OECD Insights

1993-6753 (online)
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OECD Insights are a series of reader-friendly books that use OECD analysis and data to introduce some of today’s most pressing social and economic issues. They are written for the non-specialist reader, including interested laypeople, older high-school students and university freshmen. The books use straightforward language, avoid technical terms, and illustrate theory with real-world examples. They also feature statistics drawn from the OECD’s unique collection of internationally comparable data. Online, you can find a number of special features to enhance each book’s educational potential.

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Debate the Issues: New Approaches to Economic Challenges

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21 Sep 2016
9789264264687 (PDF) ; 9789264264700 (EPUB) ;9789264262119(print)

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To capitalise on the new international resolve epitomised by COP21 and the agreement on the universal Sustainable Development Goals (SDGs) requires a renewed effort to promote new policy thinking and new approaches to the great challenges ahead. Responding to new challenges means we have to adopt more ambitious frameworks, design more effective tools, and propose more precise policies that will take account of the complex and multidimensional nature of the challenges. The goal is to develop a better sense of how economies really work and to articulate strategies which reflect this understanding. The OECD’s New Approaches to Economic Challenges (NAEC) exercise challenges our assumptions and our understanding about the workings of the economy. This collection from OECD Insights summarises opinions from inside and outside the Organisation on how NAEC can contribute to achieving the SDGs, and describes how the OECD is placing its statistical, monitoring and analytical capacities at the service of the international community. The authors also consider the transformation of the world economy that will be needed and the long-term “tectonic shifts” that are affecting people, the planet, global productivity, and institutions.

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  • New Challenges, New Approaches

    The year 2015was a landmark year for international co-operation, with a transformative agreement on a set of universal Sustainable Development Goals (SDGs) in NewYork and the Paris Agreement at COP21 marking a decisive turning point in our response to climate change. Both agreements make a strong call for a more sustainable development path, a new growth model that benefits all people and that takes care of the environment.

  • Introduction: The Romeo and Juliet of economic transformation

    Let’s begin with a proposition: The UN Sustainable Development Goals (SDGs) and the OECD’s New Approaches to Economic Challenges (NAEC) Initiative were made for each other. They are the Romeo and Juliet of economic transformation.

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    • The Sustainable Development Goals: A duty and an opportunity

      The Sustainable Development Goals (SDGs) are universal, multidimensional, and ambitious. To achieve them we need an integrated framework that promotes a growth path that respects the environment, and whose benefits are shared by all, not only by the privileged few. The concept of sustainable development challenges us to rethink how we relate to the world around us and how we expect governments to make policies that support that world view.

    • Answering the Queen's question: New Approaches to Economic Challenges

      “Why did no one see it coming?”asked Queen Elizabeth II of Great Britain, shortly after the world economy collapsed in 2008. In addressing the question to a group of economists, the Queen was spot on. As OECD Chief of Staff Gabriela Ramos said, “The crisis struck at the core of tightly held economic ideas, modules and policy”. I would go further. Crisis struck because of tightly held economic ideas, models and policies. The policy models used pre- 2008 were wrong or seriously flawed; this contributed to the collapse, chiefly by omission. The OECD’s New Approaches to Economic Challenges (NAEC) report recognises this, arguing that the challenge is for economists to develop a better sense of how economies work; and for economic policy to develop policies which reflect this understanding.

    • Policy coherence from new data, new research, new mindsets

      Recent global economic performance – characterised by sluggish growth, widening inequality, environmental precariousness, and market volatility – is a sobering reminder of the myriad challenges facing policy makers. How can understanding and quantifying the interrelationships between and among policies help design policy packages to improve performance?

    • Measuring multidimensional well-being and sustainable development

      The notion of sustainable development is profoundly multidimensional so assessing progress on sustainable development requires measures of multidimensional well-being. The number and diversity of the new Sustainable Development Goals (SDGs) and targets reflect the many dimensions of development (health, decent work, climate, etc.), and policy thinking must integrate these dimensions if progress is to be achieved across the board.

