Rumors are flying around that the World Bank will water down or even abandon its ten-year old Doing Business series which measures the extent and quality of pro-growth economic policies in individual countries round the world. A committee has been set up by World Bank president Jim Yong Kim to review the series. People are naturally writing and worrying about the outcome.
What a terrible mistake it would be to end or dilute this useful measurement system. I remember when the Doing Business reports first started. I was Under Secretary of Treasury with responsibility for U.S oversight of the World Bank. The Doing Business series was part of a response to a concentrated effort by the U.S government to improve effectiveness and measurement of development assistance—both multilateral and bilateral—a subject I gave a bunch of speeches about. It was at that time that the U.S. proposed and created the Millennium Challenge Account whereby U.S. bilateral development aid would be directed more toward countries following good pro-growth policies based on certain measurable criteria. A lot of economic research at the Treasury and other U.S. agencies went into choosing those selection criteria, which ended up including items such as those now covered in the Doing Business report,including the time it takes to start a business.
This was also the first time that the U.S. insisted on linking the size of its contributions to the World Bank’s program for poor countries to specific measures of the delivery and effectiveness of the aid. The straightforward idea was that insisting on measurable results would make aid more effective in reducing poverty and improving people’s lives. The story of the “measurable results” campaign is told in my book Global Financial Warriors.
It’s good that Bill Gates is now writing a lot about this idea. As he put it in his recent Wall Street Journal piece My Plan to Fix The World’s Biggest Problems ”In the past year, I have been struck by how important measurement is to improving the human condition. You can achieve incredible progress if you set a clear goal and find a measure that will drive progress toward that goal….This may seem basic, but it is amazing how often it is not done and how hard it is to get right.”
The committee reviewing Doing Business should read Gates piece, examine the positive benefits of this approach when used over the past 10 years, and strengthen, not weaken, Doing Business.