The financial crisis sweeping world markets is the worst since the Great Depression. While the crisis is biting into the real economy, hard lessons are being learned. How should policymakers move forward, particularly as room for manoeuvre is being squeezed?

In half a century the OECD Model Tax Convention has established itself as a model for international business. Here is how.

Today, barely more than a decade after its first commercial incarnation, it is difficult to think of a policy domain that is not affected by the Internet.

The Internet and the constellation of information technologies it connects are viewed as essential ingredients in addressing some of the world's most pressing policy issues: sustainable and increasing economic growth, ageing societies, environmental management, energy efficiency, the eradication of poverty, and many more. The implications for economic and social development are far-reaching and profound, including for the next several billion users.

See Joong Choi
Chairman, Korea Communications Commission

In 1998, the Internet was emerging as a major new medium for communications. OECD ministers gathered in Ottawa, Canada, and established policies promoting online activities in areas such as privacy, security, taxation and consumer protection. Since the Ottawa ministerial, the global Internet economy has grown remarkably.

2008 will be a decisive year in the battle against climate change. Hopefully, it will see us forge an international consensus so an agreement can be reached in Copenhagen in 2009 that will allow us to build on the Kyoto Protocol.

With the world economy today experiencing turbulence on a number of diverse fronts, OECD countries are preoccupied with meeting these challenges.

The 2008 OECD Ministerial Council Meeting and Forum, the high points of the OECD calendar, could not be more timely. The issues we will be dealing with and the policy responses we will discuss should pave the way for a better world economy. Christine Lagarde, the minister of economy, finance and employment of France–the OECD’s host country–will chair the ministerial meeting.

Real estate is an important strategic sector in most economies–just think of the links to construction or the importance of property in the investment portfolios of pension funds. But it is also vulnerable to abuse for money laundering and tax fraud.

A 50% rise in global greenhouse gas emissions by 2050, higher temperatures, with more droughts and storms harming people, crops and buildings; more animal and plant species becoming extinct under expanding farmland and urban sprawl; dwindling natural resources; a billion more people living in water-stressed areas by 2030, with more pollution, disease and premature deaths ahead.

Europeans, particularly women, generally work fewer hours than their US counterparts. How does this difference help explain the transatlantic gap in incomes?

If Shakespeare was right, and the world is a stage, then “Gathering Storm” could be the title of the play as we enter 2008. With a US economy flirting with recession, the euro area losing stamina under a strong euro, a barrel of oil close to $100, international food and commodity prices reaching record levels and climate change intensifying, it looks like we are heading into a turbulent zone.

The history of human progress is also a history of innovation, and OECD countries have been rediscovering what this means for the global economy. Consider the US. For two decades the world’s largest and most advanced economy has been driving forward the frontiers of technical progress. Yet whether in information technology, pharmaceuticals or biotechnology, the US knows it must innovate to stay in front.

As political leaders gathered in Heiligendamm in northern Germany this June and before that at the OECD in Paris in May, the concern on everyone’s minds was the future shape of the global economy.

The global economy is into its fifth year of growth. The expansion enjoyed in the OECD area has benefited from the dynamism of large non-member economies, especially in Asia. Globalisation has helped these countries raise living standards and reduce poverty. Indeed, the participation of China, India and other non-OECD nations in global economic flows has been increasing at a remarkable pace, now representing around half of total world GDP (measured by purchasing power parities), about 40% of world exports and nearly half of the world’s energy consumption. They have become massive outward investors, too.

On 1 January, Germany took over the presidencies of the European Union and the G8. The last time our country had this dual-chair role was in 1999. Our basic goal this year is to address global challenges and to tap fully the opportunities of globalisation.

The interests and concerns of the EU and the G8 are by no means identical, but there are several areas where we can take the opportunity of our dual presidency to build useful synergies.

The OECD Anti-Bribery Convention is ten years old this year. In that short time it has established itself as the first truly effective global instrument to fight corruption in cross-border business deals. But despite enormous advances, the fight against bribery must continue. And the key to further progress depends on the resolve and willpower of OECD member countries.

Energy has moved to the top of our policy agendas, and with good reason. First, there is the price of oil, which though easing a little in recent months, remains historically high. This has pushed up costs for producers and consumers alike.

I am in contact with leaders and officials both from the world’s most developed nations and from developing countries. When the Doha Development Round talks collapsed in July, I was struck by the gap between what officials say when they meet at the OECD in Paris and how they define their positions in the WTO talks in Geneva.

