The Doing-Better Syndrome and Our Prisoner’s Dilemma

What if you can’t be the ‘best’? Of course, you must work hard to become better in order to ‘be better’. Whether it’s contestants in beauty pageants, educational institutions trying to move up a few notches in university/business-school rankings, or even countries that project themselves as ‘better’ and more attractive investment destinations. By looking to attract investors, the game seems to be one of ticking the right boxes and fulfilling external assumptions of what matters, in order to win the game.

Now take the case of the infamous ‘Doing Business’ report, which was recently quashed by the World Bank. For the past 17 years, the report has been followed by academics as well as policy makers, corporate figures and politicians and taught in business-school classrooms as a way of assessing the business environment of the country. Its junking has been framed as an issue of ethical concerns linked to data irregularities, particularly in the survey’s treatment of countries such as China, Azerbaijan, the United Arab Emirates and Saudi Arabia, and some notches above them. Because of this. Possibility of quid pro quo deals for the bank. However, there are deep concerns about the entire business of ratings and rankings.

In my role as an academic, I have watched with amusement and concern how students in classrooms and in the media (both local and global) report India’s outperforming and improving their ranks on the ‘Ease of Doing Business’ indicator enjoy. India has undoubtedly outperformed, climbing 79 places in the five years between 2014 and 2019 to finally reach the 63rd position (out of 190 economies) in the ‘Doing Business’ report of the World Bank (WB) 2020. The obsession with ratings and rankings in line with Indians’ propensity for genuine success metrics results in celebrating such ‘improvements’ without understanding the impact or methodology of such rankings on larger goals affecting the lives of a large group of stakeholders . .

India’s ‘Ease of Doing Business’ is based on improving so smoothly in just two Indian cities, Mumbai and Delhi (bit.ly/2XB9CZH). Clearly, there is no reason to celebrate when only two cities do better on ‘being better’. Of course, inspired by the ‘Doing Business’ ranking, the Government of India has also initiated reforms at the level of Indian States and Union Territories (UTs). In 2014, the Center came out with a Business Reform Action Plan (BRAP) for Indian states and union territories, based on 10 business themes tracked and monitored by the World Bank report. The implementation of these rankings and the Ease of Doing Reforms by those administrative units has been linked to additional lending permissions for states, among other bounties (bit.ly/3hRk6va), even if these reforms only mean a ‘race to the bottom’. Why should this not happen. ‘. For that, of course, would result in policies that the States/UTs would need to adopt to earn the promised rewards.

An overview of ‘Business Reforms’ on the WB website (bit.ly/3nSBeVk) indicates a high value on such pauper ‘reforms’ as the US reduced its corporate income tax rate from 34% to 21% in 2018 , and Hungary reduced the social tax rate paid by its employers to 19.5% from 22% in January 2018. Should India or other emerging economies follow such policies? This remains a debatable question.

The strategies used by countries or states trying to do better for maximum payouts can be analyzed using game theory. Consider the prisoner’s dilemma, which explains why a ‘limited’ player’s game involving 190 countries and/or 29 Indian states and seven union territories would result in a predictable effective strategy. An effective strategy is, by definition, preferable because it promises the maximum possible payout regardless of competitors. A key strategy appears to be for emerging countries and backward states to pursue ‘doing business’ reforms, which envisage higher payments in terms of greater foreign investment, larger central funding, etc. However, in doing so, they can only act as ‘. Prisoners of the Western paradigm of growth and success are choosing sub-optimal (albeit effective) strategies with their low financial and welfare implications for India. These are strategies that pay little attention to improving social equity and addressing ecological concerns.

Ratings and rankings, in general, promote a certain homogeneous pattern of success, which may not be tailored to the specific needs of individual countries or institutions. The abandonment of the Doing Business report has lessons for business schools and educational institutions trying to pursue sub-optimal global standards. The success fetish of management education has made it fashionable to speak of “learning from failure”, even as we bow down to the altar of global ratings and rankings and work hard to be part of an elite club of successes.

Changing the narrative will require collaboration, challenge and a concerted effort on the part of Indian business schools to set a set of goals that are more relevant to us. Or else, we run the risk of falling into the same prisoner dilemma in which the participating countries in the WB rankings found themselves. The WB has resolved the dilemma for the participating countries by dumping that report. Countries may find themselves free to pursue different goals. Can Indian educational institutions now solve the teachers’ dilemma for themselves?

Tulsi is Professor of Economics at Jayakumar Bhavan’s SP Jain Institute of Management and Research. These are the personal views of the author