URGENTLY NEEDED: AN OECD, MARK II, FOR THE NIC'S What the OECD Is and Why It Is An Important Model for the NICs We recently celebrated the fortieth anniversary of the creation of the Marshall Plan, the enormously successful agent of post WW-II recovery in Europe and prototype for dozens of less successful development programs elsewhere in the world. Recognizing that America alone could not bring about Europe's reconstruction, Secretary of State George Marshall invited the nations of Europe to form their own organization to study the needs, make recommendations, and allocate U.S. aid. The agent resulting from these deliberations was the Organization for European Economic Cooperation, consisting of all the countries of Western Europe, both Axis and Allied, occupied and neutral. It is, of course, now recognized that the miracle of Europe's rapid recovery was due to the fact that the Continent already had in place the greatest reservoir of unemployed human capital in existence, and all that was needed were the financial resources to put its economy in motion again. This was not at all self-evident at the time, however, and any number of development programs were subsequently introduced around the world, many backed by U.S. development assistance, based on the partial insight of the Cobb-Douglas model, itself developed from the Marshall Plan experience. In its simplest form the Cobb-Douglas function can be expressed as: K ; A ; L = Y, where "K" represents capital, "A" represents land (acres), "L" represents Labor and "Y" signifies total output, or GNP. The superscripts represent the relative weights of the factors of production in any given economy. Since K is the most obvious variable and since injections of U.S. financial assistance had worked such evident miracles in Europe, this suggested to most analysts at the time that economic growth was directly related to injections of capital. And, consequently, that the way to promote development among the less developed countries was transfers of capital on more or less the same terms as those which had promoted such rapid growth in Europe. Now it is understood that human capital, "L", is an essential prerequisite for the efficient application of "K". And, as it turns out, human education is perhaps the most capital intensive form of investment there is. Establishment of this fact was in no small measure due to one of the early studies of the (later) OECD, where it was found that there existed a large unexplained "residual" in the factors contributing to the rapid growth of the OECD during its "Growth Decade", the first common challenge adopted by the new organization. It proved that the "residual" represented human capital or "know how", which considerably multiplied the static effects of A, L, and K. Investment in human capital requires a lead time of up to twenty years to reach fruition -- at least in its most critical forms -- trained engineers, medical doctors, and the o her learned professions. In retrospect, it is no wonder that where the recovery of Europe took a mere eight or ten years, Africa and Latin American development is just now meaningfully getting underway after a twenty-five year lag. (Attention really only turned to Third World economic development in 1960 when European recovery was already an accomplished fact and the Marshall Plan agency, the Organization for European Economic Cooperation, was in process of being reconstituted into the OECD -- the subject of discussion in this paper). Though invited to participate in the OEEC at its formation in 1948, the Soviet Union and its Eastern European satellites notified the United States that they would not join. As a result of this nonparticipation, presumably motivated out of fear of contaminating the Soviet bloc countries with liberal, democratic ideas from Western Europe, the East did not receive U.S. reconstruction finance and still lags behind the rest of Europe in both its level of efficiency and standard of life. Only now is General Secretary Gorbachev striving to reform by introducing elements of competitive pricing to allocate factors of production and assure the more efficient distribution of goods. Indeed, the Soviet Union and its Comecon partners participated but reluctantly and partially in the various UN economic programs, including their refusal to submit timely, accurate, and comparable statistics to the UN Economic Commission for Europe (ECE). This had ramifications for the evolution of Western European cooperation. The Perestroika program of Chairman Gorbachev may have contrary ramifications for the broadened OECD program outlined below. With a paralyzed UN, the OEEC began the task of collecting and collating trade and production statistics for participating Western European nations. Soon its remarkably able Secretariat was publishing quarterly economic date which, by reason of their accuracy and comparability, proved of extraordinary value to national policy makers in formulating the international trade and domestic programs which made possible the European Economic Miracle. The OEEC also early adopted the practice of regular meetings of Trade, Economics, and Finance Ministers for the exchange of policy experiences and near-term intentions, which have ever since constituted one of the more significant contributions of the Organization and its successor, the OECD. This was the first time in history where such accurate and timely data and meetings of top government officials occurred on a regular basis. The recovery of Europe accomplished, participants in the OEEC experience, and admiring outside observers, were reluctant to terminate these valuable activities of the OEEC and see its extraordinary Secretariat disbanded. Indeed, with the setbacks which had been experienced in the attempts to achieve European political integration as a result of the semi-paralysis of the Western European Union and the aborted European Defense Community, Jean Monet and his Europeanist associates looked at the success of the OEEC as a model for a new try at accomplishing the essentials of integration, through an appeal to the pocketbook interests of member nations, agreeing with the Sage that, "Where one's treasure is, there will one's heart be also." In 1958, just ten years after the OEEC, the engine of the "European Miracle", came into being, was created the European Economic Community (EEC), including the European Iron and Steel Community which had proved remarkably successful in uniting the forces of the Saar/Ruhr basins to stimulate the recovery and development of these adjoining regions of France, Germany, and Belgium. The EEC, which has during the course of its existence evolved into the EC, or European Community -- today incorporating the European Parliament, the European Court of Justice, and EURATOM. While somewhat less successful than its founding fathers intended in bringing about European political union, the EC has proved to be enormously successful at least in the field of economics, and has experienced remarkable progress both in membership