    • The importance of a policy coherence lens for implementing the Sustainable Development Goals

      The 2030 Agenda for Sustainable Development and the Addis Ababa Action Agenda call upon all countries to “pursue policy coherence and an enabling environment for sustainable development at all levels”. Sustainable Development Goal 17 – on the means of implementation – includes a Target to “enhance policy coherence for sustainable development” (PCSD). The OECD defines PCSD as an approach and policy tool to integrate the economic, social, environmental, and governance dimensions of sustainable development at all stages of domestic and international policy making. PCSD aims to increase governments’ capacities to foster synergies across economic, social and environmental policy areas; identify trade-offs; reconcile domestic policy objectives with internationally agreed objectives; and address the spillovers of domestic policies.

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    • How Tajik weddings helped me understand Wall Street

      The Silo Effect first sprung to life during the Great Financial Crisis of 2008. But it is not a book about finance. Far from it. Instead, it asks a basic question: Why do humans working in modern institutions collectively act in ways that sometimes seem stupid? Why do normally clever people fail to see risks and opportunities that are subsequently blindingly obvious? Why, as Daniel Kahneman, the psychologist, put it, are we sometimes so “blind to our own blindness”?

    • Turning the tide towards inclusiveness

      A rising tide lifts all boats, or so many used to think. But the evidence suggests that over the past three decades in a large number of advanced and emerging countries economic growth has disproportionally benefited people who are already relatively welloff, leaving the lower middle-class lagging behind.

    • Inclusive Growth: An opportunity to put growth on a socially sustainable footing

      The crisis left many a nation teetering on the edge of financial and economic catastrophe. Thankfully, governments managed to pull us back from the brink. Yet, as we have stabilised our economies, the gaping chasm between our societies’ “haves” and “have-nots” has come into sharp relief.

    • The productivity and equality nexus: Is there a benefit in addressing them together?

      Productivity growth has slowed since the crisis and inequality has been getting worse. Could they be influencing each other? The linkages between the productivity and inequality challenges are still to be fully explored. Each may have its own solution, but there is also good reason to think that there is a nexus between them. For instance, OECD evidence suggests that wage dispersion between firms, which reflects diverging rates of productivity growth, has contributed to rising inequality of incomes between workers. At the same time, the increased prevalence of knowledge-based capital and digitalisation may have unleashed winner-take-all dynamics in key network markets, which in turn may have led, in some instances, to an increase in rent-seeking behaviour.

    • Structural policies and distributional consequences

      In a majority of OECD countries, growth over the past three decades has been associated with growing disparities in household income. This suggests that some of the forces driving GDP have also fuelled inequalities. As a result, gains in household disposable incomes generally have not matched those in GDP per capita and the gap has been particularly large among poorer households and the lowermiddle class. An important policy question is whether some of the policy changes driving GDP may in addition play a “hidden” role on inequality. New empirical evidence produced by the OECD on the effects of structural policies on household incomes across the distribution scale has identified potential policy trade-offs and complementarities between efficiency and equity.

    • Environmental policies and economic performance

      A dirty, rundown environment has quantifiable costs for the economy and the well-being of societies. For example, the welfare costs of air pollution from road transport alone are estimated to amount to around USD 1.7 trillion in OECD countries, USD 1.4 trillion in China and USD 0.5 trillion in India. Without adequate policy action, costs will continue to increase, and can have tangible effects on economic growth, for instance through reduced labour productivity. Similarly, the prospects for long-term growth are under stress – for example, climate change is projected to decrease global GDP by 1% to 3.3% by 2060.

    • Understanding and managing the unequal consequences of environment pressures and policies

      The consequences of the degradation of environmental quality, as well as the consequences of environmental policies, are typically unevenly distributed. In general, poorer countries and lower income households are more severely affected by environmental degradation and at the same time have less capacity to adapt.

    • Resilience of economies to exogenous shocks

      Countries are subject to economic shocks originating from longterm trends, such as demography, and short-term events, such as financial crises; but healthy economies should be resilient to both. It is important to understand the factors that shape a country’s economic resilience, defined broadly as a country ability to contain long and short-term vulnerabilities as well as its capacity to resist and recover quickly when shocks occur. Ideally, whatever the shock, policies should be such that they help the economy remain close to its welfare potential in a sustainable way, notably in terms of jobs, incomes and quality of life.

