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          By BriaN leVy

           APRIL 2011   59
     SPecial rePortS

              he numerous              Institutions are the formal and in-
                                                                                 BeSt Practice, or wiShful
                                   formal “rules of the game” within which
              tectonic shifts      development takes place. So a decade
                                   ago we began to think that the answer
              that have shaken     was “good governance” institutions. We      But PoliticS MaKeS the equation
                                   thought that institutional reform was       considerably more complex. Achiev-
              the foundations of   akin to engineering. Because the insti-     ing best-practice means working back-
                                   tutional characteristics of capable and     wards from a predefined end state. But
              the development      accountable states are well known (see      politics—including stakeholders and
                                   Box), we thought that the challenge         their power, incentives, skill, and capac-
paradigm over the last half-       was straightforward: to redesign all fac-   ity to organize—gets in the way and
                                   ets of the governance system because        inevitably shapes the dynamics of re-
century have had far-reaching      strengthening each part was necessary       form. A country’s economic, social, and
                                   for the performance of the whole. “A        political institutions cannot be re-engi-
implications for development       chain,” went the reigning metaphor, “is     neered from scratch. A country starts
                                   only as strong as its weakest link.” This   from where it is, and evolves through
policy formulation and             became the “best-practice” approach to      search and learning. Changes in one
                                   governance reform.                          part of the system call for adaptations
implementation. In the 1980s,                                                  in other parts, in an ongoing process.
                                                                               Effective policy making works with
we recognized the limitations of                                               rather than against a country’s grain as
                                                                               it nudges forward this often nonlinear
                                        SoMe characteriSticS
investment finance as the path          of traNSPareNt aNd                     process.
                                        accouNtaBle StateS                          Moving away from the best-prac-
to poverty reduction, which then                                               tices model requires a different way
                                        ■    predictable decision              of thinking about policy formulation
led to a focus on policy reform.             making and                        and implementation. The reality is that
                                                                               many countries lack the institutions
Acknowledging the limits of             ■    oversight mechanisms              and capacities to implement otherwise
                                             that guard against                desirable policies; or the policies may
policy reform, we moved on,                  arbitrariness and ensure          threaten the leaders’ power or the po-
                                             accountability in how             litical stability. So the craft of policy
                                             resources are used
first, to building institutions                                                making is about finding entry points
                                        ■    public officials committed        that are feasible and that advance the
and, more recently, to the role              to social goals, including        development agenda, at least to some
                                             the efficient provision of        degree.
of politics. The implications                public services

                                        ■    a political process                 how to do it—a traJectorieS
for development policy making                that is broadly viewed              aPProach
                                             as legitimate
are profound—and only partly
                                        ■    the protection of                 SiMPly SayiNG that the answer is “coun-
understood.                                  property rights.                  try-specific” is not very helpful. For eco-
                                                                               nomic policy reform, Hausman, Rodrik
                                                                               and Velasco’s (2006) binding constraints

