Inclusive Growth in a Globalized World: T20 Summit

Remarks delivered 29-05-2017, Paris 

I am delighted to be here today in the T20 addressing inclusive growth in the G20 economies. I commend the T20 for having included this important topic, in which the OECD has been working for decades.  My message today is that the goal is not only about addressing inequalities. It is about changing a growth model that has failed us on three counts.

First by not preventing the crisis. Second by not preventing the increased inequalities of income and opportunities, and third by not addressing fully the impact of our actions in the environment.

Indeed, in the OECD income of the bottom 40% has been stagnated in the last decade, and the richest 10% of the population earn 10 times more than the poorest 10%. 30 years ago, it was 7 times. In developing economies, even though there may be progress, they still suffer from high level of poverty and informality, and the income distribution is even worst.

Inequality is not just about income. Wealth is much more highly concentrated than income. The richest 10% in the OECD possess half of total wealth, while the bottom 40% own little over 3%.[1]  

The problem here is that income inequality produces inequality of opportunities, and inequalities of outcomes. Low income groups accumulate disadvantages in terms of low quality education, lower life expectancy, and less access to quality jobs.   

The digital revolution may bring additional challenges, with a fast pace of change, and demanding high level skills and investments.  In fact, at the OECD we have documented that, in the age of technology, there is a wide dispersion of productivity growth, with the frontier firms growing at 3 or 5 percent, while the rest seeing their productivity stagnant.  We call it the break- up of the diffusion machine.  Productivity dispersion brings wage dispersion, and increased gaps between people, firms and regions.  

This without considering the fears that automation and redundancy. On average across OECD countries since 9% of jobs are at high risk of automation, and another 25% will likely experience a major retooling because of automation. The ownership and management of big data is also another source of concern in terms of concentration of market power.

Inequalities also hinder growth. We call the “nexus” productivity and inclusiveness.

For instance, more unequal countries show larger skills mismatches than more cohesive ones, with significant negative effects on productivity. Large inequalities jeopardise future growth and productivity potential through low labour force participation, low employability and marginal attachment to the labour market.  But it also prevents investment in human capital of low income groups.

No wonder about the backlash against globalization and technological progress, which are closely interlinked, are blamed for all the ills of our economies and societies and for leaving many behind.

People’s trust in governments has declined markedly across the OECD, hitting the lowest record of just 42% in 2016[2], thus making it more difficult for governments to pursue and sustain the reforms required to make society and economy inclusive.  

What are the policy priorities in this context?

We need to change the growth model I referred before. Get away from the mantra of growing first and distributing later,  to include the equality considerations ex- ante. We should avoid informing our policies just by looking at aggregate figures, and look at the distributional impact of the policies we take.

We need a multi-dimentional approach of well being to avoid the silo approach, to develop comprehensive policy packages.

Given that 40 percent of the population  is being left behind, the goal is to “level the playing field” for the bottom deciles so they can fulfil their full potential.

Education is key, but we need to go granular, and not only ensure quality provision of education, but to target low income groups needs. We need to break the link between socio-economic background and school attainment and performance.

If you are born in a family whose parents do not have high school diploma, you have only 15% chances to make it to that level, compare with 63% of the children with parents with higher education. Early childhood education and care is key in this domain.

For this, we need to strengthen the overall progressivity of the tax structure, broadening tax bases, and lowering taxes for low-skilled workers (for example). We have made progress with AEOI and BEPS, but more need to be done regarding tax on wealth.

On the spending side, the OECD identifies a series of innovative interventions – on social protection, education, preventive health, active labour market policies, etc. – that offer the biggest “bang for the buck” in terms of growth and inclusiveness.

Another key component of inclusive growth is women’s empowerment. 

G20 countries’ progress in closing the gender gap in labour force participation is still very slow: on average, the gap has only narrowed from 20.3% in 2012 down to 19.6% in 2015, notewitstanding the fact that 130 million more women could join the labour force across G20 countries, with an expected increase of annual growth by 0.68 % point in a number of countries.[3] Here again, tax system could play an important role.

Getting women and girls into STEM will also prevent opening another door for a digital divide. (through initiatives just like the one I launched with Mexico, matchmaking female STEM-related professionals and aspiring female students).

Have countries made any significant action to make growth more inclusive?

I must say we had too many talks and probably to focused on reignited growth as we know it. Now, we need action for real inclusive growth! The OECD will develop a Framework for Policy Action to help guide the G20 on the available options.

I hope this discussion will continue in this year’s OECD MCM under the theme of “Making Globalisation Work: Better Lives for All”.

 

[1] OECD Statistical Database

[2] Percentage of the population reporting confidence in the national government, 2006-2016, Gallup World Poll (2017)

[3] Women at Work

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11th OECD- ICGLR -UN GoE Forum on Responsible Mineral Supply Chains

Remarks delivered on 02-05-2017, OECD, Paris

European Commissioner for Trade Cecilia Malmström, Vice-Minister of Mines for Colombia, Executive Secretary of the ICGLR, Ambassadors, distinguished guests, members of the press, good morning and welcome to the 11th Forum on Responsible Mineral Supply Chains.

