Adam Taylor from the Washington Post (4 November 2021) offers a thoughtful review of a new study (“World Protests: A Study of Key Protest Issues in the 21st Century,” from a team of researchers with German think tank Friedrich-Ebert-Stiftung (FES) and the Initiative for Policy Dialogue, Columbia University ) which demonstrates that the scale and scope of global protests have tripled since 2006 – see Figure and map below. More than half the protests worldwide were due to perceived failures of democratic governance and demands for enhanced political representation. Others pertain to corruption, inequality, lack of decent jobs and working conditions, poor living standards, and lack of action on climate change. So far, politicians across the world have not responded satisfactorily to these concerns. This implies that such protests are likely to continue to the detriment of social cohesion.
There was a time when the creators of the World Bank’s Ease of Doing Business Index (EDB) encapsulated in its Doing Business report (DBR) exuded a great deal of enthusiasm. They proposed that an inter-country ranking system along multiple dimensions of the domestic business environment held a lot of promise:
The main advantage of showing a single rank: it is easily understood by politicians, journalists, and development experts and therefore created pressure to reform. As in sports, once you start keeping score everyone wants to win (as cited in Doshi et al)
Scholarly investigations marvelled at how influential the DBR was. Thus, Doshi et al conclude:
The World Bank, … marshaled the Ease of Doing Business (EDB) index to amass surprising influence over global regulatory policies …The EDB ranking system affects policy through bureaucratic, transnational, and domestic-political channels. We use observational and experimental data to show that states respond to being publicly ranked and make reforms strategically to improve their ranking. A survey experiment of professional investors demonstrates that the EDB ranking shapes investor perceptions of investment opportunities.
Indeed, large emerging economies, such as India and Indonesia, represent, in retrospect, embarrassing examples of how the highest political leadership became so enamoured of the EDB that they made it a cornerstone of their policy. In February 2020, one report points out that
President Joko “Jokowi” Widodo has ordered his Cabinet to improve the country’s Ease of Doing Business … ranking and to make it into Top 40.
In India, even as recently as May, 2021, India’s Prime Minister Modi’s office proudly proclaimed
India has successively scaled greater heights in the World Bank’s Ease of Doing Business ranking jumping from 142 in the year 2014 to 63 in the year 2019. As per the latest report, we are one of the top 10 improvers in the world. Under the leadership of PM Modi, the journey of India is moving closer to the global best practices.
Jokowi, Modi and their minders were apparently blissfully unaware that the World Bank itself was preparing to abandon its flagship publication. By mid-September, 2021, the fatal blow to the much-cherished DBR was delivered. In the pithy words of the World Bank:
After data irregularities on Doing Business 2018 and 2020 were reported internally in June 2020, World Bank management paused the next Doing Business report and initiated a series of reviews and audits of the report and its methodology. In addition, because the internal reports raised ethical matters, including the conduct of former Board officials as well as current and/or former Bank staff, management reported the allegations to the Bank’s appropriate internal accountability mechanisms.
After reviewing all the information available to date on Doing Business, including the findings of past reviews, audits, and the report the Bank released today on behalf of the Board of Executive Directors, World Bank Group management has taken the decision to discontinue the Doing Business report. The World Bank Group remains firmly committed to advancing the role of the private sector in development and providing support to governments to design the regulatory environment that supports this. Going forward, we will be working on a new approach to assessing the business and investment climate. We are deeply grateful to the efforts of the many staff members who have worked diligently to advance the business climate agenda, and we look forward to harnessing their energies and abilities in new ways.”
This scandal-ridden report almost claimed the position of IMF Chief (Kristalina Georgieva) because of allegations that, during her tenure as World Bank Chief, internal staff were put under pressure to improve the rankings of China. She narrowly escaped being fired by the IMF Board. In another case of inappropriate pressure being applied to the EDB exercise, Saudi Arabia was implicated.
