Document(s) 6 of 11

Introduction

It is not the intent of this paper to give a detailed account of how the OECD functions. Two works have been published in French, from which we have drawn heavily (Bonvin, 1998 and Chavranski 1997). In addition, the OECD web site provides details on the organization's structure. What we have tried to do here is to highlight the main characteristics that explain the fundamental nature of its functioning. As the subtitle of this chapter suggests, it is in effect an essay on the sociology of the organization's institutional culture.

Inevitably, it gives a stylized view of the organization. However, many variations of common practices coexist within the organization and in this way, OECD is rich in its diversity. Even peer reviews are conducted somewhat differently depending on the nature of the subject. Specialists such as, for example, economists and health specialists, have different scientific traditions as well as different means to reach their goals. Such differences eventually work their way into the manner by which this 'network of networks' conducts its business.

SECTION 1
FOUNDATIONS OF THE OECD'S INSTITUTIONAL CULTURE

1.1 Historical Background

At the end of the Second World War, European countries were physically and morally devastated. Two years later, in 1947, economic recovery had scarcely begun: farm output, for example, was still 25 percent below what it had been in 1939, and governments were still resorting to rationing. The generalized demoralization of Europe and the onset of the Cold War induced in most leaders the fear that "capitalism's days were numbered" (Bonvin, 1998: 6).

Major reforms were obviously called for (see Chapter 1). The protectionist measures that characterized the economic behaviour of all European states had led to drastic declines in trade and led to war. But how should the reform process be addressed? Mistrust was universal and no European government really believed that other states would implement any reforms that might be agreed, without cheating. In effect, governments were facing the 'prisoner's dilemma' (see Box 3.2).

The announcement of the Marshall Plan in June 1947 served as a veritable lifesaver: it provided an input that was rare at that time—hope (Bonvin, 1997: 7). General Marshall's idea of providing financial assistance for European recovery came with some strings attached, however. In exchange for firm, multiyear commitments on the part of donors, participants were expected to cooperate with each other. The reforms were to be introduced over a period of several years, and they would be slow in making their impact felt. The continuity of this financial and technical assistance represented an essential commitment for reassuring the Europeans.

It is important to remember that all the countries of Europe, from the Atlantic to the Urals, were invited to participate in this program. On June 27, 1947, however, at a meeting convened by France and the United Kingdom to discuss the American proposal, Stalin's representative, Vyacheslav Molotov, refused on behalf of the USSR to take any part in a cooperative approach to the economic reconstruction of Europe. Instead, he presented a list of useful imports that might be purchased with the aid of American credits (Griffith, 1997: 34). His refusal also meant that the states that were under Soviet influence would be left out as well (Bonvin, 1998: 7) with the exception of Yugoslavia, which maintained an independent stance toward Moscow and cooperated with western institutions.

What followed was a process of self-selection and taking sides. In the end, the states of Europe split into two opposing ideological camps. On one side were the future members of OECD, most of which shared to a greater or lesser extent the characteristics discussed in the preceding chapters: a democratic political system that respected human rights, and a developed industrial economy that recognized the primacy of the market (Bonvin, 1998: 7). On the other side stood the Socialist states, whose allegiance to Moscow was unquestioned. From a sociological viewpoint, they constituted two separate groups that for the next 40 years would pursue diametrically opposed policies.

The European countries participating in the Marshall Plan met under the aegis of the OEEC (Organisation for European Economic Cooperation); the two donor countries, Canada and the United States, participated as observers. The steady influx of American aid amounts in 2003 dollars amounts to some US$ 80 billion; it helped to reduce the severity of the economic crisis, to overcome shortages, and in this way to assuage political discontent. The much more modest contribution of Canada added a political dimension to this collective effort.

The Marshall Plan has too often been viewed as simply a financial mechanism: in fact, it served first and foremost to instil hope among European leaders and to stabilize the political situation. In this way, it served as a conflict prevention mechanism by helping to establish the social peace that was essential to economic progress.

With the money also came some good ideas. European states now were obliged to work together, to submit all their economic policies to critical review by their neighbours and to provide OEEC with all the information it needed (and not merely the data that they were interested in sharing—a subtle but extremely important distinction). They also undertook to liberalize their economies and to reduce barriers to trade (Bonvin, 1998: 9). A great many ideas thus emerged from the informal debates within the OEEC. Older staff members of OECD recall that it was an American delegate who, at one of the organization's meetings, suggested to the Europeans that they start by working out an agreement on a specific problem: coal and steel. Everyone knows how this modest idea has since snowballed into what is currently known as European Union.

Marshall Plan aid was provided with another important precondition: no country could receive assistance until all countries had reached a consensus on the distribution formula for sharing the American funds (Bonvin, 1998: 13). Besides effectively resolving the perennial problem of aid allocation, this approach marked the first application of the consensus method. Thus the effort to reach consensus and the system of peer reviews were to become two of the pillars of the OECD approach.

In 1959, after activities had ceased under the Marshall Plan, Europe was well on its way to economic recovery and the six-nation European Community was up and running. It was time, perhaps, to do away with OEEC. On the other hand, tensions were appearing within NATO, sparked in particular by France's threat to withdraw its Mediterranean fleet from the NATO high command. Moscow chose this moment to launch an 'economic offensive' in the developing countries. Suddenly, it seemed urgent to do something spectacular, not only to coordinate the efforts of Western countries on behalf of the developing countries, but also to deal with the many commercial disputes that were emerging between Europe and North America.

The idea of transforming and expanding OEEC seemed attractive, but what was to be done with the many decisions by which the European states were by then bound? Would they apply to the new members? Some Europeans saw this as a splendid opportunity to revisit decisions that they found difficult to implement. After hot debate about whether the new organization, OECD, would adopt the commitments taken within OEEC, a compromise was found whereby all acts of OEEC were to be subject to a unanimous vote by members of OECD (Griffith, 1997: 247).

Thus it was that in 1961 the members of OEEC, plus Canada and the United States, undertook to prolong the efforts launched with the Marshall Plan, but this time in order to, "lay the basis for economic relations between the new Europe and the two North American powers that had emerged unscathed from the war. It was crucial, in the end, to establish principles for cooperation and solidarity with the outside world.... Prosperity posed its own problems" (Chavranski, 1997: 8).

It was only after a convoluted process that the legal personality, the conventions adopted within OEEC and the institutional culture of that organization, born in the aftermath of war, were transmitted to OECD and forged the organization that we know today.

Reliance on peer pressure and consensus, and on a coherent set of operational characteristics, then, is explained by the historical and cultural context of the nations of Western Europe that set out to build this organization in association with their two North American partners. There is a degree of cultural homogeneity between these states, based on a shared historical past.

1.2 OECD's Basic Rules of Conduct or the Values of the Institution

From the outset, it is important to emphasize the pragmatic character of the OECD negotiation process. The OECD approach to negotiations is designed to lead to an agreement upon policies or policy options and structures that may be implemented by all member countries, since they arise from a consensus-building process. In essence, the OECD process produces outcomes that are seen—by member countries—to be reasonable and acceptable. These policy outputs are generally considered relevant and timely, and can be readily adapted to the specific needs of the concerned member countries. The possibility of adapting policies adopted through consensus is the essence of the very subtle OECD process. If a country adapts a policy in a manner that seems contrary to the spirit of the common policy, the perceived misadaptation will give rise to discussions at the occasion of Peer Review. The process can only be described as intensively iterative; for some it sounds slow and tedious, but it should be argued that it results in resilient and sustainable agreements in the end.

Over the years, OECD members have enlarged the subjects of their analyses. In many cases their concern for reducing trade barriers and creating a level playing field for business transactions has been expanded to include sharing knowledge about 'promising or best practices' on matters that do not involve mutual competition. This is the case for studies on health or education, for example. In such cases the pursuit of consensus and the negotiation process is less critical; sharing 'intelligence' on these matters becomes the real essence of their cooperation.

The success of OECD rests on a 'blueprint' for international and regional cooperation consisting of three elements:

• Espousal of a supra-national policy regime based on respect for human rights, democratic government, and the market economy (see Chapter 2);
  
  
• Respecting certain basic rules of conduct (discussed in this chapter);
  
  
• Application of certain unique techniques and skills for making and negotiating collective choices (see Chapter 4 and Appendix 1).

The rules for OECD meetings and procedures include agreement on an agenda for achieving practical and defined outcomes. It has a practical, operational mission, which is expected to lead to tangible objectives and to real, demonstrable progress. Its primary product is agreed policy options based on common analysis, but of course allowing for a variety of coherent and consistent responses based on differing national situations. In many instances these will evolve into agreed policies among its members, that will become national policies enforced through subtle yet unequivocal peer pressure methods.

From the beginning, it is probably the position of strength from which the major victorious powers (Canada, the United Kingdom, and the United States) started that explains the predominantly Anglo-Saxon character of the organization. If we observe the functioning of OECD, we find the traits of a juridical system based on jurisprudence or case law, one that evolves by comparison of precedents, by flexible interpretation rather than literal application of statutes and regulations. OECD is thus full of exceptions, gentlemen's agreements, and unwritten conventions that are constantly evolving. In this respect, it follows in the tradition of English law. In its early days, the organization was nicknamed "Whitehall-sur-Seine"! Since then, this original dominant culture has undergone considerable evolution. The success of the organization rests on finding compromises and adaptations to local circumstances. This adaptive characteristic is reflected not only in its overall process, but also in its organizational arrangements and collective behaviour.

We also find the use of recognized scientific methods, in particular the concern to base solutions on research and on objective analysis of the relevant facts. The peer review method comes close to the peer evaluation tradition that is commonly used in scientific research and publishing.

The OECD approach is in fact the product of a mixture of political pragmatism and the search for empirically demonstrated solutions. Countries participating in the organization have gradually become accustomed to seeing their actions dissected by the Secretariat in the presence of their peers. They have gradually come to understand and to appreciate the need for harmonizing their national accounts, and for ensuring that all economic data and analyses are made public and therefore available not only to competing states but, more daring yet, to domestic critics and opposition parties. This has given rise to a degree of steadily expanded transparency across many sectors that were unusual even within democracies. Members have learned as well to appreciate the indirect influence that democratic practices such as peer review can have on improving individual as well as collective welfare.

Using Game Theory to Better Understand

Moving down the road mapped out by OECD required 'the willing suspension of disbelief.' The theory of games offers some especially useful metaphors for understanding the 'OECD mystery.' The 'prisoner's dilemma' is a classic metaphor in literature of this kind. It helps us to understand the problems facing European states at the end of the war. The second metaphor, less well known, allows us to intellectualize the approach that was adopted for dismantling the trap from which the Europeans seemed unable to escape. The habits induced by the Marshall Plan ran counter to 'received ideas' of the time—because of this, it represented a bold and innovative wager. The metaphor of the 'rational pigs' demonstrates this mechanism.

The 'prisoners' dilemma' is a representation for many diverse business and economic interactions. For example: Two nations trading with each other are driven by rational, national-interest calculations to erect trade barriers when both would be better off if they were eliminated. The rational pig game or metaphor arises in less trivial circumstances. Consider, for example, how, in a sense, General Marshall pressed the lever in 1947 and allowed a flow of resources to 'feed' the European economy. The intent was as generous and enlightened as it was selfish: in the end, the calculation paid off for the benefit of American exports to Europe and for European recovery.

