The OECD and globalisation

The OECD was formally established in 1961 to succeed the Organisation for European Economic Co-operation (OEEC), which administered the Marshall Plan, responsible for the miraculous recovery of post-war Europe.

The OECD's objectives were to promote economic growth in the West, help the developing nations which were coming out of colonial subjugation, and to help expand free international trade. In short, the OECD's fundamental goal was to function as a bulwark against communism and to ensure the success of free-market economies at the height of the Cold War.

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After the collapse of the Soviet Union in 1991, the threat of communism as an alternative system virtually disappeared in most of the world. Even China, which politically remained communist, adopted capitalism as its economic system. So, what happens to an organisation, when it loses its raison d'etre? Does it commit hara-kiri or reinvent itself? The OECD will try to address this issue at this month's ministerial meeting.

Despite the defeat of communism, history has not come to an end as Francis Fukuyama precipitously proclaimed, and the world's problems have not disappeared. Some of today's problems are the same as before but others are relatively new. In the economic field alone, there are a number of inter-related problems like poverty, immigration, alternative energy resources, fair international trade, and globalisation which need to be dealt with adequately.

Globalisation has so far produced a mixed bag of results -- an unprecedented economic growth and at the same time a widening gap between the rich and the poor. In the words of the Nobel laureate Amartya Sen, globalisation has created "massive levels of inequality and poverty."

It has until now been characterised by free movement of capital, liberalisation in the movement of manufactured goods (the WTO has over the last fifty years managed to cut tariffs on industrial goods and services in which the rich nations have a comparative advantage, from 40% to 4%), destruction of local industries in the developing countries, all sorts of protectionist barriers like agricultural subsidies and tariffs to obstruct the movement of agricultural products from poor countries to the rich, import quotas on textiles from the poor to the rich, and ever increasing restrictions to impede free movement of labour from the poor to the rich countries.

In all this, the West's role has been shameful and hypocritical.

Until very recently, the burden of this unfair distribution of wealth created by globalisation had been borne principally by the poor nations, but now the industrialised countries, which have so far reaped the benefits of globalisation through their control over the IMF, the World Bank, and the WTO are also facing the challenges of globalisation.

As pointed out by another Nobel laureate Paul Samuelson, faster technological advances in countries like China may soon erode the current competitive advantage of more advanced countries. China is currently spending vast sums of money on research and development.

This combination of low wages and high technology in some emerging countries is already creating problems in the US and Europe. As the technological gap between the rich and the poor narrows and as the West's monopolistic control over international organisations loosens, there will be growing insecurity and inequality among workers in the rich countries.

According to a report published recently in the New York Times, in this time of plenty, more Americans are currently in danger of slipping into poverty than before. Europe is facing sluggish growth, high unemployment and social unrest. Some fear that it might eventually lead to a social collapse in America and an economic collapse in Europe.

So it is here in these areas, i.e. globalisation, fair trade, and immigration, where the OECD, with its knowledge and experience, can play a useful role. But in order to do so in an equitable manner, it needs broad-based support from the rich and poor countries alike.

Until now the OECD has been a Western-oriented organisation. China, according to a report published recently by the OECD itself, "could overtake the US and Germany to become the largest exporter in the world in the next five years."

Yet China has not been invited to join the OECD. Brazil, Russia, and the oil-producing countries of the Middle East are also in a similar situation. The OECD should not commit hara-kiri but in order to function as an effective international organisation, it needs to reinvent itself and admit new members like China, Russia, Brazil, etc. as equal partners.

The writer is a columnist of The Daily Star.