- Moderator: Luiz Vieira, Bretton Woods Project
- Panelist 1: Chris Roberts, Canadian Labour Congress
- Panelist 2: Alejandra Scampini, PODER
- Panelist 3: Amanda Janoo, Wellbeing Economy Alliance
- World Bank Speaker: Andrew Stone, Independent Evaluation Group (World Bank)
- World Bank Speaker: Norman Loayza, Global Indicators Group (World Bank)
A video recording of the event can be found here.
Luiz Vieira: *Welcomes and introductions*
In this discussion, we want to critically analyse the Bank experience, following the news of the Doing Business Report (DBR)’s cancellation and the creation of the Business Enabling Environment (BEE) project, and the Bank’s support to the private sector. We will discuss specific steps the Bank could take.
Chris Roberts: Will review the limitations of the DBR approach moved over to the BEEP. The Bank’s Ease of Doing Business is used in developing countries and the developed world. In Canada, the government pays close attention to rankings, libertarian think tanks have drawn on them. Social benefits of regulation must be finely balanced. The approach embodied in DBR and BEEP reflects an impoverished approach of private sector development. Deregulatory emphasis neglects the role of the climate crisis etc, fails to investigate what business models need to address the objectives. A Canadian study of the DBI pointed to data irregularities. The study noted the business environment in Toronto is presumed to provide an accurate picture of the whole country. The pool of experts that participated in the report are business owners and lawyers, who have particular interests and perspectives, so this is not representative.
The is a lack of appreciation of how business strategy is positively affected by regulatory constraints. Business strategy and firm growth can be positively shaped by regulation. Consider the extent to which market and business strategy are shaped by legal and regulatory factors. Unions are well aware of this – labour regulation in business can increase stability, lower labour turnover and efficiency wage effects. Labour regulation encourages investment in technology, and favours more productive and dynamic firms. Pushing firms to innovate introduces dynamism to the economy. This is also part of a broader industrial strategy.
The idea is that it slows down economic development in favour of wages. Looser and more flexible market regulation reduces bargaining power of workers. It encourages deregulation and unequal income distribution. An alternative recognises role of deregulation of private sector labour, focuses on decent work creation, technological innovation and a climate-centered focus. The BEEP should be abandoned and labour regulation should be dealt with separately.
Alejandra Scampini: The cancellation of BEEP is an opportunity to address structural problems on its approach to market solutions. In a recent webinar of the WB referring to consolidation of recovery, representatives of Chile mentioned the cancellation of social environmental sustainability in the projects, so therefore for us it’s very pertinent questioning whether these requirements are, you know of human rights, environmental rights are being effectively contemplated. And so as we enter the third year of the pandemic, vaccine inequality and fiscal cuts are already challenging our collective ability to achieve. For instance, the raising inflation rates, debt burdens, new geopolitical challenges. All of these have been mentioned very recently.
The private sector has played a role in increasing the inequality; unemployment, human rights and labor abuse. It is fundamental that in these conversations about recovery, we talk about, you know, the first step of this very long road. It’s to recognize and identify the problem. And for us, the problem is the state capture. State capture is at the root of issues. This is a phenomenon that has been long studied and it has to do with the exacerbated interference of the private sector in public life in development debates. Private and public entities make institutional agreements to impose their will and interest over the needs and rights of their society and and the planet.
It is important what we are seeing in Latin America. That is the the more violent region for environmentalists, activists that we see that there’s another interference of the private sector that use army policy forces to interfere to go up to a road. Indigenous rights, for instance, to their territories and how the states support these mega projects and and go against the rights of indigenous communities or other communities. So their territory, so we really want to hope, we hope that these debates really puts the rights and sustainability of life at the centre and not the profits of the company. Thank you.
Andrew Stone: Independent evaluators report to the board, comprised of member countries rather than to World Bank Group management. When we at the Independent Evaluation Group were assigned to evaluate doing business, we knew we were stepping into a minefield because many people inside and outside the World Bank Group had firmly told us about doing business. And there are parallel reviews going on. At the same time on the process’s integrity, on the indicator methodology on ethical compliance; what we didn’t anticipate was that just as we finished the indicators that we were evaluating, it would be cancelled. Our evaluation was not the first time doing business. So in our approach paper, we noted some findings that were already there from earlier reviews. The Doing Business indicators don’t capture the full range of legal and regulatory priorities in such areas as competition policy consumer protection and environmental concerns.
A third of Doing Business indicators are not tracking reform impacts and this was something that we had noted originally in about 2008. And finally, that doing business is practice of aggregating indicators was controversial. So in issuing a general index may imply value judgments about what’s better for doing business and how much better it is without plaintiff as strong empirical basis. In our own evaluation, we used a variety of methods including interviews, case studies, literature review and review of World Bank Group portfolio. We were diving deeply into five indicators to come up with some findings about both the strengths and limitations of how the indicators are being used, because at the end of the day we were looking at development effectiveness rather than a technical analysis of the composition of the indicator. We had some findings on both the relevance and effectiveness of the way the indicators were used. At first we found that doing business indicators were motivating the countries to initiate reforms. It was very engaging for governments and often lead governments to create the form capacity. But we found that Doing Business with its limited agenda, lack of granularity of some indicators, and limited generalisability of some of the ways it approaches issues needs to be integrated with complementary analysis and other indicators to assure that limited resources focus on binding development constraints.