1.3 OECD Structure and Functions

OECD's mandate calls for the organization to promote and coordinate policies aimed at achieving the highest sustainable economic growth and employment for member countries and the world, as well as policies to stimulate the expansion of world trade on a multilateral, non-discriminatory basis. The 30 member countries of OECD include all the advanced industrial countries.

OECD functions through its governing body, the Council, chaired by the Secretary General, and its network of about 120 Committees and Working Groups, which are issue-related. One deals, for example, with maritime transport, another focuses on competition law and policy, while another was formed to deal with scientific and technological policy. The OECD Secretariat carries out work mandated by the Council and the Committees. The Council approves decisions and recommendations. Generally, decisions of Council require unanimity (consensus). An Executive Committee, chaired by one of the ambassadors to the OECD, provides day-to-day supervision of OECD activities. The Secretary General is responsible for managing the implementation of Council and Executive Committee decisions. Agreed policies are then implemented through the domestic policy apparatus of each individual member country. Overall compliance with these agreements is reviewed and discussed within each Committee. Peer pressure from other member governments provides powerful inducements for implementation of OECD recommendations leading to harmonization.

Representatives from government departments of member countries responsible for the work area designated for the committee attend meetings and, along with specialists from the Secretariat, monitor developments, advance policy ideas, deal with specific problems shared by member countries, and establish standards for the reporting of information and guidelines for carrying out policy. They make recommendations for Council decisions and encourage member countries to harmonize their policies.

As was noted previously, OECD is neither a funding agency nor a program delivery agency. The key to OECD's role in promoting international economic cooperation lies in its continuous review of economic policies and trends in member countries. Draft reports on each member country's economic policies and performance are prepared by the Secretariat for vetting and discussion with its government before being addressed at the Economic Development and Review Committee. At that level, the concerned country is expected to respond to questions prepared by the Secretariat and other members. These review procedures usually lead to frank and open exchanges, often resulting in recommendations for policy changes. OECD also conducts studies of its own intended to enhance the design and to improve the coordination of policies for the management of economic growth, trade expansion, and development cooperation.

One of the principal working committees of OECD is its Economic and Development Review Committee, which examines and monitors economic trends and policies in individual member countries. The Committee thus plays a leading part in the process of multilateral surveillance of economic policies within OECD. Subsequent to each examination, the Committee's country survey and policy conclusions are published. In practice, the economic surveys (and the biannual reviews of the OECD grouping) also present economic forecasts for the year/eighteen months ahead.

Another committee, the Economic Policy Committee, is responsible for the review and surveillance of macroeconomic and structural issues common to member countries, or arising from interactions of national economic trends and policies. Its members are senior officials from economics or finance ministries and/or central banks of member countries.

The Secretariat, with about 1200 staff members, gathers statistical and policy information from member country governments. They process the data, do analyses, forecasts, manage policy reviews, organize meetings, provide translation services, prepare directories and other reference materials, monitor agreements reached by member countries, and publish much of the analyses, forecasts, and statistical information. Member country governments fund the work of the OECD Secretariat. National contributions to OECD's annual budget are determined by the size of each member's economy.

OECD has established mechanisms to help address the challenges of enforcing its international policy regime in the absence of more formal institutionalized systems of global governance. These mechanisms function within the consensus arrangements of OECD, and are managed through OECD itself, mostly without permanent staffing or administrative systems of their own. For example, the mechanism put in place to deal with delinquent borrowers of official loans was the so-called "Paris Club," an ad hoc arrangement of the OECD; this committee is now autonomous. Another mechanism for addressing unfair trade subsidies is the OECD 'consensus arrangement'; here again the consensus is outside of OECD but is related to a committee dealing with export credits. The Development Assistance Committee (DAC) deals with matters concerning aid policy and criteria. This approach to policy enforcement enables OECD to achieve a fair measure of coherence and consistency (if not participatory universality) in the making and application of the international policy regime that governs 'Western' state behaviour in these domains.

1.4 Economics Department

Some of the salient achievements of OECD are exemplified by the work of its Economics Department. The department addresses issues of both a macroeconomic and a structural character, and the interaction between structural and macroeconomic policies and developments. What is unique about its contribution to OECD is the overall economy-wide perspective it brings to every policy issue. Most of the Department's work is eventually published, but its first and primary use is by member governments as represented in a range of committees and working parties. Of particular significance is the Economics Department's input into the work of the Economic Development and Review Committee and the Economic Policy Committee, among others. Here, the department's analysis forms the basis for a process of multilateral monitoring and surveillance.

The department's macroeconomic work is based on continual monitoring of events in member countries, including regular projections of short- and medium-term economic developments. Interactions among individual country policies and developments are of particular concern. The department's focus on structural issues has evolved over time. Currently, its analytical efforts are concentrated on policies affecting, inter alia, labour, regulatory reform, corporate governance, income distribution and poverty, and sustainable development and climate change, as well as policies dealing with ageing populations.

In one way or another, the work of this department contributes to policy discussion in committees and working parties and, ultimately, in national capitals. Indeed, many of the participants in committee meetings come for the occasion from national capitals. Committee discussions deal with both the analysis of particular issues or policy areas between countries, and with the country-by-country review of a broad field of policy settings. In typical committee practice, issues are first discussed in a country-by-country setting, with the aim of setting general policy orientations. Then general orientations are considered in the context of individual countries, taking their particularities into account. Finally, once a number of countries have been analyzed and discussed, the lessons learned from country-specific analyses are pulled together and discussed in a multi-country setting. The results of this process can also have an impact on the overall agenda of OECD.

The primary purpose of OECD committee discussions is to help individual governments arrive at decisions appropriate to their own and other countries' conditions. These discussions therefore remain largely confidential. However, four series of publications are produced regularly to communicate conclusions of OECD to a wider audience: various annual reports, 22 journals and magazines, studies, and conference proceedings. OECD now offers over 3500 paperback and 700 electronic publications.

In a distinctively subtle but nevertheless meaningful way, OECD has been at the centre of an iterative and often far-reaching policy discourse. The activities of OECD and its efforts at fostering transparency have helped invigorate the domestic policy discourse on economic and social issues in member countries, contributing to the emergence of an active and articulate civil society. OECD plays a vital role in facilitating the sharing of knowledge and lessons learned and in the formulation of common standards. Furthermore, OECD has provided valuable mechanisms for ensuring overall governance transparency, for rigour in national accounts, for sharing experience in defining many basic governance policies, and for tracking both the implementation of agreed policies and their ongoing adaptation to changing circumstances. Interestingly, OECD is itself at both the sending and receiving ends of this policy discourse. In essence, the OECD annual Peer Reviews in as many as fifteen major sectors, have made data, statistics, and analysis of each country's performance progressively available to civil society, thus reinforcing the abilities of citizens and citizens' groups to voice their views and to influence government policies. In turn, these citizen's groups have demanded more information, analysis, and transparency from their government, thus inciting OECD to probe further into many issues and complex problems.

By virtue of this information-sharing function, OECD has helped inspire increased confidence, connectivity, networks, and standards among its member countries. As a result, public sector initiatives and economic enterprises have become increasingly more efficient at doing what they do best. Moreover, international trade among OECD countries has expanded exponentially, generating employment and wealth among the countries, as well as inducing growth in many developing countries through massive transfers of technology and investments.

As Joseph E. Stiglitz aptly demonstrated, classical economy rests on the premise that information essential to making good economic decisions is more or less equally shared by all actors, and therefore, the market is functioning well; and the 'invisible hand' can play its role. But reality is different: In many cases, information is private and too costly to acquire, thus leading to 'asymmetries of information' between economic actors. This gives rise to a variety of distortions, creating challenges for policymakers who rely only on classical paradigms to guide their action.

Supply, or demand-side economics and many other fads born in classical economic schools, have marked the policies of OECD member's governments over the last forty years. This pendulum-like discourse has also influenced all aid-giving institutions, be they bilateral or multilateral. They more or less echoed the prevalent policy of the day into their programs and most importantly into their 'prescriptions' to aid recipients, generally referred to as 'conditionality'; this elegant euphemism means that aid will be granted if the beneficiary agrees to do certain prescribed things. The beneficiary is, of course, free to refuse the aid thus extended.

Close observation of what happened in reality in the field raised doubt about the wisdom of applying any of those prescriptions. Some development specialists, and I joined their ranks in the early 1980s, noticed that information essential to take good decisions is often so scarce, so distorted or so missing in the essential, that even good prescriptions have little chance of succeeding. For instance, in the early 1980s, at the instigation of World Bank analysts, some countries attempted to move away from state control currency valuation (always distorted, of course) by auctioning daily foreign currency. This seemed a fair and transparent way of handling the problem, however, it soon became obvious that this created bias in favour of rich, well-informed business and weakened even more essential social activities. For instance, hospitals trying to import necessary drugs were seldom capable of winning any bids against commercial activities. "Bidding where there is known to be asymmetries of information will be markedly different from that where such asymmetry does not exist. Those who are uniformed will presume that they will win only if they bid too much ..." (Wilson, 1977: 511-518, in Stiglitz, 2001: 489).

Another example of the way information accrual, policy formulation and economic growth occurs comes from some of the OECD's Sahel Club research carried out when I headed the Club. From 1986 onward, the Club and its Sahelian partner, CILSS, produced ever increasingly precise yearly cereal crop estimates. This was deemed essential to help define food aid requirements. Gradually this new information flow revealed two important policy distortions. In 1989, it soon became obvious that Sahelian Governments as well as donors overestimated food deficit, thus providing greater quantities of food aid. This lead to artificially deflated prices which acted as disincentive to local farmers, thus reducing local production. The contradiction between aid activities targeted at increasing food production and other aid programs providing food aid became obvious. Better information about crops incited Sahelian countries and Donors to sign an agreement governing food aid in 1991. Furthermore, this also led to significant policy changes in most Sahelian countries. A case in point was Mali. Laws had been passed earlier that made it a criminal offence to export cereals. Such a law made sense in time of drought and shortage, but it deprived farmers access to regional export markets. Faced with reality, those laws were changed, thus inducing economic growth. This is another tangible demonstration of the significant role that quality information provided by governments can play in economic growth.

In the meantime, some smart Sahelian traders noticed opportunities along the extensive borders of the region years before governments changed import and export laws. Studies undertaken by the Sahel Club in 1988 through 1990 revealed a strong underground cereal trade that had emerged in the 1980s. The analysis soon made it obvious that West Africa operated as a vast free-trade zone whereby cereals (and presumably other goods) moved across borders in large quantities unimpaired by rules or regulations. Confronted with these facts, donor representatives, experts, and Sahelian officials pondered the significance of this new outcome. Some argued that an underground economy was just another way to attain economic efficiency (balancing supply and demand) when faced with ill-advised government controls and policies. Others argued that it led to human and capital underutilization. It induced a less efficient economy in general, and most importantly, it bred income disparities. Their argument rested in large part on the fact that those that had access to information were generally the same that had resources in the first place: they could bribe officials to access whatever meaningful statistics they could buy. Farmers for their part were seldom given a fair share of profit, as they did not know the real worth of their exportable surplus crop. By not recognizing that information of this nature is a 'public good,' and by not acting decisively to correct this imbalance, governments further compounded 'information asymmetry.' We soon noticed, for instance, that some crafty government officials increased their rent by retaining information longer, thus creating artificial scarcity. In one particular case, some regulations were passed with absolutely no other rationale but to sell the right to circumvent it... Rent seekers are quite smart indeed.

