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.

The crisis has bitten deep, but unemployment in Germany has fallen. How?

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”.

One insight worth mentioning is that it is entirely rational for lenders (and insurance companies) to cut prices and underwriting standards to increase market share in good times. That is the way to make money. But it is important to understand the concept of insurable versus uninsurable risks. Credit default swaps to a significant extent, aim to protect investors from systemic risk. This is not an insurable risk. So swaps are really an abuse of strong balance sheets (or outright fraud if not backed by strong balance sheets). So I think it would be wise to simply outlaw them. It is hard enough to price risk first hand. Trying to price risk second or third hand is simply impossible. The failure of ratings agencies and the willingness to peddle trash as treasure conclusively prove that there are no fixes for transactions that simply can’t be priced by the parties involved.

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%.

Anyone who doubts that policy can spur innovation should look at the Kyoto Protocol. After it was adopted in 1997, the number of patents for certain technologies used to mitigate climate change climbed worldwide. In fact, just six years later, the number of patents on wind technologies had grown more than five-fold, and those on solar photovoltaic and hydro/marine technologies had more than doubled. The number of new patents for other climate change mitigation technologies, such as carbon capture, biofuels and geothermal energy also rose, though at a rate that was not much faster than the increase for patents in general over the same period.

“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?

Why is innovation so important for growth and what can governments do to improve it? The OECD has been working on this question for several years and is delivering a comprehensive perspective, the OECD Innovation Strategy, to governments from around the world at the OECD Ministerial Council Meeting on 27-28 May. Here are some highlights.

Innovation in organisation and management will be needed if sectors are to adjust to new, oil-challenged realities. Supply chains will evolve as a result, notably in transport.

If the transport sector is to make deep cuts in carbon emissions, the carbonintensity of travel must be reduced. For that, policy analysis has to be based on how world markets actually function, and that means understanding what consumers look for when deciding to buy a vehicle, and what drives manufacturers’ decisions too.

Tax burdens fall; OECD enlargement; Youth warning; Development aid rises, but......; Soundbites; Economy; UK adopts bribery bill; Poland mourns; Plus ça change...

Companies and non-governmental organisations are forging new types of relationships. Do they really work for the benefit of both?

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.

The Caisse des Dépôts, a publicly-led longterm investment group, which has entered a partnership with the OECD focusing on the role of long-term investors, has founded, together with three other European public financial institutions–Cassa Depositi e Prestiti, KfW Bankengruppe and the European Investment Bank–the Long-Term Investors Club. What is it all about?

Countries must quickly agree new financial rules to boost bank lending and strengthen the global economic recovery, said OECD Secretary-General Angel Gurría at a conference in Berlin.

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.

Chile has become the 31st member of the OECD this May and the first from South America. The country joins the organisation during a time of uncertainty both globally and at home, as the shock of February’s tragic earthquake still reverberates. Chile’s finance minister, Felipe Larraín, shares some thoughts on that disaster and the country’s recovery programme

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.

As an OECD “veteran”, I was delighted to see that “human progress” is now on the OECD agenda (see www.oecd.org/progress). If you compare the OECD strategy to emerge from the oil-shock recessions of the 1970s (the McCracken Report) to the OECD Strategic Response to the Financial and Economic Crisis of today, you can see that in three decades the OECD has been transformed.

Despite a 12.5% decline in international tourism travel in the first quarter of 2009–the depths of the current recession– international tourism has been growing slightly faster than the world economy and is expected to continue to do so, with a projected average annual growth rate of about 4% over the long term.

Biotechnology has steadily evolved to become a potential motor of environmentally sustainable production and a proven source of a diverse range of innovations in agriculture, industry and medicine. Could we be at the dawn of a new bioeconomy? Public policies will influence the answer.

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.

International mergers and acquisitions have registered a decline of 56% in 2009 over 2008, latest estimates show. This is the largest year-on-year decline in recent history. Much of this decline was due to the 60% plunge in M&A activity by firms based in the OECD area, from over $1 trillion to $454 billion. But major emerging economies, which enjoyed strong international investment performance in 2008, also suffered their first sharp declines in 2009 with respect to both outward and inward M&As.

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?

The recovery that began earlier this year in a number of non-OECD economies has now spread to the OECD area at large. But in most OECD economies, growth is likely to fluctuate around a modest underlying rate for some time to come. It is being held back by still substantial headwinds as households, financial institutions, non-financial enterprises and, eventually, governments have to repair their balance sheets. This also means that unemployment is set to move higher and already-low inflation will be under further downward pressure. It is only some time down the line that the recovery will become sufficiently strong to begin to reduce unemployment.

