Today the OECD gave a presentation in Paris stating that the recovery in the major industrialized economies has come to a grinding halt. If you are not familiar with the OECD (Organisation for Economic Co-operation and Development), their main function is to promote policies that will improve the economic and social well-being of people around the world. From their website:
“The OECD provides a forum in which governments can work together to share experiences and seek solutions to common problems. We work with governments to understand what drives economic, social and environmental change. We measure productivity and global flows of trade and investment. We analyse and compare data to predict future trends. We set international standards on all sorts of things, from the safety of chemicals and nuclear power plants to the quality of cucumbers.
We look, too, at issues that directly affect the lives of ordinary people, like how much they pay in taxes and social security, and how much leisure time they can take. We compare how different countriesâ€™ school systems are readying their young people for modern life, and how different countriesâ€™ pension systems will look after their citizens in old age.
Drawing on facts and real-life experience, we recommend policies designed to make the lives of ordinary people better. We work with business, through the Business and Industry Advisory Committee to the OECD, and with labour, through the Trade Union Advisory Committee. We have active contacts as well with other civil society organisations. The common thread of our work is a shared commitment to market economies backed by democratic institutions and focused on the wellbeing of all citizens. Along the way, we also set out to make life harder for the terrorists, tax dodgers, crooked businessmen and others whose actions undermine a fair and open society.”
OECD Chief Economist Pier Carlo Padoan stated that “Growth is turning out to be much slower than we thought three months ago, and the risk of hitting patches of negative growth going forward has gone upâ€. One of the main points that the OECD brings up is consumer confidence. (which is something I have mentioned before, a happy consumer = a happy economy):
“The debate over fiscal policy in the United States, the sovereign debt crisis in some countriesÂ of the euro area and the fact that governments have fewer options to boost growth are driving both business and consumer confidence downward. The extent of bank deleveraging, due to the impact of regulatory changes, may also have been underestimated.”
“On the fiscal side, the OECD says that to rebuild confidence itÂ is essential that countries take credible steps to curtail debt. Medium-term consolidation plans, however, must be accompanied by growth-friendly structural reforms. Credible fiscal frameworks may create room for short term fiscal stimulus if needed. The governance of the euro area in economic and fiscal matters must be improved. The process of capitalisation of banks should be accelerated, and support to their short-term funding needs should be addressed.”
The OECD report confirms what I have been saying about the economy – consumers and business owners have too much fear of the future. Consumers are holding back on spending as fears of a double dip recession continue. And business owners (especially small business owners) are not hiring or investing in new equipment as not only fears of a bad economy are holding them back, but they are facing additional fears of future tax increases and new regulations.