In Stiglitz words, "The most challenging problems for growth lie in economic development. Typically market failures are more prevalent in less developed countries, and these market failures are often associated with information problems... Asymmetries of information give rise to a host of other market failures—such as missing markets, and especially capital markets imperfections, leading to firms that are risk averse and cash constrained." (Stiglitz, 2001: 515, 516).

The way the OECD works has impacted directly in the diversity, quantity, quality, and transparency of information collected and made available by its member governments. This not only created better national accounts, but also expanded the diversity, depth, and range of various census and statistics. It has also led to wider dissemination of the information not only within each nation but also universally. Following Stiglitz' reasoning, by reducing significantly, albeit progressively, 'information asymmetries' has lead into markets that function better as economic operators became increasingly more confident to invest, expand their operations and create employment. Furthermore, it is increasingly being recognized that the arrival of new market information allows a market to expand, not just to operate more efficiently. It is difficult to argue, in my opinion, that this did not have a direct impact on growth.

As explained in Chapter 3, Section 4, the first thing the OECD Secretariat does when tasked with studying a problem is to collect data from each member, and, most importantly, to harmonize it in order to analyze it. This has the obvious result of creating data, statistics, and knowledge that are universally readable. It also results in improving the quality and the transparency of information provided by less diligent members. Through annual Peer Reviews, all OECD members are made to perform at the highest possible level. In other words, a Danish hotel entrepreneur can access and analyze tourist statistics in France with the same certainty his French or German competitor will. He can also benefit from the same analysis and forecast produced by OECD in order to measure his risks and profits. From 1949 onward, the OECD work has progressively reduced 'information asymmetry' allowing economic operators to invest, expand, and create employment with greater confidence and boldness.

1.5 OECD's Basic Rules of Conduct

The methodologies deployed by OECD are not well understood, and have rarely been discussed in the professional and scholarly literature.

The success of OECD rests on a 'blueprint' for international and regional cooperation consisting of three elements: (1) promulgation of a supra-national policy regime based on respect for human rights, democratic government, and the market economy; (2) enforcement of certain basic rules of inter-state conduct; and (3) application of certain unique techniques for making and negotiating collective choices among member countries.

The rules for OECD meetings and procedures include agreement on an agenda leading to a practical and defined outcome. This has a practical operational mission that is expected to lead to tangible objectives and real, demonstrable progress. The basic principles of OECD procedures include: (1) respect for ethics; (2) confidence and trust in the other partners; (3) frankness, blended with courtesy; (4) a commitment to respect agreements as they are reached and not to reopen them to obtain advantage at later stages; and (5) a consensus based on objectivity and common standards (these will be described in more detail later).

Taken together, these principles create a common normative framework for organizational behaviour, and reflect themselves in the style of discourse within OECD and among its members.

In addition, OECD has developed its own know-how on reconciling diverse opinions and consensus building. This is achieved through: (1) iterative peer review; (2) application of common standards; (3) well structured meetings; and (4) transparent processes.

1.6 OECD's 'Etiquette' or Unwritten Behavioural Principles

The Unwritten Rules of the Game

In the institutional culture of OECD the stress is on informality and on respect for some unwritten rules that, for want of a better term, we may call those of 'decorum and etiquette.' These, in short, are the principal rules, for the most part unwritten, that govern the behaviour of players within the organization. Without this set of complementary rules, the search for consensus would be merely an illusion and peer review would be a sham.

The primary commitments of states (to work together; to submit their economic policies to peer review; to provide all information needed by OECD) have produced what we might call the OECD 'etiquette.' It is summarized below and discussed in more detail later.

Working Together

• The dominant ethical code in the organization resembles somewhat that of an old-style English 'gentlemen's club.'
  
  
• All decisions are taken on the basis of unanimity, or consensus.
  
  
• In committing themselves to work together, member states have never sacrificed their sovereignty, as some did more recently upon joining the European Community. Even when they sign on a specific convention, such as the 'Convention to Fight Bribery,' they do so under no obligation to a majority decision. Furthermore, as there exists no formal enforcement mechanism, one may argue that conduct remains voluntary in all respects.
  
  
• The consensus rule, however, is subject to certain exceptions and accommodations in order to make it less constraining.
  
  
• Formal decisions are rare: since 1961 there have been perhaps 50 at most (this does not include annual budget resolutions for the functioning of the Secretariat). For the most part, the results of OECD's work are reflected in a range of commitments that are progressively less formal and constraining.
  
  
• As the process moves along, many partial agreements are reached: once such a decision is taken, the issue is considered closed and should not be reopened (Bonvin, 1998: 22). This is another rule specific to the OECD, and one that has allowed it to make steady progress over long periods of time. This firmly rooted and thoroughly respected rule allows issues to be ratcheted forward step by step. This method of proceeding is a central feature in the drafting of minutes of meetings. We shall return to the subject in Chapter 4.
  
  
• The OECD statutes engage every member to contribute a share of the organization's operating budget, calculated in accordance with a burden-sharing formula based on a country's wealth and size. In addition to the activities that involve the entire membership, members are free to make voluntary contributions to finance activities to which they attach an importance that may not be shared by other members. There are five 'affiliated organs' of the OECD, including the International Energy Agency that have been created and entirely financed by subgroups of members. This is yet another way of getting around the rigid requirement of consensus.
  
  
• Respect for consensus is enforced by peer pressure, i.e. a kind of moral and political constraint that can be highly effective but is quite different from that flowing from formal agreements (Bonvin, 1998: 50).
  
  
• Working together consistently for four decades has transformed the organization from a negotiating mechanism to achieve 'level playing fields' to rich 'collective learning machinery,' where every member, including its Secretariat, learns from the other. The richness of new knowledge based on comparative analysis and on 'promising practices' is central to allowing member country governments to surmount domestic obstacles, especially interest groups whose resistance is often based on fear and ignorance (see Chapter 6).

Peer Review

• It is important here to distinguish between peer pressure, which as noted above helps in reaching consensus, and peer review. This subject will be discussed in detail in Chapter 4. It is important, however, to understand that in peer review, representatives of other member countries serve as a kind of 'jury' to evaluate a country's performance.
  
  
• All member countries, without exception, are expected to submit their policies for evaluation and to respond to questions from their peers.
  
  
• To forestall any ill feelings or vendettas between officials, various procedures have been adopted. For example, a period of 10 years is allowed to elapse before a country that has evaluated another member is in turn subjected to evaluation by that member (see Table 3.2 and Chapter 4).
  
  
• Nothing would change if national administrations were not open and flexible. They must be in a sense 'porous,' so as to absorb comments and modify their habits, their rules and procedures, and even their laws, to take account of OECD's 'informal' recommendations. The latter have no legal force and might indeed be regarded by some as nothing more then interesting declarations of principle.
  
  
• This called for discipline and respect for political agreements on the part of the authorities of member states. Protecting the 'honour' of one's government (however quaint this may sound in a modern world which is seemingly governed by interests and geopolitical considerations) is most likely at the core of the behaviour of those bureaucrats who implement and enforce nationally these informal arrangements. Honour is essentially linked with the pursuit of order and stability as it may be achieved through traditions and stable institutions (Berger, p. 89-90). Coming out of the devastation of World War Two, Europeans were in search of order, national dignity, and sought institutional stability. This may explain the relative ease by which agreements reached within OECD (and previously within the OEEC) were adhered to: the 'honour' of the nation was an important feature for the reconstruction of a stable and peaceful Europe.
  
  
• Most decisions arrived at by country delegates, no matter what their rank is, seldom require ministerial approval; the OECD modus operandi rests on real delegated authority at lower levels of the administration.
  
  
• The system will work only if member states, and in particular the principal members, are really willing to seek and eventually to implement a new common approach.
  
  
• Respect for power relationships is still one of the unspoken rules within the community. Although all states are equal when it comes to consensus, some are more equal than others. The most important members, led by the United States, will always find it easier to impose their views on the others, and by the same token their opposition will constitute a virtually insurmountable obstacle to any new undertaking. These power relationships may nevertheless shift over time. It is clear, for example, that the predominance once enjoyed by the Americans is now shared with the major European countries (to the extent they can agree among themselves) and with Japan. It is being claimed by some representatives that Peer Reviews are often more direct and frank with smaller countries.

Providing All the Information Needed by OECD

• The approach to information gathering is highly precise and calculated. Data and studies are made public, and the entire system is reinforced by open publication policy (discussed in detail in Section 5.3).
  
  
• On the other hand, the minutes of internal discussions within the Organization, characterized as these are by a great degree of frankness, are considered the property of the members themselves and are not always made public. In fact, "some debates are considered so "frank" and of such strategic importance that they are reserved to a restricted group of members. This is the case, for example, with Working Party No. 3 (Economic issues), in which only 10 members participate [... :] its minutes and records are communicated to other OECD members only on a very restricted basis." (Chavranski, 1997: 63)
  
  
• This obligation of frankness implies another rule of etiquette on the part of members: the confidentiality of debates is vigorously protected. No member would think of taking secrets learned during a debate and using them to its negotiating advantage in another forum. Confidence is a precious commodity that takes a long time to build and can be easily destroyed. Without this mutual trust, the entire structure of OECD would collapse like a house of cards.
  
  
• OECD does not issue dogma even if a dominant thinking prevails. This explains the tone adopted in all of its work. It would be considered 'poor taste' to make dogmatic pronouncements: these are left to national authors and researchers and to politicians. As a result, the Organization's style of writing is so nuanced and subtle that uninitiated readers may mistake subtlety for vagueness and nuance for indulgence. We shall return to the subject in Chapters 3 and 4.
  
  
• Since the Secretariat was expected to serve as a kind of arbitrator vis-à-vis national administrations, it was essential to endow the Secretary General with clear and sufficient powers when it comes to staff planning and appointments. (The subject is discussed in greater detail in Section 5.1.)

Taken together, these principles create a common normative framework for organizational behaviour, and are reflected in the style of discourse within OECD and among its members. In the recent past, some NGOs have been included in a number of working groups. This raises an interesting and haunting question: will they accept to observe meticulously those rules created by and for bureaucrats?

SECTION 2
A NETWORK DRIVEN BY PEER PRESSURE

By now, it should be clear to the reader that OECD is not a typical international institution whose organizational rules can be analyzed according to traditional descriptive methods. Rather, OECD is clearly a network, or what Pierre Vinde, a former Deputy Secretary General, describes as "a permanent intergovernmental multi-sectoral conference." This is confirmed by the fact that the OECD Secretariat's annual budget is roughly equal to the estimated costs borne by its members to attend meetings in Paris and to keep permanent national delegations in place. It is a little known fact that 40,000 delegates from capitals and national administrations attend various meetings dealing with the work of more than 140 committees and working parties, for a total of 2,829 meeting days (1997 data). Vinde, who first attempted to evaluate these relative costs, has established that there is a ratio of 1 to 1 between members' direct costs and the running of the Secretariat. Such a ratio makes this organization somewhat unique among international bodies. In a report released in December 2002, Vinde reviewed in some detail the relative costs for Sweden. It reveals an interesting pattern worth noting. The Government of Sweden spends around 85 million Kroners (7.75 Kronors = US$ 1, May-8-2004) per year for its participation in OECD. That figure accounts for a statutory contribution to Part one and two of 14 to 15 million Kroners to which it adds 10 million Kroners as voluntary contribution. This implies that Sweden's own direct cost for participating in this network is about 65 million Kroners, or twice as much as its contribution to the operation of the Secretariat. In other words, the ratio is greater than one to one and presumably Sweden gets 'value for money' from the Secretariat, as it perceives it as the hub of a significant and important network. This may not be the case, however, for a country such as the United States whose contribution represents 25% of the cost of running the Secretariat. In this case the ratio is probably less than one to one. This might partially explain why the US delegation has been arguing for significant cost reductions for the Secretariat, while smaller members, such as Sweden, have agreed to shore up for lost capacity on a voluntary basis.

