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fragile states

'It’s the Trust, Stupid!' The Influence of Non-Quantifiable Factors on Policymaking

Steve Utterwulghe's picture



Should trust be something that policymakers need to worry about? I started reflecting on this question after I came across the 2015 Edelman Trust Barometer. It suggests that 80% of the people surveyed in 27 markets distrust governments, business or both (see figure 1).

A staggering number, to say the least. The year 2014 did not spare us from economic, geopolitical and environment turmoil. Nonetheless, the trend over the last few years has been a growing distrust in our leadership, despite the fact that progress has been made in the three main pillars of trust: integrity, transparency and engagement. More needs to be done, it seems.

Figure1. Trust in business and government, 2015



As Ralph Waldo Emerson, the American essayist and poet, wrote: “Our distrust is very expensive.” The lack of trust in our government affects policies and reforms, and thus damages the overall economic environment. Investors will lack confidence and shy away. Growth will stagnate, sustainable jobs won’t be created, and trust in government will erode even further. A vicious circle is being created.

Professor Dennis A. Rondinelli, lately of Duke University, argues: “What are called 'market failures' are really policy failures. The problems result from either the unwillingness or inability of governments to enact and implement policies that foster and support effective market systems.” Distrust thus influences policymakers in multiple ways: They will either adopt bad policies, or overregulate. A study published in The Quarterly Journal of Economics shows that “government regulation is strongly negatively correlated with measures of trust.”  “Distrust creates public demand for regulation, whereas regulation in turn discourages formation of trust. . . . Individuals in low-trust countries want more government intervention even though they know the government is corrupt” (see figure 2).

Figure 2. Distrust and regulation of entry. Regulation is measured by the (ln)-number of procedures to open a firm.
Sources: World Values Survey and Djankov et al. (2002).




The evaporation of trust in government institutions requires that governments and development agencies rebuild trusted institutions. However, it also behooves all of “society’s stakeholders” to rebuild trust among themselves and “engage.”

Integrity and transparency are two of the pillars of trust that have received a lot of attention during the past decade. Indeed, tackling corruption and ensuring transparency have been at the top of the institutional and corporate development agenda. The third pillar, engagement, has been more rhetorical or grossly underestimated.

A prerequisite for inclusive and responsive policymaking is that citizens use their voice and engage constructively with government institutions. As we have seen, increasing social and political trust helps market economies function more effectively. In turn, sound economic policies foster social and political trust. In recent years, the practice of structured public-private dialogue (PPD) has helped the private sector and other stakeholders engage in an inclusive and transparent way with governments. PPD mechanisms have resulted in better identification, design and implementation of good regulations and policy reforms intended to create an improved investment climate and increase economic growth. As a result, this process has built mutual trust between institutions and business.

Confidence-building has been most critical in post-conflict and conflict-affected states where deep mistrust among stakeholders is prevalent. That topic will be discussed in greater depth at our 2015 Fragility Forum’s session on public-private and multi-stakeholder dialogue, coming up on February 13. Foreshadowing the Fragility Forum, a panel discussion in Preston Auditorium on Monday, February 2 – featuring, among others, Sarah Chayes of the Carnegie Endowment for International Peace, who is the author of  “Thieves of State: Why Corruption Threatens Global Security” – will focus on "Corruption: A Driver of Conflict."
 
In an age of distrust, this type of policy reform – through multi-stakeholder engagement – is not an obvious exercise. The economist Albert Hirschman claims that “moving from public to private involvements is very easy because any single individual can do it alone. Moving from private to public involvements is far harder because we first have to mobilize a lot of people to construct the public sphere.” But the increase of PPD platforms across the world  the WBG Trade & Competitiveness’ Global PPD Team currently supports 47 PPD projects worldwide  suggests that there is an appetite for engagement among citizens, business and governments alike.

Trust can be slowly restored by, among other things, designing adequate interventions such as PPD mechanisms. By their inherent iterative process of discovery, collaborative identification of issues and joint problem-solving, PPDs can activate favorable mental models of stakeholders. According to the 2015 World Development Report on "Mind, Society and Behavior," these “mental models can make people better off.” I would argue that these mental models drawn from their societies and shared histories can help build trust as well.
 
