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MOVING FORWARD

Debates on governance and economic devel- opment have enlivened and complicated an already cluttered field of theoretical conjec- ture. Initially, the focus was more on the high-level question of the role of markets versus states. While not entirely resolved, there has been a convergence towards ‘mar- kets and states’ as the key governance frame- work for economic development, with the relative importance of each varying across nations and time periods. Consequently, pre- occupation has shifted to the relationships among governance, aid, and economic growth.

Debate goes on, with several promising avenues for research. More importantly, there are a few areas – methodological and substantive – where ‘caution flags’ need to be raised.

Methodological approaches and measurement tools

Much of the recent research on governance, aid, and economic growth has been based on large-sample, multi-country, multivariable regression analysis. While perversely fasci- nating, the results of these studies, taken together, are not consistent, conclusive or particularly helpful for policymaking. Varying definitions and development objec- tives, problems of endogeneity, directions of causality and country-specific characteristics create complexity and ‘noise’. In addition, at all levels, attribution problems are formida- ble (Bourguignon and Sundberg, 2007). This suggests that a different methodological approach might bear more fruit.

Measurement tools such as the WGI and TI’s Corruption Perceptions Index also have been subject to methodological criticism. Both sets of indicators have been perceived as helpful in publicizing governance and cor- ruption issues, ‘naming and shaming’ the worst offenders. How effective this has been is open to doubt: there has been no overall

improvement in scores over time (Kaufman et al., 2008: 20).More concerning is the use of the indicators in performance criteria linked to aid decisions and cross-country research.

It may be time to return to the ‘old-fash- ioned approach’ of using fieldwork and case studies at the national and subnational levels to analyze ‘the governance deficit’ and the dynamics between growth and specific gov-

ernance aspects. There has been a new

emphasis on randomized impact evaluation using experimental or quasi-experimental designs. This is helpful in bringing back a focus on ‘what works’ and may assist in pin- pointing governance/growth linkages, if they exist, at the project level. However, the use- fulness of randomized evaluations is proba- bly confined to testing alternative design strategies in project settings. Broad policy questions like the ones discussed are not amenable to this type of evaluation. Also, even at the project level, there can be ethical, efficiency, and opportunity cost concerns (Banerjee, 2007; Bourguignon and Sundberg, 2007: 318; Goldin et al., 2007).

The case-by-case approach is time-con- suming. Also, if one accepts governance as a contextually-specific, interlocking system, most findings will not be easily portable. Nonetheless, if some of the resources were redirected from other approaches, an impres- sive body of knowledge – and perhaps some robust conclusions, building theory from the ground up – could emerge relatively quickly.

A final comment, more procedural than methodological: there is a communications gap between academics and practitioners on the subject of governance and economic development. Nuanced and caveated aca- demic findings were transformed into simpli- fied policy prescriptions and put into practice prematurely. This manifested itself, for exam- ple, in the international aid community’s embrace of governance reforms and condi- tionality in the latter half of the 1990s. The gap has narrowed, but still exists. There is also the perennial distance between politi- cal scientists and economists. Unless the

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disciplines come together, there is little hope of meaningful progress in resolving, or at least better understanding, the principal unsettled questions.

Simplicity is overrated

The search for a ‘silver bullet’ to bring about economic development and poverty reduction continues. While intellectually tempting, there are dangers in simplicity.6

Shrinking substance and ‘institutional engineering’

For a time, bad governance was embraced as the primary cause of economic stagnation. In effect, economic development was reduced to a matter of governance. In turn, bad gov- ernance was reduced to corruption by a seg- ment of the donor community (Hyden, 2007: 16754). A symptom of this is that the World Bank’s 2007 strategy needed to make the point that ‘Governance and corruption are not synonymous’. Przeworski, in his critique of the primacy of institutions in economic development, notes: ‘This theoretical claim has practical, policy, consequences: it licenses institutional engineering. If different institu- tions generate different outcomes, then one can stick any institution into any historical condition and expect that it would function in the same way it has elsewhere’ (2004: 166). When it comes to economic development and governance, looking for simple formu- laic answers across countries has not been helpful (Rodrik, 2006; Chang, 2007).

Avoiding simplistic constructs does not grant, however, a license to overcomplicate with elaborate frameworks that attempt to capture all possible variations of governance across countries. The contextual concept of ‘good enough governance’ may frustrate theory but improve practice.

Overlooking the mundane

An evaluation of World Bank-supported public sector reform between 1999 and

2006 found: ‘Performance usually improved for public financial management, tax administration, and transparency, but not usually for civil service. Direct measures to reduce corruption – such as anticorruption laws and commissions – rarely succeeded’ (World Bank, 2008: xiii). Civil service reform and anti-corruption campaigns capture head- lines. Improved expenditure management, auditing, and accounting rarely get public notice. Routinizing the latter set may prove critical to the public sector’s ability to foster economic development.

Leaving aid out of it

Aid has become so entwined in development that it is impossible to leave aside donor gov- ernance issues. It is a relatively recent phe- nomenon for donors to admit that their own governance issues (poor accountability, trans- parency, and coordination) hamper aid effec- tiveness. More analysis, beyond the anecdotal, of aid practices and donor governance issues is needed.

Ignoring new developments

Globalization has brought new challenges, actors, and aid modalities. Providing global public goods (GPGs) is an increasing chal- lenge (International Task Force, 2006). There is a fairly complex relationship between GPGs and economic development at the country level. There are instances of comple- mentarity between supplying GPGs and aiding development (for example, containing the spread of HIV/AIDS in Africa). There are also instances where providing GPGs involves short-term trade-offs with income-producing activities and/or distorts country develop- ment priorities (for example, preserving large tracts of tropical forests or prioritizing polio eradication over more prevalent ‘poor country’ diseases). Also, GPGs have spawned single-purpose global programs. Some have impressive results, but many global programs are not well integrated into country planning, increase the coordination burden on govern- ments and donors, and focus on short-term

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