It is a great honour to have been given the mandate to lead the OECD following Donald Johnston’s great legacy. We are facing a number of pressing challenges, of which I will mention just a few. Starting with the global economy, I would note that although the economic outlook for this and next year is rather positive, there is no room for complacency.

The euro area has recorded a disappointing economic performance over recent years. Its per capita income grew on average by 1.3% between 2000 and 2005, compared to 1.9% in the US over the same period.

At the end of the 2006 Ministerial Council Meeting (MCM), Donald Johnston will complete his second 5-year term as the fourth secretary-general of the OECD and will formally hand over office to Angel Gurría, who was nominated by OECD member countries last November. A former lawyer and minister in the Canadian government, Mr Johnston took over the reins from Jean-Claude Paye in 1996. We asked the outgoing secretary-general for his reflections on what has proved to be a period of great change in the global economy.

The OECD Ministerial Council Meeting and the Forum are major opportunities for member countries and other emerging economies to exchange views on global economic issues, share best practices and discuss policy priorities. Our central theme this year is “Delivering prosperity” and our focus is on the wide-ranging reforms required to make our world a safe and thriving place for its citizens. Chair's summary, now available.

This is my last editorial for the OECD Observer before I step down as secretary-general in May 2006. Nevertheless, I will focus on the future, rather than dwell on the past. That is not to say that we should ignore John Maynard Keynes’ advice that we should examine the present, in light of the past, for the purposes of the future. But sometimes the present and the future cannot draw many useful lessons from the past.

Even a few short decades ago, power and politics seemed to be played out only at election time, when politicians would consult the people, then return to government or opposition to take care of the affairs of the state. The next election was barely on their minds. Citizens, whether through trust or ignorance, generally would ask no more of them than that.

Economic forecasting is a delicate exercise, but having just arrived back from Beijing, I am satisfied that all our predictions about the might of China in the global economy will come to pass, perhaps even sooner than many believe.

The Dark Ages, the Renaissance, the Industrial Revolution: these may be phrases from previous centuries, but they carry a multitude of images, lessons and historical memories that are still relevant today. I believe that the end of the last century and the beginning of this one will be characterised as the dawn of the “Age of Globalisation”.

To launch this summit season, the OECD Ministerial Council and the Forum which precedes it present an important opportunity for ministers and civil society to update and refine the international policy agenda in key areas. For Sweden's prime minister, Göran Persson, who chairs this year's OECD Ministerial Council, four main areas stand out.

The Ministerial Council meeting and Forum this year provide a rich menu of issues for consideration including investing in energy, structural adjustment in response to globalisation, development challenges, as well as the progress of trade negotiations under the Doha Round.

The OECD is once again hosting a meeting of social policy ministers. The last meeting took place seven years ago. Then, priorities and challenges were identified that needed to be addressed urgently in OECD countries. Many of these issues are still on the agenda today.

“Nothing exists until it is measured”. This keen observation by the Danish physicist and Nobel laureate, Niels Bohr, has become something of a leitmotiv in the statistics world, but it bears some scrutiny.

Just a few days ago, an article appeared in a major Canadian newspaper deploring the exodus of qualified doctors and nurses from African countries struggling to contain disease, especially AIDS. These highly skilled professionals are being attracted by opportunities in more developed countries, but while they may look forward to better lives, the communities they leave suffer an important loss.

There are large economic forces at work in the world that carry the potential for immense human progress, but that also can make our economies and societies more vulnerable. Despite the fact that we have known this for at least two decades, since the process of globalisation began to take hold, the international community still fails to secure cooperative action on a scale and nature that will allow all nations to reap the benefits of globalisation.

The value of shared learning and mutual understanding: this was a key message of the OECD Health Ministers Meeting last May. The agenda showed the myriad areas where economic analysis can enrich policy design: from quality, efficiency and cost-effective provision, to the economics of prevention and the incentives for innovation.

Demography and climate change: as I read the literature and consult the experts, I am increasingly convinced that many of this century’s important challenges, especially for our children and grandchildren, will flow from these two phenomena. Let me sketch some scenarios and questions with respect to each.

Investment in health is not only a desirable, but also an essential priority for most societies. However, our health systems face tough and complex challenges, in part derived from new pressures, such as ageing populations, growing prevalence of chronic illnesses, and intensive use of expensive yet vital health technologies.

The formal accession to the European Union of 10 new member states on 1 May 2004 is a defining moment in the history of Europe. The Irish Presidency was honoured to welcome the accession states as full members of the Union and to celebrate together this great event with a “Day of Welcomes”. Enlargement on this scale, from 15 to 25 members, is unprecedented in the Union’s history.

