The Limits of Institutional Reform in Development

Who is needed to make pdia work?

Last week we had a really interesting meeting at Harvard about doing development differently. In a number of presentations people spoke about 'we','us' and sometimes even 'them' when talking about development initiatives that proved successful. This raised a bunch of questions: 'who' are you talking about, and 'who' matters in stories of effective development?

Some commentators have suggested that the work we do on pdia does not address this question. Perhaps it does not address it enough, but I thought I'd gather some materials here that show how we at the Building State Capability program think about 'who' is needed to make development work.

First, we argue that you need to have multiagent leadership solutions, where multiple individuals engage in groups--playing a variety of roles, when needed...

 

I often use the example of Singapore to show that multiagent leadership solutions were often in place even when many people think it was about a key individual (note that there can be key individuals but they have impact when they have a broader group around them).

 

We also emphasize the importance of the authorizing environment when thinking about leadership and agency. 'Authorizers' are vital to effective development especially for outsiders to any given context (as I tend to be and as most of my students tend to be). 

 

Here are some readings for those with more time to engage:

Development as Leadership-Led Change ; Who Really Leads Development?; Going Beyond Heroic Leaders in Development;  Does Successful Governance Require Heroes (Download Wp2014-035_1-3)

Finally, an article in the Guardian on the topi might be interesting.

Hopefully it is apparent that the issue of agency is key to the work we are doing. It is a really difficult issue to research, however, and one where we have more questions than answers...

The reality of budget reform in Lesotho’s health care system: A case of poorly adapted reform ‘with limits’

Taryn Vian and William Bicknell from Boston University's School of Public Health wrote a really interesting article on reform in Lesotho that has just been published in the journal Health Policy and Planning. They examine a reform that began in 2005 and has as yet not been properly evaluated—meaning that no one has asked about implementation of reform by deconcentrated or distributed entities (like clinical personnel working in clinics).The authors find that the reforms have had the kind of limits I discuss in my book—first, there are implementation gaps (they have new performance budgeting mechanisms that are not really being used); second, they have a major problem with getting users in clinics to use the new systems. The authors offer two crucial lessons from the case: adapt reforms to the context and realities of health sectors in developing countries… and measure the implementation of reform. Change only matters if it changes functionality…

Here is the abstract to the article (I have adapted and added and re-structured it a bit) which you can access in full at PBB in Lesotho health sector article

Lesotho has been implementing financial management reforms, including performance-based budgeting (PBB) since 2005 in an effort to increase accountability, transparency and effectiveness in governance, yet little is known about how these efforts are affecting the health sector. Supported by several development partners and $24 million in external resources, the PBB reform is intended to strengthen government capacity to manage aid funds directly and to target assistance to pressing social priorities. This study designed and tested a methodology for measuring implementation progress for PBB reform in the hospital sector in Lesotho. We found that despite some efforts on the national level to promote and support reform implementation, staff at the hospital level were largely unaware of the purpose of the reform and had made almost no progress in transforming institutions and systems to fully realize reform goals. Problems can be traced to:

• a complex reform design,
• inadequate personnel and capacity to implement,
• professional boundaries between financial and clinical personnel and
• weak leadership.

The Lesotho reform experience suggests that less complex designs for budget reform, better adapted to the context and realities of health sectors in developing countries, may be needed to improve governance. It also highlights the importance of measuring reform implementation at the sectoral level.

Countries where finance ministries are stronger than other government agencies

My book notes that one of the key limits of institutional reform in development relates to the fact that central agencies like Ministries of Finance improve after reforms but distributed or deconcentrated agencies (like line ministries, local governments, etc.) are often not stronger after reforms.

The result: Any part of the reform that is under control of the concentrated Ministries of Finance does well, and the process works well when under the authority of these concentrated agents. Other parts of the reform and governance process do less well.

The following map show the gap between the quality of public financial management processes under the authority of stronger concentrated agencies as compared with deconcentrated agencies. The red dots show the size of this gap (as calculated using the methods described here). 

93% of the 80 countries exhibited this gap, which is really large in some places. In Kyrgyzstan, for instance, the average PEFA score is 2.2 (where the minimum score is 1 and the maximum is 4) and the deconcentrated gap is 1.05. This suggests that PFM processes under the authority of the Ministry of Finance in Kyrgyzstan will garner the country about a B- on PEFA measures (probably around 2.5 out of 4) but PFM processes under the authority of line ministries and local governments will get about a C- (maybe a 1.6).

The problem is that the process dimensions falling under the authority of deconcentrated agents have to do with execution:  where money is spent, goods and services are purchased, etc. 

My argument: Having a strong rule-maker without strong rule implementers yields limits of institutional impact.

 

Narrow leadership and the Limits of Institutional Reform: Still Looking at Anti-Corruption

In the last few days I have laid out some of the basic ideas in the book as to what I mean by limits to reform and why reform is often limited.

The limits manifest in a gap between what new systems look like and how they operate. Reforms produce new laws and procedures and organizational entities that have the right form but do not function.

This is the result of reforms being adopted as signals to garner and maintain support, especially from the international community.

