Out of Business

Tom Stevenson

On 16 September the World Bank discontinued its annual Doing Business report. It had been one of the Bank’s flagship publications: a detailed index of the conditions for businesses in different countries around the world, along with an eye-catching league table. Countries could improve their ranking by cutting red tape, strengthening investor rights or making labour more ‘flexible’ – the standard neoliberal reforms. Following the prescription rarely made places richer or more developed, but that didn’t seem to affect the report’s influence.

Its demise, however, came as a result of a nine-month external investigation, commissioned by the Bank, into irregularities in the reports. In 2018, China’s ranking was set to drop from 78th to 85th. The Bank’s then president, Jim Yong Kim, and his staff, under pressure from Beijing, intervened.

At first, Bank executives considered incorporating Hong Kong’s data into China’s score to lift its ranking. But the Bank’s CEO, Kristalina Georgieva, now managing director of the IMF, said that wouldn’t be possible ‘for political reasons’, and looked for other ways to improve China’s position. Georgieva brought in her enforcer, Simeone Djankov, a veteran Doing Business ideologue who, according to staff quoted in the audit, used ‘terror and intimidation’ to find a solution. China’s data were altered to improve its ranking.

The Doing Business methodology was designed to discourage state-directed economies like China’s, so why did Bank executives intervene to improve its ranking? A charitable explanation might have been that they were having misgivings about their methods. The mismatch between China’s sustained economic growth and the Bank’s assessments of its business environment was increasingly stark. But the investigators came to a different conclusion: the Bank was simply worried that China would reduce its funding.

Had the scandal been limited to China and the 2018 report, Doing Business might have survived. The integrity of the report’s methods had been questioned before, sometimes by the Bank’s staff. Paul Romer, a former chief economist, had raised questions about a drop in Chile’s ranking after Michelle Bachelet was elected president. But the investigation turned up more irregularities.

During the preparation of the 2020 report, Saudi Arabia had pressured the Bank – now led by David Malpass – to lift its ranking. Saudi officials gave the Bank to understand that its lucrative advisory contracts with the Saudi state might be threatened. According to the investigation, Djankov instructed staff to manipulate the data to make Saudi Arabia the ‘top improver’ in the 2020 rankings.

Georgieva has the most to lose as a result of these claims. She was quick to issue a statement disagreeing ‘fundamentally with the findings and interpretations’. But Jim Yong Kim does not come out well either. There were once hopes that Kim, one of the founders of Partners in Health and a former director of the WHO’s HIV/Aids department, would allay the Bank’s neoliberal zeal. He’s now the vice chairman of Global Infrastructure Partners, an investment fund whose assets include several airports and gas pipelines (and a few windfarms).

Doing Business was never very useful as an analytical resource. But it wasn’t the only World Bank project that dressed up political convictions with questionable data. For a decade the Bank has been claiming a mass reduction in global poverty that does not stand up to scrutiny (in 2015 it suggested only 1 per cent of Egyptians live in extreme poverty). According to the UN special rapporteur on extreme poverty and human rights, the ‘mainstream pre-pandemic triumphalist narrative’ is ‘unjustified by the facts’, but its usefulness to politicians ensures that it continues.