Trust matters for policymakers. Ultimately, it matters for all citizens. Designing interventions and offering a safe space where stakeholders can engage with governments in an inclusive and transparent fashion will go a long way toward restoring that valuable trust.
 

Fostering Private Sector Development in Fragile States: A Piece of Cake?

Steve Utterwulghe's picture
Private sector development (PSD) plays a crucial role in post-conflict economic development and poverty alleviation. Fragile states, however, face major challenges, such as difficult access to finance, power and markets; poor infrastructure; high levels of corruption; and a lack of transparency in the regulatory environment. 

The private sector has demonstrated its resilience in the face of conflict and fragility, operating at the informal level and delivering services that are traditionally the mandate of public institutions. However, in post-conflict situations, PSD can have predatory aspects, thriving on the institutional and regulatory vacuum that prevails. The private sector will need to create 90 percent of jobs worldwide to meet the international community’s antipoverty goals, so pro-poor and pro-growth strategies need to focus on strengthening the positive aspects of PSD, even while tackling its negative aspects.

Is the Idea of ‘Areas of Limited Statehood’ Useful or Superfluous?

Sina Odugbemi's picture

The October 2014 edition of Governance: An International Journal of Policy, Administration, and Institutions is a special issue on 'areas of limited statehood’.   As the overview essay states, the themes and arguments of the special issue revolve around external actors, state-building, and service provision in areas of limited statehood. It is an excellent issue of the journal and worth reading. What I am interested in is the idea of ‘areas of limited statehood’ itself.

Now, as we all know, professors spout theories and fine distinctions the way fountains spout water. The global community concerned with the fragility of states has been trafficking for a while in terms like 'fragile states', 'failed states', 'weak and failing states' and combinations thereof. Does the idea of areas of areas of limited statehood serve any additional purpose?

Weekly Wire: The Global Forum

Roxanne Bauer's picture
These are some of the views and reports relevant to our readers that caught our attention this week.

 

The Promise of a New Internet
The Atlantic
People tend to talk about the Internet the way they talk about democracy—optimistically, and in terms that describe how it ought to be rather than how it actually is. This idealism is what buoys much of the network neutrality debate, and yet many of what are considered to be the core issues at stake—like payment for tiered access, for instance—have already been decided. For years, Internet advocates have been asking what regulatory measures might help save the open, innovation- friendly Internet. But increasingly, another question comes up: What if there were a technical solution instead of a regulatory one? What if the core architecture of how people connect could make an end run on the centralization of services that has come to define the modern net?

Are the Oceans Failed States?
Foreign Policy
In the early hours of March 8, Malaysia Airlines Flight 370 lost contact with air traffic control just one hour after taking off from Kuala Lumpur. Since then, a multinational effort has scoured the Indian Ocean floor, deploying aircraft, ships, and even a robotic submarine in search of the wreckage. Yet four months on, the jet remains lost in the least accessible and most ill- understood ecosystem on the planet. Only about 5 percent of the ocean floor has been mapped in detail. We know more about the contours of the moon and nearby planets than we do about the basins of the high seas. But however remote these depths might seem, no corner of the ocean is untouched by human activities. As a result of these impacts, much of it is now in peril. That is the conclusion of the Global Ocean Commission, which reported in late June that the planet's largest and least- protected bioregion is close to collapse.

A Fragile Country Tale: Restrictions, Trade Deficits, and Aid Dependence

Massimiliano Calì's picture

 Masaru Goto, World BankPart of the World Bank’s new vision is to step up its efforts to help fragile and conflict-afflicted states break the vicious cycle of poverty. But this is no easy task.
 
The destruction of productive assets and the restrictions on the capacity to produce are among the most severe economic impacts of conflicts and fragility. These effects explain why countries in conflict or emerging out of conflict typically have very large trade deficits. The productive sector is often particularly weak by international standards, so exports are low and domestic consumption has to rely on imports. Indeed, five of the ten countries with the largest trade deficit in the world (Timor-Leste, Liberia, the Palestinian territories, Kosovo and Haiti) are considered fragile by the World Bank and other regional development banks (figure 1).
 