Chile is set to become the OECD’s 31st member country. It is a momentous occasion, as captured in the following extracts from speeches by President Michelle Bachelet of Chile and by OECD Secretary-General Angel Gurría, following the signing of the agreement on the terms of accession by the Republic of Chile to the OECD Convention, delivered in Santiago, Chile, 11 January 2010.

Governments in Asian countries have been responding to the global crisis with stronger social policies. The economy should benefit.

As the financial storm recedes the full cost of the damage is being assessed. According to Financial Market Trends, from the start of the crisis to October 2009 governments and central banks in the US and Europe had provided over $11 trillion in support to banks and other financial firms, made up of capital injections, asset purchases, debt guarantees and facilities, and so on. This total does not take account of other wider social and economic costs incurred by way of losses in business, jobs and other fallout from the crisis. Still, as a Dow Jones journalist pointed out in seeing the figures, it amounts to a contribution of over $1,600 for every person on the planet. The question is: are policymakers doing enough to tackle the root of the problem and prevent the worst crisis in 50 years from happening again?

As the financial storm recedes the full cost of the damage is being assessed. According to Financial Market Trends, from the start of the crisis to October 2009 governments and central banks in the US and Europe had provided over $11 trillion in support to banks and other financial firms, made up of capital injections, asset purchases, debt guarantees and facilities, and so on. This total does not take account of other wider social and economic costs incurred by way of losses in business, jobs and other fallout from the crisis. Still, as a Dow Jones journalist pointed out in seeing the figures, it amounts to a contribution of over $1,600 for every person on the planet. The question is: are policymakers doing enough to tackle the root of the problem and prevent the worst crisis in 50 years from happening again?

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?

Some 15 million people have joined the ranks of the unemployed in OECD countries since the end of 2007. Unemployment has already reached a record high of 8.5% as a result. Without the right policies and if the recovery fails to gain momentum, OECD unemployment could approach 10% next year. That would mean 57 million people out of work-roughly equivalent to the population of some G8 countries!

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.

A jolt of innovation can be a powerful antidote to recession. But innovation risks being hit hard by the economic crisis as the capital to finance research and develop new products grows scarce. The economic fallout could be serious, since innovation is a key driver of growth.

Banks and investment companies are more than mere financial firms. They hold and manage assets, such as retirement income, on behalf of others, whether individuals, companies or governments. In short, they have a fiduciary role to fulfil, based on trust. So why have the beneficiaries not really benefitted?

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).*

Oil prices rebounded but are unlikely to return to pre-crisis peak levels.

OECD activity now looks to be approaching its nadir, following the deepest decline in post-war history.

The current crisis is an opportunity to launch a new economic model, in which the environment, as a pillar of human welfare, must be central.

The main victims of severe economic downturns tend to be workers and their families, so governments are rightly stepping in to help job losers weather the storm. But while the severity of the unfolding jobs crisis may require extraordinary policy responses, how can governments avoid the wrong ones?

Where there's money, there's also time for relaxing.

Governments must put transparency and accountability at the heart of all rescue and reform measures if they are to regain public trust and investor confidence. Here is why.

Korea was one of the OECD countries most severely affected by the global crisis, even though its financial sector had been relatively healthy.

Charities have become the latest victims of abuse by tax fraudsters and money launderers. Can they be better protected?

The global economy today is facing difficulties like we have not seen for at least half a century.  

Angel Gurría, Secretary-General of the OECD

When leaders of government, international organisations and civil society from around the world gather for critical discussions at the OECD summit meetings in Paris this June, one question will dominate the agenda: Is enough being done to restore confidence and long-term growth, and break the grip of the worst global crisis of our times?

In February 2009, Singapore and Hong Kong, China, undertook to bring tax transparency up to international standards and relax bank secrecy laws for tax purposes. Hot on the heels of these announcements were others from the Cayman Islands, Jersey, Andorra and Liechtenstein, and more recently we have seen Austria, Belgium, Luxembourg and Switzerland signing up to the OECD standard on exchange of information.

Though OECD work on making international tax fairer began over 50 years ago, it was not until 1998 and a report on harmful tax competition that the OECD stepped up its work against tax evasion, tax havens and abuse.

