draining development.pdf - Khazar University

4 Draining Developmentinterviews with 550 senior corporate executives in 11 nations into estimatesof trade mispricing in the global economy. This is not a simpletask. For instance, the nature of the sample is critical to such an exercise(in terms of dimensions such as the commodities and services involvedor the countries with which these are traded). Similarly, between theearly 1990s, when Baker did his interviews, and 2005, when the estimatewas published, there were many changes that could have either raised orlowered the share of mispriced transactions.For the criminal revenues, Baker uses figures that are often cited inthe semiprofessional literature. Consider drug markets, for example: thisrepresents the most well studied illegal industry. Baker uses figures fromthe United Nations Office on Drugs and Crime that cite a total of US$400billion in retail sales and US$120 billion in wholesale revenues. There is,however, a critical literature suggesting that these are substantial overestimates,perhaps twice the true value. 1As Baker and his colleagues have acknowledged, given the scarcity ofavailable data, the numbers Baker presents are not precise estimates, but,rather, are indications of orders of magnitude that are meant to promptacademic researchers, the International Money Fund (IMF), and theWorld Bank to collect more accurate and complete data and devise morerigorous estimating techniques. Nonetheless, as is the norm with suchwork, popular accounts of Baker’s conclusions have focused on themoney amounts, which are in the hundreds of billions of dollars, andignored the caveats that accompany them.Moisé s Naí m’s Illicit: How Smugglers, Traffickers, and Copycats AreHijacking the Global Economy, also published in 2005, has added to theprominence of the topic. Naí m’s emphasis is on the expansion of thevariety of illicit international trade involving banned goods, such asdrugs, or the counterfeit and theft of intellectual property. He offers nooriginal estimates, but includes alarmingly high numbers, such as aninternational trade volume in illegal drugs amounting to US$900 billion.Though Naí m’s book does not use the term “illicit financial flow,” it reinforcesthe sense that there are large flows of dirty money from the developingworld to the developed nations.Global Financial Integrity, an organization founded by Raymond Bakerin 2006, has turned out a number of reports on illicit flows. 2 These have