The ‘Doing Business’ report is still doing harm
The World Bank has just published its annual “Doing Business” report. This flagship publication ranks countries on how easy it is for business to do everything from starting up to enforcing property rights.
It is high influential, but also highly controversial in pressuring governments to scrap any sort of regulation – from employment protection to paying taxes. This year’s report has responded to some union criticisms but is still largely a roadmap for “doing business as usual”.
Unions have heavily criticised the Bank over the years for the report’s employment index which has rewarded countries for slashing employment protection. Last year it praised Belarus for making it easier to sack people. And Rwanda won the “top reformer” prize for allowing business not to consult the workforce about redundancies.
Years of debate and piles of research led to the conclusion that employment protection has little bearing on economic performance. In fact, labour markets in countries with strong employment protection legislation weathered the global financial crisis better than those that didn’t – they acted as automatic stabilisers to keep the economy ticking over.
Unions and the Doing Business people have fought each other to something of a draw: the Bank agreed to drop the ranking this year which is welcome, but it still retains all the grisly detail of the employment protection data in an annex to this year’s report (Check out page 141: Paid annual leave = burden. Retraining redundant workers = burden. Notice period for termination of employment = burden, etc).
Closer to home, this year’s report praises the UK’s effort to cut the regulatory burden on business, motivated by government estimates of “…a particularly heavy burden in employment law, tax administration, and health and safety” (Page 35). This is despite the UK being a top performer, coming in at 7 on a ranking of 183 countries, and despite the positive effects of such regulatory “burdens”. Of course no one wants pointless bureaucracy, but the report doesn’t distinguish between that and regulations for business which might e.g. save lives at work or support extending social protection.
This sort of one-sidedness runs throughout the report and is painful to read. Its “paying taxes indicator” (page 52), rewards countries having the lowest level of taxes and social contributions payable by business. At a time when public coffers have been emptied propping up the excesses of the finance sector this is a staggeringly thoughtless indicator. And it only pressures governments to shift tax burdens onto workers and consumers or cut services.
So what about an annual “Doing Decent Work” index compiled by the International Labour Organisation to provide a bit of balance? You could never do that – I’ve been told by officials – because that’s “political”.