My brief few posts on debt and governance have helped me illustrate (to me, at least) that it is really hard to say that governance is good or bad.
As I understand it, governance is about the way governments exercise authority given to them by citizens.
I looked at debt because governments are authorized to raise debt on behalf of citizens. My first blog post on the topic noted that developed countries have higher debt/gdp ratios than developing countries. I implied that this seemed like a bad thing. Mostly because thirty years ago high debt burdens were a major reason developing countries landed in trouble, were termed 'bad governance' examples, and ended up beholden to multilateral and bilateral lenders.
But is debt always bad, and are countries that run up higher debt burdens than others badly governed. The ever-smart Philipp Krause thinks not, as reflected in today's Beyond Budgets blog post (What Does Debt Mean for Governance?). Philipp writes, "Matt wonders whether this worsening of rich countries’ debt position says something about their governance. If debt/GDP was a governance indicator, what would it tell us? Matt seems to lean towards thinking it’s not a good thing. I think it could just possibly be a great thing." (the emphasis here is mine).
Philipp's post is worth a read (as is the Beyond Budgets blog) and I think you will see some meeting of minds in his argument and my posts from yesterday and the day before. I would argue quite emphatically that we cannot say that higher debt means bad governance. Or that low debt means good governance.
What these indicators mean for a specific country depends on the country, its pressures, opportunities, etc. And most importantly, what the citizens authorize the government to do. If governments are on a short chain because citizens remember financial calamity with fear then high debt is probably an indicator of bad governance. If the country is coming out of crisis and there is demand for government to lead economic recovery and the government can raise debt cheaply, then surely high debt is not bad governance. (I can't bring myself to say, with Philipp, that debt is great...).
The contextual relativity of this discussion might bother some people who are looking for indicators that are certain and specific, and can imply judgment in a single figure... But I think that governance is a relative and contextual thing, and that any governance discussion needs to face up to uncomfortable thoughts. Let me suggest, for instance, that we can rarely say that many of our staples of good governance are good or bad:
- If meritocratic hiring is always a good thing, why do we see most governments across the world reserving posts for political hires (and why do we see meritocratic hiring reforms conditional on other things...see Christian Schuster's interesting paper Civil Service Reforms are Thorny). Could it be that the right political appointee is the right civil servant in some positions? and is 'merit' such an objective concept after all?
- If transparency is always a good thing, why do many of the world's better governments value secrecy in some areas? Why do the World Bank and IMF keep negotiations secret until they are concluded in many instances? Could it be that transparency and opacity are just tools or conditions under which different things happen? Could it be that some high transparency countries are just being transparent about stuff that doesn't matter? So the act of being transparent is neither good nor bad.
- Does a business friendly government always mean a better government? many current indicators say it does. But sometimes we want government to be a regulator of business and sometimes a facilitator. So, regulations are neither good nor bad either.
I think we could make a list like this for just about every indicator of governance, and argue that labels like 'good' and 'bad' are oversimplified, misplaced and potentially damaging to the overall narrative on governance.
High debt is neither good nor bad. High levels of merit-based hiring is also not good or bad. High levels of transparency may not be good or bad either.
Uncomfortable thought about governance for the day: The idea of good governance may not make sense.