I'm really happy that my 2010 Governance article looking comparatively at governance regimes is now available in Chinese, at Chinese Translation .
I'm taking this from the Governance Blog, April 2012 (see below).
Governance: An international journal of policy, administration and institutions
Download translation of Andrews article on good governance
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Written by governancejournal
April 30, 2012 at 12:46 pm
Posted in Translations
I blogged about debt and governance a few days ago, suggesting in a highly simplistic fashion that we should look at government debt levels as an indicator of governance. The argument is simple: Governments are authorized by citizens to raise revenue through debt when it makes sense and to manage the debt exposure to ensure the country's fiscal dependence.
I reflected on data that showed developing countries have lower debt to GDP levels than many developed countries do. This is a reversal of the past, where developing countries typically found themselves in debt problems that were arguably construed as reflecting a failure of governance.
Now, what do we make of high debt figures in developed countries? Is it also a failure of governance? Philipp Krause responded to my simple post by saying that it may be the exact opposite. If governments like Japan and Italy can borrow at cheap rates to levels of 150 - 200 percent of GDP, surely it shows that they are seriously creditworthy and the government is just getting better leverage in financial markets.
Certainly an interesting argument. Of course, there is a cost of borrowing, and every cent one pays in servicing debt is money that could be spent differently. Some countries manage this cost better than others, by structuring their debt appropriately, etc. Even when they do this, of course, many argue that governments are just deferring the debt costs to future generations. And even well managed debt portfolios can become costly in the short run as well.
This is important because today's governments are not elected by future generations, and governance is most simply about exercising authority on behalf of those who gave it to you... today's electorate. Unless, of course, today's electorate indicate a concern for the future.
In reflecting on this, I'm going to suggest that we look at two dimensions of 'debt and governance' in today's terms when thinking about this issue.
The combination of these dimensions is shown, for about thirty of the world's wealthiest nations, in the figure below. (All data from the World Bank's World Development Indicators).
The first thing I see in this figure is that there is a positive relationship between the size of a country's debt relative to GDP and its servicing costs—at least in this one period cross section. In other words: the bigger a country's debt today, the more a country tends to pay today. So, a country like the USA pays about 11 cents of every dollar raised revenue on interest to service its debt—compared with Sweden where less than 3 ӧren are spent n interest, out of every Krona collected as revenue.
I like the table as a way of indicating the governance challenges of a given country—note I am not saying that the indicator should be construed as reflecting good or bad governance. There are sixteen quadrants in the way I show the countries and a country's location says different things about its debt governance:
For those who like to criticize the USA debt situation and suggest that Armageddon is days away, the graph should show something simple: THE USA IS NOT GREECE. It should also show that the UA is not Sweden, or any other conservatively governed debt regime. The question is whether this is a problem or not, and if governance strategies should change as a result of the USA's position.
For those who are interested in governance, this final question is of utmost importance. This is because it is the kind of product that we should be developing from governance indicators. Strategic questions to guide comparative policymaking, not singular measures that suggest whether a country exhibits 'good' or 'bad' governance. The contextual nature of governance prohibits such simple measures and we should stop pretending these kinds of measures are useful.
Regular visitors to this blog know that I spend a fair amount of time thinking about governance and governance indicators. I have proposed a range of ideas for measuring governance in the past. Let me try a new one today.
As in the past, I like to define governance as being about the way governments exercise authority on behalf of citizens. In this respect I think that governments are given authority to raise revenues through taxes and debt (and other means) to responsibly finance interventions in society.
It makes sense then to say that good governance must be reflected in the degree to which governments exercise this resource mobilization and management authority.
A potential measure of this--which is clear to understand--is the level of debt to GDP in a given country. This was certainly used as a measure to argue that African and other developing country governments could not govern in the 'stabilization' years of the 1980s. Many many governance reforms came from such logic.
