Global growth for global gain
G7 Summit

Global growth for global gain

Angel Gurría, secretary-general, Organisation for Economic Co-operation and Development, shares with John Kirton how the OECD is advancing equality, where it is helping to add economic value and what the digital transformation means in economic terms

How is the Organisation for Economic Co-operation and Development helping the Biarritz Summit to advance host President Emmanuel Macron’s goal of fighting inequalities?

The OECD has a long-standing engagement in fighting inequalities and we have been raising awareness on this major issue. All of our work is about inclusive growth – not only because it is fair, but also because it is sound economic policymaking. Back in 2008, we published Growing Unequal? Income Distribution and Poverty in OECD Countries, and there have since been four more flagship reports on this issue, most recently this May, Under Pressure: The Squeezed Middle Class. We have also produced dozens of working papers and thousands of statistics and cases. So we commend President Macron’s choice to set fighting inequality as the overall theme for Biarritz. It is the defining issue of our times.

Growth has returned in all major regions of the world, yet inequality is staggering within countries – it is at its highest point in many countries for 30 years, and growing. The top 20% of households across OECD countries hold on average financial wealth worth around 72 times that of those in the bottom 20%. Intergenerational and social mobility is very low, and the risk of slipping down the social ladder is high. This leads to further ‘squeezed middle classes’ – and the middle class is the bedrock of liberal democracies.

We are lending our expertise to provide evidence and policy recommendations to support the G7 in finding common solutions to this global challenge, building on our contributions to the G7 Bari Agenda in 2017 and the Charlevoix equality and growth statement last year with the OECD Inclusive Framework and our Business for Inclusive Growth Platform for Policy and Action. We are also inviting G7 leaders to take concrete action across the employment, gender, development, education and finance dimensions to support various G7 deliverables.

Where else has the OECD been most able to add value?

As you know, we are the house of structural reforms and evidence-based policymaking, so we have been looking at what policies have worked better and which have not, and looking at their costs, complementarities and sequencing in gender, the future of work, education and digitalisation. When you tackle an overarching objective such as fighting inequalities, you need a comprehensive approach to public policies, dealing with several items simultaneously and leveraging their synergies and identifying trade-offs, although each has to be treated separately.

Gender is a key element, and one in which we have a lot of experience to draw upon, including through the G20’s 25 by 25 target. We are participating in the G7’s better gender law initiative, helping identify laws and legislations as best practices for gender equality and women’s empowerment, supporting implementation and finding mechanisms for effective peer learning.

The G7 Social ministerial meeting helped reinforce social justice by integrating social and labour norms in multilateralism, supporting universal social protection, finding common policy responses to the new forms of work and ensuring gender equality in the workplace. The OECD has a range of policy tools that we invite countries to take up and implement to help apply the highest social and sustainability standards in globalisation, such as our instrument on responsible business conduct and due diligence.

Environmental challenges, and most notably the erosion of biodiversity as the planet is now facing its sixth mass extinction, exacerbate inequalities and create insecurity. The efforts led by members of the G7 in fostering the green transition and the goals defined by the 2030 Agenda through the preservation of biodiversity are timely and necessary. The OECD, faithful to our long-standing engagement on the environment, is helping the French presidency deliver on its priorities on biodiversity by putting forward the business and economic case for preserving biodiversity and contributing to elaborating an ambitious post-2020 global biodiversity framework.

In the joint education and development agenda, we are helping to advance the G7’s girls’ education agenda and develop a compendium of good practices to promote girls’ education, thanks to our analysis drawing on the PISA for Development exercise and the Social Institutions and Gender Index. We are also working on vocational education and training, financing for education, teacher training, and early childhood education and care.

But the responsibility for living up to the challenge of fighting inequalities cannot rest only on the shoulders of governments. It requires the whole of society. We are working to bring together governments, companies and investors on a common agenda for inclusive growth. We propose that at Biarritz, the public and private sectors seal their engagement to support programmes that will reduce different types of inequalities – spatial, gender or in opportunities.

How is the OECD helping the G7 seize the opportunities offered by digital technology and artificial intelligence?

The OECD has been exploring the profound implications of the digital transformation through our Going Digital project. AI is one major component of a digital ecosystem that includes computing power, the Internet of Things, blockchain, 5G, big data and cloud computing. AI brings a whole new range of benefits. It helps people and organisations make better decisions. It detects patterns in enormous volumes of data and it models very complex and interdependent environments. It allows much more accurate and less expensive predictions and decisions. It promises productivity gains. We are seeing the rapid uptake of AI in finance, transport, health care, security, defence and manufacturing, and even marketing and advertising. It is a growth area for investment and business development – in 2016 alone, the amount of private equity investment in AI start-ups doubled to reach $16 billion by 2017.

However, AI also raises new challenges to ensure that AI systems are trustworthy, respecting the needs of people and society for privacy, security, safety and autonomy, fairness and quality work, as well as transparency and accountability of AI-powered outcomes. Leveraging AI also requires data, models and computing power, and the capacity to adapt organisational processes. AI can also raise ethical and diversity concerns, including the safety of autonomous systems that evolve over time, sometimes in unforeseen ways, and the dangers of transferring existing biases from the analogue world into the digital world – including those related to gender and race — notably for high-stakes decisions in areas such as criminal justice or employment.

Based on the evidence that is being developed as part of the Going Digital project, including the AI Principles, the OECD is working with the French G7 presidency to support the creation of a multi-stakeholder Group of International Experts on Artificial Intelligence to assist with and guide the responsible adoption of AI that is human-centric and grounded in human rights, inclusion, diversity, innovation and economic growth.

This year, the G7 summit is taking place after the G20’s summit in Japan in June. Has that changed the dynamic?

We have had to adapt a little, but this hasn’t fundamentally changed the outcomes or the internal dynamics of each forum. Both have complementary priorities and coordination roles in global governance.

The origins of the G7 derive from the time of the Plaza Accord, with the world’s largest economies coming together to tightly coordinate their action, given their systemic impact and weight in the global economy. This has since determined its internal dynamics. The G20 dynamic is somewhat different: it is a response to a shift in the global economy that accelerated during and after the financial crisis, with the emergence of China, Brazil, India, Indonesia and South Africa. These actors have become key players and policy coordination with them is therefore essential. But the G20 is much more heterogeneous. As such, its role is to ensure global policy consistency, mutual reinforcement and a global level playing field.

In that regard, their roles are highly synergistic. Take the issue of international taxation. Some of the main fault lines over the digital services tax are actually among G7 countries. Within this context, finding agreement at the G7 level on key parameters of the solution to challenges arising from the digitalisation of the economy can help pave the way once the G20 has also been brought on board, for a near-universal solution within the context of the Inclusive Framework on Base Erosion and Profit Shifting. This is how BEPS was set up, leaving a sequenced role to both G7 and G20.

AI is another example. The G7 is putting forward the creation of an international panel on AI that would foster cooperation on the adoption of human-centric AI. In the G20, members have agreed on non-binding principles drawn from OECD principles to guide the adoption of responsible AI. There are several other examples of constructive articulation of agendas between the G7 and G20, such as gender or marine litter.

The G7 has a logic based on the world’s largest economies coming together because of their impact and because they represent such a large percentage of global domestic product, so they need to understand the impact of each other’s policies and, ideally, coordinate them. In the G20, because the world has changed with the emergence of China as well as Brazil, India, Indonesia and South Africa, members represent a broader diversity of geography and levels of development.

It all tells you one thing: work undertaken in both forums confirms that global issues can only be addressed and dealt with by global and multilateral approaches.