Remarks by Aart de Geus, Deputy Secretary-General OECD

It is a great pleasure to participate in this UNESCO Future Forum, to share our perspectives on the global financial and economic crisis and its implications for multilateralism.

This crisis is an unprecedented challenge, but it is also a big opportunity to revise our concepts, our systems and frameworks. It is a great opportunity to build a stronger, cleaner and fairer global economy.

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We will need new ideas, new innovative approaches; because the conventional way of thinking is not working anymore. And I believe there is no better place to build this new rationale than in a multilateral forum, where we learn to see the world from different cultural perspectives.

Thank you very much Mr. Matsuura for this invitation.

1. The gravest crisis in our lives

Let me start by confirming the gravity of this crisis. It might sound commonplace, but this is indeed the gravest crisis of our lives.

The financial crisis has turned into a global economic paralysis.

The world economy is heading for a zero growth in 2009. Global industrial production is falling steadily. World trade volumes are expected to contract for the first time since 1982. Foreign direct investment (FDI) inflows will also contract, after shrinking by 21% in 2008. (i) Development aid is also falling, while remittances from migrants are also running dry.

And this meltdown is starting to hurt families through rising unemployment. The International Labour Organisation (ILO) projected recently that the crisis could swell the number of unemployed in the world in 2009 by a range of 18 million to 30 million workers, and by more than 50 million if the situation continues to deteriorate; while the number of working poor living on less than a dollar a day could rise by some 40 million – and those at 2 dollars a day by more than 100 million. (ii)

These are not just numbers. These are broken dreams, social disappointment, desperation. All these financial and economic contractions have a dire human dimension: increasing poverty; growing inequalities.

And this is not only happening in developing countries. As our recent publication “Growing Unequal” shows, inequalities are a growing concern in (and between) OECD countries. In some of them, these inequalities are creating tensions that can breed protectionist policies, economic nationalism or xenophobia.

2. What to do?

First and foremost, we must restore confidence in the financial markets. Removing the toxic assets from bank’s balance sheets is an essential step that should precede recapitalisation. We have remarked the importance of this step to our member countries. We also need urgently to implement big and smart fiscal packages to get demand going again.

We will then need to rewrite a new set of rules for the global financial system and the global economy. And all these actions will have to be internationally concerted and coordinated; because this, my dear friends, is the most global crisis that we have ever lived. And a global crisis demands global solutions.

Let me say a few words on this togetherness, multilateralism and partnership.

3. A global crisis: understanding “togetherness”

The times when a single country could solve its problems in isolation are gone for good. As Joseph Stiglitz remarked in a recent article, now there are simply too many interdependencies for any country to go its own way.

I remember when the global tide of the crisis started rising at worrying levels, around September 2008, some people were still talking about “decoupling”, trying to explain why some emerging economies would not be seriously affected. At OECD we have argued since the beginning that in a highly interdependent world there are no decouplings.

This morning the Financial Times reports that net capital flows to emerging markets will drop to just 165 billion dollars this year, down from 929 billion as recently as 2007.

Today there is not one single country that is not suffering from this crisis, no single region or city that is immune. From Detroit to Delhi, from Liverpool to Lusaka, from Sao Paolo to St Petersburg the crisis is the defining issue of the moment.

We might live times of unprecedented cultural plurality, but we are all “sailing in the same boat”. Some of you might remember how some years ago, in fact not so long ago, practically all regions and countries in the world were growing at the same time; today we are all decelerating together.

We need to understand this “togetherness”.

As a Latin American poet recently wrote: “We are many and one / in dire synchronicity / the time has come to know it / only together we fall / only together we shall rise again / all is connected to all / we are many and one / if we forget this logic we act against ourselves.”

4. Inclusive multilateralism: the way forward

This crisis has exposed many uncertainties, but at least one thing is certain: the solution and the post-crisis world can only be built through inclusive multilateral co-operation.

The age of blunt interdependence is here. The only way forward is multilateralism.

In the past months, we have seen not only the extent of our interdependencies, but also the deficiencies of our global governance.

A highly integrated global economy needs effective mechanisms of international regulation. In a recent paper, Henry Kissinger exposed the risks of having a globalised world economy without powerful international institutions: a gap has opened between the economic and the political organisation of the world, he said. It is time to bridge that gap.

One of the reasons why markets have taken so long to stabilise and regain confidence is the lack of tuning and coordination between national responses around the world; but also, let’s admit it, because of the faulty coordination in the assessments and recommendations of international organisations.

The only way we can reconfigure the global economy is through enhanced international co-operation. And for that we need stronger, more inclusive and better coordinated international organisations.

As we have seen recently, through the emergence of different innovative schemes like the G8+, the Major Economies Meeting (MEM), the OECD’s Heiligendamm Process or the G20, there is a growing realisation that we cannot build a stable global economy without including developing countries in the decision-making process.

At OECD we are strongly pursuing this new inclusive multilateralism.

