ORGANIZATION FOR ECONOMIC CO-OPERATION AND DEVELOPMENT

The Organization for Economic Co-operation and Development (OECD) was born in 1961 as the successor to the Organization for European Economic Cooperation (OEEC), which itself was created after World War II to administer the United States' Marshall Plan funding of European recovery. OECD is related in its structure, antecedents, and goals to other post–World War II international agencies such as the International Monetary Fund and the World Bank.

Brief History

In December 1959 the presidents of the United States and France, the West German chancellor, and the British prime minister, meeting in Paris, issued a communiqué calling for the industrialized countries to cooperate to help the less-developed world and to "pursu[e] trade policies directed to the sound use of economic resources and the maintenance of harmonious international relations, thus contributing to growth and stability in the world economy and to a general improvement in the standard of living" (OECD 1961, p. 11).

The OEEC member countries agreed on several principles. First, Europe's economic recovery was complete, and the OEEC was no longer needed. Second, it had become more evident in the postwar years that "the policies of any individual country had a direct and unavoidable influence for good or bad on economic conditions in every other country" (OECD 1961, p. 9). Third, the member nations, acting together, could use the new organization as a forum for giving "a higher priority than in the past to the problems of helping the less-developed countries of the world." The convention establishing the OECD was signed on December 14, 1960, and it went into effect on September 30, 1961.

Late in 1961, the twenty member nations met for the first time in Paris. They set a joint target of 50 percent growth in gross national product for the period 1960 to 1970, in support of the thesis that the industrialized countries could support the developing world only by sustaining their own growth at the same time. And they reaffirmed their commitment to interdependence: "[I]ndependent pursuit by each country of its legitimate objectives could not only aggravate existing disequilibria in the world economy but might also prevent the attainment of its objectives" (OECD 1961, p. 21).

The U.S. Senate, which under the Constitution was called upon to "advise and consent" to the convention creating the OECD, reacted with some anxiety. To some isolationist senators and their constituents, the OECD seemed like a Trojan horse containing the elements of a new, international executive organization that would usurp Congress's legislative powers. In the February 1961 hearings of the Senate Foreign Relations Committee, chaired by Senator William Fulbright, a Democrat from Arkansas, the senators were gradually lulled by witnesses from the executive branch reassuring them that the OECD would neither supplant the United Nations nor infringe upon the powers of Congress. "[T]he impression might be left," Senator Fulbright said, "that the OECD does not do anything." No, countered the State Department witness, OECD is an "important instrumentality ... providing for the first time for an opportunity for full and free discussion ... [in an] atmosphere of complete candor."

Structure

The OECD Council, the organization's supreme governing body, includes representatives of all the members. The Council meets occasionally at a higher "ministerial" level, and more regularly holds gatherings of the permanent representatives. The Council acts through the issuing of decisions, agreements, recommendations, and resolutions. Because there must be complete unanimity for the issuance of any of these, the negative vote of any member is sufficient to veto any OECD action.

The Executive Committee, consisting of representatives of ten members, meets every week. Other entities appointed by OECD are committees on economic policy, technical cooperation, and trade. OECD's broad-ranging interests include nuclear power, immigration, capital flows, science, technology, tourism, fisheries, and education.

In January 1960 the OEEC created the Development Assistance Group. Under the newly formed OECD, this entity was renamed the Development Assistance Committee (DAC) in October 1961, and it was given a key role in OECD's efforts to aid the Third World. The original DAC members were Belgium, Canada, France, Germany, Italy, the Netherlands, Norway, Portugal, the United Kingdom, the United States, the European Economic Community organization, and Japan. DAC has never disbursed funds of its own, but acts "as a centre for the exchange of information and experience in this field" (OECD 1961, p. 22). Its members are the source of 90 percent of the total flow of private and public capital to developing nations. The DAC nations recognized that aid would be wasted unless the recipient countries were able to increase their own exports as a result. DAC and OECD therefore took on the subsidiary mission of providing "expanding markets for the products of the less developed countries and to remedy the instability of their export earnings" (OECD 1961, p. 23).

Assessment

The DAC has been highly criticized for its failures. DAC and OECD treat aid as an absolute good, without ever confronting the variety of existing definitions and implementations, let alone the political underpinnings. Most aid relationships are based on "historical circumstances or some particular interest. ... [T]he work of DAC must to a large extent be an exploration of the margins within which a joint or common policy exists or can be created" (International Organizations, p. 235).

OECD and DAC both were explicitly created lacking any legislative or executive power; their effectiveness is limited to "mutual exhortation" of the member countries. "One might well get the impression," says International Organizations dryly, "that much of its work must have been in vain" (p. 236). The overall volume of capital flow from the industrial nations to the developing ones has almost stagnated since DAC's creation.

DAC's main strength has been in the gathering and reporting of information. Its Annual Aid Review is a comprehensive collection of data and also serves as an "exercise in shame tactics, exposing behavior of those countries which give least or do so with the most demands and conditions." However, all the data is provided by the states surveyed; there is little independent collection or assessment of the data. According to critics, it is "difficult to identify individual improvements of aid policies clearly attributable to" the Annual Review (International Organizations, p. 237).

Very occasionally, specific solutions to problems are proposed at DAC meetings, but most such proposals have come to nothing, and "for the most part hopes of actual coordination have been dashed, and even the best-prepared meetings have remained exchanges of uncertain usefulness" (International Organizations, p. 238).

