Lars Karlsson: CapacityNow

The World Bank’s chief economist said he would recalculate national rankings of business competitiveness going back at least four years.

Paul Romer, the World Bank’s chief economist, said World Bank staff put a thumb on the scales of its rankings of countries by business competitiveness, by repeatedly changing the methodology.

The World Bank repeatedly changed the methodology of one of its flagship economic reports over several years in ways it now says were unfair and misleading.

The World Bank’s chief economist, Paul Romer, told The Wall Street Journal on Friday he would correct and recalculate national rankings of business competitiveness in the report called “Doing Business” going back at least four years.

The revisions could be particularly relevant to Chile, whose standings have been volatile in recent years—and potentially tainted by political motivations of World Bank staff, Mr. Romer said.

The report is one of the most visible World Bank initiatives, ranking countries around the world by the competitiveness of their business environment. Countries compete against each other to improve their standings, and the report draws extensive international media coverage.

The former director of the group responsible for the report, Augusto Lopez-Claros, defended the changes to the report over the years.

All changes had been made following “extensive internal peer review and the Bank went out of its way to announce these changes to the authorities of its member countries and to other uses,” he said. “Preliminary rounds of the new data collected were shared for comment and, in general, the whole process was undertaken in a context of transparency and openness.”

A former professor at the University of Chile, Mr. Lopez-Claros is on leave from the World Bank this year while serving as a senior fellow at Georgetown University.

Over time, World Bank staff put a heavy thumb on the scales of its report by repeatedly changing the methodology that was used to calculate the country rankings, Mr. Romer said.

The focus of the World Bank’s corrections will be methodology changes that had the effect of sharply penalizing Chile’s ranking under the recent term of Chile’s outgoing president, Michelle Bachelet.

“I want to make a personal apology to Chile, and to any other country where we conveyed the wrong impression,” Mr. Romer said. The problems with the report, he said, were “my fault because we did not make things clear enough.” Mr. Romer said the World Bank is beginning the process of correcting the past reports and republishing what the rankings would have been without the methodology changes. He said he couldn’t defend “the integrity” of the process that led to the methodology changes.

Chile’s overall ranking has fluctuated between 25th and 57th since 2006. During that period, the presidency of Chile has alternated between Ms. Bachelet, of Chile’s socialist party, and Sebastián Piñera, a conservative. Under Ms. Bachelet, Chile’s ranking consistently deteriorated, while it consistently climbed under Mr. Piñera.

Recalculating the numbers could show significant changes to other countries as well.

“Doing Business” ranks nations on metrics like the number of days it takes to open a business, or the cost of getting construction permits. Countries that make their business environment worse, for instance by drawing out the permitting process, get penalized in the rankings.

The World Bank has updated the methodology over time. For example, in the years covered by Mr. Romer’s review, the World Bank added new components dealing with construction permits, new measures of electricity reliability and tariffs, new measures of the quality of judicial processes for shareholders and a new measure of tax filing, among others.

During Ms. Bachelet’s tenure since 2014, new components had the effect of lowering Chile’s ranking. For example, in the report published in 2015, Chile had been ranked 33rd for ease of paying taxes; in the report published in 2016, the World Bank added a new metric on the amount of time businesses must spend dealing with taxes after having filed them, such as via audits or obtaining refunds on value-added taxes. Chile scored exceptionally poorly on this new index, and once it had been added, its ranking for ease of paying taxes sank from 33rd in the world to 120th.

According to a preliminary analysis by Mr. Romer, over the past four years, Chile’s drop was driven almost entirely by adding new metrics to the index, and not by changes to standing measures of Chile’s business environment. He added that changes to the methodologies used in the rankings had the appearance of being politically motivated.

“Based on the things we were measuring before, business conditions did not get worse in Chile under the Bachelet administration,” Mr. Romer said. “I didn’t do enough due diligence and later realized that I didn’t have confidence in the integrity” of the report’s data.

Mr. Lopez-Claros said that the claim that methodological changes targeted Chile is “wholly without merit.” He said that changes were made “without focusing on the impact these changes will have on particular countries.”

He said that Chile’s rankings also deteriorated as other nations were more aggressive in undertaking reforms. Between the reports in 2013 and 2016, for example, he said that Mexico made eight significant reforms, while Chile introduced only two.

“Not surprisingly, Mexico overtook Chile as the country with the best business environment in Latin America,” he said.

