The public domain and the quest for renewal

January 9, 2024 By in adaptive, bureaucracy, inclusion, legitimacy, participation, Uncategorized Tags: , , , , , , , , , 4 Comments

Changing times bring changing questions. For decades, my work has focused on incremental ways to improve development and governance  in the midst of messiness. Now, though, in many countries these are times of decay and rage.  When and how the fever will break is unknowable. So for now I choose to look beyond incrementalism  and explore the broader challenge of better understanding – and fostering – renewal.

In exploring renewal, I take inspiration from the work of the great twentieth century social scientist Albert Hirschman. (See here,  here and here.) Hirschman   identified  three distinct phases in a (repeating) cycle of political, social and economic change:  a phase of vibrancy, underpinned by hope;  a phase of disillusion, anger and conflict; followed (if a continually deepening downward spiral can be averted) by  a phase of renewal. In  recent papers, I explored how this Hirschman cycle has played out in recent decades in South Africa and in  the USA. In both countries, the cycle was driven by changes in two sets of  perceptions – in the tolerance for inequality, and in perceptions as to the legitimacy of the public domain. Citizens  have become increasingly skeptical as to the public sector’s effectiveness, and increasingly question whether the purposes the public sector pursues are ones for which it has a mandate, and are in the national interest. 

My new research, introduced in this post,  focuses on the ways in which interactions between citizens and the public sector shape perceptions of legitimacy – in particular whether  “socially-embedded bureaucracy” might help turn around disillusion with the public domain.  As defined here (and elaborated in this accompanying paper)  a socially-embedded bureaucracy (SEB) is characterized by:   

“problem-focused relationships of co-operation between staff within public bureaucracies and stakeholders outside of government, including governance arrangements  that support such co-operation”.   

At least on the surface, initiatives that strengthen SEB seemingly have the potential to help renew the legitimacy of the public domain by cultivating trust – and thereby reinvigorate society’s capacity to  achieve win-win outcomes to mixed motive bargaining challenges – not only at the micro-level, but systemically as well.  

Notwithstanding its surface plausibility, the case for championing SEB is far from open-and-shut.  On the one hand, among protagonists of SEB, enthusiasm all-too-easily outruns both the empirical evidence and conceptual clarity. On the other, SEB is inconsistent with mainstream conceptions of public sector governance; as a result  its potential is all-too-easily dismissed.  My new work  aims to help put the empirical and (especially) conceptual platform of SEB discourse on a sounder footing. The work addresses two inter-related questions:

  • At the micro-level: Can SEB help improve public sector performance?
  • At the systemic level: Insofar as SEB indeed can help improve public sector performance, might it also transform perceptions more broadly, and in particular help renew the perceived legitimacy of the public domain?

To begin with the micro-level,  as the figure below highlights, the contrast is stark between SEB and conventional notions of  how public bureaucracies should be governed.  In the conventional view, governance is organized hierarchically, with a focus on ‘getting the systems right’  Citizens engage upstream in the chain via their selection of political representatives who oversee both policymaking and implementation. The tasks of public officials are defined by legalistic, rule-bound processes, which also insulate public bureaucracy from political interference. Civil society’s  governance role is to bring pressure from the demand-side to help ‘hold government to account’.  By contrast, SEB is problem- rather than systems-oriented; it incorporates horizontal as well as hierarchical governance arrangements; interactions (both within the bureaucracy and at the interface with civil society) are less legalistic and more adaptive, oriented towards  deliberation and fostering initiative.

These distinctive characteristics potentially enable SEB to improve public sector performance via three channels which are unavailable to insulated bureaucratic hierarchies:

  • SEBs potentially can foster synergistic gains from co-operation between public bureaucracies and non-governmental actors;
  • SEBs potentially can  transform the governance arrangements for monitoring and enforcement from a morass of red tape to trust-building interactions between public officials and service recipients; and
  • SEB potentially supports developmental alliances among reform-oriented public officials and civil society actors – thereby enabling an unambiguous focus on the (developmental) public purpose, while obviating the risk of capture.  

(See the accompanying ‘microfoundations’  paper for more details.)

The above is not intended to imply that SEB necessarily is superior. Social embeddedness risks  adding messiness in contexts where the priority task is to enhance bureaucratic coherence; it risks enabling new modes of predatory capture of public resources. But, as recent syntheses of the empirical evidence underscore, it does suggest that it is, at the least,  premature to be dismissive of SEB’s possibilities. Don’t risk throwing out the baby with the bathwater.

At the systemic-level,  a very different (and again controversial) case for SEB emerges. As the background paper explores, social learning and an associated cultivation of ‘pro-sociality’ is central to the micro-level argument. Might such learning  cascade upwards to the systemic level, and  help buttress citizens’ perceptions of the legitimacy of the public domain? Answering this question calls for careful unbundling of interactions between public effectiveness, trust, trustworthiness, social cohesion and legitimacy  – a task I will take on in a subsequent blog (and accompanying background paper).   For now, what can suffice to make the key point is to contrast two contributions, fifteen years apart, by Margaret Levi, former president of the American Political Science Association.

In 2007, Levi (with co-authors Karen Cook and Russell Hardin) argued that  a pre-occupation with relationships of  trust between civil society and public bureaucracy is at best a distraction – and  at worst a way of weakening rule-boundedness and increasing the risk of capture. Their critique is captured vividly in the title of their  book, Co-operation Without Trust.  Championing institutionalism, they determinedly push back against a too-easy extrapolation from micro-level success stories of co-operation to the systemic level:

“When we are assessing the reliability of governments and politicians, what we ultimately put our confidence in is the quality of the institutional arrangements within which they operate…. At the personal level, relational trust makes our day-to-day lives richer and more manageable. More often, however, and in many varied contexts, we co-operate without trust.”

