How the Doing Business scandal has exposed the weak accountability of the Bretton Woods Institutions
The Doing Business scandal brought the Bank's structural problems into the public eye, namely the weak independence and integrity of its research and the widespread conflict of interest in its policy advice.
On the face of it, the storm that rocked Washington DC over recent weeks and threatened to dominate the debate at IMF-WB Annual Meetings appeared to be about the fate of IMF Managing Director Kristalina Georgieva. In fact, it is a far deeper and murkier story, one that puts at stake the accountability of both Bretton Woods Institutions.
Clouds started to appear after internal audits of the World Bank's flagship Doing Business Report (DBR) revealed data manipulation which led to the Report's suspension this year. The Report already had a history of misconduct and manipulation. Civil society had long criticised it for embodying the Bank’s neoliberal ideology, imparting a view of economic development as a competition between countries that can only be won by reducing the role of the state and creating the conditions for unfettered capitalism.
Then, a few weeks ago, without warning, the World Bank made public the results of a methodology review by an independent panel and an investigation by the law firm WilmerHale that revealed that DBR data had been manipulated to change the rankings of five countries (China, Saudi Arabia, United Arab Emirates, Jordan and Azerbaijan) and to accommodate vested interests, under undue pressure from World Bank top leadership. The investigation also uncovered conflicts of interest inherent in the Bank’s Advisory Service. Georgieva, who was CEO of the World Bank at the time, was accused of pressuring the manipulation of China’s ranking.
The scandal has brought to the public eye the Bank’s structural problems such as the weak independence and integrity of its research and the widespread conflict of interest in its policy advice. It also called into question the World Bank’s self-proclaimed role as policy advisor and development knowledge hub for the world. More than ever, this episode should have pushed the Bank to undertake far-reaching structural reforms.
Instead, the response to the scandal was reduced to a fight between two camps: those defending and those accusing Kristalina Georgieva. Her supporters favour a wide development mandate for the IMF in the global economy, including academics such as Joseph Stiglitz and Jeffrey Sachs; her opponents are keen on maintaining a conservative role for the Fund as the keeper of macroeconomic stability, and disliked her collaborative attitude to China.
On Monday, the IMF Board reaffirmed its confidence in Georgieva’s leadership, on the grounds that the investigation “did not conclusively demonstrate that the Managing Director played an improper role regarding Doing Business 2018 Report”. While this conclusion leaves many questions unanswered, by having focused on the responsibility of a single individual, the risk is that by the end of the Annuals the World Bank and the IMF will consider the problem solved and will go back to business as usual.
No serious attempts have been made to address the faults in the system uncovered by the DBR scandal. Georgieva was cleared by the Board through a process that remains opaque to say the least, despite her claim that the institutional integrity of the IMF is of the highest standard and that the problem “is on the other side of 19th Street” (i.e. at the World Bank). Meanwhile, David Malpass, President of the World Bank at the time that the DBR ranking was manipulated in favour of Saudi Arabia, remains unquestioned. When asked about the issue at the CSO Townhall meeting, he reaffirmed the Bank’s intention to continue working with countries to ‘strengthen their business climate’, with no hints that this will be done critically to address the problem exposed by the DBR scandal. The fact that he attended part of the meeting from his car with no possibility for CSO direct engagement is yet another demonstration of the Bank’s disregard for accountability.
The whole DBR scandal is a clear demonstration that the top-level decision-making of the Bretton Woods Institutions is highly vulnerable to capture and manipulation in the name of geopolitical interests.
In a statement released on Tuesday, more than 130 civil society organisations and academics are demanding root and branch reforms to restore the World Bank’s credibility and legitimacy and strengthen their internal and external accountability. This includes reform of their governance system that would get rid of the quota voting system that underrepresents the global south and overwhelmingly favours the global north, and dispose of the ‘gentleman’s agreement’ which currently governs the leadership selection process, despite its colonial and patriarcal flavour. These two arrangements make the management of the two institutions vulnerable to geopolitical manipulation and highly undemocratic. Last but certainly not least, a Doing Business 2.0 should be avoided at all costs and instead the Bank should set out a path for rethinking what constitutes an ‘enabling business environment’ for firms that put people and planet before profit and are aligned with the Sustainable Development Goals.