OECD, IMF and World Bank drivel

Discussion in 'Economics' started by traderob, Oct 6, 2018.

  1. traderob


    OECD, IMF and World Bank drivel condemns them to obsolescence
    International Monetary Fund managing director Christine Lagarde. The IMF completely missed the global financial crisis.

    I read a wide range of material in my job — from newspaper columns to academic journal articles, from blogs to government reports. Don’t get me wrong; I absolutely love it.

    But my life has been made slightly easier in recent years because there is a molehill of tendentious, pointless material I can now ignore. That is, apart from having to read up for this column.

    I am referring to the slanted puff pieces masquerading as serious analysis issued by international agencies, including the OECD, the International Monetary Fund and the World Bank.

    Let’s talk about the OECD, located in a beautiful part of Paris. It has a workforce of more than 2500. The very well-paid employees pay no tax and enjoy the mother of all pension schemes.

    The secretary-general is the politically correct, deeply green-tinged Mexican, Angel Gurria. He has held the position since 2006, having briefly been the Mexican finance minister. He has been reappointed three times, an unheard of arrangement but one that Australia has supported.

    A recently appointed deputy secretary-general — there are two — is from Japan. He has been a lifelong international bureaucrat.

    You may not have caught up with the fact our own Greg Medcraft is now the director of the OECD Directorate for Financial and Enterprise Affairs. Recall that Medcraft was previously chairman of the Australian Securities & Investments Commission, which has come in for heavy criticism from the banking royal commission. Medcraft was shrewd to build up various international connections while at ASIC, which enabled him to leapfrog into this Paris-based position.

    Note all these three senior positions are held by men. But when it comes to gender matters, the OECD could not possibly be more politically correct in its messaging. There is even something called the Equal Pay International Coalition of which the OECD is a member.

    There was a pledging event held during the recent UN General Assembly in New York. Evidently, global leaders from government, private sector companies, trade unions and civil society — whatever that means — pledged to “take concrete action towards closing the gender pay gap by 2030”.

    And here’s what our poster-boy, Gurria from the OECD, had to say: “Gender pay gaps are not only unfair for those who suffer them but are detrimental to our economies. If you do not have equal pay, productivity suffers, competitiveness suffers and the economy at large suffers. It is in our power to make an immediate improvement in the quality of life of hundreds of millions of women and their families if we succeed in delivering equal pay for men and women.”

    Where do you start? Gurria claims to be an economist, but none of these sentences is defensible. Economists know the gender pay gap is overwhelmingly explained by objective job and worker characteristics. The small residual that remains is largely about the wage premium attached to jobs that demand long and unpredictable hours that, in turn, are overwhelmingly held by men.

    Workers’ preferences are a large part of what drives the gender pay gap. The idea that simply lifting the pay of women will improve productivity and economic competitiveness is not just fanciful; it is downright dangerous.

    The good thing is that the nagging of the Equal Pay International Coalition will be largely ignored by most countries.

    Another area in which the OECD has completely lost the plot is in relation to climate change.

    Take this tosh introducing one of its reports: “Climate change is the result of our fossil fuel-entangled global economy. Yet powerful interests continue to resist the transition towards a low-carbon economy, even as the old economic model is dying. Now is the time to accelerate our efforts. Our response today will define our collective future for generations to come.” The only surprise is this purple prose was not set to music.

    Not even scientists believe that human-induced CO2 accounts for very much of all CO2 emissions. And since when did the staff at the OECD adopt a writing style that would be more in keeping for the blurb to promote Michael Moore’s latest leftie documentary?

    For serious economists, the OECD has become a complete joke. Even its statistical tables are not completely reliable.

    Economic growth is now shunned unless it is inclusive economic growth. And according to the good folk at the OECD, this must be “economic growth that is distributed fairly across society and creates opportunities for all”.

    What these zealots don’t seem to understand is that sequencing is the key. Only with strong and consistent economic growth will the benefits be enjoyed across the workforce and society. By attempting to distort the pattern of economic growth, the beneficiaries of these distortions will win at the expense of overall per capita economic growth. The OECD simply refuses to acknowledge that the causation runs the other way: open and competitive markets underpinned by lean and efficient governments are the best way for people to make their way out of poverty. Constraining policies to those that are “inclusive” is almost always perverse in its impact.

    Mind you, it’s not just the OECD producing this left-leaning sludge. Take this recent piece from the IMF about the Vietnamese economy and climate change. The summary states “higher global temperatures, rising sea levels and more frequent and more intense extreme weather events are taking their toll on the Vietnamese economy and its people. How the country develops innovative solutions to mitigate the impact of climate change will be the key.”

    And here’s the bit I really love: “By 2100, climate change could impact more than 12 per cent of the Vietnamese population and reduce growth by 10 per cent. The country — which has relied heavily on fossil fuels and overexploitation of natural resources — needs to further adapt its economy towards a more sustainable and eco-friendly growth model.”

    Oh please. Someone clearly just dreamt up these figures 80 years down the track to scare someone — just not me. This sort of nonsense really gives economists a very bad name.

    And let’s not forget the IMF (and OECD) completely missed the coming global financial crisis. And when the worst was over, the IMF continued to over-estimate the pace of the recovery. Note that this is core business for the IMF.

    Don’t get me on to the drivel that comes out of the World Bank, which, until recently, refused to assist developing countries to provide electricity to their citizens using reliable fossil-fuel generation. The bank had preferred “a climate smart transformation”.

    So you can see where I’m coming from and how ignoring the highly questionable and one-sided output from these international agencies, which is surprisingly thin given their enormous resources, is a definite plus for me.

    Sadly, the march through the institutions is well and truly on show in these international agencies. This should be the trigger for their abolition or defunding, given that the rationales for their existence are, by and large, no longer relevant. This particularly applies to the OECD.

    Judith Sloan is an economist and company director. She holds degrees from the University of Melbourne and the London School of Economics. She has held a number of government appointments, including Commissioner... Read more
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