The above argument is eminently plausible in contexts where institutions are strong and stable. It holds up less well, however, in contexts where a downward spiral of accelerating distrust in the public domain is underway, with institutions increasingly under threat. For one thing, institutional guardrails have turned out to be more fragile than many (myself included) might have hoped. Further, as I explore in a forthcoming paper with South African civil society activist Mark Heywood,  in contexts of declining state capability a pre-occupation with ‘holding  government to account’ can have the unintended consequence of making public officials feel increasingly beleaguered and reluctant to experiment, while fueling civic disillusion.

Once disillusion and institutional decay have taken hold, the necessary first step in fostering reversal is not yet-another -round of institutional engineering, but rather to find ways to renew hope in the possibility and desirability of achieving collective gains through co-operation,. In that spirit, and in contrast to the 2007 book, here is what Levi and Zachary Ugolnik argued in  2023 in the lead article of an ambitious 2023 exploration of pathways to “creating a new moral political economy”: 

“A new moral political economy….[will be centered around]….some form of sociality and cooperation….It demands attention to the governance arrangements that facilitate, even generate, prosocial behavior”.

There are, to be sure,  many ways to foster pro-sociality that have little to do with the interface between public officials and non-governmental actors; nothing in Levi and Ugolnik’s  2023 argument makes an explicit case for SEB. But, especially in light of the micro-level positive potential of SEB,  the notion that sustained efforts to foster pro-sociality  at micro-level might cascade upwards into systemic change should,  at the very least, not be dismissed out of hand. At the systemic level, too,   it is premature to throw out the proverbial baby with the bathwater.

Finally, returning to the two questions posed earlier, insofar as the answer to both is “yes” – “yes, SEB improves public sector effectiveness” and “yes, SEB can also buttress systemic-level legitimacy” – a third question naturally arises: Might problem-level SEB provide a platform for a systemic-level transformation of the interface between citizens and public officials? Here (as a prelude to further work, some already underway…..) are four places where one might look for answers:

  • Bottom-up: The accretion of experience and learning at the problem-level might inspire others to initiate similar initiatives. Over time, multiple small initiatives might add up to more than the sum of their parts, with  a new set of ideas, offering a new vision of what is possible, taking hold. (I plan to explore this via a new round of empirical research, focused on responses to the twin affordable housing and homelessness  crises in Los Angeles County.)
  • Inside-out: Fostering deliberation and SEB within bureaucracies by championing changes in overly-rigid and overly-hierarchical rules, and in organizational culture. (Efforts to foster relational governance within the rigidly hierarchical bureaucracy of South Africa’s Western Cape province comprises an intriguing example.)
  • Outside-in: While some civil society activists might respond skeptically to SEB as counter to a perceived mission of holding government to account, others might shift from a confrontational to a more co-operative vision, centered around building cross-cutting problem-solving-oriented coalitions, including with reform-minded public officials. (The forthcoming paper  with Mark Heywood explores this possibility.)
  • Top-down – via political and social mobilization, with  micro-level SEB successes preparing the ground  for new transformational acts of both social and political leadership. 

Might forward-looking political leaders embrace an electoral and governance platform centered around a vision of partnership between the public sector and non-governmental actors?  And what are the prospects for myriad concrete, deliberative and problem-focused civil society initiatives serving as potential building blocks for a broader social movement?  Mobilization centered around deliberative problem-solving would be a radical departure from contemporary pressure-cooker discourses which thrive on raising rather than reducing the temperature. But, as Robert Putnam explored in his 2020 book, The Upswing,  it has happened before, and might happen again:

“A distinct feature of the Progressive Era was the translation of outrage and moral awakening into active citizenship…Progressive Era innovations were a response – seeking to reclaim individuals’ agency and reinvigorate democratic citizenship as the only reliable antidotes to overwhelming anxiety……[Similarly], our current problems are mutually reinforcing. Rather than siloed reform efforts, an upswing will require ‘immense collaboration’,  [leveraging] the latent power of collective action not just to protest, but to rebuild….”

There is work to be done………….

How context and reform align (or misalign): New evidence from the education sector

January 30, 2023 By in Education, governance, institutions, Uncategorized, Working with the Grain Tags: , 3 Comments

Recognition that ‘context matters’ for development policymaking and implementation has become commonplace, almost to the point of cliché – but going beyond the general nostrum to something practically useful continues to challenge.  This post draws on a set of ambitious new case studies of the politics of policymaking in education to illustrate  the practical potential of an approach that takes seriously the ways in which power and institutions shape context,  and thus  reform opportunities and constraints.  (A companion post lays out the approach’s theoretical underpinnings.)

On the surface, global gains in educating children have been remarkable. Access has expanded enormously. So, too, has education-sector-specific knowledge about how students learn and successful teachers teach.  Yet the combination of access and knowledge has  not translated into broad-based gains in learning outcomes. Why?

To better understand the reasons for this disconnect, and to help uncover new ways of improving learning outcomes, the ambitious, decade-long RISE program championed broad-ranging research on systems of education. As part of this effort, it  sponsored a set of country studies  of the politics of education policy adoption. In early 2022, I was  commissioned by RISE to write a synthesis (available here)  of the individual studies. The synthesis paper provided an opportunity to explore further some questions left over from an earlier round of research in the education sector.