Mr. Romer raised the concerns with World Bank leadership who supported his decision to correct and recalculate the figures.

The World Bank Group said in a statement Saturday that “We treat all countries equally in our research, and the Doing Business indicators and methodology are designed with no single country in mind but so that the overall business climate can be improved.”

The statement added that “in light of the concerns expressed by [Mr. Romer] in the media and our commitment to integrity and transparency, we will conduct an external review of Chile’s indicators in the Doing Business report.”

Mr. Romer joined the World Bank in October 2016 from New York University. The changes to past reports will date back years before his arrival at the World Bank.

Mr. Romer has clashed with World Bank economic staff before. In May, he published an internal memo he’d written in which he told World Bank economists they should write more clearly and concisely.

“The problem with vague writing is that it lets an author convey a false impression yet retain plausible deniability when someone tries to verify the claim,” he wrote.

In the memo, Mr. Romer referenced critical research from Stanford University’s Literary Lab that had studied the writing in World Bank reports and concluded the reports were written in “almost another language, in both semantics and grammar” and were “becoming more abstract, more distant from concrete social life; a technical code detached from everyday communication.”

During that 2017 clash, Mr. Romer also published an earlier memo he had written about a budget document he received early in his tenure as chief economist. The budget memo said converting 90 contract workers to full-time workers would “have no impact on the Bank Budget,” but upon questioning the staff and investigating the issue, Mr. Romer determined that the full-time employees would cost considerably more than contractors.

Mr. Romer became alarmed, saying that a group in charge of economic data and empirical research shouldn’t be producing internal documents with misleading data. “If people in the Bank cannot believe everything [the Development Economics Group] writes, they can’t believe anything we write,” he wrote in that internal memo.

Source: Wall Street Journal

The cities with the highest homicide rates are once again nearly all in Latin America. I have visited them all over the years,

Cocaine is grown primarily in South America, and trafficked to the world’s biggest market, the United States, via Central America and the Caribbean. The land routes originate mainly in Colombia, and pass through the small nations of El Salvador, Honduras and Guatemala before traversing Mexico. It is little wonder, then, that Latin America remains the world′s most violent region not at war. According to data from the Igarapé Institute, a Brazilian think-tank, 43 of the 50 most murderous cities in the world last year, and eight of the top ten countries, are in Latin America and the Caribbean. (War zones, where numbers are hard to verify, are excluded.) Conflicts between gangs, corruption and weak public institutions all contribute to the high levels of violence across the region.

The top of the rankings has not changed. In both 2015 and 2016, El Salvador was the world′s most violent country, and its capital, San Salvador, was the most murderous city. However, the most recent numbers do represent a slight improvement: the national rate fell from 103 killings per 100,000 people in 2015 to 91 last year, and San Salvador′s from 190 to 137. Most analysts credit a clampdown by government security forces for this reduction, though tough-on-crime policies do little to address the underlying causes of gang violence. A similar downward trend is evident in neighbouring Honduras: San Pedro Sula, which for years wore the unwelcome crown as the world′s most murderous city, now ranks third.

However, spikes in violence in neighbouring countries suggest that anti-gang policies are merely redistributing murders geographically rather than preventing them. Acapulco, a beach resort on Mexico′s Pacific coast, recorded 108 homicides per 100,000 people last year, placing it second behind San Salvador. That reflects the nationwide trend: Mexico′s overall rate rose from 14.1 killings per 100,000 people to 17. That figure nearly equals the previous violent peak of Mexico′s drug wars, in 2011. As a result, six Mexican cities rank among the top 50, three more than did so a year earlier. And there is no evidence of a reversal in 2017. The number of murders in Mexico during the first two months of 2017 is the highest for January and February since records began.

The middle of the list is dominated by Brazil: the world′s second-biggest cocaine consumer is home to half of all cities in the ranking. That mostly reflects its large population. During the past year, violence has reshuffled from place to place within Brazil: the murder rate has fallen in the largest cities, but increased in smaller ones. In Maraba and Viamão, homicides rose by 20% in a year, whereas in São Paulo, Brazil’s most populous city, murders fell by 55% from 2014 to 2015. Unlike in Mexico and Central America, there is evidence of a slight overall improvement: the national homicide rate fell from 29 per 100,000 in 2014 to 27 in 2015, the latest year for which data are available. Nonetheless, by sheer virtue of its size, Brazil reigns as the world′s overall murder capital: 56,212 people were killed there in 2015.

