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Doing Business with the World Bank: When 'Development' Drives Inequality and Poverty

The World Bank's Doing Business rankings reward countries who service the needs of large-scale international business, to the detriment of the majority, and punish those that don't.
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World Bank President Jim Yong Kim (left) listens to African Development Bank President Donald Kaberuka. Photograph by Dominic Chavez/World Bank.

The thing about 'international development' is that it’s a bit of a murky, catchall term. It’s got a good feel to it – if you’re involved in international development, you’re more often than not seen as one of the good guys − and it swirls around in a bucket of meaning alongside similarly noble-seeming notions such as 'foreign aid' and 'disaster relief'. 'International development' could be helping people escape from the ruins of an earthquake or the ruins of economic mismanagement, but it is generally understood to be about 'doing good'.

How would you feel, then, if some projects that came under the umbrella of 'international development' were hiding something darker, less altruistic and far more self-interested? What if some groups charged with leading global development were actually doing more for a small group of transnational elites than for the 870 million people in the world suffering from chronic undernourishment or the 1.2 billion living on less than $1.25 a day?

Well, in many ways, the World Bank, with its $30 billion annual budget, is doing just that and contributing to misery and environmental destruction along the way.

Laws of the land

According to the World Bank, its missions are to “end extreme poverty within a generation" and "boost shared prosperity.” And like almost all governments and multilateral institutions, the Bank subscribes to the current economic orthodoxy in as much as all of its models for poverty reduction have economic growth as a prerequisite. Almost any sort of growth is considered positive.

Another assumption in this economic understanding is that for developing countries to develop, they must be connected to global markets. They must be able to sell what they have to the people who want it, whether that's oil, grain, rare earth, cotton or diamonds. As climate change challenges access to water and governments become more concerned over food security, that list also, crucially, includes arable land. Land − especially that connected to water − is getting rarer and more valuable, and it is already in huge demand, both by those looking to build industrial, often monoculture operations, and those looking to turn a quick buck by playing the market.

Practically all of the land being traded, however, is already owned, mostly by smallholder farmers, pastoralists and Indigenous Peoples − exactly the sort of groups 'international development' is supposed to be about. But, unfortunately, for millions of such people − from Cambodia to Ethiopia to Guatemala − they don’t have the right paperwork. The fact that they have been tending the same land for generations, or that they are feeding 80% of the developing world, or that their methods are environmentally-sustainable where industrial agriculture can be hugely toxic, is irrelevant. No paperwork means no claim. Or, more to the point, no paperwork means the land officially belongs to the government, which means it is visible to the world as a tradable asset.

Enter the World Bank

Through a system called the Doing Business (DB) rankings, the World Bank uses its considerable financial and political power to make it as easy as possible for these visible and tradable assets to exchange hands. The land is often traded in huge plots and to the only people with the capital necessary to buy assets on this scale: big foreign corporations or local elites.

The fact that the World Bank helps out the global 1% in this way might not necessarily be a bad thing. After all, investment can bring jobs, tax revenue and expertise to a country − in fact, that is development. But this is rarely what really happens.

In far too many cases, corporations are given considerable tax breaks, while the jobs created and expertise transferred are meagre. This is firstly because industrial farming is designed to operate with minimal human input, and secondly because even those few jobs that do exist are more often than not kept in a relatively closed loop of expat workers or a handful of locals.

This foreign investment does, however, do one critical thing. It brings more economic activity into the country than previously existed. This activity may not benefit the country's citizens and the new money may leave the country through tax havens more or less as soon as it appears, but it is there albeit briefly. And it, therefore, registers as growth. The World Bank thus, on paper, helps developing countries connect to global markets and raise their GDP.

The DB rankings encourage this kind of economic activity by awarding points to countries when they act in favour of the “ease of doing business”, which are published in an annual report. The Bank claims that its rankings have “served as an incomparable catalyst for business reform initiatives,” but as we have seen these reforms primarily service the needs of intensive, large-scale international business.

This is clear from looking at the kinds of policies the Bank rewards. For example, the fewer regulations there are on the purchase of land, the higher the rating, with maximum points being awarded to countries with total freedom of purchase. The more minimal a country's corporate taxation is, the better the country's ranking too, with most points awarded for zero corporate taxation. Meanwhile, by contrast, countries are punished for even offering workers minimum wages.

This is the neoliberal blueprint for economic development: low corporate taxation, low worker wages and protection, maximum privatisation, and minimal standards of environmental protection. Everything, in other words, to maximise wealth extraction and concentration.

The World Bank claims that the rankings are merely about minimising bureaucracy, but even a brief look at what happens to countries as they move up and down the rankings shows that they in fact work more like a bulldozer clearing the path of smallholder farmers and whatever local labour or environmental protections exist, so that large Western corporations or local elites can move in and start extracting wealth.

For example, in the 2012 rankings, Cameroon jumped four spots (from 165 to 161) after it made it easier to 'start a business' by allowing company founders to produce only a sworn declaration instead of a hard copy of their criminal records.

Liberia was placed in the top ten DB reformers in 2008-2009 because of the measures it took (with the help of the DB reform advisory team) in the areas of 'starting a business', 'dealing with construction permits' and 'trading across borders'. Its new, shinier ranking helped it attract investments from palm oil giants such as the UK's Equatorial Palm Oil in 2008, Malaysia's Sime Darby in 2009, and Singapore's Golden Agri-Resources in 2010. These deals involved the corporate takeover of millions of acres of land at the expense of local populations’ farms and existing livelihoods.

Sierra Leone meanwhile has also been praised as a good reformer, with its DB ranking increasing 15 points between 2008 and 2010. In particular, key steps have been taken in the area of 'protecting investors', but these have mainly consisted of reducing companies’ tax burdens and introducing flexible tax rates for investors.

Similar stories can be told about Guatemala, Sri Lanka, Nicaragua, Senegal, Honduras and the Philippines. In all these cases, the needs of ordinary people have fallen under the tracks of the World Bank’s Doing Business bulldozer. Around the world, millions of people are being displaced, and their lives uprooted to help create a wealth they will ever see.

 

/TheRules has launched a campaign to try and get the World Bank to throw out this ranking system. The Bank has the first of two big meetings this year on 11-13 April. With farmers groups and civil society organisations from around the world, /TheRules will use the opportunity to introduce them to the Our Land, Our Business campaign, and then work through until the Annual Meeting in October to get as many people, from as many countries as possible, to hear about it and stand with us.

With enough signatures, press activity, offline protests and social media, enough critical and public attention can be generated to force them to abolish the Doing Business system. The Bank hates bad publicity and has changed its ways because of it in the past.

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Currently taking IPE with Y Wolemariam at Fort Lewis College. These kind of articles really pull the class into relevance.