There are many reasons to be critical of the International Monetary Fund and the World Bank, but the legitimacy crisis now confronting both institutions is not based on any of them. Instead, it has arisen for the wrong reasons, and this is serving to reinforce the real problems that have plagued the Bretton Woods institutions’ functioning.

The current controversy stems from the World Bank’s alleged manipulation of its annual Doing Business index in order to improve the rankings of China and Saudi Arabia. It threatens to claim the scalp of IMF Managing Director Kristalina Georgieva, who was the World Bank’s chief executive officer at the time of the alleged improprieties.

The World Bank appointed a US law firm, WilmerHale, to investigate the matter. But its report relies on innuendo rather than evidence, prompting the Nobel laureate economist and former World Bank chief economist Joseph E Stiglitz to describe it as “a hatchet job” and part of an attempted coup against Georgieva. The investigation also conveniently focused primarily on China, thereby underplaying the possible role of World Bank President David Malpass in influencing the ranking of Saudi Arabia, which was surprisingly declared the world’s top reformer in the 2020 Doing Business report.

The WilmerHale report is manna from heaven for Republicans in the US Congress, who are demanding that Georgieva resign.

But the current moralistic fervor about data manipulation overlooks the fact that the Doing Business index — which has now been discontinued — was deeply flawed and overtly political from the beginning. Unfortunately, it became hugely influential in driving investors’ perceptions and policymakers’ choices.

The problems were legion. For starters, the indicators it used emerged directly from an orthodox “Washington Consensus” economic-policy approach, irrespective of its validity or applicability in different contexts.

As the Columbia University historian Adam Tooze has noted, Doing Business was always “a rickety and unpredictable construction shot through with discretion and complex judgments.” My own critique centered on how the index viewed any government regulation as costly and undesirable, and treated taxation only as a cost rather than as a means of ensuring the infrastructure, institutions, and educated workforce that businesses need in order to function.

In 2018, Paul Romer, then the World Bank’s chief economist, said that right-wing ideology at the Bank played a critical role in methodological changes that altered countries’ rankings, and apologised to Chile’s left-wing government for the artificial lowering of its rank.

A more recent independent academic evaluation pointed out that the index measures only de jure rules rather than their de facto implementation, and “sometimes rewards policies that benefit business at the expense of broader social objectives.”