Judith Clifton / Daniel Diaz-Fuentes
The new political economy of the OECD in a context of shifting world wealth
in Revista de Economia Mundial · January 2011
„In 1961, the OECD replaced its predecessor, the OEEC. The US had pro- moted the establishment of the OECD in 1948 for the primary purpose of managing Marshall Aid to certain Western European countries but, by 1952, the US cut Marshall Aid. Rather than closing the OEEC down, a special committee decided it would be charged with issues relating to the European economy. Contemporary scholar Gordon (1958) labelled it the “economic NATO”, and considered it an instrument of the Cold War.“ 557
„the US, France, Western Germany and the UK agreed that there were advantages to establishing an institu- tion based around the transatlantic alliance. Most importantly, they could use this institution to better co-ordinate inter-dependent issues relating to trade, finance, development and other economic areas (Aubrey, 1967). According to its Convention, the OECD’s role was to promote policies to achieve high, sustainable economic growth and employment, world trade and economic development (OECD, 1960).
When the Convention came into force in September 1961, the OECD inherited all existing members of its predecessor: Austria, Belgium, Denmark, France, Greece, Iceland, Ireland, Italy, Luxembourg, the Netherlands, Norway, Portugal, Sweden, Switzerland, Turkey, the United Kingdom and both occupied zones of Western Germany. The OECD added to these members the US, Canada and Spain, thus consolidating the transatlantic alliance. Beyond the original twenty members, however, the OECD took a purposefully restrictive attitude to further member expansion, so the “club” remained “exclusive”. In this phase, the OECD only extended membership to Japan (1964), Finland (1969), Australia (1971) and New Zealand (1973).“ 558
„until the 1990s, the logic of OECD membership policy followed an “exclusive club” approach, based on the transatlantic nexus “plus Japan”. The “club of the rich” enjoyed a membership that represented the domi- nant share of the world economy. It was not until OECD members’ shares of the economy started to slip, inexorably, from the 2000s, that officials used membership policy as part of the organization’s strategy to woo important emerging countries, particularly, China. Despite these efforts, the incom- ing members have not helped the organization avoid its own decline. In 1989, with 24 members, the OECD enjoyed over 56 percent of world GDP and 70 percent of exports. By 2010, with 34 members, it only boasted 50 percent of world GDP and 60 percent of exports. The OECD predicts its share of world GDP will shrink to 43 percent by 2030 and to 41 percent of exports (Table 1). And it remains unclear whether this “Western club” has much to offer countries with differently structured economies. The OECD needs the emerging markets, but do they need the OECD?“ 559
„Clearly, the size and composition by nationality of staff provides only a partial and very imperfect picture about an organization. But the historic domination of the OECD by the three post-war allies is striking. During periods of recruitment expansion, the influence of the French and British waned, as other nations, including the US, became better represented. But, even in 2010, these three countries remain very heavily represented whilst other important economies are seriously under-represented. Whilst the US was the leading contributor to the core OECD budget in 2010 at around 22 percent, France and the UK contribute just over 6 percent each (OECD, 2010b). We argue that this long-term dependence on the West, as illustrated by both membership and staff, is part of a broader path-dependency that the OECD has yet been unable to shake off.“ 560
„Scholars have repeatedly pointed out that the OECD has received inadequate attention in the lit- erature on IOs in comparison with its peers, such as the IMF, the World Bank, the WTO, the European Union, or NATO (Woodward, 2009). We suggest there are two main reasons for this. Firstly, from its origins as the OEEC, a culture of “secrecy” shrouded the organization because many discussions, such as those on Marshall Aid distribution, were held behind “closed-doors”. Observers claimed this facilitated negotiations on highly sensitive questions (Lintott, 1949). This tradition continued, even when the OECD replaced the OEEC, and scholars trying to study the organization repeatedly complained about problems of access to information and ob- stacles caused by over-rigorous classification of documents (Aubrey 1967: 130; Camps 1975: 47, Blair, 1993, xii). From the 1990s, the OECD adopted a more open policy to outside observers, which included a swifter and more comprehensive declassification policy. Secondly, as pointed out by Barnett and Finnemore (1999), rationalist accounts of IOs, which dominated until the 1990s, focused primarily on the materialist use states made of them. Since the OECD offered little in the way of financing or mandating states, rationalist accounts underestimated the significance of its subtler forms of activities, including norm-making, influence and persuasion.“ 561
„We use the three phases already identified, spanning from 1961–1973, 1973 to 1989, and the 1990s to the present, as an organizing and analytical device.“ 561
„In 1961, members comprised 53 percent of world GDP and 55 percent of world exports, which increased to 59 percent and 72 percent by 1973, respectively.6 As we have seen, staff numbers more than dou- bled in this period and, with them, the OECD’s budget, the bulk of which pays for personnel.“ 561
„The Council of Foreign Relations (CFR) commissioned the most impor- tant monograph on the OECD during this phase and, indeed, the next phase. On this occasion, they commissioned the study to Henry Aubrey, a political economist and war immigrant from Austria, formerly at the New York Federal Reserve Bank (Heilbroner, 1970).7 At the heart of this, largely prescriptive, monograph, was a search for the justification for es- tablishing the OECD from the US perspective. The general argument was that, under the settlement between the US and Europe as established by the OEEC, the US had prioritised security over economic requirements, because they viewed the communist threat as their top priority. However, as Europe recovered, the US became increasingly irritated with European trade discrimination. (…) These scholars viewed the OECD as one way important way of in- stitutionalizing this transatlantic cooperation. Scholars viewed the OECD as a “black box” and assumed it was an instrument of nation states, par- ticularly, the US.“ 562
