New OECD Economic Outlook….

…below the fold.

But first an introduction. I’m guestblogging from Amsterdam and my site can be found here. Very much honored to post at the Fistful (I would be, they’ve got visitors), although in all honesty they might be better served by a Francophone blogger.

As it is, they are grossly misunderestimated by the French part of the blogosphere (le sphère au blog?).

… but the OECD’s new forecast it is. Released at 11.00 AM CET this morning. Important stuff, the OECD even has a webcast of the affair to show you how many photographers an OECD press conference can muster.

They do this every 6 months, and like all -smart- prognosticators they take heed not to compare the new forecast with the old one. I bring you the slightly abridged version of the 229-page report and put the November 2005 numbers in to boot.

OECD1

Growth in the US has been revised downwards a bit, news from Japan has gotten better and Europe has remained roughly at (sub)par. Now you know.

A couple of notes:

The underlying assumptions are twofold: (1) The Middle East will not explode. Oil remains steady at $70. (2) The United States will not implode. The US current account deficit will climb unhindered to 7.6% of GDP in 2007, and the housing market will not crash.

Every Economic Outlook has a special subject. In November it was the housing market (they think it is overvalued), this time it’s public healthcare (they think it costs too much). I don’t know if I’m reading the chart right, but it seems that the US now spends as much on public healthcare and long term care (as a % of GDP) as does Britain. Yes, that’s just the public bit of US healthcare.

The healthcare special was also the only part where I could find any mention of GDP per capita, and that was in a useless table citing a 2005-2025 average. No population forecasts either. I had to Google around to find population growth estimates. Do the economists at the OECD desperately want to hide the fact that they expect per capita growth of GDP to be higher in Japan than in the US?

When you assume oil remains at $70/barrel, you also assume that Norway is TEH man. In 2012 the Norge Government will have net financial liabilities worth -196% of GDP. That is so cool. They could all go on a two year sabbatical…..

7 thoughts on “New OECD Economic Outlook….

  1. >That is so cool. They could all go on a two year >sabbatical…

    Jasper, it’s been said that Norway is the only country that was able to cope with oil riches without developing serious distributional disfunctionalities. Any idea how a continuously high oil price might affect that? Or the recently allegedly slim majority in favour of EU entry?

  2. I think the advantage Norway has over the other oil-dominated economies is that it was economically and politically developed *before* oil was discovered in significant quantities, and indeed was a more egalitarian society than most developed countries. I suspect if say South Korea had found a great lake of oil in the late 60s, it would have been bad news for the average Korean in the long run. Other countries’ elites have used oil as a fast track to wealth and stability, and have thus lacked the incentive to develop a more advanced economy, whereas this is imperative for elites in resource-poor countries (assuming they’re too big to pursue the Cayman Islands approach!) Oil money also gives the elite financial independence from the masses in a way that advanced economies do not, thus hampering political reform.

    I think Norway will eventually face intense pressure to spend its big pot of gold, most likely if Norway’s economy stagnates or inequality rises to politically unacceptable levels, and whether it will spend the money wisely is anyone’s guess. But I don’t see what difference joining the EU would make per se, given Norway is already in EFTA.

  3. “No population forecasts either. I had to Google around to find population growth estimates. Do the economists at the OECD desperately want to hide the fact that they expect per capita growth of GDP to be higher in Japan than in the US?”

    I´m sorry fo asking Jasper, but what are you trying to prove here?

    That the OECD is sweeping things under the rug? That the OECD has some pro-American bias? That projections always carry with them uncertainty? That the OECD is not paying proper attention to the effects of demography?
    For that last point,the OECD has written a lot of reports on the potential effects of ageing. It´s simply a matter of looking it up, it´s all there.

    Furthermore if you can keep your GDP stable or manage to slightly increase it whilst having a decling population of course your GDP per capita increases*. It´s a sort of negative growth “bonus”. You simply spread the total wealth over less people. Even if the total GDP declines, per capita people may still get “richer” as long as the population decline is slightly higher.

    *Although there´s a debatable issue on where the potential losses of economies of scale and technological progress meet. At some point GDP per capita growth may become negative.

  4. Cap TVK wrote:

    “I´m sorry fo asking Jasper, but what are you trying to prove here?

    That the OECD is sweeping things under the rug? That the OECD has some pro-American bias? That projections always carry with them uncertainty? That the OECD is not paying proper attention to the effects of demography?

    For that last point,the OECD has written a lot of reports on the potential effects of ageing. It´s simply a matter of looking it up, it´s all there.”

    Don’t be sorry for asking.

    Yes, I do get the feeling that the economists at the OECD are a bit biased.

    I don’t think their bias is pro-American, though. I think their bias is pro-economy.The whole point of achieving economic growth is to raise the standard of living for the people inside that economy. If you forget that and focus instead on the standard of living of the economy then you’re suffering from what in Dutch is called “beroepsdeformatie”. Like the surgeon who writes: “Surgery succesful. Patient died.”

    I would not claim that the OECD are sweeping things under the rug, if only because they are under no obligation to print per capita statistics in their report, but yes, I do think that no per capita stats whatsoever in a 229-page report is a worthnoty omission. So I noted it. People want per capita growth. Is it too much to ask for a stat that shows how well an economy is doing in providing this?

    And yes, the reams and reams of paper have been printed by the OECD on the effects that changing demographics will have on economies. I have only read a tiny fraction of it but I am pretty confident that it all shows the same pro-economy bias.

    Healthy retirees enjoying their golden years while they could still work? Detrimental to economic growth. (But people want to retire early.)

    A worldwide preference for smaller families? Bad for economic growth. (But people want smaller families.)

    A shrinking population? Bad for housing construction. (But everybody will be housed.)

    Economists should study the economy so they can finetune it to suit the needs of the people living inside this economy. They seem to be studying the economy so they can promote policies that finetune the people to suit the needs of the economy.

  5. Why, a voice of sanity in a world of neoreligious madness.

    Isn’t it endearing, how we always end up “creating” a new deity with a new caste of high priests, who always happen to be more than happy to appeal to our fears with a new back-twisting dogma, trying to keep going whatever they have become?

    I think you said it quite well. Economy has become a purpose. No longer a means, but an end.

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