Corruption – a question of perceptions

 A few recent headlines: “Denmark, New Zealand and Singapore top list of least corrupt countries” , “The 10 Most (and 10 Least) Corrupt Countries in the World”, “Israel stalls in rot ranking” . In case you’re wondering, the stories were all about Transparency International, which ranks countries on a scale from zero to ten. Low scores, for example Somalia’s 1.1, indicate severe corruption; high scores, such as Denmark or Singapore’s 9.3, suggest public and commercial life are squeaky clean.

Now 15 years old, the Transparency International (TI) index is probably regarded as the leading tool for measuring corruption worldwide. Which is interesting, because it doesn’t actually measure corruption. Instead, it measures perceptions of corruption. The distinction is crystal clear in the name of the index – it’s the Corruption Perceptions Index, not the Corruption Index – but it’s often blurred in media coverage. Does it matter? In some ways, not really.

Corruption is, by its nature, secretive and can’t be measured directly. (Even detecting it is difficult, not least for tax officials.) So, instead, corruption has to be “measured” through surveys. These usually involves asking businesspeople, international officials and others questions, such as the extent to which they’ve encountered corrupt practices. TI pulls together 13 of the most reputable surveys from around the world, does a lot of number crunching, and produces its index. But, in other ways, the tendency of the media and investors to ignore the “Perceptions” bit of the Corruptions Perceptions Index may matter a great deal.

At the very least, we need to ask whose perceptions are being measured. In many cases, “it’s ‘experts’ or business managers, many of whom live outside the countries they are rating”, argue Charles Oman and Christiane Arndt in a new paper  from the OECD Development Centre . By contrast, it’s rare to hear of the experiences of the man or woman in the street, in part because compiling such data is expensive and time consuming. The paper argues that there are other issues, too, that need to kept in mind when it comes to “governance” indicators, such as the Corruption Perceptions Index and the World Governance Indicators . One is the use of a single “point score”, e.g., Somalia’s corruption rating of 1.1. What does that number actually represent? First, it reflects realities – or at least perceived realities – on the ground. But, of course, reality is complex, and can’t always be represented by a single number.

Nevertheless, says the paper, because of “the well documented tendency of people to believe that numbers are facts” the number can come to be seen as the reality, and may shape important decisions on a country’s future, such as foreign investment. Second, the number represents the output from some tricky statistical calculations. Like most such outputs, it comes with a health warning – in this case a “confidence interval”. In effect, that’s a statistician’s way of indicating that the difference between, say, Somalia’s 1.1 and Myanmar’s 1.4 may – or may not – be significant.

Like any reputable agency, TI clearly indicates the survey’s confidence indicators. However, journalists and investors may be less discriminating: As Oman and Arndt write, “Users tend widely to use countries’ governance scores as if they were accurate to a degree they are not.” So, should we ignore Corruption Perceptions Index? Not at all, but like any survey it has limits. Understanding these can ensure it’s not misused, and so ultimately make it more useful.

Useful links:

Measuring Governance, by Charles P. Oman and Christiane Arndt

Policy Brief No. 39 from the OECD Development Centre

Migration slumps in recession

Click on the image to read the book

A new international study offers further evidence of the recession’s impact on migration – some countries appear to be seeing very sharp falls in the numbers of new arrivals while the job prospects of existing migrants continue to take a hit.

 The report, from the BBC and the Washington D.C.-based Migration Policy Institute, suggests there have been big falls in the numbers of EU citizens travelling to work in other EU countries. They’re down by about two-thirds in Spain and by about 60% in Ireland, it estimates.

Indeed, says the report, some EU countries may be seeing a reversal in migration, with more people now leaving than arriving. “Anecdotal reports of young Irish men leaving for other English-speaking countries such as Australia are becoming increasingly common, evoking the possibility of a return to Ireland’s historical roots as an exporter of people,” it states. “The same is true (though to a lesser extent) of Greece, another former country of emigration that had been transformed into a country of significant immigration in the 1990s and 2000s.”  But as the report stresses, these apparent trends are still anecdotal; it will take some time before they’re verified by national and international statistics, such as the data compiled by the OECD.

