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The Road To Recovery: A Conversation With Angel Gurria

Speaker: Angel Gurria, Secretary-General, Organization For Economic Cooperation And Development
Presider: Jessica P. Einhorn, Dean, Paul H. Nitze School Of Advanced International Studies, The Johns Hopkins University
June 2, 2009 Washington D.C.
Council on Foreign Relations



JESSICA EINHORN: So I'm Jessica Einhorn, and I want to welcome you all to today's Council on Foreign Relations -- good morning, Jim -- Council on Foreign Relations meeting, a conversation with Angel Gurria, secretary-general of the OECD. This meeting is part of the C. Peter McCullough series on international economics.

Before we begin, I want to ask you to turn off all your wireless devices -- really turn them off, not just put them on mute -- BlackBerrys, cell phones and, for all I know, Kindles. We need them fully turned off to avoid interference with our sound system. And let me also remind you that this is a different CFR meeting. This is a special meeting that is on the record, not off the record. So. Angel Gurria has many long-standing friends in Washington -- indeed, so many and so long-standing that I represent quite a few when I say that I was delighted to see in your bio that you were born in Tampico, Mexico in May 1950, and that means that in less than a year, finally, young Jose Angel will turn 60.

ANGEL GURRIA: One day, one day, one day. Not yet. No rush. No rush.

EINHORN: (Laughs.) Right. But his record of public service is more than three decades, from his earliest days at Nacional Financiera, which was Mexico's development bank, which was an excellent vantage point from which to learn how economics and politics intersect to meet the developing needs of a relatively poor country, then. It's that knowledge that informs his work today.

For many in the world of public finance, Angel Gurria represents the very best, the pinnacle of civil servant and technocrat, whose instinctive appreciation for politics and a natural and great gift for communication --these gifts made him the ideal champion to represent Mexico in its international negotiations, beginning with the major debt crisis of the early 1980s.

That crisis was inaugurated by an announcement that some of us remember very well by Mexico's finance minister, Silva Herzog, in 1982, telling the world that Mexico could not meet the burden of its debt service to banks in the developed world. In many ways, it was the beginning of the postwar financial crises that have brutally punctuated the halcyon years of globalization up to our own crisis today.

Angel came to age and influence by his ability to represent his country through those difficult negotiations, never losing sight of his nation's interest but also never grandstanding or politicizing the intricate financial negotiations which were required to build that bridge back to creditworthiness.

Later in his career, as you know from his bio, Angel rose to ministerial rank, first as foreign minister, which was actually a little bit of a surprise to those of us who'd known him all those years --

GURRIA: Me too, me too. (Laughter.)

EINHORN: -- but he did it with distinction, and then as finance minister.

But as I remember Angel from those days, I most recall a quiet determination and pride as his country moved deliberatively on the path of transition from a single-party, quasi-authoritarian state to a fully democratic one. The sanctity of an honest and open election was the true crowning achievement of President Zedillo and his leadership team, proven only by the string -- by the sting of defeat at the polls. That, my friends, is having the courage of your convictions.

And so who would be better placed to become secretary-general of the OECD? This charming and oh-so-affable gentleman from Mexico, who mastered all the arcana of international finance in the early decades of his career, and then became both a champion of economic reform and democracy as a national leader. I think it's not an irony, but an elegant arc of history which puts Angel Gurria in front of us, leading a ministerial meeting later this month of all the developed economies in the world to discuss the crisis and beyond.

And so it is really my personal honor to call to the podium Angel Gurria.

GURRIA: My God, Jessica! In Mexico, we have a saying that the most difficult part of being a prize fighter and a bullfighter is choosing when to retire. After that introduction, I should leave the place now! (Laughter.) Just leave you with that, you know, introduction hanging in your minds.

Thank you all for being here. It's great to see so many old friends. And thank you, Ambassador Jones, for joining us today. And thank you, for the better half of the Negropontes to be here today. And thank you for one half -- I can't say the better half -- of the Wilsons, because you have Mr. Wilson, Ambassador Wilson of Canada, who was the finance minister when all these things were happening. And so many other friends here. I really appreciate all your friendship and your support throughout the years.

Monsieur Lamb -- we were talking yesterday about some of the guidance we've had. Carla Hills -- so instrumental in terms of the relationship with my country in ups and downs, but always there, always faithful. And some of the lawyers who were on the wrong side when we were negotiating the debt -- (laughter) -- but who became friends of us. And thank you all, really, for joining us.

Let me just -- you know, we have to mention a little bit of the crisis, and then we'll mention a little bit of how we see things going on, and the OECD itself and a bit of the governance. All that in a few minutes, and then we'll take it from there for questions.

The worst crisis of our lifetimes, yes. The comparison with the '30s is quite irrelevant, I'd say, because -- well, first of all, we were never there; and second, the world was quite different. But the virulence in the way it spread -- it is just quite unique. A massive failure of regulation, massive failure of supervision, massive failure of corporate governance, massive failure of risk management. And we all have a certain degree of responsibility. The first two of these massive failures applied to mostly regulators and government. The other two applied to the industry itself, and of course, rating agencies, corporations and international organizations who were supposed to be looking at the world and making sure that nothing untoward happened, and then were not as fast on their feet as they should have been.

So, you know, it's never too late to face such responsibilities and act accordingly. We, I think, have an important opportunity to get it right this time and build what we call a stronger, cleaner and fairer world economy.

There are some good sides of the story -- not too many, though, but -- and it is this new-found capacity to act in consonance and to actually define and identify common problems, and then tackle them. And I remember being here last October when we were in the middle of the IMF and World Bank meetings. And the G-20 had not been convocated at leaders level. They were still dealing with the G-7 and the G-8 -- because, of course, the G-7 finance ministers are not G-8; it's only the leaders who are G-8: the finance ministers have not accepted the Russians, no. (Laughter.)

