The World Bank's Doing Business report may not be perfect, but it still helps us understand poverty and wealth creation

 
Julian Harris
Follow Julian
Wolfowitz Faces Pressure To Resign As World Bank Finds He Broke Rules
The World Bank has produced a Doing Business report since 2003 (Source: Getty)

The ability to do business freely and easily is a key characteristic of liberal, prosperous countries.

With this in mind, an economist named Simeon Djankov founded the World Bank’s “Doing Business” study nearly 15 years ago. Djankov, who later became chancellor and deputy prime minister of Bulgaria, believed it possible to measure how easy – or difficult – it was to start a business and keep it trading in hundreds of countries across the world.

The original findings, published back in September 2003, painted a stark picture, with wealthier countries dominating the top of the rankings and poorer states lumbering at the bottom.

The findings supported, and continue to support, the view that people in much of the world remain stuck in poverty largely due to overbearing governments that stunt economic growth and wealth creation.

A new edition of Doing Business was published yesterday, reiterating its aim of convincing governments to break down internal barriers to trade and commerce. The report remains unapologetic in “its focus on promoting regulatory reform that strengthens the ability of the private sector to create jobs, lift people out of poverty and create more opportunities for the economy to prosper”.

Read more: UK retains seventh spot in ease of doing business rankings

Critics of the study point to cases in which countries climb the rankings despite widely-publicised economic and political problems. For example, Russia has risen from the bottom half of the rankings just five years ago, to 35th today (ahead of several EU countries and just one place behind Japan), amid lingering sanctions and widespread corruption.

With a transparent methodology that focuses on very specific metrics, it is feasible the report can be targeted by governments keen to manipulate their position. And it is true that it does not reflect broader macro-economic events.

However, that does not diminish its value as a global snapshot containing numerous fascinating stories. Take India, which has jumped into the top 100 following some of Narendra Modi’s well-known reforms. Or Georgia, a country with crippling poverty when it broke from the Soviet Union that has since enjoyed exceptional growth and stands in the ranking’s top 10.

At the other end of scale, sadly, are countries such as Venezuela. The first Doing Business report estimated that starting a business in the oil-rich state took 119 days and cost around 19 per cent of the average per capita income. Now, following a disastrous socialist revolution, it takes 230 days to start a business and costs over 350 per cent of the average person’s income.

The World Bank’s report is far from perfect, but it does add to the sum of evidence available on why some countries prosper while others go backwards.

Read more by this author: Productivity in London is actually pretty good

City A.M.'s opinion pages are a place for thought-provoking views and debate. These views are not necessarily shared by City A.M.

Related articles