Back in 2012, I launched an in-depth research project on the politics and governance of basic education, centered around case studies in two provinces of South Africa. The project built on  decades of work as a researcher-practitioner at the interface between governance and economic development across a wide range of sectors (though never before on education),     I came away from the research  enormously impressed by the rigor of specialized, education-sector scholarship  and, more broadly,  by the knowledge and commitment of many in the education-sector-focused policy and research community. But I was also  struck by how little progress has been made in linking  this knowledge to broader findings on interactions between governance, policymaking and implementation.

In seeking to account for this disconnect, a useful point of departure is the 2018 Learning World Development Report’s distinction between proximate and underlying causes of learning shortfalls. Proximate causes include the skills and motivations of teachers, the quality of school management, the available of other inputs used in schools, and the extent to which learners come to school prepared to learn. Underlying these are the governance arrangements through which these inputs are deployed. Specialist knowledge on the relation between the proximate causes and learning outcomes can straightforwardly be applied in countries where governance works well. However, as the RISE political economy case studies detail vividly, in countries where the broader governance context is less supportive, specialist sector-specific interventions to support learning are less likely to add value.

How to move forward in the latter contexts?  “Focus not only on sector-specific technical interventions, but also on improving governance”  is a seemingly obvious answer. That answer is not wholly wrong – but it can all-too-readily be interpreted in ways that  lead reformers down counterproductive dead-ends.  To see why, consider the definition of governance offered by an influential World Bank report:

 “Governance is the process through which state and nonstate actors interact to design and implement policies within a set of formal and informal rules [institutions] that shape and are shaped by power”.

As this definition signals, governance processes are embedded within broader contexts shaped by power and institutions. Further, as voluminous research has shown (see here, here, and here), over the medium-term (in most countries, most of the time)  these broader contexts change only on relatively small margins. Viewed from the perspective of sector-level decision-makers, the broader political context is exogenous. What can be done to improve outcomes in messy governance contexts?

One useful way to move forward  is to construct a typology, organized around  a small number of distinct contexts, each characterized by distinctive configurations of power and distinctive institutional forms – and thus distinctive patterns of incentive and constraint (and possibilities for improving development outcomes) within which sectoral governance plays out. With a set of distinct types in hand, a key next step is to find ‘good fit’ ways forward, by identifying a variety of potential entry points for improving outcomes, and clarifying how they align with the different  contexts.  

This piece and its companion are organized around three distinct (heuristic) political-institutional types, each resonant with a familiar ‘real-world’ pattern. The three are:

  • Context A (‘dominant’) –  in which power is highly concentrated, and exercised top-down.
  • Context B (‘personalized competitive’) – in which authority is fragmented, with multiple centers of power, limited capacity for co-operation, and limited compliance with formal rules.
  • Context C (‘impersonal competitive’),  characterized by strong formal ‘rules of the game’ that are intended to provide a platform for resolving conflict among stakeholders and their goals, and for implementation – but, insofar as political contestation remains unresolved, can result in a combination of exaggerated rule compliance and/or isomorphic mimicry.

The companion  blog lays out the theoretical rationale for focusing on these three heuristic political-institutional contexts. This piece (and the RISE synthesis paper) uses this three-fold typology to organize, and analyze comparatively,  the country cases studies on the politics of education policy.  As an initial step, the case study countries were grouped into the three types. This was done using three V-DEM governance indicators – the extent of electoral democracy, the quality of the rule of law, and the pervasiveness of clientelism. The resulting categorization is shown in Table 1 below. (See the synthesis paper for details).

The synthesis paper builds on the individual case studies to lay out some distinctive,  within-type patterns of education sector governance:

  • In dominant contexts, with power centered around a political leader and a hierarchical governance structure, the education sector’s goals are largely shaped by the leaders.  As the Vietnam case details, top-down leadership potentially can provide a robust platform for improving learning outcomes.  However, as the case studies of Ethiopia, Indonesia, Nigeria and Tanzania illustrate, all-too-often dominant leaders’ goals  vis-à-vis the education sector can veer in other directions.
  • In impersonal competitive contexts,  a combination of strong formal institutions and effective processes of resolving disagreements can, on occasion, result in a shared commitment among powerful interests to improve learning outcomes – but in none of the case studies was this outcome evident.  Instead (as discussed further below), the case studies  a combination of unresolved political contestation over the education sector’s goals, exaggerated rule compliance and performative isomorphic mimicry.
  • Personalized competitive contexts such as Bangladesh, Ghana and Kenya lack the seeming strengths of either their dominant or their impersonal competitive counterparts;  there are multiple politically-influential groups and multiple,  competing goals –  but no credible framework of rules to bring coherence either to political competition or to the education bureaucracy.

As the case studies detail, these  political and institutional realities rendered ineffective many specialized sectoral interventions intended to improve learning outcomes.

What might be some context-aligned entry points for improving learning outcomes in the midst of this messiness?  Key is to open up  space in a way that enables sector professionals to bring their specialist knowledge to bear. The rows in Table 2 highlight four ‘soft governance’ entry points with space-expanding potential.  Each entry point is  (loosely) aligned with a distinct level  in a  chain of governance processes that link politicians, policymakers, public officials and citizens:

  • The leadership level – purpose: What are the goals of the education system? How to strengthen leaders’  orientation towards learning?
  • The bureaucracy level – mission: How to empower mission-oriented public officials within the education system?
  • The stakeholder level – alliances: Which influential stakeholders champion learning? How to foster co-operation among these stakeholders, thereby strengthening their collective influence?
  • The citizen-level – expectations: How do the expectations of parents, communities and citizens influence the extent to which the education sector is learning-oriented? How might learning-oriented influences be strengthened?

As the cells in Table 2 suggest, and the paragraphs below detail,  the potential for each of these ‘soft governance’ entry points to improve learning outcomes varies systematically across the three types. (The paragraphs that follow are a summary of a more comprehensive treatment in my February 2023 RISE insight note.)