Environmentally-friendly investments form part of many recently launched recovery programmes. With the right policies, they could achieve growth and a cleaner planet as well.

Record fall in GDP; Economy; Gender learning; Other news; Soundbites; Plus ça change...

The progress on offshore tax centres at the G20 in London in April has fuelled international momentum to develop common principles and standards on integrity, transparency and propriety for a whole range of global challenges, including investment, the environment, labour and health.

Did you know that the number of people living in high-growth economies or in countries with per capita incomes at OECD levels has increased fourfold over the last 30 years to 4 billion?

Crisis bites deeper  ; Economy; Jobs opportunity ; Green teens ?; Tax information-exchange agreements; Freedom of Investment initiative; Fighting Bid Rigging in Public Procurement ; Development aid; Soundbites; Plus ça change...

The financial and economic crisis has already put millions of people out of work in the OECD area alone, and the unemployment figures are going to get far worse. What can governments do to ease the suffering? 

The world economy remains gripped in the deepest and most widespread economic crisis in modern times. The latest update of the OECD Economic Outlook expects GDP to plummet by an average 4.3% in the OECD area in 2009, and world economic activity to shrink by 2.7%.

The financial crisis and economic downturn are likely to put upward pressure on government debt. The trouble is, according to OECD in Figures 2008, public debt (general government debt, which includes central and local government) had already risen quite sharply in the OECD as a whole since 1987, from 59% of GDP to 75% in 2007. Two decades ago, Belgium had the highest public debt, but today that position is filled by Japan, whose debt rose from below 60% to 170% of GDP. Italy’s debt has also shot above 100% of GDP in the past 20 years.

As every number cruncher knows, there is a plethora of statistics available in print or online. Very often, the trouble is not how to find the numbers you want, but what to choose and how to use them when you do? How can you be sure about the quality of statistics you find?

The crisis sweeping the world’s economy is reflected in the output results for the third quarter of 2008, when GDP of the OECD area fell by 0.1% compared with the previous quarter. This was the first decline since 2001.

The global economic crisis has focused minds on restoring growth. But does growth necessarily mean progress? What about factors which growth depends on, such as the environment or happiness? Measuring true progress demands new indicators and a major global project to develop them is now underway.

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

The OECD Economic Outlook issued end-2008 sees some 21 of 30 member countries already in or heading into a recession that could last a year. Business investment will contract by over 5%, and unemployment could rise by at least 8 million by 2010. This social crisis is affecting families and communities across the planet, with emerging and developing economies suffering too.

The OECD and IMF forecasts for 2009 suggest that for the first time since the 1930s GDP will fall in the industrialised economies that make up the OECD. Yet even these forecasts are based on relatively optimistic assumptions that the financial markets begin to stabilise in the months ahead and that there are not other major “shoes to drop” in terms of negative financial shocks.

The economic crisis has hit the entire world economy, with governments stepping in to rescue financial systems and kick-start economic growth. This adds up to a triumph for government fiscal policy, though fiscal policy must be used audaciously.

Did you know that, even before the current recession and despite the economic boom of recent years, the gap between rich and poor and the number of people below the poverty line have grown over the past two decades?

OECD will work with governments in a two-strand approach to develop policies for tighter financial market oversight and risk management, and for economic recovery, Secretary-General Angel Gurría has announced. The plan will form part of a comprehensive contribution to the G20’s Action Plan agreed in mid-November, he said.

Many OECD economies are in or are on the verge of a protracted recession of a magnitude not experienced since the early 1980s. As a result, the number of unemployed in the OECD area could rise by 8 million over the next two years. At the same time, inflation will abate in all OECD countries and some even face a risk, albeit small, of deflation.

The effect multinationals have on wages and working conditions can be positive, but there are conditions to bear in mind, not least for policymakers wishing to attract foreign direct investment.

The pharmaceutical industry’s important role in the OECD economy is reflected in expenditure, with a total of US$569 billion on pharmaceuticals (excluding pharmaceuticals for in-patients) in 2005.

Emerging markets such as China, India and Brazil are increasingly regarded as central rather than peripheral players in the global markets. Can this “rebalancing” continue through the current crisis?

Consumer price inflation has been rising in many countries for the first time in several years. Indeed, the consumer price index for energy tracked alongside prices for non-energy and non-food for most of the last two decades, but jumped to a far steeper trend from 2003, the latest OECD in Figures 2008 reports.

