Our elected officials will spend the holidays paining over ways to trim the deficit. One simple solution is to stop sending our tax dollars to international organizations whose primary purpose is to squeeze consumers and promote government control. There is no more deserving target than the Organization for Economic Cooperation and Development.
When it was formed more than 50 years ago, the OECD’s mission was “to promote policies that will improve the economic and social well-being of people around the world” by strengthening “market economies.” Today, it draws taxpayer funds from 34 member countries and has become one of the biggest global cheerleaders for stronger government regulations.
Twenty-two percent of the OECD budget, or $93 million, comes from American taxpayers, which is the largest single contribution to its operations.
The power of free markets in creating opportunity and helping individuals prosper is often lost on government bureaucrats bent on consolidating power in their own hands. True to form, the OECD in recent years has performed intellectually bankrupt analysis and advocated increased government control in key industries. Leaders in Canada, Australia, and other countries have been shocked by the OECD’s senseless policy prescriptions. In the U.S., even fellow bureaucrats at the Federal Communications Commission have scoffed at its shoddy analysis.
To take a recent example, the OECD recently set its sights on the Mexican telecom industry. It took it upon itself — based on examining something called purchasing power parities (PPPs) — to determine that the level of investment in telecom infrastructure by private companies in the country is “too low” and that prices for average consumers are “too high.”
Yet numerous studies, including the OECD’s own “Methodological Manual on Purchasing Power Parities” from 2006, point out that the use of PPPs for cost comparison of individual services is inappropriate. In fact, the OECD itself points out that the use of PPPs is not recommended as a “precise measure establishing strict ranking of countries.”
Furthermore, when reviewing prices and industry structure, the OECD was unwilling or unable to examine major market segments: wireless vs. wire-line, pre-paid vs. post-paid, and so forth. And the OECD asserted that the state of development of Mexico’s telecommunications infrastructure was poor due to the lack of effective competition. Again, the OECD neither substantiated its claims nor revealed the actual equations or variables it used to come to these conclusions.
So it is no surprise that more credible analysis from the International Telecommunications Union and the Instituto Nacional de Estadistica y Geografia has shown that Internet access in Mexico has risen from 2.7% of the population in 2000 to 29.4% in 2010. More than 32 million Mexicans now enjoy Internet access.
The OECD claims that objectivity and ethical work are two of its “core values.” It promises “evidence-based” analysis and “integrity and transparency.” Yet OECD bureaucrats have refused to release the data sets they used to promote what economist J. Gregory Sidak called the “cartelization” of telecommunications in that country.
Sidak produced an extensive report concluding that OECD proposals for Mexican telecoms would harm consumers by raising prices in a way that would reward inefficient companies while penalizing more efficient ones. Price caps and reductions in profit margins would limit the capacity for telecommunications carriers to expand coverage and improve services, leaving millions without access and slowing recent progress.