OECD: Right policies essential for fairer globalisation

Published 29 March 2017 in:

Photo: UN Photo

Globalisation has reduced poverty in the world – but it has also increased inequality. Consequently, the Organisation for Economic Cooperation and Development (OECD) is now strengthening its efforts to ensure fairer globalisation.

Globalisation has helped raise the standard of living for many people and reduce poverty around the world. Yet, the gains of globalisation have not benefited everyone. We are seeing greater income inequality in societies and increasingly widespread discontent with the direction societal development appears to be taking. But how can we reverse the social exclusion experienced by many people? The OECD is now strengthening its efforts to provide better guidance to governments and other actors on measures needed to ensure that globalisation benefits everyone, regardless of education or income. Safeguarding openness and free trade is a fundamental part of this. The OECD is an important partner for Sweden in these efforts.

Recent decades have been characterised by increasing openness, trade and international cooperation. The middle class has grown and technology has developed rapidly, contributing to stronger growth, while cross-border exchanges have also increased. We are now on the cusp of even more rapid technological developments as a result of the digital economy, which is creating major opportunities for continued good growth and productivity gains. Sweden is at the forefront to be able to benefit from these developments.

But globalisation has also meant that large groups of people have not been able to benefit from its advantages, experiencing social exclusion as a result. This includes people with lower levels of education and simpler jobs in developed countries such as Sweden and other OECD countries. Income inequalities have widened in many countries. Globalisation has benefited certain groups and regions of a country more than others.

In Sweden, the labour market is increasingly polarised. Reorganisation and technological developments in the labour market have led to many educational programmes and skills that were once in demand no longer being so. The OECD considers that for many people this has created a lack of faith in public authorities being able to provide the security they seek. It has also led to a lack of faith in public representatives, institutions and decision-makers. Why have we come to this? What can we do about it?

The OECD is now launching initiatives in several different areas to analyse and present proposals on how globalisation can better benefit everyone, on the one hand, and to counter the weakening of the international rules-based system, primarily in the economic area, on the other. The OECD underscores that unless accompanied by the right policies, the gains of globalisation will not benefit everyone.

According to the OECD, a key issue involves working towards increased economic productivity while combating social exclusion. Growth in itself is not a sufficient driving force to ensure sustainable social development. It is also very much a matter of a better distribution policy and more effective policy frameworks. It is important to strengthen social insurance and education systems to create conditions that enable individuals to keep pace with the rapid changes taking place in society and in the labour market.

The OECD maintains that adaptations must take place to enable individuals to benefit from rapid technological developments and digitalisation, which means that many of tomorrow’s jobs do not yet exist, while many existing jobs will disappear in the future. This is why it is important that governments are able to create policy frameworks that make it possible to maximise the potential of digitalisation while also preventing digital exclusion.

Another important dimension involves safeguarding regional policy. This will make it possible to overcome the tensions between urban and rural areas and ensure that the matter of combating social exclusion is dealt with at national, regional and local level. In connection with this, it can be noted that more and more people are living in cities – more than 75 per cent in OECD countries. This represents not just a challenge but also great potential for more sustainable development through environmentally friendly construction, public and environmentally friendly transport solutions, increased productivity and more decent jobs.

For many OECD countries and around the world, migration and integration are also an important element in ensuring that globalisation can better benefit everyone. For many years, the OECD has engaged in solid and fact-based work on migration and integration. A new feature this year is that the OECD has launched a horizontal project on migration/integration that spans a large number of areas in the organisation. The aim is to indicate which integration measures are effective. The rapid integration of new arrivals into society is key to immigration being better able to promote economic growth. Sweden has been an instigator of this work and has benefited greatly from the OECD’s expertise in these issues.

Another central aspect involves safeguarding the international rules-based system. The OECD’s work on rules and standards is an important contribution to this, as are the OECD’s reviews of regulatory compliance. One concrete example of this is that the OECD and the G20 have worked effectively together to draw up a global standard on the automatic exchange of information concerning cross-border financial transactions to prevent the possibility of tax evasion. Increased transparency and accountability are important building blocks to ensure a functioning rules-based system. Institutions must be defended and strengthened, people’s confidence must be regained and the independence of the media must be guaranteed.

The most recent OECD economic survey of Sweden, which was presented in February, noted that the Swedish economy and productivity are growing rapidly and that unemployment is receding. At the same time, income inequalities have widened, in part as a result of social benefits increasing more slowly than wages and capital incomes. The OECD also highlights the increasingly polarised labour market and increasing income inequality between those born in Sweden and those born abroad. One of the measures recommended by the OECD is to index-link the benefits of the social insurance system. Globalisation and free trade strongly favour a small, open economy such as Sweden’s. Investments in continuing education and professional development are necessary to secure our place in the global value chain.

The OECD has an important role to play in supporting national measures in Sweden and other member countries, but the OECD also has an important role to play in supporting the actions of OECD countries in a broader international perspective and in helping us tackle common global challenges. The OECD currently cooperates with more than 130 countries that are not members of the organisation. It also functions as a secretariat for the G20 and strengthens cooperation with the United Nations and other actors. There is a clear link between major international challenges and how the advantages of globalisation can better benefit everyone.

Climate change and environmental damage remain causes for serious concern. Rising sea levels, increasing air pollution and a lack of clean water represent major challenges for many countries. Climate refugees are no longer a future threat. There is a considerable lack of faith in the world’s leaders being able to manage these challenges. The year 2015 was a strong year for multilateral cooperation. The Paris Agreement, with its concrete goals and commitments for reducing climate change and emissions, inspires hope. The 2030 Agenda and the Sustainable Development Goals, adopted by all the world’s leaders, offer a great opportunity to manage the challenges of globalisation.

But 2016 illustrated the challenges involved in implementing these commitments.

Effective implementation of the 2030 Agenda will lead to reduced social exclusion and enhanced gender equality. The OECD has an important role to play in helping member countries to implement the 2030 Agenda, both nationally and at global level. Sweden cooperates closely with the OECD on these issues. The OECD also has an important role in ensuring that the advantages of globalisation, free trade and rapid technological developments benefit everyone, while also combating their negative consequences through concrete and long-term policy recommendations and establishing regulatory frameworks, and through peer reviews and accountability procedures.
Annika Markovic, Sweden’s Ambassador to the OECD

Jörgen Karlsson, Deputy Head of Mission, Delegation of Sweden to the OECD