Open Budgets

The Political Economy of Transparency, Participation, and Accountability

Sanjeev Khagram, Archon Fung, Paolo de Renzio

• Publisher: Brookings Institution Press/Ash Center
• Year: 2013
• ISBN:
  9780815723387
• Topic: Politics & International Relations
• Subtopic: Public Affairs & Administration
• Index: Politics & International Relations

A Brookings Institution Press and Ash Center for Democratic Governance and Innovation publicationDecisions about "who gets what, when, and how" are perhaps the most important that any government must make. So it should not be remarkable that around the world, public officials responsible for public budgeting are facing demands—from their own citizenry, other government officials, economic actors, and increasingly from international sources—to make their patterns of spending more transparent and their processes more participatory.Surprisingly, rigorous analysis of the causes and consequences of fiscal transparency is thin at best. Open Budgets seeks to fill this gap in existing knowledge by answering a few broad questions: How and why do improvements in fiscal transparency and participation come about? How are they sustained over time? When and how do increased fiscal transparency and participation lead to improved government responsiveness and accountability?Contributors: Steven Friedman (Rhodes University/University of Johannesburg); Jorge Antonio Alves (Queens College, CUNY) and Patrick Heller (Brown University); Jong-sung You (University of California—San Diego) and Wonhee Lee (Hankyung National University); John M. Ackerman (National Autonomous University of Mexico and Mexican Law Review); Aaron Schneider (University of Denver) and Annabella España-Najéra (California State University–Fresno); Barak D. Hoffman (Georgetown University); Jonathan Warren and Huong Nguyen (University of Washington); Linda Beck (University of Maine–Farmington and Columbia University), E. H. Seydou Nourou Toure (Institut Fondamental de l'Afrique Noire), and Aliou Faye (Senegal Ministry of the Economy and Finance).

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Overview and Synthesis: The Political Economy of Fiscal Transparency, Participation, and Accountability around the World

SANJEEV KHAGRAM, PAOLO DE RENZIO AND ARCHON FUNG

Raising, allocating, and spending public resources are among the primary functions and policy instruments of any government. Government budgets, as well as off-budget fiscal instruments such as state-owned enterprises and sovereign wealth funds, profoundly affect economies, societies, and ecoystems. Decisionmaking around government revenues and expenditures has historically been shrouded in secrecy—the purview of heads of state, finance ministers, and central bankers, along with a few select officials in executive agencies. Often, other ministries, government branches (including parliaments), the business community, civil society organizations, and the broader citizenry have had little or no access to information on public financial management. The quantity and quality of engagement and the inclusion of these nonexecutive actors in fiscal decisionmaking and oversight processes have been severely limited.

In recent years, however, interest and action with respect to transparency, participation, and accountability in fiscal decisionmaking have surged around the world. Indeed, over the past two decades, several broad trends have brought fiscal transparency, participation, and accountability into sharp focus:¹

—The proliferation of good governance norms and standards that emphasize greater transparency, participation, and accountability in all government matters,

—Numerous transitions from closed, authoritarian political regimes to ones characterized by policy contestation, separation of powers, political party competition, an organized civil society, an engaged citizenry, and an active media,

—The introduction of modern public finance management systems and good practices in countries around the world,

—Greater decentralization and devolution of powers to subnational levels of government, including the power to raise, allocate, and spend public resources,

—The growth in the number and operational capacity of independent civil society organizations (CSOs) seeking to be informed about and actively participate in government decisionmaking, and

—The dramatic growth, spread, and use of information and communication technologies around the world.

The global financial and economic crises that began in 2008 further revealed that the disclosure of government fiscal risks and positions was inadequate. This lack of transparency contributed to government fiscal crises in many countries (epitomized by Greece), which created additional perverse incentives for governments to cloud rather than open their fiscal data.² Ordinary citizens began calling for greater accountability in the use of public resources—from the streets of Athens and the Arab spring to the tea party and Occupy Wall Street movements in the United States.

Given the fundamental importance of—and increased focus on—these issues and trends in the global economy, it is surprising to find that rigorous analysis of the causes and consequences of fiscal transparency, participation, and accountability is thin at best. This volume seeks to fill this gap in existing knowledge, deploying multiple research methodologies and examining a range of quantitative and qualitative evidence.³

We focus on three broad sets of questions. First, how and why do improvements in fiscal transparency and participation come about, and how are such changes sustained over time? That is, what are the key factors and causal mechanisms that contribute to improvements or regressions in these aspects of fiscal decisionmaking? Second, under what conditions and through what type of mechanisms do (or might) increased fiscal transparency and participation lead to more government responsiveness and improved accountability, including outcomes such as better fiscal management, reduced corruption, shifts in budget allocations, and improved public services? Running across these two broad questions is a third set of queries regarding the complex interrelationships among transparency, participation, and accountability in fiscal matters. In particular, does greater transparency contribute to greater participation?

