The OECD Should Promote Economic Growth, Not Redistribution

Bildschirmfoto 2018 07 05 um 17.33.31

Perhaps, instead of asking how the pie should be distributed, the OECD should ask how to make it bigger.

Most supranational governmental organizations in the world have a rather questionable track record in promoting freedom, peace, and economic prosperity. But the Organization for Economic Cooperation and Development (OECD), based in Paris, could be the worst. Consistently promoting higher taxes, more redistribution of money, and more government spending, it has given bad advice to governments everywhere in the world for quite some time, from the US to Latin America – all of it on taxpayer’s dime of course. “Though it gets strong competition from the International Monetary Fund, the Organization for Economic Cooperation and Development wins the prize for being the worst international bureaucracy,” says Dan Mitchell, too.

No exception to its disastrous legacy is the OECD’s newest platform called CompareYourIncome.org. It is here where Average Joe can find out how much the rich are betraying him from his legitimately earned wealth. Of course, that’s not what the tool is officially all about. The purpose is instead to find out the following:

When you think about your household’s income, do you feel rich, poor, or just average? Most of us have no idea – or the wrong idea – of how we compare with the rest of the population. But here, in 10 clicks, you can find out how many households are better or worse off than yours, and see how your ideal world compares.

Isn’t it beautiful? Just ten clicks to compare yourself with the citizens of the world. Actually, the tool is not as innovative as the OECD seems to think. You can find out where your income ranks nationwide – then again, you could just do a Google search to get the data. You can find out whether you are better off than your parents were at your age (you are) – but then again, just thinking of living conditions a few decades ago will give you the answer. You can indicate whether you think the next generation will be better off than yours – but, naturally, you will not get an answer from the OECD, since no one knows for sure. And you can also check how much wealth the richest ten percent of your country hold in comparison to the bottom ninety. Again, a quick look at the stats (or Google Images) are enough, though.

Only at two points it gets a little thornier: the OECD wants to know what you would like the situation to be. For one, how I would divide up the income of my country:

But also, how I want the distribution to look like:

I don’t know how you feel about this, but I am at a loss. How am I to decide on this? What would it even mean for me to decide on this issue? Would it cause redistribution in the way I like it? And is there a right answer? For the social justice advocates of the OECD there seems to be. But as Hayek always reiterated, the concept of ‘social justice’ is an oxymoron anyway. Who am I to argue if some have more than others if they fairly earned the wealth they hold? Of course, those that have a lot should help those out that are poor. But is there any reason why those who are successful shouldn’t get an appropriate gain out of it – or the profit that the rest of society allocates to them through voluntary cooperation and trade? Or, to use another useless buzzword, shouldn’t they receive their “fair share” then?

The main problem in the thinking of the OECD is perhaps that they assume that wealth can’t increase (even though its own tool proves the opposite). The question that introduces to the tool is “What’s your share of the pie?” The OECD’s idea seems to be that you have a pie with a fixed size which will never get bigger or smaller. Let’s say the richest ten percent have accumulated ninety percent of the wealth. Then it will forever stay the same and the poor will always stay poor on the same level. Thus, you have to redistribute the wealth to make it more equal and help the ninety percent.

However, this is one of the great falsehoods in today’s political discourse, perpetrated by the likes of Bernie Sanders and Jeremy Corbyn. In reality, the size of the pie changes constantly – it can get both bigger as well as smaller. Both the ten percent as well as the ninety can get richer and poorer over time. In the last two centuries, the pie has increased dramatically. Wealth has increased almost everywhere in the world. The poorest of today in industrialized countries are materially richer than the richest just one century ago. The poorest of the poor around the world have escaped poverty in masses. And yes, indeed, “the rich,” if we look at them as one static group (which they are not, since economic mobility exists), have also gotten richer. All of this has happened thanks to free trade and the market system.

Tragically, the advice the OECD gives would ultimately shrink the pie. Almost everyone would be worse off in a system of bigger governments and less freedom. Perhaps, instead of asking how the pie should be distributed, the OECD should ask how to make it bigger.


  • Kai Weiss

    Kai Weiss is the Research Coordinator of the Austrian Economics Center, a board member at the Friedrich A. v. Hayek Institute, and a graduate student in politics at Hillsdale College.

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The views expressed on austriancenter.com are not necessarily those of the Austrian Economics Center.

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