So they were still doing these things, you know. Well, it dawned on them that it was too big, and it was so big that it threatened the whole of the system and it had to be addressed in a different way. And then, the G-20 appeared, you know.

I remember with Paul Martin, when we created the G-20 originally, and we -- when Paul Martin became prime minister -- EINHORN: Of Canada.

GURRIA: Of Canada. Yeah, Canada. Yeah -- yes, it was Canada. (Laughter.)

When Paul Martin became prime minister, we then said, okay, now everybody goes to L-20, leaders-20. And we didn't get to first base. Nobody was interested. Nobody wanted to say anything and do anything with the L-20. The Americans didn't like it. The Japanese didn't like it.

Nobody -- just, you know, and we tried and we tried. And we wrote learned papers. We wrote a book. We wrote articles.

You know, Jim Balsillie financed us for five years, in order to lure -- there at the CIGI, at the Center for International Governance Innovation. Hopeless. But it took the crisis, you know, to get the G-20.

So it's an important reaction. Government interventions, massive central banks, massive so-called stimulus packages, unprecedented at least in the case of the United States and of China and of Japan certainly, with a patchy scene more in the case of Europe, because some started with a surplus. They could do a lot of stimulus. Some started with a huge deficit and obviously could not do so much stimulus.

The only ones who started with a big deficit and went for the big stimulus were the United States. In that sense, they've been leading the charge. And of course, it leaves some questions that we will allude to in a moment.

It's looking bad in general for 2009, regardless of -- (inaudible). It's going to be very bad. It's going to be -4 percent for the OECD, with the people who are the developing countries; 6 percent, 2008; they'll be about 2 percent, 2009.

China, 6 percent, 7 percent instead of 13, two years ago. India: half of their growth of two years ago. Overall the world economy is going to shrink by 2 to 3 percent this year. And we still have toxic assets in many of the banks. That means the banks are still not lending.

And the question is, it is not sufficient for the banks not to go bankrupt. Remember, they also have to do something else. They've got to lend for the economy to pick up. And right now we're still in the process of making sure they don't go bankrupt and that they have the stress tests and the proper capital and all that.

It's okay. We've got to go through that. But it means the work is still to be done. One thing is that now they are stress tests. This is with a French accent. Stress tests, you've got, in Italian. Now there are stress tests everywhere.

This has become now a part of the culture. In practice, every single competent regulator does stress tests all the time. Every day, they are doing stress tests. But now the question of having done stress tests and put them out in the newspapers and saying, who is needing what, et cetera, et cetera, has created a new culture.

Now there are stress tests everywhere being done. And public opinion is demanding the stress tests. So that's another important contribution, just like this package of the bad assets and the good assets and the purchase thereof, et cetera. That was another contribution.

So now the Swiss are ring fencing. And you know, the Swiss -- the British are guaranteeing, whatever. Everybody is doing it. But they're all separating. They're all doing the fundamentals, again, part of the business of letting banks come back and lend again.

Foreign direct investment flows to fall in '09, after a 20- percent drop in '08. Trade flows, international trade flows, to drop by about 13 percent, according to our numbers. You know, this is quite unique. It gives you an idea of the size of the problem.

Developing countries who are doing everything by the book mostly, who are doing everything that we told them they should be doing. Well, less international financing, sometimes no financing. Less international investment, sometimes no investment. Lower export volumes, because people over here are not buying. Lower commodity prices; whatever they're buying, they're buying at lower prices.

Less remittances and in some cases, huge domestic credit crunches, both because banks are owned by foreign banks, who are themselves credit crunching -- in Austria or in Germany or in the U.K. or in the United States -- or because the local banks -- in Africa or Latin America or Asia -- cannot be funded, are not getting funded, because of the risk aversion. And therefore they're not being able to fund their clients.

Social and human consequences: dramatic. Unemployment right now 11 million more, just in the OECD; by the end of 2010, 25 million more. In the whole of the world, 50 million more of course including the 25 of the OECD. Not counting the fact that -- in India or in Mexico or in Brazil or whatever -- a very substantial part of the workforce is informal. And you can't count the damage that is being done in that kind of environment.

If 90 percent of the workforce in India is informal, you can't count the people that become unemployed in the informality. So obviously the damage if much worse. Hundreds of millions are going hungry and are going poor or becoming poorer. That is very serious and that is very dangerous. And that is very important to take into consideration, when you're talking about the policy implications.

A major danger and perhaps inevitable consequence of the crisis: We probably will have to lower our -- what you call potential growth forward. That means, how big can economies get? How fast and how far can economies grow. There was one paradigm before the crisis. That is a lower number now, it looks. We'll have to do a lot of policy stuff in order to simply get it back to where it was today.

In unemployment terms, very probably what we call the equilibrium unemployment level -- which is the way economies talk about when you say we have to get used to a certain level of unemployment, which is a stable level of unemployment -- well, it's going to be higher than the one we had in the past. That means pressure on the social security systems, et cetera. And now we're talking just about the consequences. You know, we leave behind who is guilty and why and everything else; now we're just talking about the aftermath and what happens next.

Well, you know, everybody started to run for some solutions. Very briefly, let me tell you some of what happened at the OECD, and which I was very proud of. We at the OECD, we're 2,500 of us. I lead the secretariat. There's a council. But the pillars that hold the OECD are about 100 or 150 bodies -- they call them bodies -- and these are committees, subcommittees, task force working groups, et cetera, et cetera, which are specialized on either agriculture or taxes or budget or nanotechnology or education or health, or whatever moves, except security -- or except security in the military, as I mentioned, food security, energy security we do.

