On 27 May 1882, The Times newspaper proclaimed, "Today we have to record such a triumph over physical difficulties, as would have been incredible, even unimaginable, a very few years ago". They weren't talking about Queen Victoria avoiding a recent assassination attempt by a poet she'd annoyed or Jesse James having less luck with a friend he'd trusted. They were talking about sheep meat.

International trade fell off the charts in the fourth quarter of 2008 and showed only a modest easing in the rate of decline in the early months of 2009. Well-regulated open trade is essential for economic recovery and development, yet in times of crisis, protectionism may appear an attractive solution. It should be resisted.

The good intentions of governments and donors to ensure long-term food security for all may be melting away in the face of the current global financial and economic crisis.

The financial crisis might not have been caused by taxation, but it nonetheless raises concerns about evasion, compliance and transparency in financial markets. The OECD Observer asked South Africa's minister of finance, Pravin Gordhan, who chairs the OECD's Forum on Tax Administration, to explain.

OECD faces a huge challenge of image. You insist that the organisation, known for its in-depth analyses and reliable statistics, aims to represent all relevant economies. Emerging countries, however, cultivate the impression that the OECD, despite its co-operation and development efforts well beyond its membership, is still the voice of "rich nations" only.

Development aid rose to a new record in 2008. While good news in a crisis, how can the trend be maintained?

Like Alice, the OECD appears to be bursting through to the other side of its looking glass. Change may be the order of the day, but as the organisation approaches 50, lessons from past work on innovation might speak to the current economic crisis.

The effect multinationals have on wages and working conditions can be positive, but there are conditions to bear in mind, not least for policymakers wishing to attract foreign direct investment.

While OECD countries compete to attract high-skilled immigrants, the 2008 International Migration Outlook finds that employers increasingly rely on immigrants for low-skilled work. Just a fifth on average of the low-educated workforce in 21 OECD countries in the report is foreign-born, whereas the EU25 average is 14.1%.

Can the OECD Model Tax Convention, which is 50 years old this year, continue to fulfill its role of helping to make international taxation fairer and more manageable? Probably yes, though there are challenges.

The world has seen recent decades of rapid growth. This has been most obvious in newly-industrialising countries, notably China and India, but has been shared by OECD countries. Yet the fruits of this economic growth have not been equally divided–either between countries or within countries. As it is put in the introduction to a new OECD report, Growing Unequal?, “there is widespread concern that economic growth is not being shared fairly” (page 15, see references). A rising tide does not necessarily raise all boats. Or, to use another liquid metaphor, we cannot rely on trickle-down.

Fisheries may be an ancient economic activity, but nowadays they are at the forefront of globalisation. First, there is the trade itself: a blue hake caught off the coast of New Zealand by a Japanese vessel may be processed in China before being flown to a market in London or Paris.

The gloomy image that has for so long hung over the world’s largest continent may at last be lifting.
Conflict and disease remain a bane, and there are challenges in areas like governance and transport, but as we reported in our last issue (No 255, May 2006), the OECD Development Centre’s latest African Economic Outlook is upbeat about future economic growth there.

German Chancellor Angela Merkel hosts a special conference with heads of international organisations on “Fair Ground Rules for a Socially Equitable and Open Global Economy,” Berlin, 19 December 2007. To Ms Merkel’s right are Angel Gurría (OECD), Pascal Lamy (WTO) and Juan Somavia (ILO), and to her left are Germany’s labour minister, Olaf Scholz, Robert Zoellick (World Bank) and Dominique Strauss-Kahn (IMF).

Both the size and the relative incidence or frequency of the foreign-born population have increased in all OECD countries since 1995. So while there have been large increases in traditional migration countries such as the US and New Zealand, there have also been sharp rises in Denmark, Korea, Ireland, Italy, Norway and Spain, where inward migration has recently taken off.

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.

Something new is happening in Africa. Once talk of investment in the continent’s countries was dismissed as idealism. Now global investors are turning their eyes–and their funds–to a new investment frontier. Is this short-term euphoria?

Centres of higher learning often exude a rarefied air. From the spires of Oxford to the lanes of Bologna, a remoteness from local communities and disdain for the commercial world are still a common characterisation, if not a tradition.

Latin America is looking towards China and Asia–and China and Asia are looking right back. This is a major shift. For the first time in its history, Latin America can benefit from not one but three major engines of world growth.

Globalisation may have accelerated, but how big is international trade in a country’s income? For some major countries, the answer is not much bigger than before.

City managers are important economic players, handling as they do billion-dollar budgets and thousands of employees. In its second territorial review in a series on competitive cities, the OECD explains that in the last few decades, city managers have recognised that inner city problems could not be resolved by throwing more money at them.

“Innovation: Advancing the OECD Agenda for Growth and Equity”: that is the theme of this year’s annual Ministerial Council on 15-16 May, and it reflects what many governments believe are clear priorities. (Chair's conclusions now available!)

If ever you are unsure about the advantages of open trade, why not take a lead from students in economics and consider the story of Robinson Crusoe. Generations of students have discovered how Crusoe, shipwrecked on a desert island and cut off from the outside world, improved his welfare as he became economically re-integrated into the wider world.