Can the OECD Model Tax Convention, which is 50 years old this year, continue to fulfill its role of helping to make international taxation fairer and more manageable? Probably yes, though there are challenges.

UK warned on corruption; Gender gap persists; Tax progress mixed; Economy; News shorts (healthcare, pollution, education, migration); Soundbites; Plus ça change…

The financial crisis sweeping world markets is the worst since the Great Depression. While the crisis is biting into the real economy, hard lessons are being learned. How should policymakers move forward, particularly as room for manoeuvre is being squeezed?

What are the main impacts of the financial crisis on the real economy, and what lessons might we draw from the crisis for the future? The next OECD Economic Outlook due on 25 November will provide some answers. We asked the new OECD Chief Economist Klaus Schmidt-Hebbel for some early insights.

Denmark is confirmed as the OECD’s highest-tax country, followed by Sweden, while Mexico and Turkey remain the lowest-taxing countries, the latest 2008 edition of Revenue Statistics says. Denmark’s tax-to-GDP ratio stood at 48.9% in 2007, while Turkey’s was at 23.7% of GDP.

Deposit insurance limits

Amid the worst current financial crisis since the 1930s, some government leaders have pledged to protect savers’ deposits and others are considering this option. Already most OECD countries have explicit deposit insurance schemes for savings up to certain limits. In a number of countries these have now been raised temporarily. Until the latest statements suggesting unlimited guarantees in some countries, legal coverage was highest in Norway, France, Italy and Mexico (see graph). Click here for full story.

We welcome and support the adoption of the systemic rescue plan announced by the US government on 19-20 September , which will contribute to re-establish the normal operation of financial markets and preserve employment and economic activity.

Improving the diversity of biological habitats and ecosystems is a vital goal in itself, yet policies to encourage biodiversity, like most legislation, will have both supporters and naysayers. Limitations on land use to protect biodiversity can sometimes reduce income, but have broad benefits for the general public.

2008 will be a decisive year in the battle against climate change. Hopefully, it will see us forge an international consensus so an agreement can be reached in Copenhagen in 2009 that will allow us to build on the Kyoto Protocol.

Klaus Schmidt-Hebbel has been appointed chief economist of the OECD. A national of Germany and Chile, he joins the OECD after 12 years as chief of economic research at the Central Bank of Chile. From 1988 to 1996 he was successively economist, senior economist and principal economist at the World Bank.

International trade is very prominent right now. Can we start by looking at Switzerland's position?

As a very export orientated country, trade is extremely important to us. Switzerland has for years been open to trade deals, both as a member of the European Free Trade Association and through bilateral agreements, with 19 in all now.

We hear again and again that we must choose between having a stable climate and having a strong global economy. This is a false choice.

Harsh financial reality often rides roughshod over good intentions when it comes to corporate and national balance sheets. Climate change is no exception, for though it may rouse worldwide concern, it also makes people uneasy because of how much it might cost and who should pay.

Promoting effective competition in developing countries means getting tougher on cartels in the OECD area, and compensating customers internationally. Through a new competition fund, the OECD could play a lead role in making sure poorer countries get a fairer deal.

Financial market turmoil is at extreme levels and threatens economic growth in the OECD area and beyond. A near-term recession is likely in some countries, though the ultimate economic impact will depend on the ability of policymakers to soften the “credit crunch” now unfolding through the balance sheets of financial institutions.

The OECD’s campaign against harmful tax competition garnered a higher profile at the start of 2008 with disclosures concerning widespread tax evasion by Germans and others through Liechtenstein. The revelations drew wide media attention in Germany and beyond, and have prompted fresh resolve in many OECD countries to fight tax evasion via offshore havens. In fact, investigations have been launched in over a dozen countries since then, including Australia, Canada, France, Germany, Italy, New Zealand, Spain, Sweden, the UK and the US.

When Citigroup, a major US commercial bank, sold a large stake to an investor to offset subprime-related losses in late 2007, relief could be felt across the economy. But when people focused on the fact that the investor was Abu Dhabi Investment Authority, a wealth fund owned by a government in the Middle East, questions were raised.

Over the last two years, prices of agricultural commodities have risen spectacularly, and nominal prices for many crops and dairy products are at an all-time record high. This surge in prices is not unique, and when adjusted for inflation, the recent price spike is neither unique nor the biggest one to occur in the last three decades or so.