 Some countries also appear to be seeing big falls in non-authorised – or “illegal” – migration. In the United States, the Pew Hispanic Centre estimates that there were two-thirds fewer non-authorised immigrants each year between 2007-2009 than in the first half of the decade.

 The BBC/MPI study also looks at the impact of the recession on migrant employment, and reports that young immigrants have been hit particularly hard. In Spain, it says, 41% of young immigrants are out of work and in Sweden 37%. As an OECD report  noted earlier this year, the recession is going to make it even harder for migrants to get a firm foothold in the workforce: “The integration period for immigrants is often long and the current downturn contributes to turning back the clock.”

 Has the recession sparked a change in governments’ attitudes to migration? There’s evidence it has. According to research by the Dallas Federal Reserve, “advanced economies from Australia and Western Europe to developing countries such as Thailand and Kazakhstan adopted policies ranging from keeping new migrants out to encouraging resident migrants to leave”. Changes have included tighter numerical limits on immigrants, providing migrants with fewer opportunities to renew work permits and round-ups of unauthorized immigrants.

One surprising finding: The recession has had only a moderate impact on remittances – the money migrants send home to their families. The World Bank estimates that officially recorded remittances worldwide fell 6% in 2009 compared with the previous year to $316 billion. But it expects them to rebound by about the same percentage in 2010 and to rise by just over 7% next year.

Useful links

OECD work on migration and on employment

 OECD Insights: International Migration

 OECD Insights: From Crisis to Recovery

Strike!

This post comes to us from Fiona Stewart of the Financial Markets, Insurance and Pensions Division of the OECD’s Directorate for Financial and Enterprise Affairs.


Those of us struggling with our commutes to work in France don’t need to be reminded that pensions are on the top of the agenda again in many OECD countries.  Workers are understandably perturbed when they feel as if their hard earned right to a well deserved retirement is under threat.

Yet, given the ageing of the population across the OECD region, the scale of the challenge of paying for our pensions is rarely understood. Without reforms, spending on pensions will require an extra 5% of GDP by 2050 – posing a much greater challenge to our economies on a long-term basis than the financial and economic crisis of recent years.

We are all living longer – which is a good thing – and we are increasingly healthy at older ages. When pension systems were first introduced, the retirement age was 65 and life expectancy was 65. Now we might work for 30 years and be retired for 30 years.  Lord Turner, who conducted a major review of the pension system in the UK a few years, ago spelt out the choices we have starkly – we can save more, live on less in retirement or work longer.

Some say that corporations making big profits should be taxed more (the banks which were so involved in the financial crisis being singled out) or that governments should cover the rising cost of our pensions rather than individual workers. But this does not solve the problem that the costs of our pensions are ever rising and there are fewer and fewer young workers to pay for them.

One particularly striking (being the operative word) fact in France is that young students are demonstrating against the rise in the retirement age.  No one seems to be trying to explain to them that if these reforms do not happen they are the ones who will be hit hardest and have to pay in the long run – as they will have to pay for the decades of retirement their parents are likely to enjoy, whilst, when it comes to their turn to retire, there may not be enough money to pay for their pensions.  To the great French cry of ‘Liberty, egality, fraternity’ should be added ‘intergenerational solidarity’!

The complexity of the pension debate again means that the students are mixing the issue with other matters – notably arguing that if the older generation work 2 years longer, they will have to wait 2 years more until these jobs are ‘freed up’ and they can start work.  Yet the experiment of the 1980s and 1990s recessions, when early retirement was used as a policy tool to try to fix unemployment, showed that these policies did not free up jobs, but in fact had the opposite effect, as the number of jobs within an economy is not a fixed pie to be shared out.

Fortunately OECD governments have learnt this lesson and are indeed pushing ahead with raising the retirement age – as we saw in the UK this week. Some have also linked the retirement age to longevity increases, making the rise gradual and automatic which should avoid damaging political battles such as these in future.