Only two countries outside Latin America contain cities in the top 50: the United States and South Africa. In America, the only rich country on this list, a spike in homicides has propelled two more cities, Detroit and New Orleans, to join St Louis and Baltimore, which also figured on last year′s list. Each has a rate that is around ten times the national average of 4.9 homicides per 100,000 people. South Africa is the only country outside the Americas on this ranking. Two new cities, Nelson Mandela Bay and Buffalo City, have been added to the list, mainly because data collection is improving in the country. The homicide rate in South Africa did climb 5% last year, though other violent crime dropped.

Source: The Economist

A wall is a wall is a wall. CNN says that drug cartels believe President Trump’s Mexico wall will increase their profits and strengthen criminal networks.

The tricks of the multibillion drug business include using drones, submarines, ultralight planes and even frozen sharks to transport product across the US-Mexico border. Just consider that in 2016, US Customs and Border Protection Air and Marine Operations agents attempted to seize a submarine in the Pacific Ocean with nearly 194 million USD worth of cocaine.

And yet President Trump argues that his proposed border wall, a throwback to a bygone era, will “stop much of the drugs from pouring into this country and poisoning our youth.”

As he said last July, he is worried that smugglers will throw “large sacks of drugs” over the wall and hit US citizens on the head — a preoccupation that led to his request for a transparent border wall.

Should he get funding from Congress to build such a wall, Trump will be faced by an even bigger problem — the geographical reality of the border itself. Any wall will have to navigate floodplains, international treaties and the rights of landowners who refuse to sell their land. Simply put, Trump does not understand the dynamics of the US-Mexico border.

But more importantly, the wall will be a gift to the drug cartels. In interviews with a New York Times contributing writer, drug dealers and human traffickers have preemptively thanked Trump for his border wall. Smugglers see the wall as a quaint distraction, because it has little practical application in a world where they harness the latest technology to move drugs and people into the US. If anything, they believe the wall will increase their profits, strengthening criminal networks.

And they might not be far off. According to a2015 report by the US Drug Enforcement Administration, 95% of drugs coming into the US were entering via container ships and other vessels.

In addition to drones and submarines, drug dealers and human traffickers rely on the trucking industry to move drugs and people via the 52 legal crossing pointsalong the US border. In July, eight dead migrants were discovered inside a tractor-trailer parked in a Walmart parking lot in San Antonio, Texas, while two more died at the hospital and dozens were injured.

None of this would be stopped by a wall.

And the truth is: US citizens provide a constant demand for drugs from Latin America. According to the 2015 National Survey on Drug Use and Health, 27.1 million people aged 12 or older had used drugs within the past 30 days — the equivalent of 1 in 10 Americans in that age group.

Americans also rely on the labor of undocumented migrants who often cross the US-Mexico border. A 2017 Pew report shows that more than 11 undocumented immigrants live in the US. And they comprise roughly 5% of the US workforce.

But even undocumented migrants don’t fear Trump’s wall. While interviewing migrants from Mexico, Guatemala, Honduras and El Salvador during the past year for a project at Longreads, I’ve found that they see the wall more as a symbol of racism than a functional barrier. Many of them laugh at the wall, mentioning the unparalleled tunnel architecture of Mexican smugglers.

This architecture even extends tounderwater tunnels manned by scuba diving smugglers. These same migrants, ironically, are also fleeing unprecedented violence, much of which is caused by the US demand for drugs.

The drugs are pouring in at levels like nobody has ever seen. We’ll be able to stop them once the wall is up.” As a businessman, Trump should understand that the laws of supply and demand apply equally to selling Ivanka’s clothing line as they do to the drug trade. As long as demand exists in the US, suppliers, whether in Mexico or Afghanistan, will find creative ways to meet that demand.

And until Trump addresses the illegal drug epidemic as a public health issue rather than criminalizing it, the demand for drugs from Central America will only continue to grow.

In Trump’s reality, narcos smuggle drugs in sacks, and only a transparent multi-billion dollar wall will stop them.

The truth is, the wall is just a symbol. It is a physical monument to the idea of returning to a more homogenous white past — a past that ignores the contributions of undocumented migrants and the fact that they have raised our children and fed our families.

Narcos, who are consummate businessmen, will thank Trump for this distraction of a border wall while flying the drones and building the submarines that will fuel our drug-filled dreams.

Source: CNN