Understanding Understanding Good GovernanceGood Governance

Governance is the buzzword. Anne Governance is the buzzword. Anne Mette (Mehteh) Kjaer (kchjer) in her Mette (Mehteh) Kjaer (kchjer) in her book book GovernanceGovernanceidentified 6 types of governanceidentified 6 types of governance1. Governance in Public administration1. Governance in Public administration2.Governance in International 2.Governance in International RelationsRelations3.Regional Governance as in EU3.Regional Governance as in EU4.Governance for Economic 4.Governance for Economic DevelopmentDevelopment5.Governance for Democratization5.Governance for Democratization6.World Bank concept of Governance6.World Bank concept of Governance

This lecture concentrates on This lecture concentrates on public administration concept of public administration concept of governance. Global and regional governance. Global and regional governance will not begovernance will not be discussed. discussed.

Six major concepts from PA perspective

(I) An old term with new nuances (II) A positive concept -A new style of

government (111) A normative concept- good governance (IV) No universal concept – historical concept (V) Third World concept of Governance – Mo

Ibrahim Index of governance in Africa (VI) Indigenous concept of governance

The term governance was used interchangeably with the term government since the 15th century. In the 1970s, distinction was made between short term and long term changes. Government refers to day to day administration, while governance refers to long term effects of the interaction between technological change, social change and administrative action. The difference between government and governance was one of degree and nuances and not of substance. Governance emphasizes the role and the goals of the institutions rather than of institutions themselves.

GGoverment

Government

Old Concept of Governance and Sovereignty

TNC IGO NGO

Firms Central Government

National Non-profits

Local traders Local government

Local NGOs

PrivateGovernment Third sector

International

International

International

Local

Sub-local

The substance of government has changed. Stephen Goldsmith and William D. Eggers in their book “Governance by network” talks of the shift from hierarchical to network government. This was accompanied by hollowing of state. The state lost its supremacy. The private sector and the third sector became equally powerful.

Hierarchical Governance

– This new concept of governance was elucidated by R.A.W.Rhodes who defined governance as”self-organizing interorganizational network”. The three characteristics

The networks are self-organizing and not dependent on the state

Secondly, it is interorganizational because no single agency can address the problem adequately

Thirdly, they are networks which are run using market instruments like brokerage and negotiation rather than control and negotiations

Differences between Hierarchical and Differences between Hierarchical and bureaucratic governmentbureaucratic government

Hierarchical govt Network govt

Single professional skill Diverse professional skill

Government predominant provider

Potential providers many

Outcome ambiguous – process must be correct

Outcome of output clear

Govt. has necessary skill Skill source diverse

Service is stand alone Multiple services for the same customer

In-house delivery (Works Ministry)

Third party delivery

Hierarchical govt., Network Govt.

Service not affected by technology

Rapidly changing technology

Services concentrated at single level

Multiple level of government provides service

Single agency single function

Multiple agency single function

Outside capacity not important

Use all available assets

Reach or credibility limited Greater reach or credibility

There are four problems with this approach1 Too much outsourcing creates problem of

supervision. E.g. NASA2.Lack of regulation in energy sector created

problems of pricing and O&M. Rajan and Zingales “Saving Capitalism from Capitalists”

3.Lack of coordination. It cannot handle emergency. Homeland Security was modeled on hierarchical government

4.Self-organizing networks do not exist in developing countries

Rhoades redefined governance as Rhoades redefined governance as follows: Governance refers to self-follows: Governance refers to self-organizing inter-organizational organizing inter-organizational network characterized by network characterized by interdependence, resource interdependence, resource exchange, rules of the game exchange, rules of the game and significant autonomy from and significant autonomy from the state.the state.

Jon Pierre defines governance as ‘ co Jon Pierre defines governance as ‘ co sustainable coordination and sustainable coordination and coherence among a wide variety of coherence among a wide variety of actors with different purposes and actors with different purposes and objectivesobjectivesPeters and Pierre:governance relates Peters and Pierre:governance relates to changing relationship between state to changing relationship between state and society and on a growing reliance and society and on a growing reliance on less coercive policy instruments on less coercive policy instruments (However, they believe that the role of (However, they believe that the role of the state is dominant)the state is dominant)

World Bank model: World Bank model: Intellectual originsIntellectual origins

1.African failure. The term was coined by African department in 1989. Section 10 of Article 10 of IBRD forbade interference in internal politics. Governance is a value-free term. The end of Cold War strengthened the bank.

2.New-institutional school in economics provided intellectual foundation. Douglas C. North, James Buchanan, Ronald Coase and Herbert Simon receive Nobel Prize in Economics.Other proponents:Harold Demsetz, Tullock, Acemoglu, Allchian, Williamson etc.