Sure our pension systems aren’t perfect – and neither are the French reforms. For example, there are still unanswered issues such as how to ensure women, who tend to have broken career paths for child rearing, receive more equal pensions, or how we should treat those in particularly strenuous or dangerous jobs, or the unfairness caused by differences in longevity across social classes. The 40 year contribution period to be introduced into France is fairly long by OECD standards, and arguably hits blue-collar workers more disproportionally  But these issues should not cloud the core fact that working a few extra years in retirement is an essential step to putting our pension systems on a sustainable path and securing them for future generations.

As France demonstrates, much still needs to be done by governments to communicate why pension reforms are needed and how we must not only share the costs of our rising longevity, but hopefully celebrate the fact as well.

Useful links

OECD work on pension systems

OECD work on private pensions

Article by the author on pensions as a policy response to the financial crisis

Good morning. How are you? Shut Up.

Tanta Prep School

I used to teach English in Egypt. To be more accurate, I used to teach pupils to pass their English tests. We had a book called Living English, based on a series of dialogues. These usually started out well then exploded in mid-flight. “What school are you in? I am in Tanta Prep School. The walls are big and the ceilings are high”.

Not that that bothered the kids. They understood, well before me, that you had to treat the thing like a catechism. So all over the country, when you asked any child where they went to school, they all replied Tanta Prep. Some of my colleagues dreamed of organising a pilgrimage to this mythical school, but we never got round to it.

The result, naturally, was that pupils who got a perfect score in the exam couldn’t hold a simple conversation with a native speaker. Except me. One of my fondest memories is of a post office in Cairo where two boys who’d obviously tried their English on every foreigner they’d seen asked me “How are you, mister?” It was liking watching the sun rise on their faces when I replied “Fine thank you. How’s Nabil? He’s fine too”.

I thought this kind of caricature of learning had long since disappeared, but looking at the results of the “Raise your hand” exercise organised by the OECD Education Directorate, I’m not so sure. People from over 90 countries, including Egypt, cast 27,000 votes on what the priorities for education should be.

“Teach to think, not to regurgitate” is top of the list, and judging from the most popular proposals, the other flaws in the system where I taught are still widespread. For instance, many participants mention equal opportunity for children from disadvantaged backgrounds. In my school, children whose parents couldn’t afford private tuition had practically no chance of succeeding.

And it wasn’t just a question of money either. At a university where I also taught, one of my co-examiners wanted to fail a student in the spoken English exam on the grounds that her parents were peasants and she shouldn’t be allowed to become a teacher.

It happens in OECD countries too, though probably not so blatantly. A working paper from OECD’s Deborah Nusche talks about the “dreary results” in the education of migrants and even students whose parents were migrants. The good news, as Deborah points out, is that this situation is not inevitable.

If you’d like to find out more, the Education Directorate has produced a short introduction to their work that’s also a practical summary of the main concerns in education today and how teaching will have to evolve to respond to new needs and expectations in the years to come.

And for tomorrow, learn this: “Let us go and say hello to our old classmates. Goodbye.”

Useful links

OECD work on education

Education at a glance 2010: OECD Indicators

educationtoday – OECD’s education lighthouse for the way out of the crisis

World statistics day

Today, on 20.10.2010, more than 100 statistical organizations celebrate World Statistics Day at the initiative of the UN.

OECD statisticians and economists will discuss the contribution of statistics to the mission of OECD: “better policies for better lives“, with a focus on green growth, innovation, societydevelopment and progress. The talk is scheduled today at noon Paris time, and it can be seen live  at http://interwebcast.oecd.org/ (and it will be archived there afterwards).

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A football field the size of Belgium

Did you know that if you spread all your skin evenly over a flat surface you’d die? Fifty percent of our readers thought I was going to say it would cover an area the size of Belgium. (The other one’s gone to look for a knife, since you ask.) What is it about this “highly improbable” country that’s made it the standard international measurement for death and destruction, as in “an area of rain forest the size of Belgium has disappeared”?

