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Monday, October 18, 2021

A perspective on the EoDB ranking controversy

The World Bank's Ease of Doing Business (EoDB) survey, perhaps the most famous of any WB product or service (though of deeply questionable technical merit), is at the centre of a high profile governance scandal. An independent investigation has found that the rankings of China and Saudi Arabia were manipulated at the behest of the Bank's senior management. There have been calls for the removal of Kristalina Georgieva, the current head of IMF, who as the CEO of the World Bank is alleged to have been personally involved in manipulating China's rankings. 

Without holding a brief for anyone whatsoever, this post seeks to offer some thoughts that can perhaps help place the incident (purely on its own, and independent of other things that may have been going on) in a better perspective. 

Complicating any effort to separate the wheat from the chaff and make an objective assessment of the situation is the politics surrounding the issue. As Justin Sandefur has written, everything from the 'independence' of the investigation, the relative under-examination of similar actions involving Saudi Arabia, the Washington polarisation surrounding China and ex-President Donald Trump's appointees, raises at least as many questions as those about Georgieva's actions.

Any dispassionate view of the controversy is difficult, especially for those once involved with the Bank or IMF or currently engaged with the Washington development aid ecosystem. And much of the commentary has been by these people. In these extremely polarised times, it's most likely that views of those involved with the issue on these lines become skewed towards one side or the other.

This is not to deny that there are some deeply questionable findings. For example, it has to be said that Georgieva's visit to the House of a junior EoDB staffer on a weekend to collect the China report raises deep suspicions. But is it also possible, from whatever information is available on the public domain and without being judgemental, that Kristalina Georgieva was merely doing what any pragmatic leader would do to protect the larger interests of her organisation?

In this context, as a complete outsider, let me offer two alternative perspectives from the private and public sectors. In both these cases, in their own respective contexts, the relative stakes are much higher for all sides involved than with either China or its alleged supporters like Georgieva. 

Let's first do the private sector. In recent years, there have been several similar controversies involving the most reputed consultants, financial institutions, audit firms and so on. They have been accused of either directly or indirectly supporting or indulging in corrupt or manipulative practices, most of which could not have happened without the complicity of the leadership. The stake in each case is much, often by orders of magnitude, higher than the one involving the EoDB survey rankings, for all sides. 

If we take the view of those calling for Georgieva's head, Lloyd Blankfein and David Solomon of Goldman Sachs and Dominic Barton and Kevin Sneader of McKinsey should have resigned many times over. They have been associated with allegations of much more serious nature, involving fraud and bribery (perhaps even murders and genocide), especially with governments. The same applies to the several Wall Street chief executives whose firms actions in short-changing, even defrauding, their investors and clients could not have been done without at least the tacit approval from the top. All the Big Four major accountancy and audit firms have been accused (and some even found guilty) of having helped manipulate accounts or cover-up large bribery and corruption cases, or massage corporate accounts through arguably illegal practices that have helped evade billions in taxes. 

And, in common with the EoDB issue, it's possible to trace at least one instance involving most of these companies and their leaders where their actions in support of China or Chinese interests could be questioned on grounds of violating corporate governance standards, with some even bordering on corrupt practices. Is it at all possible that all those Chinese princelings were hired on preferential basis by venerated Wall Street institutions and consulting organisations without the approval of the top leadership?

The second perspective is from the public sector. Consider the following examples from an Indian context. One, a Municipal Commissioner deals with several Councillors, most of them with entrenched links with local preferred contractors and lobbying to further their interests. Two, a District Collector often comes across decisions requiring the selection of housing colonies or roads or other works or locations for an economic establishment from among competing ones, and with strong political interests behind many of them. Three, a Head of Department (HoD) or the Managing Director (MD) of a public Corporation deals with requests for postings, transfers and deputations of officials at various levels, often involving intense pressure from political representatives and employee unions.

