Tuur Elzinga on the OECD: 'The OECD is more than a club for wealthy countries'

20 December 2015

Tuur Elzinga on the OECD: 'The OECD is more than a club for wealthy countries'

Neoliberal ideology is no longer holy writ at the Organisation for Economic Cooperation and Development. Partly thanks to the efforts of SP Senator Tuur Elzinga, the OECD is focusing more on a broader concept of prosperity and on inclusive and sustainable growth. SP Senator Elzinga answers questions from Tijmen Lucie.

Since last year you've been rapporteur for the Parliamentary Assembly of the Council of Europe on the OECD. What sort of organisation is the OECD?

The OECD is often seen as the club for wealthy, western countries. That's true as far as it goes, but as I've got to know the organisation during the last few years, it's a great deal more than that. The organisation was created in the years immediately following the Second World War when the idea was that European countries would cooperate economically so that there would be no more wars between them. Shortly after it was established these forerunners were joined by countries outside Europe, such as the US, Canada and Japan. That became the OECD, an intergovernmental organisation that offers its members the chance to discuss conventions, but which lacks the power to put them into force. The OECD's culture has therefore always involved seeking consensus on the basis of persuasion, supported by statistics. In this the organisation has never been controversial, but what's researched is of course politically directed. For a long time the OECD, in common with the IMF and the World Bank, underwrote the Washington Consensus, which means extending the role of the market and reducing the role of the state in the economy. But in recent years the body has been prepared to look more critically at itself. That has come partly as a result of a number of new countries acceding, countries with a different background, such as Chile and Mexico. The current Secretary-General, for instance, is a Mexican. He come from a country of extreme inequality and widespread poverty. It's probable that this has also contributed to a broader orientation.

What does being rapporteur for the Council of Europe on the OECD involve?

The OECD is an intergovernmental organisation, with no parliamentary dimension. For that, in order to measure its work against the democratic will of the people it looks to organisations with a major geographical overlap which do have such a dimension, such as the Council of Europe. Once a year, therefore, the Parliamentary Assembly of the Council of Europe – (hereafter PACE – translator's note) is joined by delegates from other OECD countries, such as Mexico, Chile, New Zealand and Japan, for a debate with the Secretary-General. The US never comes, because they insist that the Secretary-General comes to them. The debate is conducted on the basis of a report made by a member of PACE, from which a resolution is formulated by the responsible committee, after which this is voted on and recommendations made to the OECD and its member states. This year I have written the report.

What are the main points of the report?

The report generally concerns the activities of the last year, but my idea was to look back at some fifty years of the OECD, because after fifty years of its existence nothing had happened in relation to the financial crisis, I've been trying for a long time to urge the OECD to take a critical look at its own analyses and policy recommendations against the background of the crisis. Eventually in 2012 the organisation initiated the research project New Approaches to Economic Challenges (NAEC). That project was aimed at finding out how the crisis could have started and what the underlying causes were that were overlooked by the OECD. I used the final report from NAEC as a source for my own report on the long-term effects of economic development since the creation of the OECD in 1961. My report is radically different to all the previous reports on OECD activities. I think that this report will move the discussion between the Council of Europe and the OECD on a step further and provoke reflection. It contains a number of practical recommendations for reducing inequality, by for example increasing the wages of low- and middling wage earners and making taxes more progressive. The resolution on the basis of my report also calls for the financial sector to be brought under control and for workers' wages to be increased at the expense of income from profits. That left ideas of this kind appear in my report won't surprise anyone, but that it has been so widely supported, by both the OECD and an overwhelmingly conservative PACE, might be called remarkable.

How do you explain this broad support?

I've done the same thing myself as has the OECD. Persuading people on the basis of irreproachable data which show that in a number of ways things aren't going so well for our planet and that this has to change. The OECD itself has demonstrated that growing inequality is absolutely not good for economic growth and that you have to adopt policies that both promote growth and reduce economic inequality. In addition it has shown that growth and environmental protection can go hand in hand, but that growth since industrialisation has for the most part caused ecological damage and that a revolution in thinking is needed in order to turn this process around. My recommendations still don't go far enough, but they do go as far as PACE could accept. I hope that this report encourages the OECD to look more critically at the unintended consequences of encouraging free trade and international investment. There's still a long way to go, but bodies such as the OECD, the IMF and the World Bank are further on in the modernisation of their thinking than are the economic policy makers in Brussels and The Hague, who are still clinging to an extremely dogmatic neoliberal ideology.

What has brought about this turnaround?

I think that the last crisis, given its depth and persistence, certainly contributed. Although many countries have right-wing governments, which recouped the costs of the crisis from ordinary members of the public and not from the banks, I think after all that we can say that the crisis of 2008 brought about a transformation in thinking about the economy. Prominent neo-Keynesian economists such as Paul Krugman and Joseph Stiglitz were more or less excluded from the economic debate before the crisis but are now taking an increasingly central place and are being widely embraced.

Will this change in thinking also lead to doubt about the capitalist system?

Within these institutions certainly not yet. But the capitalist system hasn't been entirely bad. In my report I describe a number of trends since industrialisation. If you see how many people have been helped out of poverty, the extent to which average life expectancy has increased and how many more literate people there are thanks to capitalist economic development, then it's also brought a great deal of prosperity. Above all after the Second World War, when it went along with strong economic control by nation states. Recent decades have seen this state control, however, decreased, which has led to immediate disinvestment, the erosion of public services and a rapid growth of domestic inequality. And some of these trends went bad from the start. Look at ecological sustainability, where we are now reaching the limits. If we don't succeed in turning this giant oil tanker around, things are going to go fundamentally wrong with our planet.

Is sustainable, inclusive growth possible under the current capitalist system?

It depends on how you define capitalism. I don't think that it's possible within a laissez-faire model that states that the market always knows best. Since that principle was introduced in the 1980s, a number of developments have been derailed. But it could have been when things were as they were in the 1950s, '60s and '70s, when a large part of the economy was left to the market, but the main lines were actually controlled by the state. In those days the government did succeed in reducing inequality, increasing prosperity for everyone and investing in education and health care.

At the beginning of October the OECD presented an action plan against tax avoidance by multinationals. Will the plan put an end to this practice?

No, but I think it's good that the OECD is taking the lead in this, because the majority of multinationals are going to feel the effects. And not only in the OECD countries, because emerging economies such as Brazil and China are also involved. That's necessary as well, because if large slices of the world economy are left out, it will be difficult to make effective agreements. This plan will certainly not close all of the gaps in international taxation law, but it is a step in the right direction.

NGOs are critical, because developing countries weren't involved - or were hardly involved - in decision-making and this plan won't help them. Do you share this critical view?

Yes and no. I know that developing countries do sometimes get to join discussions and are listened to by the OECD, but their influence is minimal. As to whether they'll be helped by this plan, I think they will, a little.

Is the OECD really the suitable body to tackle tax avoidance? Shouldn't decisions on this be taken at UN level?

You're right. Ideally the United Nations should be taking the lead. The fact is, however, that the OECD is best equipped to take responsibility for the coordination. But in an ideal world, every country should be involved in the decision-making process, and not only those that are invited.

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