and the scope of its activities. In recent weeks the EC Council announced 1992 as the target date for achieving full common market status with totally free movement of goods, services, and manpower among member states. Britain, Ireland, Switzerland, Austria, and the Scandinavian countries chose not to join the EEC for various reasons -- Britain through lingering insularity and an attachment and sense of responsibility to the Commonwealth; Austria, Switzerland, and Sweden restrained by their respective neutralist policies; and the other Scandinavian countries because they were still pursuing the ignus fatuus of their so-called Nordic policy. Shortly, however, finding themselves disadvantaged in trade by the existence of the EC, these nations, plus Iceland, and Portugal, in 1960, formed their own somewhat less comprehensive defensive trading bloc, the European Free Trade Area (EFTA). As one wit soon had it, Europe was now at Sixes and Sevens. Sensing the divisiveness of these two economic groupings within the NATO Defense Community as the Krushchev challenge began to heat up the Cold War, means were sought to bring the Six and Seven into a more harmonious, or at least less confrontational relationship. Coinciding as these events did with the recognition that the work of the OEEC was done, yet taking into account the desire to maintain the valuable contribution to statistical knowledge of the OEEC Secretariat and he highly utilitarian meetings of senior economic and financial officials, adding in the admiration (and perhaps envy), of the United States and Canada as they saw the fully recovered European economic powerhouse outstripping the sagging performance of the post-Eisenhower U.S. economy, plus the search for a response to the Krushchev challenge that the Soviet Union was going to bury the West economically (which at the time was seen by some as a serious challenge), governments were led to appoint a group of "Wise Men" to make recommendations regarding the future of the OEEC. In their report, the Wise Men recommended that the OEEC be reformed and reconstituted with its principal activities being continued as the Organization for Economic Cooperation and Development . "Europe" was now gone from the title, and "Development" was added to reflect the contemporary interest in development economics and the added role of the new organization in lending the experience of North America and Europe to the Third World and in coordinating the development efforts of the broadened OECD membership. Upon ratification of the treaty on December 14. 1960, Canada and the United States became immediate new members of the OECD. Japan, already the leading economy of Asia, was admitted in 1964. Neutralist Finland joined in 1969, and the principal Commonwealth trading partners Australia and New Zealand joined in 1971 and 1973, respectively, bringing current OECD membership to twenty-four. For various policy reasons important at the time, Greece, Portugal, Turkey, and Yugoslavia had become members of the OEEC and continued as members providing the new OECD with valuable bridges to Eastern Europe, the Arab world, and the LDCs. So, while the OECD has as members all of the richest nations of the earth, accounting for over 60 percent of global GNP and upwards of 80 percent of Free World Trade, for which reasons it has come to be known as "The Rich Men's Club", it is, in fact, remarkably diverse in its membership. It includes both large and small populations; highly advanced, as well as less developed economies; Free Market and quasi-Command economic systems; the most democratic and some less-democratic forms of government; and incorporates European, Eurasian, Oceanic, and Far Eastern members. Looking at some of its economic diversity, for example, the GNP of the United States, the largest member, is a thousand times the size of the GNP of Iceland, the smallest member. Exports account for 104 percent of Luxemburg's GNP, but only 7 percent of the U.S.'s. Less than 3 percent of Britain's labor force works on the land, compared to 57 percent of Turkey's. An Overview of the OECD's Contributions to Member Country Well-Being In its present incarnation, the OECD continues to provide significant services of great importance to member states. Perhaps most significant among these are: 1. The continuation and amplification of the series of unsurpassed quarterly economic reports covering all member nations on a fully comparable basis. While researchers must wait months, and sometimes years, for comprehensive UN data, quickly available OECD data cover at least 70 percent of essential world trade/production research needs. Economist have never in the past had access to such current international economic data, and one has only to compare the quality of economic studies relating to any OECD member state with those depending on the estimated and defective data for most other countries in the world to appreciate this contribution. 2. An increased sense of professionalism among the statisticians who prepare national accounts in member countries, knowing that they are part of a team international experts the reliability of whose work must be defended before the professionals of the Organization. Unlike so many other international groupings, member countries have never been so much as suspected of submitting doctored data, though some have protested at the interpretation of these date by secretariat analysts. 3. A continued series of meetings held on a regular basis, now expanded to include virtually every significant economic agency of participating governments, including in addition to Ministries of Finance, Commerce, Economics, and Development Assistance, those responsible for Energy, Education, Labor, and Environmental affairs. Several meetings are scheduled every day of the week at OECD headquarters in the Chateau de la Muette on the edge of Paris' Bois de Boulogne, and at least once a year meetings are held at Ministerial level to exchange views and discuss current and planned policy changes, thus avoiding to the extent possible surprise introduction of new policies, which, without such advance notification, might conflict with or even cancel out policies of partner nations. Theoreticians have come to call such exchanges "The International Policy Coordination Instrument", pointing out that through introducing an added degree of freedom, this amounts to a fourth instrument of economic policy, supplementing the traditional monetary, fiscal, and trade policy instruments. In a period of increasingly complex and demanding international interdependence, this additional degree of policy flexibility has proved not only useful, but essential. Certainly the developed world has never before experienced two such extended periods of uninterrupted prosperity as those of 1962-66, immediately following the creation of the OECD, nor 1983-88, following its rediscovery by the United States. Nor has it confronted more serious economic challenges than the oil embargo of 1971, followed by the LDC debt problem of the '80s .Insiders attribute the success in achieving such unprecedented growth in the face of such major challenges in no part to the OECD and the effects of the International Policy Coordination Instrument. Certainly, the need to defend national policy and respond to the probing questions of one's peers has been instrumental in reinforcing the good sense of national policy makers, restraining them from resorting to rank expediency, as so often in the past, when considering the policies they recommend and pursue. 