Why the abandonment of the “Doing Business” rankings was necessary

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Leave the almighty “Doing Business” published every year by the World Bank. It was definitively abandoned on Thursday, September 16, 2021. So much the better, rejoice all those who have contested it for many years already.

And there are plenty of them. There are of course the poorly rated and therefore dissatisfied states. But there are also hundreds of NGOs. In March 2021, 360 organizations or researchers in economics and development signed a petition to demand its abolition. The scandal broke out with the departure of the World Bank’s chief economist in 2018, just over a year after his arrival. The American Paul Romer, who a few months later will be crowned Nobel Prize winner, is shocked by the lack of intellectual honesty in the ranking. He had publicly condemned the manipulation of Chile’s score. Downgraded after socialist Michelle Bachelet came to power, then upgraded when liberal Pinera became president. Only to fall back again when Michelle Bachelet was re-elected while the business environment was almost stable during this period.

It took one last polemic to spray the managing director of the IMF for “Doing Business” to be abandoned

A few weeks before the two financial institutions’ annual meetings, it was urgent to put out the fire as quickly as possible. Kristalina Georgevia, who was previously at the World Bank, is suspected of exerting pressure for the benefit of several countries, including China. The facts go back to 2018 for China. The bank then has an urgent need for financing. Its first contributor, Donald Trump’s USA, is unenthusiastic, hard in this context to insult its third contributor, China, which that year was to drop 8 places in the ranking. China will finally retain its 78th place. The facts, if true, show the extent to which the immediate interests of the institution have taken precedence over its independence.

In reality, critics of the ranking emphasize that the World Bank cannot be judge and jury

On the one hand, the bank finances and advises the governments of poor countries or countries in crisis, and on the other hand, it gives them a rating which plays a decisive role for their future. Roles that collide more and more because this relationship, created almost twenty years ago, has gained disproportionate importance. Some states like India or Rwanda are making reforms only to better meet the expectations of “Doing Business”. For developing or emerging countries, it is a highly publicized calling card, especially when performance improves, to attract foreign investors. It is taken into account in the calculation of country risk, which affects the interest rate at which a state borrows. And until 2019, the World Bank even provided paid advice to countries that wanted to improve their ranking, advice sought by the United Arab Emirates or Saudi Arabia, among others. Faced with the outcry caused by this practice, it was stopped dead.

He is also criticized for his Anglo-Saxon prism

This is a criticism issued by France in 2015. Paris was then furious at being ranked 44th that year, behind Jamaica. France believes that the liberal vision of the Anglo-Saxon world prevails in the analysis. Moreover, the promulgation of laws is taken into account, but not their application, which leads to a very distorted view of reality. Keynesian economists believe that this “Doing Business” is the natural son of the monetary adjustment programs of the 1980s and 1990s, painfully imposed by the IMF. The elements that facilitate the liberalization of the economy drive the average up, and the protections introduced by the states drive it down, as they play a stabilizing role in the event of a crisis, as seen with the Covid-19 pandemic.

MAP

► The stock market in Hong Kong fell sharply. It lost 4% this morning due to the collapse of Chinese promoter Evergrande, listed on this exchange. Evergrande, on the brink of bankruptcy, lost 17%, dragging down other property giants and a Chinese insurance giant.

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