Is Good Governance Good for Development?

Anisuzzaman (Anis) Chowdhury

• Publisher: Bloomsbury Academic
• Year: 2012
• ISBN:
  9781780932507
• Edition: 1
• Topic: Economía
• Subtopic: Desarrollo sostenible

This book is available as open access through the Bloomsbury Open Access programme and is available on bloomsburycollections.com. While good governance is a worthy goal, this book argues that it is not a prerequisite for economic growth or development. The book exposes the methodological shortcomings of the commonly-used governance indicators developed within the World Bank. The authors argue that donors should not impose onerous good governance conditions, expecting the developing world to simulate now-developed countries. They contend that most poor countries lack the administrative and financial capacity to achieve these reforms or institutions - so donor conditionality often becomes a recipe for failure. In place of grand government reforms aimed at enhancing market efficiency, the book's position is that the reform agenda should target strategic bottlenecks for development and enhance the state's capacity to deal with these disruptions. Bringing together contributions from leading political scientists, political economists and development practitioners, this is the first book to provide a systematic critical perspective on received notions of good governance.

Chapter 1
Introduction: Governance and development

JOMO KWAME SUNDARAM AND ANIS CHOWDHURY

The idea of governance began to influence policy debates during the period of liberalizing market reforms in the 1980s. Margaret Thatcher and Ronald Reagan, in the United Kingdom and United States, respectively, sought to reorganize society and government around the principles and values of markets and private property. It was generally presumed then that such reforms would end problems of economic inefficiency, corruption and arbitrary rule in developing countries. In this context, governance was advanced as an alternative conception of authority expressed through institutions that would insulate markets from rent-seeking ‘distributional coalitions’ (Olson 1982). Nobel Laureate Douglass North’s (1981) discussion of the security of property rights from threats by the monarch or the state has also influenced the governance agenda.¹ This emphasizes the role of institutions in providing checks and balances on the power of various organs of the state to ensure a stable, predictable and non-arbitrary state – a fundamental condition for spurring economic growth and prosperity. Thus, governance became a major concern of the Washington Consensus on development. Good governance should address market failures and ensure institutional reforms capable of making markets work better.

The presumption of a benign, potentially developmental post-colonial state was replaced with the idea of a necessarily predatory government whose politicians and administrators pursue their self-interest, seeking rents and other privileges. In this context, the question of who would drive the reform process became a major issue, as neither the state nor the political processes could be counted upon. Thus, reform has to be led by enlightened leaders operating ‘outside’ politics, for example, from civil society to advance the general welfare interests of society against self-serving bureaucrats and other vested interests.

The notion of ‘good governance’ met this new expectation in two ways. Conceived as authority potentially beyond politics and the traditional scope of government administration, it claims autonomy for ostensibly technocratic authority from Olsonian distributional coalitions. Individuals can thus be drawn directly into market processes while bypassing competitive politics presumed to be rent-seeking.

After over a decade of growing influence, more recently, however, new thinking about governance seems to have become increasingly influential in policy circles, for example, in the Department for International Development (DFID) in the United Kingdom and French Development Agency (AFD) in France (see DFID 2003; Meisel and Ould-Aoudia 2007). In the evolution of the idea of governance, the first phase emphasized a narrow view of governance – such as technocratic measures to improve government effectiveness and to develop a legal framework for market-based development – in the early World Bank reports on governance.

Hout and Robison (2009) suggest that then World Bank President James Wolfensohn’s Comprehensive Development Framework (CDF), the Poverty Reduction Strategy approach and the post-Washington Consensus (Stiglitz 1998; Jomo and Fine 2005) were all part of the second phase’s broader concern with political organization, emphasizing civic participation and social inclusion.

A third phase seems to be emerging, characterized by increasing sensitivity of power, politics and social conflict in shaping development outcomes; these are difficult to address with existing institutional and governance programmes. For example, as Mungiu-Pippidi (2006) pointed out, the main result of many anti-corruption policies introduced in Romania with the assistance of the international ‘good governance’ programmes was the establishment of many new institutions (anti-corruption ombudsmen and special prosecutors, etc.). But the problem is that these new institutions were quickly taken over by existing corrupt political networks and other interests. The same was true of the former Soviet Republics, including Russia.