So I looked at World Bank data on this for about 70 countries and generated the following simple excel graphs. They show how countries with lower GDP per capita tended to have higher debt/gdp ratios as recently as 2001 (with a trend line showing slight negative relationship between the variables). But if you look at the other two graphs you will see that the trend line changed over the 2000s and there is now a positive relationship: Wealthier countries now have higher debt to GDP ratios on average than poor countries.
As with all indicators we should contextualize the measure and i need to say up front that this is the product of an hour or so tinkering around...so don't go presenting this to your class as gospel! This is all the more important given that debt is now the political focal point in countries like the USA. So it behooves us to remember that 'ggod governance' could lead to higher debt to GDP ratios in some times than in others (like after a financial crisis). It is also important to look at actual data and remember that US government debt to GDP is only about 75 % now. IT IS NOT GREECE (sitting at 1bout 135%, behind Japan at over 150% according to the World Bank). In this list of about seventy the USA ratios are lower than a variety of countries: Hungary,Malta, the United Kingdom, France,Ireland, Belgium, Portugal, Barbados, Singapore, Iceland, Italy, Greece, and Japan.
I will bog a little more on the US situation in coming days, thinking about the kinds of processes that might help improve the governance of resource mobilization and management when this crisis is over...
In the meantime I really wanted to revel (as a development person) in the fact that poorer developing countries seem to have managed to keep their debt to gdp ratios in check over the past decade. Of course this reflects the fact that the 2008 crisis hit wealthier countries disproportionately. It could also suggest that developing country governments don't try to spend more in downturn because they realise fiscal policy is blunt if you can't actually implement the spending plans you propose (because of some of the process problems I have recently discussed).
When I think of governance contexts, I think of institutions--what we call 'rules of the game'. I think that anyone working on reforms in developing countries (or developed countries) should have a thorough appreciation of these rules of the game.
In speaking of institutions, people commonly refer to one of a number of things: formal regulative mechanisms like laws (that influence how people behave through extrinsic means), norms (that shape choices by offering intrinsic rewards when individuals do what they see as appropriate), and cultural-cognitive devices (that influence how groups think and include one's nationality or religion).
In development there is a bias (I believe) to seeing institutions as either laws, or norms, or cultural-cognitive devices.
I think that rules of the game are not one of these concepts alone, but rather take shape when you have an amalgamation of all three. I also believe that norms and cultural-cognitive devices are more deeply embedded than regulative mechanisms like laws, and hence provide the foundation necessary for rules to have an effect. People must think in a way that supports laws and deem the regulative devices appropriate before they adhere to such.
The problem is that cultural-cognitive devices and normative mechanisms are often informal and difficult to see--so they are frequently taken for granted when outsiders look at a country or government's context. These outsiders just look at the laws in place, and prescribe reforms accordingly. In the case of Malawi I started talking about last month, development experts thought that corruption festered because of a lack of formal anti-corruption laws and a formal anti-corruption agency. In reality, there are deeply embedded norms and cultural cognitive devices that underscore decisions in the country (and have fostered corruption for decades). The new laws and agency cannot work when these foundations are in place (which helps explain why the new laws and agency have not been as succesful as many would like).
My approach is stolen from people like Richard Scott, and sees institutions as something like icebergs: with formal regulative devices that all can see and less visible normative and cultural cognitive foundations (lying below the water line). If one fails to see the foundations when crafting a reform, the reform could end up crashing like the Titanic!
Below is the figure I use in my forthcoming book, of institutions as icebergs. Makes me wonder what the iceberg behind Greece's fiscal profligacy looks like (and if the foundations support new fiscal rules and austerity measures)?
I also wonder what kind of iceberg foundations lie behind the US government's current budgeting woes. For all those advocating fiscal rules, balanced budget amendments, etc. in the USA I ask: What are the cultural-cognitive and normative rules of the game that have routinely undermined discipline? For those who blame the President, I ask: Who is really responsible, formally and informally, for bringing out the budget and bringing down spending?
The same kinds of questions could be asked of reforms in all developing countries, and governance more generally:
Following my last blog entry, let me suggest one thing we should always remember about the importance of context in development and governance, especially when we are contemplating institutional reform. The idea is implicit in my forthcoming book on the topic.
