8/2/2019 Economic Crisis -The Long Term Starts Now -Observer OECD

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NOTE: All signed articles in the OECD Observerexpress the opinions of the authors

General Leaders

Economic crisis:

The long term starts nowAngel GurraSecretary-General of the OECD

Can 2009 bring a ray of light to lift the gloom and end the severest financial and economic crisis in decades?

The OECD Economic Outlookissued end-2008 sees some 21 of 30 member countries already in or heading into a recessionthat could last a year. Business investment will contract by over 5%, and unemployment could rise by at least 8 million by2010. This social crisis is affecting families and communities across the planet, with emerging and developing economiessuffering too.

Lower global inflation and more affordable energy and food prices offer some relief, but with the economy still in intensivecare and public anxiety spreading, the situation could worsen. Restoring growth, stability and confidence must remain the

policy priority for months to come.

Make no mistake: we need healthy financial markets for our prosperity and development, and to strengthen vital publicservices. But 2008 reminded us how damaging for our economies badly regulated markets can be.

The OECD is working with the worlds governments and other international organisations to stop such failures happeningagain.

Our strategic response, whose details are now online, tackles the crisis in a comprehensive way, by focusing on finance,competition and governance, including their interactions, as well as how to achieve sustainable growth in the realeconomy. These are exceptional times. They require exceptional responses. Business-as-usual is not an option.

The crisis has led to some major new thinking, about regulation and markets, about accountability and ethics, and aboutthe kind of economy we need to build. Our strategy is about devising better policies, better regulations and betterinstitutional frameworks that enable businesses to flourish and public interests to be safeguarded in a stronger, cleanerand fairer world economy.

Take financial markets. A range of factors are being addressed to help curtail excessive risk taking and more closely alignfirm incentives with the interests of shareholders and stakeholders. We are scrutinising such issues as balance-sheetcoverage, taxation and restoring market signals. We are evaluating the volatile investment bank segment, its size, capitalrequirement rules, and other questions. And we are examining broader issues, such as boardroom governance of risk,remuneration and shareholder rights, and how to improve agreed standards, such as OECD Principles of CorporateGovernance, regulatory management rules, performance guidelines, and more.

Pension funds have taken a battering in recent months, and the OECD strategy will facilitate the search for moreappropriate diversification strategies between public and private systems to reduce reliance on risky financial markets.

We are also working to improve consumer protection and awareness in using complex financial markets, and boostingethical standards and international codes of conduct for financial services professionals.

One sure protection for consumers is choice, and governments must uphold competition standards for this to happen.

Of course, competition is key for a sustainable recovery to take place generally, alongside such fundamentals as keepingmarkets open for trade and investment, and operating sound, counter-cyclical, fiscal policies. As we see unemploymentlevels increasing fast, the OECD experience on policies to promote job creation may be useful too.

While growth is vital, not any kind of recovery will do. There are systemic threats to the global economy, particularlyclimate change and poverty, which we must urgently tackle. Indeed, the crisis provides us with the chance to do so now,and it is encouraging to see major OECD governments placing green investment at the heart of their own crisis-responsestrategies for 2009.

Such approaches could help poorer countries too. If we are serious about sustainable growth, we must double ourdevelopment efforts, despite the recession. A Doha trade agreement is in sight, and holds out the promise of more trade,investment and development. Governments must clinch it for everyones sake.

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and do not necessarily represent the opinion of the OECD or its member countries.

All rights reserved. OECD 2009.

One thing is clear: the massive public interventions of recent months cannot be sustained indefinitely. They are costly tobudgets, and like any strong medicine, may damage the patient in the long run. That is why the OECD is devising exitstrategies, not to return to the pre-crisis vulnerable arrangements, but to help governments safely withdraw emergencymeasures without disruption once stability returns.

2009 marks the Chinese Year of the Ox, a symbol of patience and hard work, and inspiring confidence in others. The crisishas knocked governments off balance, but like the ox, we must not be knocked off course. The long-term job of building abetter tomorrow starts now.

For details of the OECD Strategic Response to the crisis, go to www.oecd.org/crisisresponse

Read the Reuters article "Davos debate: Towards economic models that work".

To download the PDF of the OECD's strategic response to the financial and economic crisis: Contributions to the globaleffort please click here.

OECD Observer No 270/271 December 2008-January 2009

Related links on www.oecdobserver.org

Related links

To read more OECD Observer articles on the financial crisis, click here

Remarks by Angel Gurra on the challenge of the financial crisis and faith in multilateralism

Financial crisis and the economy

The world needs to rewrite the rules of finance and global business

The economy: Working for a solution

Is fiscal policy back?

Tipping back the balance

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