What Is the OECD?

European in restaurant
The OECD promotes economic development in Europe. Photo: ONOKY - Fabrice LEROUGE/Getty Images

Definition: The Organization for Economic Cooperation and Development, (OECD) is an association of 35 nations in Europe, North America, and the Pacific. Its goal is to promote the economic welfare of its members, and coordinate their efforts to aid developing countries outside of its membership. Although it was originally based in Europe, it is broadening its scope to become more global. It is working to add six of the fastest growing countries in the emerging markets as members.

Statistics

The primary function of the OECD is to collect, analyze, and report on economic growth data for its member countries. This gives members the knowledge to further their prosperity and fight poverty. It also balances the impact of economic growth on the environment.

The OECD continuously 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 implement OECD recommendations.

Members have used OECD recommendations to create formal "rule of the game" agreements for international cooperation. Some examples of these agreements include prohibitions against bribery, arrangements for export credits, and the treatment of capital movements. OECD agreements have resulted in standards in bilateral tax treaties, cross-border co-operation on outlawing spam, and corporate governance guidelines.

Reports

Most people know the OECD from its statistical reports. The most widely used is the OECD Economic Outlook, which analyzes the economic prospects for the 34 members and the major non-member countries. The Outlook provides in-depth coverage of the economic policies needed for each country, as well as an overview for the total OECD area.

The report is updated twice a year to stay current with the major shifting trends.

The OECD Factbook is a 300-page reference tool (also available online and for mobile apps) of major economic, social and environmental indicators of the OECD countries, as well as those applying for membership. Statistics cover population and migration patterns, production and income, pricing, labor, energy and transportation, science, technology, the environment, education, health and public finance.

The OECD Economic Surveys are done for each member country every one to two years. It summarizes each country's main economic challenges and provides policy recommendations. For example, the OECD recommended that the best way for Greece to overcome its debt crisis was by implementing austerity measures that would make it more competitive.

The "Going for Growth" report highlights the structural reforms each country needs to make to recover from the 2008 financial crisis. It highlights the five most important changes that should be made to best enhance long-term growth.

Members

The 35 members of the OECD are basically the major countries of Europe, as well as Australia, Canada, Chile, Israel, Japan, Mexico, New Zealand, South Korea, Turkey, and the United States.

Specifically, these members are: Australia, Austria, Belgium, Canada, Chile, Czech Republic, Denmark, Estonia, Finland, France, Germany, Greece, Hungary, Iceland, Ireland, Israel, Italy, Japan, Korea, Latvia, Luxembourg, Mexico, Netherlands, New Zealand, Norway, Poland, Portugal, Slovak Republic, Slovenia, Spain, Sweden, Switzerland, Turkey, the United Kingdom and the United States. (Source: "Membership," OECD.)

The OECD is working with six other emerging market countries to become members. This process is long and complex. A country must be reviewed by up to 20 OECD Committees who make sure it conforms with OECD instruments, standards and benchmarks. It must be willing to reform its economy, if needed, to meet standards in the areas of corporate governance, anti-corruption, and environmental protection.

It might have to go as far as to amend its legislation to conform with these standards. The countries being considered for admission are: Brazil, China, India, Indonesia, Russia, and South Africa.

History

The OECD was originally called the Organisation for European Economic Cooperation, or OEEC. It was started in 1947, 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 US joined the OEEC nations to form the OECD on December 14, 1960. The OECD actually went into full force on September 30, 1961.