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.

NOECD generic 311 (photo credit: NCourtesy)
NOECD generic 311
(photo credit: NCourtesy)
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. Inthe long-term, though, compliance with the norms and standards of theorganization will act as a watchdog on the activities and policy-makingof our government. On the one hand, OECD membership will boost theinternational standing of Israel as a developed country, helping theeconomy to become an even more appreciated partner in the eyes ofinternational investors, and attracting foreign investment. In the longrun, a greater flow of foreign investment into the country willtranslate into more jobs and better living standards for individuals.
On the other hand, Israel is joining the OECD as its poorest member andwith the largest social gaps, while its member countries are therichest in the world. A couple of months ago, the OECD lauded Israelfor weathering the global downturn relatively well, but criticized thefact that the benefits are shared unequally. Israel’s poverty rate ishigher than in any OECD country and is almost twice the OECD average.
In its latest report published at the beginning of the year, the OECDsaid that Israel’s deep socioeconomic cleavages must be given duepriority, with a focus on tackling low workforce participation, andpoor levels of achievements in education and employment by ArabIsraelis and haredim. In its report, the OECD linked the high incidenceof poverty to high rates of nonemployment and a high incidence oflow-paid work concentrated among Arab and haredi households.
One of the benefits of membership in the OECD is the ability of Israelto discuss the details of its economic agenda, but it also means thatit has to share the responsibility to benchmark its economic and socialreforms with OECD standards. The OECD keeps an eye on its membersthrough a system of checks and balances, which regularly producescountry statistics and comparative reports on a variety of areas fromeducation, health services, competition, anti-corruption efforts,energy, air pollution and international migration. These reports willincrease transparency of government activities and expose the realpicture of unresolved issues in the country. Just months ago in thefinal stages of the process, Israel’s application to the OECD wasthrown into doubt for a moment as the organization’s Secretary-GeneralJose Angel Gurria raised concerns about the country’s tackling of threecritical issues: anti-corruption measures, in particular in the defenseindustry; compliance with intellectual property legislation common toOECD member countries; and the exclusion of statistics relating toterritories that are not considered part of the country.
In a nutshell, apart from the economic benefits, more importantly OECDmembership for Israel will have to be translated into better policyperformance in key areas like trade, investment, poverty, inequalities,employment and education. Living up to the standards of this exclusiveclub will force the government to deal with these issues, in particularpoverty and social inequalities, which for a long time have not beentackled. If Israel wants to be a leading economy in the world, it willneed to act like a leading economy.