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The OECD’s Positive Peer Pressure

SOUTH ORANGE, NEW JERSEY – If an international organization made recommendations for improving a country’s economy, and the country adopted fewer than half of them, the organization might seem like a failure. But an international organization should be judged according to the quality of the information and advice that it provides, not by whether governments listen. Indeed, measuring its success solely on the basis of compliance ignores the purpose: to encourage – and facilitate – reform by informing officials about its costs and benefits.

Every 18 months, the Organization for Economic Cooperation and Development releases an economic survey of each of its 34 member countries, including a list of previous recommendations and their implementation status. In its 2010 survey of the United States, the OECD made 29 recommendations, from rebuilding the national electricity grid to expanding health-care coverage to implementing a cap-and-trade scheme. But, according to its latest US survey, only 14 recommendations have been adopted.

This pattern is not unique to the US. According to a recent report that evaluated OECD surveillance in 24 randomly selected member countries, 52% of the OECD’s economic recommendations are adopted – a level of adoption that is consistent over time and across different types of issues.

Unlike the International Monetary Fund, which can deny member countries access to loans if its conditions are not met, the OECD is not designed to enforce its advice. While some of the OECD’s recommended reforms, such as in trade policy, directly affect other countries, most are largely domestic in focus, addressing such issues as education and health care. Without external pressure, policymakers lack incentive to undertake difficult reforms, making a high degree of reform implementation unlikely.