Organization for Economic Cooperation and Development was founded in 1948 to promote growth, employment and financial stability in the Member States. In this way, the OECD wanted to contribute to sound economic development in the world.
It is sometimes called a wealthy club – the Organization for Economic Co-operation and Development (also known as OECD according to Abbreviationfinder). Together, the 37 member states account for almost two thirds of the world’s gross domestic product (GDP), three quarters of world trade and more than half of the globe’s energy consumption.
The OECD advocates liberal and democratic values and seeks to promote free trade, economic development and growth. All member countries are industrialized countries with similar societal systems and values.
According to the convention which sets out the objectives of the OECD’s work, the organization shall strive to:
Achieve the highest possible sustainable economic growth, employment and living standards in the Member States, while maintaining financial stability. Through this, one must contribute to the development of the world economy.
- contribute to sound economic development in both member and non-member countries.
- contribute to the increase of world trade on a multilateral, non-discriminatory basis in accordance with international obligations.
The OECD is above all an intergovernmental cooperation body for the governments of the member states, which in the OECD’s premises in Paris has the opportunity to discuss common issues and problems. The co – operation is based on analytical studies and voluntary co – ordination of Member States’ policies. But the OECD also has extensive co-operation with non-member countries and NGOs, and aid and development issues are a key area of work. The OECD is perhaps best known for its compilation of economic statistics on growth, GDP, inflation rates, etc., or its economic country forecasts with advice and criticism. These are often included as a basis for individual countries’ decisions on economic policy issues.
The OECD has been in a difficult budget situation since the mid-1990’s. As in the UN, the United States in the OECD has at times not paid in its full grant amount, mainly due to the US Congress’s restraint in allocating funds to international organizations.
The consequence has been a demand for the OECD to lower the total budget in order to counteract the fact that the US contribution increases with the addition of new members (see below).
The OECD’s total budget has been extended over two years since 2003 and consists of two main parts. The work programs in which all Member States are obliged to participate are financed through Part 1. The activities that fall under Part 2, on the other hand, have different memberships and sometimes individual non-member countries also participate. The budget is therefore distributed differently for the different activities within Part 2.
The total budget (part 1, part 2 and supplementary budgets) for 2002 amounted to EUR 155.7 million (SEK 1.42 billion), of which part 1 accounted for the majority. The USA and Japan make the largest contributions, around 25 and 23 per cent, respectively, to part 1. Sweden accounts for just over 1 per cent. The minimum membership fees are around 0.1 percent.
In an attempt to overcome the difficult budgetary situation and achieve stable funding, the OECD set a target of reducing the budget by 10% in 1997–1999, which resulted in cuts, mainly in the administration. Since 1995, the budget in real terms has been cut by a fifth.
Member States pay their contributions according to a contribution scale, which is calculated on the basis of the ability to pay the country is considered to have taken into account, inter alia, GDP and population. However, a change in the contribution scale within the OECD has been discussed, and it is the United States that has pushed the issue. Without the 25% ceiling on the share that a country will have to pay, the United States would have paid about a third of the OECD’s budget.
As more countries become members, the OECD’s budget usually increases. A country whose share is limited to 25 percent then automatically receives a higher nominal contribution, ie the quarter is more in money. Other Member States, which have not already received a rebate through the ceiling, may in some cases see their percentage contribution reduced, as more Member States will be helped to finance the remaining 75%.
For the smallest countries (Iceland, Luxembourg and Slovakia) a floor of 0.1 percent is applied. They have to pay 0.1% of the OECD’s budget, even though their contribution share would actually have been lower. In practice, this means that an Icelander, via tax money, pays four times more for membership than an American, if you exclude the membership fee per person. This is often pointed out by the small states as the largest want to change the grant scale.
The OECD also accepts voluntary contributions from member countries. These have partially offset the budget cuts, but the voluntary contributions are more uncertain than the mandatory ones. The voluntary contributions are usually given to support a special area of work that is important for the donor country. Japan, the European Commission and the United States have made the largest voluntary contributions.