Taxpayer funds wasted on flawed agenda-driven study, expert says

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Betsi Fores The Daily Caller News Foundation
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The Organization of Economic Co-operation Development (OECD) squandered taxpayer resources by releasing yet another flawed and agenda-driven policy report earlier this year, according to an expert at the Massachusetts Institute of Technology.

The OECD report, released in January, concluded that lack of competition in Mexico’s telecommunications market caused mobile consumers to be overcharged by $25 billion every year.

The report recommended significant changes to the regulatory structure of Mexico’s telecommunications system and specifically targeted America Movil, the country’s largest provider.

According to Dr. Jerry Hausman, the Director of Telecommunications at MIT, the OECD’s methodology was fundamentally flawed.

In a response study, commissioned by America Movil, Hausman concluded “that the OECD study was incorrect when it concluded that a lack of competition in Mexico’s telecommunications sector caused a loss in consumer surplus of over $129 billion between 2005 and 2009.”

Hausman used “peer comparisons” — as opposed to comparing Mexico to other OECD countries — and sounder econometrics subject to academic scrutiny. He concluded that Mexico’s telecommunications industry is not overcharging its customers.

In fact, compared to countries of similar wealth, Hausman found that mobile prices were actually 33-percent cheaper in Mexico — not 19 percent more expensive, as the OECD reported.

According to Hausman, in the last decade, the OECD has moved from a data collector to a policy consultant with a European-style pro-regulation agenda.

In an interview with The Daily Caller, Hausman explained that typical economic policy recommendations are held up for scrutiny by peers. The OECD, by contrast, refused to hand over the numbers from their telecommunications report.

America Movil CFO Carlos Garcia Moreno continued in the same vein in a statement to the Daily Caller. “The OECD report’s misguided recommendations are based on a report that was materially flawed, with major methodological errors and with pricing data that was erroneous and even fictitious–something, by the way, that the OECD knew full well.”

Garcia Moreno adds, “We found the OECD’s refusal to release its data for public review particularly disturbing.”

The OECD receives a United States taxpayer subsidy of $93 million, which accounts for 22 percent of the OECD budget. The U.S. is the largest contributor to the OECD.

For years, member countries have been dissatisfied with reports and policy recommendations from the organization.

In 2008, when the U.S. ranked 15th in broadband access, the FCC disputed the OECD’s system for ranking countries. The FCC argued that the OECD did not account for differences in geography and population distribution in their ranking analysis.

And a Canadian company refuted the OECD’s report of high internet costs in Canada, claiming the organization’s study failed to take into account higher costs of infrastructure in rural areas of the country.

The OECD even misreported the tax status of the average Australian worker in 2005 by claiming such workers had the second-highest marginal tax rate in the developed world, a statement that the OECD later retracted. Australian authorities were outraged at the time.

Australian economist and professor, Bill Mitchell, wrote a highly critical blog post on an OECD study titled “Fiscal Consolidation: How much, how fast and by what means?

Mitchell writes, “Like the IMF, the OECD has moved well beyond its original charter (which was as a progressive force on the World stage), and is now a major part of the problem.” He proceeds to call the OECD study “a disgraceful piece of work” and “5.9 mbs of nonsense.”

Recently, critics have objected to the $93 million Congress appropriates to the OECD annually. The Coalition of Tax Competition wrote a letter to Congress asking that it stop funding an organization that releases policy recommendations “contrary to US interests” that support a “leftist economic agenda.”

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