Well, I called in all the committees, and I said, "What do we do?" You know, we're supposed to come up with some goods here. You know, this is the biggest crisis." And, number one, they all had something to say. They all had something to contribute. And most of them have already been working on these issues, not just for the last three months, but for the last two years -- which is very interesting, because they were working on competition issues or investment issues, on financial markets issues, on regulatory issues and on supervisory issues, et cetera, and some of them have even written and warned that, you know, things like these could happen, et cetera.

But I was very impressed by and very proud that the OECD seemed to be, you know, through this process -- because sometimes we're perceived as a little Byzantine and a little, you know, like -- sometimes a little boring, certainly -- but it's very much alive because it's got these pillars from under, and there's got this force that comes from the fact that the best experts in the world, the people who have the problems of energy and the problems of agriculture and the problems of health and the problems of -- are the ones who are saying what we should be doing. And that gives it this vibrancy and this -- it makes it alive all the time.

And we've had that experience also with climate change, with biofuels, with a spike in the food prices and with the energy prices and with corporate governance and everything else. And it was really very exciting, and it has allowed us to make a number of deliverables, you know, in the last few months.

Now, some of the work we've undertaken of general guidance and for effective and efficient financial regulations, fighting every form of protectionism -- trade, but also investment, but also financial. I was with the prime minister of Slovakia, and suddenly we listened to the fact that Mr. Sarkozy says, "I will help Peugeot and Citroen if they get their factories out of Slovakia and the Czech Republic." Very consistent with European values, as you can imagine. (Laughter.)

Well, the prime minister said, "Could you please take a message to the Elysee?" And I said, "I'll be delighted. Honored." He said, "Would you please tell them I'm going to expropriate Electricite de France and not pay them, and that I will immediately suspend negotiations with Areva to buy a nuclear reactor?"

And I said, "Oh. Well, I will." And I would not be telling you this if the prime minister had not chosen five minutes later to stand with me in a press conference and say exactly that.

So I was very popular in France, standing by the prime minister threatening the French in the photo in Le Monde the next day.

But green. You know, green recovery, green innovation led. We're working very, very hard on that, on all the low-carbon growth. The social aspects, not only of the crisis, but the social aspects of the structural ways in which we do business even before the crisis. Social security, all the aging thing. And now, of course, the questions of the unemployment, the pressure of the Social Security issues and the numbers, et cetera.

And of course, we tend to forget the medium-term stuff because of how critical the short term is. Doha. We can't do Doha. We can't do anything. That's the low-hanging fruit. Climate change. The fight against poverty in general. You know, now even the Italians, who are the host of the G-8, are reducing their commitments to the MDGs and to -- you know, so we've been writing to them and saying, "Don't forget," you know.

And then the dark side of globalization. Tax evasion. Money laundering. Cross-border bribery. Corruption. You know, these things which globalization makes a little easier because the money can be hidden or moved around. We have made more progress in terms of, for example, tax transparency and tax information in the last three months than we had made in the 10 or 12 years before that, because of the imminence of the G-20. And so we've been working a lot on that. Two things before we go to comments or questions. One is, this world of networks -- the Internet is a network, FaceBook is a network, everything is a network except finance -- international economic institutions. They are still told: The IMF will do this, the world Bank will do that, the Financial Stability Forum will do that, in exclusivity, and the ILO will be the only one who can ever dare to talk to any worker, you know, and the WHO is the only one who can ever deal to talk to any people who need to be vaccinated.

Now, obviously, we blew it majestically. You know, we should know better. But we're doing it all over again in the same way. We're a multi-disciplinarian organization. We were born like that. We were designed like that. We grew up like that. We didn't -- you know, we're not getting on these issues because it's a flavor of the day, but we are -- we've always been working with all these organizations very well, et cetera, but we are again setting the recovery process now by tasking on a monopoly basis.

And then, of course, what if somebody blows it again? What if somebody misses the boat again? So they miss the boat for all of us, and none of us have a chance to even put in a good word and say, "Hey, you know, wait, there's another way. There's another aspect. There's another analysis. There's another number. There's another fact that you should take into consideration."

I say this because -- Angela Merkel called Bob Zoellick, Strauss- Kahn, Juan Somavia of the ILO, Pascal Lamy and myself to say say, "What do we do?"

And -- Secretary Coleman (sp), how do you do? Welcome.


GURRIA: Delighted. (Laughter.)

And I said, "Well, you know, we get along pretty well, all these five. We've known each other for 30 years. We coordinate very well. How about you, the governments? And she said, "Well, that's a little bit more difficult. We've got to come out with an announcement of what you guys are going to do." But effectively, it is true, we are not networking enough among the organizations and we're not providing each other with what I would call the additional enrichment, the additional angles of the problems, and therefore we are looking at a very unidimensional view of the problems.

Last but not least, the OECD is opening up. It is now negotiating the accession of Russia, Chile, Israel, Slovenia and Estonia. And it is in what we call enhanced engagement mode, quote- unquote, with a view to possible memberships, Brazil, China, India, South Africa, Indonesia. Why? Well, because if you don't get these --- we claim that we are the hub of globalization; you know, the hub of all things global. Obviously, you can't do that credibly if you don't have these countries with you. They don't necessarily have to be members, but you have to take them into consideration both for everything that you rake up in terms of statistic information, analysis, comparability, et cetera, but also in terms of the policy recommendations that you craft.

