OECD: the story on HearLore

OECD

The Organisation for Economic Co-operation and Development began its life not as a global economic powerhouse, but as a desperate attempt to distribute American aid to a continent in ruins. In April 1948, the Organisation for European Economic Co-operation was established to manage the Marshall Plan funds that would rebuild Western Europe after World War II. The first Secretary-General, Robert Marjolin, a Frenchman, oversaw the initial distribution of resources to nations that had been devastated by years of conflict. The headquarters were set in the Château de la Muette, a stately palace in Paris that would eventually house the successor organization decades later. This early body was strictly European, limited to Western states, and its primary function was the allocation of American aid rather than the formulation of global economic policy. By 1952, when the Marshall Plan aid ended, the organization had to find a new purpose or risk obsolescence. The OEEC shifted its focus to broader economic issues, but its coordinating role was soon challenged by the 1957 Rome Treaties which established the European Economic Community and Euratom. The organization faced a critical juncture where it could either fade into history or evolve into something more significant. The decision to transform the OEEC into a global body required navigating complex political waters, including the inclusion of the United States and Canada as full members rather than mere observers. This transformation was not immediate; it required several meetings at the Hotel Majestic in Paris, some of which were described as unruly, before a resolution was finally reached to create a new entity. The goal was to devise policies that could assist less developed countries while solving European and Atlantic economic issues. The Convention on the Organisation for Economic Co-operation and Development was signed on the 14th of December 1960, and the OECD officially superseded the OEEC in September 1961. The founding members included the European founder countries of the OEEC, with the additions of the United States and Canada. Three countries, the Netherlands, Luxembourg, and Italy, ratified the OECD Convention after September 1961, but are nevertheless considered founding members. The official founding members were Austria, Belgium, Canada, Denmark, France, West Germany, Greece, Iceland, Ireland, Italy, Luxembourg, the Netherlands, Norway, Portugal, Spain, Sweden, Switzerland, Turkey, the United Kingdom, and the United States. Japan became a member in 1964, and over the following decade, Finland, Australia, and New Zealand also joined the organisation. Yugoslavia had observer status in the organisation, starting with the establishment of the OECD, until its dissolution as a country. The OECD also created agencies such as the OECD Development Centre in 1961, the International Energy Agency in 1974, and the Financial Action Task Force on Money Laundering. The aims of the OECD are stated in Article 1 of the Convention as achieving the highest sustainable economic growth and employment and a rising standard of living in Member countries, while maintaining financial stability, contributing to sound economic expansion in Member as well as non-member countries, and contributing to the expansion of world trade.

When was the Organisation for Economic Co-operation and Development officially established?

The OECD officially superseded the OEEC in September 1961 after the Convention on the Organisation for Economic Co-operation and Development was signed on the 14th of December 1960. The first Secretary-General of the OECD, Thorkil Kristensen, began his term on the 30th of September 1961.

Who are the founding members of the OECD?

The official founding members of the OECD were Austria, Belgium, Canada, Denmark, France, West Germany, Greece, Iceland, Ireland, Italy, Luxembourg, the Netherlands, Norway, Portugal, Spain, Sweden, Switzerland, Turkey, the United Kingdom, and the United States. Three countries, the Netherlands, Luxembourg, and Italy, ratified the OECD Convention after September 1961 but are nevertheless considered founding members.

What is the current global minimum corporate tax rate set by the OECD?

Finance officials from 130 countries agreed on plans for a new international taxation policy known as the global minimum corporate tax of 15% on the 1st of July 2021. All major economies agreed to pass national laws that would require corporations to pay at least 15% income tax in the countries they operate.

Who is the current Secretary-General of the OECD?

Mathias Cormann, an Australian, has served as Secretary-General of the OECD since the 1st of June 2021. He succeeded José Ángel Gurría from Mexico, who served from the 1st of June 2006 to the 31st of May 2021.

How many countries are currently members of the OECD?

There are 38 members of the OECD as of the latest reporting period. The organization has expanded significantly since its founding to include countries such as Chile, Slovenia, Israel, Estonia, Latvia, Lithuania, Colombia, Costa Rica, and others.

