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#5 from 2014: Politics in Development? Meet the New Institutional Economics

Kate Henvey's picture

Our Top Ten blog posts by readership in 2014.
This post was originally posted on January 29, 2014


Around the end December of every year, the pundits start coming out with their forecasts for 2014. This past December, the World Bank pundits predicted everything from girls outperforming boys in developing countries (girl power!) to the staggering idea that for Europe, 2014 will be a better year.

This year though, the World Bank’s Future Development Forecasts blog, included a prediction that caught these two political scientists by surprise— “as more and more economists point to the primary [sic] of politics in development, political scientists will wake up and wonder why they have been left out of the discussion.”

Joel Hellman, the World Bank’s Director of the Center on Conflict, Security and Development in Nairobi (OPSFN), predicted there will be a new movement of “political contextualists.” Meaning: we as development practitioners have to take a look at the broader institutional framework influencing the performance of the economy, and on development in particular. This is particularly relevant with regard to governance reform and strengthening institutions and service delivery in countries.

Politics in development, hear, hear! The World Bank’s People, Spaces and Deliberation blog has been making this case for years. Nevertheless, neither economists nor political scientists have really introduced a convincing framework for how this political contextualization would play out in development: how it influences development and how it helps us understand strategies that promote development effectiveness and the efficiency of development interventions.

#8 from 2014: The Fourth Revolution: The Global Race to Reinvent the State

Sina Odugbemi's picture
Our Top Ten blog posts by readership in 2014.
This post was originally posted on July 10, 2014

 

Can liberal constitutional democracy run the state in a manner that is both responsive and accountable to citizens without succumbing to incurable elephantiasis precisely because it is democratic? Does democratic governance inevitably lead to government as an ‘all-you-can eat- buffet’ (allegedly per Lee Kuan Yew of Singapore), and, therefore, bloat, fiscal crises and collapse? These crucial questions are taken on in an important new book by two of the leading minds around the Economist Magazine: John Micklethwait is the Editor of the Magazine, and Adrian Wooldridge is the management editor, who also writes the Schumpeter column. The book is: The Fourth Revolution: The Global Race to Reinvent the State.

The authors argue that there have been three and half revolutions in governance in the West, and each one is linked to an emblematic political thinker/economist. The first revolution was the rise of the nation-state, and the paradigmatic thinker is Thomas Hobbes, author of Leviathan. The second revolution was the rise of the ‘liberal state’, and the focus thinker here is John Stuart Mill. (Objection from a Bentham scholar: the authors do not do justice to the role of Jeremy Bentham).  The third revolution was the rise of the welfare state, and the authors discuss the ideas and efforts of Beatrice Webb.  According to the authors, these first three revolutions in governance were completely successful. The fourth revolution, the effort to roll back the bloated welfare state – the focus here is the economic thought of Milton Friedman – was only partially successful. The authors argue, I believe, that this revolution needs to be completed.

Five ways technology is improving public services

Ravi Kumar's picture

If you live in a country where electricity never or rarely goes out, you are lucky. In my country, Nepal, we are pleased when we get uninterrupted electricity for even eight hours a day.

Like Nepal, many countries around the world struggle to deliver basic services to their citizens. But things are slowly improving.Here are five examples of how technology is improving public services.

1. Participatory budgeting

Community health worker at the Marechal Health Center
Photo Credit: Dominic Chavez/World Bank

In the Democratic Republic of Congo, citizens of South Kivu Province are using “mSurvey” to obtain information about budget meetings. Using just their mobile phones, they can actively monitor, discover what was decided at meetings, and evaluate those decisions via online voting. The Participatory Budgeting project encourages accountability by actively reminding local authorities of their commitments while ensuring that citizens are getting services they deserve.

#9 from 2014: Exit, Voice, and Service Delivery for the Poor

Robert Wrobel's picture

Our Top Ten blog posts by readership in 2014.
This post was originally posted on January 08, 2014


Inspired by Jeremy Adelman’s wonderful biography of Albert Hirschman (Worldly Philosopher: The Odyssey of Albert O. Hirschman, Princeton University Press, 2013), I’ve read and reread Hirschman’s masterpiece, Exit, Voice and Loyalty: Responses to Decline in Firms, Organizations, and States, (Harvard University Press, 1970) and his follow up essay “Exit, Voice, and State” (reprinted in The Essential Hirschman, Princeton University Press, 2013). Although Hirschman produced these works over 40 years ago, his simple model of flight (“exit”) or resistance (“voice”) in the face of unsatisfactory economic, political or social conditions remains highly relevant for policymakers and development practitioners concerned with eliminating extreme poverty, reducing inequality, and improving basic services accessible to the poor.