4. The scheduled reports and special studies requested by Ministers, the Committee of PermReps, or the limited membership Executive Committee (EXCOM), prepared by the able Secretariat, addressing various national and international problems, bringing to the attention of member governments in appropriate meetings Secretariat findings and recommendations for consideration by policy makers are also major contributions of the Organization. Among such regularly published studies are the popular and highly useful Country Studies of the Economic and Development and Review Committee (EDRC) which examine on an annual basis (occasionally more frequently) the policies and performance of each member country, with observations on how these effect the performance of the OECD as a whole. Each study includes recommendations for policy changes considered desirable and endorsed by the full EDRC. Among the highly regarded regular reports are the annual Short-term Forecast, generally considered the most authoritative, if not always the most accurate, pertaining to the major trading nations. While some consider the Forecasts have declined in precision in recent years, in all but 1974 (with the U.S. essentially sitting out) they have been with two percentage points of the outturn. A further important publication is the monthly Economic Outlook , containing the regular statistical series and articles on matters of topical interest. The Country Studies have proved particularly useful to knowledgeable politicians and technicians in members governments who not infrequently encounter difficulty in recommending sensible policies to colleagues of narrower outlook. It is common knowledge among insiders -- though this is seldom admitted openly -- that national representatives have asked for inclusion in EDRC reports of specific recommendations which can be used to reinforce arguments in battles being waged at home. Of course, this is only done where such policies also make economic sense to the Examining Countries (chosen from among the subject's major trading partners) and the other members of the EDRC. (For reasons of economy of time and staff, not every member of the OECD is represented on every committee. The so-called Group of Seven -- the U.S., Britain, France, Germany, Italy, Canada, & Japan are permanent members of all major committees, with other member countries serving in rotation.) Exceptions are the more severely limited Working Party 3 of the Economic Policy Committee (see discussion below) which deals with International Finance and the Balance of Payments, and the EXCOM which represents the major country representatives transacting interim business on behalf of the full committee of Permanent Representatives. Both WP-3 and EXCOM must, of course, report periodically to the full committee, defending any actions they have taken or recommend, as well as to the Council of Ministers in their annual meetings regarding policies of highest interest. So representative democracy in this international organization is maintained at least as successfully as in most parliamentary governments where committee work is essential to keep the process of government moving forward. (The OECD is, of course, not a government and, indeed, doesn't even qualify technically as an international organization. As its present Secretary General Jean-Claude Paye has said, it is " . . . a place where policymakers can meet and discuss their problems, where governments can compare their points of view and their experience. The secretariat is there to . . . act as a catalyst; nor does it have the authority to impose its ideas. Its power lies in its capacity for intellectual persuasion." When Walter Heller was Chairman of the Council of Economic Advisors, and hence chief U.S. representative and Chairman of the Economic Policy Committee, his inside knowledge of the intentions and thinking of the Kennedy Administration (reciprocated by equally capable colleagues from other member nations), made these exchanges especially meaningful and contributed to the accuracy of the Short-term Forecasts. This led to unparalleled success in managing member country economies during the decade of the Sixties. Unfortunately, this resulted in the hubris which has sometimes brought down nations, and Ministers of Finance and Economics Ministers soon began thinking in terms of "fine tuning" or "micro-managing" their economies to make prosperity a one way street. This proved beyond the reach of economics as a discipline for reason not then understood, but which now seems to be the result of the inevitable cyclical instability of all events and processes into which the new field of Chaos Theory is giving us insight (see Fractals and Chaos Theory: The Limits of Economic Forecasting . Timmins & Timmins, Proceedings , SWEA. Houston. 1988). A Negative Interlude: Warning for Potential Participants in Mark II Unfortunately, during the Carter Administration, perhaps because of the lack of success in trying to fine tune world economies, or perhaps because the President had little knowledge or personal interest in international affairs, U.S. interest in and attention to the OECD faltered. Carter's senior economic officials found little attraction in attending what appeared to be time-consuming meetings in far-off Paris, of little direct significance to their jobs. In consequence, the accuracy, and hence the value of much of the work of the OECD suffered. With the U.S. participating only at functionary level, many other member nations began to send second-level officials who often didn't have personal knowledge of the intentions of their governments, and who were perceived as being unable to speak with authority on behalf of their principals. Countries soon began to avoid taking decisions in Council or Committee meetings, acting ad referendum , thus introducing a far less immediate atmosphere into the Organization's proceedings, and to some degree even a sense of disengagement. When new issues arose such as the Energy Crisis and the LDC Debt Crisis, new organizations were created to address them (though rediscovery of the value of the OECD (see below), the International Energy Agency has been absorbed into the OECD framework). Despite profound differences in style and substance between Reagan and Carter, President Reagan, with the exception of his focus on national defense, came to office with many of the same nationally- oriented preoccupations of his predecessor. It was not until the international Economic Policy Coordination Instrument had