4 min read.Updated: 21 Sep 2021, 11:32 PM ISTTulsi Jayakumar
Enthusiasm for going up ranking charts based on inapt criteria can yield suboptimal outcomes
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In this world of make believe I must confess, To be number one you’ve got to do it better…" go the lyrics of Natalie Cole’s Winner.
What if you can’t be the ‘very best’? Why, of course, you must try hard to be better at ‘being better’. Whether it is contestants in beauty pageants, educational institutions seeking to go up some notches in university/business-school rankings, or even countries which seek to attract investors by pitching themselves as ‘better’ and more attractive investment destinations, the game seems to be one of ticking the right boxes and catering to external perceptions of what matters, so as to win the game.
Take the case of the now-disgraced ‘Doing Business’ report, which was recently junked by the World Bank. The report, for the past 17 years, was followed by policymakers, corporate honchos and politicians, besides academics, and taught in business-school classrooms as a way of assessing a country’s business environment. The junking of it has been framed as an issue related to ethical concerns, linked to data irregularities, especially in the survey’s treatment of countries such as China, Azerbaijan, the United Arab Emirates and Saudi Arabia and their being bumped up a few notches in the likely expectation of quid pro quo deals for the Bank. However, there are deeper concerns with the whole business of ratings and rankings.
In my role as an academic, I have watched with amusement and concern how students in classrooms and media (both local and global) revel in reports of India doing better and improving its rank on the ‘Ease of Doing Business’ indicator. India, undoubtedly, has done better, climbing a cool 79 positions in the five years between 2014 and 2019 to finally reach 63rd place (out of 190 economies) in the World Bank’s (WB) 2020 ‘Doing Business’ Report. The obsession with ratings and rankings, in line with the predilection of Indians for tangible success metrics, results in our celebrating such ‘improvements’ without quite understanding the methodology or impact of such rankings on the larger goals affecting the lives of a larger group of stakeholders.
India’s ‘Ease of Doing Business’ is based on such ease improving in just two Indian cities, Mumbai and Delhi (bit.ly/2XB9CZH). Clearly, there is no reason to celebrate when only two cities do better at ‘being better’. Of course, inspired by the ‘Doing Business’ rankings, the Indian government has initiated improvements at the level of Indian states and Union territories (UTs) as well. In 2014, based on the 10 business topics tracked and monitored by the World Bank’s report, the Centre came up with a Business Reform Action Plan (BRAP) for Indian states and UTs. The implementation of these rankings and the Ease of Doing reforms by those administrative units has been linked to additional borrowing permissions for states, apart from other bounties (bit.ly/3hRk6va), even if these reforms may merely mean a ‘race to the bottom’. For that, arguably, is what would result from the policies that states/UTs would need to pursue in order to earn the promised rewards.
A perusal of the ‘Business Reforms’ on the WB website (bit.ly/3nSBeVk) indicates a high value placed on such pauperizing ‘reforms’ as the US reducing its corporate income tax rate from 34% to 21% in 2018, and Hungary cutting the social tax rate paid by its employers from 22% to 19.5% in January 2018. Should India or other emerging economies pursue such policies? This remains a moot question.
The strategies used by countries or states trying to do better for maximum pay-offs may be analysed using game theory. Consider the Prisoner’s Dilemma, which reveals why a ‘limited’ player game, involving 190 countries and/or 29 Indian states and seven UTs, would result in predictable dominant strategies. A dominant strategy, by definition, is superior for it promises the maximum possible pay-off irrespective of what competitors do. Pursuing ‘Doing Business’ reforms appears to be a dominant strategy for emerging countries and backward states, with larger pay-offs envisaged in terms of greater foreign investment, larger central funding, etc. However, in doing so, they may simply act as ‘prisoners’ of a Western paradigm of development and success, choosing sub-optimal (even if dominant) strategies, with their inferior fiscal and welfare implications for India. These are strategies that devote little attention to improving social equity and addressing ecological concerns.
Ratings and rankings, in general, promote a certain homogeneous paradigm of success, one which may not be in line with the specific needs of individual countries or even institutions. The case of the Doing Business report being abandoned holds lessons for business schools and educational institutions trying to chase sub-optimal global standards as well. The success-fetish of management education has made it fashionable to speak of “learning from failure", even as we prostrate at the altar of global ratings and rankings and try hard to be part of an elite club of successes.
Changing the narrative will require a concerted effort on the part of Indian business schools to cooperate, challenge and set out a set of goals that are more relevant for us. Or else, we run the risk of being trapped in similar Prisoner’s Dilemma situations that countries participating in the WB rankings found themselves in. The WB has resolved the dilemma for participating countries for now by dumping that report. Countries may find themselves free to pursue different goals. Can Indian educational institutions now solve the Educator’s Dilemma for themselves?
Tulsi Jayakumar is professor of economics at Bhavan’s SP Jain Institute of Management & Research. These are the author’s personal views