We are currently involved in a significant enlargement process that will bring five new countries (Chile, Estonia, Israel, Russia and Slovenia) into our Organisation. We are also strengthening our co-operation with other five crucial emerging economies (Brazil, China, India, Indonesia and South Africa) through our Enhanced Engagement strategy with a view to eventual membership.

And we are fostering a closer collaboration with nearly 200 other countries through a wide gamut of innovative co-operation instruments, like our initiative on Governance and Investment in the Middle East and North Africa or the Emerging Markets Network (EMNET) meetings to share experiences between multinational corporations from OECD and emerging economies.

Based on this growing plurality, we recently presented the OECD Strategic Response to the Financial and Economic Crisis, to help governments and other international organisations redesign the international financial system and revive economic growth.

At the same time, we are fostering a much stronger and more dynamic co-operation among the main economic international organisations. A few weeks ago, our Secretary General, Angel Gurría, gathered in Berlin with Chancellor Angela Merkel and the Heads of the WB, the IMF, the WTO and the ILO, to establish the bases of a reinforced collaboration between these organisations, to build a stronger, cleaner and fairer global economy.

Partly as a result of this meeting, we are now working with these international organisations to produce a package of global regulations and standards to advance towards a first global normative; towards a more reliable regulatory framework for a better global economy.

But to build a better global economy, to produce a more balanced and inclusive world, we will need much more than a new financial and economic regulatory framework. We will also need a major cultural change; both in our societies and in our leaders. This is why the role of UNESCO is becoming more and more important.

5. The role of UNESCO: a natural partner

We are living foundational times. The intellectual edifice that sustained this economic model has collapsed; in the words of Mr. Alan Greenspan himself. We need a new map for human progress. And this time the guiding principles will have to come from a broader and more plural social base.

This time the new paradigms, the new rationale, will have to be a truly global contribution. The new model can no longer be designed by a small group of nations, because it will not sustain the new project.

The reconfiguration of the global financial and economic system ─ the operational part of the equation ─ is crucial. But this time this reconfiguration will have to be done in the lines of important core values like inclusiveness, equity, sustainability, diversity and tolerance.

We need to build a new and inclusive global consensus. But we also have to generate a new leadership through a new “creative diplomacy”, because the leaders of the previous model ─ the top financial gurus, the CEO’s of big corporations ─ are not in a strong position to provide it anymore.

To create this new global consensus and to produce such renewed moral leadership, we will need the partnership of international organisations like UNESCO.

Very few international organisations are in a better position than UNESCO to help us seize the cultural diversity of this world to fabricate a new reality. Because, as the Spanish philosopher Ortega y Gasset used to say, “reality is the sum of all perspectives”.

OECD and UNESCO are natural partners. We have to work together to build the new global economy over a more solid structure of fundamentals and values, guided by objectives of sustainable development.

And when we say “together” we should think big: I mean UNESCO, OECD and other international organisations and emerging schemes like the G20, along with national governments, parliamentarians, corporations, banks, trade unions, NGOs and academics. We need to forge a new global alliance.

This is the role of OECD. We don’t lend money. We are not a financial institution. But we provide an effective and increasingly global forum to share government experiences, to analyse them and to provide policy advice.

We are a hub where countries meet to produce international standards, soft-law, principles and guidelines, like the ones we have for corporate governance, like our Guidelines for Multinational Enterprises, our Anti-Bribery Convention or our OECD Model Tax Convention.

During the past 50 years we have produced an arsenal of these soft-laws and international standards to make markets work better. We have been promoting free trade and investment practices, deregulation and liberalisation, but we have also been the source of important international regulation and frameworks.

We believe a healthy balance between markets and governments is not only possible but also fundamental. At OECD we are convinced, as a Mexican economist recently put it, that governments should act, not because markets don’t work, they should act so that markets do work.

The financial crisis has confronted us with the world we have created. Like a big mirror it has revealed the fragility of a global financial system; the risks of excessive deregulation with bad supervision; the vulnerability of a global economy based on the understanding that ever increasing production and consumption was the key to success.

It is time to change. It is time to re-write the rules of the game. It is time to create a more reliable and harmonious globalisation. It is time for a greener type of economic growth. This will not only require better international organisations and better global governance; this will also demand a change of mind, a change of culture. The new economic fundamentals have to be based on values which UNESCO has been promoting for decades.

The big lesson of this crisis is that we are all one. And the realisation of this interdependence is an opportunity to revise our theories, our policies, our daily behaviour and its relation with the economy, with society, with the environment.

At OECD we are making a big effort to adapt to the new global economic reality. But we must act together, for now we know this is not a “solo” challenge, and surely we all have an important contribution to make.

Thank you very much.

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(i) According to estimations by UNCTAD. See: http://english.cri.cn/6826/2009/0l/20/164s445585.htm
(II) ILO, "ILO says global financial crisis to increase unemployment by 20 million", Press Release, ILO/08/45. See: http://www.ilo.org/global/About_the_ILO/Media_and_public_information/Press_releases/lang--en/WCMS_099529/index.htm