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March 2015

50 years of "Returns to Education" studies

Harry A. Patrinos's picture


At last week’s Comparative and International Education Society annual conference in Washington DC, Najeeb Shafiq put together a special panel honoring the work of pioneering education economists Martin Carnoy and George Psacharopoulos (formerly of the World Bank).  Martin and George were supervised by Theodore Schultz, a Nobel Prize winning economist, who made human capital theory an important force- not just in economics- but the social sciences in general.  Their work paved the way for thousands of researchers who followed in their footsteps. 

Slovakian non-standard contract reform has marked effect on jobs

Peter Golias's picture
The 2013 reforms of non-standard employment contracts in Slovakia transferred the full payroll-tax burden to workers and their employers regardless of their income. This caused a rapid decrease in their net income and forced some of them into the informal sector, although overall unemployment numbers did not change. To rectify these problems, in 2014 the Ministry of Finance presented a new proposal known as a health insurance allowance. This frees minimum wage employment contracts from paying health insurance contributions. The ministerial proposal came into effect from 2015. The goal is to increase motivation to work for low wages and thus to help to decrease unemployment. Early indications suggest that it will increase the net income of more than 500,000 people and cost €146 million in 2015, although its overall impact on unemployment is so far unclear.
 

Piggybanks for plunder: Corrupt cash flows to Global Cities, requiring transparency and complete disclosure of assets

Christopher Colford's picture



Corrupt cash from secretive international sources – deliberately funneled through ‘shell companies’ to conceal the money’s illicit origins – is often used to buy ‘Towers of Secrecy’ in leading global cities like New York, as documented by a recent New York Times investigation.

Cities exert a magnetism that’s irresistible – attracting not just the most ambitious who seek economic opportunity and the most creative who revel in cultural richness, but also lawbreakers and looters: notably nowadays, the corrupt kleptocrats and tax-avoiding oligarchs whose hot money increasingly flows into the safe haven of prime real estate in the world’s leading cities.

At least part of the trend toward soaring center-city property prices, according to many anticorruption monitors, is due to the impact of illicit financial flows. It’s not just the plutocratic One Percenters who are steadily bidding up real-estate valuesPlunderers and profiteers – often concealing their identities, with the aim of shielding their wealth from tax authorities and international asset-trackers – use prestigious parcels of center-city property as a piggybank to shelter their tainted lucre.

The most vibrant and most competitive of Global Cities – notably London, Paris, New York, Hong Kong and Singapore – have long been magnets for money, luring the world’s most enterprising entrepreneurs as well as its most desperate refugees. As their global vocation and vitality have lured the ambitious and the avaricious, however, the “priced out of Paris” syndrome has often taken over: Gentrification has morphed into “plutocratization,” notes Simon Kuper of The Financial Times, with “global cities turning into vast gated communities where the One Percent reproduces itself.”

Meanwhile, “the middle classes and small companies [are] falling victim to class-cleansing," Kuper asserts. "Global cities are becoming patrician ghettos” – with the middle class and the poor being driven ever-further out from the center-city in search of affordable housing, doomed to interminable commutes to sterile suburbs or brooding banlieues.

Most of the property price spiral in world-leading cities is surely attributable to the allure of cosmopolitan life in an age when urbanization is accelerating worldwide. But as two members of the World Bank Group’s unit on Financial Market Integrity (FMI) and the Stolen Asset Recovery (StAR) Initiative recently wrote in a StAR blog post, the melt-up of prime property prices often involves corrupt money and evasive property-registration practices.

Citing a recent New York Times investigative series that meticulously documented suspicious practices within Manhattan real-estate trends, FMI specialists Ivana Rossi and Laura Pop noted that the property-buyers “took several steps to hide their identity as the real owners of the properties. Some of these steps involved buying condos through trusts, limited liability companies or other entities that shielded their names. Such tactics made it very hard to identify the 'beneficial owner': to figure out who owned what, or who was the ultimate controller of a company (or other legal entities) since the names were not shown in the company records.”