From an organizational point of view, a network such as OECD differs from an institution in that it is composed of entities that are 'free participant nations', which are never subject to the discipline and authority of a typical hierarchy. They may freely enter into binding agreements and contracts, but they cannot be forced to do so. They may not even be swayed by majority votes. For a concept, an idea or a policy to be agreed to and to be transformed into a general practice, each and every participant in the network must recognize and accept its intrinsic merit. At the very least, it should see it as in its interest to stay with the group or be swayed through other arguments. Occasionally, a majority may decide to proceed and leave a few laggards behind, thereby suspending the consensus rule in hopes that the holdouts will eventually join the consensus; such situations, however, are the exception and are not intended to last very long. The health of a network demands that the entire process be subject to closure.

2.1 Peer Pressure

The central element in this methodology for collective choice, arguably, is the use of peer pressure. Peer pressure and its adjunct, peer review or appraisal, serves as an organizational engine to propel participants forward and to ensure progress in procedural terms. This concept will be more widely discussed in Chapter 4, but it is important to distinguish it from peer appraisal as it is known in the scientific world. These two concepts, however, are very close to each other. In a number of cases, the two methods function in tandem.

There are three distinct periods in the negotiation process over collective choices when peer appraisal seems to be most effective: a) When the group concerned establishes a common agenda; b) When the group concerned formulates and adopts a policy choice or policy options; or c) When the group concerned monitors, evaluates, and enforces, again through peer appraisal, these newly adopted policy choices.

Defining a Common Agenda: Two Contrasting Examples

In explaining this way of proceeding, it is useful to look at some examples. Following is a deconstruction of two examples of peer pressure, involving analysis of the subsidies that all member states give to their agricultural and industrial sectors. Since the early 1980s, many governments have recognized the need for structural adjustment. The methods—in particular targeted subsidies—that were used to stimulate output, and that did so much to relaunch the European economy, have had a perverse effect: they have engendered new forms of protectionism and this, of course, runs counter to the OECD spirit of cooperation.

In the first example, OECD members managed to overcome their 'visceral' objections, and since 1988 OECD has been publishing a detailed annual report (Agricultural Policies, Markets and Trade: Monitoring and Outlook) on the comparative state of farm subsidies in each member country. By making 'hidden' information available and allowing for objective comparison of country performances, this report has had a steadily growing impact on debate.

By contrast, one major member or another has blocked repeated initiatives at a similar undertaking on industrial subsidies. We shall see below what light these two stories can shed on the concept.

Agricultural Subsidies

From its earliest days, the European Community has had in place a set of policies for encouraging agricultural output. The initial challenge was to overcome food shortages and restore production to its pre-war levels. Leaders were determined that they should never again be dependent on distant sources of supply, in case the 'cold war' should erupt into open hostilities. Fear of a naval blockade was felt nowhere more strongly than in Finland, where agriculture is protected and subsidized at a very high level.

European farm support is based essentially on shoring up market prices through variable import levies and export subsidies. This is one of the principal mechanisms of the Common Agricultural Policy (CAP). As a result, prices remain high even if output rises. Predominantly industrial countries thus find themselves financing agricultural growth in EC countries that are better suited to farming. Europe is in this respect a protectionist stronghold.

This situation is a constant source of irritation to American and Canadian farm lobbies, as well as those of Australia and New Zealand. During the 1970s and the early 1980s, these countries exerted constant pressure on European nations to abandon its agricultural policy. They saw it as costly and economically distorting, to the detriment of more efficient and competitive producers elsewhere in the world. The Europeans retorted that farm subsidies in the United States amounted to some US$ 60 billion, a figure they considered astronomical and that, they charged, betrayed the real motive of North Americans, which was to increase their market share.

This is an extraordinarily complicated technical issue, since it is difficult to compare the costs and effects of the measures taken by each country and (in the case of federations such as Canada) by every province or state. The Canadian provinces of Quebec and Ontario, for example, control milk prices through 'supply management' schemes. These provinces assign each producer an output quota and impose stiff penalties if that quota is exceeded. This means, in turn, that imports must also be subject to quotas, otherwise the sacrifice demanded of local producers would be in vain. Is this merely an elegant euphemism for subsidizing domestic output, much as the EC does, or is it, as Canadian farmers believe, a remarkable mechanism intended solely to reduce the devastating hazards of laissez faire?

It is probable that the debate would still be dragging on were it not for renewed criticism of the CAP within the EC. Complaints were raised that it was costly for consumers and taxpayers alike. Even more important, it came to be seen as providing support to large, efficient producers while doing little to improve incomes for small farmers or to offer effective aid to disadvantaged rural areas (Chavranski, 1997: 92).

In the end, under the impact of peer pressure, OECD members agreed that the Secretariat should shed some light on this discussion. The item was accordingly placed on the organization's agenda. The Secretariat was to play its role in accordance with the method and procedures discussed in Section 4.

After repeated and fruitless attempts to compile comparable statistics, the OECD agriculture directorate had no choice but to innovate and to invent a new operational concept. Basing itself on "incontestable technical foundations" (Chavranski, 1997: 92) , the Secretariat developed a method for calculating producer subsidy equivalents (PSE) and consumer subsidy equivalents (CSE). This calculation includes all monetary transfers that each country offers its farmers and livestock producers, as well as support measures that are the equivalents of subsidies. In 1988, the Secretariat published its first report on this subject.

To nearly universal surprise, this report revealed the full measure of farm support provided by all OECD members. The total figure for farm support of various kinds in OECD countries in 1986 was set at US$ 302 billion, against total output of US$534 billion (based on farm gate prices), or 56.5% of output value. It represented more than 2.3% of total GDP. In some countries, notably Japan, the distortion is even higher (as much as 70%). The analysis showed that every farmer was being subsidized to the tune of US$ 10,000 in the European Union, US$ 16,000 in the United States, and US$ 8,000 in Canada. These practices were obviously causing significant economic distortions not only domestically but also in international trade. Another OECD body, the Club du Sahel, showed that these subsidies were having a depressing impact on developing country producers. Studies by the Club revealed that in the 1980s, Sahelian cattle herders lost their traditional meat market in Côte d'Ivoire in favour of subsidized meat exported from the EU.

It was not OECD itself that undertook to negotiate the details of measures to reform these practices. The organization merely recommended to its members that they try their best to do so gradually. But "by highlighting the tremendous burden on taxpayers and consumers, as reflected in the PSE calculations, it had in hand a powerful lever for promoting agricultural policy reform" (Chavranski, 1997: 95). The Secretariat's annual monitoring report has become a key document for objectively assessing progress, while highlighting examples of backsliding and broken promises.

This move had an impact on the Uruguay Round trade negotiations of the late 1980s. At that time, the disagreements dividing the Europeans and the Americans were so deep and so serious (not to mention the suspicions surrounding Japanese protectionism), that GATT negotiations seemed doomed to failure. Indeed, the creation of the World Trade Organization in 1991 may never have come about had it not been for this injection of transparency.

It is also noteworthy that the OECD Secretariat, in inventing the PSE, was providing far more than a statistical indicator: it was in fact laying the basis for a common language among member countries. The PSE now serves as a kind of "Esperanto" for dealing with agricultural support policies.

In short, we have here an example of the complexities and the importance of peer pressure for defining a common agenda and establishing rules for monitoring it. To overcome the impasse, European states that derive fewer advantages from CAP would have had to exert strong pressure on its net beneficiaries. Otherwise, any single member could have blocked progress for a long time on this issue. It is also an example of the central role that information and transparency can play in improving the economy, as discussed in Chapter 2.

Last but not least, it gives us an idea of how difficult it is to demonstrate the value of prevention efforts when those efforts are successful. There has been modest progress since that time, despite heavy pressure from farm lobbies. Subsidies in 2001 represented only 1.3% of GDP, and accounted for only 54% of the total value of agricultural output. These may be modest gains, but the situation could certainly have been a lot worse.

Industrial Subsidies

On the other hand, things do not always turn out so well in a network. Consider the following history of failure, as recounted by Chavranski (1997: 91):

"In the early 1980s, a few countries, led by the United States, brought pressure within the organization to improve the transparency of industrial subsidies. The objective was, first, to develop an overall view of the importance of subsidies in each member country, with the underlying but not explicit idea that they might eventually be phased out. This was a key chapter in structural adjustment policies. At the time, France objected and the project remained bogged down until it was revised by a compromise in 1987. Since then, there has been considerable progress in the course of peer reviews aimed at drawing international comparisons.

"Paradoxically, the current situation is diametrically opposed to that of the early 1980s. European countries are eager to pursue the project, while the United States and Canada, citing institutional differences between centralized and federal countries, have declared it impossible to provide information on subsidies provided at the state or provincial level - which, according to available data, are far from negligible. For these two countries, the initial results of the exercise were a surprise, and quite different from what they expected, and they are now seeking to rein in the project. In any case, significant methodological difficulties remain, relating in particular to the existence of indirect subsidies through the taxation system that are not easy to pin down.

"Efforts are now confined to analyzing the economic effects of subsidies on the industrial sectors of countries for which adequate information is available. This represents a significant backtracking from the original goal of transparency. This example is fairly typical of the behaviour of certain member countries, and of their capacity to shift their stance when the results of an exercise they supported turn out to be different from what they expected."²

Here is what game theory has to say on this subject:

"Cooperation is not the only equilibrium of the repeated game. Suppose one of the firms doggedly charges a low price, regardless of what its rival does. Then the best the rival can do is charge that low price too. [In essence, that is what continues to happen concerning subsidies to industry among OECD member nations.] Game theory does not predict that cooperation occurs in a repeated game; it says only that the repetition makes cooperation possible. Many outcomes are consistent with all the players behaving rationally, and it is possible to be trapped in a low-level equilibrium. Cooperation is just one of the outcomes of a repeated game. The conclusion is therefore regrettably indeterminate." To the related question, "Does it pay to be trustworthy?" the

². It should be noted that this particular issue is now under the responsibility of the World Trade Organization. Using a different approach may result in changing this particular practice, which in essence, contradicts all fundamental rules of fair trade among nations.

answer is "maybe" (McMillan, 1992: 30). This is the reality in any network, including OECD. Therefore, the remarkable feature that should be highlighted is the fact that it has worked consistently for so many important occasions. The fact that at times it does not work should be taken as a natural variation.

SECTION 3
CONSENSUAL DISCIPLINE AND DYNAMIC TENSION

3.1 Maintaining Balance

Dynamic tension is what creates equilibrium and balance in a network. Forces must at all times be kept in balance, as one cannot count on hierarchy to compensate occasional or permanent loss in balance.

One could argue that within each OECD country, government institutions are kept healthy by constantly being confronted with permanent tension created by conflicting interests and interest groups, as we have seen in the previous example. Agricultural policymakers, for example, are confronted with pressures from farmers, food processors and related industries, and consumer and other interest groups (including their own bureaucracy). This tension balances itself out more or less (sometimes less) over a long time period, so that legislation and adopted practice remain more or less fair to each segment of society. This tension is also reflected within OECD itself. Each country delegate is moved and prompted to adopt positions that, over time, are bound to reflect conflicting national interests.