For dominant contexts,  the top ‘soft governance’ priority is to engage with leaders as to the purpose of education. As noted earlier, Vietnam was alone among the case studies of dominant countries in consistently having improvements in learning outcomes as the sector’s principal goal. In Indonesia and Tanzania the principal goal was to aligning education with a distinctive set of ideas about the nation and its collective identity; in Ethiopia under the military Derg regime (and in Nigeria, too, at least for a time) it was to expand access to historically excluded groups, with little attention to quality. (How) can leaders be persuaded to prioritize learning, and to  take the steps needed to improve learning outcomes?  

For personalized competitive contexts, contestation among stakeholders invariably leads to policy incoherence,  bureaucratic fragmentation, and high risks of predation – and thus little  prospect that efforts to strengthen public systems can gain traction.    Yet as Table 2 suggests (and as analyses of Bangladesh and Ghana detail), fragmentation can have a silver lining – it can create space for alliances of developmental stakeholders to successfully push back against predatory pressures, and  eke out islands of effectiveness at local levels (sometimes even as localized as an individual school). More ambitiously, insofar as a societal expectation of “all for education” can take hold – that parents and communities, especially, have an active role to play in supporting a learning-oriented education system – then, even in personalized competitive contexts, far-reaching national gains in learning outcomes can be achieved.  As the synthesis paper details, Kenya offers an example of what is possible.

In impersonal competitive contexts, there is (as noted earlier) a clear normative vision of how a learning-oriented education system should function. In practice, however, things fall short of that vision in all four of the impersonal competitive case study countries:

  • In  Peru, there was ongoing  conflict over purpose between politicians on the one hand, and sectoral stakeholders and experts on the other.
  • In India, there was a large disconnect between (national) policymakers and  (state-level) implementers.
  • In Chile and South Africa, there was an ongoing pre-occupation with formal systems, with correspondingly less de facto attention on how to improve learning.

A comparison of the Chilean and Peruvian case studies offers some striking insights as to both the challenges confronting impersonal competitive contexts, and a promising way forward.  In Chile,  interactions among stakeholders largely were top-down and systematically managed.  Peru, by contrast,  was characterized by ongoing back-and-forth jockeying among stakeholders, messy compromises with the teachers union, and multiple policy reversals.  Insofar as better-aligned institutional arrangements and systematic, consistent policies are likely to be more effective than ‘messier’ ones,  learning outcomes would be expected to show more improvement over time in Chile than in Peru. Yet, as the synthesis study details,  between 2000 and 2018  Peru  achieved very large gains in learning outcomes, while the gains in Chile were modest. Why?

The Chilean approach to sector governance was, from a technocratic perspective of governance, “best practice”. Yet the (not yet published)  case study concludes that:

“Good intentions to improve educational quality, resources and carrots and sticks have not been enough to move the Chilean educational system in the direction that its political authorities wanted…. The top down character of Chilean educational policy making and the insufficient use of institutional voice mechanisms might backfire as the mounting social tensions and the 2019 social movement casts some doubts about its survival” (p.47)

By contrast,  Peru’s messier, less formalistic and more iterative process of policy formulation and adaptation helped build broad legitimacy among stakeholders –  importantly including strengthening trust in the technocrats and professionals responsible for its formulation – thereby enhancing their ability to push back  against idiosyncratic initiatives proposed by political appointees. As the Peru country case study put it:

“ Civil society organizations – NGOs, universities, think tanks and research centers – have also played a key role in defining policy agendas [and….]  in the development of education policies and reforms. Though not always able to contain either technocrats’ or other policy makers – agreements are often ignored by ministerial administrations and political parties –  they have certainly contributed to the continuity of agendas and to the advancement, through piecemeal, of reforms.”

The contrasting trajectories of Chile and Peru point to the importance, in impersonal competitive contexts, of not seeking to govern education solely within the strictures of an autonomous bureaucracy, but rather to open up space by embracing “social embeddedness”, working to build  developmental alliances with a sense of shared purpose. Indeed, the point applies broadly. Across the range of less-than-perfect governance contexts, rather than focus narrowly on technocratic (governance or sector-specialized) initiatives, foreground attention to the question of ‘commitment to learning’.  Especially in competitive contexts (both personalized and impersonal)  cultivate the idea that improving learning outcomes is everybody’s business,  and create opportunities for engagement –  invite citizens to become  active participants in a shared endeavor to equip coming generations with the capabilities they will need  be part of a vibrant, thriving society.

Characterizing context – how power and institutions interact

January 30, 2023 By in institutions, Uncategorized Tags: , 1 Comment

Ambiguity has its uses – but only up to a point. Its limitations  became evident in an early 2016 research retreat  to take stock of progress in research on ‘political settlements’.  The retreat (sponsored by the Effective States and Inclusive Development research programme)  revealed that, beneath a shared, enthusiastic embrace of the transformative potential of political settlements  analysis for development practice, were very disparate understandings of the term.  Some researchers explored political settlements through the lens of power; others through the lens of institutions;  others moved ambiguously between the two.  

Work over the subsequent six years has, in my view, decisively resolved the ambiguity.  Reflecting the intellectual evolution, this piece explores conceptually how power and institutions interact to shape a variety of distinctive contexts for  development policymaking and implementation.  A companion blog summarizes how the resulting typology was applied in a recent comparative evaluation  of the political economy of  education systems and their reform in a dozen countries, prepared for the RISE research programme.  

