Governance and Growth: History, Ideology and Methods of Proof

There is a broad consensus that sustaining growth in poor countries is a challenge not only because the right economic policies have to be identified but also because policies have to be supported by appropriate governance capabilities, which in poor countries are correspondingly weak. Weaknesses in governance have therefore received a great deal of attention in Africa and other poorly performing areas of the world. However, there is much less agreement about the specific governance capabilities that are required to trigger and sustain growth in countries at different levels of development and facing different development problems. This chapter points out ideological, methodological and historical differences in the ways that governance is understood by making a distinction between the dominant liberal approach to governance, which we call ‘market-enhancing’ governance (and which is generally referred to as good governance), and an alternative view of governance appropriate for developing countries which draws on the historical evidence of catching up. We describe the alternative approach as ‘growth-enhancing’ governance.