The global political calendar for 2004 appears unspectacular compared with recent years. No Monterreys, no Johannesburgs, no Cancúns, no summits on water or the information society. Yet, like all calm waters, looks can deceive.

We live in a multilateral, networked, world. It requires rules, of course, but these will never be strong without a system based on principles and values. Trade, business and science are just a few examples of areas where trust needs to be rebuilt. How ironic that mistrust should develop during today’s age of information, where knowledge and confidence, not ignorance and fear, should be the hallmarks.

Inflation has been brought under control in OECD and non-OECD countries alike, including in Latin America and Africa. This progress is thanks in no small part to strong action by central bankers.

After a decade of rising employment, innovative start-ups and widespread business euphoria, unemployment has started to increase again across the OECD. It seems that the rise in unemployment is less pronounced than was the case in previous bouts of economic weakness, and this reflects encouraging improvements in structural employment. Still, it is a stark reminder that the fight against high and persistent joblessness must remain at the top of the policy agenda.

In some circles, these days, it is fashionable to blame globalisation for all manner of ills. Critics hold it responsible for everything from poverty and inequality to environmental pollution.

Some commentators say that the divisions over Iraq have put multilateralism in jeopardy. I have also participated in recent days in discussions as to how to heal the transatlantic rift. Relationships are said to be “frayed” or “irreparably damaged”. Really?

The OECD grew out of a heightened recognition at the end of the Second World War of interdependence on two levels: between nations, and between security and economic development. In some ways the current international environment brings us back to that starting point. The OECD Ministerial Council and the Forum which precedes it provide an occasion for ministers and civil society to take stock of the achievements of the past half-century, and to update and refine the policy agenda for promoting shared growth and development.

The OECD might not be thought of as playing a role in water supply and management, but in fact it has a leading role, as it does in all areas of sustainable development.

In terms of maximising economic growth and wealth creation, the OECD has performed remarkably well, and perhaps better than our founders could have expected. What do the social indicators tell us? Frankly, on this front, we have not been as successful.

We are inundated these days with concerns about corporate governance. Corporate executives are under attack and major auditing firms are worried, as well they might be in the wake of the demise of one of their giants, Arthur Andersen. Enron, WorldCom, Tyco – what should our reaction be to these extraordinary and outrageous breaches of faith with shareholders andemployees?

There seems to be a wide variety of definitions and opinions as to what “sustainable development” really means. One might even be tempted to conclude that sustainable development is in the eye of the beholder!

The world has become a radically different place in the last year. So when the OECD Ministerial Council convenes on 15-16 May in Paris, immediately after the OECD’s annual public Forum, we shall also have to change the way we talk.

This is the year of development! The Monterrey Summit on Financing for Development, the OECD Ministerial starting 15 May, the African Initiative of the G8 Summit and the World Summit on Sustainable Development in Johannesburg: all are largely focused on poverty reduction and effective development assistance. This 10-point strategy could help:

It was Louis XIV’s finance minister, Jean-Baptiste Colbert, who claimed that the art of taxation was to pluck the maximum amount of feathers from the goose with the least amount of hissing. Colbert’s view was close to the truth, even in today’s world, but taxation in his day was not used as an instrument to achieve a broad range of economic and social objectives. Rather, it was a tangle of practices and customs designed to finance wars, private and public works, as well as the pet schemes of the royal family – and their aristocratic hangers-on. In fact, until the 20th century, the notion of a progressive tax on income did not strike them as being virtuous.

“Look to your health: and if you have it, praise God.” This quotation is drawn from Izaak Walton’s seminal work, The Compleat Angler, a book which is to be found in the library of every fishing aficionado. Walton lived in the 17th century. At that time, the general belief was that health was “a blessing that money cannot buy”. True, we see around us in friends and family a connection between good genes and longevity. But, unlike the days of Walton, we no longer accept the premise that the benefits of health and consequent longevity are left to God and chance.

Last year the World Health Organization dedicated its World Health Report 2000 to improving the performance of health systems. We did so because we recognised that the good health of nations is key to human development and economic growth and we felt it was important to analyse health systems’ performance and to share what we knew with governments and the international community.

Globalisation, of course, is not new. In fact, some would argue that it even dates back at least to Marco Polo’s voyages in the 1300s. But what is new is the qualitative nature of the recent big wave that began in the 1990s, signifying a new stage in the evolution of the global economy. The implications for public policy — and thus international institutions — are immense. Indeed, countries, more than ever, need to work together in supranational efforts to successfully navigate the challenges of an increasingly globalised world.