Typologies provide a useful way of drawing sharp distinctions among a small number of heuristic patterns that, considered together, delineate a variety of contexts along which many  real world polities might be aligned.  My 2014 book Working with the Grain  built a typology around cross-country variations in institutional characteristics.  The typology laid out in the 2022 book Political Settlements and Development: Theory, Evidence, Implications gives primacy to variations in the configuration of power.  (The book was a multi-author effort led by Tim Kelsall; I was one of the co-authors.)  This  piece integrates the two approaches,  using the four variables included in Figure 1.  

Kelsall et. al’s definition of a political settlement provides a  useful point of departure for clarifying the relationship between power and institutions. It defines a  settlement as:

“An ongoing agreement (or acquiescence) among a society’s most powerful groups over a set of political and economic institutions expected to generate for them a minimally acceptable level of benefits, which thereby ends or prevents generalized civil war and/or political and economic disorder”

While both power and institutions  feature in the above definition –  a settlement is reached when powerful groups agree on the  ‘rules of the game’ (i.e. the institutions)  that govern the settlement – the 2022 book focuses principally on the delineation of power, and its consequences. It carefully defines  two aspects of power:

  • The social foundation (SF) characterizes who is powerful –  the included socially salient groups (insiders, groups to which policy must somehow respond) as opposed to the excluded (outsiders)…along a spectrum that extends from broad (nearly all social salient groups belong) to narrow (most are excluded).
  • The concentration of power (PC)  characterizes the extent of power – the extent of coherence in the allocation of decision-making procedures and authority among insiders, ranging from concentrated (highly coherent) to dispersed (lacking in coherence).

The book reports measures of each of PC and SF over time in forty-two countries in the global South, and uses these measures to explore statistically the causal influence of each on development. Higher levels of PC turn out to be  associated with more rapid economic growth, and higher levels of SF with broad-based gains in social indicators.

Considering SF and PC from a more disaggregated perspective yields additional insights. The SF variable underscores the importance for  inclusive growth of empowering excluded actors– both at an aggregate level  and at more micro-levels by giving ‘voice’ to beneficiaries who are intended to benefit from social programs. The PC variable directs attention to the roles of three sets of drivers –  distributional, ideational and institutional – in shaping the balance between co-operation and conflict in a country’s polity:

  • Distributional drivers.   As per the definition of a political settlement, a necessary condition for a high PC (and thus rapid growth) is that the breadth of the SF and the distribution of economic benefits are aligned with  each other. (Note that both broad SF/inclusive growth and narrow SF/unequal growth are consistent with this condition, at least in the short-to-medium term.)  A loss of alignment between the distribution of power and of economic benefits is likely to result in a  decline in PC, with an associated slowdown in economic growth, and rise in political polarization. (See here and here.)
  • Ideational drivers. As the 2022 book details (building on Ferguson 2020) political settlements can usefully be understood through the lens of collective action. Shared ideas can provide a basis for achieving co-operative outcomes to mixed-motive bargaining challenges (and thus a high PC); ideational political entrepreneurs (populist or otherwise) can destabilize a previously stable settlement. (See here and here.)
  • Institutional drivers. As per the definition of a political settlement,  institutions (‘the rules of the game’)  provide the container for a political settlement. The institutional arrangements can take a variety of distinct forms,  each of which shapes interactions among stakeholders in a distinctive way. Attention to institutions is thus key to addressing a central question confronting practitioners:  Given the incentives and constraints prevailing in a specific context, what might be some tractable, context-aligned entry points for improving development outcomes?

This last question brings us to the two institutional variables identified in Figure 1.

Variable #3 in Figure 1 can usefully be interpreted as a continuum between wholly top-down (principal-agent)  governance and peer-to-peer governance among multiple principals. As its location at the power-institutions intersection in Figure 1 suggests, this continuum can be interpreted both from the perspective of institutions and of power:

  • As institutions, both principal-agent and multi-principal governance have been the focus of a voluminous literature (for example here, here, and here).
  • As power, each depicts a very different relationship among stakeholders – unequal power in the former, and interactions among relative equals in the latter. At all levels – from the micro (families; firms) to the meso (communities) to the national –  horizontal governance between peers plays out very differently than hierarchical governance arrangements that link those who are powerful with those who are not.

As variable #3 suggests, high PC can thus be achieved via two distinct institutional forms – top-down, hierarchical command-and-control,  or peer-to-peer resolution of horizontal challenges of collective action.

Variable #4 distinguishes among institutions according to  and whether the rules of the game take the form of personized deals or impersonal rules.  This distinction is given only limited attention in analyses of power (including the 2022 volume), but it is central to the contributions of Douglass North and colleagues (see here, here  and here), yet.  As North and colleagues argue persuasively, impersonal institutions cannot be created by fiat; they emerge as a facet of long-run processes of political, economic and social changes.

Considered together, variables #2, #3  and #4 provide the basis for a typology  that distinguishes among  a variety of political settlements, each with distinct institutional forms, and thus distinct, context-aligned entry points for improving development outcomes.  Logically, with three variables, each  aligned along a continuum, the number of possible types is large.  The goal, though  is not comprehensiveness, but to  focus  attention on a few core contexts – radically different from each other, each resonant with a familiar ‘real-world’ pattern, and each characterized by distinctive patterns of incentive and constraint, and thus distinctive entry points for improving outcomes.  Figure 2 below identifies three types that meet these criteria. (In applying this framework, I have found that many countries can be interpreted as hybrid combinations of the three – but I have not come upon a fourth type that  meets the tests of both real-world resonance and enough qualitative distinctiveness that it warrants inclusion as an additional category.) The paragraphs that follow elaborate on each of the  types, drawing on the companion blog on education systems to signal their practical relevance.

