Source:
Agenda Global - La Diaria
Roberto Bissio
Mon May 11 2009
In an unexpected change of heart about what is good for development, the World Bank announced on April 28 changes in the methodology used for its report "Doing Business", the most influential publication of the institution, which ranks all countries of the world as more or less attractive to investors depending on how easy or difficult it is to establish, lead and close a business, or obtain credit. Several of the ten indicators that define the place of each country in the table of "Doing Business" will be changed in the 2010 report, to be published in September this year, announced the World Bank.
A legend says that the teacher Nasreddin Hodja, who was invited to dinner by the sultan Timur Lan, praised excesively each dish. "I didn't like the cabbage very much," says Timur, finally. "You're absolutely right, Your Majesty," Hodja answered immediately, "too much vinegar, perhaps to conceal it was not very fresh." The Monarch, arching eyebrows, says: "As my adviser, how do you explain this sudden change of opinion?" "It's because I work for the Sultan,” answered Hodja. “And not for the cabbage.”
The index "Paying Taxes" (PT) will be reviewed by a panel of experts and redefined. Until now, the PT average property taxes were not many, that amount was small and easy to pay. This had the consequence that many of the countries mentioned by the Organization for Economic Cooperation and Development (OECD) in their lists "gray" and "black" of tax havens have a very favorable place in the PT. The index "Employing Workers" (EW) rewards those countries where firing workers is easy and cheap, since it is assumed that employers will not hesitate to hire new people if firing does not generate tragedies.
It will now be replaced by "Protection Working" (PW), which now rewards countries that meet "the letter and spirit" of the conventions of the International Labor Organization (ILO). "We recognize that well-designed protection of the rights of workers are good for society as a whole," says the World Bank. The EW shall cease to be used as a component of the country assessments. An explanatory note sent to all governments and officials and consultants from the World Bank makes clear that the EW index does not represent the policy of the Bank and should not be used as a basis for advising the government or be cited in papers that describe the development strategy of any country. Now World Bank emphasizes the need for regulatory approaches that promote job creation in the formal sector of the economy, protection for workers' rights and vigilance against the tendency to shift the risk of firms to workers and families of low income.
“In this times of crisis,” says the World Bank, “it is important that the actions of governments do focus on the needs of workers and the poor as well as in the survival and growth of business. “In this perspective, access to unemployment insurance and social security is a key aspect.” However, a week after the announcement, the website of the World Bank continued to distribute a "simulator" in which the relative position of a country in the world ranking improved if the dismissal or lower working hours are flexible or reduce taxes on company profits. Since its first publication in 2003, "Doing Business" has been criticized by unions worldwide, who see in it an instrument of pressure to weaken the labor laws and social protection of their countries.
While the report presents itself as a mere intellectual exercise, its inclusion in the set of indicators on a country's performance makes the countries applying for loans or grants, if not in a good position in the report, try to make at least some "progress" in the way that until last week was considered correct. In the last three years, the ILO criticized "Doing Business" for referencing labor agreements (which have the value of international law) as an impediment for a country to improvements in the table. The Financial Services Committee of the House of Representatives of the United States held hearings on the subject in October 2007. In its conclusions, the chairman, Barney Frank, said: "Excessive inequality can be politically dysfunctional and in the sense that it starts to reduce consumption or the ability of producing savings it may become also economically dysfunctional ...
It bothers me a lot that the report “Doing Business” of the World Bank reinforces these trends.” In June 2008 the own internal audit of the World Bank criticized the report, noting that the assumptions made for the study were not proven and that what is good for a separate company (like paying less taxes or lay off workers easily) can not be for the whole group of companies and the business operations in general. Real investment (before the crisis) would not flow to countries with a high ranking on "Doing Business" report, with often authoritarian regimes and the "competitiveness index" developed by the World Economic Forum in Davos, a business entity, which ranks the first places to the Scandinavian countries that have the highertaxes and social protection in the world.
This torrents of criticism always fell on deaf ears until, suddenly, the World Bank last week announced sweeping changes. The immediate cause was not self-criticism, an academic opinion or a formal recognition of the failure of the policies implemented so far, but a more prosaic one.
To obtain the release of 4,500 million United States dollars which will provide the World Bank with much needed as part of what was promised by the G-20, it requires the approval of Congress and Congressman Barney Frank was able to condition the delivery of such funds to the review of “Doing Business” . A policy, moreover, consistent with the president Barack Obama, who said on Tuesday, May 5 that he will fight the companies that export job positions overseas “and evade U.S. taxes through offshore banking and tax havens”. Thus the World Bank, as the wise old Hodja, do not work for unions, not even for employers. Works for the U.S. government.
This article was first published by the Uruguayan weekly publication Agenda Global/ La Diaria, May 07 2009.
Related Information:
-> Revisions to the "Employing Workers" Indicator (EWI)
Frank praises changes to World Bank's "Doing Business" report
-> Why has the World Bank changed its views on tax and labour standards?, by Eurodad Blog
-> ITUC welcomes World Bank’s suspension of "Doing Business" labour indicator
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