The Architects of Global Tax

The OECD has quietly become the world's most influential tax architect, setting the rules that govern how multinational corporations pay their dues across borders. The organisation sets the rules governing international taxation for multinationals through the OECD Transfer Pricing Guidelines for Multinational Enterprises and Tax Administrations, a Model Tax Convention and country-by-country reporting rules. The OECD publishes and updates a model tax convention that serves as a template for allocating taxation rights between countries. This model is accompanied by a set of commentaries that reflect OECD-level interpretation of the content of the model convention provisions. In general, this model allocates the primary right to tax to the country from which capital investment originates, the home or resident country, rather than the country in which the investment is made, the host or source country. As a result, it is most effective between two countries with reciprocal investment flows, such as among the OECD member countries, but can be unbalanced when one of the signatory countries is economically weaker than the other, such as between OECD and non-OECD pairings. Additionally, the OECD has published and updated the Transfer Pricing Guidelines since 1995. The Transfer Pricing Guidelines serve as a template for the profit allocation of inter-company transactions to countries. An OECD proposal to allocate multinational profits, for taxing purposes, to countries where they do business, by a formula, including to markets which multinationals sell into without a physical presence. This is hoped to eliminate the need for Digital Services Tax implemented by several countries, including France. There are exclusions and minimum thresholds, including banking and extractive industries. The proposal involves allocating only residual profit, profits above what is established through transfer pricing, thus creating a hybrid mechanism. This is essentially no change to what is currently allowed, routine profits allocated using transfer pricing plus residual profits allocated through profit split. On the 1st of July 2021, finance officials from 130 countries agreed on plans for a new international taxation policy known as the global minimum corporate tax of 15%. If a country taxes a multinational at a lower rate, the multinational's HQ will receive the difference. All the major economies agreed to pass national laws that would require corporations to pay at least 15% income tax in the countries they operate. This new policy would end the practice of locating world headquarters in small countries with very low taxation rates. Governments hope to recoup some of the lost revenue, estimated at $100 billion to $240 billion each year. The new system was promoted by the Biden Administration in the United States and the OECD. Secretary-General Mathias Cormann of the OECD said, This historic package will ensure that large multinational companies pay their fair share of tax everywhere. The OECD Guidelines for Multinational Enterprises are a set of legally non-binding guidelines attached as an annex to the OECD Declaration on International Investment and Multinational Enterprises. They are recommendations providing principles and standards for responsible business conduct for multinational corporations operating in or from countries adhering to the Declaration.