If you don't take them -- you know, no climate change solution without China, no trade solution without China, no nothing solution without China, for practical purposes. And no recycling solution without China, and the dollar without China. You know, what can we say to Mr. Geithner except, "Courage," you know; "Keep at it."

I will stop here, Madame, and then we'll have comments and questions and violent objections, if you so choose. (Applause.)

EINHORN: Thank you. I don't know if you want to sit here. I think they have you miked up, and they like us to get into a conversation.

So the schedule now, which is familiar to a lot of you, is I will ask just one question to get us started, and you can start to formulate your questions, hopefully one question from each. And we'll open up, and we'll end promptly at 9:30.

Angel, let's follow up a little bit on this question of the work on anti-corruption and the tax compliance. It's an issue that was of importance to you throughout the career of your life. As you said, there were decades since the U.S. passed its law, and it worked in the OECD.

What do you think actually does account for this coming together with such verve to create a consensus and move forward on the issue just now?

GURRIA: In the year 2000, there was a definition -- there was something called the Global Forum that was created. There was a definition of which were tax havens, and also the so-called Exchange of Information Standard was adopted. The G-20 adopted it. The United Nations adopted it. So it's no longer a question of the OECD members. Eighty-four jurisdictions in the world have adopted the OECD standard, which is mostly Article 26, basically saying exchange of information on request. Okay?

I have to say that until recently, even four of the OECD members had not yet accepted the standard -- Switzerland, Belgium, Austria and Luxembourg. But you had, you know -- but they had some form of exchange of information; not our exchange of information, but you had countries like Monaco or Luxembourg or -- sorry, or Liechenstein or Andorra -- who had no exchange of information of any kind. And you still had a number of other jurisdictions. And what has happened in the last three months -- in fact, in two weeks, between the 5th of March and the 2nd of April -- three weeks -- is that all the 84 jurisdictions either are now practicing or have committed to adopt the standard.

Why? Why in 10 years we couldn't make any progress, in 12 years couldn't make any, and in three weeks? Well, because there was going to be a G-20 meeting of leaders, and because before the G-20, there was going to be a meeting of finance ministers on the 14th of March in London, and because the word "sanctions" was being talked about for the first time ever for those that did not exchange information; and because the Germans in a meeting last October, which was co-hosted by the French, Mr. Steinbrueck and Mr. Virth (ph) both very, very harshly referred to the non-cooperating jurisdictions, and basically said, "We will apply sanctions," and then, more importantly, started to negotiate a law in Germany, and that continues.

Mr. Sarkozy just called in all the banks and said, "Make sure your (whole ?) jurisdictions cooperate and exchange information; otherwise, you, French banks, will no longer be allowed by the French government to work in the 2,000 branches that you now operate in these jurisdictions. Mr. Gordon Brown has just written to all the jurisdictions that are somehow historically, politically or legally related to the U.K. by saying, "By September, by the next meeting of the G-20, please comply with the standard." And Mr. Sarkozy also encouraged Monaco, and Mr. -- and Andorra.

I remember the prime minister of Monaco saying, you know, we don't want to be the last, and I said, well, hurry up -- (chuckles) -- you know, the -- and of course, because France has this special legal status there, and the president of France is a co-prince of Andorra, so that they really had a way to encourage them to move on.

The Chinese, of course, are fully compliant, but Hong Kong and Macao both have committed to apply this standard. And of course we'll be monitoring them all. But there are many who committed six or seven years ago, and though those worry me, I've just written to them, saying, hey, time's up.

EINHORN: Right. (Let's go ?).

GURRIA: So this is -- it's been dramatic movement. Now we got to make sure that they comply, that the exchange of information happens, and maybe go back to the work that we stopped doing some time ago about harmful tax practices.

It's about the level playing field, and it's about now taking advantage of this golden opportunity provided by the crisis, not to have homogenized tax systems, but at least to eliminate that dark side of the tax practices.

EINHORN: Right. Right. Okay. So now we're going to invite the audience to join the discussion.

Please wait for the microphone and speak directly into it. We ask that you state your name and your affiliation, and also please stand up and keep questions, if you could, concise, because we have a lot of speakers.

Okay. We have a lot, and I think Angel has some enthusiasm for some of them.

So let's start with Ms. Negroponte.

EINHORN: And give your name again.

QUESTIONER: Diana Negroponte, the Brookings Institution.

Secretary Gurria, what role does the OECD have to develop a standard, or various standards, for the stress tests? Because my reading suggests that different nations have different tests, some tougher than others. What role for you? EINHORN: Thank you. Will you repeat the question, Angel, for the audience?

GURRIA: What role does the OECD have in the standard? Well, our Committee on Financial Markets and our Directorate of Financial and Enterprise Affairs have been looking at what are the best ways in order to identify which are the really -- the key variables.

But as I said before, this is like when we did PISA the first time. PISA is about education, comparison, the systems. First time we came out, anybody who didn't come out number one complained and said the system is wrong, the methodology is wrong. (Soft laughter.) You didn't take into account the uniqueness of our country. (Soft laughter.)

Now, nine years later, nobody's fighting about the method. Everybody is looking at the substance of the -- and trying to catch up. And the same thing is going to happen with this.

When I alluded to the fact that the regulators are always looking at a stress test, I was the chair of all the regulatory bodies of Mexico, and I sat in many international regulatory bodies by virtue of my job as finance minister, deputy finance minister, directeur du Tresor, you know, a bunch of other responsibilities I had. And I was sitting in all the -- the Securities and Exchange Commission, the Banking Commission. Everybody was looking at the stress tests.

(And we remember ?) -- one of the tests was called Monte Carlo, I remember, which --

EINHORN: (Inaudible.)