Changes in the equilibrium, however, are to be expected. They are often the result of strong political forces, and there is nothing anyone in the OECD Secretariat can or should do about this. For example, the Thatcher and Reagan eras, in conjunction with the end of the Cold War, brought about a shift away from many Welfare State creeds and ideas. This push by two conservative leaders opened a general quest for structural adjustments among most if not all OECD members in the 1980s and 1990s. One must recognize that the fulcrum has moved somewhat to the right. It is nevertheless the function of OECD to challenge political fads where it can, and try to illuminate the issues with evidence and nuance.

A long 'rivalry' went on, for example, between those advocating a strict economic approach in the public sector, and those who sought a broader view, balancing policy effectiveness with budgetary efficiency. Classical economists, believing in the virtue of the 'invisible hand', and of the effectiveness of market competition to keep costs down, argued that the private sector was more efficient at delivering services than heavy bureaucracies. They persuaded OECD members to privatize many government-owned organizations and to seek ways to reduce further the overall cost of government. In some cases, governments even privatized natural monopolies, such as municipal water systems, for example, thus losing the leverage of competition to maintain discipline and keep prices down. In addition, as private corporations are bound to maximize profits and not redistribution, social problems could be expected to emerge following privatization. To continue on the same example, municipalities had traditionally found ways and means to give access to water even to impoverished citizens. Obviously, private companies could not be expected to do the same, but targeted fiscal transfers could compensate. However, opponents argued that targeting a segment of population is laden with problems and heavy costs, and therefore not always feasible. Secondly, many sectors in which the government was present were involving externalities (energy) or concerned public goods (water), in which case the government can be more efficient as it internalizes the externalities. Furthermore market imperfections and the results of market failures have a tendency to constantly affect the same segment of society more than the others. In other words, the single-minded pursuit of 'budgetary efficiency' needed to be balanced by social, political, and other considerations.

To rally a majority vote, it is necessary to convince only half of the participants plus one, and this in essence is less of a tedious task than convincing everyone, as required under the consensus rule. In addition, in a situation requiring consensus, any less-concerned participating country can wait until all the others have committed themselves and then demand an enormous 'price' to cast its vote with them. If a game is played only once, then the consensus rule gives enormous power to the last one in. But this tactic is unlikely to work in a repeated game. "Once a game is played many times by the same players it acquires a past and a future. Retaliations are in order and, in fact, constitute the principal means to instil corporate discipline" (McMillan, 1992: 29).

Even this factor, however, becomes less and less important as time goes by and the same players regularly interact. After a number of iterations, a collective behaviour will have been developed and a shared language arrived at. An agreed and generally unwritten form of self-imposed discipline arises. Obvious misbehaviour is simply chastised by the others and in the worst case the offending member may be ostracized. Eventually, when one player refuses to join a consensus, a clear message is being given to the group: it has no choice but to listen carefully to the arguments and build a consensus that takes them into consideration. "In the search for consensus, then, everyone is obliged to make concessions and a compromise will finally emerge, after all the essential concerns (to the extent they are mutually compatible) have been taken into consideration" (Chavranski, 1997: 43).

3.2 Mechanisms for Softening the Rigours of Consensus

Occasions will arise when concessions and compromises will not suffice. The full consensus rule must then be bent. This is one of the ways by which a network moves ahead and refuses to be held hostage to the slowest, or to what is called the "rule of the lowest common denominator." OECD has harboured a number of mechanisms to foster flexibility and to encourage its members to adopt in all circumstances a proactive attitude, to move as far as it can go to promote reforms and to seek, jointly and individually, the best means to arrive at it. There are four ways of softening the demands and the obstacles inherent in the consensus rule.

Rule of Exception to the Consensus

In all cases, the meeting chair will allow the discussion to continue (perhaps over several months) until there are no further formal objections. A member may then simply sit silent so as not to prevent a consensus from being reached. This approach is sometimes less binding than a formal vote. On the other hand, a member may formally abstain. In this case, the 'decision' (or the 'recommendation') will not apply to that member, a situation that differs from the rules of the European Union, where a majority vote (in certain fields) is equally binding on all members (Bonvin, 1998: 50).

Downgrading the Degree of Formality of Commitments

OECD has the power to take 'decisions' that, by virtue of the OECD Charter, are binding on all members. Although the Charter does not provide for any sanction mechanism, these decisions engage the political honour of states, and for this reason they are always taken seriously. States are expected to take all the steps necessary to ensure that obligations assumed in this way are effectively respected. Experience has shown that they do respect such commitments. As a result, every article of a 'decision' will be examined and debated in the finest detail. Consensus in such cases is usually a long time in coming. It is therefore a fairly rare form of commitment. Bonvin counts at most 40 decisions since the founding of the organization. Two of the best known and most important concern the 1961 Codes of Liberalization of Capital Movements and of Current Invisible Operations. These codes have had a major impact on the development of economies, by supporting and reinforcing the process of economic opening, as Chavranski has so elegantly and persuasively shown.

OECD is more likely to produce recommendations, which are easier to negotiate and are, moreover, generally followed by the members. They come into force as soon as the Council adopts them, and they are not dependent on any time-consuming and obstacle-strewn ratification process. They are applied in a flexible manner that allows member states to apply them gradually. Peer reviews exert sustained pressure to ensure that this happens.

The Council may also issue declarations, the legal import of which is poorly defined but which, as with everything OECD does, will in the end have considerable moral force. In 1997, 130 declarations were in force. This reflects the fact that the Council can take supplementary decisions on the application of the declarations and can decide later how they are to be applied. Each new stage therefore serves to refine and reinforce the initial consensus.

Finally, OECD members may agree on arrangements or what are more generally known as "actes innommés/gentlemen's agreements." These do not carry signatures but are 'officialized' by the Council, which takes note of them and records them in its minutes (Bonvin, 1998: 53 and Chavranski, 1997: 57). There will even be occasions where the Council decides not to take note of an acte innommé, if it involves a particularly delicate political issue. In this way, discussions within the 'arrangement' may gradually lead to a consensus that is more precise and operational. The 'arrangement' with which aid specialists are most familiar is that regarding the use of export credits. In fact it eventually came to be known as the 'Consensus.' Its aim was to prevent governments from using tied bilateral aid as a disguised subsidy for their exports, contrary to the spirit and rules of agreements concluded among OECD members (see Section 3.3, Chapter 1).

This simple terminology reveals the flexibility and the subtlety that guide the actions of the organization and that allow it to progress step-by-step as far as possible.

Nomenclature of the Committees

The Council is the supreme authority of the organization. Every country has a representative on the Council, with the rank and status of Ambassador, who heads the country's delegation to the organization. It is the Council that takes every important decision, that creates the committees, and that adopts the annual budget.

In most cases, every national delegation will have a number of counsellors with specialized functions, whose mandate is to follow the work of the committees (subsidiary bodies created by the Council) and to prepare reports that will be routed to each of the ministries concerned. In total, national delegations had nearly 600 such diplomats in 1997. In the committees, delegates not only discuss new ideas but also examine progress in certain fields such as economic policy, international trade, science and technology, development assistance, or financial markets.

The structure of committees and working parties is another indicator of the organization's great flexibility. A number of working parties have been established, following the course of events. A consensus had to be struck every time, because every committee requires the mobilization of the Secretariat capacity, and in many cases it implies the creation of a new unit within the Secretariat and consequent costs for member country delegations.

In addition to the Committees, the following entities coexist within the Organization, as established by Vinde in his 1998 internal report:

• Working party: a subsidiary body of a committee. Some working parties operate by electronic communications, without actual meetings, and are referred to as electronic working parties.
  
  
• Working group (or possibly, a subgroup): subsidiary body of a working party.
  
  
• Task force: an open-ended subsidiary body set up by a Committee or a Working party with a specific and time-bound mandate.
  
  
• Workshop: a meeting convened by a subsidiary body for a one-time discussion of a particular topic. Occasionally the terms seminars, ad hoc meeting, special session are used for the same purpose.
  
  
• Conference: identical to a workshop but with broader participation and usually at a higher level.
  
  
• Forum: a subsidiary body meeting on a regular basis linked to an OECD Committee with participation of non-member countries, other international organizations, and the private sector, particularly, but not exclusively, in connection with the outreach program.
  
  
• Expert group: a group with limited participation set up by a Committee or a Working party to study a specific issue, and composed of participants chosen for their particular expertise.
  
  
• Steering group: in certain cases there is the need to create a subsidiary body with limited participation to supervise and guide certain activities/projects on behalf of a Committee, a Working party, or a Working group.
  
  
• In addition to all these groups, every year sees an "OECD Ministerial": it is, in essence, a Council meeting held at the ministerial level rather than at the Ambassador level. It brings together ministers of finance and of foreign affairs and trade from all member countries. This ministerial conference discusses the major issues affecting the economies of member states and of the world in general. When deemed necessary, any Committee may be held at the ministerial level.

Initiatives Financed on a Voluntary Basis

The annual operating budget of the organization is based on the planned activities and work of the committees (as well as the other subsidiary working groups identified above). Every participating country is expected to pay a quota that is determined by a complex burden-sharing formula The Organization's expenses are shared among its members in accordance with a formula based on gross domestic product during the most recently available three-year period. This principle is subject to three modifications: the smallest countries (Iceland and Luxembourg) may not pay less than 0.10% of the total budget each, while the largest country, the United States, will never pay more than 25%. The size of every other member's contribution is thus calculated from the remainder (74.8% of the total) (Chavranski, 1997: 69). This common budget is discussed and approved by the Council, and it is known as "Part One" of the OECD budget.

Over the years, OECD has expanded its field of action and has agreed to play host to a number of entities that are financed by a limited number of members. As some see it, this plethora of agencies sows disorder and fosters the impression that OECD is a bloated bureaucracy. They argue that the organization would do better to focus on what they see as its principal mandate. Here again, the organization regularly makes efforts to simplify its administration and reduce its costs. It is not our purpose to defend one view or another concerning the existence of the committees or agencies, including those known as "Part Two." It must be admitted, however, that this method has three important advantages.

The first and most obvious advantage is to accommodate the desires of some members without requiring the search for an undoubtedly elusive consensus. The entities created in this way with the support of certain member countries are covered under "Part Two," as opposed to "Part One," i.e. the part of the Secretariat's operating budget to which all members contribute. This is the case, for example, with the International Energy Agency (IEA). The IEA was created in the early 1970s, in the wake of the first oil shock. OECD member countries felt the need for a watching post to analyze changes in oil supply and demand as an aid to refining their energy policies. France preferred to go it alone. Thus, what would otherwise have become a Committee of the Organization, financed annually under "Part One" of the budget, became one of the entities under Part Two of the organization's budget. It should be noted that eventually France saw to its advantage to join the IEA as a full member.

Second, the great diversity of these activities serves to involve members ever more deeply in common undertakings by allowing them to support the collective effort voluntarily, just as volunteer associations involve citizens in their community. They may provide financial support or 'in-kind' contributions toward those specific goals they believe to be critical. In the recent past, many countries have chosen to increase their voluntary contributions. It is reflected in the fact that following a series of personnel reductions, OECD still employs as many people as it did before downsizing, due to increased voluntary contributions.

The OECD Family: A System of Concentric Circles

Third, we may note that these activities a llow the organization to expand the scope of its moral authority into new communities, which in turn will benefit from the rigour, the methodology, and the reputation of OECD. For example, the library of documents published by the Club du Sahel includes many African authors who otherwise could scarcely have hoped to see their work distributed in European and North American capitals.