33..State failure between1955-1994. 12 State failure between1955-1994. 12 states and 127 cases of civil and states and 127 cases of civil and revolutionary war. Recent example of revolutionary war. Recent example of state failure: Liberia, Afghanistan, D. R. of state failure: Liberia, Afghanistan, D. R. of Congo, Sierra Leone, Cambodia, Congo, Sierra Leone, Cambodia, Rwanda, Lebanon, Uganda, Chad, Rwanda, Lebanon, Uganda, Chad, Zimbabwe, Sudan, Iraq, Central African Zimbabwe, Sudan, Iraq, Central African Republic, Guinea, Cote de Ivoire.Republic, Guinea, Cote de Ivoire.

4.The end of history and the triumph of democracy. Fukuyama thesis. Ideology of Thatcher and Reagan. Theories of New public management. Government should be market-based, customer driven, innovative, problem-solving.

Characteristics of World Bank Characteristics of World Bank ConceptConcept

1. A shift from institution-building to state-building. Institutions built as islands of excellence may not survive. The whole state needs to be strengthened

2.An increased emphasis on the role of the state. The failed states need more governance. Bank assistance was expanded to police and army. This is in stark contrast to hollowing of states in developed countries.

3. Governance,a positive concept, became good governance a normative concept. Six elements in World Bank definition:

1. Voice and Accountability. Orderly transfer of power, freedom of association, Press freedom, travel freedom. Human rights, democratic accountability, the role of opposition

2.Political stability. Military coup, insurgency, terrorism, assassination, civil unrest

3.Government Effectiveness. Quality of bureaucracy, budgetary process, policy consistency

4.Regulatory Quality. Regulation, foreign investment, govt. intervention, tax effectiveness

5.Rule of law. Crime, quality of judiciary, quality of police, black market, property rights

6. Control of corruption. Incidence of Corruption, anti-corruption measures and public trust in government

Criticism of World Bank Criticism of World Bank concept of good governanceconcept of good governance

1. This is the definition of multinational companies. Even the civil society is missing

2, It emphasizes the process and not the outcome. Growth rate, poverty rate or life expectancy, literacy etc. totally overlooked

3.There are serious data problems in cross country comparison. There are halo effects and biases.

Two grand themes of WB concept

1. Economic Development depends on good governance

2. Good governance is achievable

Critique of governance and Critique of governance and development nexusdevelopment nexus

This correlation is crucial for world bank to justify its involvement in the internal affairs. Two questions: (1) Is the correlation meaningful (2) What does the correlation signify?

Is correlation meaningful?Is correlation meaningful?China does not fit into this format.

Governance in China is deteriorating. Indicator 1996 2008 Voice & Accountability -1.7 -1.72 Political Stability -0.56 -0.32 Government Effectiveness 0.11 0.24 Regulatory Quality +0.15 -0.22 Rule of Law -0.2 -0.33 Control of Corruption -0.1 -0.44

Rural areas of China are in ferment. The number of mass incidents was 87000 in 2005- close to 240 per day. It was 10000 in 1991.Yet growth rate in China during 1991-2001 was 9.8 percent, above 9 percent in recent years. No country in the World grew as fast as China in the last three decades.

Bangladesh’s governance IndicatorsBangladesh’s governance Indicators

Indicator Rank 2008(LOWEST)

2008 estimate

1996 estimate

Voice and accountability 31( 15%) -0.61 -0.2

Political Stability and absence of violence

10 (5%) -1.54 -0.8

Government Effectiveness 23 (15%) -0.77 -0.7

Regulatory Quality 21 (10%) -0.82 -0.2

Rule of Law 27 (15%) -0.7 -0.8

Control of Corruption 11 (10%) -1.1 -0.5

Total No of countries-215

World Bank calls this Bangladesh World Bank calls this Bangladesh Conundrum.Conundrum.The paradox of bad governance and The paradox of bad governance and development in Bangladesh. Six development in Bangladesh. Six HypothesesHypotheses1.Devarajan’s hypothesis- vibrant civil 1.Devarajan’s hypothesis- vibrant civil society and bypassing the society and bypassing the governmentgovernment2.WB indicators are wrong2.WB indicators are wrong3. The flow of resources through 3. The flow of resources through private sector (remittance, garment private sector (remittance, garment and NGOs)and NGOs)

4. The relationship between 4. The relationship between development and governance development and governance

is kinkedis kinked

Development0

Bad governance

5.Fernandez and Kraay. It is a 5.Fernandez and Kraay. It is a nine day’s wonder it will not last. nine day’s wonder it will not last. An economist is someone who An economist is someone who takes something that works in takes something that works in practice and wonders whether it practice and wonders whether it will work in theorywill work in theory6. Fruits of growth did not reach 6. Fruits of growth did not reach the poor and growth in the poor and growth in Bangladesh could have been Bangladesh could have been much higher with good much higher with good governancegovernance

Significance of correlationDoes economic development lead to

better governance or does better governance lead to development? World Bank thinks that growth may not lead to better governance. Sachs argues that Africa’s governance is poor because Africa is poor.