GURRIA: -- I said why is a stress test about banks called like a roulette playing -- you know, this Monte Carlo, you know, a place where there was a casino. It was a bad name.

But anyway, the fact is that they're always doing scenarios about "what if this goes wrong."

The great thing about this time is that it was done very much in the open. There's a lot of information about it. It was negotiated. Yes, of course, everything is negotiated.

And as somebody said, what we don't -- we want to spread out solutions, not panic. If somebody's found blatantly to be short of capital, what -- you go whisper in his ear and say, hey, you know, you got like two weeks or three weeks or whatever it is, and then he will make a public statement or go out and raise some money.

But if you go before him and say they are blatantly short of capital, they will go back up the next day. So the problem is the combination between, you know, the -- these announcements and the policy. But now everybody's going to be doing the same, and now the problem is, everything's going to have to be out in the open, because people don't trust the regulators.

They don't trust the supervisor. They certainly don't trust the rating agencies.

In Madrid the other day, I'd say, "What do you think about the rating agencies downgrading the U.K., and maybe downgrading the U.S.?" They'd say, "Well, that will be their last act." (Laughter.) After that, they will close the curtains for the rating agencies, and they'll go out. You know, they haven't seen the printing presses here -- you know, this is -- those owned by the Federal Reserve.

You know, this is a -- just, you know -- so it is very, very important to create a culture not only of stress tests but also of transparency of the stress tests. And then -- because it's going to be ongoing; it stops being news -- that's when you really -- when you -- it becomes mainstream.


GURRIA: And we're going to be looking at it all the time -- you know, breathing over --

EINHORN: Thank you.

GURRIA: You know, on everybody's necks over here.

EINHORN: Yeah. All right, let's see how many hands we have all around and then get a sense of it.

Okay, yes, please. One there and one there.

GURRIA: And one boy, also, because there are five girls --

EINHORN: I didn't see a boy with his hand up.

GURRIA: Over there?

EINHORN: Well, now, I especially looked at Ambassador Jones, and he didn't have his hand up. Do you have a question?

QUESTIONER: (Off mike.)


QUESTIONER: Hi. I'm Amy Bondurant, and I was OECD ambassador in the second half of the Clinton administration, during the time that we got the tax haven work off the ground, really.

But my question is about the role of the OECD in the future. If the other international entities that are involved in the economic crisis weren't, what would be your idea of the best work that the OECD could do? In other words, if you didn't have the competition from all these other entities who have staked out what they're going to do, given the unique ability of the OECD, with its international committees of the -- made up of governments, and its resident expertise, what would you suggest the OECD -- the role that the OECD take?

GURRIA: Well, we -- we're actually not suggesting; we're doing it. It's not a question of -- and we don't really compete with the others. We've been working on how to divide the work, and I have perceived lately that some of the other institutions who are running out of a mission are creeping into the kinds of things we've been doing for 50 years. They're welcome. (Laughter.) They're welcome, because I have to be consistent with what I said a while ago --


GURRIA: -- which is that you need inputs into the things, so. So what are we doing now, for example, about investment protection? We called in the IMF, UNCTAD, the WTO and ourselves. And we're going to be reporting to the world regularly -- the G-20, but also the G-8 and whatever G-G wants it -- about investment protectionism. And we're going to be coordinating with them.

Now, we just did a seminar about the stimulus packages, and we're preparing a paper about stimulus packages -- comparative stimulus packages -- to our ministerial council meeting. And we developed a little bit of a paper -- of course, in those days, things were not so clear -- about stimulus packages to the actual G-20 meeting.

So we have very clear -- on macro, we do our working party of three. The deputy secretaries of the Treasury were all over the world, and the Economic Policy Committee, chaired by Christina Romer, of all people -- you know, the Council of Economic Advisers chair -- very, very distinguished people in the world were looking at macro, were looking at the macro options, the most important challenges of the world economy at large.

But we're looking at corporate governance, we're looking at competition, we're looking at investment issues and we're looking at exit strategies -- basically, as I said, don't do anything today that you will regret tomorrow because it looks expedient today -- but exit strategies also in the sense of saying, how are we going to have a competition policy when the governments own all the banks and all the car companies now, in this acquisitive vocation that you have developed? And -- now, I have to say, we are all for big stimulus packages, and we were all for doing, in the words of Gordon Brown, "whatever it takes" in order to keep the financial system. Going into some sectors of industry is a little bit more complicated, because, as the newspapers were saying today, where do you stop, you know? Which is the next sector? Or who do you say yes, who do you say no, winners, losers, et cetera -- all like that.

But all those structural issues -- I mean, the unemployment -- but then, unemployment, the aging, migration, the health -- implications of the aging on the health and the health care, on the pensions; the pensions -- the private pensions -- you have a very, very serious problem today with many people discovering that they actually can't retire because there won't be enough, because there was an erosion of the value of the pensions.

We are doing this -- what was exciting is when we called the troops in and said, "What are we going to do to the -- you know, for the world, for the crisis," they were already doing it.

We changed a little bit -- we gave some resources to some more because they needed some additional support, but basically it was a question of organizing the work, not inventing it, recreating, and certainly not getting onto somebody else's turf. We didn't need to do that. We were already on the issues.

And we worked very well. I mean, with Juan Somavia we're working on labor. And UNESCO starts, when we deliver our work on PISA, and we're working now on adult education; we're working on tertiary education; we're working on Babies and Bosses, so that women can actually work, rather than have to choose between working and having a family. And all these things, we just keep at it. You know, we just keep at it. And these are the things that are going to get us out of the hole after we tackle the bad assets and the good assets.