accumulated almost five years of rust from disuse, and the Secretariat, for lack of top level member country input failed to predict the recession of 1981-83, the worst since the pre-war period, that the value of the Coordination Instrument was rediscovered. As so often, absence sharpened recognition of old virtues. Six U.S. Cabinet-level officials attended the 1985 Ministerial Meeting, signaling the rediscovery by Washington of the value of the OECD and the International Economic Policy Coordination Instrument. While problems of international coordination remain -- the Germans have proved reluctant to expand their economy as rapidly as he U.S. and Britain desire (and as the OECD has recommended), and the Japanese have been slow to open their economy to many outside products (as the U.S. has urged bilaterally, again supported by the OECD), the return of the U.S. to first-rank participation and the active reactivation of the Policy Coordination Instrument have, despite these lapses, significantly contributed to the longest period of uninterrupted economic expansion in U.S. history -- the runner up expansion having occurred during the Kennedy Administration when the contribution of an international body to the growth process was more readily acknowledgeable. The current Administration seems to have a hang up on crediting the expansion to the Supply-side tax cuts that political opponents and most professional economists see rather as the source of unprecedented budget deficits and balance of payments disequilibrium. The contemporary failure of some member nations to acknowledge the contribution of the Organization to their prosperity aside, the major problem confronting facing the Organization today is that it has grown to a size which inhibits the free exchange of information by Ministers and other participating officials. Meetings with exchanges of twenty-four representatives simply take too long for the attention span of even the most dedicated public servants; and too much strain is placed on even an enlarged Secretariat to produce required studies. Even with the existence of restricted committees and limited working groups, the problem remains. Certainly the OECD could be further enlarged only with grave consequences to its effectiveness. Looking At Future Needs At the same time that the OECD has reached, if not surpassed the span of control frontier, a number of Newly Industrialized Countries have emerged (the so-called NICs), which could benefit enormously from participation in OECD-type activities: up-to-date, comparable statistics; the services and backing of a competent international secretariat, and exchange among policy makers of experience and outlooks to bring into play the Policy Coordination Instrument thus avoiding the canceling out effects of ill-considered and ill-timed conflicting policy measures. Some NICs, such as Taiwan, South Korea, Hong Kong, and Singapore, have already matched or overtaken some OECD countries, e.g. Portugal and Turkey in income per capita, and have far surpassed them in manufactures. This transition has been underscored by the February 1988 decision by the United States to drop Korea, Hong Kong, Taiwan, and Singapore from its list of Generalized System of Preferences beneficiaries under which special trade benefits are accorded developing countries. These nations will now face an average tariff of 5 percent, costing them around $500 million a year. As the world economy becomes increasingly interdependent, with such major economic preoccupations as the LDC debt overhang and incipient protectionist measures, the demand for such an organization is magnified. And the new perestroika program of Chairman Gorbachev and his recently expressed interest in closer relationships with South Korea as a means of engaging its economic experience in the development of USSR holds considerable promise of attracting the Soviet Union as a member of a new Pacific Basin OECD, Mark II. This would appear to offer promise not only of solidifying economic and social reforms within the USSR, but of improving the timeliness and accuracy of the Soviet Union's economic statistics, as appears now to be happening with regard to map declassification. This would clearly be of benefit to the whole world in terms of improved foreign trade forecasting. While the problems of the Third World and the NICs are different in detail from those of prostrate post-war Europe, the underlying economic realities are similar: Nations split into competing trading blocks, high unemployment, sagging economic growth, enormous indebtedness, lack of capital to replace (in the case of the LDCs, initially to build) infrastructure. Further to the call of William Maynes in the summer edition of Foreign Policy for new modalities to permit the NICs to enter into more permanent and rewarding relationships with the Developed World, it is suggested that a new OECD, Mark II could well adopt the emphasis of the original OEEC, concentrating on reducing trade barriers between member countries, drawing on the synergism of the International Economic Policy Coordination Instrument, and preparing a coordinated program (as with the draft Marshall Plan) to which the current OECD's Development Advisory Committee might respond as a major supplier of capital, taking the place of the United States' unilateral assistance under the original Marshall Plan. This new edition OECD, Mark II, might be composed of a second tier of like-minded nations would also benefit through the publication of accurate, comparable statistics; the exchange of views, policy intentions, and experience among national leaders in a series of regularly scheduled international meetings; and from regular and special studies in support of national needs, together with the technical recommendations of an experienced international secretariat, giving backing and force for the adoption of intelligent policy measures in the face of pressure for popular or expedient policies. And were the USSR to express interest in joining, as now does not appear entirely improbable, this could have considerable importance in terms of helping internal Soviet reform and integrating the USSR into the world economy, considerably reducing world tensions. How a New OECD, Mark II Might Be Created It is unlikely that left to their own, the NICs will find sufficiently compelling circumstances to bring them together. After all, it took the aftermath of the greatest war the world had ever seen, the extraordinary foresight of an extraordinary Secretary of State, and the unprecedented generosity of the United States acting in the rosy aftermath of a great victory to bring the recently warring nations of Europe together. The recent breakthrough in relations between Israel and its neighboring Arab states provides an attractive contemporary opportunity which should not be missed. It is suggested that the OECD itself take the initiative, calling together a group of qualified states for the purpose of discussing their needs and giving them a helping hand, in the spirit of