What went wrong? What are the lessons that one can learn from this debacle? Professor Sonaldi Desai offers a thoughtful critique. She notes:
The (EDB) experience has highlighted both the power of data and the political influence such rankings can yield. Should we try to reform the index or give up on it? The decision rests on the answer to two questions. First, are there universally acceptable standards of sound economic practices that are applicable and measurable across diverse economies? Second, if the indices are so powerful, should their construction be left to institutions like the World Bank that bring not just knowledge but also wield the heft of global economic power? For the moment, the answer to both seems to be a no.
It widely known that the challenge of vaccine inequality (see Map above) impedes the ability of emerging and developing economies (EDEs) to cope with the pandemic and thus resume normal economic activity. As of today (September 15, 2021), 60.8% of the population in high income countries had at least one dose of available vaccines, while only a little over 3% of the population in low-income countries had one dose. It would take a massive – and unaffordable – increase of 57% of health-care spending for low-income countries to inoculate 70% of the population against COVID-19. In contrast, advanced economies will only need to increase 0.8% of health-care spending to reach the same target.
Given this grim challenge, the IMF – in conjunction with other international agencies – has recently (June, 2021) proposed the provision of a USD 50 billion plan to vaccinate at least 60% of the world’s population and complement the global vaccination program with relevant COVID-safe health measures. No concrete actions have been taken so far.
The announcement by the IMF of the largest allocation of special drawing rights (SDRs) amounting to USD 650 billion in August, 2021 might be one way to support the USD 50 billion-dollar plan. Yet, critics are concerned that the new SDRs might raise a lot of expectations without fulfilling them. This is because SDRs – in line with line with long-standing practice – will be distributed to countries in line with a country’s quota share with the IMF. Given that EDEs are ‘minority’ shareholders, it is not surprising that EDEs as a whole are expected to get 42% of SDRs, while low-income countries are likely to get 3.2% of the new SDRs. In some cases, even this modest amount might be a lot as a share of the GDP of low-income countries, but this might still fall short of their spending needs. On the other hand, advanced economies that do not really seem to have financial constraints in dealing with the pandemic, will have significant shares of SDRs which they might not be prepared to recycle to the poorer parts of the world. Hence, a proposal has been made that a COVID-19 trust be set up to recycle the SDRs as well as transfer them to the regional development banks (Eichengreen, 2021). Whether this will happen remains to be seen.
There is the long-term development challenge of attaining and financing the SDGs. Even in the pre-COVID-era, there was a USD 2.5 trillion financing gap which, as a result of COVID-19, has increased to USD 4.2 trillion (OECD, 2021). This has occurred against a background of modest trends in national tax revenues of EDEs as well as aggregate trends in external finance – see Figure 1 below. Hence, as the international community approaches 2030, the key fiscal policy will revolve around finding sustainable means of resource mobilization to reduce the SDG financing gap.
 These figures are based on data provided by the IMF (https://blogs.imf.org/2021/08/26/a-shot-in-the-arm-how-special-drawing-rights-can-help-struggling-countries.)
The Indian economy apparently grew by an astonishing 20 percent in the most recent quarter for which data is available (Q1, 2021-22). In a tweet, the Ministry of Finance proclaimed:
Q1:2021-22 data reaffirms Government’s prediction of an imminent V-shaped recovery made last year at this time. Increase of 20.1% in GDP – despite the intense second wave (of COVID-19) in the months of April-May – highlights the continued economic recovery.
This was accompanied by the following figure.
Really? Despite the savage impact of the second COVID-19 wave that killed hundreds of thousands within the space of a short period and decimated small business? This should provoke one to invoke the old adage ‘lies, damn lies, and statistics’. It is always possible to use numbers to bolster a weak argument.
Consider the following admittedly contrived example. Take three periods (each representing a quarter). Set period 1 as 100. Now assume there is a massive economic contraction so that the level of GDP in the second period is 75. Assume that a ‘V-shaped’ recovery takes place so that the GDP level in period 3 is 90. One could argue that this is not yet a ‘real’ recovery because the level of GDP in period 3 is still below period 1.