In context A (strong dominance), power is highly concentrated, and exercised top-down –  with all of the strengths of decisiveness, and the pathologies of hubris and demotivation of subordinates that can accompany this institutional mode of exercising power.  The political economy of education case studies for Indonesia, Ethiopia, Nigeria, Tanzania and Vietnam illustrate some of the ways in which dominance plays out in practice.   As the education research details, key to achieving gains in these contexts is to engage top-level leadership around purposes.

Context B (personalized competition)  is characterized by fragmented authority: multiple centers of power, limited capacity for co-operation, and limited compliance with formal rules (including the rules necessary for the functioning of a formal bureaucracy). In this context, as education case studies for Bangladesh, Ghana, Kenya and South Africa’s Eastern Cape province illustrate – and as a broader literature has explored in depth (see here, here and here) – entry points for achieving gains come not from efforts at systems reform, but from more focused efforts to strengthen islands/pockets of effectiveness.

Context C (impersonal competition) is characterized by strong formal ‘rules of the game’ intended  to provide a platform both for resolving conflict among stakeholders and their goals,  and for implementation. In successful, mature democracies this platform can indeed result in a shared commitment among powerful interests to craft win-win resolutions of collective action problems, and in the effective operation of public bureaucracy. However, as the education case studies of Chile, Peru, India and South Africa illustrate,  the all-too-common  result is instead a combination of  unresolved political contestation over  goals (and thus, as per Figure 2, a ‘medium-level of PC),  exaggerated rule compliance and/or performative isomorphic mimicry.

More broadly, as many democracies (even seemingly mature ones)  are demonstrating, polarized discourse renders impersonal competitive contexts increasingly vulnerable to a cumulative delegitimization of the public domain, and a downward spiral of institutional decay. Reversing downward spirals is a central challenge of our time. At a micro/sectoral level, as I summarize in the companion blog,  the education studies offer some interesting insights as to how this might be achieved across the different contexts. At a broader level, I explored some possibilities in a comparative analysis of interactions between inequality and polarization in South Africa and the United States. Extending this analysis into a broader exploration of what it will take to turn from rage to renewal will be a central focus of my work going forward.

What are the priorities for strengthening South Africa’s public sector?

August 22, 2022 By in Uncategorized Leave a comment

Building public sector capability is again rising on the agenda, in South Africa and elsewhere. The topic has been a longstanding pre-occupation of mine – as practitioner, as researcher, and in my teaching. I’ve especially emphasized the importance of looking beyond proximate causes (eg weak ‘capacity’ and institutional forms) – and to focus (also) on underlying causes (“public sectors are embedded in politics”) and reform initiatives that can effectively address these underlying causes. Here’s a mouthful that will guide my research agenda in this area going forward “socially-embedded bureaucratic autonomy”.

A year ago, I published a piece in The Conversation on what it will take to renew South Africa’s public sector. “https://theconversation.com/beyond-the-cabinet-reshuffle-what-will-it-take-to-renew-south-africas-public-sector-165777 In the rush of everything happening at the time, I neglected to include it in my blog series. So here it is. And here is a link to a TV interview with eNCA that builds on the piece. https://www.youtube.com/watch?v=pFhltdDorhk

Between South Africa’s frying pan and America’s fire

April 28, 2022 By in Uncategorized Tags: , , , , Leave a comment

Fueled by hope, I spent the 2010s travelling back-and-forth between South Africa and the USA, sharing  an optimistic approach to integrating governance and development strategies with mid-career practitioners at both SAIS and the Mandela School. But the subsequent decade unfolded in unexpectedly toxic ways in both countries. It felt important to complement with-the-grain pragmatism with an exploration of underlying challenges. A 2021 co-authored paper explored why things turned rancid in South Africa.  My new paper –  How Inequality and Polarization Interact: America’s Challenges Through a South African Lens, also published by the Carnegie Endowment for International Peace – takes a comparative perspective.  This post lays out five personal take-aways from the comparison. (Here’s a link to the paper’s executive summary).

Take-away #1:  Far more than is the case for contemporary South Africa,  America’s current wounds – increases in inequality since the 1980s, and their attendant social and political correlates –   have been self-inflicted.

Back in the 1970s, I had been  drawn to the USA by its openness, its commitment to freedom, equal dignity and equal justice for all – everything that the South Africa I left behind was not.  With its 1990s ‘rainbow miracle’ transformation from apartheid to constitutional democracy, South Africa became a new  beacon of possibility for people around the world who value democratic governance and inclusive societies. However,  the country’s subsequent reversals were not wholly unexpected. Three decades after the end of apartheid,  South Africa remains among the world’s most unequal countries, and its fraught racial history continues to fester – though the rawness and relative recency of the anti-apartheid struggle perhaps continues to offer some immunization against a further-accelerating downward spiral.   

For the United States, however, the converse may be true. In the decades subsequent to World War II, the combination of an equitably growing economy and a vibrant civil rights movement had fostered the hope of deepening economic and social inclusion. But  beginning in the 1980s, the benefits of growth became increasingly skewed, and  ‘culture wars’ became increasingly virulent. Complacency bred of long stability may have lulled America  into  political recklessness at the inequality-ethnicity intersection – a recklessness that risks plunging the country into disaster.

Take-away #2:  In both South Africa and the USA, the drivers of polarization have been multiple and mutually reinforcing; essentialist explanations that focus narrowly only on a single dimension –  economic, institutional,  cultural or racial  – and ignore the others are, at best, seriously incomplete.

The Carnegie paper distinguishes between polarization’s demand-side and its supply-side.  The demand-side comprises the way citizens engage politically – as shaped by power, by their perceptions of the fairness of economic outcomes, and by whether they frame identity  in inclusive or in us/them ways.  The supply-side comprises political entrepreneurs and the ideas they champion –  ideas about how the world works; ideas about identity. Mutually-reinforcing interactions between the demand- and supply-sides can become increasingly toxic – potentially even to the point of a doom loop that destroys constitutional democracy.

