Analysis: To join the club you have to play by its rules

Israel's accession to the OECD will have to be translated into better policy performance.

May 11, 2010 11:24
3 minute read.

NOECD generic 311. (photo credit: NCourtesy)


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For over 15 years, Israel has been trying to crash the barrier and get into the club of the wealthiest nations to be one of the “big guys.” On Monday it became a reality.

Israel has been recognized as a developed economy after years of fighting high inflation, huge deficits and economic uncertainty as an emerging economy. The accession to the Organization for Economic Cooperation and Development was expected in light of Israel’s strong macroeconomic fundamentals in recent years and the relative success with which the economy has weathered the global financial crisis compared with other countries that are part of that same club. The question is, what is in it for us, or is it just another title government heads can bluster about?

Not much is expected to change from today for the ordinary citizen. In the long-term, though, compliance with the norms and standards of the organization will act as a watchdog on the activities and policy-making of our government. On the one hand, OECD membership will boost the international standing of Israel as a developed country, helping the economy to become an even more appreciated partner in the eyes of international investors, and attracting foreign investment. In the long run, a greater flow of foreign investment into the country will translate into more jobs and better living standards for individuals.
On the other hand, Israel is joining the OECD as its poorest member and with the largest social gaps, while its member countries are the richest in the world. A couple of months ago, the OECD lauded Israel for weathering the global downturn relatively well, but criticized the fact that the benefits are shared unequally. Israel’s poverty rate is higher than in any OECD country and is almost twice the OECD average.

In its latest report published at the beginning of the year, the OECD said that Israel’s deep socioeconomic cleavages must be given due priority, with a focus on tackling low workforce participation, and poor levels of achievements in education and employment by Arab Israelis and haredim. In its report, the OECD linked the high incidence of poverty to high rates of nonemployment and a high incidence of low-paid work concentrated among Arab and haredi households.

One of the benefits of membership in the OECD is the ability of Israel to discuss the details of its economic agenda, but it also means that it has to share the responsibility to benchmark its economic and social reforms with OECD standards. The OECD keeps an eye on its members through a system of checks and balances, which regularly produces country statistics and comparative reports on a variety of areas from education, health services, competition, anti-corruption efforts, energy, air pollution and international migration. These reports will increase transparency of government activities and expose the real picture of unresolved issues in the country. Just months ago in the final stages of the process, Israel’s application to the OECD was thrown into doubt for a moment as the organization’s Secretary-General Jose Angel Gurria raised concerns about the country’s tackling of three critical issues: anti-corruption measures, in particular in the defense industry; compliance with intellectual property legislation common to OECD member countries; and the exclusion of statistics relating to territories that are not considered part of the country.

In a nutshell, apart from the economic benefits, more importantly OECD membership for Israel will have to be translated into better policy performance in key areas like trade, investment, poverty, inequalities, employment and education. Living up to the standards of this exclusive club will force the government to deal with these issues, in particular poverty and social inequalities, which for a long time have not been tackled. If Israel wants to be a leading economy in the world, it will need to act like a leading economy.

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