framework can help. For governance re-         litical and economic institutions.               (Keefer and Khemani 2005). Bangla-
form, we offer a new trajectories approach          But failure is at least as likely as suc-   desh, Albania, and Zambia and, histori-
typology (Levy and Fukuyama 2010).             cess: if a dominant party promotes only          cally, Mexico (Haber and others 2003)
This approach distinguishes between two        its own narrow interests; or when person-        demonstrate that competition and cli-
sharply contrasting paths to good gover-       alized leadership becomes increasingly           entelism can attract private investment.
nance and growth, based on a country’s         self-seeking and predatory. Many exam-           But sustaining forward momentum is a
experiences and current socioeconomic          ples exist, such as the former Zaire and         high wire act: decision making is con-
position. Within each of these trajecto-       the Philippines during the Marcos era.           stantly contested; and narrow interest-
ries, countries can be in the early, middle,                                                    seeking and even individual corruption
or later stages of developing sophisticated                                                     are ubiquitous. Conflict continually
                                                 the coMPetitiVe clieNteliSt
institutions and organizations. (North,                                                         threatens to spiral out of control. But as
Wallis and Weingast 2009) Knowing                                                               long as the momentum of continuing
where a country fits in this model can                                                          growth can be sustained, an expanding
shed light on how to approach reforms.         iN the alterNatiVe PatterN, the com-             private sector, middle class and civil so-
    The table summarizes the two tra-          petitive clientelist trajectory, elite groups    ciety will continue to reshape interests,
jectories and presents their political         compete for power through elections.             incentives, and alliances, thereby feed-
features, governance challenges, and           Where public institutions are already            ing a groundswell for further rounds of
principal governance risks. We can see         strong—normally in middle- and high-             institutional improvement.
that the governance risks and challeng-        income countries—elections can be
es are very different in each.                 organized around different visions of
                                                                                                  aliGNiNG actioN with “reforM
                                               suitable public programs (platforms).
  the doMiNaNt State traJectory                But where public institutions are weak,
                                               elites may, in return for continuing sup-
                                               port, promise to direct public resources         SuStaiNiNG forward MoMeNtuM and
iN thiS traJectory, coordination               to favored clients rather than com-              avoiding the ever-present risks of re-
among elites is relatively straightfor-        mit to governing for the public good.            versal depend on prevailing political
ward. Rulers base their claim to legiti-
macy on an implicit promise that their
decisions will serve the broader long-          taBle: GoVerNaNce StructureS aNd the StaGeS of deVeloPMeNt
run public interest. If they are success-                                                               traJectory
ful, development will generate an in-                                             doMiNaNt State              coMPetitiVe
creasingly sophisticated economy and a                                                                        clieNteliSM
wealthier, more empowered citizenry—            Structural featureS               a dominant party or         competitive among
which in turn leads to rising pressure          how the distribution of state     leader                      parties
                                                power is organized
to create institutions that can support
the increasing economic and politi-             how government makes              coordinated across          “Just enough governance”
cal competition. Examples include the           decisions                         government units            muddling through
East Asian “tigers,” Ethiopia, Tunisia,         froNtier GoVerNaNce               how to evolve toward a      how to strengthen the
and others. The Republic of Korea,              challeNGeS                        more competitive polity     capacity of state
                                                                                  and economy                 institutions
for example, has gone from poor to
rich—and from closed to open—along              PriNciPal GoVerNaNce              dominance becomes           institutional decay
                                                riSKS                             increasingly self-serving
this trajectory. How? Rapid growth                                                and predatory
produced a strong private sector and
                                                couNtry eXaMPleS                  Mozambique, ethiopia,     Bangladesh, Kenya,
a strong middle class that demanded                                               uganda, Vietnam, tunisia, zambia, albania, india,
more sophisticated and responsive po-                                             republic of Korea         Mauritius, costa rica

                                                                                                                      APRIL 2011       61
and institutional factors. The best ap-         zones rather than systemwide trade             mortality—and that spelled out all the
proach is to find ways of working with          liberalization is an approach taken by         health services to which each village was
the grain. The figure shows a number of         Korea, Taiwan, Mauritius, and many             entitled—brought about a 33 percent
engagement options, ranging from be-            others.                                        overall reduction in child deaths in the
ing more modest in policy reform op-                                                           space of a single year (Bjorkmann and
tions, to small-g initiatives that enhance         SMALL-g reforMS                             Svensson 2009). Viewed from a longer-
accountability at a micro-level, to far-                                                       run perspective, the potential impact
reaching big-G governance reforms.                                                             may be broader still. Initiatives such
Their feasibility depends on the “space”        eVeN where Political leaderS may               as these give people voice in their deal-
for reform.                                     not be accountable for delivering re-          ings with government officials, thereby
                                                sults, there may nonetheless be oppor-         encouraging the shift from “subject” to
     “JuSt eNouGh” Policy reforM                tunities for small-g initiatives such as       “citizen.”
                                                creating strong, unambiguous incen-
                                                tives for stakeholders to foster partici-        orcheStratioN
a firSt-BeSt policy proposal presup-            pation in and oversight of the provision
poses a government with the ability and         of public services. Examples include
will to pursue the public good. But this        parental participation in schools; com-        ORCHESTRATING stakeholders for policy
is often not the case because (as in some       munity oversight of local health clinics       reform focuses on upstream rather than
examples of the dominant state capacity         or road maintenance projects; coali-           downstream processes. In contrast to
trajectory) leaders have narrower goals,        tions of businesses and middle-class us-       approaches that work around incum-
or perhaps because (as in the competi-          ers of urban water, electricity, and other     bent stakeholders, the aim here is to
tive clientelist trajectory) coalitions suc-    utility services seeking agreements with       pull those who have a stake in reform,
ceed in blocking certain options. So            utility providers on how to improve            and other advocates of change, into
we would choose policy options that             services; and the independent oversight        the discussion to build momentum for
do not confront directly the interests          of public procurement practices.               more far-reaching reform initiatives.
of powerful existing stakeholders who               In the short run, small-g initiatives      Multistakeholder engagement is more
want to sustain the status quo. Though          can yield significant benefits. To give just   likely in the open environment of the
such options are generally not the best,        one example: A Ugandan community-              competitive clientelist setting than in the
they can achieve short-term gains, and          based monitoring project that provided         dominant state capacity alternative—
potentially lay the groundwork for              residents in each of fifty communities         although, even in the latter, reformist
more far-reaching reforms down the              with comparative information on how            leaders sometimes encourage stake-
road. Promotion of export processing            their village fared in the area of child       holder orchestration as a way of in-