There is no such thing as a blank canvas, and what's there matters and may not be well identified, appreciated or understood by outsiders.
Let me explain what I mean, and why it is important.
Most serious new institutional theorists (including Douglass North) argue that all social groups have rules of the game; including small communuities, sports teams, scout groups, ministries of education, tax collection offices, and classrooms of students. These rules differ in size and shape across contexts and through time, but they are always there, as incumbents that have emerged to direct behavior in the context. They influence how agents think and make decisions, impact patterns of resource allocation, and shape the kinds of capacities that exist and do not exist.
In a way, they are like the paint marks an artist has already put on her canvas. Sometimes they make sense to external observers, and appear ordered and purposeful (maybe like the flowers below), and other times they make a little less sense to observers, looking disordered and messy (the Pollock painting under the pretty flowers may look like this to some, certainly I have a hard time working it out).
It turns out the functionality of different incumbent institutional forms may be as subjective as art, and as difficult to make sense of and appreciate for outsiders who have not learned about such mechanisms. Rules of the game in a poor country with no transparency may resemble messy and 'in need of reform' painting marks to you and me, for instance, but they could merge to provide some kind of chaotic order that works for important groups of people in the country (often even for the poor).
More importantly, the people in the country may not see any need to change incumbent rules of the game, or may lack capacities to change given the entrenched dominance of incumbents. So any new reforms you introduce become like added paint on the Pollock canvas; which has to fit in with what's already there or risk adding to the chaos; or being overwhelmed by the incumbent patterns (as seems to happen to so many reforms).
This basic observation is an important starting point for thinking about context and governance and institutional reform: Institutions always exist, in all contexts, in many different forms that have some functionality for some people in the context, and that need to be considered when thinking about reforms, but probably are never properly considered by outsiders.
It is an obvious observation, you may say, but is it always respected when development agencies craft their reform programs for developing countries, or when we as outside specialists conceive our indicators of what constitutes a good, or better, or best practice?
It seems to me that many reforms are crafted with only a passing glance at the context; which is followed by a much more serious presentation of externally devised, 'better' and 'right' rules. It seems, further, that the act of creating generic indicators of the 'right rules' turns a blind eye to the fact that different places already have rules in place and that relevant governance solutions are more than just a little likely to look different across different places (if only because the opening slates are so different).
In both instances it seems that we in the development comunity think it appropriate to craft reform solutions and think about 'good governance' ideas as if there are a bunch of clean or clean-able slates on which to work our masterpieces. The reality is that you cannot 'buy' a clean slate on which to paint new governance solutions (like those shown below) and that we should stop blaming countries when reforms fail because the reform slates were filled with other incumbents that we either did not see or did not take seriously.
We need to remember this. And stop pretending that the world is our oyster. And start developing the tools, capacities, and sensibilities to better understand how to appreciate 'what's already there'.
What do you think these tools, capacities, and sensibilities should or could look like?
My blogs so far suggest that there is a growing governance gap created from many governance reforms. This is largely because reforms introduce best practice formal interventions that ultimately are not implemented. I suggest we should do things differently. What does that mean? Today I suggest a basic first step: ensuring reforms are 'wanted' by constituencies that have to do the implementation. Note I am not talking about 'ownership' in some vague sense. 'Want' is more direct, focused, immediate. And the underlying story with many governance reforms is that they are not wanted by those required to ultimately implement the change. For good reasons.
Let me frame this idea with a short story and then get to the point, and some ideas on generating 'want' in a reform context.
The story is about adopting international accounting standards. These are an important 'best practice' element of the good governance and doing business regimes. Developing countries are encouraged to adopt them, with multilaterals and bilaterals sponsoring projects focused on such in locales across the less affluent parts of earth.
Mir and Rahaman write about the adoption of international accounting standards (IAS) in Bangladesh (http://www.emeraldinsight.com/journals.htm?articleid=1528645&show=pdf).