In this chapter, we begin by summarizing the relevant—and limited—theoretical and empirical literature on fiscal transparency, participation, and accountability. We then examine broad cross-country evidence through a set of statistical and comparative studies, looking for conditions (variables) that are associated with higher levels of budget transparency, a major subset of fiscal transparency. The summaries of country case studies that follow (chapters 2 through 9 of this volume) provide a much richer and more nuanced understanding of the causal mechanisms and trajectories that different countries followed as their fiscal systems opened up and became more inclusive (or sometimes regressed).

Overall, our findings suggest that four main causal triggers stand out as contributing to fiscal transparency and participation within countries: (a) political transitions that not only bring an end to autocratic rule, but also bring about political contestation and alternation, giving voice to opposition parties and greater powers to oversight bodies such as legislatures; (b) fiscal and economic crises that force governments to tighten controls over the public purse and put in place mechanisms and incentives for fiscal discipline and independent scrutiny; (c) widely publicized cases of corruption that lead reform-oriented actors to react strongly and compel governments to provide better public access to fiscal information; and (d) external influences that promote global norms to empower domestic reformers and civil society actors, rather than undermine domestic reform processes with interventions that bypass local institutions and seek fiscal information to satisfy external demands rather than to inform a domestic public debate. These factors often interact in complex combinations to shape the trajectories in different countries by fostering or impeding advances in fiscal transparency and participation.

The evidence presented in this volume details tentative responses to the first set of questions that we started with, identifying key factors and mechanisms (particularly combinations and sequences) that are associated with higher levels of fiscal transparency and participation and their improvement over time. However, evidence is more limited of how greater public availability of fiscal information—and related opportunities to engage with the budget process—may affect government accountability, broader public finance management, and quality of service delivery. There are various examples of legislators becoming more demanding vis-à-vis the executive and of civil society campaigns achieving significant but isolated success, but the evidence for the positive impacts of transparency on accountability and responsiveness remains far from systematic or definitive.

We conclude the chapter by looking at some promising trends in the evolving international context, and suggesting strategic lessons and a research agenda.

Fiscal Transparency, Participation, and Accountability: What Would We Have Expected?

At present, there is no holistic or integrated theory on the political economy of fiscal transparency, participation, and accountability. The analytical framework and orienting ideas summarized here are drawn from the broader literature on good governance, transparency, democracy and democratization, participatory politics, and the political economy of reforms, as well as from the emerging empirical literature assessing the impact of development interventions in the areas of transparency, accountability, and governance.⁴

Correlates of Fiscal Transparency

The conditions that are likely to be associated with more open government, specifically in the fiscal realm, can initially be classified into three broad categories: political, economic, and cultural or historical.⁵ In addition, the interactions among these conditions need to be analyzed in relation to country contexts, taking into account the actors involved, their potentially conflicting interests, power, and capabilities, the institutions that shape their behavior, and the incentives that such institutions create. This, in turn, will help to explain how and why specific outcomes occurred (or not).

Political conditions often associated with transparency include elections, political competition, government size, and decentralization.⁶ Electoral competition and political rights may create pressures to open up government processes to public scrutiny. In addition, transitions from authoritarian regimes increase the possibilities for political contestation and so open the field to a range of domestic actors—opposing parties, politicians, CSOs, and independent media—who seek information about government fiscal activity to advance their own agendas. However, the presence of electoral democracy may only increase transparency and participation after it has reached a certain threshold or if other conditions, such as higher levels of political competition or a vibrant civil society and media, are present. Decentralization may or may not increase transparency, depending on the interactions with other conditions such as regional inequalities in the distribution of power. Finally, it is unlikely that transparency will be enabled in situations of violent conflict.

In terms of economic correlates, many studies have found the level of development (per capita income) to be strongly related to various measures of transparency.⁷ The spread of education and the expansion of middle classes may give rise to pressures for transparency, as better-off citizens come to desire greater quality and efficiency in the provision of public goods and gain the resources to express that interest politically. Some studies have found that trade openness, presumably operating through increased economic competition and economic growth, is associated positively with transparency to a significant degree. Conversely, countries with larger endowments of natural resources seem to be significantly less transparent.⁸ Larger natural resource endowments may dampen pressure for transparency, as the government relies less on taxation to raise revenue. Greater levels of inequality can also contribute to lower levels of transparency through material and normative mechanisms.

Cultural and historical accounts of the quality of government institutions focus on the effects of religion, social values, colonial heritage, legal traditions, and ethnolinguistic fractionalization.⁹ Such factors create more or less favorable normative resources that condition the extent to which transparency (and participation for that matter) are understood as a component of legitimate government. Egalitarian or individualistic religions such as Protestantism may encourage challenges to nontransparent behavior, whereas hierarchical religions such as Catholicism, Eastern Orthodoxy, and Islam may discourage such challenges. Protestantism's link with economic development and democracy offers two additional causal pathways. Some scholars have suggested that ethnolinguistic fractionalization decreases the quality of government institutions. Colonial experience and legal systems are closely linked potential correlates of good governance and transparency. For some, legal systems reflect the relative power of the state vis-à-vis property owners. Whereas the British common law system was developed as a defense against attempts by the sovereign to expropriate property, the civil law system was developed as a sovereign instrument for state building and economic control.