Vast sums are flowing unchecked around the world as never before – whether motivated by corruption, tax avoidance or investment strategy, and enabled by an ever-more-borderless economy and a proliferation of ways to move and hide assets,” said the painstaking New York Times investigation, "Towers of Secrecy," by Louise Story and Stephanie Saul.

Probing “the workings of an opaque economy for global wealth,” the reporters excavated the substrata of this enduring scandal. “Lacking incentive or legal obligation to identify the sources of money, an entire chain of people involved in high-end real-estate sales – lawyers, accountants, title brokers, escrow agents, real-estate agents, condo boards and building workers – often operate with blinders on.”

In a moment of inadvertent self-revelation, a Manhattan real-estate broker confessed her look-the-other-way negligence “when vetting buyers: ‘They have to have the money. Other than that, that’s it. That’s all we need.’ ” A former executive of a property-development firm was equally blunt: “You pretty much go by financial capacity. Can they afford it? They sign the contract, they put their money down with no contingency, and they close. They have to show the money, and that is it. I don’t think you will find a single new developer where it’s different.”

No wonder that the upper reaches of the U.S. real-estate market are “more alluring for those abroad with assets they wish to keep anonymous,” the Times analysis found. “For all the concerns of law-enforcement officials that ‘shell companies’ can hide illicit gains, regulatory efforts to require more openness from these companies have failed.”      

The Times’ discoveries, asserted Rossi and Pop, thus underscore the important issues involved in asset disclosure and "beneficial ownership” rules. Many nations require that public officials fully disclose their financial holdings. Such transparency is one important safeguard against the plundering of public wealth by kleptocrats, corrupt clans or well-connected cronies in countries that are vulnerable to chronic larceny.

Yet some dishonest public officials exploit legal loopholes – or flout the law entirely: “As the StAR publication ‘Puppet Masters’ demonstrated, those that do engage in corrupt activities are likely to use entities such as companies, foundations and trusts to hide their ill-gotten wealth,” wrote Rossi and Pop. “These conclusions are also confirmed by a recent Transparency International UK report. It showed that 75 percent of UK properties in the UK, under criminal investigation since 2004 – as the suspected proceeds of corruption – made use of offshore corporate secrecy to hide the owner’s identities.”

Drawing on a new World Bank Group report (which they co-authored with Francesco Clementucci and Lina Sawaqed), “Using Asset Disclosure for Identifying Politically Exposed Persons,” Rossi and Pop argued that accurate and complete financial disclosure by officials in positions of public trust (known in the financial-integrity world as “Politically Exposed Persons”) are an essential safeguard against the diversion of assets. Such disclosures, by themselves, don’t provide a “magic bullet” solution to prevent corruption, yet they are a vital mechanism in building transparency and trust.

“Once there is an ongoing investigation, the information declared can be very helpful as evidence, both in what has been included as well as omitted,” wrote Rossi and Pop. “In many countries, intentionally leaving out information on a house or a bank account carries serious penalties. Furthermore, financial disclosures can help catch a dishonest public official whose lavish lifestyle – including real estate in a prized location – could not be supported by the resources, such as a public-sector salary, indicated in the declaration.” The key factor in ensuring integrity and combating corruption is thus the full disclosure of “beneficial ownership.”

Property prices in Global Cities are already being propelled upward by the gusher of money that is flooding, through fully legal channels, into the world’s most desirable and stable locations – thus threatening to put affordable housing, in many major cities, beyond the reach of all but the fortunate few. The last thing that already-unaffordable cities need is an unchecked flood of illicit billions and furtive real-estate transactions, which will only intensify the pressure that now threatens to create a renewed boom-and-bust cycle of unstable housing prices.

Urban advocates who are working to promote inclusive, sustainable, resilient and competitive cities will applaud the continued vigilance of asset-trackers and corruption-hunters – like the FMI and StAR units, through their work sans frontières
on the disclosure of beneficial ownership – whose efforts to halt illicit financial flows will provide an additional instrument to help ensure that cities will be as inclusive as possible in a relentlessly urbanizing age.