Consider also in each case that the Commissioner or Collector or HoD/MD has to deal with the China equivalents - a very powerful Mayor or local Parliament representative or legislator or Department Minister. They also have to deal with slightly less powerful other interests - certain Councillors, other legislators, and other Ministers. 

There are two simplistic perspectives on viewing such situations, one involving compromise and another refusal to accommodate. One, compromise and get on the bed with the political interests. Once on this slippery slope, also compromise with all the other less powerful interests. Two, reject all such requests and not accommodate even one bit. The fate of the former is easy to predict. He or she is likely to be both corrupt and weak administrator. But the latter is a much misunderstood creature. While being completely honest, given the complex contexts and the challenging nature of public responsibilities, the rigidity is most likely to constrain effectiveness. 

Accommodation can provide the space and flexibility necessary to not only administer effectively but also rein in vested interests and push through bitter and contested reforms. It can be the critical difference between being successful with your initiatives and hitting the wall and failing on your endeavours. It has to be said that this is no universal recipe and such accommodation is not possible with certain Mayors or legislators or Ministers. But in many, if not most, cases, there are spaces for accommodation. 

Accommodation would involve even simple things like prioritising on addressing the problems or issues raised by the powerful interest purely on merits, or greater application of mind or spending more time on references made by them, or even a slight preference in razor-thin margin decisions involving exercises of judgements. In all these cases, the mindset of a complete non-accommodater can generate significantly different outcomes from that of even the only slight accommodator. 

So a third perspective is a mesonic accommodation, but one inclined more towards the second perspective. The very powerful interest has to be accommodated, but only to just the least possible extent. There has to be clear red lines of accommodation, known to both sides. And, especially in case of individuals holding high public office, they will have to hold him or herself accountable for not only adhering but also seen to be adhering to those red lines. Yes, I admit there are several judgement calls, and all of them have very slippery slopes. But, we must all admit that even the most saintly life or unblemished career itself are too complex to be algorithmized or to be sanitised from judgement calls.  

There is something about seeing the big picture without also not losing sight of the small pictures. Accommodating without compromising. Accommodating only to the least possible extent required. Drawing lines and walking the talk with those lines. This path is difficult to straddle for the individuals themselves and the idea is even more difficult for outsiders to comprehend. 

A simple test around this conundrum is the personal integrity test. As long as the individual did not benefit financially from the incident and the actions were motivated purely by organisation's best overall interests, there's a case for condoning the actions. But here too the simplicity can be deceptive. A slightly more accommodative official can benefit from future employment and other opportunities, which ultimately confer financial benefits on the individual. 

Another test in such cases is take the long view. Instead of judging the individual actions as an isolated incident, it's better to judge the actions in the backdrop of the individual's career track record on personal integrity. This is exactly what Sandefur, for example, does, when he takes Shanta Devarajan at his word in his (Devarajan's) judgement of Georgieva's instructions involving China. 

I hold no brief for either Georgieva or World Bank, much less the EoDB ranking. I have little idea of Georgieva's track record of professional and personal integrity. But, given the information in the public domain, there are enough grounds for us to at least pause and reflect before indicting based on commentary which may in theory be at least as flawed as Georgieva's motivations. Having said all this, I'm open to the possibility that Georgieva did indeed cross a line and should be sacked. It's also very much possible that, given the politics of the current circumstances (read China's aggressive bullying and wolf-warrior posturing and appeasing it), her actions have crossed a line too far and it may therefore be appropriate to remove her. 

But it's important for us to have a more accurate perspective on the current accusations so as to not only be balanced about our views on the EoDB scandal, but also focus our collective consciousness on the important and critical governance problems in both the public and private sectors. 

I'm also inclined to believe that even in a ranking of all the countless questionable and corrupt practices (including those trying to placate or protect the interests of their main funders) indulged by the leadership of the World Bank and IMF over the years, the actions currently under discussion would struggle to register anywhere in even the top half. 

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