The OECD and the aftermath of the crisis: Another missed opportunity?

Recently, the OECD released a working paper that attempts to explain why the organization had been so wrong in its economic projects in the aftermath of the crisis (Pain et al., 2014). By the end of 2009, the OECD was projecting growth and recovery, although we now know the worst had yet to come within the Eurozone. The projection errors were compounded by austerity policy prescriptions that seemed, and ultimately were, out of touch with reality. While the crisis was seen by many to create an opportunity for a new economic paradigm to emerge from the apparent failures of neoliberalism, within the OECD there was no substantive change to the mix of policy reform recommendations (McBride and Merolli, 2013). The literature on paradigm shifts reminds us change is slow and organizations and their actors can get locked into particular ways of thinking that lead them to draw up conclusions that as Blyth (2001) argues make ‘no sense’ (p. 24). However, Kuhn (1962) points to the importance of ‘anomalies’: results that cannot be explained by the current paradigm. While the crisis itself could be considered one of these anomalies, the economic projections in the years that followed, and the policy recommendations based upon them, should also be seen as results that suggest that the dominate paradigm did not account for situation at hand. So, while the immediate aftermath of the crisis may not have precipitated any substantive paradigmatic change, it is possible that reflection on these anomalies in the years since has opened a new window of opportunity for change.

As an organization whose authority is based on expertise and evidence-based policy recommendations, but who was also responsible for disseminating flawed economic forecasts and ill-fitting policy prescriptions, it seems appropriate to revisit the question of whether the financial crisis has any effect on the ideological positioning of the OECD. This is not to suggest that the OECD has a single logic. The variances between the respective departments at the OECD, especially between the Economics Department and Directorate for Employment, Labour and Social Affairs, are well documented (Mahon, 2010, 2011). While the Directorate for Employment, Labour and Social Affairs (DELSA) has been more attuned to the issues of inequality and has advocated for targeted social policy expansion, driven by what Mahon calls ‘inclusive liberalism’, there are several issues along which there is agreement within the organization. Across departments, commitments to capital mobility, free trade, targeted (and limited) government intervention and flexible labour markets are considered to be the building blocks of economic growth, which is the central goal of the organization. The question remains, what, if anything, has changed in response to the OECD’s failure to capture the depth and duration of the crisis, and consequently to promote appropriate solutions?

In 2011, the OECD launched the Better Life Initiative (BLI), which includes a new annual report on quality-of-life measures and an interactive online tool. BLI is a direct response to criticisms that the OECD had relied too heavily on GDP performance measures. These new measures consider both the individual and household well-being across 11 dimensions including income and wealth, jobs and earnings, housing, health status, education and skills, work and life balance, civic engagement and governance, social connections, personal security, environmental quality, and subjective well-being. Relatedly, later that year the OECD released the report Divided we Stand, which addressed why the period leading up to the crisis was marked by rapid but not shared growth, and the risks this posed for future growth prospects both through the indirect effect it had on long-term growth, and the resentment and political instability rising inequality breeds. The 50th anniversary of the OECD appeared to present an opportunity for the organization to shift its focus towards sustainable, equitable growth.

However, 3 years later, it is unclear what the impact of these new initiatives will be on the long-term ideological direction of the OECD. In the short term, it does not appear they have had any immediate effect on the general policy direction of the overall organization. ¹ Going for Growth, Employment and Economic Outlook are three of the OECD key annual publications, but the extent to which each of them have incorporated attention to inequality measure varies not only between the reports, but also within them. The Economic Outlook Reports between 2012 and 2014 are marked by a similar emphasis on structural reform and fiscal consolidation, with GDP was the primary performance measure. Notwithstanding this, the 2012 report noted that in some cases there was room to ease fiscal constrain and the 2013 report acknowledged that consolidation should be approached with a twinned goal to reduce inequality. Going for Growth and the Employment Outlook have included equitable growth measures more consistently in each report, but this has not translated into integrated approach. For example, in Employment Outlook reports, the status of the labour market is discussed separately from assessments of the quality of jobs. The labour market is assessed in terms of overall unemployment levels and considered to have improved when those levels decrease. Questions about the kinds of jobs that are being created are secondary. The OECD also provides substantial research support for the G20 and as a result has produced several reports on the financial crisis. In these, we see more sustained attention to issues of inequality and well-being, but these reports are also often written with the ILO, which has equitable growth as a core principle.

Despite the inclusion of well-being and equality measures in various reports, rather being used as a primary tool to assess the effectiveness of any given policy, they are at best a secondary measure applied to recommendations that first pass the GDP performance test. The question is not how states might balance policies that improve quality of life against pro-growth policies, but rather how states might choose among pro-growth policies. This points to the inherent limitations to the changes described above. Rather than constituting a true rethinking of what the OECD does as an organization, the BLI and quality-of-life indicators constitute ‘flanking measures to make that project more sustainable in the long run’ (Jessop, 2003: 138). This is not just in terms of the neoliberal project generally, but also applies to the OECD’s mandate. By adding these measures, but keeping them as secondary, the OECD is able to respond to criticisms of past approaches, without sacrificing the ultimate goal of the organization: capital accumulation. As such, it is not surprising that there has not been any dramatic shift in the kinds of policy solutions promoted by the OECD. Across the various reports on the crisis since 2012, the recommendations reflect the OECD traditional set of policy prescriptions: Active Labour Market policies, labour market and corporate deregulation and fiscal restraint. A more optimistic assessment of the above might suggest that the BLI indicates that DELSA’s model of ‘inclusive liberalism’ is slowly being adopted by the rest of the organization. While this may be true to some extent, it is clear that the financial crisis, both in the immediate aftermath and in the years since, has not precipitated a dramatic shift in the ideological position of the OECD. Even in the face of inaccurate projections and failed policies, the OECD’s commitment to the overall logic of neoliberalism remains robust.