 

#TakeOn Corruption


Weekly wire: The global forum

Roxanne Bauer's picture

These are some of the views and reports relevant to our readers that caught our attention this week.
 
How disasters drive displacement – and what should be done about it
IRIN News
The risk of people being displaced by natural disasters has quadrupled in the last 40 years and, unless governments adopt national and global plans to address the main drivers of displacement, increasing numbers of people will lose their homes to floods, earthquakes and landslides in the future. This is the main message of a report released on Thursday by the Internal Displacement Monitoring Centre (IDMC) ahead of the third World Conference on Disaster Risk Reduction due to take place in Sendai, Japan in the coming days. UN member states are expected to adopt a global plan to reduce disaster risk that will build on the Hyogo Framework for Action adopted 10 years ago.  The Hyogo Framework addressed disaster risk reduction but not the risk of being displaced by a disaster..

6 Ways Technology Is Breaking Barriers To Social Change
FastCompany
We all know that technology is changing the world from artificial intelligence to big data to the ubiquity of smart phones, but many of us working to change society are just starting to understand how to harness tech forces for good. The stakes are high: Some 2 billion people continue to live on less than $2 a day. Millions of women and girls around the world lack basic human rights. Forty percent of children in U.S. urban school districts fail to graduate. A slew of initiatives address these and other intractable social issues, yet often, even the most successful ones only address a fraction of the problem.

Thinking about stakeholder risk and accountability in pilot experiments

Heather Lanthorn's picture

ACT malaria medicationHeather Lanthorn describes the design of the Affordable Medicines Facility- malaria, a financing mechanism for expanding access to antimalarial medication, as well as some of the questions countries faced as they decided to participate in its pilot, particularly those related to risk and reputation.

I examine, in my never-ending thesis, the political-economy of adopting and implementing a large global health program, the Affordable Medicines Facility – malaria or the “AMFm”. This program was designed at the global level, meaning largely in Washington, DC and Geneva, with tweaking workshops in assorted African capitals. Global actors invited select sub-Saharan African countries to apply to pilot the AMFm for two years before any decision would be made to continue, modify, scale-up, or terminate the program. One key point I make is that implementing stakeholders see pilot experiments with uncertain follow-up plans as risky: they take time and effort to set-up and they often have unclear lines of accountability, presenting risk to personal, organizational, and even national reputations. This can lead to stakeholder resistance to being involved in experimental pilots.

It should be noted from the outset that it was not fully clear what role the evidence from the pilot would play in the board’s decision or how the evidence would be interpreted. As I highlight below, this lack of clarity helped to foster feelings of risk as well as a resistance among some of the national-level stakeholders about participating in the pilot. Several critics have noted that the scale and scope and requisite new systems and relationships involved in the AMFm disqualify it from being considered a ‘pilot,’ though I use that term for continuity with most other AMFm-related writing.
 
In my research, my focus is on the national and sub-national processes of deciding to participate in the initial pilot (‘phase I’) stage, focusing specifically on Ghana. Besides being notable for the project scale and resources mobilized, one thing that stood out about this project is that there was a reasonable amount of resistance to piloting this program among stakeholders in several of the invited countries. I have been lucky and grateful that a set of key informants in Ghana, as well as my committee and other reviewers, have been willing to converse openly with me over several years as I have tried to untangle the reasons behind the support and resistance and to try to get the story ‘right’.

Prizes, literacy and innovations in education

Michael Trucano's picture
an innovation supporting a revolution?
an innovation supporting a revolution?

"Innovation!"

The buzz around this buzzword in education (the need for it, the celebrations of it, the challenges in catalyzing it) continues to get louder and louder, and the word itself seems to get invoked with increasing (almost de facto) frequency as part of discussions about the need for change.

Indeed:

How are we to meet and overcome many of the pressing, endemic, and sometimes seemingly intractable challenges facing learners, educators, education policymakers and education systems around the world if we aren't being innovative in how we define (and redefine) our problems -- and in how we propose to go about solving them?

