OECD Forum 2018: Distilling the message from the noise

About the OECD Forum, 29 to 30 May 2018

Over two days 3000 attendees came together in Paris to hear some of the 80+ sessions and explore ‘What brings us together?’. Discussions were loosely structured around three central and connected themes: inclusive growth, digitalism and international cooperation.

Spending two intense days at the OECD is like walking into a beautiful library with only a few minutes to find the perfect book before closing time. There were so many speakers, authors and panellists it was hard to choose where to spend those valuable minutes. It is even harder to then step back and report on what I learnt. Below is a list of high-level takeaways followed by a more detailed discussion.

Quick takeaways

The most disconcerting comment I heard was that ‘we have probably moved too late on climate change’. This was from French economist Oliver Blanchard, who is currently a professor at MIT in the US. I think it was the way he said it rather than being anything new or surprising.

The biggest losers in the dialogue: The rich and the global elite (e.g. Facebook), the gig economy (risks acknowledged but no new policy), climate change and defence (hardly mentioned), the media (or more accurately the lack of an effective, independent media), weak and unresponsive leaders, companies that undertake social or environmental dumping and, of course, leaders who are taking us back to the law of the jungle (e.g. tariffs). 

The biggest winners in the dialogue: ‘Fiscal policy is the new game in town’ and BEPS (base erosion and profit shifting), reconnecting citizens with representatives, rebooting democracy, policing the rule of law and protocols, international dialogue, social dialogue, inclusive growth, structural policy, and of course, being multilateral.

The most innovative policy idea: The New Zealand Wellbeing Budget was a stand-out in that it is a new initiative – a public policy experiment. The ‘Towards a Wellbeing Budget’ session proved very popular, with standing room only.

My favourite quote was ‘vision without execution is an hallucination’. This was from Amelie de Montchalin, a French MP, during a session about the future of the EU.

The best speaker was President Emmanuel Macron. He was able to traverse discussion of our history and our future while exploring how we might get to that future. My favourite lines were ‘we will not be forgiven’ by future generations, ‘the system we live in is not a sustainable system’, ‘we have a battle on all fronts’ and ‘this is our battle’.

Forum overview
The world is messy and is likely to become even more so. There was a great deal of good intentions at the Forum and general agreement that matters were urgent, but little agreement over the general direction we should be taking or new policy instruments that could get us there. This is perhaps understandable considering the evolving role of the OECD and the changing political environment, but it would have been good to bring back some really innovative, concrete policy ideas.

What follows are my observations and some excerpts from the discussions.

1. We need to be responsive and make decisions quickly (even if they are the wrong decisions). There were many examples of how slow the EU is to respond to concerns of member countries on issues such as immigration, debt, privacy, AI and digitalisation. Using the analogy of a living ecosystem, the worst thing one can do to an ecosystem is to starve it from stimuli; it learns through activity. Sandro Gozi, former Minister for the EU in Italy and panellist for a session about the future of the EU, talked about the need for the EU ‘to be more responsive’ and asserted that ‘common problems require common approaches’. The moderator of the session, Ryan Heath, a senior EU correspondent for POLITICO, noted that respondents of a recent EU survey were asked to list the two things the EU should discuss as a matter of priority: the top two were terrorism and youth unemployment.

In the same survey in 2013, terrorism ranked lowest on a list of concerns, nominated by just 7% of those surveyed. In 2018, that had risen to 49% overall across the EU.

The results varied widely between countries. There is a great deal of concern about immigration in Italy (where 66% said it is a priority issue), Malta (65%), and Hungary (62%).

Fighting youth unemployment and support for economic growth are the top concerns in Spain, Greece, Portugal, Cyprus and Croatia. Dutch, Swedish and Danish citizens describe “social protection of citizens” as their top concern.

No matter what the election campaign focuses on, many Europeans have little interest in the Parliament and its work.

2. There are ‘challenges that no one can address on their own’. This quote is from Ángel Gurria, Secretary-General of the OECD. In his keynote address, Gurria discussed our ‘DNA of collective action’ and used the human body as a metaphor, warning us to be on guard for new pathogens and to consider where new antibodies to fight them might come from. He concluded by quoting from Salman Rushdie’s book The Enhancement of Florence: ‘The curse of the human race is not that we are so different from one another, but that we are so alike’.

3. What happens in cities matters. Anne Hidalgo, the Mayor of Paris, said ‘Big cities are in the frontline – for better or worse’ and noted that we need to ‘look for the new idea that does not exist now’. She concluded that ‘values need to be visible’ and that we need to ‘translate values into actions’. She concluded by quoting Martin Luther King: ‘We must learn to live together as brothers or perish together as fools’.

