TUAC challenges OECD to review and revise its economic thinking

The Trade Union Advisory Committee to the OECD (TUAC) is challenging OECD to reexamine its economic policies and to shift towards a new economic paradigm putting working people at the centre of policy by unambiguously supporting full employment, secure employment and social dialogue, together with industrial policy, in dealing with today’s mega challenges including climate change and economic resilience.

Trade unions believe that there is growing momentum for new economic policies with Bidenomics in the US, the ‘new form of capitalism’ being promoted by the Japanese government, and the successful labour market reforms and price controls in Spain.

A plenary meeting of national leaders of TUAC affiliated unions with Alvaro Santos Pereira, Director of Policy Studies in the OECD Economics Department heard presentations from Josh Bivens, Chief Economist at the Economic Policy Institute, in Washington; Hideyuki Shimizu, Secretary-General of the Japanese trade union confederation RENGO; and Jorge Uxó, Professor at Complutense University of Madrid on the new economic policies in the US, Japan and Spain.

TUAC considers that the OECD has made a costly mistake in prioritizing monetary policy as a means of tackling supply-driven inflation following shocks in gas, oil and wheat after Russia’s invasion of Ukraine and various supply bottlenecks from China. TUAC is not alone in fearing that the full force of higher interest rates will hit the economy hard in 2024 despite inflation having already declined close to or below target levels.

“If the OECD had taken full employment as a key economic objective alongside keeping inflation in check, it would not have recommended tackling inflation caused by supply-side shocks through monetary policy and aggressively raising interest rates” said Veronica Nilsson, General Secretary of TUAC.

Similarly, TUAC argues that climate change cannot be tackled wholly through market mechanisms and increasing energy prices via taxation. “Climate action needs public investment and industrial policy neither of which OECD is currently championing despite the example of US policy,” said Veronica Nilsson.

The OECD should draw lessons from recent Spanish labour market reforms that have reduced the number of temporary contracts and increased permanent jobs, not by reducing protection for open ended contracts but by closing loopholes which had allowed the abuse of fixed-term contracts. The OECD should also draw attention to the good example of US policy making green subsidies conditional on respect for labour rights.

‘’The OECD needs to embrace these examples of good practice, be more flexible in its approach to economic policy, and to accept that market-failures require correction. A shift in economic thinking is urgently needed’’ commented Nilsson.

“Some OECD studies are supportive of collective bargaining, and this is welcome, but this should also be reflected in OECD policy recommendations.”

For more from TUAC on this topic see

https://www.oecd-forum.org/posts/the-monetary-policy-enigma-why-it-s-time-for-a-rethink and

https://www.equaltimes.org/here-s-how-governments-can-tackle