George Marshall, to organize a new OECD, Mark II. It is, of course, unimportant what name the new organization carries. But just as the preservation of the essence of the OEEC was of psychological and material value to the new OECD, taking advantage of the reputation, prestige, and "know How" of the parent organization, similar reasons can be advanced for lending the name of the OECD to the new offspring organization(s). For one thing, it would respond -- at least in part -- to the aspirations of some of the more advanced NICs to join the "old country club" -- the OECD, something which is quite out of the question, for reasons already explained, despite the expressed interest of at least Korea in joining the OECD. Looking at modalities of how the new organization might take form and get underway, it might be recalled that the Harvard Business School lent its talent and some of its renown to help get started new business schools in France and Spain: the Institut Superieure des Etudes d'Administration (INSEAD) at Fontainbleau in France, and the Instituto Superior de Administacion de Empresas (INSAE) in Barcelona, Spain. In the early days of these schools, professors were brought to Cambridge to see how things were done at first hand; and a number of Harvard professors spent sabbaticals teaching in the new programs abroad, imbuing both administrators and students with the HBS philosophy.The OECD could play the same role with OECD, Mark II. Mark II could start by having its initial professional staff spend six months or a year interning with the OECD Secretariat, attending meetings and participating in drafting Secretariat studies. As a next stage, Mark II could initiate its own meetings, the initial agenda based on the felt needs of member countries as expressed at an organizing session, but basically patterned on the forty years' successful experience of the OEEC/OECD. Selected senior OECD personnel could be seconded to Mark II to help with start-up problems and to contribute to the transfer of philosophy/know-how. One would hope that regular exchange of personnel would continue on an indefinite basis, as with Harvard and its overseas offspring, to ensure continuity of the OECD spirit and harmonious relations not only between the two organizations, but between the "Rich" and "Newly Rich" member countries. New Outreach Possibilities For The Rich Nor would there appear to be anything to inhibit members of the present OECD becoming members of one or more of the new "Marks". For example, going significantly beyond Former Treasury Secretary Baker's suggestion for an Asian G-7, Japan, and perhaps the United States, might join an Asian OECD, Mark II, providing experience and leadership to a group comprised of Hong Kong, Korea, Singapore, and Taiwan -- fortifying relations with important trade partners. And the United States and perhaps Canada could similarly participate in an OECD, Mark III comprised of some of the Latin American countries listed, should this be acceptable and desired by them. This would extend the value of the International Economic Coordination Instrument in our relations with some of our important trading partners to the south. Possibly Britain, France, and Spain, each of which pretends some special relationship with the Arab world could be induced to participate in an OECD, Mark IV including Egypt, Jordan, Lebanon, and Israel -- open to later adhesion by other Arab NICs as their militancy towards Israel wanes. Certainly both Britain and France would wish to join an African OECD comprised of their more economically successful former colonies. West Germany, Austria and Yugoslavia (and why not Finland) might find similar interest in an association with some of the bordering East European countries now demonstrating a desire for more "glasnost" than the USSR has heretofore been willing to accord. Poland, Czechoslovakia and Hungary would be natural members of such a group. Indeed, it is not unthinkable that Russia itself might be prepared to participate in such a late-blooming Marshall Plan scion, whereas under Stalin they refused to join the original. Such overlapping regional economic pacts might be ideal and far more durable successors to the variety of regional defense pacts of a generation ago -- NATO, Warsaw, SEATO, CENTO -- several of which have disappeared with the passage of time. And, unlike the military pacts, the OECDs, like their parents, would be positive sum games, contributing to the wealth and prosperity of their members instead of being sinks for a substantial portion of national income. Not least in the value of establishing such new relationships would be their contribution towards reducing, if not entirely eliminating, conflicts over the differing economic interests of the two major competing theories of economic management still extant in the world -- particularly if a liberalizing USSR should choose to participate in a Pacific Basin OECD, Mark II (or III). This could also help to avoid a slide into the neo-protectionism which currently threatens world prosperity. A First Cut at Membership of the New OECD, Mark II Most difficult is consideration of what nations might appropriately constitute Mark II, though the difficulty lies not in identifying prospective members. The OECD itself is no longer a regional organization, though as the OEEC it started out that way. With the addition of the U.S. and Canada, it quickly took on the coloration of a group of like-minded trading partners, rather than a neighborhood group of old cronies. And the addition of New Zealand, Australia, and, above all, Japan, confirmed that orientation. It was probably as well that the Eastern bloc chose not to participate in the Marshall Plan. If it had, the OEEC might well have foundered in the confrontational tactics which have characterized the UN, in which case it would never have been given the second and more exalted life which has carried it in vigor past its first quarter century of activity -- over forty years, counting its first incarnation as the OEEC. ASEAN has shown the way, having created the equivalent of an OECD Mark II for Asia -- the so-called APEC, or Asia-Pacific Economic Cooperation forum, though there is still room for either further expanding ASEAN, or creating another OECD filial to take account of Korea (soon perhaps to include North Korea), Hong Kong, the Philippines, Malaysia, and Singapore; and Latin America, -- where the largest number of potential, but presently stultified developing nations are located; or Africa -- where the largest number of basket cases needing emergency resuscitation exist, one might equally well decide that avoiding both regional narrowness and philosophical contrariety might be the most successful formula for success. In this case, one might decide to skip the OEEC pupa stage and invite together for discussion a representative group of more or less equally developed and like-minded nations from all three regions of the world, or even from the Middle East, giving four. As Mark IIs and IIIs grow to strength and