    • Gender equality and the Sustainable Development Goals

      The push for policies to improve gender equality at the global level is getting new impetus through the Sustainable Development Goals (SDGs). SDG No. 5 is devoted to gender equality and aims to “achieve gender equality and empower all women and girls”. The goal’s detailed targets refer to a range of challenges, such as discrimination of women, violence against women, reproductive health, ownership rights and technology. Global progress in reaching these targets has been uneven. Despite impressive progress in enrolling girls in primary education, for example, gender equality in many other domains is still in far reach in the developing world.

    • Finance, growth and inequality

      Finance is the lifeblood of modern economies, but too much of the wrong type of finance can hamper economic prosperity and social cohesion. We have taken a holistic approach to study the consequences of finance for the inclusiveness of growth, in the spirit of the OECD New Approaches to Economic Challenges initiative.

    • Challenges facing Asia and Pacific in terms of sustainable development

      Despite great strides in reducing the number of people in abject poverty, Asia and the Pacific remains home to more than half of the world’s extreme poor. With the global and regional economic outlook uncertain, the key challenge facing Asia is to sustain the growth needed to create jobs and reduce poverty.

    • From analysis to action – Multidimensional Country Reviews

      Multidimensional Country Reviews (MDCRs) support developing countries in designing development strategies that aim for high impact. These strategies address the binding constraints to development, defined as sustainable and equitable growth and wellbeing. A growing number of developing countries worldwide are implementing MDCRs. Many see the MDCR as a tool to implement the Sustainable Development Goals.

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    • Making trade and investment work for people

      Both the UN Sustainable Development Goals (SDGs) and the OECD NewApproaches to Economic Challenges (NAEC) explicitly recognise that trade and investment are not goals in themselves, but are a means to an end. That desired end is stronger and more inclusive growth, better jobs for more people, and improved societal wellbeing. Trade and investment policies cannot deliver these outcomes alone, but they can contribute as part of a wider package of comprehensive structural policy reforms, designed in light of the specific situation in countries at various stages of development.

    • The Sustainable Development Goals and development co-operation

      The Sustainable Development Goals which world leaders agreed on in 2015 are focused on people, peace and planet. Achieving goals requires a transformational, integrated, and universal agenda that is based on effective policies, sufficient finance, and true partnerships.

    • Benefiting from the next production revolution

      The production of goods and services has been transformed in many ways over recent years. First, production increasingly takes place across borders, in global value chains (GVCs). Second, production is increasingly knowledge-based and involves a mix of goods and services, a phenomenon also known as the “servitisation of manufacturing”. Third and closely related, a growing part of production, in particular in the services sector, is affected by digitalisation and can sometimes be delivered through digital means. Finally, a new wave of technological change is now fundamentally altering the nature of production, heralding what has been referred to as a next production revolution. Ensuring that these transformations support overall growth and well-being requires sound policies in many areas and is a current focus of OECD work.

    • Learn to earn: Skills, inequality and well-being

      Jobs, wealth and individual well-being depend on nothing more than on what people know and what they can do with what they know. There is no shortcut to equipping people with the right skills and to providing them with opportunities to use these skills effectively. If there’s one lesson the global economy has taught us over the last few years, it’s that we cannot simply bail ourselves out of a crisis, that we cannot solely stimulate ourselves out of a crisis and that we cannot just print money our way out of a crisis.

    • The future of development is ageing

      Two themes that resonate strongly across the OECD are the need to achieve sustainable development and the growing significance of population ageing. It is rare, however, that these two agendas are brought together to consider the importance of ageing for developing countries.

    • A new paradigm for rural development

      Three billion people in developing countries live in rural areas; they include the majority of the world’s poor; and their number will continue to grow for the next decade and a half. Conditions for them are worse than for their urban counterparts when measured by almost any development indicator, from extreme poverty, to child mortality and access to electricity and sanitation. And the gulf is widening, contributing to large-scale migration to urban areas.

