Paul Romer, Nobel Laureate in Economics: “I don’t think the World Bank is capable of conducting research with high integrity”

In January 2018 Paul Romer, winner of the Nobel Prize in Economics awarded that same year, opened a controversy that has Chile as the protagonist and that he is not willing to close. As chief economist of the World Bank, he accused the institution of manipulating the Doing Business to damage the national position in the ranking on business environment, making the country look worse under the administrations of Michelle Bachelet.

Three months later, he left office with the conviction that the investigations of the multilateral entity do not necessarily adhere to the truth, an idea in which it persists regardless of whether more than two years later, just a couple of weeks ago, the World Bank recognized irregularities in the report, suspend its publication and announce a new external audit.

According to Romer to PULSO, not even the recently assumed chief economist of the institution, Carmen Reinhart, has the capacity to solve the “systemic” and “organizational” problems of an institution that in her opinion does not adhere to the truth in her research and that it has people in positions of responsibility who lack integrity and cannot be removed.

In this context, he has little or no faith in the new audit being conducted regarding the Doing Business, anticipating that, like the previous one, it will result in what he qualifies as a cover-up. From his point of view, one of the solutions would be to close the research department of a diplomatic institution, leaving that task to the universities.

Are you celebrating the determination that the Doing Business has been suspended?

“It is unfortunate that the World Bank has not taken seriously the problems I highlighted. Instead of trying to look carefully at those issues and address them, they tried to cover up the matter. It does not give me any satisfaction and it seems to me that the most relevant question is whether the WB has the capacity to take this task seriously, otherwise I think they should seriously consider getting out of the research business. It was the latter that I installed a couple of years ago. I don’t think the World Bank is capable of conducting investigations with high integrity. It seems to me that there are universities that are better prepared for that.

Do you think that the determination of the suspension has to do with the arrival of Carmen Reinhart as chief economist of the institution?

-I do not know. I am not aware of who is behind this determination. But I think the most important thing here is to recognize that the World Bank’s problems are systemic and organizational. Therefore changing leadership is not the solution.

The problems go to the heart of the World Bank and will require a lot of effort to solve them. I am not sure that the organization really wants to resolve them, because it could conflict with the diplomatic mission.

So do you think the problems go beyond the observations you made regarding Doing Business?

—There is a fundamental problem in relation to the objectives of the organization. The main character of the World Bank is diplomatic, it is about managing relations between different countries. In this world of diplomacy, it sometimes helps to overlook facts or pretend something is true when it is not.

That may be part of diplomacy, it is not corrosive to investigations, which from my point of view should be undertaken organizations better committed to the truth than those of a diplomatic nature.

What will you expect from the new external audit that will be done on the matter?

—What they did after my criticisms was to form a commission and generate an external report that only worked as a cover-up, to pretend that the problems didn’t exist. Then it would be easy to form a new commission to do a new cover-up and we finally don’t see any relevant changes. I think that what corresponds is to look in detail at organizational problems, which in my opinion are quite serious.

What do you mean exactly?

—The fundamental problem of the World Bank is that it is impossible to remove a person who is dishonest from leadership positions. The protection of some positions is so extreme that they are not responsible for their actions.

Are you saying it based on your experience? Who could she not remove?

—I made the arrangements to remove a person from a position of responsibility within the area that corresponded to me and another outside that area. But I spent all my time on it and thus I could perceive that the system is completely broken.

The arguments one hears are about how brave people are and their investigations are containing pressure from other people. But the truth is that they are people who lack integrity. I am not going to give specific names.

Should the government of Chile ask for an explanation considering what you denounced and the suspension of the report?

—The government and the people of Chile should ask the World Bank for an explanation for the pattern that I identified. There were changes in the business environment measurement system that made Chile look worse under some administrations and better under others. There was never a clear explanation for this pattern. What the report with which they covered the matter said was that there was a random result, the truth is that there is no evidence to support this alternative.

Turning to the contingency that exists in your country, what is the difference that the fate of the United States faces between an administration of Joe Biden and Donald Trump?

“A Joe Biden administration would be a return to normalcy.”

What is this normality in a context as unusual as the current one?

—Normality is a system in which the United States is a true world leader. The administration that we have at the moment is a pathological, sick system. You have to understand that this is not about choosing between Democrats and Republicans. This is about integrity and law enforcement versus corruption, dysfunction, and incompetence.

Do you consider Trump a corrupt politician?

– Yes. There is a lot of evidence about his corruption.

Is your opinion also negative in economic matters?

– Sure, like your response to the pandemic, which has been totally disastrous. It is one of the worst disasters in our system as a country and it was absolutely avoidable.