The global economy took a sharp turn for the worse following the collapse of Lehman Brothers in September 2008, and today it is increasingly apparent that the crisis has entered its second round. This time we are facing a combination of low growth and trouble in the financial sector, just as governments find themselves running out of economic policy options.
The history of economic policymaking has been marked by a succession of “paradigms” defining the goals of economic policy and the instruments used to attain them.
OECD Chief Economist Pier Carlo Padoan looks at where we go from here.
Financial market failures were a major cause of the economic crisis, but property markets, particularly for housing, have had a leading part to play too. From the subprime debacle in the US to the bursting of unprecedented real estate bubbles in Ireland, Spain and Greece, among others, the overheating and collapse of property markets not only hurt savings and investments, but was felt throughout entire economies, affecting construction, employment, lending, spending and more.
“Growth is turning out to be much slower than we thought three months ago," OECD Chief Economist Pier Carlo Padoan said when issuing his organisation's forecast update for major global economies on 8 September.
Why do some businesses, organisations, economies and even countries succeed in achieving their objectives while others do not? Important insights are provided if we treat each of these entities as a complex adaptive system, subject to the same processes as biological evolution.
Canada’s labour market was spared some of the more dramatic peaks and troughs of the economic crisis. Why?
Canada is a trading nation. As a geographically large country, rich in natural resources and with a relatively small population, trade was a natural starting point. But Canada has built on this foundation and today boasts a highly skilled and educated work force, a well-developed physical and financial infrastructure, a transparent and predictable regulatory environment, and a high degree of openness to trade and investment.
Building tax administration capacity is needed to help spur development in Africa. A new survey shows that action is being taken, but more work is needed.
How can we all learn from a crisis? Today, we find ourselves in a disappointing, if not altogether unexpected, predicament. The very governments who took bold and decisive action in the period of the financial crisis 2008-09 to bail out banks and keep financial markets alive now find themselves on the receiving end of severe punishment from financial markets. How could this be?
“The government’s top priority is reducing the nation’s deficit and returning Britain to strong and sustainable growth. That means the right economic policies at home and creating the right economic environment abroad.
The recent financial crisis has left a hole in the public finances of many countries. Yet, with the right preparation, governments may have been better placed to fund that gap. This holds lessons for future crisis resolution strategies.
The financial crisis has taken a heavy toll on government finances and taxpayers are still footing the bill. Could private investors do more to help out? Mohamed El-Erian, CEO and co-CIO of PIMCO, believes they should. He explains to the OECD Observer.
A floor has now been placed under the banking crisis, albeit at a very high cost to the public purse.
“The outlook for growth today looks significantly better than it looked a few months back,” OECD Chief Economist Pier Carlo Padoan says. Growth in the G7 economies outside Japan appears to be stronger than previously projected, with accelerating private sector investment and trade boosting recovery, his analysis showed. Read on here
Is the worst economic crisis of modern times really over? Though there are risks to the downside, the latest OECD Economic Outlook points to a recovery taking hold.
Speculation and greed were at the heart of the global financial collapse. Reforms of financial regulation have gone some way to curbing their impact, but a lot more still needs to be done.
The financial system may be out of intensive care, but it would be wrong to assume it has fully recovered. Major questions remain over how banks operate and how they are regulated. The solutions aren’t always obvious, but they must be found if we’re to avoid another crisis.
Governments and central banks managed to avoid a global economic catastrophe, but the crisis has left a legacy of nearly bankrupt governments. A quick return to solvency is required.
How can governments restore public finances and promote sound economic growth at the same time? With budget deficits stretched and public debt at historical highs, it will not be easy. But the OECD believes that with the right mix of policies much progress can be made.
Structural economic challenges and preparing for recovery were the dominant themes at this year’s Ministerial Council Meeting (27-28 May), under the chair of Italy’s prime minister, Silvio Berlusconi. Fiscal challenges, jobs, green growth, innovation, development, trade and investment, and societal progress all figured on the agenda. These highlights are based on the full conclusions, which can be read at www.oecd.org/mcm2010
“To reform and to perform” is the goal of many a serious politician. It is not an easy task.
Pensions are a major component of public expenditure, and a target for governments looking to streamline budgets. What are countries doing to manage costs at a time when populations are ageing at an accelerated pace?
Did globalisation contribute to the economic crisis and if so how? This is one of several interesting questions asked in Measuring Globalisation: OECD Economic Globalisation Indicators 2010. In snapshot mode, this book looks at the financial crisis, trade, technology and multinational enterprises, and asks how these may have influenced the proliferation of the crisis, just as they helped spread prosperity and wealth in the first place.
