Liberal democracy just suffered a major loss, and most Americans don’t even know about it.
The recent decision of the World Bank to discontinue the Doing Business report departs wildly from the substantive yet relatively modest recommendations of the independent review it cited to explain the news. Despite 15 consecutive years of democratic decline around the world, the World Bank has summarily eliminated one of the most effective means of encouraging the adoption and preservation of liberal democratic institutions.
I have witnessed the true downstream impact on people on the receiving end of reform that came in response to the Doing Business rankings. I have met them personally. Ending this report is a colossal mistake.
In March 2019, I traveled to South Asia, filming short documentaries featuring real people whose lives have been transformed thanks to market-liberalizing reforms—and those who struggled in poor regulatory environments. In the Muslim-majority neighborhood of Zakir Nagar in India’s capital, I met with Zubair Ahmed to learn about his digital marketing agency.
Zubair first tried his luck at starting his company in 2014 but was prevented from doing so because of India’s minimum capital requirement, which forced would-be entrepreneurs to deposit 111.2% of per capita income in order to register a business. To put that in an American context, you would need the equivalent of $37,923 in a bank account just to formally launch a business. The minimum capital requirement in India was a driving force behind the size of its informal economy, with certain projections estimating that 85% to 93% of the country’s workforce operated in the shadows.
Zubair—and tens of thousands more would-be entrepreneurs—could not conduct business solely because of this requirement. When a firm operates illegally, it has no access to finance. It cannot grow. Potential is capped, and the poorest of the poor are those who suffer the most.
Thankfully, an independent think tank called the Centre for Civil Society chose to use the Doing Business report to structure its market reform proposals, and in 2017 the law changed. The minimum capital requirement was removed. Zubair incorporated AddtoGoogle in 2018. His company now employs a dozen workers. Where would they be without Doing Business?
North of New Delhi, in Dehradun, we filmed the story of Rekha Dey, a woman who runs a company making pre-fabricated homes out of bamboo. This became possible when the Centre for Civil Society swept away another bad law: The 1927 colonial act that rather arbitrarily classified bamboo as a tree. (Botanically, bamboo is a grass.) By categorizing bamboo—which grows in abundance throughout India—as a grass, a whole market has been created for tens of thousands of indigenous Indians. More families are enjoying affordable and environmentally friendly housing because of Doing Business.
Its value transcends India. Lithuania’s transition to a market economy has been smoother than some of its peers, but it lays claim to a large informal economy. The Lithuania Free Market Institute has published extensive research on the various factors that contribute to the economic activity taking place outside of applicable laws. It is no surprise that the regulatory and business climates loom large.
In September 2019, I trekked to the rural Lithuanian town of Zūbiškės to meet Ona Raudeliūnienė. Ona bakes traditional šakotis cakes to supplement her income as a librarian by 30% to 40%. She is able to sell these cakes thanks to a simple business license, renewed annually for 210 euros. Ona is one of 100,000 Lithuanians who take advantage of this basic license regime, which operates as a gateway out of the informal economy.
Across the news cycle, critiques of liberal democracy and market solutions are commonplace. But the World Bank’s Doing Business report served as a valuable reminder that the potential of economic opportunity is limitless in the right regulatory environments. The beneficiaries are real human beings with their own dreams of prosperity. There are now countless stories of people leading their own way out of poverty—with dignity.
Doing Business has been one of the greatest forces for strengthening liberal democracy in recent decades, inspiring institutions that promote more equal market participation for historically marginalized low-income populations.
People like Zubair, Rekha, and Ona are catalysts in their communities. Doing Business helped us remember that they need opportunity, not World Bank loans, to thrive. Without Doing Business, the World Bank has shown it is less committed to their success, and to the ideals of liberal democracy that make their success possible.