The Data Empire of Paris

The OECD has built a vast empire of data that shapes economic policy and public understanding across the globe. The OECD publishes books, reports, statistics, working papers, and reference materials. All titles and databases published since 1998 can be accessed via OECD iLibrary. The OECD Library & Archives collection dates from 1947, including records from the Committee for European Economic Co-operation and the Organisation for European Economic Co-operation, predecessors of today's OECD. External researchers can consult OECD publications and archival material on the OECD premises by appointment. The OECD releases about 600 books and over 400 papers yearly on topics spanning public policy. The publications are updated to the OECD iLibrary. Most books are published in English and French. The OECD flagship titles include The OECD Economic Outlook, published twice a year. It contains forecast and analysis of the economic situation of the OECD member countries. The OECD exceptionally published the 2020 Economic Outlook on the 10th of June 2020 to adjust economic forecasts greatly impacted by the Coronavirus since the March Interim Economic Outlook. The June Economic Outlook assesses the economic impact of COVID-19 and provides projections for economic impact if a second outbreak were to occur. The Main Economic Indicators, published monthly, contains a large selection of timely statistical indicators. The OECD Factbook is published yearly and available online, as an iPhone app, and in print. The Factbook contains more than 100 economic, environmental and social indicators, each presented with a clear definition, tables, and graphs. The Factbook mainly focuses on the statistics of its member countries and sometimes other major additional countries. It is freely accessible online and delivers all the data in Excel format via StatLinks. The OECD Communications Outlook and the OECD Internet Economy Outlook, formerly the Information Technology Outlook, rotate every year. They contain forecasts and analysis of the communications and information technology industries in OECD member countries and non-member economies. In 2007 the OECD published Human Capital: How what you know shapes your life, the first book in the OECD Insights series. This series uses OECD analysis and data to introduce important social and economic issues to non-specialist readers. Other books in the series cover sustainable development, international trade and international migration. The series was discontinued in 2017. All OECD books are available on the OECD iLibrary, the online bookshop or OECD Library & Archives. OECD Observer, an award-winning magazine, was launched in 1962. The magazine appeared six times a year until 2010, and became quarterly in 2011 with the introduction of the OECD Yearbook, launched for the 50th anniversary of the organisation. The online and mobile editions contained news, analysis, reviews, commentaries and data on global economic, social and environmental challenges and listings of the latest OECD books. An OECD Observer Crossword was introduced in Q2 2013. The OECD Observer was last issued in the fourth quarter of 2019, with a double edition looking ahead at artificial intelligence, and a cover leading on why statistical offices should hire a comedian. The OECD Observer website closed in the first quarter of 2021; the archive can be consulted at www.oecd.org. In July 2014, the OECD publicly released its main statistical databases through the OECD Data Portal, an online platform that allows visitors to create custom charts based on official OECD indicators. OECD statistics are available in several forms, as interactive charts on the OECD Data Portal, as interactive databases on iLibrary together with key comparative and country tables, as static files or dynamic database views on the OECD Statistics portal, as StatLinks in most OECD books, there is a URL that links to the underlying data. In July 2024, the OECD announced that it has transitioned to an open-access information model and that Creative Commons CC-BY-4.0 attribution licenses will be used on all data and publications. There are 15 working papers series published by the various directorates of the OECD Secretariat. They are available on iLibrary, as well as on many specialised portals. The OECD is responsible for the OECD Guidelines for the Testing of Chemicals, a continuously updated document that is a de facto standard, soft law. It published the OECD Environmental Outlook to 2030 in March 2008, which argues that tackling key environmental problems, including climate change, biodiversity loss, water scarcity, and the health impacts of pollution, is both achievable and affordable. In 2020, the inaugural University Press Redux Sustainability Award was given to OECD by the Association of Learned and Professional Society Publishers and Cambridge University Press. The award recognised the development of the SDG Pathfinder, an open-access digital discovery tool for finding content and data relating to the Sustainable Development Goals.