We usually start this Forum that we launched with th the Great Lakes Region, OECD and UN Group of Experts on the Democratic Republic of Congo since 2011  with great enthusiasm given the accomplishments and the commitments from all of you to build a rules based and human global economy.

This time is different. I will ask you to stand, and to observe a minute of silence in the memory of our co-hosts, UN experts Michael Sharp and Zaida Catalan, who were murdered in the Democratic Republic of the Congo last month.

On behalf of the OECD, I wish to convey our condolences to their families and colleagues from the UN and beyond.

I also take the opportunity of this remembrance to extend our thoughts to all victims of the ongoing conflicts in Central Africa.

Thank you.

Now let me move to the Forum, and in their memory, increased our resolve to address the problems on this issue. I am very please to see that over time, this unique global multi-stakeholder forum has managed to attract an ever-increasing number of participants, with an unexpected growth both last year and this year.  We have 850 participants!

This demonstrates the increasing awareness on the need for responsible business conduct in supply chains of minerals worldwide.

But there is no other way. We are now confronting a stong backlash against globalization fuelled by the financial crisis, by the increased income inequalities, and by the suboptimal outcomes of our economic model on the environment. But it is also link to the uneven application of international standards and the respect of human right and dignity in so many international economic operations.

So this exercise aquires more meaning, and making our standards strong will help us build a more balanced global economy, and rebuild our social capital that seems to be plagued by extremisms.

 

11th OECD_ ICGLR _UN GoE Forum on Responsible Mineral Supply Chains_GR
Europe Commissioner for Trade, Cecilia Malmström

I am glad to report, nevertheless, that the global agenda to promote responsible production and trade of minerals has progressed.

This progression has become possible notably through the implementation of the OECD Guidance on Responsible Mineral Supply Chains and other efforts over the last 5 years.

There now seems to be a solid understanding that due diligence in mineral supply chains is expected by the market, and responsible sourcing is a way to help business grow and prosper.

Due diligence is the means for business to cut out the most harmful practices that undermine our collective security and development in a way that seeks to raise volumes of responsible exports, rather than embargoing entire producing regions from global markets.

We are proud to be hosting this year parallel sessions on the implementation of our instrument in a variety of mineral supply chains, including mica, cobalt, coal and precious stones.

The OECD Guidance as you all know is a framework applicable to all minerals.

In addition, this year we will begin conversations on responsible minerals trade in Myanmar, while also advancing our existing work in Africa’s Great Lakes Region, China, India, West Africa and Colombia.

The relevance and applicability of the OECD standard across the globe is further underscored by the adoption of the European Union Regulation setting supply chain due diligence obligations for importers of tin, tantalum, tungsten.

We are proud to see that this regulation, which has a global scope, is based on the recommendations set out in the OECD Guidance.

I look forward to learning more in the key note address from Commissioner Malmström and the regulatory update session later in the day today, and I commend her for her effort.

This year, we will also be delving deeper into the ways that company risk management measures can have positive impacts on the ground.

We are pleased today to launch a set of practical actions to help companies address the worst forms of child labour in their mineral supply chain. The International Labour Organisation has reported that almost 1 million children are working in mines worldwide.

I was in Dehli last December in the march against child slavery with Kailash Satyarty and it was enlightening. But there is so much to do!

Our tool was developed and launched by the Secretariat, with input from many of you and builds off the OECD Guidance.

I hope it will be used as an urgent call to action to avoid mining that undermines children’s rights.

This year we will also be hosting together with the World Bank on 5 May a half-day workshop on global support to responsible artisanal and small-scale mining.

As you may know, the implementation of the OECD Guidance pays specific attention to the inclusion of informal miners, to ensure that responsible mineral supply chains also translates into inclusive supply chains.

We are delighted to be able to move this agenda forward with the World Bank.

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Ladies and Gentlemen,

Before I conclude my introductory remarks I would like to take this opportunity to emphasise two important messages.

First, I would like to call on all countries that have committed to OECD Recommendation of Council on Due Diligence Guidance to continue do more.

In the end, responsible sourcing efforts by companies must be complemented by Governments living up to their own duties.

We have seen some very proactive efforts by a small handful of countries, many of you are here today, but there is still room for improvement.

I hope to return in 2018 to this Forum and hear how governments have strengthened their efforts to promote the OECD Guidance.

Second, I wish to emphasize how important it is that all stakeholders respect each other and engage in a constructive and open manner. I am proud that our work here is carried out in close cooperation with the private sector as well as civil society organizations.

Civil society contributes in varied ways that often complement the roles and functions of governments and the private sector. Their efforts should be supported and their voices protected, in particular by governments. The OECD is committed to protecting and promoting an inclusive and enabling environment for civil society in policy and in practice.

Thank you all again and I wish you successful dialogues over the coming days.