„One of the most important works on the OECD in the second half of the 1970s is Camps (1975). The CFR commissioned Miriam Camps, formerly a State Department Official turned foreign affairs researcher, to write the second monograph on the OECD (The New York Times, 2 January, 1995). Like Aubrey (1967), they commissioned her to analyse the OECD from the perspective of how best it could serve US foreign policy interests. The main function of the OECD, from this angle, was as a kind of “antechamber” which could be used by the US and its allies to convene, agree upon, and shape strategic policy initiatives on issues of interest, including trade, investment and economic development. Because the OECD only included a small number of like-minded countries, members could arrive swiftly at a decision. Once the allies had come to a joint decision or posture, they could then present this to the United Nations and its specialised and associated agencies such as the IMF, World Bank, ILO and WTO. Following a similar logic, Meltzer (1976) analysed how, during the 1960s, the US used a flexible, “wise men” format, at the OECD to advance their trade interests. When the G77 countries called for trade preferences as part of the wider “New International Economic Order” during the 1960s, US trade officials used the OECD to meet with their West European peers to agree on a common response. Once the US officials agreed on a position, they brought this home for approval in the US as well as used the position in discussions at the United Nations Conference on Trade and Development.
Increasingly, scholarly focus on the OECD diverged from being only concerned with US foreign policy and took on broader perspectives, in- cluding studies which analysed the organization per se. At the same time, scholars started to attack, indirectly or directly, the OECD.“ 562 f.
„During the 1980s, the OECD fell out of favour with Ronald Reagan and Margaret Thatcher, who found its work insufficiently market-oriented. As the summitry evolved, the G-7 meetings became an increasingly important, annual event where the most powerful states in the world discussed cooperation on economic policy and other issues. The OECD initially appeared as the ideal actor to provide Sec- retariat functions, which of course the G-7 lacked. However, Putnam and Bayne (1984: 142–4) describe how, although the OECD was at first brought in to help with summit preparation, conducting commissioned analysis and producing reports, this close relationship quickly became tense. The expectation at the G-7 summits was for the OECD to clearly endorse poli- cies that would not necessarily be accepted by all its members, whilst participating in work that only benefited some of them.“ 564
„In the final phase of international political economy, the OECD faced two, major, crises: the first was political, the second, economic. Firstly, from the 1990s, members questioned the continued political rationale of the OECD in the light of the end of Cold War tensions. Donald Johnston (2011: 104), Secretary General from 1996–2006 described the atmosphere as “turbulent, even traumatic”, due to the severe budget cuts and repeated job uncer- tainty for staff. Secondly, from the 2000s, the relative economic weight of OECD members declined. This shift in the world economy undermined the OECD’s former claim to represent a club of “rich, successful” nations.“ 564
„The recent period, from 2000 onwards, represented the richest, most diverse and productive period for research on the OECD so far. Woodward (2009) and Caroll and Kellow (2011) published academic (non- commissioned) studies on the organization, whilst Mahon and McBride (2009) and Martens and Jakobi (2010) published edited volumes which focused on the mechanisms of OECD governance.
Marcussen argued that the OECD could be understood as a power- ful disseminator of Anglo-Saxon and, particularly, neoliberal ideas, such as privatization and monetarism. Moreover, he argued that, in the post Cold War period under pressure from the Americans for demonstrating value for money, the organization had become their “ideational agent” (2004:101).
In her paper on the OECD Jobs Strategy in this issue, Mahon (2011) stressed that it was not accurate to simply consider the OECD as a monolithic engine of neoliberalism, and illus- trated this by tracking the flow of ideas and discourses on jobs by the Department of Economics and the more socially sensitive Directorate for Employment, Labour and Social Affairs.“ 565
„Finally, another new stream of research has emerged on IOs and public goods. Traditionally, scholars analysed the concept of public goods and externalities at the national level, but Inge Kaul and her colleagues argued that globalization has meant public goods have taken on an increasingly global or regional dimension (Kaul et al., 1999; 2003; 2006). These authors argue that IOs have behaved for too long as clubs in the interests of a few, rich countries. They argue IOs must reform urgently by aligning who they represent (broader inclusion and representation) with what they produce (global and regional public goods). These authors direct most of their attention to the United Nations, whilst they virtually ignore the OECD. Clifton and D ́ıaz-Fuentes (2011) applied this argument to the case of the OECD, and revisited and reversed Fratianni and Pattison’s (1982) proposition that favoured small clubs. They argued that a more inclusive, open and representative OECD will lend the former Western club a new legitimacy, and make it better positioned to help providing much-needed global public goods.“ 566
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