Market-based economic principles work

Mathias Cormann has taken up his post as the secretary-general of the OECD. Picture: Colin Murty

The OECD is a force for good in the world. All of us have a collective responsibility to use it to its full potential. The core purpose under the OECD convention is to preserve individual liberty and increase the economic and social wellbeing of our people.

The Paris-based organisation’s member countries share a commitment to democracy, hum­an rights, the rule of law, market-based economic principles, a global level playing field and a rules-based international order as the best way to maximise sustainable growth, prosperity and general wellbeing.

During the past 60 years the OECD has become the key global institutional custodian of these values and principles, which have stood the test of time. Across international organisations, we have unique expertise and a proven working methodology, facilitating consultation and co-operation, providing comparative data and evidence-based policy analysis, promoting policy best practice and setting standards to facilitate greater interoperability, strengthening economic relations between nations.

The issues and specific policy challenges we face necessarily evolve across time, and the OECD continues to adapt in response, but our capacity to find solutions and better ways forward together remains. Many countries around the world continue to face serious challenges as a result of the most significant pandemic in more than a century.

Our essential mission of the past – to promote stronger, cleaner, fairer economic growth and to raise employment and living standards – remains the critically important mission for the future.

We need to continue to overcome the immediate health challenge, including by pursuing an all-out effort to reach the entire world population with vaccines. This is not just an act of benevolence from advanced economies. It is about sustained protection for all of us and the best chance of a sustained recovery.

We need to always remember what has made us strong in the past. Market-based economic principles work. Global competition at its best is a powerful engine for progress, innovation and an improvement in living standards.

Yes, competition can also be uncomfortable. It can lead to social disruption which, collectively, we need to better manage. We need effective rules to protect our values and ensure a level playing field. We need to ensure access to high-quality education, upskilling and reskilling to ensure everyone can participate and benefit. We need the necessary social supports for those who struggle.

But competition is, and should be, unavoidable. Protecting ourselves from competition and innovation does not stop it from happening elsewhere; it just means that, across time, those who find themselves behind those protective walls fall further behind. That is a key lesson of history we must never forget.

Ultimately, further expansion of world trade and investment is one of the most important drivers of economic development and better international economic rela­tions. Core to our economic mission, and that of all governments, is the preservation, restor­ation and creation of as many new jobs as possible – creating opportunities for people to get ahead.

Most jobs will be created by the private sector, by viable, successful and growing businesses. Small and medium enterprises will be key to the jobs growth our economies need. We need to ensure our policy settings facilitate, encourage and incentivise post-Covid recovery and investment.

More and more countries are committing to net-zero emissions as soon as possible and by no later than 2050. The challenge is how to turn those commitments into outcomes and to achieve our objective in a cost-effective, economically responsible and publicly supported way that will not leave people behind. During the next 100 days we need to operationalise the OECD’s International Program for Action on Climate.

The digital transformation of our economies has accelerated during the pandemic. To ensure everyone has the opportunity to participate and benefit, risks and challenges will need to be well managed – from transitional supports and skills development requirements related to the future of work, to cyber security, privacy and tax policy implications of the digitalisation of an increasingly globalised economy.

It is important we continue to lead the global fight against tax evasion and multinational tax avoidance and to ensure digital businesses and all large businesses pay their fair share. We need to complete this work, including by facilitating agreement on an appro­priate minimum level of global taxation and by minimising profit shifting.

Great power competition will shape the world order in the coming decades. The OECD must demonstrate how our democratic and market-based economic values make us politically, socially and economically stronger.

Our global relations strategy must include a renewed focus on engagement with the Asia-Pac­ific, including Association of Southeast Asian Nations countries and China. Given the central role of this region in driving global economic and population growth, energy demand, innovation and more, it is a critical part of seeking effective solutions to global challenges. We also must continue to strengthen our development co-operation. Low-income countries need it more than ever to ensure access to vaccinations, to trade, to financing to help them deal with the climate challenge.

Together we can continue to be stronger than the sum of our parts. I will give the OECD, members and staff my absolute best.

Mathias Cormann is a former Coalition finance minister. This week he took up his post as OECD secretary-general.