Historical evidence on growth-Historical evidence on growth-governance nexusgovernance nexus

Ha Joon Chang in his book Kicking Away the Ladder argues that much of the elements of good governance were missing in the initial phases of Now developed countries. Women had no votes, the bureaucracy was corrupt, patronization was rampant, labor laws and corporate governance were missing. Better governance came with economic development

Is good governance Is good governance achievable?achievable?

These are ideals. In real life there is no evidence of improvement in governance world wide.Even G-8 countries cannot do it.

During 1996-2008, governance deteriorated in the USA by five out of six indicators

Decline in Governance of USA, Decline in Governance of USA, 1996-20081996-2008

Indicator 2008 1996

Voice and accountability 1.55 1.72

Political Stability and Absence of Violence

0.59 1.02

Government Effectiveness 1.65 2.22

Regulatory Quality 1.58 1.26

Rule of Law 1.65 1.68

Control of Corruption 1.55 1.72

Performance of other G 7 countriesPerformance of other G 7 countriesduring 1996-20081. Canada, 4 indicators during 1996-20081. Canada, 4 indicators down, 2 updown, 2 up2.France. 3 indicators down, 3 up2.France. 3 indicators down, 3 up3.Germany. 4 down, 2up.3.Germany. 4 down, 2up.4.Japan 3 up, 3 down4.Japan 3 up, 3 down5. UK. 4 down, 2 up5. UK. 4 down, 2 upCorruption increased in UK, USA, Canada Corruption increased in UK, USA, Canada and Germany and decreased in France and Germany and decreased in France and Japan.and Japan.

Good governance versus Good governance versus good enough governancegood enough governance

Marilee S. Grindle talks about good enough governance.

The agenda of good governance is long. It is growing. In 1997 conditions for good governance was 45; in 2002-03, it increased to 116.

The implementation capacity is limited

Good enough governance may be defined as “a condition of minimally acceptable government performance and Civil Society engagement that does not significantly hinder economic and political development and that permits poverty reduction initiatives to forward”.

Real problem is how to prioritize.

Some tips for prioritizationFind areas of strength from historyLook at regional best practicesLearn from what is workingPay attention to poverty alleviationSequence the reformsThink of alternatives. Do not forget

government

Conclusion: good governanceConclusion: good governance

1.All reforms are not needed. They are not possible. Small changes may be very useful.There is no universal concept.

2.What needs to be done, when it needs to be done and how it needs to be done

Historical conceptHistorical conceptThis was developed by Subrata K. Mitra in

his book The Puzzle of India’s Governance.Governance is always an unfinished agenda.

Instead of looking at unfinished business at hand look at the past successes.

For example. Look at the success of India in keeping it together and keeping democracy alive rather than at her failures

Build on the past success

Regional conceptRegional concept

• Mo Ibrahim Index of governance. Mo Ibrahim (cell phone Moghul) award of $500.000 to the head of the state for good governance. Elements of this index includes

Safety and Security Rule of Law Transparency and Corruption Participation and Human Rights Sustainable Economic Development Human Development

World Bank index emphasizes the means to exclusion of ends. Ibrahim index takes into account per capita income, economic growth, road network, electricity, poverty, life expectancy, mortality, undernourishment, literacy

It is also too longIt was developed by Harvard experts. No

indigenous roots

Indigenous ConceptIndigenous Concept

Governance is presented as a western concept and is not, therefore locally owned.

Such concept will be country-specific and will have to be developed by each country

Major issues of governance in Major issues of governance in Bangladesh contextBangladesh context

The rule of law is a major issue. The concept of matsanayam (fish-like world).Anarchy unleashes a Darwinian struggle for survival.Democracy as the solution for anarchy. Gopala in Bengal and Gopala in Assam.Buddhist tradition of running monasteries. The Buddhist doctrine of MahaSammata. In anarchy, the king is chosen by people and he represents the great consensus. Kautilay advised that the king's agent should propagate that the king was elected.

The Bengali proverb Dushter Daman. Shishter Palan. Hazrat Ali’s advice to Malik Ashtar, Governor of Egypt , “do not treat the good and the bad alike. That will deter the good from doing good and encourage the bad in their bad pursuits”. This is the incentive problem of the principal agent problem. Address the Gresham’s law in society.

Rule of Law- Story of Sultan Rule of Law- Story of Sultan Ghyasuddin Azam ShahGhyasuddin Azam Shah

Main elements of indigenous governance

1.Consensus based on democracy2.Punish the wicked – court, ante-

corruption3.Reward the virtuous – change the

recruitment and promotion system