Rethinking Governance Empirical Lessons Challenge Orthodoxy

In this discussion draft, linking research findings with concrete operational challenges, we review key issues in worldwide governance, and present recent empirical evidence. Focusing on defining and unbundling key governance components, such as rule of law, voice and accountability, corruption control, and state capture, we then provide evidence which suggests a sobering picture: on average, there appears to be scant progress worldwide in recent times in improving rule of law and governance, in controlling corruption, and in improving institutional quality -although there is clearly variance across countries. Further, recent empirical research points to the private sector as influencing public governance, thereby challenging traditional notions of the functioning of politicians, public policy and the public sector, and on the conventional determinants of the investment climate. We posit that the interplay between the elite’s vested interests and the political dynamics within a country, in turn affecting governance and corruption, has often been under-emphasized in program design. These argue for revisiting conventional approaches to promote institutional reform. In particular, we challenge the notion that passing laws by fiat, creating new public institutions, or embarking on anti-corruption 'campaigns', can be very effective, and question the value of traditional public sector management and conventional legal/judiciary reform approaches for many emerging economies. We argue instead that sharper focus on external accountability is required, focusing on: transparency mechanisms and empirically-based monitoring tools (including e*governance), as well as participatory 'voice' and incentive-driven approaches for prevention. These need to feature more prominently in providing checks and balances on traditional public institutions, in empowering non-traditional stakeholders, and in ameliorating state capture and mitigating the very ‘unequal influence' playing field in many countries. In turn, this necessitates probing deeper into the private-public governance nexus, which inter alia leads to focusing on concrete measures to address the challenges of political contestability, political financing reform, and transparency in parliaments, the judiciary and the executive. Recommendations on governance strategies for the next phase are suggested, including on the role of the international community. 1 The author is the Director of Global Governance and Regional Capacity at the World Bank Institute (WBI). This paper builds on the chapter entitled ‘Governance Crossroads’ in the 2002/03 Global Competitiveness Report by the World Economic Forum (February, 2003). The responsibility for the errors and views in this paper are the author’s, yet credit for the work discussed here is due to many at the World Bank, in academia, at the World Economic Forum, TI, and other partner institutions. The work carried out at the World Bank in this area would not have been possible without the support of its President. I have benefited from feedback at conferences and workshop presentations at Stanford University, Madrid’s Judiciary Workshop, Davos World Economic Forum, European Parliament, European Commission, OECD, DfID-UK, ODI, Wilton Park, and at the World Bank. The work draws from collaborative projects within the World Bank with J. Hellman, A. Kraay and F. Recanatini, as well as inputs from J. Turkewitz, M. Gonzalez and S. Pradhan and other governance experts in the Bank’s Public Sector Board and WBI. I have benefited from the insights in the collaboration on governance and anti-corruption programs with L. Moreno-Ocampo and colleagues at TI. The excellent assistance of M. Mastruzzi, D. Vasileva, E. Farnand and K. Morgan is acknowledged. The views, data, and research findings aim to further debate and analysis, and do not necessarily reflect official views of the World Bank or its Board of Directors. The margins of error in any governance and institutional quality dataset imply interpretative caution is warranted in general, and in particular argue against inferring seemingly precise country rankings from the data. For details on the governance research and data: http://www.worldbank.org/wbi/governance/.