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OECD challenged to forge new economic consensus

27 June 2024

The OECD is being challenged to forge a new economic consensus for the ‘new normal’ of climate crisis, geo-political tensions and supply chain bottlenecks feeding inflation, which increases prices and disrupts economic activity.

The challenge was raised at the annual TUAC-OECD liaison committee meeting and in a document submitted ahead of the meeting to senior OECD officials and country Ambassadors to the OECD.

TUAC stressed that the current model of putting monetary policy in the driving seat and fiscal policy in the back when steering the economy is no longer fit for purpose. Large global supply-side shocks, likely to become more frequent in the coming years, requires all economic policy makers to join forces to achieve common objectives.

“The age when globalisation brought low inflation and growth was moderately steady is over. New situations require new solutions. Monetary policy is not the right tool to tackle supply-side shocks like the energy and food supply problems – and subsequent inflation and cost of living crisis - caused by Russia invading Ukraine.”

— Veronica Nilsson, General Secretary, TUAC

TUAC calls on the OECD to shape a new economic policy consensus with

  • closer co-ordination of fiscal and monetary policy,
  • fiscal policy and price -cap regulation supporting monetary policy in achieving price stability,
  • monetary policy creating the space for fiscal policy to make economies shock-proof by investing in the green transition and more secure supply chains,
  • fiscal policy sustained by fairer and more progressive tax policies,
  • increased social dialogue and collective bargaining ensuring a fair distribution of the costs and benefits of change and better predictability of wage trends.

TUAC is also encouraging OECD and OECD governments to discuss industrial policy to help achieve the technological transformation needed to tackle climate change and to create more and better jobs than are lost in the transition away from fossil fuel emissions.

TUAC highlights the US Bipartisan Infrastructure Law, CHIPS and Science Act and Inflation Reduction Act as a notable example of new industrial policies being pursued by OECD countries and asks governments to share information about their industrial policies and to discuss the role of the OECD in developing industrial policy recommendations.

“The world has committed to tackling climate change, and climate action can be scaled and speeded up if governments have clear and adequate industrial policy. The OECD together with member states need to play an active role in reviving industrial policy as part of the answer to the looming existential climate crisis.”

— Veronica Nilsson, General Secretary, TUAC

For more information see ‘Rebuilding the Economy for a Better Society’, TUAC’s paper for the meeting with the OECD Liaison Committee.