OECD Ministerial faces slowing growth and stalled investment, needs a plan to raise demand through higher wages and public investment


The OECD focussed its annual Ministerial on the objective of  raising investment. However, firms are sitting on massive reserves and profits. They can no longer wait and see, but need to step up investment. They will only do this if wages and demand from households rise," said John Evans, TUAC General Secretary at the end of the OECD Week 2015.

The growth projections of the OECD’s latest Economic Outlook being revised downwards from November 2014 to global growth at 3.1% in 2015, rising to 3.8% in 2016 (the Euro area is the only exception due to the effects of monetary easing), gave a warning to governments at the start of the Ministerial Meeting (MCM). A series of trade union leaders spoke at the MCM and OECD Forum reiterating the urgent need to shift policies from an austerity driven agenda towards a strong social dimension.

TUAC had called on OECD governments to increase public investment ahead of the MCM ( see TUAC's MCM statement) by bringing forward infrastructure plans. In doing so, green and decent jobs would be created and the long-term productive potential improved by supporting the transition to a low-carbon economy.

The revised version of the OECD Policy Framework for Investment (PFI), adopted by the Ministerial is an improvement on the 2006 version but still provides insufficient guidance on ensuring that foreign investment effectively contributes to sustainable development through respect for citizens’ and stakeholders' rights. 

The OECD had to admit that the global economy is only achieving “a muddling-through ‘B-minus’ grade”, which is partly due to tepid business investment. The OECD Secretary-General Angel Gurría said:  “The failure to trigger strong, sustainable growth has had very real costs in terms of lost jobs, stagnant living standards in advanced economies, less vigorous development in some emerging economies, and rising inequality nearly everywhere.”

TUAC Vice President Marc Leemans (CSC/ ACV – Belgium) called on the OECD to reverse rising inequality by strengthening collective bargaining and recognising the role of  trade unions (see TUAC Background paper on Inequality).

This year, the OECD paid more attention to the social dimension of economic growth, low-wage workers and inequality. However, its policy prescriptions concentrate almost only on skills development. At the Economic Outlook panel, TUAC and AFL-CIO President, Richard Trumka said: “This is a wrong approach, there are no automatic effects from skill or productivity gains on wages, supply-side measures are not trickling down to households. We need a strategy to empower workers and bargaining rights to restore economic and social balance and trust in our political leadership.”

Reducing inequality can and should go hand in hand with boosting growth. It must be part of a comprehensive strategy. Structural reforms and austerity went into the wrong direction. As Financial Times’ Martin Wolf said during a MCM panel: anyone, who is talking about structural reforms, needs to clarify what they mean and add some content to it,” said Evans. TUAC has developed a policy check list towards reducing inequality as well as key recommendations to boost sustainable growth.

Climate change and green investment were another central topic of the MCM with the COP21 coming up in Paris in December. ITUC General Secretary, Sharan Burrow, intervening on the topic at the OECD Forum and MCM, said that “Finance and environment ministers when talking climate at the OECD can identify the issues but what is missing are the national plans for industrial transformation and Just Transition. The Trade union position is clear. We support urgent and ambitious climate action, but without dialogue and respect for workers and agreed plans for a just transition at the workplace, social and economic tensions will only increase further.”

On the trade and development nexus, messages and decisions did not go far enough given what is at stake this year for development and in the daily lives of workers in global supply chains across the globe. “The OECD has put inequality and the demand for 'new economic thinking' at the forefront of its public agenda. While global value chains are acknowledged as the dominant model of trade, the recognition that the exploitative model of business that often comes with it, must change, is weak,” said Burrow.

The rise of global supply chains has turned the spotlight on violations of workers’ rights, including negative impacts on their safety and livelihoods. With the G7 putting decent work in supply chains on its agenda this year, “the time has come to strengthen the OECD MNE Guidelines and Contact Points and define consequences for breaching workers’ rights and safety. Governments must also show leadership and legislate for corporate responsibility concerning fundamental rights and due diligence,” Burrow added.

Many trade union speakers called on the OECD governments to “raise the bar” in their implementation of the OECD Guidelines for Multinational Enterprises – that is also on the agenda of the G7  Schloss Elmau Summit held on 7-8 June. In his conclusions of the meeting the OECD Secretary General Angel Gurria exhorted governments to strengthen their National Contact Points to implement the Guidelines. This will be a key issue for trade union follow-up at the OECD Responsible Business Conduct meetings later in June, which mark the fifteen year anniversary of the creation of the National Contact Points.

The OECD besides its development strategy has the tools to ensure responsible private investment and business conduct with the Long-term Investment Principles ( see TUAC Background paper) and the Principles on Private Public Partnerships ( see TUAC PPP check list). Similarly, regarding domestic resource mobilization, the implementation of the G20/ OECD BEPS action plan paired with technical capacity building to assist nations in establishing robust progressive tax systems should play a central role going forward.

For more on Trade Union positions for the OECD week, go here.

Follow this link to read the MCM Chair's Summary.