OECD

What is the OECD (Organization for Economic Cooperation and Development)?

The OECD, or Organization for Economic Cooperation and Development, is an international organization that promotes policy coordination and economic freedom among developed nations. The OECD was derived from the Organization for European Economic Cooperation (OEEC) that was established in 1948 to monitor American and Canadian contributions under the Marshall Plan.

Headquartered in Paris, France, the OECD was formed in 1961 and included members from democratic states such as the United States, countries in Western Europe, Japan, Canada, Australia, and New Zealand. The organization expanded in the 1990s to include Mexico, South Korea, and Eastern European nations. In recent years, India, Brazil, China, and Indonesia also made contributions to the work agenda of the OECD.

The OECD’s Mission

The mission of the OECD is to promote policies that will improve the economic and social welfare of people in developed nations.

The OECD’s Objectives

The main purpose of the OECD is to improve the global economy and promote world trade. It provides an outlet for the governments of different countries to work together to find solutions to common problems. It includes working with democratic nations that share a commitment to improving the economy and well-being of the general population.

The OECD’s main focus is to help governments around the world achieve the following:

• Improve confidence in markets and the institutions that help them function.
• Obtain healthy public finances to achieve future sustainable economic growth.
• Achieve growth through innovation, environmentally friendly strategies, and the sustainability of developing economies.
• Provide resources for people to develop the skills they need to be productive.

The OECD’s Organizational Structure

The organization is structured in three tiers: the Council, the Secretariat, and the Committees.

1. The Council

The Council consists of ambassadors from the member nations. They exercise authority over decision-making and establishing goals for the organization. They are in charge of the strategic direction of the OECD.

2. The Secretariat

The second tier is the Secretary-General, the deputy, and the directorates. The current OECD Secretary-General is Jose Angel Gurria, a Mexican economist and diplomat. The Secretariat lists 2,500 members and includes economists, scientists, and lawyers who are in charge of the collection of data and research and analysis. The council and the Secretary-General oversee the work of the Secretariat.

3. The Committees

The third tier is the committees, which include representatives from different member nations that meet to discuss the environment, education, trade, and investment.

The OECD’s Functions

The OECD uses information on various topics to fight poverty, help governments prosper, and prevent financial instability. The organization monitors the economies of member and non-member nations, and the Secretariat collects and analyzes information on different aspects of society.

The committee discusses relevant policies to be implemented using the information, and the council makes the final decisions on the policies. The governments of the different states execute the recommended strategies.

1. Peer Reviews

There are processes where individual member countries’ performance is supervised by the other members of the OECD. This is a core function of the organization and helps them create more effective policies. It can also help governments gain support for the implementation of difficult policies in their home country. An example of a peer review is when the UK was told to keep foreign aid at a commendable 0.7% level. It was done to ensure that the extra money is spent in the most efficient way possible.

2. Standards and Recommendations

At the committee level, member countries of the OECD discuss general policies and rules for international cooperation. There are formal agreements on issues such as exports, imports, investments, and combating bribery. They also set the standards that all countries need to follow regarding the tax system and treaties, and provide recommendations on environmental practices and corporate regulations.

3. Publications

The OECD publishes articles on economic outlooks, statistics, and a general overview.

1. OECD Economic Outlook – Provides a forecast for member and non-member nations
2. OECD Factbook – Serves as a guide-book for economies that are implementing new policies
3. Going for Growth – A comparison of countries, based on national performance

The peer review, standards, and agreements, and publications help the OECD achieve economic growth for nations while also providing a base for the implementation of future policies.

Conclusion

The OECD’s overall goal is to promote economic development in member countries, and they plan to continue and improve on their mission. While they’ve faced competition from forums such as the G20 Summit and the Financial Stability Forum, they remain a powerful driver in increasing economic efficiency and improving living standards around the world.

Related Readings

CFI is the official provider of the Financial Modeling and Valuation Analyst (FMVA)® certification program, designed to transform anyone into a world-class financial analyst.

To keep learning and developing your knowledge of financial analysis, we highly recommend the additional CFI resources below:

• Gross National Product
• Gini Coefficient
• Hoover Index
• Purchasing Power Parity
• See all economics resources