    • New Approaches to Economic Challenges in a century of cities

      We live in the century of cities. In OECD countries, two out of three people live in cities with 50 000 or more inhabitants. Outside the OECD, the share of urban residents is currently slightly lower, but urbanisation is progressing rapidly. While today over half of the world’s population lives in urban areas, the United Nations (UN) estimate that the global urbanisation rate will reach 60% by 2030 and 70% by 2050. Cities are important drivers of economic performance, and their contribution can be expected to increase. Metropolitan areas with more than 500 000 inhabitants generate 55% of OECD countries’ GDP and more than 60% of their economic growth. Due to agglomeration economies and high levels of human capital, most cities have higher productivity levels than their countries as a whole. As many OECD countries have seen declining rates of productivity growth in recent years, utilising the full potential of productivity-increasing agglomeration effects can create new sources of growth.

    • Food security and the Sustainable Development Goals

      The new Sustainable Development Goals (SDGs) include a significant number of interconnected objectives related to agriculture and food. SDG 2 focuses explicitly on food by seeking to “end hunger, achieve food security and improved nutrition and promote sustainable agriculture”, but multiple other goals relate to challenges in the food system. SDG 1 focuses on poverty reduction, where agriculture and food has a key role to play. Sustainable agriculture plays a central role in achieving SDG 6 on water, SDG 12 on sustainable consumption and production, SDG 13 on climate change adaptation and mitigation and SDG 15 on land use and ecosystems. Sustainable management of fisheries also features prominently in SDG 14 on marine resource and oceans. This chapter summarises the main policy leverages to achieve sustainable and secure food systems in line with these goals.

    • Co-ordination and implementation of the Sustainable Development Goals: The role of the centres of government

      A principal issue for governments with respect to the Sustainable Development Goals (SDGs) is how to align policies in practice given the breadth and complexity of the SDGs and their 17 goals and 169 targets, the mixed track record of most governments in working horizontally, and the need to include an unprecedented range of public and private actors in both policy formulation and implementation. The different phases bring with them very specific challenges. For example, adapting global targets to national contexts and setting targets at department level is a delicate, political task that requires careful and sensitive negotiation in order to ensure an inclusive process with real buy-in from key stakeholders both within and beyond government. Implementing the SDGs is a formidable governance challenge that needs to be steered. In recognition of this challenge and as a shift in thinking since the last set of global goals were agreed, the SDGs underscore the importance of building effective, accountable and inclusive institutions at all levels (Goal 16) as a foundation for achieving the desired outcomes from ending poverty, to improving health, and combating climate change and its impacts.

    • The implications of the UN 2030 Sustainable Development Agenda for the OECD

      OECD countries need to cope better, in terms of household wellbeing, income equality, and environmental damage, in response to external shocks and risks around migration, financial markets, climate, disease, security, to name a few. The UN’s 2030 Agenda would want the OECD to contribute to global partnerships to address these issues. In addition, the OECD should continue its historical way of dealing with the developing world through the OECD Development Assistance Committee (DAC) and facilitate the developing world to come to terms with this agenda.

    • A policy pathfinder for the Sustainable Development Goals

      At one time, I might have said that sustainable development is in the OECD’s blood, but biological metaphors have made enormous progress over the past few years and now I’d say it’s in the Organisation’s DNA. The OECD Convention, signed in December 1960, talks about the signatory countries’ determination to: “promote the highest sustainable growth of their economies and improve the economic and social well-being of their peoples”. This commitment has been reaffirmed regularly, in 2013, for example, when the strategic role of the OECD was defined as helping to achieve a resilient economy, inclusive society, and sustainable environment.

    • New Approaches to Economic Challenges and the Sustainable Development Goals: The way forward

      While global integration has been an engine of growth since the emergence of capitalism, the financial and economic crisis highlighted that the current level of interconnectedness between countries and its impact, positive or negative, was poorly understood. This increased complexity has exposed the limitations of prevailing analytical tools, policy frameworks, and governance arrangements. It has also underlined the fact that global challenges can only be addressed through collective co-ordination and action.

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