This contrived example offers a good representation of what happened to the Indian economy. Today, (2021-22) Indian GDP is lower than it was in 2018-19 – see Table 1 below. Hence, celebrating a 20 percent quarterly growth rate conceals more than it reveals.
Mahesh Vyas, who heads the highly cited Centre for Monitoring the Indian Economy (CMIE), aptly observes:
India can … choose to celebrate the rapid recovery from the excruciating pain of lockdowns or bemoan the steady erosion of well-being and growth potential…it is now becoming increasingly clear that the recovery … will not get India’s real GDP to where it was before the shock even by the end of March 2022.
Source: scroll.in which in turn is extracted from other media reports (Hindustan Times, Indian Express)
Afghanistan is in the news these days as the Taliban, ousted from power following the US -led invasion in 2001, has returned to power after a surprisingly short-lived, but strikingly successful, military campaign against the incumbent government. Afghanistan’s future is uncertain as the memory of the Taliban’s brutal regime of religious dictatorship between 1996 and 2001 comes back to haunt the international community. There are widely shared fears that the reincarnated Taliban might simply be a recreation of murderous misdeeds of the past driven by religious zealotry.
While reflecting on the future of Afghanistan, it would be worth noting that Afghanistan had a relatively prosperous and peaceful past, especially in the 1950s and 1960s. Indeed, some estimates of long-run per capita GDP suggest that Afghanistan in the 1950s and 1960s was richer than China and South Korea. Decades of conflict have rendered Afghanistan so poor that per capita GDP in 2020 was apparently lower than in 1950 (see Figure below).
Others have compiled a photo montage of Afghanistan of the ‘60s conjuring an era of a modern looking country. As Alan Taylor, writing in the Atlantic, notes wistfully:
In the 1950s and 1960s, some of the biggest strides were made toward a more liberal and westernized lifestyle, while trying to maintain a respect for more conservative factions. Though officially a neutral nation, Afghanistan was courted and influenced by the U.S. and Soviet Union during the Cold War, accepting Soviet machinery and weapons, and U.S. financial aid. This time was a brief, relatively peaceful era, when modern buildings were constructed in Kabul alongside older traditional mud structures, when burqas became optional for a time, and the country appeared to be on a path toward a more open, prosperous society. Progress was halted in the 1970s, as a series of bloody coups, invasions, and civil wars began, continuing to this day, reversing almost all of the steps toward modernization taken in the 50s and 60s.
Picture taken in 1962 at the Faculty of Medicine in Kabul of two Afghan medicine students listening to their professor (at right) as they examine a plaster cast showing a part of a human body. (Source: The Atlantic, July 2, 2013)
A panoramic view showing the old and new buildings in Kabul, in August of 1969. The Kabul River flows through the city, center right. In the background on the hilltop is the mausoleum of late King Mohammad Nadir Shah. (Source: The Atlantic, July 2, 2013)
Contrast the seemingly idyllic pictures shown above with the one below as the Taliban insurgents occupy the Presidential palace in the wake of their triumphant return to Kabul. All we seem to have are armed mullahs projecting their invincibility to the rest of the world.
As one ponders the future of this conflict-ridden country which apparently had a peaceful and reasonably prosperous past, how should one respond to the claims of the US and its allies that Afghanistan in the post-2001 era went through a major phase of progress that is now likely to be reversed?
Was there significant progress? The per capita GDP figures shown above does not support that claim. A broader measure of well-being – the UNDP’s Human Development Index (HDI) – suggest some positive changes between 2000 and 2010 and a tapering off afterwards. Afghanistan has languished in the low human development category (HDI) for decades. Between 2014 and 2019, its international ranking (in terms of HDI) has slipped five places. Today, it is ranked 165th out of 189 countries.