Globalisation produces winners and losers, including in employment. But while the job threat is real, it is manageable as long as the right policies are in place.

The OECD's core mission is to help make the world economy work better, Secretary-General Angel Gurría said in a keynote address to the meeting of the Parliamentary Assembly of the Council of Europe Strasbourg, 4 October 2006. While the organisation's work is well known, stronger partnerships with parliamentarians are needed to strengthen its impact and influence, Mr Gurría said.

“You cannot find a bigger, more complex and all-encompassing subject than that of ‘Balancing globalisation’ ”, said moderator David Eades of BBC World in his opening remarks to the 2006 OECD Forum. There are no simple answers to the challenges it poses either. In a light-hearted observation, Mr Eades suggests a clue might be found in Douglas Adams’ novel, The Hitchhiker’s Guide to the Galaxy, where the indecipherable answer to “Life, the Universe and Everything” was found to be the number 42.

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.

A dangerous new trend is emerging in many industrialised countries. Widespread pockets of anti-globalisation sentiment, furthered by alleged national security concerns and a perceived need to protect “strategic” sectors have led to a resurgence of protectionism. Even in countries that have long promoted and benefited from global markets, politically-motivated barriers are being resurrected. These winds have temporarily chilled economic progress.

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.

How do multinational corporations put into practice the rather higher level concepts of sustainable development and still respect the bottom line? Environment and the OECD Guidelines for MNEs relates how a pharmaceutical company, Baxter International, saved energy but also saved $50 million in operations costs by switching to the most energy-efficient lightbulb.

The global meat sector has suffered from bad press in recent years, with sales affected by trade bans and consumer caution in light of scares from the likes of mad-cow disease (BSE) and avian flu.

Developing countries and OECD countries have seen a boost in foreign investments, as FDI outflows from the US hit a record US$252 billion in 2004.

Not long ago the term globalisation was held high as a positive force, a rallying cry for nations of all shapes and sizes to come together to build a safer, cleaner, more prosperous world. Today, to many, it is a byword for all things negative, not least for the “delocalisation” (or relocation) of jobs to low-wage countries. Take the debates over EU enlargement and increased trade with China and India. There are diverse concerns animating these discussions, but the impact of globalisation on jobs is one that commentators and ordinary people keep repeating.

The 21st century had just begun when something new came into the world: the World Social Forum, which met for the first time in Porto Alegre, Brazil in 2001, to coincide with the already well-established World Economic Forum in Davos. Since then it has gone from strength to strength and it is now a permanent fixture on the international calendar. What is it about?

The global economy is dangerously volatile: extreme currency swings and the risk of stock market collapse are a recurrent feature, bearing an extreme cost in terms of poverty and unemployment. According to the World Bank’s Global Economic Prospects 2004, the number of people surviving on less than US$2 a day has reached 2.7 billion.

It is easy to knock globalisation, but it is all too easy to forget the benefits globalisation has brought too. Slipping back into protectionism is not the way forward.

It is rare that I see my family's situation reflected perfectly in an article in a journal such as the OECD Observer. However, this came to pass in your 40th anniversary edition (No. 235, December 2002).

In “The battle for world progress” (OECD Observer No. 236, March 2003), Ron Gass discusses the uneasy march of globalisation, and proposes that the OECD take a leadership role in the “socio-political leg of the fair distribution of wealth” of Arnold Toynbee’s theory of progress; that OECD provide the policy bridge between the “Davos” forces and the “Porto Alegre” forces. Although this suggestion is a noble idea, it is flawed...

Through the latter part of the 20th century, many of the world’s high-income countries embraced a market-centred approach to economic and social policy. Many low-income countries embraced the same approach, somewhat less willingly, as a condition of loans from the IMF or the World Bank.

I read with interest secretary-general Donald Johnston’s recent leader (“Multilateralism: Is there a choice?”, OECD Observer No. 237, May 2003, also online). His optimism is inspiring, but I wonder if it is not a bit excessive.

Is there light glimmering on the economic horizon? Phil Swan, chief economist at IBM and prominent member of the Business and Industry Advisory Committee of the OECD, searches for what he sees as being the tenets of global growth and prosperity. And that includes making Doha work.

Is the world heading on a path of diverging economic destinies? Could these developments undermine global security and stability? How should we respond to such dangers? These were just some of the issues debated by the more than 1,000 people gathered at the fourth edition of the OECD Forum, on the theme “Grow, develop and prosper”, and as ever held in conjunction with the OECD Ministerial Council.

Globalisation has made the world a smaller place and has changed the way of doing business in OECD countries. But did you know that a significant part of global integration reflects trade within transnational firms and industries?

Since late last year we have watched the steady march towards war in Iraq with a mounting sense of horror and disbelief. This has stemmed in part from deep concern about the immediate destructive consequences of war upon the Iraqi population and the further inflammation of the Middle East, but also from a belief that the situation in Iraq is symptomatic of a larger global crisis that has immense implications for human rights, civil liberties, and social and economic development.

