The deep scars of the crisis can be relieved through appropriate policy action, particularly in competition, jobs, taxes and financial services. This would bolster long-term growth too.
Now for sustaining growth–; –as China sets the pace; Greening Greece; Soundbites; Economy; Aid shortfall; Chile's new president; Tax watch; Plus ça change...
Spring is finally in the air for most OECD countries, as the signs of recovery start to multiply. The recession has been long and hard, so this is reassuring news. But while the worst of the crisis may be behind us, the recovery remains fragile, and there are still many policy challenges to address.
Has the crisis affected remittances from migrants abroad? One survey has found that migrants from Latin America based in the US are still sending money home even if that means cutting expenses, taking second jobs, working more hours or, if they have lost their jobs, dipping into their savings.
Ireland was the fastest growing OECD economy since the mid-1990s. It is now experiencing one of its most severe recessions. What explains this turnaround? How will the Irish economy recover?
Governments in Asian countries have been responding to the global crisis with stronger social policies. The economy should benefit.
The United States spent 16% of its national income (GDP) on health in 2007. This is by far the highest share in the OECD and more than seven percentage points higher than the average of 8.9% in OECD countries. Even France, Switzerland and Germany, the countries which, apart from the United States, spend the greatest proportion of national income on health, spent over 5 percentage points of GDP less: respectively 11.0%, 10.8% and 10.4% of their GDP.
More active education and employment policies, particularly targeted at minority groups, are needed to bolster its economic performance and bridge deep divisions within its society.
Could today's jobs crisis end up scarring the hopes of an entire generation? Even in the best of times, many young people have a hard time getting a foothold in the labour market, with youth unemployment often two to three times higher than for adults. In recessions, finding work gets tougher still. Moreover, many of those young people who have work are on short-term contracts and commonly find themselves first in line when it comes to lay offs-some 35% of workers aged 15-24 in the OECD area held temporary contracts in 2008. In this recession, there is extra cause for concern.
By sector-
International trade has declined steeply during the crisis, though how has the fall been reflected in different sectors and countries? Take the US, Germany and Japan, the three largest OECD traders-OECD countries account for roughly 60% of world trade. As shown in the top graph for total trade (which is the sum of imports and exports, rather than the difference, which is the trade balance as shown on page 5), machinery and transport equipment have broadly speaking been the main culprits, falling by over 11% in the US, 14% in Germany and 15% in Japan, comparing the second quarter 2009 with a year earlier. Lower energy prices have also contributed to fewer imports. Trade in fuel and lubricants fell by nearly 10% in the US and Japan, though exports by just over 3% in Germany. A closer look shows that fuel and lubricant imports in the US and Japan plummeted, by 13.6% and 18.1% respectively. Trade in manufactures and chemicals were not affected quite as badly, though it fell particularly steeply in Germany, by 6% and 3.6% respectively, year-on-year.
As actress Bette Davis once said, "getting old is not for sissies". Just when you expect to be reaping the rewards of a life of hard work, there is a surprisingly good chance that you will, instead, be struggling just to get by. In the mid-2000s, an average of 13.3% of people over 65 were living in poverty in OECD countries. An astonishing 45% of Koreans of that age were income poor, as were more than one out of every five older persons in Australia, Greece, Ireland, Japan, Mexico and the US. In only eight countries was the income poverty rate 5% or less among their oldest citizens.
Jobs crisis or no, it's best to invest in education. As this year's edition of Education at a Glance shows, men and women who have university-level degrees earn far more over the course of a lifetime than those who don't. In fact, men with higher education in Italy and the US can earn over US$300,000 more than their counterparts who do not have a university degree. Rewards tend to be lower for women, with Korea and Spain the exceptions.
Thanks to prompt and significant government responses to the crisis, many economies are experiencing initial signs of recovery. However, there is still much uncertainty concerning what lies ahead and unemployment is still rising in many countries. The OECD unemployment rate reached a post-war high of 8.5% in July 2009, with an OECD estimated 15 million extra out of work since the start of the crisis. In contrast, unemployment across the OECD was at a 25-year low of 5.6% in 2007.
International trade fell off the charts in the fourth quarter of 2008 and showed only a modest easing in the rate of decline in the early months of 2009. Well-regulated open trade is essential for economic recovery and development, yet in times of crisis, protectionism may appear an attractive solution. It should be resisted.
The world economy has hit a wall over the past 12-18 months. This was the opening message from INSEAD's Soumitra Dutta in a panel debate at OECD Forum 2009 to discuss the OECD's latest economic forecasts launched moments earlier (OECD Economic Outlook No 85, June 2009).*
Your article on Islamic banking ("Islamic banking: an asset of promise?" No 272 April 2009) suggests that financial temperance is still possible. The ratio of assets leveraged against capital cited in the article, 20 to 1 in US banks, 30 to 1 in Europe, yet only 10 to 1 in Islamic banks reveals just how much the financial system has made greed systemic.
The International Energy Agency (IEA) is 35 years old in 2009. A sister organisation of the OECD, it offers a timely reminder that a co-ordinated public response to a crisis can succeed.
The global economic crisis is affecting families and communities across the planet. With regions bearing the brunt of the crisis, affecting businesses, jobs and people generally, regional policies are very much part of the solution.