Economic forecasting is a worthy business. It helps governments, central bankers and companies take key day-to-day decisions about policies, investments, levels of spending, interest rates and so on. There is a rich and diverse supply to choose from, both in the public and private sectors. Whole businesses thrive on it and some major television networks have even turned watching the economy into a form of mass entertainment.

Until 2002, Japan was mired in a prolonged period of stagnation–the “lost decade”–which saw its per capita income drop from the fifth highest in the OECD area in 1992 to only 19th in 2002. The miracle economy that mesmerised the world in the 1980s looked decidedly weak. Now, thanks to exports and business investment, Japan has achieved the longest expansion in its post-war history.

Is the German Wirtschaftswunder back? The tide has obviously turned for the better in what for most of the post-war period was indeed Europe's “wonder economy”: after years of very slow growth at the beginning of the decade, the EU’s largest economy has been experiencing a strong upswing since 2005. The reforms of recent years, notably on the labour market, are showing positive results with the unemployment rate falling to a seven-year low of around 7.5%.

Internet 2011 alert; More oil investment; Financial reform needed; Economy; Germany signs tax convention; Pensions strength; Soundbites; Plus ça change…

With the world economy today experiencing turbulence on a number of diverse fronts, OECD countries are preoccupied with meeting these challenges.

It may be a truism among economists by now to state that more competition can improve a country’s economic performance by creating business opportunities, reducing costs of goods and services and boosting choice. But numerous laws and regulations still restrict competition in the marketplace.

Real estate is an important strategic sector in most economies–just think of the links to construction or the importance of property in the investment portfolios of pension funds. But it is also vulnerable to abuse for money laundering and tax fraud.

The gap in productivity and economic performance between the US and Europe has been a source of much debate in recent years, but many experts seem agreed on one point: that a lack of progress on reform in labour and product markets has not helped the European cause.

One of the main challenges for the future will undoubtedly be the migration of a highly skilled workforce from Asia (see for instance, “Globalisation and Labour Markets: Policy Issues Arising from the Emergence of China and India”, OECD Social, Employment and Migration Working Paper No 63, November 2007, www.oecd.org/migration).

The world economy faces challenges from the new powerhouses of China and India (see Nos 263 and 264/265, 2007). In order to compete, there is a case for closer co-operation between developed countries and, in particular, tighter integration in Europe.

Outlook deteriorates; Transport tackles CO2; Development setback; News shorts; Adult skills; Wikigender; Four new members; Pensions; Tax drag; Liechtenstein affair; Economy; Soundbites; Eastern promise; Brazil visit; Plus ça change…

Europeans, particularly women, generally work fewer hours than their US counterparts. How does this difference help explain the transatlantic gap in incomes?

How can governments promote higher living standards? A pertinent question for many countries in light of today’s rather unsettled economic picture. A basic step is to ensure good policies that support both productivity and labour market participation. Is this being done?

The Korean economic wave continues forward, with strong growth and low unemployment expected in 2008-2009. But the upsurge appears to have left some younger people behind. True, at 10%, Korean youth unemployment is below the OECD average of nearer 15%, and though the country has a lower employment rate, this reflects a much lower school drop-out rate and high participation in education.

With ageing and pressure on public finances, monitoring the pensions market has become an important task for policymakers. The market is vast: in 2006 the total OECD funded pensions market was valued at some $24.6 trillion, with a ratio of OECD pension fund assets to OECD GDP of nearly 73% in 2006, and above 100% in a few countries.

Innovation has played a modest role in explaining growth in both China and India in recent years, but both countries have work to do to sustain their promising growth paths. Moreover, there are important differences between the respective challenges that each country faces.

The OECD economic forecast for 2008-09 has been revised down. For the authors of the latest OECD Economic Outlook, policy settings should be adjusted accordingly. Several shocks have hit OECD economies recently: financial turmoil, cooling housing markets, and higher prices of energy and other commodities.

OECD Observer No 264/265, December 2007-January 2008

Strong economic growth has given India’s people much to smile about as their country celebrated its 60th anniversary of independence this year. They could achieve much more still, though changes would be needed.   

Has monetary union helped structural reform in Europe? The 2007 Economic Survey of the Euro area attempts an answer. On the one hand, well-functioning markets and stronger supply incentives would offer scope to better exploit the benefits of the euro, by taking advantage of more price transparency and lower international transaction costs.

As the 8th annual OECD Forum in May showed, everyone agrees that innovation is important, but not everyone agrees on the reasons why.

