The current crisis offers governments the opportunity of combining emergency action with the important structural reforms needed to improve long-term growth and resilience in their economies. Going for Growth identifies key reforms to raise living standards in each OECD country.
It points out that a number of policies, if carefully implemented, can both boost demand in the short term to soften the impact of the recession, and also raise economic growth over the long term. This ‘double dividend’ is achievable by pursuing policies in a number of areas.
· Introducing infrastructure projects that can be brought onstream quickly or improve the quality of existing facilities, particularly in education.
· Boosting spending on training programmes to give workers skills that will be needed as the labour market recovers.
· Cutting taxes on labour income, particularly for those with low wages, thereby boosting consumption and improving long-term job prospects.
· Reform anti-competitive regulations in product markets. Obstacles to businesses entering new markets should be reduced to stimulate the creation of new products and businesses, so increasing demand. Over the long-term stronger competition will help raise productivity and living standards.
Because crises can unmask weaknesses in existing policies, there are periods when important reforms are often initiated. But the report warns that when politicians are under pressure to act quickly, they risk implementing policies – such as import barriers in the 1930s, early retirement schemes in the ‘70s – that are ultimately bad for growth. In addition, state aid to help non-financial sectors risks delaying necessary adjustments to new economic circumstances and creating costly dependence on public support. If such measures are taken, they should be phased out quickly, the report says.
This report also has special chapters on taxation and economic growth, infrastructure investment and public policy, the stance of product market regulation, and the effect of population structure on employment and productivity.
More details are available at; http://www.oecd.org/economics/goingforgrowth