The rise of the “knowledge society” is not only happening in the economic and professional spheres, but in the public domain as well. The way our fellow citizens look at scientific and technical questions is changing radically. Not that their interest in such questions has been dulled, quite the opposite, but they are now much less interested in simply knowing the facts, phenomena and theories, and much more attracted by shared contemplation of the impact that new knowledge and new technologies are having on their own lives.

I confess to being somewhat tired of the term “globalisation” which seems to find its way into the speeches and writings of everyone who has any interest in public policy. Globalisation is alternatively condemned as a worldwide agenda driven by greedy multinational corporations and bureaucrats where the rich get richer and the poor poorer, or praised as the way forward to increased prosperity for all and the answer to the dire circumstances of billions of distressed people on planet earth.

When we in government look at our collective record on global sustainable development at the start of the 21st century, it is difficult to feel a sense of satisfaction. For despite the progress in some areas, we have been unable to reverse the worrying trends in global development. Too many people still live in abject poverty and in many places exploitation of water, land and other natural resources is well above critical limits.

The world is a living biological organism, not just a planetary rock with life somehow superimposed on it. This is the so-called gaia hypothesis developed by James Lovelock and Lynn Margulis. In a recent interview Mr Lovelock noted: “Life clearly does more than adapt to Earth. It changes Earth for its own purposes. Evolution is a tightly coupled dance, with life and the material environment as partners.”

Since I arrived at the OECD in 1996, I have participated in more conferences on more issues than I would have imagined possible. These many and varied meetings focused on almost every area of public policy. Without exaggeration, I can report that in all cases a common thread of consensus was education as the fundamental building block of social and economic progress. Would this have been the case, say, 100 or even 50 years ago? I doubt it.

The dot.coms that were the darlings of the stock markets just a few months ago have gone into hibernation. I say hibernation because I believe that some of them, those that have real value, will return. Others which floated upwards on wishful thinking may never again find their way into serious investment portfolios. Indeed, many of them have already folded. What does this mean, if anything, for the future of electronic commerce?

Poverty in all its forms is the greatest challenge to the international community. Of special concern are the 1.2 billion people living on less than $1 a day and the additional 1.6 billion living on less than $2 a day.

Over several months I have participated in many discussions with experts from all over the world on the issue of the new economy. The question usually raised: is there a new economy? The consensus answer seems to be “perhaps”. There may be an element of media hype about it all, but there is also substance behind the headlines. As OECD chief economist, Ignazio Visco, points out in this special edition of the OECD Observer, trends are finally emerging in the economic data that the new economy might help to explain, especially in the area of productivity.

The 1990s was a busy decade in the fight against international corruption. Several high-profile campaigns were launched, in the world Bank, the Council of Europe, the Organization of American States, to name but a few. In the Clean Hands campaign, the pool of Milan magistrates purged Italy’s public sector with a thoroughness and a forthrightness that inspired other countries to follow suit.

Evolve or die! A harsh admonition, but a very appropriate one as we contemplate the century and millennium ahead! In 1893, John Hanson Beadle, author and journalist, wrote this epitaph for futurology (reported in New Scientist, October 15, 1994): “All history goes to show that the progress of society has invariably been on lines quite different from those laid down in advance, and generally by reasons of inventions and discoveries which few or none had expected.”

On the Eiffel Tower here in Paris where the OECD is based, there is a clock which clicks down the days left to the end of the 20th century and the beginning of the new. It is a large, brightly-lit clock and it can be seen from quite a distance away. At the time of writing there were 178 days to go. Tomorrow it will be 177. Soon it will be 10 and in the blink of an eye, it will be day zero, or is that day 1?

Within the developed world, food has never been safer, life expectancy never longer. Yet scares, recently over mad cow disease and now over genetically modified food, have pushed biotechnology high on the popular and political agendas in several countries, with accompanying regulatory battles, public showdowns and trade disputes. Public opinion appears divided, with all sides making sense and at the same time adding to the confusion. The trouble is that amid all the noise, virtually anything to do with ‘genetic engineering’, whatever the benefits, is in danger of becoming -taboo.

OECD Observer editorials published between December 1996 and January 1999.

The liberalisation of trade and foreign investment has stimulated innovation, encouraged efficiency and promoted growth. Open trade has been a driving force for stability and prosperity. It has been a precondition for the fourteen-fold expansion in world trade in goods since 1950 and a six-fold increase in world production.