Alone, Doing Business was insufficient in many countries to capture the binding constraints. Do we really think that Afghanistan in 2019 should have been focused on strengthening minority investor protection as a priority? We found Doing Business was not particularly sensitive or complete enough to serve as project objectives or metrics that are various assumptions and methods pathological features. We found that some indicators could lose relevance over time, either as other constraints became more binding as identified reforms became less tractable, or if indicators did not adapt to underlying changes.
There were huge gaps in the evidence, with robust evidence limited by indicator area and type. So there was a lot of research on starting a business, trading across borders and protecting minority investors, but much less in other areas of doing business. In addition, our analysis of 11 years of Doing Business reports showed that many of the claims made in their reports went beyond rigorous evidence and lacquered, consistent criteria for what constituted evidence. We tried to translate this into lessons in September 2021 as the evaluation was undergoing final review, and it was decided to discontinue the Doing Business Report. So we adopted the learning on Doing Business as lessons for a successor project called Business Enabling Environment. More broadly, for the use of global indicators and the clear message was this global indicators can be powerful tools that should not become ends in and of themselves should be used in combination with other sources of information.
Norman Loayza: We want to consider not only the burden of regulations but also the quality of regulations; the compliance. We want to strike a better balance of de jure and de facto sources. We want to see a better balance between the Bank and representatives for each country.
Amanda Janoo: Often economic growth and Foreign Direct Investment (FDI) and business rankings are taken as goals in their own right. Very few governments develop strategies and policies in the first place, there are usually consultants and IFIs who would draft the policies for them. These multimillion dollar documents would not be looked at, or states would try to implement policies they didn’t understand. We are asking why these states wanted to increase GDP, FDI etc, and this helps us understand the development goal of countries. It might be peace, economic resilience, or something else. If Myanmar wants to reduce inequality then they shouldn’t focus on multinationals who will concentrate wealth, for example. This thinking does not go hand in hand with the BEEP, which is focused on maximising business. A major problem with the DBR is it’s anti-government stance. The BEEP still treats people like they exist to serve the economy. The ‘economy’ is just a word for the way we produce and provide for one another. Everything we produce comes from the earth, and everything we do of value contributes to our wellbeing. Let’s reward economic activities that most serve people. Not evaluating countries by their economic growth but by what is best for humans. We can’t continue to use the planet for resources. We must focus on business models that help regenerate earth’s resources. Let’s move away from market fundamentalism. If anyone can shift the tide of history, it’s the World Bank.
Luis: What can the WB do better to have a transformative impact?
Andrew: Tt’s hard to go beyond evaluation, but the way we think about business law and regulation is important. Laws and regulations are ways of organizing societies, so consider what they intend to do and whether they are effective. Past evaluations pointed to the need to consider policy objectives of regulation, whether it’s environmental or social protection or economic order. If regulation is only taken in one dimension, we will not have a balanced consideration of policy.
Luiz: Many people talk about the democratic deficit and the erosion of governance and institutions. The link between state capture and trust in institutions – how does this relate to your idea of the BEEP? This is like the Post Washington consensus where the state becomes a derisking actor.
Norman: We must take into account the benefit of informal workers, particularly in Africa.
Luiz: Amanda, what can the Bank do differently for systemic change?
Amanda: Firstly, change the definition of development. We are way beyond the point that Gross Domestic Product (GDP) per capita is not sufficient. Performance indicators should become the dominant way of evaluating. We should develop notions of development that align with a lot of processes to be found within Global South to achieve happiness with less consumption. Secondly, reigning in Multinational Corporations (MNCs) – they inhibit space for local and national actors. A huge part of most economic sectors are now controlled by very few. Institutions have rights to force governments to change things to suit their interests. We should shift from looking outwards for drivers of development coming from global markets, and instead focus on local and national communities and governments as key to development. I disagree that the purpose of private sector development is to grow the economy; these are just groups of people. What are we producing and providing?
Chris: We should be skeptical of the utility of scoring and ranking indices of countries. And I recall in this light the 2015 balancing regulations to promote jobs report developed by the bank at with the ILO. So the fact that there is no overall blueprint to design or adapt labour regulations in this instance, rather there are different reform paths that depend on country characteristics and are shaped by social, political, economic and historical circumstances, combined with different legal traditions. We heard that harmful practices and harmful indicators are based on simplistic assumptions, often what is good for business is also good for people and the planet. I think that certainly we know from long experience in the developed countries as well as in the developing world that business isn’t certain. Business models are antithetical to the interests of people in the planet. And what’s critical is the capacity to shape those strategies and models in the interests of human rights, environmental sustainability, fairness, inclusion, and true economic development. So in this respect, I think that the binding constraints that Andrew referred to are absolutely essential. Amanda touched on those.
