In the week of the World Economic Forum Rani Singh talks to Angel Gurría, head of the OECD, who has sharp words on capitalist ‘schizophrenia’ and a coded warning for Gordon
‘Because of the miners’ strike we were all asked to have only one light bulb on. My wife and I had to take baths together in order to economise on heating the water and since then we’ve always taken baths together, for 35 years,’ booms Angel Gurría in a surprising aside, recalling Ted Heath’s premiership. The 57-year-old was then an MA Economics student at Leeds University. He is now secretary-general of the Organisation for Economic Co-operation and Development (OECD).
Gurría’s brightly lit office is in a former Rothschild mansion in the 16th arrondissement of Paris. It is the eve of the annual Davos super-fest when the world’s most powerful political and economic leaders get together to mend the world and to network hard in a sleepy Swiss resort. Gurría is attending, along with the usual suspects: Condoleezza Rice, Tony Blair (holding hands no doubt with his new J.P. Morgan boss James Dimon), Hamid Karzai, Rupert Murdoch, Bill Gates, Pervez Musharraf and — of course — Bono. Gurría is addressing some pet subjects at Davos: fighting corruption, safe water, and financial risk — the last most timely in a week of crash and burn on the markets.
Angel Gurría is dynamic and charismatic in a Latin-American way, leaning in close to make a point, touching my arm frequently and making eye contact throughout the interview. He contradicts me when he wants and I have to interrupt him if his answer is too long. As finance minister to Mexico, he was nicknamed ‘Señor Scissorhands’ because he curbed spending and turned the economy around. When he was minister of foreign affairs he encouraged dialogue and ‘consensus-building’. These qualities are useful in the post he took up 18 months ago.
The OECD, set up in 1961, is still the world’s leading economic forum, with 30 members. Some non-member countries are growing much faster than member nations, says Gurría, so Brazil, China, India, Indonesia and South Africa have been invited to join an ‘enhanced engagement’ programme. But, I ask — in this week of all weeks — what gives the luminaries mentioned above, along with the presidents of the European Central Bank and the World Bank and the head of the International Monetary Fund (and — oh — mustn’t forget Emma Thompson, mentioned on the VIP list alongside the UN’s Ban Ki-moon) the right to sit and pronounce on the rest of the world when the financial system is on the brink of crisis and three billion people still live on less than two dollars a day? Fiddling while Rome burns?
Gurría gets serious. ‘If you are suggesting that we as mankind . . . we are not doing our job well enough, I would accept that. We have a lot of work to do and we should do better, we should do more, we as society, we as international institutions . . . we are dealing with the greater challenges of globalisation, it is generating in many cases an increase in the levels of inequality in societies . . . that is undesirable.’ Though many of his international counterparts will be at Davos, Alistair Darling will be ‘missing in action’, perhaps wishing to avoid questions about how his country experienced its first run on a major bank since Victorian times. Explanations will be left to Gordon Brown.
What does Angel Gurría think the future holds for Britain? He carefully sets his answer in an international context. ‘The sub-prime [crisis] has not played out completely, in May and June [ . . . it’s] going to be a big test. The problem is, you have a crisis of confidence and credit is about confidence . . . it will affect the rate of growth of the economy. You were finding ways in which you were using market creativity, market innovation to stretch the capital of financial institutions but we all found out, too late probably, that they were stretching it too far and also because it was not really arm’s length.’
The secretary-general says financial infrastructures require scrutiny. ‘So by having a construct that was not quite transparent and by the whole regulatory architecture allowing for that to happen and not having seen . . . not having pierced intensely enough through the architecture and by not having enough people ask, what if things go wrong? What happens with these assets, are they really off your books or not?’
He points to the independence and autonomy of the British regulatory authority, the FSA. ‘What you see is the excesses of a hyper competitive market. And yes I think that the regulators, although there were some warning signals, were not focusing on the issue.’
He says ‘the pricing of the risk is what went very wrong’. He acknowledges that Britain faces challenges. One of them, he says, is co-ordination between different authorities. He says that the regulators in the UK, the US and Japan were not moving as fast as the markets.
‘It’s a paradox because . . . in the end, what do you aspire to? What do you want? You demand low inflation, long periods of stability and low interest rates, which is exactly what they got! And now people are saying its because of low interest rates, and the long period of stability that we are getting this bubble. So we are a little bit schizophrenic because we are condemning the same thing we demanded and wanted!’
And that’s not all. The OECD says that ‘corruption has become an issue of major political and economic significance in recent years and the necessity to take measures against it has become evident’.
They’re not just talking about developing countries, either. In March last year the OECD’s working group on bribery expressed ‘serious concerns’ about the UK’s legislative arrangements in relation to bribery in international business deals. This was to do with the public controversy about BAE Systems plc. In this context, the working group said it would send a team of experts to review Britain’s arrangements. The group will visit Britain at the end of March to see whether things have advanced since the same time last year. At that time, as an investigation into BAE’s activities was quashed, there was speculation that the British government was effectively contravening an OECD convention banning the payment of bribes to foreign public officials in international business transactions.
This is all Gurría will say on the matter: ‘Our mission is to make the world economy work better. All of our members monitor each other’s performance. We are constantly calling on countries to do better. That’s how we work.’ But it’s clear what he means.
In the week of Davos, it is tempting to see Gurría as no more than a charming accumulator of economic information and a world-class schmoozer. But — when the fine wines and warm words are no more than a memory — his team could be causing Gordon a serious headache this spring.