In 1962, we usually divided the world into three regions. The advanced capitalist group was then known as the developed world. The second was the “Sino-Soviet bloc”. Countries “in course of development” were the third world. The China-USSR split occurred in the early 1960s; most of the communist regimes collapsed around 1990, and the hostility of the cold war has largely faded away. The income gap between the former communist countries and the advanced capitalist group has become very much wider than it was. For this reason, a tripartite division of the world economy is no longer appropriate.

Your article on “The global financial architecture in transition”, by Flemming Larsen, the director of the IMF office in Europe, says:

Contrary to popular myth, the most serious threat to workers from globalisation is not trade or investment, on which many of our members depend for their livelihoods, but the erosion of the legitimate role of the state, and in particular the effective public regulation of markets.

After the accounting debacles of Enron and WorldCom, the credibility of large companies hit rock bottom. In a bid to restore confidence, the US authorities now require chief executives and chief financial officers of large listed companies to swear to the truth of their financial statements. The chief executive officer (CEO) and chief financial officer may be charged with civil and criminal offences if any of their financial statements are found to be false.

Globalisation has given rise to a kind of economic “culture shock” and international business is one of the principal sufferers. Tens of thousands of companies are trying to conduct business in a global mosaic of legal, regulatory, business and social environments. Operating in all of these environments and responding to their diverse expectations of corporate behaviour is a formidable challenge, in particular as public (and market) pressure becomes more intense.

Your article “Tobin tax: Could it work?” (OECD Observer, No. 231/232) supposes that the tax would be levied at the dealing sites, which would create huge administrative problems and make it unfeasible. The foreign exchange (Forex) market has two sides to it. According to Rodney Schmidt, a Canadian economist from North-South Institute, while dealing is not organised, settlement, which usually operates two days later via the back office, is very regulated, centralised and organised – the money is closely tracked.

James Tobin died on 11 March 2002. He was born in 1918. Just like the tax with which his name has become associated, a lot has been written and said about Mr Tobin. A Nobel prize winner in 1981 for his analytical work on financial markets, and Yale professor from 1950 until his retirement in 1988, Mr Tobin has been described by many as a man whose influence reached well beyond the circles of many of his contemporaries.

During the past quarter-century, economic and financial liberalisation across the world has led to the new, market-based financial economy in which we live. This transformation of the financial system has brought considerable benefits. But as the recent episode in Argentina reminds us, it has also been accompanied by too many financial crises, especially affecting emerging market countries.

Newness in politics has a long and eventful history. Globalisation and the battle for and against are no exception, as the events of the late 18th century show.

The creation of a new Scottish Parliament two years ago was more than just a case of constitutional reform. By devolving local decision-making powers to Scotland, the UK was responding to the need for innovative governance brought on by the forces of globalisation.

Empires rise and fall while the economic wheel keeps turning. The last millennium saw the west gain ascendancy – but our decline is inevitable.

Globalisation means many things to many people, but in essence it is actually quite a simple idea. Some of the accusations levelled against it appear to be without substance.

Farmers’ incomes still rely too heavily on subsidies, which distort markets, put exporters from developing countries at a disadvantage and cost taxpayers hundreds of billions of dollars a year. Agricultural reform and reductions in trade barriers could help farmers both in the industrial and developing worlds get a better deal in a more cost-effective way.

Understanding global public

National borders are routinely breached by diseases, pollutants, cyber viruses, subversive ideas and terrorists. In recent years there has been an increase in such activities, known as transnational or global public goods.

Eight rounds of global trade talks have still not reduced trade barriers enough. Developing countries’ concerns about access to industrial markets must be met before a new round can even be launched, let alone succeed.

The OECD Guidelines for Multinational Enterprises have been rewritten to bring them up to date with today’s world. This is a good step. Now it is time to think about where we go from here on implementation and enforcement. First, a reminder of some basic points. The Guidelines are important, but being guidelines they are not a substitute for binding legal regimes that protect workers, the environment, and corporations that follow a high road from those who would degrade workers and despoil the environment. However, they do have an important role in establishing the OECD standard that governments have agreed should be followed wherever their multinationals operate.

Since their creation in 1976, the OECD Declaration on International Investment and Guidelines for Multinational Enterprises have reflected the expectations of signatory countries and their citizens as to how international companies should operate and relate to governments. The OECD Declaration, of which the Guidelines are an integral part, aims to improve the climate for foreign direct investment. At the same time it seeks to encourage good conduct and the positive contribution that multinational enterprises can make to economic, social and environmental areas in the countries where they operate.

The review of the OECD Guidelines for Multinational Enterprises concluded in 2000 was two years in the making. It was a difficult challenge, but a nonetheless successful one. There are several reasons for this.

Was the World Wide Web an invention of the US military, or did it come out of Microsoft? The answer, perhaps surprisingly, is more scientific than that, although both defence and business had their parts to play.

The rapid technological changes affecting economies and societies around the globe may have transformed firm-to-firm transactions, generated new forms of production and exchange, and created new forms of work, but the new economy has not begun to remove the old economy’s social problems.