A large measure of flexibility blended with rigour becomes the true asset of this modern construct. Possibly as a result of reduced outside political pressures, combined with relative economic affluence, the consensus-based decision-making process has become increasingly unwieldy. OECD has been searching for an alternative for some years with no consensus. In the meantime, pragmatic ways are found to work around each specific obstacle.

To help understand what otherwise appears to be an extremely complex operation, OECD could be seen as a system of concentric circles (see chart). In the centre are the core activities of OECD financed by "Part One." In this core, we find all the main 'Committees' and 'Working Parties'.

There is then a second circle of activities that are closely linked to the core and generally complement it. This second circle is financed in "Part Two" of the budget. Part-two entities also contribute to meeting the general overhead expenses of the organization.

A third circle is constituted by international organizations or intergovernmental activities that for reasons of convenience have chosen to use OECD administrative rules and services, but which have an autonomous status. IMHE is recorded in 'Part Two' activities, other independent entities do not appear in the OECD budget documents.

Many participants, and a fair number of observers, find this architecture needlessly complex. It has been the subject of many internal studies and discussions in order to simplify its application and to reduce its costs. Yet rationalization implies abandoning activities that will be dear to one delegation or another, and consensus will always be elusive. Whatever the arguments pro and con a specific program feature may be, one might suggest that this plethora of arrangements and accommodations reflects, in a sense, the very nature of the organization, and as such is essential to its success.

In fact, these various forms of committees and entities as well as the various forms of commitments, act as a series of 'little tools,' the differences among which are subtle and often difficult to perceive. Their use, however, in the hands of skilled negotiators make it possible to continue flushing out small points of consensus that would otherwise have remained hidden. The sum total of all these efforts and all these partial successes helps to instil harmony and peace within the group. In a universe that is constantly changing, this array of tools would seem to be an essential factor for adaptation. Yet we must recognize that the nomenclature of entities subsidiary to the Council is rather obscure and seems at times to lack consistency. It should be emphasized however, that member countries can always do things that matter to them somewhere within OECD, something they often can't do elsewhere.

SECTION 4
POLICY PROCESS, BLENDING NEGOTIATIONS AND RESEARCH

The OECD policy process is itself designed to be progressive, iterative, and empirical: it follows the progress of its members, at times leading, pushing, pulling, or tugging, always moving from common knowledge to new facts, and eventually to new policies. It also makes use of state-of-the-art synthesis of knowledge on a contentious topic. It sponsors in-house or hands-off research to shed new light on a growing topic, and moves the agenda progressively in a seesaw fashion using various techniques.

The entire process can be broken down into six distinct steps or elements:

1. Agreement on a common problem to be assessed and eventually resolved.
   
   
2. Establishment of an information base for making comparisons.
   
   
3. Analysis of findings and the drawing up of conclusions.
   
   
4. Forecasts and scenarios.
   
   
5. The preparation and adoption of recommendations.
   
   
6. Evaluation through peer reviews.

Not all activities of the Organization comprise all those six elements. Many activities considered very useful by country members include only some of those. For example, between 1961 and 2001, the Secretariat only collected and compared data concerning health. Furthermore, in recent years an increased proportion of the work focuses on exchanging information and sharing experience with the view of identifying 'promising practices' or what many still refer to as 'best practices.'

Each Committee is composed of member states and chaired by the representative of one of them; it is responsible for overseeing the entire process. However, it is clearly understood that the work of a technical and scientific kind (phases 2, 3, 4 and the drafting of recommendations) is primarily the responsibility of the Secretariat. The Committee will take the lead, however, in defining the agenda, adopting recommendations, and reviewing the performance of other members.

The entire process remains at all times rigorous, subtle and, in keeping with tradition, eminently flexible.

4.1 Defining a Common Agenda through 'Preliminary Inquiry'

The process begins with a 'preliminary inquiry' designed to ensure that the dialogue among partners is actually feasible and viable, and that it can reach the intended goals. In essence, it is deemed feasible if all partners agree to put it on the agenda, and it is not feasible if a consensus cannot be reached. This may sound like somewhat circular logic, but it works.

Defining the question remains a most difficult task, one that may require much iteration, and may raise many questions. What is to be emphasized? What is excluded from the field of research? Are we working from the basis of a broad question with many related sub-issues, possibly concerning many fields and departments? Should we start with a very limited and operational question, and elaborate it as we move along? Is it a field that is already well studied by other international organizations? Will further research on the question then be redundant or complementary? How strong and how well entrenched are national vested interest groups?

All these questions are obviously linked to national interests and to specific lobby groups, which, at least in some cases, are likely to win or lose depending on the definition adopted by OECD.

Once the parties have agreed on the topic, applying the 'OECD process' then involves the four steps of a more scientific nature, which fall clearly under the responsibility of the Secretariat: a) establishing a database; b) analyzing findings; c) forecasts and scenarios; and d) preparing recommendations (Bonvin, 1998: 56). This typology is typical of scientific research—but as it applies to the resolution of national and international political problems, the research approach taken may differ from the methods of the academic world. Its focus is often broader and multidisciplinary. In OECD parlance, this is referred to as 'horizontal.'

The Secretariat reports to the committee upon completing each of these steps. The ensuing discussions will allow member countries to commit themselves progressively and more deeply to the path of reform.

4.2 Establishing Reliable and Comparable Databases

Once members have identified a common problem, the Secretariat is charged with constructing a reliable database of statistics on the subject. The Secretariat must not only compile the data supplied by member states, but must also "make these data mutually compatible in order to facilitate international comparisons over a long period. To do this, it must develop standards and classifications" (Chavranski, 1997: 19).

This groundwork can itself produce results that are sometimes surprising. They may bring to light facts of which governments were previously unaware. They may also reveal discrepancies when the variables stray particularly far from the mean. The publication of reliable and transparent statistical data helps national and international investors as well as economic operators in general to take decisions. This means that capital will move more freely and effectively, thanks to the confidence and certainty generated. For example, reliable statistics on tourist movements are needed for investments in new hotels to materialize (this is fully discussed in Chapter 2).

Finally, these studies may give rise to new concepts and new ways of understanding and describing reality: a sort of Esperanto for governance. As described earlier, (see example Agricultural Subsidies) the Secretariat had to invent new indicators, the PSE and the CSE, in order to compare different forms of farm subsidies. A second example of innovation can be seen in the development of Purchasing Power Parity (PPP, see Box 3.5), which has become an essential concept for comparing economies while correcting for distortions induced by exchange rates.

4.3 Analyzing the Data

Based on the data it has collected, the Secretariat conducts the necessary studies. There are many kinds of studies that may be appropriate to specific circumstances, ranging from the preparation of synthetic summaries, through inter-country comparisons, to original research. These studies are similar to academic research—after all, OECD analysts generally have the same academic training as university researchers, but they must first and foremost answer all the questions posed by the decision-makers. The scope of their analysis may therefore go beyond the normal bounds of a scientific research project.

The conclusions and recommendations will then have to be fed into the process specific to the OECD committee, which remains the final client for all this work. The organization may also use the analysis "to criticize national policies, in particular on the basis of comparisons with the policies and outcomes of other member countries..." (Chavranski, 1997: 21). This approach in fact constitutes an unprecedented social innovation.

4.4 Forecasting

As an aid to decision-making and policy formulation, the Secretariat is often expected to extend its analysis over time in order to show member states the foreseeable consequences of current policies or of modifications to them. This is common practice for economic assessments.

This forecasting work has become the hallmark of the organization. It makes it possible indirectly "to test the quality of studies and analysis on the basis of which these forecasts are made. Their credibility depends on the discrepancies between the figures forecast in the past and the figures actually observed" (Bonvin, 1998: 60). Thus, before discussing the recommendations or debating changes in habits and laws, countries must first become familiar with the comparative data so that they can understand and discuss the analysis and ultimately assess the impact of the various scenarios.

Tabel 3.1
PPP and International Comparisons of GDP

Source: OECD, 2002.

4.5 Recommendations

Unlike the previous steps, preparing recommendations is in reality more of an art than a science. It involves applying know-how to the results of a 'sober' analysis of the observed facts, while constantly avoiding dogmatic approaches and putting forward proposals that will lead to real improvements, with due regard to the existing political situation and the absorptive capacity of each state. These recommendations are discussed in detail by member countries, although they may give only cursory attention to the preceding documents. Primarily, this reflects the fact that monitoring will be based on the recommendation, and so it is important for countries to make commitments that they can respect, since their evaluation will depend on it.

Throughout the process, then, there is a subtle play between the pressure that countries exert on each other to move the issue forward and reach consensus, and the prospect of peer review, the final stage of the entire process, since it is that review that will determine whether each member has respected the consensus.

4.6 Peer Review

Peer review is the keystone for this architecture, which is at once fragile and robust. It is a highly structured process, and its rules are never left to chance, given the delicate nature of its task, which is to enlist commitment from the governments of sovereign states.

It is worth recalling that this procedure was imposed on states that were just emerging from a long period of unceasing warfare. We must appreciate how much tact and diplomacy was needed to bring about such a change in values and behaviour. At the same time, we need to grasp the scope of the challenges that had to be overcome and that must never be underestimated, although they are today taken for granted, as is economic prosperity. On this point, analysts who have looked closely at OECD are unanimous in recognizing that the experience of more than four decades shows "by all accounts that the pressure exerted by one or several states is the principal driving force behind the organization's thinking and action, despite the fact that there is no mechanism, even in the case of decisions, for penalizing violations of solemn obligations" (Chavranski, 1997: 32). All of these intersecting methods serve to reinforce the idea that indirect but sustained effort is worth more than a single spectacular act.

Peer review has been taken farthest in the all-important economic committee, which remains the point of reference on this subject. The method can also be applied for evaluating social, health, or environmental policies. Regardless of the subject, the basic rules remain the same. The process of peer review will be examined in detail in Appendix 1, but the first process of peer review in OECD is well described by Bonvin and Morrisson (1998) and is reproduced below.

The First Example of Peer Review: The Examination of Economic Situations

"The Committee for the Examination of Economic Situations and Development Problems was created in 1961, to examine annually the economic situation of each country, based on the principle that every member is required to keep the organization informed of any significant change in its economic policy.

"The working method of this committee and of the Secretariat servicing it is worthy of attention, because it reflects what makes OECD's work special.

"A draft report is prepared by the Secretariat on the basis of missions to the country concerned. Information (statistics, trends) is compiled using detailed questionnaires. OECD experts also hold meetings with senior economic policy officials. For several years, a structural dimension (pension system, labour markets) has been added to the studies and the national officials responsible for these questions are also asked to contribute. The draft report is then sent to the national authorities, several weeks before the committee meeting.

"The committee session lasts a full day (Chavranski and other participants have expressed the opinion that this is clearly too short to discuss fully such complex and rich reports) and the delegation of the country under examination consists of senior officials of the departments and agencies concerned. It presents its viewpoint and notes the aspects on which it may disagree with the draft report. For any examination, two countries will be named as examiners and will pose a series of questions. The representatives of other countries may then intervene. The examination is divided into different chapters. The committee chair plays an important role, which is to draw out a consensus, in particular on the conclusions. This process is characterized by what we may call 'mutual pressure' or 'peer pressure.' In fact, every country faces pressure from other countries to ensure that the direction of its national policies will converge with those of its own. An examining country, which may be tempted to take radical positions, must never forget that it too will be examined one day. Moreover, the regular schedule of examinations helps keep countries to their commitments: if the country has undertaken before the committee to move in a certain direction, it will be held accountable at the time of the next examination.