Fake goods are not cheap. In fact, they exact a heavy cost on industry, governments and the general public. There is a strong case for public action across OECD countries against counterfeiting. The question is how to make progress? Want to buy an expensive Swiss watch? Not everyone can afford a real one–a Patek Philippe timepiece can be worth many thousands of dollars, and some very exclusive makes, such as a Vacheron Constantin, can cost over a million!

 Economic prospects in the US, Europe and Japan have become less buoyant and more uncertain, OECD chief economist Jean-Philippe Cotis said today, Wednesday 5 September. Economic prospects were losing buoyancy, while the risks are becoming more ominous, he said. 

Are you confused about the state of your country and where it is going? Do you sometimes feel overwhelmed by the plethora of information–often contradictory–about the health of your economy, society or the environment? Governments should be judged on the effectiveness of their policies and projects, but against which benchmarks? And how can citizens take part in honest democratic debate about policy alternatives if they do not know what is really going on in their own country or region?

Announcements about enlarging the OECD’s membership and strengthening co-operation with other countries took much of the limelight at this year’s annual ministerial meeting. Below is an extract on enlargement from the Chair’s summary, followed by some selected highlights of the meeting.

OECD Observer No 262, July 2007

Property prices have been soaring for several years now in many OECD cities. A few markets, in UK and US cities for instance, have seen some cooling.

Dublin’s high property prices belie the city’s relatively small population–just over 1.1 million within the county. This pales compared with the 22 million inhabitants recorded for the metropolitan region of New York, which has the largest population of all OECD urban regions, and accounts for about 8% of the total population of the US.

Globalisation may have accelerated, but how big is international trade in a country’s income? For some major countries, the answer is not much bigger than before.

Should the US current account imbalance still cause global concern? The question is never far from the headlines in any major business newspaper or television channel.

The world economy seems to have entered a rebalancing phase, with Europe in particular showing signs of firmer growth just as the US economy is decelerating. This would seem to make it as good a time for reform as ever, and several large and small OECD countries are in fact moving ahead. While all countries should continually adjust to new global circumstances, for some the need to reform is particularly pressing. The road ahead will be challenging, but there may be lessons for policymakers to help them smooth over some of the bumps.

Remember manufacturing? For some policymakers with an eye on the future, it may be easy to forget. After all, manufacturing is on the decline in the OECD area in terms of GDP and employment. But according to “The Changing Nature of Manufacturing in OECD Economies”, an OECD working paper, there are many reasons to take manufacturing seriously, not least because of its role in technological innovation.

The global economy is into its fifth year of growth. The expansion enjoyed in the OECD area has benefited from the dynamism of large non-member economies, especially in Asia. Globalisation has helped these countries raise living standards and reduce poverty. Indeed, the participation of China, India and other non-OECD nations in global economic flows has been increasing at a remarkable pace, now representing around half of total world GDP (measured by purchasing power parities), about 40% of world exports and nearly half of the world’s energy consumption. They have become massive outward investors, too.

With some of the world’s G7 economies finally shaking off the sluggish economic growth of recent years, what are the priorities for reform? “Beware of reform complacency” is a common warning issued by economists during times of economic buoyancy.

Death and taxation may be certain, but what about the tax level? The answer to that depends more on social status and where you work.

Ever wonder what marriage and cooks have to do with economic growth? The OECD has the answer. The organisation’s publications are stocked in university libraries around the world, but it has rarely produced a textbook. Yet, questions are often asked about how national accounts are calculated.

Until recently, the OECD area was enjoying a prolonged period of non-inflationary growth despite rising oil and commodity prices. Underlying these favourable trends, persistent wage moderation provided for both price stability and strongly rising profits as well as vigorous job creation in the main OECD regions.

Russia needs to do more to attract foreign direct investment, in the wake of its move in early July to make the rouble fully convertible. This would strengthen its economy and reduce its reliance on oil and gas revenues, OECD experts say.

Dynamic countries tend to have a fast-growing and competitive city at their hub, even if cities accumulate social and economic disorders as well. San Francisco is the wealthiest in a new OECD ranking of 78 metropolitan regions, with income of $62,350 per head, adjusted for purchasing power parity.

A decade ago, used tyres ended up mostly in stockpiles, as an eyesore for landfill. Some 62% of old tyres went that way in 1994. Today, more are recycled for use in adhesives, insulation, brake linings, and conveyor belts, for instance.

