The good-gov­er­nance trap

Financial Mirror (Cyprus) - - FRONT PAGE -

De­vel­op­ment and im­proved gov­er­nance have tended to go hand in hand. But, con­trary to pop­u­lar belief, there is lit­tle ev­i­dence that suc­cess in i mple­ment­ing gov­er­nance re­forms leads to more rapid and in­clu­sive eco­nomic and so­cial de­vel­op­ment. In fact, it may be the other way around.

The fo­cus on good gov­er­nance stems from the strug­gle to re­store sus­tained growth dur­ing the de­vel­op­ing-coun­try debt crises of the 1980s. In­stead of re­assess­ing the pre­vail­ing eco­nomic-pol­icy ap­proach, in­ter­na­tional de­vel­op­ment in­sti­tu­tions took aim at the easy tar­gets: de­vel­op­ing­coun­try gov­ern­ments.

The World Bank, us­ing well over 100 in­di­ca­tors, in­tro­duced a com­pos­ite in­dex of good gov­er­nance, based on per­cep­tions of voice and ac­count­abil­ity, po­lit­i­cal sta­bil­ity and the ab­sence of vi­o­lence, gov­ern­ment ef­fec­tive­ness, reg­u­la­tory qual­ity, the rule of law, and lev­els of cor­rup­tion. By claim­ing that it had found a strong cor­re­la­tion be­tween its gov­er­nance in­di­ca­tors and eco­nomic per­for­mance, the Bank fu­eled hope that the key to eco­nomic progress had been found.

The case was flawed from the be­gin­ning. The in­di­ca­tors used were ahis­tor­i­cal and failed to ac­count for coun­try-spe­cific chal­lenges and con­di­tions, with cross­coun­try sta­tis­ti­cal analy­ses suf­fer­ing from se­lec­tion bias and ig­nor­ing the in­ter­link­ages among a wide ar­ray of vari­ables. As a re­sult, the World Bank badly over­es­ti­mated the im­pact of gov­er­nance re­form on eco­nomic growth.

To be sure, gov­er­nance that is ef­fec­tive, le­git­i­mate, and re­spon­sive pro­vides un­told ben­e­fits, es­pe­cially when com­pared to the al­ter­na­tive: in­ef­fi­cient gov­er­nance, crony­ism, and cor­rup­tion.

In fact, this gov­er­nance-fo­cused ap­proach may have ac­tu­ally un­der­mined de­vel­op­ment ef­forts. For starters, it has al­lowed in­ter­na­tional in­sti­tu­tions to avoid ac­knowl­edg­ing the short­com­ings of the new de­vel­op­ment or­tho­doxy of the last two decades of the twen­ti­eth cen­tury, when Latin Amer­ica lost over a decade, and Sub-Sa­ha­ran Africa a quar­ter-cen­tury, of eco­nomic and so­cial progress.

It has also com­pli­cated the work of gov­ern­ments un­nec­es­sar­ily. With good­gov­er­nance re­forms now a con­di­tion for in­ter­na­tional aid, de­vel­op­ing-coun­try gov­ern­ments of­ten end up mim­ick­ing donor ex­pec­ta­tions, in­stead of ad­dress­ing the is­sues that are most press­ing for their own cit­i­zens.

More­over, the re­quired re­forms are so wide-rang­ing that they are be­yond the means of most de­vel­op­ing coun­tries to im­ple­ment. As a re­sult, good-gov­er­nance so­lu­tions tend to dis­tract from more ef­fec­tive de­vel­op­ment ef­forts.

The con­clu­sion is clear: the de­vel­op­ment agenda should not be over­loaded with gov­er­nance re­form. As Har­vard’s Mer­ilee Grindle has put it, we should be aim­ing for “good enough” gov­er­nance, se­lect­ing a few im­per­a­tives from a long list of pos­si­bil­i­ties.

But se­lect­ing the most im­por­tant mea­sures will not be easy. In­deed, ad­vo­cates of gov­er­nance re­form have rarely been right about the most ef­fec­tive ap­proach.

Con­sider the un­re­lent­ing pro­mo­tion of ef­forts to strengthen prop­erty rights. Ab­sent alien­able in­di­vid­ual own­er­ship of pro­duc­tive re­sources, it is as­serted, there will be in­suf­fi­cient means and in­cen­tives to pur­sue de­vel­op­ment ini­tia­tives, and shared re­sources (the “com­mons”) will be over­ex­ploited and used in­ef­fi­ciently.

In re­al­ity, the so-called “tragedy of the com­mons” is nei­ther ubiq­ui­tous nor in­evitable, and in­di­vid­ual prop­erty rights are not al­ways the best – and never the only – in­sti­tu­tional so­lu­tion for deal­ing with so­cial dilem­mas.

Herein lies the real prob­lem with the good-gov­er­nance agenda: it sup­poses that the so­lu­tion to most pol­icy and po­lit­i­cal dilem­mas lies in com­pli­ance with a set of for­mal process-ori­ented in­di­ca­tors. But ex­pe­ri­ence over two decades shows that such di­rec­tives pro­vide lit­tle prac­ti­cal guid­ance for solv­ing the tech­ni­cally, so­cially, and po­lit­i­cally com­plex real-world eco­nomic de­vel­op­ment.

Recog­nis­ing that gov­er­nance im­proves with de­vel­op­ment, the in­ter­na­tional com­mu­nity would be bet­ter served by pur­su­ing re­forms that di­rectly ad­vance de­vel­op­ment, in­stead of a broad agenda that may have, at best, a small in­di­rect im­pact. Such a prag­matic ap­proach to im­prov­ing gov­er­nance would be nei­ther dog­matic nor pre­tend to uni­ver­sal­ity. In­stead, the ma­jor con­straints would be iden­ti­fied, an­a­lysed, and ad­dressed, per­haps se­quen­tially.

Many of the good-gov­er­nance agenda’s key goals – em­pow­er­ment, in­clu­sion, par­tic­i­pa­tion, in­tegrity, trans­parency, and ac­count­abil­ity – can be built into work­able so­lu­tions, not be­cause out­siders de­mand them, but be­cause ef­fec­tive so­lu­tions re­quire them. Such so­lu­tions should draw from rel­e­vant ex­pe­ri­ences, with the un­der­stand­ing that they do not amount to “best prac­tices.”

The blind pur­suit of good gov­er­nance has guided de­vel­op­ment ef­forts for too long. It is time to ac­knowl­edge what works – and dis­re­gard what does not.

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