     fiGure: the SPectruM of reforM SPace

                                “incremental” approaches adapting          “transformational” approaches
                                 design given existing reform space        seeking to expand reform space

                                                                            orchestrate        “Big-G” governance
                          feasible policy           “Small-g”             stakeholders for
                             reform             governance reforms                                   reforms
                                                                           policy change

child sleeping in makeshift quarters, Ghana.

ducing more conservative officials to          economic development can set in mo-          Hausman, Ricardo, Dani Rodrik, and
embrace reform. The Philippine pro-            tion deep-seated socioeconomic chang-        Andres Velasco. 2006. “Getting the
curement law was reformed by building          es that will, in time, create the kinds of   Diagnosis Right: A New Approach
a broad coalition of champions from            with-the-grain pressures for better per-     to Economic Reform.” Finance and
civil society, church and youth groups,        formance and enhanced accountability         Development, March, pp. 12–15.
and the private sector.                        which will create an upward spiral, vir-
                                               tuous circle of change.                      Keefer, Philip, and Stuti Khemani. 2005.
  BIG-G reforMS                                                                             “Democracy, Public Expenditures and the
                                               Brian Levy is Head of the secretariat        Poor: Understanding Political Incentives
                                               responsible for implementing the             for Providing Public Service.” World Bank
So what aBout the most ambitious               World Bank Group’s Governance                Research Observer. Vol. 20, no. 1, pp. 1–27.
end of the spectrum: big-G governance          and Anti-Corruption Strategy.
reform to strengthen national institu-                                                      Levy, Brian and Francis Fukuyama. 2010.
tions that hold government to account          references                                   “Development Strategies: Integrating
such as elected legislatures, the judi-                                                     Governance and Growth.” World Bank
ciary, centralized auditing authorities,       Bjorkmann, Martina and Jakob Svensson.       Policy Research Working Paper no. 5196.
ombudsmen, a free and vigorous me-             2009. “Power to the People: Evidence         Washington D.C.: World Bank.
dia, and the like? In the early stages of      from a Randomized Field Experiment on
development, leaders are unlikely to           Community-Based Monitoring in Uganda.”       North, Douglass C., John Wallis, and Barry
accept big-G institutions that will limit      Quarterly Journal of Economics 124, May:     Weingast. 2009. Violence and Social
their discretionary powers. It may be          735–69.                                      Orders. New York: Cambridge University
that this conflicts with their legitimiz-                                                   Press.
ing claim that they will use their unlim-      Haber, Stephen, Armando Razo, and Noel
ited power to pursue national develop-         Maurer. 2003. The Politics of Property
ment goals single-mindedly, or perhaps         Rights. New York: Cambridge University
for more venal reasons. Results have           Press.
been uneven. More hopeful however
for big-G institutions is that sustained

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