As the OECD reaches 50, it must continue to become more relevant, useful and open within a new architecture of global governance, argues Angel Gurría, in this extract from remarks delivered following the renewal of his mandate as OECD secretary-general.*
When Chile became the first South American country to join the OECD in 2010, the event was greeted as a seal on years of progress, not to mention hard work. Still, challenges remain, including in the fight against poverty, as Minister of Planning Felipe Kast explains in this interview with the OECD Observer.
In the aftermath of the financial crisis, one question is how to balance the short-term pressure on the health budgets with the long-term obligations to deliver ever better health services to the public. Striking the right balance is not an easy task.
With austerity the order of the day in most OECD countries, the public is understandably anxious that budget cuts do as little harm as possible to the services they depend on. Few sectors capture the dilemmas this poses for policymakers quite like healthcare.
According to the latest Economic Outlook, growth in the OECD will reach some 2.7% in 2010. But while the global economy may be out of intensive care, it remains very fragile, as underlined by market volatility, rising public debt and high unemployment. A key missing ingredient is confidence. What must be done to restore it?
Growth is picking up in the OECD area–at different speeds across regions–and at a faster pace than expected in the previous Economic Outlook (November 2009). Strong growth in emerging-market economies is contributing significantly. However, risks to the global recovery could be higher now, given the speed and magnitude of capital inflows in emerging-market economies and instability in sovereign debt markets.
As the world economy splutters back to life, policymakers have been focused on ending the jobs crisis. But despite the arsenal of policies aimed at assisting young people, the long-term unemployed and the unskilled, one of the most vulnerable groups of workers risks being forgotten.
Health spending rises; Round up; Soundbites; Benvenuto!; Economy; Food speculation question; Chinese flexibility welcomed; Slovenia joins the OECD; Plus ça change...
Praising the co-ordinated international actions in response to the economic crisis, International Labour Organization Director-General Juan Somavia, World Trade Organization Director-General Pascal Lamy, German Chancellor Angela Merkel, OECD Secretary-General Angel Gurría, World Bank President Robert B. Zoellick, International Monetary Fund Manager Director Dominique Strauss-Kahn (L-R in the photo) and issued a joint press statement on 28 April 2010 calling for continued “international efforts with the aim of ensuring a lasting recovery in the financial sector and strengthening growth in the long term, and to address the impact of the crisis on poor countries and vulnerable populations”.
Can a durable recovery come from greener growth? That largely depends on the policies. In 2011 the OECD will deliver its Green Growth Strategy. Here are some early pointers.
House prices in many OECD countries rose for more than a decade from the mid- 1990s–an unusually long and steep climb. Previously, booms typically lasted for about six years and house prices rose by about 45%; by contrast, the recent boom went on for twice as long and prices increased by an average of 120%.
“Special drawing rights”, a little-known quasi-currency, are important for developing countries and could become one of the world’s reserve monies.
A global crisis of long-term unemployment is looming. How can public-private partnerships help?
Financial literacy might not help ordinary people outsmart Wall Street professionals, but it can help people manage their funds.
Despite signs of recovery, make no mistake: this crisis is far from over. We are in the midst of the most serious jobs crisis since the Great Depression and the economic recovery is still very weak and fragile.
Rumours of capitalism’s demise may be premature. The question now is: what kind of capitalist system will emerge from the current crisis?
Current theories of portfolio management are at odds with the wellbeing of citizens. Only government policy can address this.
The recent economic meltdown was at root not a failure of character or competence, but a failure of ideas.
One of the side-effects of the global crisis has been a temporary narrowing of current account imbalances among the world’s major countries and economic areas. This is good news, but will it last? Policy actions may be needed.
Is policy sowing the seeds of the next crisis? There is a danger that it is. Imbalances in particular must be tackled.
One of the difficult challenges for governments facing a crisis is to keep an eye on the wider picture. This is particularly true in OECD countries today, as they fight down unusually wide fiscal deficits and heavy debt. These problems are a sequel to the financial crisis that started in 2008. Now, most countries, from the largest to the smallest, have to make new sacrifices. People are understandably angry, feeling they are not responsible for the current situation.
Unemployment in the OECD area is predicted to reach some 10% in 2010, up from about 5.6% in 2007. Men have been hit harder than women: across the OECD area, male employment has fallen by 3% since the recession started, while the decline for women stood at a tenth of that, at 0.3%. Hence the “mancession” tag bloggers and commentators have used to characterise the jobs crisis.