Political Economy Dynamics

Political economy dynamics shape the transparency, participation, and accountability of government decisionmaking beyond the structural conditions identified above.¹⁰ On the one hand, those who would benefit from the lack of transparency and participation by shifting public funds to their political supporters or preferred projects or by skimming profits directly, and those who simply would rather avoid the harsh light of public scrutiny, often hold powerful positions and are well organized to defend their interests. On the other hand, those who would benefit from increased openness and inclusion in fiscal processes and practices are typically numerous and poorly organized: they include government officials who have been excluded from the budget-making process and citizens who use public services such as health, housing, education, and transportation.

Although these political economy mechanisms are powerful and have often prevented change, other dynamics sometimes break through the obstacle of concentrated interests to contribute to greater fiscal openness and inclusiveness. For example, cracks in the iron grid of business-as-usual politics sometimes result from highly publicized scandals involving the (mis)use of public resources. These scandals, and crises more broadly (such as domestic or global economic crises), create opportunities for reform-minded political entrepreneurs to gain support on platforms of transparency and participation.

Similarly, different factions of political elites can be divided against one another. One side or another may view increased transparency as a tool in this competition. Politicians might favor budget transparency as a way to control the discretion of entrenched (and possibly corrupt) bureaucrats. This may be the case particularly when processes of political liberalization create new factions of hard-liners and soft-liners among the ruling elite or when, during subsequent periods of greater political democratization, avenues such as elections open up for competing political actors to promote transparency and participation as part of broader reform campaigns.¹¹ Sometimes, a faction of political elites will favor transparency reforms because they lose little through such reforms and may gain the support of an important constituency that favors transparency. Such dynamics, however, often require well-organized and vocal domestic CSOs pressing for openness. Similarly, government or independent quasi-government officials (such as civil servants or auditors) may be empowered and motivated to push for change.

International forces can also contribute to greater fiscal transparency and participation. International donors and powerful states press for formal fiscal transparency as part of the package of good governance measures—and often conditionalities—linked to foreign aid. Transnational advocacy coalitions and networks, which link foreign and international organizations with domestic civil society groups, pressure governments to become more open and inclusive.¹² Potent, but more difficult to discern, international norms and the perception that openness and inclusiveness are modern and appropriate practices can press political actors to change their laws, policies, and operating procedures.¹³

The political economy of fiscal transparency and participation is likely to occur in a multilevel way; the factors and mechanisms just described operate interactively. Opposing political parties, for example, can use scandals and crises as windows of opportunity to form alliances with reform-minded political elites and civil servants. Civil society organizations can form partnerships with organizations operating at the local grassroots level, with international organizations, and with advocacy groups based in other countries to pressure for more change.

Moreover, the emergence and evolution of the political economy of fiscal transparency and participation will likely be a complex process. The conditions, factors, and mechanisms that trigger initial improvements may be quite different from those that contribute to their deepening and broadening over time. Indeed, a seemingly stable and robust set of institutions at a particular point in time may quickly become outdated if it does not adapt to new demands and circumstances. Countries may get stuck or even regress, as when powerful actors use even more sophisticated means to obscure fiscal positions and practices. The political economy of fiscal transparency, participation, and accountability is not likely to be a linear or teleological process. And the conditions, factors, and mechanisms that contribute to increased transparency are likely to be somewhat different from those that contribute to greater participation or accountability.

Accountability, Government Responsiveness, and Impacts

Supporters of government openness are often quick to claim that transparency and participation in public policies and p...

Table of contents

• Cover Page
• Title Page
• Copyright Page
• Contents
• 1 - Overview and Synthesis: The Political Economy of Fiscal Transparency, Participation, and Accountability around the World
• 2 - What we know can't Hurt them: Origins, Sources of Sustenance, and Survival Prospects of Budget Transparency in South Africa
• 3 - Accountability from the Top Down? Brazil's Advances in Budget Accountability Despite a Lack of Popular Mobilization
• 4 - A Mutually Reinforcing Loop: Budget Transparency and Participation in South Korea
• 5 - Budget Transparency and Accountability in Mexico: High Hopes, Low Performance
• 6 - Guatemala: Limited Advances within Advancing Limits
• 7 - The Limits of Top-Down Reform: Budget Transparency in Tanzania
• 8 - The Diversification of State Power: Vietnam's Alternative Path toward Budget Transparency, Accountability, and Participation
• 9 - Capturing Movement at the Margins: Senegal's Efforts at Budget Transparency Reform
• Contributors
• Index
• Back Cover