They describe “evidence of immense pressure that major international donor/lending institutions put on the Bangladeshi government and professional accounting bodies to adopt IASs not only to provide credibility to foreign investors but also ensure that accountability arrangements with lending/donor agencies are tight enough. Clearly, the government and other institutions in Bangladesh have very little option (if any at all) because of the country's high dependence on aid…[even though]… a wholesale adoption of IASs constitutes a quick-fix that may not necessarily be in the long-term interest of Bangladesh and its accounting institutions.”
The description raises an important question of whether (and how regularly) donor insistence on best practice reform undermines local ownership--and the process of local problem solving and solution finding. Other descriptions in the story tie such questions to additional concerns about how well these imposed reforms are eventually implemented. The authors note that, "The perceived undemocratic nature of the adoption process appears to be creating and enhancing conflict among various constituencies, resulting in very low compliance with these standards."
The gap that these authors identify--between an imposed best practice reform design and an ultimate practice emerging from such--seems to emerge partly because the process of finding and fitting solutions is bypassed in favor of a solution coming from other countries. In their paper, the authors note that one reason this kind of imposed solution fails is simply that it is seen as being from the outside...emergent from an external community and not in response to local problems and through locally legitimate processes. They are not wanted internally, by the folks who ultimately have to implement and use them, digest them, allow them to interrupt their day-to-day work, change the way they think and contract and value things.
It reminds me of Richard Rose's admonition that reforms should involve “relevant” practices instead of “best” practices, where “Relevant practices are both politically acceptable and within the resources of government.” He argues that, “While relevance is no guarantee of a programme’s success, it avoids the certainty of failure due to the promotion of programmes that governments do not want or lack the resources to implement.”
While I cannot vouch for the accuracy of Mir and Rahaman's view that IAS adoption is failing in Bangladesh because it is unwanted by implementers, the story rings true enough to reproduce it. And in the story I see lessons for doing governance reform better--making it 'relevant' in the words of Richard Rose.
First, instead of focusing on reproducing solutions, reforms should emphasize solving problems. The literature on change regularly emphasizes the importance of problems, crises and the like as motivatorsof change. Agents generally do not want change but can get to a 'want' position if they see that the change is needed to alleviate a threat, solve a problem, assist their survival, maybe even make them perform better.
Second, do no support reform design processes that lead to quick, lazy, narrowly engaged plucking of external best practices as the logical solution. If you want to implement a reform you need to spend time finding a solution that fits the context. This requires engaging with those who will implement, having them contribute to a shared understanding of why reform is needed and a shared process of experimenting with local ideas and scanning the globe for 'relevant' ideas. The process of finding and fitting is absolutely vital if one truly wants an implemented reform. This process is the only way one gets a clear perspective on political realities (not possible through an externally written political economy analysis) and local capacities to implement.
Third, create a high hurdle for external 'best practice' ideas to clear before adopting them. Evidence suggests that best practice ideas travel well from place to place where they are contextualized. Rose describes this as being "altering the original model to operate in a different administrative and political setting” noting that, “When altering a prototype, policymakers are not abandoning what they have learned from better practices elsewhere; they are applying a lesson learned elsewhere in ways relevant in their own national setting.” Some basic questions should always be asked where a best practice is being reproduced: What is the lesson learned elsewhere that you are replicating? How has the practice been altered to match your political realities? How has the practice been altered to match your administrative realities? This requires having a theory about the best praxctice (understanding what it is, and how it works) and being able to see if that theory works in your context--what the literature calls 'theorization'.
These three steps require that external agents take a very different perspective on the reforms they introduce. It requires a change in focus from (i) ready-made solutions to sticky and under-understood problems, (ii) quick answers with narrow groups to longer processes of asking questions in broader constituences, and (iii) easy acceptance of best practices to more skepticism about whether best practices are relevant. I am sure these ideas will not guarantee success, but as Rose says, they will help avoid certainty of failure when it comes to implementing reforms people just do not want.
What do you think?
