,” Andrew Seidl of the International Union for Conservation of Nature says. An economist himself, he says that many in his profession instinctively favour “carrots” – or economic incentives – as a way to shape the behaviour of businesses and individuals.

But that sort of approach is seen in a less rosy light by Ambet Yuson, General Secretary of the Building and Woodworkers’ International labour grouping. While he sees some benefits in market approaches, he’s warned that pricing solutions can put a premium on owning, rather than sharing, resources. And, he says, as the financial crisis has shown, markets can always fail.

So, plenty of solutions on offer, but varying views on which work best. There was, however, agreement on the need to act – and act now – to better protect environmental resources.

Useful links

 OECD work on the environment  

 OECD Insights: Sustainable Development

OECD Forum 2010: Matching skills to jobs

One impression you could get at this year’s Forum is that participants have trouble sticking to the subject. Looked at another way, it’s the fact that issues can’t be tackled in isolation, and that each session is closely connected to the others.

For instance, at this morning’s media briefing from TUAC, the Trade Union Advisory Committee to the OECD, Richard Trumka president of the AFL-CIO argued that, apart from the financial market aspects, the underlying reason for the crisis was a drop in aggregate demand. This would be a familiar position for at least one of the participants in the earlier discussion on the future of capitalism, Robert Skidelsky, “Keynes’s great biographer” to quote a book review by Joseph Stiglitz.   

TUAC also talked about growing inequality, as documented in the OECD’s Growing Unequal study, and the fact that workers at the lower end of the income distribution had to borrow excessively to pay for homes and immediate consumption. As a result, they paid for the crisis four times over, losing their homes, losing their jobs, losing the value of their pensions, and then having to pay higher taxes to pay for the stimulus packages and the ensuing sovereign debt.

The unions warned that a “stampede” towards fiscal consolidation would only make matters worse by reducing aggregate demand even further, whereas what is needed is an income-led recovery. But how should governments go about creating the conditions for this?

 TUAC’s answer was also proposed in the session on matching skills and jobs: invest in innovation, R&D. A downturn is the time for upskilling, a time to redefine jobs and retrain workers to take advantage of them.

As Barbara Ischinger, head of the OECD’s Education Directorate pointed out, education and training systems need to prepare learners not only for rapid change, but for jobs that haven’t even been created yet, using technologies that are still to be invented, to solve problems that cannot be foreseen.

Useful links

The educationtoday blog has guest posts from participants in this session.

Barbara Ischinger discusses New thinking, working and tools for the 21st century

Bob Harris, of Education International and Chair of TUAC’s Working Group on Education, Training & Employment analyses the impact of Exit strategies on public services and democracy

John Hope Bryant, Vice Chairman of the U.S. President’s Advisory Council on Financial Literacy until January 2010 Chairman and CEO of Operation HOPE proposes Education and financial literacy as a business case

OECD Forum 2010: Unleashing innovation

The OECD launched its Innovation Strategy today, setting out what it think needs to be done to foster smart new ideas. The strategy is at the heart of a session at the OECD Forum on Thursday morning, “Unleashing Innovation”, where moderator Luca de Biase, the IT and Science Editor of Italy’s Il Sole 24 Ore newspaper, has noted that there’s rarely been a more important moment for innovation. That’s not just because we need to drive new growth in the wake of the crisis but also because we need to tackle problems like climate change and ageing populations.

 So, what do the panel think needs to be done? Andrew Wyckoff, Director of the OECD’s Science, Technology and Industry department, kicks things off by explaining that the new OECD strategy provides a framework for governments to think about innovation. Crucially, that doesn’t just mean spending more on research and development (R&D), but rather adopting what he calls a “whole-of-government” approach. For instance, that can mean promoting new networks to bring people together and distribute ideas. It also means thinking about ways to get investment to innovators and lowering barriers to entrepreneurship. And it means developing better ways of measuring innovation.

The challenges facing companies in research have been underlined by Dawn Graham of pharmacy giant MSD. She’s pointed out that of every 10,000 molecules her companies starts to research, only one will ever make it to market, and at a cost typically of about $1.8 billion. She characterizes some of the issues in this area in terms of “push” and “pull”. Governments are good at the “push”, such as protection of intellectual property and investment in scientific infrastructure, but less good at “pulling” new ideas through the system and onto the market by lowering unnecessary barriers. 

Her views have been echoed by Martin Schuurmans, Chairman of the European Institute of Innovation and Technology. He’s worried about the tendency in Europe to favour consensus thinking and would like to see a greater emphasis on leadership – “which should be about pull, not push”. Europe has too many barriers to innovation, he says – “we are too fond of precise control rather than balancing risk with control”.

So, lots of ideas and fresh thinking in this session on innovation, and for Andy Wyckoff of the OECD a great way to unveil the OECD’s new strategy: “We’re thrilled by the intense interest in this,” he’s told the session. “It’s a paradigm change.”

Useful links

OECD Innovation Strategy

OECD Forum 2010 Business ethics: restoring trust

Marilyn Achiron of the OECD’s Corporate Editorial Unit contributed this post

Should we read anything into the fact that the three panelists in the session on Business ethics: Restoring trust were all women?

In the face of what discussant Roland Schatz, president of Media Tenor, called a “trust meltdown”, the panelists and other discussants insisted that restoring trust and promoting ethics in business must be a universal issue, and one that must also involve the financial industry. As Amy Domini, founder and CEO of Domini Social Investments said, “The role of finance is pivotal to the success of the planet. If finance is working against the goals of human dignity and ecological sustainability, then governments and civil society will be incapable of achieving those goals.”

Anne-Catherine Husson-Traoré, CEO of Novethic, noted that there are already reams of rules and regulations on ethical business practices, the problem is that they are often not enforced and no sanctions are applied if they’re breached. Agnes Jongerius, president of the Dutch FNV labour union agreed, but argued that new regulations were also needed: “The G20 countries are not delivering what they promised in London and in Pittsburgh,” she said. “They have a very short time to deliver new rules for the financial world, for business ethics, for real corporate social responsibility.” She urged the OECD to strengthen its guidelines on multinational enterprises. “If you have good rules but none are applied, we won’t make the progress we need to make.”

Amy Domini stressed the tactical role that shareholders can play in influencing corporate behaviour. But first they have to assume their responsibility. “Nobody owns corporate America anymore,” she said, citing the preponderance of mutual funds in the US that have no real stake in the individual companies in which they invest. She suggested that European unions, which are far stronger than those in the US, and particularly their pension funds, could drive changes corporate behaviour. “Unions need to have a more robust opinion of their own influence,” she said.

But Edward F. Greene, partner at the law firm Cleary Gottlieb Steen & Hamilton, was not convinced. For him, it was governments and international organisations that could exert the most influence. “If we are going to manage financial institutions, we’re going to have to have much more sophisticated regulators in place and a broader regulatory system to identify and control risk.”

Carla Coletti, the director of Trade, Employment and Development at the International Metwalworkers’ Federation, was passionate: “There is no more time for unilateral good will. Enough public relations; enough window dressing; enough voluntary codes. They are dangerous because they give the impression that something is being done.” She urged ministers who will be meeting at the OECD ministerial council meeting later today and tomorrow to “take bold decisions” to require businesses to accept their ethical responsibilities.