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There are many groups, events and activities that seek to document, share knowledge about, analyze and assess various 'innovations in education' around the world. The annual World Innovation Summit for Education (WISE) in Qatar, for example, focuses explicitly on this theme. R4D's Center for Education Innovations does as well, in partnership with many international groups, including UNICEF (which has a special initiative on 'innovations in education' and whose much-lauded Innovations unit is for many of us a model for excellence within the international donor and aid community). The OECD's widely-read report last year on Measuring Innovations in Education seeks to offer "new perspectives to address th[e] need for measurement in educational innovation through a comparison of innovation in education to innovation in other sectors, identification of specific innovations across educational systems, and construction of metrics to examine the relationship between educational innovation and changes in educational outcomes."

Some observers may feel that this explicit focus on 'innovation in education' is overblown. We don't fund a lot of things sufficiently that we already know work, why don't we first concentrate on that stuff? Others may note that some 'innovations' in education promoted today have actually been around for decades, and thus perhaps no longer really qualify as 'innovations'. Sometimes the only 'innovation' in a particular 'new' approach is to utilize some new technology to do pretty much exactly what was done before, but now 'digitally', and in a way requiring a power cable or batteries. (I am not too sure that many of these things are really all that 'innovative', but many people who keep sending me related proposals seem to be convinced that they are.) Still others detect in many discussions around the need for 'innovation in education' the guiding hand of 'corporate education reformers' and/or of technology vendors with products to sell, and, as a result of past experiences, ideological leanings, an inherent tendency towards skepticism or a satisfaction with the status quo, and/or political calculus, reflexively push back (if not indeed recoil).

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'Innovations in education' are about much more than just technology use, of course -- but there is also no denying that new information and communications technologies (ICTs) of various sorts continue to enable and catalyze many of the innovations that are being explored in the sector, whether they relate to e.g. teacher training; assessment; data collection and management; payment mechanisms; stakeholder engagement and transparency; or changes in the teaching and learning processes themselves; and whether they originate in the public, non-profit or corporate sectors (or even, as for example is the case of distributed communities of people working together to help build new software or educational content in ways that are 'free' or 'open', out of no traditional or easily definable 'sector' at all).

Sometimes the ICTs are hard to miss (as is the case with Uruguay’s pioneering Plan Ceibal), and sometimes they are behind the scenes (innovative low cost private schooling schemes like those pioneered by groups like Bridge Academies, for example, depend heavily on the use of ICTs to promote efficiency and cut costs), but increasingly they are there. Many traditional groups active in advocating for funding efforts to help end extreme poverty and promote shared prosperity (the twin goals of the World Bank) are increasingly challenged to identify, make sense of and support the diffusion of 'innovations in education' in ways that are useful and efficient and cost-effective – and potentially, from time to time, even transformative.

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Macroeconomic implications of the recent oil price decline

Raju Huidrom's picture
Following four years of relative stability at around $105 per barrel (bbl), oil prices have declined sharply since June 2014. It is not the first sharp oil price swing: there have been five other episodes of oil price drops in excess of 30 percent and several more episodes of oil price spikes. Over the past five decades, these steep drops and spikes have stimulated an extensive literature on the macroeconomic implications of oil price swings and the channels through which they operate.

Media (R)evolutions: The future of the Internet of Things and wearables

Roxanne Bauer's picture

New developments and curiosities from a changing global media landscape: People, Spaces, Deliberation brings trends and events to your attention that illustrate that tomorrow's media environment will look very different from today's, and will have little resemblance to yesterday's.

The Internet is becoming increasingly ubiquitous in our daily lives.  The media and technology industries are also moving beyond individual, detached devices to new arrangements that connect our devices to one another and to larger systems of response.  

In this new arrangement, PCs and smartphones will remain fundamental but other devices like tablets, appliances, and wearables will join them to connect a network of physical objects or "things".  Each thing will be embedded with software and sensors that enable it to exchange data with the operator and other connected devices through the Internet. Hence, the Internet of Things (IoT).
 

The Internet of Everything


 


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