The Organisation for Economic Co-operation and Development (OECD) has told world leaders at the Group of 20 (G20) gathering of financial ministers in Istanbul that future policies must make sure that economic growth comes with a fairer distribution of gains to stem a global trend towards inequality.
OECD Secretary-General Angel Gurría said during a launch event: “We understand the difficulties many governments face in pushing for reforms, in a context of weak demand, limited budgetary leeway and high unemployment. But we still see structural reforms – combined with effective fiscal and monetary policy – as part of an essential trilogy to boost growth.”
The Paris-based thinktank has been analysing the impact of pro-growth policies on inequality and it has identified a widening gap between those who do, and do not feel the benefits of economic growth.
These recommendations are part of the group's annual 'Going for Growth' report.
The OECD's chief-economist Catherine L. Mann has issued an editorial titled 'Breaking the viscous circle.'
It says that 6 years after the initial on-set of the global economic crises, both Europe and Japan face the threat of a period of economic stagnation.
Ms Mann warns that pro-growth "structural reforms" may "exacerbate income inequalities."
She adds that "vulnerable households" and young people have been hit hardest by the global recession.
The study outlines the possible entrenchment of an anti-growth economic cycle where - "weak demand undermines potential growth, the prospects of which in turn further depress demand, as both investors and consumers become risk averse and prefer to save."
Catherine L. Mann says that policy makers need to focus on policies that both foster economic growth - and spread the benefits to as many people as possible.
This would involve making workers more productive, and creating more jobs - and in-turn greater demand.
The report also recommends that public spending on infrastructure could help to encourage investment.
Ms Mann concludes: "There is a risk that the broader benefits from reforms could take more time than usual to materialise in the current [economic] environment."
Ireland
The OECD notes that Ireland’s GDP per capita has remained close to the average of the upper half of the OECD in recent years – noting that a fall in labour utilisation has been offset by a rise in labour productivity.
It also welcomes the introduction of Ireland’s new personal insolvency procedure – but adds that more can be done to help people who are looking for jobs, and to foster innovation and entrepreneurship throughout the economy.
The study says that doing so would culminate in the creation of a “more dynamic and cost-competitive home-grown business sector."
