World Bank deregulation guide ignites – 18 years too late

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Image Credit: Mike Theiler / Reuters

The Washington-based World Bank, which has long touted itself as the leading multilateral development agency, announcement the last week he stopped To do business, an annual report that over the past 18 years has ranked and ranked countries according to whether their regulatory or tax regimes are sufficiently business friendly.

This flagship report offered policy advice typically to weaken or eliminate regulations or procedures imposing costs or obligations on private companies, including corporate taxes or contributions to pensions or workers’ health care. The Bank and the International Monetary Fund used the report’s indicators to pressure countries to reduce regulations, sometimes through loan terms.

Unsurprisingly, for nearly two decades of existence, DB has drawn strong criticism from organizations advocating better social protection and fairer taxes, groups calling for more equitable development policies in low-income countries. income and the global labor movement. The World Bank at the start of the last decade made a concession to those who opposed the Bank’s advocacy for lower minimum wages and reduced worker protection by suspending and more recently eliminating the DB indicator which called for a weakening of labor regulations.

But with the growing intensity of the movement for policies that more equitably distribute wealth and income, there has been a rise in opposition to DB in the face of the Bank’s stubborn refusal, for example, to stand still. get rid of the tax indicator from the report. , which has consistently given its best scores to tax havens and oil states. Through To do business the World Bank has openly opposed a recent international agreement demand an increase in corporate income taxes.

It wasn’t DB’s unpopular right-wing agenda that ultimately led the World Bank to end its most high-profile report, but rather the revelation last week
that officials at the highest level had plotted to alter DB’s findings in an attempt to please the governments of some powerful and wealthy countries. Those involved include the current director of the Bank’s sister institution, the IMF, Kristalina Georgieva, for acts that took place in 2017-2019 while she was managing director of the Bank (a post that was abolished when she left the Bank).

The director of the International Monetary Fund, Kristalina Georgieva, has tried to play down her role in the data manipulation scandal. Credit: Getty Images

The incidents described in the Bank’s investigative report include an elaborate operation, led by Georgieva, to change data and improve outcomes for China in the DB 2018 report, the writing of which coincided with negotiations to increase the World Bank capital base. The Bank was counting on a substantial financial contribution from China as a result of these negotiations.

A subsequent incident related to the Bank’s investigation involved an official named Simeon Djankov, a Bulgarian compatriot from Georgieva who happened to be one of the founders of DB whom she brought in to authorize changes to the report and then promoted to the head of the large economic department of the Bank. . In January 2019, Djankov visited Saudi Arabia where he delivered a speech promising that the country “would see significant gains in its To do business performance ”because of paying the Bank a substantial fee for providing reimbursable advisory services. In September of the same year, DB staff actually changed the data to improve Saudi Arabia’s score in DB 2020, as instructed by Djankov, according to the Bank’s investigation.

This latest data tampering scandal involving To do business is not the first. At the end of 2017, the Bank’s chief economist, Paul Romer, apologized publicly
for “unfair” changes to the DB methodology that made Chile appear to be a less successful country when the Socialist Party was in power than when the conservatives were in power, even though no significant regulatory changes had taken place. Romer speculated that Chile’s change of DB status was “politically motivated.” Georgieva responded in January 2018 by quickly firing Romer (who later that year received the Nobel Prize in economics) and handing over his responsibilities to Djankov. The latter’s first task was to prepare and publish what, under Djankov’s leadership, became a very backward World Development Report on the future of work. His other major responsibility was to take control of DB.

Former World Bank official Simeon Djankov. The ethics report describes Djankov as a “tyrant” who ruled through “terror and intimidation”, was “pompous and undiplomatic” and prone to lying. Credit: Peterson Institute for International Economics.

The World Bank has never admitted Romer’s conjecture of political biases against progressive governments as a reason for changes to the DB methodology, but it acknowledged last week that Bank officials introduced a payment ethic through To do business must have been a major inconvenience for an institution which, not so long ago, made the eradication of corruption in developing countries one of its main objectives.

For his part, Georgieva, who has headed the IMF since November 2019, initially dismissed the Bank’s investigation, saying in a three-line statement that she “fundamentally” disagreed with it. A day later, she insisted during a virtual meeting with IMF staff that it only asked bank staff to “recheck, recheck” China’s data to make sure it was correct. It appears that no one at the meeting had the opportunity to ask if they exercised the same degree of caution with DB data for the other 189 countries covered by the report, none of which were able to provide potentially a significant capital contribution to the Bank.

Georgieva’s flippant rejection of the wrongdoing documented in the Bank’s investigation report is unlikely to be convincing. An asset manager listed in a A particle
observed that if officials of a private bank or rating agency falsified a rating report as World Bank officials claim, “they would be fired and subject to regulatory investigation.”

The fact that one of the main players involved in the manipulation has since left the Bank to take over as head of the IMF calls for even more vigilance, not less. The IMF has itself been a staunch user and promoter of DB and its deregulation agenda for the past two decades, and IMF officials have proven themselves to be world-class pros in concocting distorted analyzes to justify policy plans. predetermined.

A great example is “Fostering growth in Europe now”
a report the IMF used to justify its endorsement of the European center-right offensive against unemployment benefits, minimum wages and other labor regulations at a time when Europe was yet to exit the global financial crisis and where austerity policies reigned. The results showed that labor market problems were only minor compared to barriers to growth such as non-functioning credit markets and outdated infrastructure, but the report nonetheless made calls for deregulation of the labor market. work at the top of the list in almost all of the 17 countries considered. The results of the anti-workers’ offensive combined with budgetary austerity were not long in coming: Europe entered a double-dip recession, unemployment soared to more than 20% in some countries and the level of life declined for most of those who still had a job. .

The To do business The data fraud scandal has enabled the Bank to end a festering embarrassment while avoiding having to correct fundamental flaws in the economic policy advice it and the Fund have driven in countries around the world. In fact, current World Bank executives can be privately grateful that ethics investigators have shifted the focus from politics to personality flaws. The report describes Djankov as a “tyrant” who ruled with “terror and intimidation”, was “pompous and undiplomatic” and prone to lying. (It remains to be seen whether the Bank’s listing of his multiple talents earns him a promotion to the privately funded Peterson Institute for International Economics, where he currently works.)

In his statement announcing the end of To do business, the Bank asserted that “it remains firmly committed to advancing the role of the private sector in development and to helping governments design the regulatory environment that supports it.” If that means relaunching the report under a new title and less ethically challenged leadership but with the same anti-corporate tax and anti-regulation agenda, the IMF and the World Bank will continue to contribute to policies that exacerbate inequalities around the world.

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