"A definitive report is then prepared between the Secretariat and the country examined, and is sent to the committee for written approval. It will be published in English and French, and often in the language of the country if it is different. This publication generally receives wide media coverage, because it represents an x-ray of the country's economic situation that is as objective as possible." (Bonvin, 1998: 77-78).

Finally, as noted by Thygesen (2002), the OECD peer review process has a number of distinct advantages over the review process of institutions such as the IMF:

• "First, there is more interaction with relevant national policy on the basis of the Secretariat's draft report;
  
  
• "Then there is a useful element of having, in a number of cases, such as with the EDRC, two examining countries (which is the closest thing to pure peer pressure that exists in the international system);
  
  
• "Furthermore, the subsequent process of revising and approving the report gives some ownership by the country to the final report (though this redrafting does consume a lot of time);
  
  
• "The organisation has also a manageable size (for example, IMF 133, OECD 30) and a limited diversity of membership (which is particularly beneficial in that it is difficult to keep up to date in technical areas);
  
  
• "Lastly, there is the continuity (which is typically 3 years for the EDRC) and the experience of the national officials that countries send as representatives (and examiners);
  
  
• "On the other hand, the OECD Secretariat has fewer resources to produce country surveys at regular intervals than other institutions using the same process, and this is important, for the determinant of the standing of the institution is the quality of the staff work.

"Beyond their intrinsic interest, the economic analyses produced by the OEEC played a more enduring role. In effect, they accustomed national authorities to providing honest and comparable information on their economies, based on questionnaires prepared by the Secretariat, and then studying and comparing the collected data jointly. This exercise gave them a further occasion to think about their policies and their respective forecasts, and in the end it led to a degree of coordination, as it became increasingly difficult to maintain sharp discrepancies once they were brought to light. The unanimity required for approving the economic reports, although it made the task more difficult, also worked in this direction. This gradually gave rise to habits and indeed disciplines that would be further developed within the OECD" (Chavranski, 1997: 11).

Table 3.2
List of Country Peer Reviews in the OECD

Source: The information in this table is extracted from Vinde's internal report, 1998.

SECTION 5
SUPPORTIVE POLICIES

Gravitational forces and counter weights at play in a gothic cathedral

5.1 Personnel Policy

A key factor in the OECD negotiation process is its technique for managing the Secretariat personnel. From the outset there was an agreed convention among OECD members that its secretariat would be sheltered from national interventions. Endowed with 'wise directors', the OECD Secretariat staff was therefore able to play a significant role as intermediaries in negotiations among members, and at times served as respected referees or as brokers of knowledge and of evaluations of national policies.

The Secretariat's operating rules in this complex network are thus an essential instrument of the subtle architecture that characterizes OECD, and keeps the entire system in balance.

The intellectual and moral independence of the Secretariat serves as counterweights to interest-driven pressures from member countries. In order to play its 'honest broker' role, and to provide advice that is as 'scientific' as possible, the Secretary General and staff must be recruited on the basis of their recognized knowledge, moral integrity, and impartiality. They must be protected against recriminations and possible reprisals from member states. Objectivity, professionalism, and the avoidance of conflicts of interest must form the set of values inspiring the rights and duties of the Secretariat. When filling top positions, the Secretary General is generally bound to consult the Council members. In so doing, he must make judgment calls as delegations often argue in favour of candidates from their own country, or from their region. With respect to ongoing personnel activities, such as promotion, and contract renewals, as it is the case for program activities, the organization generally works well and objectively.

The personnel makeup of member country administrations is constantly changing. This poses a significant stumbling block to the proper functioning of the network. New arrivals are generally not aware of how the machine functions: they are likely to assume that it works like other bureaucracies with which they are familiar, and they may be unaware of its most fundamental rules. They can hardly count on older members to give them the induction they need, and this role must fall to the organization's staff. Thus, the stability of Secretariat staff is another essential ingredient for keeping things in balance.

5.2 Role of a 'Wise Director'

Professionally, the Secretariat is recognized for its highly qualified staff. Its personnel, in turn, have taken care to uphold standards of excellence in their work and to safeguard the overall professional integrity of the organization. The insulation of the OECD Secretariat from the cross-current of national and international politics gives it a unique professional status and role, analogous in its own context to that of the German Bundesbank in that country's economy. In the 1980s, the OECD Secretariat issued a "Proposed Economic Survey" of the UK that was highly critical of its policies, which infuriated the British Prime Minister. She demanded the Director of the Economic Division, a British citizen at the time, be removed from office. Of course, the Secretary General refused. In the end, some moderate language was found to placate the prime minister's anger, and the Director kept his position.

What role does the Secretariat play in this regard? Each specialized division of the OECD Secretariat in Paris is charged with the task of moving the agenda forward in its own domain. Divisions have developed through trial and error specific traditions and skills that are passed on from director to director and from team to team. In a metaphorical manner, we will then refer to the behaviour of the 'wise director'.

Building a common language is a major task for the secretariat of such a network. Implicit in most of the technical work is the concern for establishing common definitions. This is what is achieved when building a data bank. Disparities in data collection are reduced through the persistent work of OECD analysts. Each concept is scrutinized and eventually harmonized before a meaningful dialogue can take place on how to improve any specific policy. As we pointed out when dealing with the example of subsidies to agriculture, the creation of the PSE was equivalent to the definition of a new Esperanto word, one that everybody could use with the certainty of being understood.

But this does not suffice: culture, history, values, habits, and old conventions colour most words used by civil servants, and this can lead to misunderstandings and suspicions. As the example in the box below will reveal, even words as standard as 'preparing detail construction designs' can hide many traps.

The universe of public administrations reveals countless differences not only in language but also in the whole basis on which things are done (or not done). Each country functions between formal and informal arrangements. In some cases, bureaucrats are allowed to 'tinker with the law,' to adapt it to specific circumstances, while in other countries such things 'are just not done'. This compounds the existing linguistic differences and breeds misunderstandings and suspicions.

To render things even more complicated, bureaucrats in national administrations move around regularly. Often, some key senior figures will change just when a consensus is about to emerge. As those cultural differences generate obstacles to collaboration between national representatives, the 'wise director' spends considerable time in 'pointing the way' to various national representatives so they will know how to influence each other and unblock protracted negotiations. The director's role as a discreet mediator is critical, and second only to authoritative expertise.

In essence, wise directors know they can count on persistent conflicts and contradictions to keep things in balance, and that they can then tip that balance in favour of the most sustainable policy option and enforce consensus on it. In some cases those tensions are such that they can only wait for a new equilibrium to take its effect.

However, there are shifts that may be the product of simple changes in personnel within member countries. A wise director strives constantly to rebuild the equilibrium in order to avoid policy imbalances, which are the result of corporate memory losses rather than substantial movements of the fulcrum. Many techniques are used.

It should be stressed that the success of a Committee rests as well on solid work performed by the Committee's president, who must provide overall leadership, determination, and tact. This will be discussed in Chapter 5.

5.3 Publication Policy

Another little known fact about OECD is that, for the past 40 years, it has been one of the largest scientific publishers in Europe. OECD's steadfast policy of publishing the research results used for policymaking has contributed to enforcing those ideas and making a meaningful statement about transparency and accountability.

As a unique forum to discuss, develop, and adjust economic and social policies, the accessibility to OECD work is crucial. The publications and statistics of OECD cover economics as well as social issues, macroeconomics, trade, education, development, science, and innovation. OECD aims at providing easy access to its research reports, conventions, working papers, country surveys, and statistics. There are over 4,000 publications in print, more than 25 statistical databases on CD-ROM and almost all can be accessed on-line.

The OECD on-line library, Source OECD, is also of great value. In 2001, approximately 2,000 institutions had subscribed to this library, which includes OECD books covering 20 subjects, from Agriculture and Food to Transport, and the 24 OECD periodicals. In 2001, the American Library Association recognized this library as a "Notable Government Document" and "an invaluable resource for academic and research libraries." In addition, OECD statistics, which are collected by in-house analysts, committees, and working parties, and by national statistical agencies, are mostly available to the public through electronic and paper publications and through the Statistics Portal.

By publishing its findings, including data and statistics, OECD helps government decision-makers to adopt new measures. According to Chavranski (1997), with its diverse publications and analyses, OECD has a comparative advantage over such institutions as the World Bank and the IMF. Experts, media, and even public opinion make use of these research results thus granting to OECD a real weight in national debate (comments offered by Chavranski in his letter dated September 16, 2002).

In fact, the best-known work of the OECD may be its regular reports on the economies of its member countries. Each of the annual reviews includes an analysis of developments in the country as well as special reports and statistics. These reviews constitute valuable reference tools for governments but also for businesses, academics, and NGOs that can use these reviews in their dialogue with the government. In addition, OECD harmonizes, validates, and presents its statistics in a comparative form. Ministries and policymakers in member country governments utilize OECD statistics; academics, researchers and planners, but also journalists, NGOs, business associations and trade unions, use them and in this way they generate effective collective debate.

Through its diverse publications, OECD provides the results of numerous debates and negotiations. Some argue that the negotiation phase and the discussions leading to the achievement of an agreement should be made available to the public. On the contrary, we have argued that the debate itself should be kept private; some confidentiality has to remain. As we have mentioned in Section 1.2, part of the etiquette of OECD is that the confidentiality of debates is vigorously protected in order to build mutual trust. Finally, some may find the language used in most OECD work a bit too toned down. This may be true in some cases, but the major issues are still identified and discussed and can lead to stimulating debates in the public sphere.

Table 3.3
Key OECD Publications

Source: OECD 2002

SECTION 6
ADAPTING THE OECD METHODOLOGY TO A NEW CULTURAL ENVIRONMENT

From a very small group of countries, OECD has now expanded to 33 members. Other countries are 'graduating' into the select group of successful industrial economies, and may wish to join this elite club eventually. This raises a challenging question: Can OECD retain its edge and continue using the methodology that has made it successful with a much larger group? Already, some delegates and members of the Secretariat are expressing concern about OECD's absorptive capacity that they feel is stretched to its limits. The temptation is great for larger countries to create a restricted sub-group within the OECD membership. As we have just seen, the OECD method rests heavily on human relations, on bureaucrats learning together, understanding each other, and gradually learning to trust each other. This process is costly and labour intensive and the difficulties related to creating a homogeneous institutional culture are diminished if the group starts with a shared past and a common cultural background.

Should OECD members encourage the creation of regional regrouping that might be inspired by its methods? Can it be exported elsewhere? Those are challenging questions for OECD members to address.

In any case, so little has been written about the organization that very few specialists have thus far reflected on these matters, especially the complexity of transferring this unique method to another set of countries. We offer a few thoughts about the inherent difficulties related to such a challenge.

To begin with, the OEEC example clearly demonstrated the need for some intellectual and moral bases that have to be established in order to define the work to be done. It should be stressed that perhaps the best way to start is to define a broad set of rules, implicit and explicit, through which members' governments should function effectively on a continental or regional basis. It is impossible to conceive of a peer review process that is not grounded in the governance approach in a given region, or at the very least in those countries that wish to be active in the Peer Review process.

It is critical before proceeding with a transfer of techniques to take into consideration two important caveats. In order to achieve a successful adaptation, numerous elements have to be taken into account, including the internal coherence characteristic of any management system as well as the inherent difficulties related to the introduction of new values. The first considers the importance of preserving the intrinsic or essential linkages, to the proper operation of a system and, the second reminds us that it is practically impossible to simultaneously introduce several new values in the behaviour of societies.

