Global Agenda: OECD rules OK!

One of the main goals of Israeli economic policy in the field of foreign affairs is to be accepted as a member of the Organization for Economic Cooperation and Development.

handshake (photo credit: )
(photo credit: )
One of the main goals of Israeli economic policy in the field of foreign affairs is to be accepted as a member of the OECD, the Organization for Economic Cooperation and Development. If all goes well, this goal will be achieved during 2007. That's great, and we'll be readying the champagne - but meanwhile a few dampeners suggest themselves: a) the vast majority of Israelis have never heard of the OECD b) of the few who have, the vast majority have little or any idea what it does c) only a handful of government officials and private sector economists actually understand why Israel wants to join and what good it would do the country if we did. Global Agenda is therefore going to use a couple of columns to explain what this entity is and why it should be good for the Jews. A useful place to start was at the Hebrew University's Mount Scopus campus on Tuesday this week, where the Leonard Davis Institute, at the initiative of Professor Alfred Tobias, kicked off a series of seminars on World Governance with a look at the OECD. The concept behind the series is very important in its own right. In the post-Second World War era, and especially as globalization has advanced rapidly over the last 20 years, world governance has become an increasingly supra-national affair - meaning that national governments have less and less control over more and more areas that used to be their sole domain. Although the citizenry of most countries, especially in the developed world, may still be under the delusion that their votes in national elections determine who makes the rules that govern their countries, in practice, most important aspects of their daily lives are determined by decisions taken by global organizations, in which their government has only limited influence. Even these supra-national entities - including the UN and its agencies, especially the WTO; the IMF and World Bank; and the OECD - are themselves driven by larger forces, notably technological, demographic and sociological change. However, in terms of making rules and regulations that determine how households, businesses and even governments function, the supra-national entities are the main players. National governments - even those of the largest countries, such as the US and China - are increasingly forced to conform to the standards they lay down. The only available alternative is to be like North Korea, Cuba and Burma, which go their own way and pay the price accordingly. Within the supra-national universe, the Paris-based OECD stands out, because it is a voluntary club with no formal powers, yet has come to wield enormous influence. How this came to be and how the OECD actually works was explained at the seminar by Andrea Goldstein, a senior economist at the OECD's Development Center. He did a remarkable job in covering the expanding spectrum of issues that the OECD has chosen to get involved in over the decades since its foundation in 1964. These now extend far beyond the narrow areas of trade and economic growth, which were its original foci, to include taxation, corporate governance and even education. The unique feature of the OECD, Goldstein emphasized, is its process of peer review, whereby member states and governments submit their policies and performance for the examination and critique of their fellow members. Obviously, the implicit assumption here is that the subject of the review is interested in hearing the findings and recommendations of other countries and of working to implement some or all of these - otherwise the whole exercise is pointless. This approach also explains why the OECD is so effective: it has no capacity to impose its will on anyone and works on a consensual basis. You only do what you want to do - but you want above all not to fall behind |"global best practice" in a whole range of key areas, because in a globalized economy, if you can't keep up, you're in trouble. So, as Goldstein pointed out, a system in which Iceland or New Zealand can criticize the US sounds weird, but if the US accepts that it may have something to learn even from very small countries then it is actually very sensible. Everyone needs to keep on their toes and no country can be the best in every sphere. However, the OECD system is especially beneficial to small countries - which is why it is so important to Israel, as the next column will explain.