Bangladesh has turned the political business cycle phenomenon upside down.
Political business cycles are cycles in macroeconomic variables – output, unemployment, inflation – induced by the electoral cycle. This type of business cycle results primarily from the manipulation of policy tools by incumbent politicians hoping to stimulate the economy just prior to an election and thereby improve their reelection chances.
Expansionary monetary and fiscal policies have politically palatable consequences in the short run. When pursued to excess, these very policies can also have very unpleasant consequences in the longer term in the form of accelerating inflation, decreasing savings, worsening foreign trade balance, and long-term expansion of government's share of the GDP at the expense of private consumption and investment. So immediately after the election, politicians tend to “bite the bullet” and reverse course by raising taxes, cutting spending, slowing the growth of the money supply, and allowing interest rates to rise. As a result, the regular holding of elections tends to produce a boom-and-bust pattern in the economy because of the on-again-off-again pattern of government stimulus and restraint to induce an artificial boom at every election time.
Bangladesh’s experience also shows the existence of a political business cycle in GDP growth, albeit with exactly the opposite pattern of boom and bust. GDP growth has consistently declined in each of the last five election years. It happened in 1991, 1996, 2002, 2007 (an election year without election) and 2009 (Figure 1). From the perspective of Western political business cycle theory these growth tendencies appear suicidal for the incumbent. Instead of expanding the economy faster to gain votes, the incumbents appear to be shooting themselves in the foot by allowing the pace of expansion to slow in the election year!
Is this another case of the Bangladesh paradox?
Bangladesh has turned the political business cycle phenomenon upside down.
Right to Information (RTI) laws can be a useful instrument for improving transparency – if the political will for implementation is sustained, and if the broader governance environment provides the enabling conditions for the exercise of the law. A research project that studied the implementation of RTI laws in a number of countries showed that implementation has been very uneven across countries. In some countries, RTI laws had been leveraged effectively for extracting information in a number of important areas, ranging from public expenditures, to performance and procurement, and exposing instances of corruption. In other countries, the existence of an RTI law had little impact in any of these areas, and oversight and capacity building mechanisms had either not been set up, or not functioned effectively.
The findings of the study are not surprising. The implementation gap between de jure and de facto reforms in countries faced with capacity constraints and political economy challenges is well-known. Yet, international agencies have pushed policy reforms without adequate attention to the constraints and challenges of implementation. The pressure to win support and legitimacy with international aid agencies has been an important driver of the adoption of RTI laws. The right has also been recognized in international human rights conventions, and more recently has gained increasing international attention (for instance, the existence of a law is one of the considerations for membership in the Open Government Partnership). Further, pressure from domestic constituencies has also propelled political actors to champion the law. But, once passed, capacity limitations, the erosion of political will, and active resistance have been important impediments to realizing the potential of RTI.
Good institutions matter for development. Institutions enable societies to address challenges – from managing irrigation and schools systems, to raising and spending revenues. In the terms of Nobel Prize laureate Elinor Ostrom, the right institutions enable effective collective action, while poor or missing institutions hinder problem-solving.
A while back I was working for a small education foundation in Bangalore. Every day I took the bus to the office along a road that had so many pot holes it felt like the driver had decided to take a short cut across the surface of the moon. About a month before I left the whole stretch was covered by a smooth layer of gleaming tarmac and a series of huge posters appeared – announcing the hard work and successful lobbying conducted by our local city councillor.
This review appears in the Evidence and Policy journal, where it is now available free online (after I protested about the scandalous, rip-off $30 they were charging). Or you can just read it here. Note to self: in future, I will not write anything for journals that are not open access (thanks to Owen Barder for that suggestion).
In recent years, the public and policy debate over climate change, ‘climategate’, and the debacle of the Copenhagen Summit (and seemingly the wider UN negotiations) has brought home the tenuousness of the links between knowledge and public policy-making. ‘Do the research and they will come’ is clearly not a credible doctrine. Knowledge, Policy and Power, written by a group of researchers from the Overseas Development Institute, tackles some important aspects of these links, building on ODI’s strong track record on the interface between research and policy-making.
The book has good instincts – sceptical of all things linear, of researchers claiming to know more than they do, stressing the importance of values, beliefs, assumptions, taboos and other group pressures, hidden power and in/exclusion in what are often portrayed as neutral processes of research and debate. There is ample discussion of the relative strengths and weakneses of different kinds of knowledge, whether derived from practice, ‘pure’ research or the people themselves.
An important new paper from some big development names – Shanta Devarajan and Stuti Khemani from the World Bank, and Michael Walton (ex Bank, now at Harvard Kennedy School) – directs a slightly fierce (but welcome) political economy gaze at donor efforts to strengthen civil society (one of the more recent developmental fads). As with most such papers, after a monumental literature review, one of the striking conclusions is how little we really know, but it gropes gamely through the fog of ignorance and confusion and arrives at some interesting conclusions.
First, the authors find that something significant is going on among Africa’s citizens: “a large shift in Africa in organization among citizens. Village-level group formation in Africa increased dramatically over the 1990s when participatory approaches were emphasized in international development paradigms, promoted through aid, and adopted deliberately by country governments to deliver projects to communities.” Interestingly, that increased participation applies to both democratic and less democratic systems. The question is in what situations that upsurge in civil society has impact, and how (if at all) aid agencies can help.
The paper adds its support to the growing demand that aid interventions abandon futile searches for ‘best practice’ in favour of understanding what are the ‘best fits’ for any given context:
The World Bank Institute's Leadership and Governance Practice, the World Bank's External Affairs Operational Communications Department, the Annenberg School for Communication at the University of Pennsylvania, and the Annenberg School for Communication and Journalism at the University of Southern California are pleased to announce the 2013 Summer Institute in Communication and Governance Reform.
The course is primarily designed for strategists and advisers in the public sector and civil society, senior development professionals, and seasoned communication specialists who want to strengthen critical competencies in providing implementation support to change agents and reform leaders in developing countries.
The 9.5-day course will be held at the University of Southern California in Los Angeles, May 28 - June 7, 2013. It will equip participants with knowledge about the most recent advances in communication and proven techniques in reform implementation. Participants will develop core competencies essential to bringing about real change, leading to development results in a wide range of sectors.
Participants will acquire critical skills in five key areas:
Our Top Ten Blog Posts by Readership in 2012
Originally published on May 1, 2012
Daron Acemoglu and James Robinson have produced a magisterial book: ‘Why Nations Fail’. If you are interested in governance, nay, if you are interested in development, you should read it. I picked it up the week it was published and I could not put it down until it was done. That is how powerful and well-written it is. Yet it is over 500 pages long. In what follows, I am going to focus on what I liked about it and the thoughts it provoked in me as I read it.
First, I admire the simplicity and power of the thesis: what the historical evidence suggests is that nations with inclusive political and economic institutions are capable of sustained growth. Nations with extractive political and economic institutions are not. End of story. Even when an authoritarian state/regime appears to engineer economic growth for a while, it will hit a limit soon enough. Why? Human creativity, human inventiveness and necessary creative destruction of old ways of doing things cannot happen in authoritarian environments. Vested interests are able all too easily to block threatening entrants to the economy; property rights are not secure and so on. Those who control political institutions use their power to extract surpluses in often brutal ways. Key quote: