The new global financial sheriff these days is not a bank president or the CEO of a security company. Appearing more and more in the headlines, the Organization for Economic Co-operation and Development (OECD) seems to be all over the place, issuing warnings of impending economic doom and heading up major campaigns on the tax front.
The OECD is an international economic organization comprised of 34 countries including much of Europe, the U.S., Australia, Canada, Japan, Mexico and Turkey and others. Established in 1961, the aim of the organization is to ‘promote economic growth, prosperity and sustainable development’ among members and non-member countries. It publishes an economic report looking at the prospects for the world economy twice a year that is highly regarded by economists for its precise coverage of important information.
According to their official website, the OECD “provides a forum in which governments can work together to share experiences and seek solutions to common problems.” That means working with governments to understand what drives economic, social and environmental change and measuring productivity and global trade and investment flows. It also analyzes and compares data to predict future trends as well as establishing international standards on a wide range of things from agriculture to chemicals to taxes.
Tax Transparency
Taxes, in fact, is one area that is closely monitored by the OECD and its director of Tax Policy Administration, Pascal Saint-Amas, is currently heading up a major international campaign to build tax standards for the global economy of the 21st century. A recent excerpt from a May 24th article posted by the OECD, pointed to the 2008 financial crisis as a catalyst to the progress made in global tax coordination. It was only in 2009 at the height of the crisis that the G20 decreed the end of bank secrecy and the 20 member countries committed to taking action against non-cooperative jurisdictions, including tax havens. Countries around the world agreed to work together to fight cross-border tax evasion.
The effort has had some success, especially of late with the publication of the Panama Papers which has raised financial transparency to new media heights. These efforts, however, have done little, according to the OECD, to promote global growth. In the OECD's latest economic outlook published on Wednesday, the organization said that global growth had "languished over the past eight years as OECD economies have struggled to average only 2 percent per year, and emerging markets have slowed, with some falling into deep recession." It downgraded its global growth forecasts and warned global policy makers to "act now" to prevent "persistent and sluggish growth" and another economic downturn.
According to OECD's Chief Economist Catherine Mann, "The prolonged period of low growth has precipitated a self-fulfilling low-growth trap. Business has little incentive to invest given insufficient demand at home and in the global economy, continued uncertainties, and a slowed pace of structural reform."
In addition, …”although the unemployment rate in the OECD is projected to fall to 6.2 percent by 2017, 39 million people will still be out of work, almost 6.5 million more than before the crisis."
Mann believes that in order to encourage global growth, policymakers need to coordinate fiscal and structural policies to propel economies to increased progress and development, rather than relying on monetary policies such as stimulus packages used by central banks in the U.S., euro zone, U.K. and Japan. These policies include increased labor market skills and mobility; enhanced market competition, innovation, and dynamism; and stronger financial market stability and functioning.