How Anti-World Bank Activists Misunderstand Business

I was recently made aware of Interoccupy‘s (link) protest against the World Bank at their fall meeting in Washington. What follows is my reaction to what I feel is Interoccupy’s misunderstanding of the arena in which most businesses operate:

I have followed the history of problems with World Bank lending. Economist Joseph Stiglitz has written extensively about the issue. I find that the World Bank is torn between its role as a bank–it does after all make loans and its business model depends on loans being repaid–and its role as a development institution. When countries fall behind on a loan the World Bank behaves as banks usually to, telling the debtor to cut back on anything not directly related to loan repayment, which sometimes means cutting muscle as well as fat out of public budgets.

Interoccupy’s complaints revolve around the World Bank’s Doing Business rankings and the Bank’s alleged encouragement of large land acquisitions by agribusiness corporations. I take issue with Interoccupy’s charge that the rankings are only about serving the interests of multinationals. The countries that score high on this and similar rankings by the World Economic Forum have been the best performers in recent years not only in GDP growth but in income growth and lifting their people out of poverty. Furthermore the rankings also serve the interests of smaller businesses who do not have the ability to influence governments. The rankings are based on surveys local businesses which in the developing world will be mostly small and mid sized. Among the survey topics are Starting a Business, Getting electricity, Enforcing Contracts, and Getting Credit.

What would really change the game is if a group like Interoccupy developed their own doing Business ranking based on a concept of profitable and responsible business. Organizations like the Global Impact Investor Network (www.theGIIN.org) are developing tools to measure social impact that they would find useful. If they then cited examples of commercially successful companies that followed these principles they would have a strong case for reform.

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