World Bank Informative - Calling Bad Business Good
Written by: Mark Engler October 30, 2006
This election season many voters are asking a critical question: What is the appropriate role for the United States in world affairs?
By punishing those legislators who voted for war in Iraq, many citizens are rejecting the idea of the U.S. as a military overlord, asserting that a different set of values should guide our foreign policy.The same type of questioning should also be applied to our economic affairs. Those who look at the values we are promoting for the global economy will be disturbed. Rather than helping create a globalization that protects workers' rights, encourages sustainable development, and prizes democratic self-determination, our country too often promotes policies that undermine the values most Americans want to uphold.An important example of this emerged recently at the World Bank, where the U.S. holds a decisive share of votes and where an American sits as president. Last month the Bank issued a report entitled "Doing Business 2007: How to Reform." The annual report ranks 175 countries in terms of the "ease of doing business" within their borders. It evaluates nations based on 10 categories related to taxation, licensing, financial and trade regulation, legal infrastructure and labor.All of this looks fine on the surface. But unfortunately, the things that lead a nation to success in the rankings are not what working families in this country would regard as good business practices.On October 13, a group of prominent Democratic senators sent a letter to World Bank President Paul Wolfowitz charging that the report encourages countries to violate internationally recognized labor standards. Signed by Richard Durbin of Illinois, Joseph Biden of Delaware, Byron Dorgan of North Dakota, Christopher Dodd of Connecticut, Paul Sarbanes of Maryland and Daniel Akaka of Hawaii, the letter decries the report’s favorable ranking of countries that lack minimum wages, fail to regulate overtime and condone union busting. "Rewarding lax or non-existent labor standards," the senators write, "contradicts ILO [International Labor Organization] policy, which encourages countries to establish a minimum wage and regulate hours of work and to pass and enforce laws protecting freedom of association and collective bargaining."The senators point out that the State Department officially uses respect for ILO principles as a factor in gauging a country's commitment to human rights. Nevertheless, the World Bank report gives high marks to countries that disregard these standards.Durbin and his colleagues note that Saudi Arabia, a country that denies freedom of assembly and does not permit workers to organize, receives the best possible score from the Bank on indices measuring "difficulty of hiring" and "difficult of firing" employees. The report also praises the country of Georgia for recent reforms that reduce the number of hours counted as overtime and decrease the amount that companies must contribute to the social security system.Perhaps most telling is the country that stands at the top of the rankings: Singapore. The same month that the World Bank unveiled "Doing Business," this country was being blasted in the international press for its repressive policies. In mid-September, the World Bank and International Monetary Fund held their ministerial meetings in Singapore. Wishing to prevent democratic protests, the government denied critics the right to hold a counter-summit or to march publicly. It also banned several dozen high-profile non-governmental organization representatives from the island altogether—even though these activists had been accredited by the Bank to attend the meetings. An embarrassed Wolfowitz dubbed the move "authoritarian." And yet his institution simultaneously lauded Singapore as an ideal place to do business.The senators’ letter to the Bank expresses concern that its report will have harmful real-world consequences. "Investors use the publication to decide where to invest and governments use it as a guide to attracting investment, making it very influential." The World Bank itself argues that its data "inspires countries to reform."That might be true. But reform to what end? "The mission of the World Bank is to alleviate poverty," write the senators. "We fail to see how praising countries for failing to guarantee a minimum wage and overtime pay lifts people out of poverty."The "Doing Business" report is part of a wider phenomenon. In the name of promoting "reform" and "good governance," bodies like the World Bank actually enforce a highly controversial and ideologically loaded set of economic mandates—policies that regularly place corporate profits above the public good. That a Bush administration attack dog now heads the Bank is not coincidental. The U.S. promotes the same type of suspect ideology in its own development policy.President Bush's new Millennium Challenge Account, for example, was designed to distribute foreign aid rewards based on measurable and transparent criteria. But many of these criteria are rooted in the same flawed ideology as the World Bank report. The Millennium Challenge Account uses materials from the arch-conservative Heritage Foundation to judge whether a country has opened its markets aggressively enough, and it penalizes countries that decline to pursue the type of deregulation that fueled the Asian financial crisis of the late 1990s.Americans who believe in real democracy don't want the U.S. to be an economic overlord any more than they want it to be a military one. Fortunately, it is possible to promote a different type of globalization. The United Kingdom recently took a good first step. During the Singapore meetings, the British government announced that it would withhold approximately $93 million worth of payments to the World Bank to protest the institution's practice of making poor countries undertake onerous, and often anti-worker, economic "reforms" as a condition of receiving loans for development.With the U.S. in control of the World Bank, it has the power to go beyond protest. Adopting a foreign policy that truly reflects democratic values, it can demand the Bank make workers’ rights a central part of how it thinks about doing business.