DAC's official view is that aid is the bounty of rich countries to Third World nations, and the self-interestedness of most aid is "never alluded to in its publications" (International Organizations, p. 239). DAC members, used to working behind the scenes without more comment or criticism than the organization's lack of authority warranted, were undoubtedly surprised to be the target of developing nations' anger at the 1964 conference of the United Nations Conference on Trade and Development (UNCTAD). Third World resentment of DAC's high-handedness led the organization to set new, possibly retaliatory, standards under which aid would be tied to the performance of the recipient.

DAC's contributions are difficult to evaluate. Its members never wanted it to be an executive agency—it is a forum only. DAC's already minimal clout has diminished as world aid policies, effected through treaties and other forums, have stabilized. "As a 'rich man's club,' it attracts suspicions of a power which it does not possess. ... Theories of the conspiratorial neo-colonialist character of Western aid are certainly not confirmed in [OECD] deliberations" (International Organizations, p. 245).

The Cold War (1945–1989), and the West's desire to counteract Soviet influence, was a major motivation for aid to developing countries from the 1950s on. The dissolution of the Soviet Union in 1989 may have made OECD's work even less significant. During the cold war, there was a struggle between "realism" and "liberalism" within DAC: Is the purpose of aid to counter the spread of Communism, or is it the developed world's humane obligation to help? DAC has never officially decided to concentrate on either the neediest countries or those that do the best job promoting democracy.

After 1989, OECD was active as a consultant to former Soviet satellites liberalizing their economic systems. An OECD delegation sent to advise Poland announced that "radical changes in attitude" among Polish workers and enterprises would be necessary for Poland's ambitious program to succeed (Greenhouse 1990).

In more recent years, OECD has again found itself on the receiving end of public anger, this time as a "fellow traveler" of globalizing forces. In October 1997 the staid and reclusive organization was astonished to be confronted by a coalition of antiglobalization activists and nongovernmental organizations, which asked it to suspend negotiations on a proposed Multilateral Agreement on Investment. OECD complied, placing a hold on talks, and France then withdrew, ending the effort entirely because of OECD's unanimity requirement.

OECD's Directorate for Science, Technology and Industry (STI) has studied and reported on ethical issues in the use of technology. In a 2001 policy brief titled "Sustainable Development: Critical Issues," the organization asked, "How can we meet today's needs without diminishing the capacity of future generations to meet their own?" It concluded that government must protect the environment and the resources available to future generations by "internaliz[ing] the costs" of bad behavior. For example, taxes on polluters, or a pollution permit trading system, align the market with the goals of sustainable development by causing the polluters to pay the actual costs of their activities, rather than making the public do so. The directorate regards this approach as more effective than a regulation-based one. STI has also done substantial work on biotechnology, including patent issues with a strong ethical component.

Another OECD crusade has been against the bribery of public officials, particularly by companies wishing to obtain international trade contracts. The organization proposed an Anti-Bribery Convention, which by December 2003 had been ratified by thirty-five nations (OECD, "Steps Taken").

OECD has also focused on the issue of decreasing the military expenditures of developing countries, in order to free resources for redeployment to sustainable development and other areas of concern. In 1997 DAC commissioned a series of case studies of military expenditures, noting that the majority of the funds borrowed by certain developing countries were for military purposes (OECD, "Final Report").

Another of DAC's significant concerns has been high population growth, which DAC links to the "vicious circle of underdevelopment [which causes] poverty, malnutrition, illiteracy and environmental degradation" (OECD, "DAC").

Conclusion

In its more than forty years of existence, OECD has kept a low profile consistent with its lack of executive power. Most references to it in research databases concern the organization's own publications or lead to the phrase "OECD countries," which is commonly used as shorthand for industrialized, aid-giving nations. OECD is entirely uncritical when it comes to the motives and modalities of international aid, avoiding the ethical questions raised in worldwide debates on modernization and globalization. The general impression given in the literature is of a publicly funded think tank busily producing valuable statistics and research reports, but with minimal impact on real-world policymaking.

JONATHAN WALLACE

BIBLIOGRAPHY

Greenhouse, Steven. (1990). "World Economic Aide Sees Trouble for Warsaw Policy." New York Times January 19.

Ohlin, Goran. (1968). "The Organization for Economic Cooperation and Development," in International Organization 22, no. 1 (Winter 1968) Cambrige: MIT Press.

Organisation for Economic Co-operation and Development (OECD). (1961). Organization for Economic Cooperation and Development. Paris: OECD Publications.

INTERNET RESOURCES

Organisation for Economic Co-operation and Development (OECD). "DAC: Development Co-operation in the 1990s." Available from http://www.oecd.org/LongAbstract/0,2546,en_2649_201185_1896179_1_1_1_1,00.html.

Organisation for Economic Co-operation and Development (OECD). "Final Report and Follow-Up to the 1997 Ottawa Symposium." Available from http://www.oecd.org/dataoecd/16/48/1886718.pdf.

Organisation for Economic Co-operation and Development (OECD). "Steps Taken and Planned Future Actions by Participating Countries to Ratify and Implement the Convention on Combating Bribery of Foreign Public Officials in International Business Transactions." Available from http://www.oecd.org/dataoecd/50/33/1827022.pdf.

Organisation for Economic Co-operation and Development (OECD). "Sustainable Development: Critical Issues." Available from http://www.oecd.org/document/55/0,2340,en_2649_34499_1890487_119696_1_1_1,00.html.