other NICs emerge, they will of course face the span of membership problem as the original OECD. In this event one supposes that further OECD equivalents might be formed to incorporate these groups, helping pick up those nations approaching qualification for OECD membership, but which do not happen to be conveniently located in any of the regions mentioned. Nor would it prevent eventual transfer of a nation to a more convenient or logical Mark with the creation of future OECDs, the passage of time, and the weighing of the circumstances which then pertain. Opinions will differ as to the countries which might most appropriately be invited to the first organizing conference called by the OECD. Final decision on the invitation list will naturally be made by Ministers in an annual meeting, probably acting on recommendation of the Secretariat and Executive Committee. Some invited countries may well choose not to participate, at least until they see how the new organization is taking form. It will undoubtedly prove difficult to reach consensus regarding some countries, otherwise qualified, regarding which there may be political problems, e.g. South Africa and Israel. The following lists, therefore, are no more than suggestive, intended to demonstrate that there is no lack of Newly Industrialized Countries to make up Mark II (or, indeed, Marks III and IV). The discussion of these countries is neither technical nor exhaustive. Presumably the OECD Secretariat, possibly the EDRC, will prepare analytic studies of each potential invitee. The few words on each country offered below are intended as no more than a brief outline of some of the particular characteristics which make that country's candidature worth examining. Others would undoubtedly differ both as to the countries included in the suggestive list and the reasons for their inclusion. But in suggesting such a major new departure in international economic organizations, one must start somewhere to get discussion going. So, among the countries, which upon quick reflection, appear qualified for consideration for membership in Mark II might be listed: MARK I MARK II MARK III Argentina Lebanon Korea Brazil Egypt N. Korea Uruguay Syria Hong Kong Venezuela Morocco Singapore Chile Iraq Taiwan Guatemala Iran (?) PRC Nicaragua Tunisia Australia Mexico Jordan New Zealand US Israel U.S. USSR US It will be noted that there is neither political nor geographical uniformity among these countries. They represent Latin America, Asia, Africa, the Indian Subcontinent. Some are military dictatorships, others in nature totalitarian or quasi-totalitarian, while a few are functioning democracies. A number have antagonistic relationships with others on the list. Some are anathema to the world press: and there are even a few "good guys". One or two straddle the line between the Free Market and Dirigisme . Taking into account, however, that the original OECD included Francoist Spain, Salazar Portugal, and Titoist Yugoslavia; came into being when both England and France were under socialist leadership; and also included West Germany led by the politically and economically conservative Konrad Adenauer (to be succeeded in 1963 by Ludwig Erhardt, father of the "German miracle"); and had as a new member the United States, just emerging from the a period of economic conservativism under President Dwight Eisenhower, such a disparate grouping would not necessarily appear too farfetched. Since this same OECD later survived the membership of Greece and Turkey under the rule of the generals, substantial political and economic differences should not prove insurmountable barriers to the success of Mark II anymore than they were to the operations of Mark I. (For a discussion of the considerations which seem to have the most direct bearing on the success of international policy coordination, see Timmins and Timmins, The International Economic Policy Coordination Instrument: The OECD Experience. University Press. New York, 1985). Some Country by Country Discussion Argentina Argentina is widely acknowledged, from the standpoint of human and natural resources, to have the best prospects for economic development in Latin America. Indeed, it was considered well on its way to emergence as a developed nation as long ago as the 1930s. Its downfall seems to have been a mixture of Latin "caudillismo" and policies adapted to popular acceptance rather than economic realism. Argentina, Brazil and Mexico (see below) with a total debt of $220 billion, or one fifth of LDC debt, comprise the three largest debtors in the world. While membership in Mark II would not eliminate these problems, it would, through subjecting its government to the force of published, analytic reports, and through giving its more intelligent technicians the possibility of using such reports to bolster their arguments for reasonable policy choices, enhance the possibility for the country to pursue a rational development path. It would also enable policy leaders to exchange experiences with more successful NICs, e.g. Taiwan and Hong Kong, which, despite severe political problems, have succeeded in surmounting them, or at least minimizing their effects on economic growth and development. Brazil Virtually identical arguments can be made for Brazil, with the additional consideration that Brazil has made significant progress in promoting notable economic growth in the face of an enormous debt-service overhang and almost unbelievable inflation. Perhaps Taiwan, Korean, and Hong Kong could convince Brazilian leaders of the merits of alternative and more long-term development policies. Venezuela Venezuela, too, has enormous natural resources and human potential which has been wastefully diverted to the pursuit of short-term, populist goals. One senses that the ability of non-political civil servants to use the published analysis and arguments of disinterested international technical experts in support of wise, rather than politically expedient policies, could usefully assist Venezuela to break out of its super-heated-growth, high-inflation, excessive-public-borrowing, economic-bust syndrome. No promises, but the experience of associating with more responsible and long-term more successful NICs could do no harm, and a sense of national pride at having arrived in such exalted company might just instil the missing sense of political and economic responsibility. Under the observation and tutelage of their more successful Free-Market brethren in the OECD, both Spain and Portugal adopted significant changes in the operations of their economies, and even Yugoslavia has introduced substantial reforms in its Marxist economy. Mexico Mexico is truly a special case. Blessed with a temperate climate, rich natural resources, an active and vigorous work force, and more political stability (if not exactly American style democracy) than most of its Latin neighbors, the country at least has regular elections in which the majority votes and feels a sense of participation. It has a civilian government, and wastes relatively