And these are the structural things: education, research and development, the universities in many of the European countries that are so controlled by the state and that don't have enough budgets, et cetera, et cetera, you know. And the health system in the United States -- yeah, with 47 million people not covered. And these are the things that are going to -- green, green, the green recovery -- well, it looked like lip service; now it's going to be unavoidable.

The climate change formula, we have been working on climate change for 20-odd years. We've been working on the environment for more than 40 years. So somebody, if they catch a fever and they say -- now, Jessica was saying, everybody's doing climate change today. Yeah, but we are not doing it today; we were doing it for 40 years. And we do it very well. And we keep up with the Joneses -- nothing personal here, you know -- (laughter) -- because it comes from the petitioners, you know.

So the good thing about your question is the answer is we are not engaging in that exercise of saying: What would you be doing were you not in competition? We're not in competition. We're just doing our own thing, and adding a few more, depending -- we added water. We're looking at some aspects of migration. We're looking at some aspects of health. Why? Because, very frankly, the United States was not very sympathetic to our work on health and on migration in the last eight years. And what happened? We had to interrupt our work oninequality -- of all things -- in the world, you know, because the United States did not like -- they cut our budget. So I had to get some voluntary contributions to continue to work on that.

Well, these are -- you know, but these are realities. You know, they don't -- it's always been there. Somebody always doesn't like what you're publishing. Berlusconi said we should shut up. They said, "Why?" He said, "Because you're saying we're going to grow minus-four." Well, you know, it was optimistic. (Laughter.)

EINHORN: Okay. So we have another, and then we have Ambassador Jones. Whom did I call on before? I just don't remember right now. Okay.

QUESTIONER: (Off mike) -- Nina Gardner, Strategy International and former OECD consultant.

GURRIA: There's a -- there's a gang here! (Laughter.)

EINHORN: It's your home away from home.

QUESTIONER: Well, no, I wanted to say that I've been sitting in with -- the Council on Foreign Relations has a whole series on global governance. And, you know, for a number of sessions, the OECD was never mentioned. And here I am, coming from Europe, where OECD is -- I won't say a household word, but people really sort of -- sort of know what they do, and respect it a great deal. And you come to the United States, and only the policy wonks have great respect, but it's not a household word, it's not particularly well known. And you're doing so much work, and you've been at it for so long. What is your strategy to make the OECD seem a little bit less Byzantine, as you said, in the United States, so you can get more appropriations and get more people to really engage with the OECD?

GURRIA: I recently asked a specialist if he thought that we had an image problem in the United States. (Laughter.)

EINHORN: He said, "No, you have no image."

GURRIA: He said, "No, you have no image, whatsoever." (Laughter.)

EINHORN: (Laughs.) Right.

GURRIA: "Nobody knows who you are, what you do." And I said, "Have they ever heard about the Marshall Plan?" And he said, "That's the last they heard about the OECD." (Laughter.)

Well, we had a very interesting -- two interesting examples.

We had to fight tooth and nail to get invited to the MEM meetings on climate change. We had published something that was not very popular about biofuel policy, not about biofuel itself but the biofuel support policies, because they're spending billions and billions of dollars on many things that we thought were not --

And they were avoiding a ton of CO2 emission at about $1,000 on average where, you know, in the EU, it costs about 35 euros or something like that. So obviously there was something wrong.

But, and then when the G-20 happened, it suddenly -- whoa, when did I get my letter of invitation? You know, we go to these G-8 meetings. We go to the leaders meetings. We go to eight or seven or however many preparatory meetings.

And then we sit together there, you know, with all the presidents and everything. And we go in the photo, you know, which makes my mother very happy. (Laughter.) But also it gives relevance that we're meeting and that, you know, we're seeking, for policy purposes.

And we're able to put in a word or two, in the meetings themselves, to create some awareness. And they say, well, it's simply that some of the non-members really don't think that you should be in the meeting. And I say, well, so what?

I mean, you know, of the 20, there are 12, you know -- there are 12 OECD members. And the three that come that are not members also are OECD, you know, Spanish and Spain and Luxembourg and the Czech Republic and the Dutch. They're all OECD.

And then there are 5 enhanced engagement countries with which we're trying to, you know, make -- so, and the Argentinians just asked to join the Development Center, you know?

EINHORN: Let me come in on this actually, because it's an interesting question, in terms of retail versus government and your own sense, as leadership of the OECD.

The question was really asking you whether you should try and be known among the populations. And I guess if you'd asked, I would have guessed that rather the OECD's way has always been as a trusted source of objective information, to governments, and as a place like the EPCand the WB3, where governments can have confidential -- not meaning, you know, anything bad but open discussions, without having it open to the public.

So do you see that differently? I mean, is OECD trying to lead -- reach citizens? Or is its clients governments?

GURRIA: I think we have a bigger problem than that, because we need to be known more by the governments, in the governments, in the different areas of governments, even before we go to the general public.

In a way, being known among the general public is not necessarily my first problem, but to be known in the Treasury, to be know in the Energy Department here. And there are some areas in the government where they not only know us very well, they work with us. And they pick our brains and they use all our capacities.

But sometimes if somebody picks up a fight with us which, you know, people do, then they suddenly, on that score, they could probably create a silo. You know, and the silo mentality will happen. And then we will not be able to do cross-border. Or we will not be invited to an MEM meeting or whatever, even though we've been contributing.

We will continue to put out work on climate change. We continue to work for the United Nations, with Mr. Yvo de Boer and Achim Steiner and the secretary-general. That will keep on going. Whether we go to the meeting or we don't go to the meeting, we'll probably still be tasked in the communique.

