The Real Rot at the IMF
The “Doing Business” controversy has shaken confidence in the World Bank and the IMF. But it must not obscure the real problems with the Bretton Woods institutions: the disproportionate power of the US, the IMF’s deeply procyclical approach, and G7 economies’ unwillingness to enable multilateral bodies to address global problems.
NEW DELHI – There are many reasons to be critical of the International Monetary Fund and the World Bank, but the legitimacy crisis now confronting both institutions is not based on any of them. Instead, it has arisen for the wrong reasons, and this is serving to reinforce the real problems that have plagued the Bretton Woods institutions’ functioning.
The current controversy stems from the World Bank’s alleged manipulation of its annual Doing Business index in order to improve the rankings of China and Saudi Arabia. It threatens to claim the scalp of IMF Managing Director Kristalina Georgieva, who was the World Bank’s chief executive officer at the time of the alleged improprieties.
The World Bank appointed a US law firm, WilmerHale, to investigate the matter. But its report relies on innuendo rather than evidence, prompting the Nobel laureate economist and former World Bank chief economist Joseph E. Stiglitz to describe it as “a hatchet job” and part of an attempted coup against Georgieva. The investigation also conveniently focused primarily on China, thereby underplaying the possible role of World Bank President David Malpass in influencing the ranking of Saudi Arabia, which was surprisingly declared the world’s top reformer in the 2020 Doing Business report.