The Gatekeepers of Growth

The OECD has evolved into a gatekeeper of economic growth, determining which nations are deemed ready to join the club of developed economies. Following the Revolutions of 1989, the OECD began assisting countries in Central Europe, especially the Visegrád Group, to prepare market economy reforms. In 1990, the Centre for Co-operation with European Economies in Transition, now succeeded by the Centre for Cooperation with Non-Members, was established, and in 1991, the programme Partners in Transition was launched to offer a partnership to Czechoslovakia, Hungary and Poland, including a membership option for these countries. As a result of this, Poland, Hungary, the Czech Republic and Slovakia, as well as South Korea and Mexico, became members of the OECD between 1996 and 2000. East Germany joined on the 3rd of October 1990 through reunification with West Germany. In the 1990s, several European countries, now members of the European Union, expressed their willingness to join the Organisation. In 1995, Cyprus applied for membership, but according to the Cypriot government, it was vetoed by Turkey. In 1996, Estonia, Latvia, and Lithuania signed a Joint Declaration expressing willingness to become members of the OECD, and Slovenia also applied for membership that same year. In 2005, Malta applied to join the Organisation. The EU is lobbying for the admission of all EU member states. Romania reaffirmed in 2012 its intention to become a member of the Organisation through the letter addressed by Romanian Prime Minister Victor Ponta to OECD Secretary-General José Ángel Gurría. In September 2012, the government of Bulgaria confirmed it would apply for membership before the OECD Secretariat. The OECD established a working group headed by ambassador Seiichiro Noboru to work out a plan for the enlargement with non-members. The working group defined four criteria that must be fulfilled, like-mindedness, significant player, mutual benefit and global considerations. The working group's recommendations were presented at the OECD Ministerial Council Meeting on the 13th of May 2004, and on the 16th of May 2007, the OECD Ministerial Council decided to open accession discussions with Chile, Estonia, Israel, Russia, and Slovenia, and to strengthen cooperation with Brazil, China, India, Indonesia, and South Africa through a process of enhanced engagement. Chile, Slovenia, Israel, and Estonia all became members in 2010. In March 2014, the OECD halted membership talks with Russia in response to its annexation of Crimea. In 2013, the OECD decided to open membership talks with Colombia and Latvia. In 2015, the Organisation opened talks with Costa Rica and Lithuania. Latvia became a member on the 1st of July 2016, and Lithuania soon followed on the 5th of July 2018. Colombia signed the accession agreement on the 30th of May 2018 and became a member on the 28th of April 2020. On the 15th of May 2020, the OECD decided to extend a formal invitation for Costa Rica to join the OECD, which joined as a member on the 25th of May 2021. Other countries that have expressed interest in OECD membership are Argentina, Brazil, Croatia, Malaysia and Peru. In January 2022, the OECD reported that membership talks were underway with Argentina, Brazil, Bulgaria, Croatia, Peru and Romania. In March 2022, the OECD suspended the participation of Russia and Belarus due to the ongoing Russian invasion of Ukraine. OECD suspends Russia, Belarus from any participation. In June 2022, during the annual OECD Ministerial Council Meeting, the Roadmaps for the Accession to the OECD Convention for Brazil, Bulgaria, Croatia, Peru and Romania were adopted. Bulgaria, Croatia, Romania on track to join OECD. In March 2024, the Roadmaps for the Accession to the OECD were adopted with Argentina and Indonesia, and in July 2024, also with Thailand. The Free Territory of Trieste was a member of the OEEC until 1954, when it merged with Italy and ceased to exist as an independent territorial entity. In May 2007, the OECD decided to open accession negotiations with Russia. In March 2014, the OECD halted membership talks in response to Russia's role in that year's Crimean annexation and continuous human and civil rights abuses. On the 25th of February 2022, the OECD terminated the accession process with Russia after it invaded Ukraine. In March 2022, Belarus was suspended from any participation in the OECD.