little national wealth on the military. In recent years the country has given special emphasis to investment in human capital. Indeed. in a way it is a pity that Mexico was recently admitted to the Paris OECD instead of having been used as a cornerstone for a new Latin American filial. While an admirable example of how adherence to solid economic behavior can bring a country into the councils of the successful, it is also an example of how the generosity of the successful can undercut (by dilution) the very fount of their success. But all is not lost. Mexico could well eventually hold membership in both the Paris and a Latin American version of the OECD (together with the United States and Canada). In this connection, a closer look at Mexico is indicated. In terms of education, Hermosillo, the capital of Sonora, a northern state bordering Arizona and Baja California, has nine accredited universities and institutes of higher learning! The State university alone has fully 23,000 students. Sonora, with 2 percent of the country's population, produces 20 percent more per capita than the national average, satisfying a sizeable proportion of the American demand for winter fruits and vegetables. It also is the home of 150 maquiladora industries (assembling parts imported "in bond" for reexport as finished goods), and giving work to nearly 180,000. Yet only 19 percent of Sonora industry is comprised of maquiladoras . The state is home to the most modern auto plant in the Western Hemisphere -- a cooperative venture between Nissan and Ford, the first such Japanese/American joint venture, promising transfer of technical and management skills in a three way exchange which has already brought notable new employment, better wages, and spillover effects as local manufactures arise to supply seats, body parts, and paint for the new plant. A recent article in The Economist magazine confirmed an assessment by the present author, who taught in one of the local universities, that while it took Japan twenty years to pace the United States, and Korea and Taiwan fifteen to begin to challenge Japan in the U.S. and EC, Mexico may well be a new Taiwan or Korea in as little as ten years. As a successful NIC, and as a Latin nation, Mexico may have as much to teach as to learn in Mark II. Chile Like Argentina, Chile has for years held forth promise of being a truly prosperous, industrialized Latin American country. But as with Argentina, it, too, has been sidetracked into meretricious, populist, side roads. What has been said for Argentina and Brazil can be repeated for Chile, in spades. Korea An example of a country which has studied and mastered the Japanese growth model, Korea would be one of the master teachers of a new OECD, Mark II. Korea has learned to study the world market, choose its entry products with care, coordinate government and banking financial support for the new industries, market its products with the full support of its diplomacy (books could be written about the flexibility and adroitness of Korean consular and embassy support for the country's exports at the highest levels. The Korean Ambassador in Morocco had the best acupuncturist in Seoul available to give treatment two days after King Hassan fell off his horse in Rabat. Being present and having time on his hands after treating the king, his services were offered to other senior levels of government and foreign embassy officials. Not a few tennis elbows were cured, and Korea stacked up brownie points on all sides. A similar story could be told of how the Korean ambassador got a pig specialist to visit Guatemala when he learned that the Foreign Minister raised hogs. The Ambassador and his pig specialist spent every Sunday afternoon for several months at the FonMin's farm teaching him pig raising, with the Korean Ambassador resolving political problems between inoculations. It would have taken the U.S. two years to mount a pig project through our AID program, would have been addressed to helping the rural poor, not the already well-to-do Foreign Minister, would have cost tens of millions, would not have involved the U.S. Ambassador, and would have won us no brownie points from anyone nor advanced U.S. commercial interests at all. Perhaps Chairman Gorbachev's recently expressed interest in closer relations with South Korea to take advantage of its industrialization miracle in the interest of Siberian economic development might provide an opportunity for similar Korean initiative to reduce military tensions in the Far East. It might at least be hoped so. And the potential results would appear to merit the effort. Singapore and Hong Kong While Singapore and Hong Kong are both Asian nations and could thus bring a new perspective to the development problems of their Latin American colleagues, Singapore, as a multi-racial society might have interesting things to say to both Israel and South Africa (discussed below), if, indeed, it were decided that membership of either of the latter two nations would not be too disruptive of the new Mark II. Certainly the prestige and teaching effectiveness of both as examples to Red China would be enhanced through membership is such an elite association of economically successful nations. Taiwan Like Hong Kong, Taiwan would provide a stirring example to other participating NICs of how countries with limited political freedom (as with Salazar Portugal, Francoist Spain, and Titoist Yugoslavia), can participate in significant economic development, benefitting their populations enormously and almost inevitably leading to later political liberalization. Taiwan, as well, might also serve as an example of how sharply differing political systems can arrive at a modus vivendi, and how different linguistic groups and cultures can come to an accommodation in a limited territory. The Soviet Union. The USSR declined to participate in the Marshall Plan and its action arm the OEEC. This was a pity in many ways. With Secretary Gorbachev now hinting at closer cooperation with Korea and Japan in the development of the Siberian economy, this might be an appropriate moment for a new Pacific Basin OECD to invite participation by both the Soviet Union and the United States. As with Greece and Turkey, who after more than a quarter century of joint participation in the original OEEC and its OECD successor, have recently declared a step down in the tension which has permeated their post-war relationship, it is not impossible to think that joint participation in a forum such as an Asian OECD might lead to a reduction of tensions between the US, the USSR, China, Japan, and Hong Kong. Nigeria This West African nation is the richest, most populous, and most highly developed of Black Africa. It is both an example and a challenge to the its continental neighbors. Just as the original OECD incorporated a Development function into its expanded, post-Marshall Plan activities, Development may prove to be the principal activity of the new Mark II. But in Mark II, the focus will probably be on learning by example how to