Take-away #3: Both South Africa and the USA need to be more pro-active in renewing economic inclusion  – but  making the shift from an inequality-fueling to an inclusion-supporting economy is less daunting than it might seem.

When considered through the lens of the interaction between inequality and ideas, pro-inclusion policies are less important as ends in themselves than for how they affect the willingness  of citizens to accept the rules of the game (including the distribution of economic outcomes) as broadly legitimate.  As South Africa’s rainbow miracle turnaround in the 1990s and early 2000s shows, a turn from anger to hope does not need a comprehensive package of pro-equity reforms. Rather, reforms that foster “good-enough inclusion”—some immediate gains that signal that things have changed, combined with credible signals that longer-term structural change is underway—can set in motion a virtuous spiral, which can be sustained as long as the momentum of  positive policy change continues to unfold over time.

Take-away #4: The influence of economic elites, though often obscured beneath the headlines,  has been central in both countries – for both good and ill. 

In South Africa, as Alan Hirsch and I explored in depth,  South Africa’s business establishment played a leading role in helping to midwife negotiations between the white minority government and the ANC.  In the USA, organized business was an important part of the elite consensus that fueled three decades of inclusive economic growth subsequent to World War II. In recent decades however, a segment of the elite  has actively financed  political entrepreneurs who have skillfully championed a combination of polarizing cultural discourse and distributionally regressive economic policies. This is a classic example of elite capture, a phenomenon familiar to scholars of comparative politics.  Paralleling what happened in 1980s South Africa, might America’s economic elites wake up to these risks and become more open to inclusive renewal?

Take-away #5: In settings that are open politically, turnaround will be achieved less by directly engaging  polarization’s most toxic champions, than by working around them.

Mass political mobilization was pivotal to South Africa’s shaking loose the shackles of apartheid – and new calls to the barricades might seem to be the obvious response to current political and governmental dysfunction.   However,  different times and different challenges call for different responses.  Currently, both the South African and U.S. governments are, at least aspirationally, committed not to accelerating polarization but to strengthening both inclusion and the institutional foundations of democracy. In such contexts, some compelling research suggests that what is called for is not fighting polarization with more polarization but lowering the temperature by fostering deliberative discourse, focused on positive, hope-evoking options. As happened once before in the USA,  the aim would be for a myriad of collaborative, problem-focused grassroots initiatives  to serve as potential building blocks for  a twenty-first-century social movement– a  movement that views cooperation in pursuit of win-win possibilities not as weakness but as key to the sustainability of thriving, open, and inclusive societies.

America’s Governance Challenges Through a South African Lens – summary

April 27, 2022 By in Uncategorized 3 Comments

This is the executive summary of my new paper published by the Carnegie Endowment for International Piece. For my more personal take on the parallels between South Africa and the USA, and their implications, click HERE.

Over the past decade, toxic interactions between persistent inequality, racial tensions, and political polarization have undercut the promise of South Africa’s so-called rainbow miracle transition from apartheid to democracy. South Africa’s recent history sheds light on the United States’ recent political travails. It illustrates how interactions between inclusion and inequality on the one hand and political ideas and entrepreneurship on the other can fuel positive spirals of hope, economic dynamism, and political legitimacy—but can also trigger vicious, downward spirals of disillusion, anger, and political polarization.

Polarization has both a demand-side and a supply-side.  The demand-side comprises the way citizens engage politically – as shaped by power, by their perceptions of the fairness of economic outcomes, and by whether they frame identity  in inclusive or in us/them ways.  The supply-side comprises political entrepreneurs and the ideas they champion –  ideas about how the world works; ideas about identity. In both South Africa and the USA, the demand- and supply-sides of polarization have been mutually-reinforcing.  

South Africa was able to transition from a society structured around racial oppression into a nonracial democracy whose new government promised “a better life for all.” Especially remarkable was the speed with which one set of national ideas appeared to give way to its polar opposite. From a society marked by racial dominance and oppression, there emerged the aspiration to build an inclusive, cooperative social order, underpinned by the principles of equal dignity and shared citizenship.

In the initial glow of transition, South Africa’s citizens could hope for a better life for themselves and their children. In time, though, the promise wore thin. It became increasingly evident that the economic deck would continue to be stacked, and that the possibility of upward mobility would remain quite limited. Fueled by massive continuing inequities in wealth, income, and opportunity, South Africans increasingly turned from hope to anger.

In the United States, a steady and equitably growing economy and a vibrant civil rights movement had fostered the hope of social and economic inclusion. But that hope turned to anger as the benefits of growth became increasingly skewed from the 1980s onward. In 2019, the U.S. economy was more unequal than it had been since the 1920s. Younger generations could no longer expect that their lives would be better than those of their parents. Such economic adversity and associated status anxiety can trigger a heightened propensity for us-versus-them ways of engaging the world.

In both South Africa and the United States, polarization was fueled by divisive political entrepreneurs, and in both countries, these entrepreneurs leveraged inequality in ways that added fuel to the fire. In the 2010s, South Africa went through a new ideational reckoning, in part to correct the view that the transition to democracy had washed the country’s apartheid history clean. But opportunistic political entrepreneurs also pushed an increasingly polarized and re-racialized political discourse and pressure on public institutions, with predictable economic consequences. South Africa’s economy slid into sustained stagnation.

