Founded to ensure the success of free-market economies at the height of the Cold War, the Organization for Economic Cooperation and Development (OECD) "is facing a crisis of identity more than 15 years after Communism crumbled across Europe". So wrote James Kanter in a recent International Herald Tribune piece, When a club of winners loses its way
What happens when an organization loses its reason for existence? Founded to ensure the success of free-market economies at the height of the Cold War, the Organization for Economic Cooperation and Development is facing a crisis of identity more than 15 years after communism crumbled across Europe.
Although the OECD remains an important forum for rich-world governments to swap tips on raising living standards and competitiveness, countries with surging economies like China still are outside the 30-member club, and there is little prospect of their swift admission.
Meanwhile, the quest by OECD officials for a prominent role in a world that already boasts an alphabet soup of seemingly similar organizations has yielded, at best, mixed results. Donald Johnston, the OECD secretary general, acknowledges that the body must embrace more countries and rekindle its sense of mission or face an uncertain future.
I'm worried about the OECD losing its relevance," Johnston said in a recent interview. "How are you going to shape the global economy if you're basically working with a minority of it?"
The OECD was founded in 1961 as the successor to the organization that administered the Marshall Plan, the American aid program to rebuild the economies of European countries ravaged by World War II. Rather than lending money, as the World Bank does, offering bailouts like the International Monetary Fund, arbitrating international disputes like the World Trade Organization or making binding decisions like the United Nations, the mission of the OECD is to gather data and to narrow policy differences among its members to aid economic growth.
In part, the consensual tradition of the OECD is why the U.S. government - which frequently complains about international bodies in which smaller countries can gang up on American officials - shoulders 25 percent of the group's $314 million annual budget despite some skepticism at home about subsidizing cadres of foreign civil servants. OECD headquarters - including the stately Château de la Muette built originally for a member of the Rothschild family and nestled in one of the most expensive neighborhoods of Paris - is currently undergoing a makeover estimated at E300 million, including the cost of temporarily relocating staff members.
Johnston sees no reason to move. Paris is cheaper than London and still probably cheaper than New York, and those two cities are the most suitable alternative hubs for an institution to which some 50,000 officials from dozens of governments travel each year to rub shoulders and explore policy options as varied as reducing health care costs, raising education standards and privatizing companies without hatching new monopolies.
Refitting the château, and equipping it with a new conference center, shows that "member countries have obviously made a major commitment to the future of the OECD," Johnston said. In fact, the prospects for the OECD look stark if it fails to open up its roster to rising economic powers beyond Europe. By 2020, current members will represent just 40 percent of global output, down from the current figure of just below 60 percent.
Authorities from Brazil, China and India participate in several OECD projects, but there are no formal talks under way to bring them in as full members of the organization. The OECD does not publish a list of candidate countries, and admission relies on vague criteria such as "like-mindedness."
Johnston said that before the end of his term in June he had hoped to start membership talks with Russia, which first expressed an interest in joining in the mid-1990s. Those talks now look less likely, in part because signs of authoritarianism have resurfaced in Russia, again raising questions about its suitability for membership.
Instead, some big members, including the United States, favor a first round of enlargement bringing on board a handful of smaller players like Israel and Chile and perhaps a couple of Southeast Asian nations like Thailand and Indonesia, emphasizing regions of future strategic interest now that Europe is largely at peace. Instead, some big members, including the United States, favor a first round of enlargement bringing on board a handful of smaller players like Israel and Chile and perhaps a couple of Southeast Asian nations like Thailand and Indonesia, emphasizing regions of future strategic interest now that Europe is largely at peace.
The challenge, according to Paul Reid, the deputy chief of the U.S. mission to the OECD, is to "strike the balance between remaining a group of countries talking the same language, and becoming a transformational force for democracy and open markets in places like North Africa, the Middle East and Asia."
That challenge is far from straightforward. Many European members are making enlargement of the OECD contingent on admitting a swath of neighboring countries, like the Baltic states, sensing that fellow Europeans are more likely to echo their own priorities than are citizens of countries on the other side of the planet
Patrick van Haute, the Belgian ambassador to the OECD, said the Belgian government had relied heavily on OECD research about aging populations to push through unpopular changes in social security last year - just one example of why there is a "strong feeling of ownership of the OECD coming from the smaller countries."
But for Johnston, who will soon relinquish his post to Ángel Gurría, a former Mexican finance minister, the diplomatic bottlenecks have left a sense of personal frustration. He said efforts by OECD members to streamline the way its priorities and budget decisions are made should enable the organization to welcome on board newer economic titans. As to whether China, and some others, have sufficiently democratic credentials to join the OECD, Johnston said that should be moot.
"Why is the OECD the policeman for democracy?" he said. "It's not even in our convention. It concerns me." Johnston noted that European dictators, including António de Oliveira Salazar of Portugal and Francisco Franco of Spain, were among the leaders of founding countries of the OECD. "I think that democracy will evolve in China, and it will have much more chance of evolving in China if they are at the table of the OECD than if they are not," Johnston said.
Even if the OECD solves its enlargement puzzle, finding a mission may still vex Johnston's successor, Gurría. Recent marquee projects, including plans for a global treaty on cross-border investment, have run aground amid concern about labor rights and environmental issues.
The story also highlights the importance of OECD statistics:
The OECD can boast its share of triumphs. Statisticians have helped trade negotiators measure the ways countries grant state aid, helping to break the international deadlock over agricultural subsidies during the 1990s and paving the way for the last global trade round to result in an agreement. Member countries also have agreed on ways to prevent companies from paying bribes and evade taxes - saving companies and governments hundreds of millions of dollars each year.
Member governments also rely on OECD studies to check the effectiveness of their policies in sectors from education to health care to the environment, and they usually are willing to submit themselves to OECD scrutiny to keep score.
"Statistics are a big part of what the moral authority of the OECD still is all about," said Enrico Giovannini, the organization's chief statistician. He plans a major new study looking at "what people know" about the rest of the world - a sort of global general knowledge quiz to find out which citizens are the most informed.
"If countries that want to participate in the 'knowledge economy' come in with a low score, they might realize they have to open up a bit more to boost their growth," Giovannini said. "You can see why this kind of survey could be so important for the key issue of democracy and future economic development."