The Organization for Economic Cooperation and Development (OECD) is an association of 38 nations in Europe, the Americas, and the Pacific. Its members and key partners represent 80% of world trade and investment.
The goal of the OECD is to promote the economic welfare of its members. It also coordinates their efforts to aid developing countries outside of its membership. As a result, its programs help promote reform in more than 100 countries worldwide.
The OECD's main headquarters is located at 2, rue André Pascal, 75775 Paris Cedex 16, France. There also are offices in Berlin, Mexico City, Tokyo, and Washington, D.C.
- The OECD helps countries formulate their economic and social policies.
- OECD members and partners represent 80% of world trade.
- A member must be willing to make economic reforms in compliance with OECD standards.
The OECD was initially called the Organization for European Economic Cooperation, or OEEC. It was started in 1948, after World War II, to run the Marshall Plan to reconstruct Europe. Its goal was to help European governments recognize their economic interdependence. In this way, it was one of the roots of the European Union.
Once the Marshall Plan was complete, Canada and the United States joined the OEEC nations, which created the OECD on Dec. 14, 1960. The OECD went into full force on Sept. 30, 1961.
Most of the 38 OECD members are from Europe. They are Austria, Belgium, Czech Republic, Denmark, Estonia, Finland, France, Germany, Greece, Hungary, Iceland, Ireland, Italy, Latvia, Lithuania, Luxembourg, Netherlands, Norway, Poland, Portugal, Slovak Republic, Slovenia, Spain, Sweden, Switzerland, and the United Kingdom.
There are five countries from the Americas: Canada, Chile, Colombia, Mexico, Costa Rica, and the United States. The four Pacific members are Australia, Japan, Korea, and New Zealand. The two member countries from the Middle East are Israel and Turkey.
This process of joining the OECD is long and complicated. A nation must be reviewed by different member committees. They make sure it conforms with OECD instruments, standards, and benchmarks. It must be willing to reform its economy to meet standards in different areas, like corporate governance, anti-corruption, and environmental protection. The countries designated as key partners, but not members, are Brazil, China, India, Indonesia, and South Africa.
The OECD collects, analyzes, and reports on economic growth data for its members. This gives them the knowledge to further their prosperity and fight poverty. It also balances the impact of economic growth on the environment.
The OECD monitors economic data so it can update its projections.
Committees within the OECD analyze the data and make policy recommendations. It's up to each member country to decide how to use OECD recommendations.
Members have used OECD recommendations in many ways. They've created formal "rule of the game" agreements for international cooperation. These rules include prohibitions against bribery as well as arrangements for export credits and the treatment of capital movements.
OECD agreements have resulted in standards in bilateral tax treaties. They've also increased cross-border cooperation on outlawing spam emails. These agreements have also improved corporate governance guidelines.
Twice a year, the OECD publishes its economic outlook. The OECD Economic Outlook analyzes the economic prospects for the 38 members and major non-member countries. The Outlook provides in-depth coverage of the economic policies needed for each member, as well as an overview of the total OECD area. The report is updated twice per year to stay current with the significant shifting trends. The OECD updates the report in March of each year.
The OECD's interim report warned about the severe economic impact of the COVID-19 pandemic. It forecast a modest upturn in 2021.
Prior to the pandemic, the OECD reported on a strengthening global economy. It benefited from robust investment, an uptick in international trade, and higher employment. The OECD warned against a global trade war. If countries were to revert to mercantilism, then global trade and economic growth would weaken.
The OECD Economic Surveys are done for each member country every one to two years. They discuss each country's leading economic challenges and provide policy recommendations.
The OECD recommended austerity measures to solve the Greek debt crisis. It said the proposals would make Greece more competitive in the global economy.
The "Going for Growth" report helped members recover from the 2008 financial crisis. It highlighted the most significant changes to enhance long-term growth.
Every three years, the OECD conducts the Programme for International Student Assessment. It evaluates education systems around the world by testing the knowledge of 15-year-old students. The OECD uses the data to recommend ways to improve equity in education.
Frequently Asked Questions (FAQs)
How is the OECD funded?
Member countries fund the OECD. Members don't pay a set rate. Instead, their contributions are based on a formula that accounts for the relative size of each national economy.
Which OECD country has the highest rate of poverty?
Mexico has the highest rate of poverty among OECD member countries (43.9%). Colombia has the second-highest rate (42.5%) followed by Costa Rica (30%).