Hirschman’s ideas provide much cause for reflection within the context of present-day Indonesia. Indonesia has enjoyed over a decade of macroeconomic stability and economic growth. From 2000 to 2011 GDP expanded by 5.3 percent per year, and the official poverty count halved from 24 percent in 1999 to 12 percent in 2012. This period also saw notable improvements in health and education. Access to education has become more widespread and equitable. Girls are now as likely as boys to graduate from secondary school. In health, Indonesia is on track to meet Millennium Development Goals for reducing both the prevalence of underweight children under five years old, and the under-five mortality rate.

What Messages do Tunisian Youth have for the next President?

Christine Petré's picture

This Sunday, Tunisians will go vote for the third time this year. The first vote, the Parliamentary election on October 26, saw the secular-leaning political party Nidaa Tounes gain the majority of votes in the country’s fist free and fair election since the new constitution. As no candidate received more than the required 50% of all votes, a runoff between the two leading candidates is scheduled for Sunday.

The Ebenezer Scrooge Economy: The Dickensian Divide Between Concentrated Wealth and Intensifying Poverty

Christopher Colford's picture



Source: Branko Milanovic

If you thought the wealth gap was vast between the miser Ebenezer Scrooge and the oppressed Bob Cratchit in “A Christmas Carol,” then lend a Christmastime thought for the desperate Dickensian divide that’s now afflicting the global economy.

The biggest economic-policy issue of 2014 has certainly been the outpouring of alarm about the chronically intensifying divide between wealth and poverty – an uproar that has had a transformational effect on the worldwide debate on economic policy. As a seminar at the Center for Global Development recently discussed, the precise statistics on inequality (and the perception of inequality) are subtle, with many nuances of measurement (whether data should be derived, for example, from tax-return filings or from household surveys). Yet this year’s irrefutable interpretation among economists and business leaders has been driven by a landmark of economic scholarship: the bombshell book “Capital in the Twenty-First Century” by Thomas Piketty. “Capital” has forced economists, policymakers and scholars to reconsider the inexorable trends that are driving the modern-day economy toward an ever-more-intense concentration of capital in fewer and fewer hands.

No wonder Piketty’s “Capital” was hailed as the Financial Times/McKinsey “Business Book of the Year.” Piketty’s analysis has fundamentally changed the parameters of the public-policy debate, and many of its ideas challenge conventional economic theory.

To explore the implications of the alarming trends in income and wealth inequality, there’s no analyst more insightful than Branko Milanovic, the former World Bank economist who is now a scholar at the LIS Center (working on the authoritative Luxembourg Income Study) at the City University of New York. Milanovic has justly won acclaim for his work, “The Haves and the Have-Nots,” which pioneered the territory now being explored by Piketty.

Confirming the trends that Piketty identified in “Capital” – and taking those insights one significant step further, to measure the wealth gaps both within countries and between countries – Milanovic recently led a compelling CGD seminar on “Winners and Losers of Globalization: Political Implications of Inequality.”

The seminar’s sobering conclusion: If you think the wealth-and-incomes gap is painful now, just wait a decade or two. If allowed to go unattended, the widening economic divide will soon become a dangerous social chasm. That data-driven projection is leading many analysts to dread that inequality (whether between countries or within the same country) threatens topose a stark challenge to social stability, and even to the survival of democracy.

The breakthtaking “a-ha!” moment of Milanovic’s CGD presentation was the chart (see the illustration, above) – praised as "the Chart of the Century" by seminar chairman Michael Clemens of CGD and discussant Laurence Chandy of the Brookings Institution – that plotted-out the pattern of how globalization has exerted relentless downward pressure on the incomes of the global upper-middle class, which roughly corresponds to the Western lower-middle class.

Globalization has helped promote the prosperity of skilled workers in developing nations, Milanovic explained, with the dramatic surge of China’s economy being the greatest driver of global “convergence.” Yet globalization has had an undeniable downward effect on the wealth and incomes of low- and medium-skilled workers in developed, industrialized nations. That certainly helps explain the angry mood among voters in Western Europe and North America, whose overall incomes and wealth have been stagnating for perhaps 40 years.

At the same time – reinforcing the significance of Piketty’s iconic formula that r>g (that the returns on capital are destined to be greater than overall economic growth) – a vast proportion of the world’s wealth has been concentrated in just the very top echelons of society. Milanovic’s meticulous data (see the illustration, below) confirm the extreme concentration of global absolute gains in income, from 1988 to 2008, in the top 5 percent of the world’s income distribution. Rigorous empirical evidence from multiple sources indeed confirms that most of the global gains in wealth have accrued to the already-vastly-wealthy top One Percent. The data on increasing socioeconomic stratification are, by now, so well-established that only the predictable claque of free-market absolutists and dogmatic denierscling (with increasing desperation) to the notion that the inequality gap is merely a myth.




