Doing Business, Indeed

As the demise of an influential World Bank ranking shows, multilateral institutions are prone to corruption. 

 Judge Glock November 5, 2021

From the United Nation’s Oil-for-Food Program to Interpol’s scandal-ridden contracts with Philip Morris and FIFA, international organizations have proved inept at management and undermined faith in the institutions they claim to support. The latest exhibit: the World Bank, which announced in September that it would stop publishing its Doing Business report, once an essential tool for ranking economic opportunity across the world. 

Internal and external audits showed that the report had become subject to political pressure, corruption, and ineptitude. The report’s demise is a tragedy, since its very success is what made it a target of manipulation. But the scandal also shows the danger of trusting such projects to international institutions like the World Bank, where malicious actors often punch well above their weight.

The World Bank created the Doing Business report in 2003 in response to a growing literature that showed the importance of small businesses to economic growth. Writers like Hernando de Soto had demonstrated that burdensome regulations not only hurt poor entrepreneurs but also kept entire economies poor. The Bank’s report soon became famous for an index that ranked all countries by ease of doing business there, based on measures such as how long it took to start a new company and how hard it was to get a construction permit.

The report had a surprising global impact. When Narendra Modi became prime minister of India, he promised to improve his country’s rank on the index to 50th. Vladimir Putin of Russia pledged to push Russia’s rank to 20th. The World Bank documented 3,800 reforms inspired by the rankings.  We now know that corruption undermined the report’s integrity. 

An outside audit of the 2018 and 2020...............To Read More....