I would also include the role of the international financial system in diminishing policy space of governments too. In fact, true industrial policy and development strategy with broad based economic and welfare outcomes for the society as a whole, and not just business. So finally, I would say that there is an anti state bias that’s embodied in the BEE indicators; reducing public services again to support the smooth functioning of markets for the reasons that Luiz pointed out. This is incredibly dangerous in terms of the ensuring the political stability of our systems and the political futures of countries which are already experiencing severe legitimacy deficits. So finally, concretely, I would say one immediate step that the Bank can take that would be important to achieving some of the objectives that we’ve highlighted here is to involve social dialogue. Working with the ILO, ILO is missing from some of the important indicators around labour regulation in the BEE project. Specific evidence based policy making around labour regulation in particular is going to be absolutely crucial.
Alejandra: When we refer to business and human rights, the corporates will always keep a route addressing benefits and privileges. There are no ILO treaties or laws that can stop them from benefitting. We ask the WB to strengthen state capacity, improve regulations and collective bargaining, improve public services etc. There are recommendations that came from the Latin American Forum in March: expand normative incidences, examples of states talking about institutional reform, looking at loans and thinking about ‘development for whom’. They celebrated the fact that institutions, OECD and multilateral banks consider fundamental treatment, right? The WB needs to look at evidence collected by researchers about abuse of corporates and creating accountability, like the French law, and the Human Rights Council (binding treaty on transnationals).
Norman: I agree that what is good for business is not always good for people. But it’s not black and white, there are overlaps in interests with firms and workers. We have seen great benefit in the development of many companies. For example, in the East Asian Miracle (low levels of income to high prosperity). We should take into account measures provided by rankings on human capital, inequality, inclusivity, UN and through the ILO programme. Secondly, on the anti-state bias that Chris referred to. I disagree, I don’t think this bias is embedded in BEEP. We want to take into account public services that help firms that comply with regulations. We are not against regulations and we want the state to help. We want the state to provide services for business to conduct in a proper way, for example resolving commercial disputes and where contracts are not enforced. We want to create a system with governments, courts etc which will play a role in this. Finally, how do we know where dividing constraints are if we don’t study all relevant aspects of the environment?
Q&A From the Floor
Emma Burgisser (Christian Aid): I want people to think about the costs of getting this wrong. The mistakes made have cost workers their power with major companies, indigenous people, women and women of colour. Please think about that. Drawing from reparative justice movements, have you considered taking basic steps for the harm that has been done and apologising?
Norman: Personally I can apologise for the mistakes but not institutionally, that is beyond my pay grade. Policies that promote discrimination are against the tenets of our work. We have regulations that address issues of anti-discrimination, workplace safety, equal remuneration for equal work. We consider these.
Chiara Mariotti (Eurodad): Thanks to Norman and Andrew and all the other WB staff following us, we appreciate your exchange here and we are coming on with a critical stance so your willingness to be open is welcome. There is a cry for the WB to do things differently, it’s not just a matter of apologising, but trying to look at things in a different way, because when you are in an institution you start thinking in that way. You need to look at a different agenda for private sector development. Do the speakers have an item that they would like to see on such an agenda that the WB should undertake? So we have some concrete suggestions. The reason the BEEP was a compelling reason for discussion is the DBR was underpinned by a paradigm of how the WB sees development (in the 90s), the BEEP addresses some issues but remains an output that was conceived in that paradigm and had thought leadership power. Stopping DBR and starting something else to completely overturn that would be an opportunity for the Bank to promote different ideas. Some policies promoted in the BEEP are important to those who do business every day, can you come up with a product that has the thought leadership and power of DBR but makes business and governments think differently?
Andrew: I don’t have a lot to add. We are trying to add light to certain attributes, but not one source will answer all policy questions. A lot of our findings have a sense of humility that say we should generate important indicators that allow us to think critically but also can be used in the broader context with many sources of information.
Norman: The paradigm was a world where there was excessive regulations dampening private sector development. Hernando’s book ‘The Other Path’ on a country burdened by regulations. He was not thinking about developed countries. It is about improving the quality of the framework and providing governments with a positive role to play. We are not the only benchmarking exercise. We have a specific role on the business environment from a regulatory perspective and focused on basic business activities.
Alejandra: States and the WB have heard that in Caribbean and Latin America, the goal is to go beyond market fundamentalism and GDP, the window for thinking differently is very small and is closing. We hope this isn’t a missed opportunity for the WB to be on the good side of the story of human rights and environment.
Amanda: One request would be to start with SDGs and ask how we can assess business capacity to achieve these goals and what kind of space is needed to support those goals.
Chris: Binding constraints issue should be looked at more closely, thinking of the function of the state. Please rectify omission of ILO and social partners, they are important to regulation discussion.