How Does Emigration Affect Countries-of-Origin? Paul Collier Kicks Off a Debate on Migration

Duncan Green's picture

Take a seat people, you’re in for a treat. Paul Collier kicks off an exchange with Justin Sandefur on that hottest of hot topics, migration. I’ve asked them to focus on the impact on poor countries, as most of the press debate concentrates on the impact in the North. Justin replies tomorrow and (if I can work the new software) you will then get to vote. Enjoy.

How does emigration affect the people left behind in poor countries? That many countries still provide little hope of even basic prosperity to their citizens is the great global challenge of our century. It is a vital matter that the poorest countries catch up with the rich world, but it will require decades of sustained high growth. To see how emigration might affect this process of convergence we need some understanding of why poor countries have remained poor. Poverty persists in very poor countries because of weak political institutions, dysfunctional social attitudes, and a lack of skills. These all make it difficult to harness economic opportunities. Emigration can either help or hinder convergence depending upon who leaves, how many leave, and for how long they go.

Potentially the most important effect of emigration is on political institutions and social attitudes. There is now solid evidence that emigrants can be influential in their home societies. Students from poor countries who have studied abroad in democracies and then return home bring with them pro-democracy attitudes. They spread these attitudes and are sufficiently influential that they speed up democratization. An astonishingly high proportion of the political leaders of poor countries have studied and worked abroad, and this equips them with both new skills and new attitudes. Even migrants who do not return have some influence with their relatives back home. During elections they give advice and commentary, and they become role models for smaller family size.

How to Fix Fragile States? The OECD Reckons it’s All Down to Tax Systems.

Duncan Green's picture

‘Over-generous tax exemptions awarded to multinational enterprises often deprive fragile states of potential revenues that could be used to fund their most pressing needs.’ Another broadside from rent-a-mob? Nope, it’s the ultra respectable OECD in its Fragile States 2014 report.

After years of growth, aid to fragile states started to fall in 2011, so the report centres around an urgent call for OECD member states to help their more fragile cousins find a post-aid arrangement that funds essential state functions and builds the ‘social contract’ with citizens.

The key is a shift from aid dependence to ‘domestic resource mobilization’ (taxes and natural resource royalties), currently averaging a feeble 14% of GDP across fragile states and far too dependent on royalties from oil, gas and mineral extraction. Foreign direct investment (factories, farms etc) is generally low in volume and volatile.

Fragile States, Fractured Media Systems: Double Trouble?

Sina Odugbemi's picture

Happily, improving the lot of fragile states (no matter how they are defined) is an item that keeps racing up the agenda of international development. Sadly, however, when there is so much to repair to be done it is not always clear where to start. Donors bring their own priorities; experts have their own preferences. A new policy brief published by BBC Media Action, the international development arm of the BBC that focuses on improving media systems in developing countries, makes the case for fixing broken media systems in fragile states. Entitled Fragile States: the role of media and communication, the report is the work of James Deane, a well-known expert in the field. The report can be downloaded here.

I believe that the work is an important contribution to the policy debate. In what follows, I offer a quick sense of the argument.

Jim Kim in Mali: Stability Vital for Prosperity

Jim Yong Kim's picture

TIMBUKTU, Mali - Months after a rebel attack was rebuffed in Mali, the country is striving to stabilize in order to fight poverty and boost shared prosperity. I'm visiting the West African nation with UN Secretary-General Ban Ki-moon to underline international commitment to the region.

A New Deal for Somalia

Makhtar Diop's picture


Getting Somalia right has huge regional and global implications and attracted $2.4 billion in support at a recent development partners meeting in Brussels. 

Supporting fragile and conflict-affected countries to get back on a stable, hopeful development path is a key priority for me as Vice President for the World Bank’s Africa region. It is on my mind especially at the moment after being in Brussels several days ago to participate in the EU-hosted New Deal Conference on Somalia, and then visiting Bamako to pledge our support to Mali’s newly formed Government. As stated by the international community and many observers, the recent election of President Ibrahim Boubacar Keita will open a new era of peace and reconstruction for Mali and we will be an active partner in this immense task.

The Brussels conference marks the anniversary of last year’s political transition and culminated in the endorsement of a “Compact” against which the international community pledged $2.4 billion through 2016. The conference, hosted by the EU and the Government of Somalia led by President Hassan Sheikh Mohamud, not only helped consolidate international political support for Somalia but also generated considerable momentum for the country’s development plans and a path to international debt relief.


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