More recently, there has been a growing debate and willingness to consider the political economy of governance. It is now widely acknowledged that political factors are not only more important than previously thought, but also that neither politics nor power is easily addressed with ‘good governance’ reforms or by engineering institutional change. Such political economy understandings of governance may well rescue the relevance of governance to development. However, efforts to depoliticize development in favour of ostensibly technocratic solutions continue. The continuing tension between these two approaches – the political economy of governance and technocratic institutional engineering – makes easy resolution improbable.

GOVERNANCE AND GROWTH: CONCEPTUAL, METHODOLOGICAL AND MEASUREMENT ISSUES

Effective government or good governance matters, but it is not obvious or clear what that means. The World Bank’s Worldwide Governance Indicators (WGIs) project has attempted to define the indicators as corresponding to what the authors consider to be ‘fundamental governance concepts’ (Kaufmann, Kraay and Zoido-Lobato 1999b: 1). Kaufmann et al. have published eight papers (Kaufmann, Kraay and Zoido-Lobato 1999a, 1999b, 2002; Kaufmann, Kraay and Mastruzzi 2004, 2005, 2006a, 2007, 2008); however, the definitions of the indicators have changed over time since the indicators were first introduced. For example, in 2006, the definition of the ‘political stability and absence of violence’ indicator was redefined to measure ‘perceptions of the likelihood that the government will be destabilized’, rather than the likelihood itself (Kaufmann et al. 2007), and in 2008, the remaining indicators were redefined as measures of perceptions, instead of measures of the phenomena themselves (Kaufmann et al. 2008). The most recent definitions of indicators are as follows (Kaufmann et al. 2008):

1 Voice and accountability (VA) – measuring perceptions of the extent to which a country’s citizens are able to participate in selecting their government, as well as freedom of expression, freedom of association and media freedom.

2 Political stability and absence of violence (PS) – measuring perceptions of the likelihood that the government will be destabilized or overthrown by unconstitutional or violent means, including political violence and terrorism.

3 Government effectiveness (GE) – measuring the quality of public services, the quality of the civil service and the degree of its independence from political pressures, the quality of policy formulation and implementation, and the credibility of the government’s commitment to such policies.

4 Regulatory quality (RQ) – measuring perceptions of the ability of the government to formulate and implement sound policies and regulations that permit and promote private sector development.

5 Rule of law (RL) – measuring perceptions of the extent to which agents have confidence in and abide by the rules of society, and in particular, the quality of contract enforcement, the police and the courts, as well as the likelihood of crime and violence.

6 Control of corruption (CC) – measuring perceptions of the extent to which public power is exercised for private gain, including both petty and grand forms of corruption, as well as ‘capture’ of the state by elites and private interests.

The World Bank’s widely used WGIs have come under severe criticisms from researchers on methodological and conceptual grounds. For example, Thomas (2010) is highly critical of the definitional changes which have taken place. As she points out, there is a substantial difference between measuring something and measuring perceptions of it. She argues that in the context of governance, perceptions of crime risk have been shown to be quite different than actual crime levels. Likewise, perceptions of corruption differ from actual corruption levels, and trust in government does not necessarily match administrative performance. Thomas notes that changed definitions should mean discontinuation of the previous series of governance indicators, but the new indicators confusingly bear the same names, with no discussion offered to justify the changes in definitions while implying continuity. Meanwhile, the WGIs’ authors continue to interpret changes in their data as reflecting changes in governance itself, rather than as changes in perceptions of governance.

Thomas also points out that the WGIs’ methodology assumes that its variables are noisy signals of unobserved governance, and questions why variables measuring perceptions should be interpreted as noisy signals of something else if it is perceptions which are being measured. Thomas (2010: 39) elaborates,

The methodology raises several concerns. The first is that some of the constructs themselves are poorly defined and may be meaningless. The second is that the proposed measures depend on undefended and unlikely assumptions about the nature of governance. The last is that no evidence for construct validity has been presented; indeed, given the methodological choices, it is doubtful that it could be.