The problem is that the awareness about the OECD and the depth and the spread of its work, and how it can be useful, and how governments can help us, can use us more.

My favorite message to ministers and prime ministers and presidents says, use us. And not only use us to tell you our comparative study about what health and this and this are doing. Also use us for the political economy of the thing. We have been talking to unions. We have been talking to the private sector. We have been talking to specialists.

We have been talking, to universities and to the media, about official government programs, of many of our members, and telling them, I don't come to tell you what to do. I just come to tell you what everybody else is doing. And watch it, because you're falling behind. And you've got it wrong and if you don't fix it, it's going to be a big problem. And it's going to blow up in your face.

And we've already helped many of the leaders in that sense carefully, quietly on demand. You know, we don't go around, you know, doing this just spontaneously. But it's because it's a much more complicated world now. And the ones that use us, you know, some of them are really artists. They play us like a, you know --

EINHORN: Violin.

GURRIA: But some still are not aware. And that -- for example, this -- in the United States, every ministry is a world, every ministry is a universe. You know, and one of the most difficult things, in the world, is to get 8 or nine or 10 agencies around the table saying, what are we going to do about what, you know, about this or about that? For example, what are we going to do about the OECD?

That is one of the challenges. So the answer to your question is, even before you get to the general public -- even before you ask the man on the street, what is the OECD; what do they do; do you support it; do you not; do you agree that they should, you know, have more support from the United States -- to just have this in the policy community of the government or the public sector itself.

QUESTIONER: Jim Jones at Manatt Jones Global. I wanted to go back to Jessica's first question on the tax havens.

We hear from a lot, particularly Caribbean countries, who are scared to death of what the OECD is going to do, what the Obama administration is going to do. They say, we're all for transparency, giving out information, et cetera.

Could you tell me, what does the OECD plan to do? Are you going to issue a statement? Are you going to recommend legislation? Are you working with the Obama administration on giving them advice, on what they want to do?

GURRIA: It's very simple. I've got 10 pages from a particular jurisdiction, a stack like that from another. I want one paragraph. Send me one paragraph by a political authority, who is empowered to do so, which says, we will adopt the exchange of information standard, of the OECD, as represented in article 26 of the model tax convention and double taxation agreement, period. That's all I need, one sentence.

And then act accordingly of course. You know, act -- sign the agreements, the double taxation agreements, and send.

It doesn't mean we're going to splash the names of the accountholders all over The New York Times. We're not going to be sending them to the yellow pages and say, "Send me anything you got -- you know, any of the names that appear here in this catalog of names." No.

There has to be a reasonable assumption about interest, and there has -- and bank confidentiality is going to be zealously kept. In fact, it's a crime not to. It's excessive bank secrecy which is going to be abolished. And that means, on request, if you are proceeding with an investigation, that means people can continue to have, you know, financial centers.

But if there is, you know, Germany or France or the United States, and they want information about a particular name or a particular list of names, and because they presume that a -- they are hiding their money and not paying taxes, well, then, they should get the information.

And, very frankly, the reason why it changed -- I just said the mechanical reasons and the dates. But it's also because we have the biggest crisis. It's also because we have the biggest deficits in the world, and also because the politics for the people who are doing this are so difficult. How can anybody justify that they're not doing their greatest effort in order to bring every half-penny that they can locate everywhere where it is located in the form of taxes and -- or that, for example, for developing countries, that you're trying to find where the monies are from corrupt leaders or whatever, you know.

Just -- when there isn't -- you know, when even aid is ebbing because of the crisis, that put the whole thing into context. We are not going to do anything we haven't done so far. We haven't changed the criteria. We haven't changed the quality of the information. We haven't changed the components of the information. What we have are that the same recipients are processing, digesting and reacting to the same information in a completely different way.

And I can tell you something. Today we have no single one of the 84 jurisdictions that has not committed. Why? Before, they couldn't care less. There was absolutely no consequence. But how do you make 20, 30, 40 jurisdictions move at the same time, some of which we've been trying to move for decades? Simply by making sure that everybody else is moving.

When they told me in Monaco, "I don't want to be the last one," it meant they saw the herd moving, you know? They saw everybody moving in that direction, and they knew if they got focused on -- and that's the same for every jurisdiction. In the Caribbean, my greatest concern is they committed seven years ago, eight years ago, and it's not very serious. They haven't done anything in many cases. In some cases they have. The isles in the U.K. channel, for example, they've all been complying.

The question is not whether you have zero taxes, by the way. People can have as low or as high the taxes -- whatever they want. The question is, do they exchange information on request? Do they help their neighbors discharge their duties in terms of taxes or not?

EINHORN: Okay. Now, we're -- we have about five minutes left. We're going to try for two more questions, because we know that we have to end on time. Here's one -- are there any questions in this section? Because I haven't been looking over here, and I want to. All right. We'll end with your question, and -- yeah.

QUESTIONER: Bob Ehrstein (ph). Angel, if we are to avoid, in the future, the "too big to fail" problem, it will require an unprecedented level of vigor and cooperation among antitrust authorities. Is there anything the OECD can do to help us achieve that?

EINHORN: And Angel, two minutes, so we have one more question.

GURRIA: Yes. The "too big to fail" syndrome is, in fact, the failure of the corporate governance and the failure of the regulatory system, because you are captive and because then the system doesn't work. We encouraged the bigness, the consolidation.

And then in some cases it could be otherwise, because you were noncompetitive. The problem is that now you are creating even bigger unities -- units. And they are becoming not only too big to fail but even too bigger to fail, you know? (Laughter.)