4. Society is unprepared for the rise of AI and the future of work. Dudu Mimran, CTO at the Cyber Security Research Center in Israel, made the following three points:

• AI is the third wave of the relationship between technology and humans. Unlike hardware (first wave) and software (second wave), AI will lead to humans becoming dependent on technology. It will become the foundation upon which we live our lives and ‘we cannot unplug it’.
• Technology has been developed in such a messy and disorganised way that the current system is left with inherent vulnerabilities. These vulnerabilities provide cyber attackers with a wide range of opportunities to disrupt our lives.
• AI technology has become more and more of a commodity and, as such, is becoming more available. ‘Actors do not need to be very large to create significant damage’ and AI allows cyber attackers to launch increasingly sophisticated attacks that pose serious threats to existing defences. Eventually the main way to mitigate cyber attackers will be to use AI extensively in cyber defence. However, this brings its own risks. My takeaway was to make robust, decentralised systems and test them frequently.

A number of sessions discussed the future of work. I generally found these overly optimistic. Although it is fair to say that new jobs may be created alongside automation and AI development, I suspect there will be a net loss of jobs overall. This means we will need to be bold and innovative to ensure that everyone can be personally fulfilled and provided for in a post-work society. One such bold approach is the UK’s world-first creation of a Minister of Loneliness, which is a response to the generally changing nature of global society (including the nature of work).

I did like the advice of one of the panellists to young people: to either do something with your personality or with your hands. Another panellist summarised the two sides of the argument (for and against work) succinctly when he asked ‘would you prefer to work until you are 70 years of age and live well until you die at 87 or work until 58 years of age and live frugally until you die at 87 years of age?’.

5. Wellbeing offers hope but is still in the early stages. Suzy Morrissey, Team Leader for Office of the Chief Economic Advisor at New Zealand Treasury, was one of the panellists for the ‘Towards a Wellbeing Budget’ session. The popularity of this session illustrated both the shared desire for such an instrument and a general lack of practical examples. New Zealand will be a world leader in this area following our commitment to produce a wellbeing budget in 2019. This will involve using the Treasury’s Living Standard Framework to assess the strengths and weaknesses of the current system.

6. Inequality (as distinct from poverty) dominated discussions. The general tenor of the discussion about inequality was around correcting the balance by taking money from rich people. Discussion was lacking around the causes of these inequalities or how we might redesign the system to correct them. The discussion that came closest to practical solutions was surrounding the OECD project on base erosion and profit shifting (BEPS), which are tax avoidance ‘strategies that exploit gaps and mismatches in tax rules to artificially shift profits to low or no-tax locations’. I was looking for answers, but instead found the same discussion we are having in New Zealand. Personally, I see a move from direct to indirect taxes to be a critical tool, as I view this change as a key reason that we have such an imbalance in the first place. See our submission on tax reform here.

Interestingly, Virginia Eubanks, American author of Automating Inequality: How High-Tech tools profile, police and punish the poor, discusses a New Zealand example in her book: a Ministry of Social Development (MSD) model that ‘sifted information on parents interacting with public benefits, child protective, and criminal justice systems to predict which children were most likely to be abused or neglected’. MSD later dropped this initiative due to public resistance, but the concept has been picked up elsewhere. Her book provides some interesting insights for our TacklingPovertyNZ project.

7. ‘Left out and left behind’ and ‘inclusive growth’ were frequent phrases. These terms are related to poverty but are broader, referring to being excluded, mistreated, misunderstood and/or misrepresented in society. The term ‘left out and left behind’ might apply to a range of different people and groups, including a 30-year-old living with a parent due to rental costs, a person struggling with health issues, a working poor family, an immigrant, a minority group or a regional community. It seems to be a catch-all phrase that enables people to articulate why Brexit happened and why Trump became president. Based on what I heard, there are concerns about the number of people that are being ‘left out and left behind’. This included a discussion on the extent to which productivity had outpaced wages.

‘Inclusive growth’ and ‘social dialogue’ (the method to achieving inclusive growth) were discussed in the session on the Global Deal. The Global Deal is a global partnership (New Zealand is not a partner) ‘with the objective of jointly addressing the challenges in the global labour market and enabling all people to benefit from globalisation’. It argues we need to rethink how to develop social dialogue and that we are at risk of not being able to provide pensions for our current youth when they reach retirement age.

I heard a few other interesting ideas. At a Q&A session, a researcher talked about how most of his life he had worked to inform decision-makers about what the general population thinks. Today he said you need to work harder; you need to undertake more in-depth research across a wide range of sub-groups. I took this to indicate that there are increasingly more different and distinct sub-groups within national populations. Although they are relatively unseen and isolated, during the elections they come together to alter the results. The challenge for policy-analysts and officials is to, as one speaker said, ‘bring them into the fold’ to ‘be included and be connected’. It was interesting that one of the panellists mentioned the work of Andrew Haldine, Chief Economist of the Bank of England; the Bank has set up its own set of regional citizen councils (learn more here).