implement a development policy, rather than merely coordinating the development aid activities of donor countries as was the experience in Mark I. Therefore the membership of such success cases as Israel, South Africa, Nigeria, Korea, Taiwan, and Hong Kong may constitute Mark II's principal strength. Morocco, Tunisia, Lebanon, and Jordan are all examples of reasonably well-developed Arab states. All are politically moderate, providing at least marginal hope of their being able to get along with each other in a pluri-national organization, setting an example to their more radical Arab neighbors. While not as rich as the petroleum producing Arab countries, they are each far more sophisticated and industrialized than Saudi Arabia, Kuwait, or Abu Dhabi, and would benefit from access to better statistics and the assistance of a trained secretariat offering counsel and advice regarding trade and fiscal policy. Each has at times demonstrated a willingness to accommodate to Israel, giving hope that participation in an OECD, Mark II, in which Israel would hopefully also be a member, might provide a breakthrough for acceptance of the Tel Aviv government by other Arab states observing the economic progress arising from such enlightened acceptance. India and Pakistan Much of what has been said of the Arab states suggested for membership can be said of India and Pakistan. While on the political outs with each other, they are each relatively well advanced economically and would benefit from an association in which they would mutually benefit and could learn to talk to each other without rancor. Just as the German and French have come to be closer to each other through participation in the mutually beneficial OECD, EC, and NA@O, participation in Mark II might well prove the critical element in political detente between the two major powers of the Indian subcontinent. South Africa and Israel Which leaves us with the two odd men out: South Africa and Israel, each a country which, because of the level of its economic development and sophistication, might be among the most natural members of an OECD, Mark II because of the experience and technical expertise they could bring to other participating members. Their participation might, moreover, eventually reduce existing friction between them and the co-members of the new organization. As a harbinger of this possibility, one might cite the recently achieved detente between Greece and Turkey, co-members of OECD Mark I, after years of strife and even an armed conflict in Cyprus. Should this prove to be the case, Israel and South Africa's examining countries in an EDRC Mark II could serve as useful advocates for more reasonable policies in both countries. Assuming such reforms were gradually adopted, these mentor countries might even one day serve as advocates for Israel's and South Africa's reacceptance into the community of nations. This is neither the time nor vehicle for exploration of these possibilities in depth. But there at least appears to be a promise in such an association which does not exist elsewhere. Of course, if the sponsoring OECD, or other nations invited to participate in Mark II veto the proposal, so be it. The pariahs must then continue to wait at the gates. And the African and Arab partners in Mark II must then look to Korea, Taiwan, Hong Kong and Singapore, less familiar with their territory and problems, for technical assistance and interchange of ideas and experiences from which the benefits of Mark II are to come. An Action Note While still Secretary of the Treasury, James Baker called for the creation of a Pacific Group of Seven. The concept of an Asian OECD can be viewed as a step in the same direction, though perhaps potentially more effective since, as suggested, it could draw upon the expertise of the existing OECD Secretariat to give the new organization a flying head start. And an OECD framework would be broader that of the G-7 which focuses on Finance to the exclusion of Development Economics, Labor/Industry Relations, and Trade. Secretary of State Christopher might wish to take a look at this more broadly based approach to ASEAN and Pacific relations. Since the OECD takes action only at the initiative of member states, or at least upon member states' approval of Secretariat suggestions, the next step might be for the United States to introduce as an agenda item for an early meeting at an appropriate level of the Organization a suggestion for studying the creation of a Mark II (and/or III and IV) organization(s). Looking at just wheat point in the Organization this initiative should take place, it should be remembered that the EPC generally focuses on narrower economic issues, rather than looking at the larger politico-economic landscape; and the Heads of Delegation Committee is too large to permit free discussion and frank exchange of views. Since, in any event, the agenda for Ministerial Meetings is always prepared in advance by the EXCOM and approved by Heads of Delegation, EXCOM might in fact be the appropriate initial point of action. The United States is represented on the EXCOM by its Permanent Representative to the OECD, who holds the personal rank of Ambassador, and is thus responsible to the Secretary of State. Much as one might admire the U.S. Department of State in other respects, it has seldom been noted for bold initiatives. If the U.S. is to lead out in the call for a new OECD, Mark II one should not wait for State Department instructions to the U.S. PermRep to the OECD. Final initiative must probably come from the White House. And, since we are welcoming to the White House a new President in January, 1989, this would appear an attractive initiative for President Bush to push upon taking office. It would show him to have a world perspective, limited neither regionally, nor by narrow economic or political interest. It could be presented as a reasoned attempt to follow-up on the recently broken logjams in Middle East, South African, and East-West relations; and it would be responsive to the rising expectations of the newly Industrialized Countries of South American and the Far East, not to mention Eastern European and Soviet aspirations. The lead-time is just right for the winner's State Department Transition Team to get the item on the agenda of the first Ministerial Meeting following the Inauguration -- since action in the first hundred days of the new Administration will probably be essential if Mark II is not to suffer the fate of all too many good ideas not vigorously pushed by a new President in the early days of a new administration. REFERENCES International Financial Statistics . IMF, Washington, D.C., 1988 The OECD: Programs and Policies . Organization for Economic Cooperation and Development. 17, rue de Franqueville, Paris, 16e Richard Cooper. The International Economic Policy Coordination Instrument. Princeton University Press. Princeton, N.J. Timmins & Timmins, The International Economic Policy Coordination Instrument: The OECD Experience. University Press, N.Y., N.Y. 1985.