Two problems with reforms that are introduced as signals relate to the context and content dimensions of the interventions: 1. Reforms are often devised without attention to context, and 2. Reforms impose specific best practices on countries; these require high content to work but reforms do not provide the content, which leaves reforms failing.

A third problem with reforms introduced as signals is that they engage agents too narrowly to succeed. Most development projects pursued by bilaterals and multilaterals, for instance, are developed on the basis of approvals by the Minister of Finance and her core team (or the equivalent). These are the ones who help to design reforms. Their approval of the reform ideas is taken to mean they 'get' the need for reform, buy in to the ideas, and have the authority to get the reform done.

According to various theories on social and organizational structure, you seldom if ever find individual agents who can do all these things. Instead, the ones who see the need for change are often not the ones who have power and authority, or the ones who can motivate and inspire the diffusion and implementation of ideas. Instead, groups of agents are required to provide all these pieces of a reform puzzle.

Where agency is narrow--as in many reforms--these groups of agents are not engaged and reforms fail at one point or another. Usually, they don't fail in the areas that the concentrated agents in a Ministry of Finance can control (writing of laws, developing new procedures, etc.) but they fail when these concentrated agents are less engaged (and distributed agents are engaged, in implementation, for instance, and diffusion of reform ideas). This is one of the reasons, I argue, why we see many better laws and processes in countries...but these don't get implemented. Narrow agency engagement, essentially, fuels gaps in reform results and fosters limits institutional reform in development.

Consider the following case brief as an example, of Ghana's anticorruption struggle (as presented in a World Bank set of resources on anti-corruption):

http://siteresources.worldbank.org/INTWBIGOVANTCOR/Resources/gha_thechallengeofdelivery_acasestudy.pdf

The case starts by summarizing a story of reform that started off very promising--especially because a Predeint seemed to be its champion (what more could you ask?)--but turned out to be limited: 

Popular desire for change swept the John Kufuor-New Patriotic Party (NPP) to election victory in December 2000 and to power on January 7, 2001. The new administration declared a commitment to fight corruption among its main priorities. It has fulfilled few of its anticorruption promises… However, very little substantial change has occurred…

The case describes the gains and limits of reform in the way I see it happening across the world: New laws are passed, with other forms, but there is limited improvement in functionality or results:

It is noticeable that most of the positive moves promised by the government to address corruption have failed to materialize - with the exception of repeal of criminal libel law, greater openness to the media, passage of the largely donor-driven and yet to be fully functional Public Procurement Act and Board, and incorporation of governance and anti-corruption reforms in PRSP

In discussing lessons learned from this experience, the case reflects on the role of the narrow leadership support it had received at the start. While recognizing that it mattered to have a strong leader in the presidency, the case notes that this was not enough--especially when the reform required real implementation. It lacked support at this stage...because the agents engaged did not have the wherewithal to make sure signals they had given were turned into practice:

Positive signals from the political leadership are central. The anti-corruption reform agenda was promising in the first year and half of Kufuor administration because the president and key officials repeated it so often that they were beginning to be taken seriously... and the encouragement from civil society and donors provided positive feedback.

Good intentions by our leaders are not enough to deliver anti-corruption reforms, political will to fight corruption is difficult to sustain in the absence of strong and sustained demand from the bottom; and top-down promises and sustained supply of anti corruption reforms must be backed by demand for official transparency and accountability.

The mini-case does not go into detail about what kinds of additional agency were needed to facilitate better implementation of the reforms. But one wonders 'who' could have been engaged to foster bottom-up demand in the bureaucracy, the parliament, and even local governments and business. Beyond this, 'who' could have been engaged to foster a design that built the anti-corruption agenda in a more measured manner, allowing political support to grow and capacity to emerge over time.

In my book I ask exactly these kinds of questions, arguing that institutional reforms will be limited if we do not know which agents are genuinely needed to effect institutional change (and when) and think through ways of mobilizing these agents to participate.

The Limits of Institutional Reform in Development

I have a new book coming out in January 2013. It is called The Limits of Institutional Reform in Development. I intend to use this blog site to discuss topics related to the book. I hope you find it an interesting place to visit, and am asking for any readers to comment on their experience with reform in development--especially where that reform has been focused on changing institutions ('the rules of the game') in governments.

Here is the first paragraph from the preface to my book, which should give you an idea of its content:

This book emerged in response to mounting evidence that institutional reforms in development often do not work. Case studies and multi-country analyses show that many governments in developing nations are not becoming more functional, even after decades and hundreds of millions of dollars of externally sponsored reforms. These studies increasingly suggest that disappointing results cannot be explained by routine excuses either. One cannot simply blame governments in these countries for not doing reforms, for instance, because many governments remain deeply dysfunctional even after many satisfactorily completed projects introducing best practices advocated by international organizations. The work on institutional reform in development has seldom explored reasons for failure beyond such excuses, however. This has created a gap in the literature, which is important from both an academic and practical perspective. The academic challenge is to see if theory and evidence can help promote a better understanding of why many reforms do not lead to better governments. The practical imperative is more fundamental: Can a better understanding of past experience help improve the likelihood of more institutional reform success in more developing countries in the future?