6.1 Respect for Essential Linkages

Any management system, such as, for example, Peer Review, the manufacturing of cars 'just in time,' or even management by objectives, includes aspects that are essential to the functioning of such a system and which we cannot ignore without endangering the operations of the whole. This is what Berger (1973) calls intrinsic linkages. But for each of these systems, there also exist parts that are not essential to the operations and that can be modified or abandoned without creating problems. These constitute extrinsic linkages. It is vital to distinguish clearly the intrinsic linkages from the extrinsic linkages when there is a transfer of technology, or when one is trying to introduce a management system conceived in a different culture (Berger, 1973: 27). Berger introduces the concept of componentiality, i.e. "a strategic element in the cognitive style [...or, said otherwise]. The apprehension of reality in terms of components is essential to the reproductibility of the production process... From this follows the interdependence of components and their sequences." Reproducing a given process (technological or bureaucratic) and reaching same or similar results is possible because the components are "continuously interdependent in a rational, controllable and predictable way." Therefore, to successfully transfer a package of interdependent components such as Peer Review requires careful analysis of the components and their interdependence. If this was technological, it is doubtful that it could be transferred without much preliminary research, testing, and adaptation. However, Berger later argues that bureaucratic systems have "a greater degree of variability than is possible in the technological production. ... In political bureaucracy there is less pressure from the logic of technology and therefore more of a chance for the peculiar "genius" of bureaucracy to unfold" (Berger, 1973: 42). This is possibly the challenge that confronts any new importers of this method.

For example, if we want to operate an airline, not only must the pilots learn to fly but we must also ensure that they manage time in a very precise manner. An airplane is neither a truck nor a horse that we can stop whenever we feel like it. If the pilots do not calculate the flight time correctly, taking into account winds and the weight of the cargo, airplanes may crash. One must also ensure that preventive maintenance of all the airplanes is performed. It would be out of the question to just take off, saying to ourselves: "If it breaks, we'll stop by the side of the road until the tow-truck comes to get us." We can therefore say that time management and preventive maintenance constitute intrinsic 'linkages'. These practices form a coherent whole and are absolutely essential to the operation of an airline.

Conversely, the presence of flight attendants on airplanes is not an essential linkage for the proper operations of an airline. We could replace them with stewards or supervisors or, worse case scenario, we could even ask the more experienced passengers to help the novices. This is therefore an 'extrinsic linkage' that could be adapted, modified, or even ignored.

Too often, unfortunately, those who attempt to transplant new ideas into a different environment are unaware or even forget to highlight these important distinctions. The new users, poorly informed, change things willy-nilly and often without realizing that some of them are essential. The OECD Basic Rules of Conduct as they are defined in Section 1.2 are composed of a set of rules, which, for the most part, are clearly essential linkages that must be taken into account when introducing Peer Review into a new political, economic, and social context. A few rules, however, could be simply modified. One would assume, for example, that the 'Part Two' approach to introduce flexibility in the organization might be replaced by other more suitable methods.

6.2 Introduction of New Values

Experience has shown, in a very convincing manner, that 'values' are still the hardest thing to import and to modify. We can learn new techniques or acquire new knowledge, but it is notoriously difficult to adopt a behaviour that is based on values that are foreign to one's society. Societies' fundamental values evolve gradually, and the introduction of new values is always faced by traditional reflexive reactions. The problem of modernization is not to get people to work (there is widespread evidence that people in just about every area of the world have the capacity to work systematically and well, to be trained in modern methods of work and to acquire high degrees of technological skills), but to get them to work in a particular way. This involves the imposition not only of external patterns of activity but, equally important, of specific structures of consciousness. Until identification with the latter has taken place in the consciousness of the individual, the external patterns are perceived as alien and essentially meaningless. As long as the new patterns are not internalized (that is, integrated within the individual's subjective structure of consciousness), they 'sit on' the individual in a loose and superficial manner. Adherence in one context can only imperfectly be transferred to another context (Berger, 1973: 124-125).

Those who are going to use methods specific to Western cultures must, therefore, demonstrate both insight and ingenuity. In fact, to properly adapt a management system, which, as we have seen, is always imprinted with cultural perspectives, we must generally find some means that can support these new behaviours with the 'importing' society's own values. Indeed, we must understand our own traditions thoroughly to be able to integrate their related values with those coming from abroad. It is also often necessary to tinker a bit to find bridges that will make it possible to undertake such transitions. Thus, it is out of the question for a foreigner to adapt the structures from his society to a society whose operating rules the foreigner only partly and superficially understands. Such a task would, therefore, fall onto the shoulders of the managers of those who are, in a sense, importers of technology. It is the importer who must define the essential adaptations.

OECD's institutional culture corresponds to a value system that, as we have explained, is linked to the Anglo-Saxon mentality. It is a flexible architecture within which decisions and informal relationships end up carrying a lot of weight and, even sometimes, more weight than formal declarations. There are many conventions that are unspoken, but that does not mean that they are not followed to the letter. To the three founding values—respect for democracy, human rights, and the benefits of the market economy—are naturally grafted the other values that already existed within Western societies. The following examples seem particularly relevant.

• The Western tradition of so-called "decentralization of power" is not new, but corresponds to old traditions so firmly anchored in custom that we no longer think about it. Therefore, it was completely normal for those who designed OECD's operating rules to insist that mid-level management were, in fact, the clientele targeted by the institution. It is the latter that, within Western public administrations, design, initiate, administer, and write amendments to policies. During my readings, I found this interesting observation made by an Arabic commentator during the Crusades. It is quoted and commented on by Amin Maalouf in his book, The Crusades Through Arab Eyes (Malouf, 2002: 301): "among Westerners, the power of monarchies was governed, at the time of the Crusades, by principles that were difficult to transgress. Usamah [Ibn Munquidh] remarked during a visit to the kingdom of Jerusalem, which "when knights render a sentence, it cannot be changed nor annulled by the king".... Their society [that of the Franks, of the Crusaders] has the benefit of being a "distributor of rights." The notion of the citizen does not exist yet, of course, but the feudal "infidels" the knights, the clergy, the universities, the common people and even the peasants all have established rights. In the Arab East, the procedure for tribunals is more rational, but there is no limit to the arbitrary power of the prince."
  
  
• We could say as much regarding the respect we, in the West, give to the linkage between science and government. The Renaissance³ saw the rise of the notion of the separation between scientific knowledge on one hand, and spirituality and the Revelation, on the other, and then between the religious powers and the civil ones. Afterwards, all these notions became interwoven and gave birth to the idea that the art of governing could be studied 'scientifically' like any other subject. This conviction, firmly anchored in custom, inspired the founders of OECD, who designed a model based on the notion that governments can examine themselves 'objectively.' In addition, they can help each other to do so with a professionally neutral and objective secretariat that would not hesitate to criticize their behaviour, with no risk of reprisals or censure.
  
  
• Finally, the peer review system presupposes that the members are what some sociologists define as 'tolerant of conflict' in order to accept having their behaviour criticized and, in turn, to be able to criticize that of other members. Here, the terms 'conflict' and 'conflict tolerant' refer to divergences of opinion, to conflicts between interest groups and, more generally, the acceptance of open and equal debates where each person can express his or her views without concern about power differentials or hierarchical differentials. Violent conflicts are the unfortunate result of poorly managed conflicts. Violent conflicts characterize 'conflict avoiders' as much as they do those who are 'conflict tolerant'.

If it were not for this deep capacity to accept conflict and to engage in debating in an egalitarian manner, this method could easily be adulterated. In fact, we should be concerned that individuals start avoiding saying the slightest disagreeable thing for fear of starting a debate, bothering or injuring someone who, some day, could do the same to them. The result is then a weakened and essentially useless evaluation system. It is evident that no society could survive

³ Out of concern for history, we must remember that these great ideas often found their origins in the great Greek philosophers, particularly Aristotle and Plato. After passing through Arab philosophers, these ideas returned to Western Europe in the 15th Century and started what was then called the Renaissance. At the political level, Machiavelli was the first witness to the new thinking regarding 'good governance' while he was writing The Prince, which is still considered as the first treatise on Power. But historians will put forth the argument that it is really during the Reformation that the concept of the separation of Church and State was established and translated into reality

for very long without the possibility of criticism at all levels, because it is criticism that triggers the search for innovation and the pursuit of new behaviour and new values. Cross-cultural studies reveal that there exist, in most cases, traditional mechanisms that play this role while still respecting the solidly Imbedded taste for etiquette and courtesy. These could be the inspiration for the method used to adapt peer review to a new environment and to different reflexes.

SECTION 7
SUMMARY AND CONCLUSIONS

"What good is melody?

What good is music?

It don't mean a thing

If it ain't got that swing"

Music by Duke Ellington,

lyrics by Irving Mills, 1932

In short, the peer review system should not be considered in isolation, nor should it be viewed as a universal panacea that will guarantee good economic and political governance for countries that are badly managed. It requires a very strong national motivation, inspired most likely by the general recognition that without reform the country's future is at risk. We may say that it is a strong remedy that requires firm commitments both on the part of those who want to reform their management and those who want to help them. This symmetry of commitments between partners is analogous to what we find between patient and doctor: without mutual trust, without stability, it is vain to expect much from this method. It represents a long-term effort and a gradual and collective learning process. The financial effort, the discipline, and the political steadfastness required of each member state to sustain this approach are considerable.

With time, and especially with the sustained economic growth of its members, OECD has grown and has come to make use of all the powers granted it by its charter, which today makes it a costly, complex, and multifaceted model, possibly too big and too complex, some representatives may argue. But, in any case, it did not start out this way. Europeans, with the help of their 'American cousins,' began with only the bare bones of an organization. They devoted all their attention to solving a few very concrete problems, such as lowering tariff barriers, something that seemed to them, a priority, both important and possible. This initial success bolstered their confidence and emboldened them to tackle increasingly complex and difficult tasks. This is surely a reasonable path that could be imitated by other countries.

The essential features to bear in mind are the following. First, everyone must start with a strong motivation on which a commitment can be built. This commitment breaks down into three aspects that are interrelated and must always be present: a commitment to work together, a commitment to submit economic policies to peer review, and a commitment to provide all the information that the organization needs. It is important to understand thoroughly and, when necessary, to adapt all the complementary mechanisms supporting the delicate architecture of peer review, which we have lumped under the heading 'the rules of the game'. This method will not be appropriate in all circumstances, and it will be important to assess its feasibility in great detail before proceeding.

Chavranski, for example, considers that "the Asia-Pacific Economic Community (APEC), which only recently made its appearance and is now growing in power, has been presented (or conceived) as a possible alternative to the OECD, and perhaps even as a way of isolating a Europe that is running out of steam. The great economic, social, and political disparities of APEC members, and the persistent tensions between China and the United States, make this a highly unlikely scenario" (Chavranski, 1997: 14). Furthermore, careful consideration should be given by any other group of countries wishing to make use of the peer review method to adapt the OECD methodology to local cultures and traditions, as well as to specific conditions and governance systems.

We believe, however, that many of the techniques essential to the functioning of OECD could be exported, and could perhaps in time lay the basis for a specific institutional culture in which peer review could be introduced. In short, before we place the keystone at the top of the arch, we must first build solid walls on which each of the stones in that arch will rest. And we must also have good masons and skilled architects.

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