Poland has just marked 10 years as a member of the OECD. It has made considerable progress, but more is needed to speed up convergence with the most advanced European economies.

If ever you are unsure about the advantages of open trade, why not take a lead from students in economics and consider the story of Robinson Crusoe. Generations of students have discovered how Crusoe, shipwrecked on a desert island and cut off from the outside world, improved his welfare as he became economically re-integrated into the wider world.

Are house prices peaking? They have certainly risen strongly, even in real terms – that is, when adjusted for inflation – since the mid-1990s in most OECD countries and, as the latest OECD Economic Outlook reports, their current upswing is the longest of its kind since the 1970s.

China has dominated policy and business thinking since the start of the century. Much has been written about its economic transformation and governance, about its huge business potential, and more recently about its influence as a major player in the wider world economy. But what is it actually like to do business there? Joerg Wuttke is vice-president of the European Chamber of Commerce in China and has been doing business there for 16 years, formerly with ABB China and now with BASF China. We asked Mr Wuttke for some personal insights.

Few economic questions in recent times have challenged policymakers and economists the world over quite as much as the US current account deficit. Some worry that it is a global economic time bomb. More recently, a contrasting argument has emerged that dismisses the deficit as little more than a harmless mirage. But most serious experts simply agree that the present situation is unsustainable. What has caused the deficit? Why is it a problem and how should it be dealt with?

OECD governments have been more effective at bringing in reforms to raise labour productivity than at helping increase the number of people in work, according to this progress report on action taken over the past year to enhance economic growth in each of the 30 OECD member countries.

Mexico’s economic performance has improved, but not by enough, according to the OECD Economic Survey of Mexico released late last year. Since the 1995 financial crisis, Mexico has made progress in terms of economic stability, and the economy is far more open, too. But while poverty has fallen, it remains widespread.

The Irish economy has transformed in recent years. It grew by 5.1% in 2005, half a percentage point faster than in 2004, driven by strong domestic demand and positive net exports. This continued the remarkable performance of the past decade, during which Irish incomes per capita have caught up with the OECD average. The forecast is for more strong growth in 2006-2007, with unemployment (4.2%) to remain relatively low.

A dangerous new trend is emerging in many industrialised countries. Widespread pockets of anti-globalisation sentiment, furthered by alleged national security concerns and a perceived need to protect “strategic” sectors have led to a resurgence of protectionism. Even in countries that have long promoted and benefited from global markets, politically-motivated barriers are being resurrected. These winds have temporarily chilled economic progress.

Home ownership, rather than rented accommodation, has become the norm in most OECD countries over the last 20 years. In fact, Germany is the only OECD country where the owner occupation rate is well below 50% of the total.

The picture of the German economy seems brighter than for quite some years. Should we feel confident?

Though legend has it that the ancient Olympic Games were founded by Heracles, a son of Zeus, the very first Olympics of the modern era took place in Athens, in 1896. The government at the time was unable to fund construction of a stadium, so a wealthy architect donated a million drachmas (over $100,000) to restore and use the Panathenaic Stadium, originally built in 330 BC.

The euro area has recorded a disappointing economic performance over recent years. Its per capita income grew on average by 1.3% between 2000 and 2005, compared to 1.9% in the US over the same period.

“The hills are high and the emperor is far away” is an old Chinese dictum that rapid growth is now putting to a severe test. Some consequences of rapid expansion, such as spending imbalances and regional lags, are probably inevitable in a country as large and varied as China, with its 1.3 billion people, multiple spoken languages and dialects, a score of provinces and five autonomous regions. But if they are not addressed, these problems could worsen, to the detriment of the economy.

Chile has elected its first female president, in Michelle Bachelet. As head of the left-leaning coalition which has led Chile since the country’s return to democracy in 1990, the new leader has promised continuity, though with a promise of more jobs and social justice. Tackling these issues could indeed make a difference, even if the economy has fared relatively well, as our OECD experts explain.

In 1962, we usually divided the world into three regions. The advanced capitalist group was then known as the developed world. The second was the “Sino-Soviet bloc”. Countries “in course of development” were the third world. The China-USSR split occurred in the early 1960s; most of the communist regimes collapsed around 1990, and the hostility of the cold war has largely faded away. The income gap between the former communist countries and the advanced capitalist group has become very much wider than it was. For this reason, a tripartite division of the world economy is no longer appropriate.