World Bank ‘Doing Business’ on Backs of Workers

by James Parks, Oct 4, 2007

According to the World Bank, workers “have the best protection” in the former Soviet republic of Georgia. But Georgia, just last year, did away with most of its worker-protection rules, removed many working conditions from collective bargaining and allowed any worker to be dismissed without valid reason. Further, unions can be banned altogether if officials believe they are stirring up “social conflict.” 

So how does Georgia rate such a lofty position from the World Bank? The problem, according to Peter Bakvis, director of the Washington, D.C., office of the International Trade Union Confederation/Global Unions (ITUC), is that the World Bank 

gives the best scores to countries that have the least amount of regulations, whether they be minimum wages; maximum hours of work; advance notice for mass lay-offs; severance pay; rules concerning priority in hiring or firing, including some types of affirmative action rules; and payroll taxes to finance workmen’s compensation, social security or health care.   

Countries that have the least of these get the best score, no matter how workers are treated or what success the countries have or have not achieved in terms of employment creation.  

The World Bank, which scores nations in its flagship publication, Doing Business, rates them based on criteria that in principle rank countries’ “ ease of doing business,” measured by 10 separate indicators. Unions, activists and academics have criticized Doing Business as a one-sided publication, focused almost exclusively on a narrow “private investor” perspective, with little regard for social impact. 

The ITUC last week released a new report documenting 16 specific country cases where the Doing Business indices were used to drive down worker protection. These add to seven other cases documented last year. Click here to read the report.  

Bakvis and AFL-CIO Policy Director Thea Lee told the U.S. House Financial Services Committee on Wednesday the World Bank talks a good game about wanting to end world poverty and has taken some positive steps to enforce labor standards in loans it gives to developing countries. But, in too many other areas, the World Bank, which offers loans, advice and an array of customized resources to more than 100 developing countries, has sent conflicting signals to governments and investors in developing countries, implying that protecting workers is somehow at odds with creating jobs and eliminating poverty. 

Lee told the committee: 

Doing Business is an international disgrace. It classifies most protections for workers as investment impediments. It ranks human-rights abusers as stars, and downgrades democratic countries with strong labor institutions and protections.  

 Doing Business is not simply a neutral set of indices, but rather a powerful policy document, used to determine loan eligibility and to send a message, both to governments and to investors, about “desirable” regulatory reforms.   

Bakvis pointed out that in some nations, labor reforms based on Doing Business have been imposed as loan conditions by the World Bank and the International Monetary Fund (IMF).  

ITUC General Secretary Guy Ryder says:  

By declaring that countries such as Afghanistan, Bangladesh, Belarus, China, Colombia, Haiti and Saudi Arabia have done a better job in ‘Employing Workers’ than most countries in Western Europe, the bank is declaring that it has no concern for the welfare of workers or respect for their rights.

One solution to the problem, Lee and Bakvis say, is for the World Bank to include promotion of decent work as one of its key criteria for loans. According to the International Labor Organization (ILO), decent work “involves opportunities for work that is productive and delivers a fair income, security in the workplace and social protection for families, better prospects for personal development and social integration, freedom for people to express their concerns, organize and participate in the decisions that affect their lives and equality of opportunity and treatment for all women and men.”   

Lee says: 

It makes a difference to American workers if our international institutions see their mission as fighting poverty by empowering and protecting workers, or as weakening worker protections in a misguided attempt to stimulate private investment and growth.   

We hope that the Congress and the administration will ensure that the U.S. executive director to the World Bank conveys in the strongest possible terms that the World Bank must live up to its mandate, cooperate with its sister international organizations (particularly the ILO), and respect the international consensus that sustainable economic development can only be achieved if workers’ human rights are respected. 

Click here to read Lee’s full testimony and here for Bakvis’ comments. 

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