Source: Branko Milanovic

Reinforcing Milanovic’s analysis, yet another well-documented study – this time, by the OECD– asserted this month that economic inequality is intensifying within the world’s developed nations. That within-country trend accompanies the yawning inequality gap between developed and developing economies. The OECD thus joined the chorus that includes the World Bank Group, the International Monetary Fund, the United Nations’ Department of Economic and Social Affairs and the U.S. Federal Reserve System in sounding the alarm about the way that income and wealth disparities are becoming socially explosive. Even on Wall Street, many pragmatists are warning with increasing urgency that “too much inequality can undermine growth.”

Economic inequality – both the perception and the reality of the egregious global gap – has surely been the key economic theme of 2014, and Milanovic’s CGD presentation capped the year with what the seminar-goers recognized as authoritative data distilled into “the Chart of the Century.” Milanovic thus echoed warnings by National Economic Council chairman Jason Furman and Canadian Member of Parliament Chrystia Freeland (both of whom have led recent World Bank seminars), who cautioned Washington policymakers about the potential dangers of runaway inequality.


Energized by Milanovic’s latest calculations and analysis, scholars and development practitioners at the World Bank Group and beyond should approach 2015 with a renewed commitment to building prosperity that is truly shared – and that avoids the potential social explosion that might await many economies if runaway inequality is allowed to continue unchecked.



 

Government by numbers: How can we solve the gaming problem?

Willy McCourt's picture

Riccardo Ghinelli under creative commons

In my last blog post, I showed that while governments are increasingly using the technology to demonstrate that services are improving, their efforts risk being undermined by “gaming” – in other words, fiddling the performance statistics to make things look better than they really are.
 
We focused on the problem in the UK.  In this blog, I look at what the UK has and hasn’t done to address the problem, and what we can learn from that. 

People Power: What Do We Know About Empowered Citizens and Development?

Duncan Green's picture

This is a short piece written for UNDP, which is organizing my Kapuscinski lecture in Malta on Wednesday (4pm GMT, webcast live)

Power is intangible, but crucial; a subtle and pervasive force field connecting individuals, communities and nations in a constant process of negotiation, contestation and change. Development is, at its heart, about the redistribution and accumulation of power by citizens.

Much of the standard work on empowerment focuses on institutions and the world of formal power – can people vote, express dissent, organise, find decent jobs, get access to information and justice?

These are all crucial questions, but there is an earlier stage; power ‘within’. The very first step of empowerment takes place in the hearts and minds of the individuals who ask: ‘Do I have rights? Am I a fit person to express a view? Why should anyone listen to me? Am I willing and able to speak up, and what will happen if I do?’

Asking, (and answering) such questions is the first step in exercising citizenship, the process by which men and women engage with each other, and with decision-makers; coming together to seek improvements in their lives. Such engagement can be peaceful (the daily exercise of the social contract between citizen and state), but it may also involve disagreement and conflict, particularly when power must be surrendered by the powerful, to empower those ‘beneath’ them.

Government by numbers: How big a problem is gaming?

Willy McCourt's picture

Brian Talbots Flickr under creative commons

Governments are under pressure to show their ever more educated and informed citizens that schools, hospitals and other public services are getting better. Traditionally, they have done that by spending money and building things: look, a brand new hospital! Of course, everybody knows that there is more to service quality than dollars, bricks and mortar. But at least we can see and touch bricks and mortar.  How can we put a finger on service quality? 

Trends in Private Participation in Infrastructure

David Lawrence's picture
The private sector has long been a major player in infrastructure projects around the globe. Its contribution is important on many levels: besides making financial, technical and managerial resources available for infrastructure projects, its participation has policy implications that impact investment and development.
 
The World Bank’s Public Private Partnership Group and the Public-Private Infrastructure Advisory Facility (PPIAF) support public discussion on the role of private participation in infrastructure, or PPI. To provide relevant information on this topic, they maintain a PPI database that includes information on over 6,000 infrastructure projects implemented from 1984 through 2013 in 92 emerging economies. The information is useful for analysts, policymakers, private sector firms involved in infrastructure, donors, NGOs and other stakeholders.

The data can be used to identify regional or sectoral trends. The recently-released 2013 Global PPI Update, for example, shows that PPI in 2013 in emerging markets fell by 24 percent in comparison with 2012, with decreases in Brazil and India accounting for much of the change. The data also show that investments in telecom and energy top the list, each accounting for 38 percent of global PPI. 



 


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