NOT QUITE A ROW OF SIXES; RANKING ECONOMIC POLICIES

The Economist
June 17, 2006
U.S. Edition

The World Bank reveals what it thinks of its clients

ARMENIA and Zimbabwe belong at opposite ends of any alphabetic roll
call of nations. They also belong at opposite ends of the World
Bank's pecking order of developing countries, which it has unveiled
for the first time. Each year the bank gives countries between one
and six marks for their efforts to do the sort of things of which
it approves, such as curbing budget deficits, keeping tariffs low
and even narrowing the gap between the sexes and looking after the
environment. Armenia scored 4.3 overall; Zimbabwe 1.8.

Points mean prizes: the 16 indicators help decide who gets what from
the pot of $33 billion the bank can disburse to its poorest members
over three years. Until now, the bank had let on only which of five
broad tiers countries fell into. Now everyone's score is on the bank's
website for all to see.

Armenia tops the class largely because of its stunning macroeconomic
record. Its GDP grew by 14% in 2005, whereas Zimbabwe's shrank by
6.5%. Armenia's inflation rate is lower than Japan's (it has done
almost too well, you might say). Prices in Zimbabwe, where official
statisticians track the debauching of the currency with admirable
precision, rose by 1,193.5% in the year to May.

The bank's assessments draw on the judgment of staff in situ and
in Washington, DC, guided by a detailed questionnaire. A country
deserves four marks out of six for its trade policy, for example,
if its average tariff is less than 16% and its customs houses run
smoothly, marred only by the odd demand for "tea money" to speed
things up. A country where women cannot easily request a divorce and
where female genital mutilation is neither a crime nor uncommon would
score just one for gender equality.

The indicators faithfully mirror "the evolution of the development
paradigm", as the bank puts it. They provide a long checklist of
things that matter, but no sense of the proper sequence of them, nor
of trade-offs between them. To earn full marks for fiscal policy, for
example, a country must show it can cut public spending in economic
adversity without "jeopardising the quality and quantity of public
goods". The sprawling range of concerns, from current-account deficits
to teenage pregnancy, bespeaks broad-mindedness. But, in practice,
countries that score well on one of the indicators tend to do well
on most.

The bank deliberated at length before disclosing its ratings. Some
outside advisers did worry that publishing the results might spook
investors or tempt politicians to "abuse the ratings for political
gain". But if an enterprising politician were to use a poor score to
press for reform, the numbers might do as much good as the money that
follows them.