One solution that was canvassed was increasing the number of referenda. Running three or four referenda at once is likely to be more cost-effective than running one and would enable the public to engage in key issues facing the country and communicate their thinking to MPs, officials and policy-analysts. Decision-makers often need a mandate to bring about change and a referendum is one way of gaining that mandate. Think what a referendum on a zero-emissions economy, a higher tax rate for corporations or a water tax might deliver in terms of a consensus on strategic issues.

Raphaëlle Bacqué, co-author of La Communauté, shared her observations from researching the history of Trappes, an area outside of Paris that is now the center of Islamic fundamentalism in France. A number of people from Trappes have left to join the Islamic State or carried out attacks inside France. She was insightful and disconcerting, explaining how the earlier industrial history of the area (e.g. a lack of employment) helped shape the current dialogue and the narrative was ‘if you want to succeed you have to leave’. She explained that, at this point in the city’s history, it suffered from a locked-in syndrome. This led to a discussion of whether more broad mobility is the answer to economic challenges and what the role of dormitory or commuter towns might be.

David Lucas, a Spanish senator and previous Mayor of Móstoles (a large city in the region of Madrid), shared his thoughts on why mayors need broad powers. Lucas had developed a strategic plan with all key stakeholders to bring employment to Móstoles. Interestingly, he also believed the best option if there are no jobs in a city (or country) is for its citizens to go  where there are jobs, even if that means leaving.

It was terrific to spend time with Shamubeel Eaqub, who was brought to Paris to speak on a special panel on housing. I had the opportunity to have dinner with him that evening and discuss his thoughts on the panel. The extract below outlines his observations.

Housing challenges are widespread in the OECD. There are many different approaches, and some are more effective than others. 

Listening to Matthew Desmond, author of Evicted, it really hit home how insecure the life of renting is, especially for the poor and vulnerable. There really is no solution other than to massively increase supply of appropriate housing (state housing, social housing, affordable rentals) and payment support (carefully, as otherwise the poor end up paying more in rent than in rich areas). 

Listening to experts on homelessness in Paris and pan-Europe, it was clear that there is always more work to be done. But a housing-first strategy, with lots of additional and relevant support for people facing homelessness can make a big difference. 

The experience of Vienna, which provides over half of all housing in the city, was remarkable. They actively supply new housing for a cross section of society (with incomes up to – from memory – 100k EUR). This allows them to avoid ghettos. The houses are built to passive house standard, meaning that while the buildings initially cost more to build, their lifetime running and maintenance costs are lower. We should be researching this closely for the HNZC as it looks to increase housing supply. 

My own contribution to the panel was very much focused on the tension between obvious need, willingness to act, and the ability to innovate. It is clear that there is significant housing need, especially for the poor and vulnerable, and many renters. To improve, we need to massively increase the supply of state and affordable housing, and reform rental regulations to increase tenure security. 

But we have not done those things. We have fewer state houses today than we did in 1991. Relative to population, state-housing stock is at the lowest level since the 1940s. We build mainly large homes, with four or more bedrooms, while smaller and more affordable homes are undersupplied. Rental rules have not changed in decades and are only fit for ‘scarfies’ (Dunedin university students). 

The politics of housing are challenging. Even the new coalition government is treading softly. Its plans to build 6400 state houses are positive, but this supply is dwarfed by the demand of a current wait-list of nearly 8000. Similarly, the KiwiBuild programme is ambitious, planning to build 100,000 homes, but it has no way to ensure those homes are in addition to what the market would have supplied, and the programme still focuses on ownership when build-to-rent and shared-equity type models would be much more effective. 

When it comes to housing, the big issues are around political will to be bold and ambitious, and using capital to try new things.

In summary

To conclude, I left the OECD 2018 Forum with a lot to think about. It was inspiring to spend time with a group of highly driven and competent people, trying to get a handle on emerging issues and see their desire to bring about improvements for the less advantaged in society.

I was reminded of the risk of letting the urgent get in the way of the important; climate change will deliver more harm than most issues that were discussed, so the focus on social inclusion and multilateralism could have been more usefully framed in terms of climate change and building more durable infrastructure for the public good.

We need to be careful what we focus on. My experience is that noise, and noisy people, sap energy and waste time. The OECD has an increasingly important role in the world and it needs to remain focused and innovative. There are so many drivers and triggers that might undermine the system; the best approach may be to focus on making the system more stable and durable so that when (not if) shocks occur, citizens are prepared and able to deal with every eventuality.

Four young New Zealanders from the Aotearoa Youth Leadership Institute attended the OECD Forum, one of who was Harry Reid. I met Harry at the Forum and have asked him to prepare a brief blog on his observations, as they will be different to mine. Harry attended events that focused on the intersection between democracy, digitalisation and the media. He will have a blank canvas whereas I brought my experience and assumptions to the Forum. If you are interested, keep an eye out for Harry’s observations and thoughts on our blog in July.