The World Bank’s “Doing Business” report improves its ranking for making dubious claims
The World Bank has just released its 2013 Doing Business report which, despite years of criticism by global civil society, still rewards countries that reduce corporate taxes and weaken workers’ rights.
“Doing Business” ranks countries against a set of indicators based on the ease of doing buinsess . It has been a deregulation sledge hammer that has inspired hundreds of reforms, many outright harmful, across both the developing and developed world. Perhaps its low point was reached in 2007 when it proclaimed that Georgia was “top business reformer of the year” for reforms that violated four out of the eight international core labour standards, and put the country on the US watch list for workers’ rights violations.
Unions and global civil society managed to convince the Bank to shelve its “Employing Workers Indicator”, as I blogged about last year. But this week’s report still includes most of the harmful data and arguments. For example, it states that countries that reduce dismissal notice periods or severance pay “are addressing one of the main factors deterring employers from creating jobs in the formal sector” (page 100). Not even the rest of the World Bank agrees with that dubious claim.
The Bank’s own Independent Evaluation Group rejected this claim back in 2008. And the Bank’s World Development Report on Jobs released earlier this month stated (at page 262) that:
New data and more rigorous methodologies have spurred a wave of empirical studies over the past two decades on the effects of labor regulation…. Most estimates of the impacts on employment levels tend to be insignificant or modest.
The report also attacks Sub Saharan Africa for “its very restrictive” approach to severance pay which is above the rich country average. Sharan Burrow, the ITUC General Secretary rightly slammed this comment: “The Bank knows full well that with the exception of South Africa, state-provided unemployment benefits are practically non-existent in Sub-Saharan Africa, contrary to the situation in high-income OECD countries.”
Doing Business also still sees corporate tax as a bad thing. With our massive squeeze on public spending, the report gives the UK a big tick for “reducing its corporate income tax rates” (page 82). It also rewards countries that “reduce labour taxes and mandatory contributions” – code for vital safety nets for workers such as pension and health insurance contributions. And it calls for the merger or elimination of “taxes other than profit tax”. So no taxes on banker bonuses or financial transactions then.
When Doing Business isn’t doing harm, it is still extremely one-sided. So while it has helped reduce the time it takes a business to enforce a contract (page 90), there is nothing to reduce the time it might take for a worker to recover her unpaid wages or get her job back through the courts.
This “Doing Business bias” is alive and well in our own Department for International Development. Our new report titled A Decent Job? which assesses DFID’s contribution to achieving decent work (it gets 25 out of 54 points) concludes that (at pages 14-15):
…it is not clear that DFID does any work to improve labour administration systems. This stands in stark contrast to DFID’s extensive work in helping strengthen government capacity to service the private sector.
On a brighter note, the new boss at the bank, Jim Yong Kim has announced a full review of Doing Business. Here’s hoping that the recommendations clean up the harmful parts of Doing Business and call for a separate “Doing Decent Work” report, co-authored with the International Labour Organisation.