The Human Cost of Policy

Behind the dry statistics and policy papers lies a human story of how the OECD's work affects the lives of billions of people. The majority of OECD members are generally regarded as developed countries, with high-income economies, and a very high Human Development Index. Their collective population is 1.38 billion people with an average life expectancy of 80 years and a median age of 40, against a global average of 30. OECD Member countries collectively comprised 62.2% of global nominal GDP, USD 49.6 trillion, and 42.8% of global GDP, Int$54.2 trillion, at purchasing power parity. The OECD is an official United Nations observer. OECD nations have strong social security systems; their average social welfare spending stood at roughly 21% of GDP. The OECD conducts multilateral surveillance as part of its economic monitoring and policy co-ordination activities among member countries. This function has developed through regular peer reviews, comparative analysis, and policy assessments carried out within the framework of the Organisation's committees and its Economics Department. The OECD's multilateral surveillance was systematically reviewed for the first time in Kumiharu Shigehara's Multilateral Surveillance: What the OECD can offer? the 1996 Global Finance Lecture, the University of Birmingham, 1996; OECD publication, Paris, 1996 at a time when Shigehara was OECD Chief Economist and Head of Economics Department, 1992, 1997; he was subsequently OECD Deputy Secretary-General, 1997, 1999. It was also discussed in Kumiharu Shigehara, Surveillance by International Institutions: Lessons from the Global Financial and Economic Crisis OECD Working Papers No.860, May 2011, co-authored with Paul Atkinson. Kumiharu Shigehara, Multilateral Surveillance: the IMF, the OECD and G20 Ligue Européenne de Coopération Économique, Paris, 2011. Kumiharu Shigehara, The Limits of Surveillance and Financial Market Failure: Lessons from the Euro-Area Crisis Palgrave Macmillan 2014. The history of OECD multilateral surveillance from the 1960s to the end of the 1990s was also described by Kumiharu Shigehara in his memoir, The Bank of Japan and the OECD: Recollections and Reflections, written in Japanese and published in December 2019. In his letter of the 5th of February 2019, Donald Johnston, OECD Secretary-General from 1996 to 2006, noted that Shigehara's book is very important for the OECD where there is little living institutional memory. The English edition of Shigehara's memoirs titled The Bank of Japan, the OECD, and Beyond was published by Palgrave Macmillan in September 2024. The OECD is known as a statistical agency, as it publishes comparable statistics on numerous subjects. In July 2014, the OECD publicly released its main statistical databases through the OECD Data Portal, an online platform that allows visitors to create custom charts based on official OECD indicators. OECD statistics are available in several forms, as interactive charts on the OECD Data Portal, as interactive databases on iLibrary together with key comparative and country tables, as static files or dynamic database views on the OECD Statistics portal, as StatLinks in most OECD books, there is a URL that links to the underlying data. In July 2024, the OECD announced that it has transitioned to an open-access information model and that Creative Commons CC-BY-4.0 attribution licenses will be used on all data and publications. There are 15 working papers series published by the various directorates of the OECD Secretariat. They are available on iLibrary, as well as on many specialised portals. The OECD is responsible for the OECD Guidelines for the Testing of Chemicals, a continuously updated document that is a de facto standard, soft law. It published the OECD Environmental Outlook to 2030 in March 2008, which argues that tackling key environmental problems, including climate change, biodiversity loss, water scarcity, and the health impacts of pollution, is both achievable and affordable. In 2020, the inaugural University Press Redux Sustainability Award was given to OECD by the Association of Learned and Professional Society Publishers and Cambridge University Press. The award recognised the development of the SDG Pathfinder, an open-access digital discovery tool for finding content and data relating to the Sustainable Development Goals.