So it is going to put -- and can you suddenly tell them, like the Ma Bell, you know, to divide in 10 to get to the right level so that they're at the right level of a relatively competent or relatively incompetent regulator, depending on how many supervisors they got, or whatever it got? I think more money's going to be put into the regulation. More money's going to be put into supervision.

Are we going to try to get better at it, in terms of the substance? Are we going to go through a period of more regulation rather than -- not only necessarily better? Because they're -- the politics of this thing is too heavy.

But basically, there will come a time -- now is not the time, but there will come a time -- when the stability of the system is guaranteed, when you will have to be looking hard into not Glass- Steagall again, but certainly, how do you make sure that you don'tcombine the cultures of investment banking, high risk-taking with commercial banking so that what happened does not happen again? It's not necessarily about the size; it was about the cultures.

When we lost the barriers and we allowed the two waters to merge, then we got the worst of both. We got, you know, the funding of a commercial bank and the risk of -- and the other way around, you know. And it just became the mess that we're in.

EINHORN: All right. We're going to take a last question. Let me remind everyone that we're on the record today, so -- yes, please.

QUESTIONER: (Off mike) -- and what is the road to recovery for some of developing countries that are just beginning to feel the impact of the global downturn? What are the components of the recovery for those who feel they're already in a situation of inequality?

EINHORN: A question that's perfect for our speaker, and it'll be hard to finish on time. But the question was the road to recovery for the emerging -- for the less developed countries, for the emerging markets.

GURRIA: The less-developed country has nothing to do with this crisis. The less-developed countries did not create it. It was not provoked by their omissions or their actions. But they're suffering just the same, and in fact they're suffering more, because they don't have automatic stabilizers, they don't have unemployment benefits, they don't have Social Security benefits, and they certainly do not have the capacity of having activation of -- or retraining and things like that.

So can this be done by aid? We're having enough problems just keeping the aid commitments, as we said.

Can this be done by some other way? Well, first of all, yes. Good policies in the recipient countries. But these days, sometimes it's about food.

And what is happening, just in the area of food, for example -- you know, Josette Sheeran is really a big hero of the world. You know, she's keeping Zimbabwe alive every day, day by day.

EINHORN: That's the head of the World Food Program.

GURRIA: The head of the World Food Program. She's keeping Darfur, but now she has to keep 2.4 million Pakistanis, and she has to keep I don't know how many Sri Lankans, and never -- and she doesn'thave a budget for that and there isn't -- you know, every day, you're having to find the money, and everybody is feeling stingy because charity starts at home, because you're in a crisis. And that's long before you start looking at what to do with agriculture in-depth, which is one way of recovery, in terms of seeds, in terms of fertilizers and in terms of water and in terms of technology and in terms of investment and making agriculture a business again.

And then what do you do with the development part of that, which is that we -- the FAO and ourselves, we forecast that in the next 10 years, food is going to be like 10 (percent) to 50 percent higher in real terms than it was in the last 10 years, depending on the type of grain or whatever.

And you're going to have a few billion more people in the world, and just to keep those people able to buy the same amount of food that they were buying before, they're going to have to have more revenue, and what you have is this huge, colossal crisis, which is keeping hundreds of millions poorer and tens of millions unemployed. How do you, you know, make all that -- so it is a massive problem of development, and a massive problems of the most vulnerable being hit the most, which happens with climate change, which happens with the recession, which happens with everything -- everything, something goes wrong, it's the most vulnerable, the poorest who suffer most. Even if this was, you know, the Fannie Mae and whatever (it did do ?) --

EINHORN: (Freddie ?) --

GURRIA: -- they've never heard about Fannie Mae in Africa or Latin American or in, you know, Asia. But it hit them. So that is one of the greatest concerns that we have.

As I said, I wrote to the leaders to say at least keep your aid commitments. But we got to do much better. Aid for trade commitments -- that is not just aid but making it possible for the things to reach the markets.

How about trade financing? It stopped. It used to be like bread and butter. Now we don't have trade financing, letters of credit. The Ex-Im Banks have to guarantee almost hundred percent of all the loans.

So it is a very, very -- it's going to leave us with a legacy of a -- big homework.

I was with Dominique Strauss-Kahn in Tanzania a few weeks ago in order to check things out. We're very active in Africa. At the OECD -- this may surprise you -- we produce the African Economic Outlook, for example, together with the African Development Bank, and with the U.N. Commission for Africa. We just produced the Aid Effectiveness for Africa, together with the United Nations Commission for Africa. So -- and we have the African Partnership Forum, and we have the NEPAD-OECD Program and the Middle East and North Africa Program.We're very, very active in Africa. And we see all sorts of problems coming up as a result of the crisis, so we will have to focus on those.

But this is like in the airplanes when they say, when the thing -- when you have a decompression, the first mask that comes out of the roof, you put on yourself, and then you do the child next to you, you know. When your tendency is to say, give it to the child first, you say, no, no, no. The child doesn't know what to do, you know. You put it on first, and then you help the child.

I'm not saying that these children are like -- or these countries are like children. I don't want to sound patronizing. But we will have to focus on a particular effort, in order to help restore many of the things that we have lost that we had built carefully, painfully, over the last decade. And look, many of these countries -- Africa was no longer a basket case, it was a mosaic. And in many of the progress and the success stories, we have lost a lot of ground, and we'll have to catch up.

EINHORN: Ladies and gentlemen, encyclopedic knowledge, passion for changing the world in a better way, and I tell you, it's mostly recruitment, because if anybody ever could work for a boss, it would be coming to work for you in the OECD or (arranged upon -- along ?) the policy issues.

So thank you so much, Angel. (Applause.)








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