Jomo Kwame Sundaram was UN Assistant Secretary General for Economic Development. Anis Chowdhury held various senior positions in the United Nations Secretariat in New York and Bangkok.
ROME, March 31 2016 (IPS) – Many well-meaning people believe that “good governance” is key to inclusive development. But research claiming that “good governance” is essential for rapid growth suffers from serious methodological or conceptual limitations. Existing definitions are extremely broad, suffer from functionalist tautology, or mainly refer to corruption.
Defining Good Governance
Invoking a functionalist definition (such as ‘good governance’ is “good-for-economic-development”), one cannot define a country’s ‘quality of government’ without measuring its effects. As The Economist (June 4, 2005) noted, defining ‘good governance’ as “good-for-economic-development” may generate tautological explanations and meaningless policy implications: “What is required for growth? Good governance. And what counts as good governance? Whatever promotes growth. And what is required for growth?”
Attempts to define Quality of Governance (QoG) as multi-faceted also suffer from tautology: “What is required for the quality of life enjoyed by citizens? Quality of governance. What is quality of governance? That which promotes the quality of life. . . .”.
If good governance or “QoG is everything, then maybe it is nothing”. Those who have defined ‘good governance’ as what can be shown to be “good for economic development” illustrate this problem. Many important non-economic attributes of good governance, such as trust and subjective measures of well-being, are left out by such definitions.
Thus, ‘good governance’ cannot be defined precisely, and hence, cannot be meaningfully or usefully monitored. Of course, the dire conditions typically associated with failed states probably preclude most economic or social progress, and cause declining living standards. Even recent World Bank research has been sceptical about the World Bank’s own frequently cited World Governance Indicators (WGIs), observing “there is little if any evidence on the concept validity of the six WGI indexes”.
The WGIs do not take into account country-specific challenges and environments, which could be different, not only between developing and developed countries, but also among developing countries. They also suffer from the typical biases of perceptions-based subjective measures. There is also no historical evidence that limited government is better for development — a premise of the WGIs. The view that the existence of government failures implies that minimalist government is best for development has no factual basis.
Many countries that have performed well in terms of growth, structural transformation and equity, have fallen short on the most widely used “good governance” indicators. Also, not all good governance reforms are similarly feasible or beneficial, let alone necessary or desirable in all circumstances.
For example, the United States and the Republic of Korea did not improve governance significantly until they had become quite affluent. Contrary to the often exaggerated claims about how much ‘institutions matter’, greater transparency, accountability and participation are often a consequence, rather than a direct cause of faster development.
Instead, all the ostensible evidence actually links good governance indicators to income levels. Observing the absence of any strong evidence relating standard good governance criteria to growth, Dani Rodrik notes that “the incontrovertible long-run association between good governance and high incomes provides very little guidance for appropriate strategies to induce high growth”.
Poor countries suffer a multitude of constraints, and effective growth acceleration interventions must address the most binding growth bottlenecks. Thus, as a rule, broad good governance reforms are neither necessary nor sufficient for growth.
The popular governance focus on corruption presumes that government policy discretion and interventions necessarily lead to corruption and abuse even though there is no factual basis for this presumption. Small governments are not synonymous with the absence of corruption while countries with very low levels of corruption have relatively large governments, as in Scandinavia and the Netherlands.
Also, defining good governance simply in terms of the absence of corruption is not very useful. While corruption is antithetical to good governance, good governance implies much more than merely the absence of corruption, clientelism, nepotism, cronyism, patronage, discrimination, and regulatory or policy capture.
If good governance indicators suffer from measurement problems, and if the causality from good governance to economic growth cannot be ascertained, is there any causal link between economic growth and corruption? This is relevant, as in practice, the good governance agenda often focuses mostly on anti-corruption measures.
Conceivably, corruption adversely affects development in many different ways, especially if it diverts resources that would otherwise be invested productively. However, the evidence does not show anti-corruption measures accelerating economic growth. Rather, while all corruption is damaging in some way, and is hence undesirable, some types of corruption are much more damaging than others.
Claiming to fight corruption in developing countries generally — by implementing a laundry list of desired governance reforms — seems laudable, impressive and deserving of support, but such efforts typically ignore more feasible and targeted policies that can improve economic performance.
The World Bank’s 1997 World Development Report advised developing countries to pay attention to 45 aspects of good governance. By 2002, the list had grown to 116 items. Countries wanting to improve their governance must undertake a great deal more as good governance advocates continue to extend their indicators lists. And the longer they wait, the more they will need to do!
Unfortunately, the long and lengthening agenda often means that a multitude of governance reforms need to be undertaken urgently, typically with little thought to their sequencing, interdependence, or relative contributions to reforming governments to be more efficient, effective and responsive, let alone to accelerate development and alleviate poverty.
Among the multitude of governance reforms deemed necessary, there is typically little guidance about what is considered essential and what is not, what should come first and what should follow, what can be achieved in the short term and what can only be achieved over the longer term, what is feasible and what is not.
The presumption that good governance accelerates growth, and hence, that comprehensive institutional reform is a pre-requisite for development continues to lose support. Large-scale institutional transformation of the type envisioned by the good governance agenda has never been a prerequisite for accelerating economic growth or poverty reduction.