The Secretaries of Change

The OECD has been steered by a succession of Secretaries-General who have shaped its direction and influence over the decades. The head of the OECD Secretariat and chair of the OECD Council is the Secretary-General. Secretary-General selections are made by consensus, meaning all member states must agree on a candidate. The first Secretary-General of the OEEC was Robert Marjolin, a Frenchman who served from 1948 to 1955. He was succeeded by René Sergent, also French, who served from 1955 to 1960. Thorkil Kristensen, a Dane, served as the first Secretary-General of the OECD from the 30th of September 1961 to the 30th of September 1969. Emiel van Lennep, from the Netherlands, served from the 1st of October 1969 to the 30th of September 1984. Jean-Claude Paye, a Frenchman, served from the 1st of October 1984 to the 30th of September 1994, and then again from the 30th of November 1994 to the 31st of May 1996. Donald Johnston, a Canadian, served from the 1st of June 1996 to the 31st of May 2006. José Ángel Gurría, from Mexico, served from the 1st of June 2006 to the 31st of May 2021. Mathias Cormann, an Australian, has served as Secretary-General since the 1st of June 2021. The OECD Chief Economist has also played a crucial role in shaping the organisation's economic thinking. British economist Christopher Dow served as Chief Economist of the OECD from its establishment until 1973. He was succeeded by two British economists, Frederick Atkinson, 1973, 75, and John Fay, 1975, 79. In 1980, Canadian economist Sylvia Ostry became the first woman to be appointed OECD Chief Economist, holding the position until 1983. Her successor was British economist David Henderson, 1984, 92. In 1992, Henderson was succeeded by Kumiharu Shigehara, former Chief Economist of the Bank of Japan. Shigehara was the first individual from outside the English-speaking world to be appointed OECD Chief Economist. At the time of his appointment, the Financial Times, in an article entitled Japan's Turn, the 22nd of January 1992, described him as exemplifying a new generation of Japanese figures characterised by self-confidence, strong international awareness, and a willingness to express their views openly. In 1997, following Shigehara's appointment as Deputy Secretary-General of the OECD, Ignazio Visco, former Chief Economist of the Bank of Italy, was named Chief Economist. He remained in the post until the appointment of French economist Jean-Philippe Cotis in August 2002. The OECD has a number of specialised bodies, including the Africa Partnership Forum, Blue Dot Network, Business and Industry Advisory Committee, Development Assistance Committee, OECD Development Centre, International Transport Forum, International Energy Agency, Nuclear Energy Agency, Multilateral Organisation Performance Assessment Network, Partnership for Democratic Governance, Sahel and West Africa Club, and Trade Union Advisory Committee to the OECD. The OECD operates on a two-year budget determined by member countries, with annual revenues over €900 million during the most recent reporting period, 2023, 2024. Totalling an estimated €229.9 million in 2024, assessed contributions to the Part I Budget are the largest single source of revenue for the OECD and these contributions are based on both the number of OECD members and the proportional size of their national economies. There are 38 members of the OECD. Dependent territories of member states are not members in their own right, but may have membership as part of their sovereign state. As of January 2021, the Dutch Caribbean and the British territories of Guernsey, Jersey, the Isle of Man, Gibraltar, and Bermuda included as part of the OECD memberships of the Netherlands and the U.K., respectively. Other dependent territories of OECD member states are not members of the OECD. The European Commission participates in the work of the OECD alongside the EU member states. The OECD designates Brazil, China, India, Indonesia, and South Africa as Key Partners, which participate in policy discussions in OECD bodies, and take part in regular OECD surveys. Since 2022, Argentina, Brazil, Bulgaria, Croatia, Peru, and Romania have been negotiating membership. Since 2024, Argentina and Indonesia have been negotiating membership. Since 2022, Bulgaria, Croatia, Peru, and Romania have been negotiating membership. Since 2024, Thailand has been negotiating membership. Applicants include countries that applied in 2007 and countries that have expressed interest. The OECD has a rich history of meetings and forums. Delegates from the member countries attend committee and other meetings. Former Deputy Secretary-General estimated in 1997 that the cost borne by the member countries, such as sending their officials to OECD meetings and maintaining permanent delegations, is equivalent to the cost of running the secretariat. The OECD regularly holds minister-level meetings and forums as platforms for a discussion on a broad spectrum of thematic issues relevant to the OECD charter, member countries, and non-member countries. Noteworthy meetings include the yearly Ministerial Council Meeting, with the Ministers of Economy of all member countries and the candidates for enhanced engagement among the countries. The annual OECD Forum, which brings together leaders from business, government, labour, civil society and international organisations, has been held every year since June 2000. The OECD Forum takes the form of conferences and discussions, is open to public participation and is held in conjunction with the MCM. Thematic Ministerial Meetings are held among ministers of a given domain, such as all Ministers of Labour, all Ministers of Environment, etc. The bi-annual World Forum on Statistics, Knowledge and Policies, which does not usually take place in the OECD, has the ambition to measure and foster progress in societies. The Forum for Harmful Tax Practices and the OECD Eurasia Week, which includes several high-level policy dialogue discussions to share best practices and experiences in addressing common development and economic challenges in Eurasia, are also notable meetings. The OECD's structure consists of three main elements: the OECD member countries, each represented by a delegation led by an ambassador, together they form the OECD Council. Member countries act collectively through the council and its standing committees to provide direction and guidance to the work of the organisation. The OECD substantive committees, one for each work area of the OECD, plus their various subsidiary bodies. Committee members are typically subject-matter experts from member and non-member governments. The committees oversee all the work on each theme, publications, task forces, conferences, and so on. Committee members then relay the conclusions to their capitals. The OECD Secretariat, led by the Secretary-General, provides support to standing and substantive committees. It is organised into directorates, which include about 15 directorates. The Centre for Entrepreneurship, SMEs, Regions and Cities, Centre for Tax Policy and Administration, Development Co-operation Directorate, Directorate for Education and Skills, Directorate for Employment, Labour, and Social Affairs, Directorate for Financial and Enterprise Affairs, Directorate for Science, Technology, and Innovation, Economics Department, Environment Directorate, Public Governance Directorate, Statistics Directorate, Trade and Agriculture Directorate, General Secretariat, Executive Directorate, and Public Affairs and Communication Directorate are the key directorates. OECD decisions are made through voting, which requires unanimity among all of those voting. Each member country has one vote. However, dissenting members which do not wish to block a decision but merely to signal their disapproval can abstain from voting. 22 of the OECD member countries are also EU member states.