You’d think that given its popularity, the measure would be standardised, with 1 Bm = 1000 millibelges, but in fact the  correct subdivision is football fields. These are used for a range of difficult measurements such as the length of oil tankers at sea, but really come into their own when scientists need a particularly precise metric for the size of sophisticated equipment like the UK’s Diamond Light Source Synchrotron.

So, how many football fields are there in a Belgium? I’ve no idea. And I haven’t a clue how big Belgium is. Even in Brussels, I’m sure few people could tell you the size of the place. Yet you see this “statistic” practically nobody could define used worldwide. Does that matter? Probably not. In fact it can be quite useful.

As Belgian writer Paul de Man said, metaphors are much more tenacious than facts. Belgium is a country most people have heard of, even if they couldn’t locate it on a map, and anything that’s as big as a country must be really big. Likewise, most of us are exhausted by the time we run the length of a football field, so it must be really long.    

The (average) statistician is now apoplectic. Comparing this kind of garbage to real statistics just because they both claim to measure something is like comparing coal to diamonds just because they’re both made of that stuff they’re both made of. They’ve got a point. A striking image is fine to draw attention to something, but for practical purposes, you need precise, comparable data. The OECD has over 200 statisticians supplying its 200 committees and working groups with over 200 indicators on all areas of government action.

To celebrate World Statistics Day, why not take a look at our statistics portal on the OECD iLibrary? You’ll find the expected and the unexpected: data economic growth of course, but even which OECD country has the tallest population. I still couldn’t find the area of Belgium though.

Useful links

OECD Statistics Directorate

It’s not that I don’t trust you…

You sure?

Last week, German police arrested a forger in connection with the sale of fake paintings to prestigious collections. Forgery is of course a serious problem (or major challenge as we say here) in the art world.

There’s a story that two art dealers came to see Picasso because one of them wanted to sell a picture he claimed was by the great man, while his colleague disagreed. Picasso took one look at the canvas and said it was obviously a fake. The seller was flabbergasted. “But I saw you painting it!”, he protested. Picasso didn’t deny it, but, he explained, “I often paint fakes”.

I’ll leave to you to decide what Picasso meant, but one thing we can agree on is that his attitude wasn’t very helpful to the art market. When artists were considered as just one among many tradespeople producing life’s little luxuries for the rich (pots, pies, poems, pictures, whatever their Wonderfulnesses desired), it didn’t occur to anybody that anything other than how nice it was mattered. That changed with the Renaissance and the notion of individual genius and inspiration.

In Questions from a worker who reads, Brecht laughs at this “great men” approach, asking if Caesar conquered Gaul without so much as somebody to make his dinner for him. Marcel Duchamp did likewise, mockingly claiming that anything an artist put in an exhibition was art, including a bottle rack he’d bought in a department store and then forgotten about (unfortunately, his sister threw it out).

Authenticity and authorship wouldn’t matter so much if vast sums of money weren’t involved. Unlike the art patrons of previous times who liked to show off their acquisitions, many of today’s owners keep their purchases in safes, simply as a highly mobile investment that can be quickly converted to cash.

And art isn’t the only market for recycling money. Charitable status can be abused too, but what will most shock the ordinary, decent citizen is that off the level playing field, various aspects of football attract criminals, as the latest FIFA scandal shows.

In Money Laundering through the Football Sector,  the Financial Action Task Force examined how transfer fees, image rights, club ownership and betting can all be used for illegal purposes such as tax avoidance. The football sector is also used as a vehicle for other criminal activities including trafficking in human beings, corruption, and drugs trafficking.

Restoring trust was discussed at last year’s OECD Forum. That session talked mainly about business ethics, but trust more broadly, including trust in government, will be one of the themes of the coming year as the OECD celebrates its 50th anniversary. Other major topics will include restoring public finances, jobs and skills, and new sources of growth.

Useful links

Financial Action Task Force

OECD work on taxation

OECD work on corporate governance

OECD work on public governance