When direct measurement of observable variables is impractical, social scientists often use proxies instead. A proposed measure of a construct, such as an inherently abstract concept, like the ‘rule of law’, is like a proxy measure in that it is essentially a hypothesis about measurement, that is, that the proposed measure correctly measures the construct. Like proposed proxy measures, not all proposed measures of constructs are equally valid. Therefore, the hypothesis must be tested, and evidence supplied of the validity of the measure, before the measure is used. But proposed measures of constructs cannot be validated by comparing them with observable variables, as constructs are inherently unobservable. Therefore, a measure of a construct is validated, first by showing that it correctly represents the theoretical definition of the construct (‘content validity’ or ‘face validity’), and then by seeing whether the proposed measure has the same relationships with observable variables that the theory predicts the construct itself to have (‘convergent and discriminant validity’). That is, construct validity requires content validity, convergent validity and discriminant validity. According to Thomas, the WGIs fail on all counts, and she questions whether the WGIs measure what they purport to measure.

Recent research at the World Bank has also raised similar doubts about the WGIs. Langbein and Knack (2008) have challenged the measurement validity of the WGIs. An indicator that purports to measure an abstract concept should systematically and reliably relate to that concept (and not to other, different, concepts), regardless of how convincing the measurement may appear logically or conceptually; that is, an indicator should measure the hypothesized abstract concept with minimal systematic (non-random) and random error. According to Langbein and Knack (2008: 3), ‘there is little if any evidence on the concept validity of the six WGI indexes’. They tested whether the six governance indicators measure a broad underlying concept of ‘effective governance’ or whether they are separate, causally related concepts. Their results reveal that the indicators are consistent with both, that is, they are causally related, separate indexes, but represent a single underlying concept. That is, the six indicators seem to say the same thing, with different words, and hence, amount to tautology. Thus, Langbein and Knack (2008: 4) conclude that ‘the six indexes do not discriminate usefully among different aspects of governance. Rather, each of the indexes – whatever its label – merely reflects perceptions of the quality of governance more broadly. An implication is that they may have limited use as guides for policymakers, and for academic studies of the causes and consequences of “good governance” as well’.

Andrews (2008) argues that the WGIs lack acceptable definition and are ahistorical. They are also ‘context-neutral’ in the sense that they do not take into account country-specific challenges and environments which could be different, not only among developing countries but also between them as a group and developed countries as a group. Essentially, the WGIs are a combination of many different measures drawn from many different underlying theories, normative perspectives and viewpoints. Thus, like Thomas (2010), he sees this mix as the result of ‘personal ideas of governance’ of those developing the indicators.

Andrews also notes that the authors of the WGIs identify the foundations of their good governance work as ‘[t]he norms of limited government that protect private property from predation by the state’ (Kaufmann et al. 2007: 2). They also assert that limited government should only be responsible for producing key ‘inputs’ to growth and development – such as education, health care and transport infrastructure. However, their arguments have changed on how such inputs should be supplied, invoking both Weberian bureaucracy and new public management (NPM) elements.

Critiques of the WGIs have raised other issues, such as the limits and biases of perceptions-based subjective measures. For example, Kurtz and Schrank (2007...

Table of contents

• Is Good Governance Good for Development?
• Copyright
• Contents
• List of Tables and Figures
• List of Contributors
• Acknowledgements
• Chapter 1: Introduction: Governance and development
• Chapter 2: The seductiveness of good governance
• Chapter 3: Good governance and donors
• Chapter 4: Perception and misperception in governance research: Evidence from Latin America
• Chapter 5: Good governance scripts: Will compliance improve form or functionality?
• Chapter 6: Is governance reform a catalyst for development?
• Chapter 7: ‘Poor governance’ for development in China and Vietnam
• Chapter 8: Beyond good governance: An agenda for developmental governance
• Notes
• Index