People pay attention to rankings for a reason. Lists such as U.S. News & World Report’s annual “Best Colleges” or the World Economic Forum’s Global Competitiveness Report aggregate massive quantities of relevant data, enabling apples-to-apples comparison of institutions that would otherwise be, well, incomparable. Is Swarthmore or Carleton a better liberal arts college? Is Brazil’s infrastructure better than Indonesia’s? The rankings promise to let you decide with confidence. Rankings can spur organizations, or countries, to improve performance so as to score higher — a real benefit.
The downside, of course, is that criteria are unavoidably subjective and, with so much riding on the difference between being No. 12 and being No. 15, institutions have an incentive to game the system — or corrupt it.
Which brings us to the scandal over the World Bank’s annual “Doing Business” reports. Since its inception in 2003, the influential list has ranked 190 countries according to “Doing Business Indicators” measuring how easy it is to establish and grow private companies. The criteria include regulatory paperwork, property rights and access to credit. The World Bank, not inaccurately, considered the rankings effective at channeling investment to, and spurring reform in, developing countries. Yet the list has come under criticism from progressives who, also not inaccurately, argued that it plays down the benefits of social regulation and disparages taxation.
The reports’ true Achilles’ heel, we now know, was an inherent conflict: China is the World Bank’s third-largest shareholder, after the United States and Japan, but — because of poor rule of law and the state’s heavy hand — a perennial laggard in the “Doing Business” rankings. In 2017, as the bank was pursuing more capital from China and others, Beijing lobbied the bank for a better ranking in the 2018 report. Then-World Bank President Jim Yong Kim’s aides and then-Chief Executive Kristalina Georgieva pressured staff to prop up China’s ranking, according to a recently released outside law firm’s investigation, done at the bank’s request in response to internal concerns. The investigation also confirmed later data-tweaking in favor of Saudi Arabia and the United Arab Emirates.
To be sure, the investigation found “no evidence” that Mr. Kim, who left the bank in 2019, “directly” ordered it, just that his aides intervened based on what they thought he wanted. Ms. Georgieva, however, “played a key role in the changes to China’s data,” according to the report. Now managing director of the International Monetary Fund, whose ethics panel is looking at the matter, Ms. Georgieva said in an statement that she only asked staff "to triple check its findings” and “would never be party to any alteration of data for political purposes.”
This episode illustrates the pitfalls of growing Chinese influence over the world’s multilateral institutions. The World Bank has discontinued its “Doing Business” reports, which seems like the right call in the immediate aftermath of such a blow to its credibility. Ideally, though, the bank will salvage what was useful about the rankings, through a new report and reformed processes incorporating its critics’ legitimate concerns, as an external review panel recommends. Ranking systems are not perfect, or incorruptible, but, at their best, they can provide a measure of transparency, in a world that needs more.