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World Bank Headquarters, Washington, D.C. (Photo: Simone D. McCourte / World Bank)

World Bank Headquarters, 2013,  Washington, D.C. (Photo: Simone D. McCourte / World Bank)

World Bank Rankings Promote Deregulation at the Expense of Working People

The highly controversial annual Doing Business report gives governments high marks if they slash taxes and worker protections.

Leo Baunach

 by Inequality.org

Through its annual Doing Business rankings, the World Bank promotes blindly deregulatory measures, including a race to the bottom on taxes and fewer protections for workers.

In the recently released 2020 edition, countries get high marks if they demonstrate a commitment to slashing regulations rather than policies that support sustainable development, poverty elimination, and inequality reduction. Both the World Bank and the International Monetary Fund have used the report’s indicators to pressure countries to reduce regulations, sometimes through loan conditions.

Doing Business has long been dogged by controversy. In 2018, World Bank chief economist Paul Romer sharply criticized the report, noting that methodological changes — not reforms — had led to dramatic swings in Chile’s ranking. Romer speculated that staff could have manipulated the rankings for political purposes, an overreach that distracted from his valid criticisms of the methodology. As the Center for Global Development pointed out, Doing Business does not require political manipulation because “the index starts from an extreme ideological premise.” The creation of Doing Business in the early 2000s drew inspiration from the right-wing Heritage Foundation’s Index of Economic Freedom.

For decades, Chile pursued the neoliberal policies championed by Doing Business and the World Bank. Under dictator Augusto Pinochet, Chile privatized its pension system. The Bank held up Chile as a model and promoted pension privatization across the world, an experiment that ended in failure. In Chile, the pension system is in crisis, wages are low, jobs are insecure, and public services including water are privatized. In recent weeks a mass movement has risen up to demand a new model that benefits everyone.

Nonetheless, supply-side ideology may have gained new life at the World Bank. President David Malpass, selected this year by the Trump administration,  described how financial deregulation in Kenya enabled an explosion of short-term microloans via mobile phones. “It’s the kind of liberalization process we need to unleash across the developing world,” Malpass said. This deregulation gave Kenya a significant boost in its Doing Business score from the “Getting Credit” indicator, where it ranks 4th globally.

While the Bank hypes mobile lending as a tool for entrepreneurship and development, there is a much darker side. Mobile lenders in Kenya aggressively market high-interest loans that trap people in unaffordable debt. These loans are not fueling business or investment either: only 10 percent of mobile borrowers in Kenya used a loan for that purpose. Most borrowers use loans for consumption, medical needs, and school fees.

Bridge Academies, which received funding from the World Bank’s private sector lending arm, is among the sources of school fees in Kenya. The World Bank Group is under pressure to divest from Bridge, which has been scrutinized for evading regulations on education standards and providing untrained teachers with poor working conditions.

Under Prime Minister Modi, the Indian government's pursuit of a higher Doing Business ranking has guided policy-making.

The discredited Employing Workers Indicator recently made an appearance in a World Bank white paper on social protection. It is no surprise that the indicator is used in a paper that calls for fewer labor regulations and a social protection system built around individual savings, reduced employer contributions, and narrowly targeted social safety nets. A full analysis of the World Bank’s proposals on social protection and labour is available here.


This work is licensed under a Creative Commons Attribution-Share Alike 3.0 License.

Leo Baunach

Leo Baunach is the Director of the International Trade Union Confederation and Global Unions Office in Washington, D.C., which advocates for reforming multilateralism and a development model that benefits working people everywhere.

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