Paralleling South Africa, America’s political entrepreneurs also cultivated an us-versus-them divisiveness. However, unlike in South Africa, political entrepreneurs and economic elites in the United States also used their divisive rhetoric as a way to persuade voters to embrace inequality-increasing policies that might otherwise not have won support. By the late 2010s, the risks were palpable in both South Africa and the United States of an accelerating breakdown of the norms and institutions that sustain inclusive political settlements.

But lessons can be overlearned. Mass political mobilization was pivotal to South Africa’s shaking loose the shackles of apartheid—and new calls to the barricades might seem to be the obvious response to current political and governmental dysfunction. However, different times and different challenges call for different responses. In both contemporary South Africa and contemporary America, the frontier challenge is not to overthrow an unjust polit[1]ical order but to renew preexisting formal commitments to the idea that citizenship implies some shared purpose. Renewal of this kind might best be realized not by confrontation but rather by a social movement centered around a vision of shared citizenship, a movement that views cooperation in pursuit of win-win possibilities not as weakness but as the key to the sustainability of thriving, open, and inclusive societies.

Between South Africa’s frying pan and America’s fire

April 27, 2022 By in governance, Uncategorized Tags: , , , , 1 Comment

Fueled by hope, I spent the 2010s travelling back-and-forth between South Africa and the USA, sharing  an optimistic approach to integrating governance and development strategies with mid-career practitioners at both SAIS and the Mandela School. But the subsequent decade unfolded in unexpectedly toxic ways in both countries. It felt important to complement with-the-grain pragmatism with an exploration of underlying challenges. A 2021 co-authored paper explored why things turned rancid in South Africa.  My new paper –  How Inequality and Polarization Interact: America’s Challenges Through a South African Lens, also published by the Carnegie Endowment for International Peace – takes a comparative perspective.  This post lays out five personal take-aways from the comparison. (Here’s a link to the paper’s executive summary).

Take-away #1:  Far more than is the case for contemporary South Africa,  America’s current wounds – increases in inequality since the 1980s, and their attendant social and political correlates –   have been self-inflicted.

Back in the 1970s, I had been  drawn to the USA by its openness, its commitment to freedom, equal dignity and equal justice for all – everything that the South Africa I left behind was not.  With its 1990s ‘rainbow miracle’ transformation from apartheid to constitutional democracy, South Africa became a new  beacon of possibility for people around the world who value democratic governance and inclusive societies. However,  the country’s subsequent reversals were not wholly unexpected. Three decades after the end of apartheid,  South Africa remains among the world’s most unequal countries, and its fraught racial history continues to fester – though the rawness and relative recency of the anti-apartheid struggle perhaps continues to offer some immunization against a further-accelerating downward spiral.   

For the United States, however, the converse may be true. In the decades subsequent to World War II, the combination of an equitably growing economy and a vibrant civil rights movement had fostered the hope of deepening economic and social inclusion. But  beginning in the 1980s, the benefits of growth became increasingly skewed, and  ‘culture wars’ became increasingly virulent. Complacency bred of long stability may have lulled America  into  political recklessness at the inequality-ethnicity intersection – a recklessness that risks plunging the country into disaster.

Take-away #2:  In both South Africa and the USA, the drivers of polarization have been multiple and mutually reinforcing; essentialist explanations that focus narrowly only on a single dimension –  economic, institutional,  cultural or racial  – and ignore the others are, at best, seriously incomplete.

The Carnegie paper distinguishes between polarization’s demand-side and its supply-side.  The demand-side comprises the way citizens engage politically – as shaped by power, by their perceptions of the fairness of economic outcomes, and by whether they frame identity  in inclusive or in us/them ways.  The supply-side comprises political entrepreneurs and the ideas they champion –  ideas about how the world works; ideas about identity. Mutually-reinforcing interactions between the demand- and supply-sides can become increasingly toxic – potentially even to the point of a doom loop that destroys constitutional democracy.

Take-away #3: Both South Africa and the USA need to be more pro-active in renewing economic inclusion  – but  making the shift from an inequality-fueling to an inclusion-supporting economy is less daunting than it might seem.

When considered through the lens of the interaction between inequality and ideas, pro-inclusion policies are less important as ends in themselves than for how they affect the willingness  of citizens to accept the rules of the game (including the distribution of economic outcomes) as broadly legitimate.  As South Africa’s rainbow miracle turnaround in the 1990s and early 2000s shows, a turn from anger to hope does not need a comprehensive package of pro-equity reforms. Rather, reforms that foster “good-enough inclusion”—some immediate gains that signal that things have changed, combined with credible signals that longer-term structural change is underway—can set in motion a virtuous spiral, which can be sustained as long as the momentum of  positive policy change continues to unfold over time.

Take-away #4: The influence of economic elites, though often obscured beneath the headlines,  has been central in both countries – for both good and ill. 

In South Africa, as Alan Hirsch and I explored in depth,  South Africa’s business establishment played a leading role in helping to midwife negotiations between the white minority government and the ANC.  In the USA, organized business was an important part of the elite consensus that fueled three decades of inclusive economic growth subsequent to World War II. In recent decades however, a segment of the elite  has actively financed  political entrepreneurs who have skillfully championed a combination of polarizing cultural discourse and distributionally regressive economic policies. This is a classic example of elite capture, a phenomenon familiar to scholars of comparative politics.  Paralleling what happened in 1980s South Africa, might America’s economic elites wake up to these risks and become more open to inclusive renewal?

Take-away #5: In settings that are open politically, turnaround will be achieved less by directly engaging  polarization’s most toxic champions, than by working around them.

Mass political mobilization was pivotal to South Africa’s shaking loose the shackles of apartheid – and new calls to the barricades might seem to be the obvious response to current political and governmental dysfunction.   However,  different times and different challenges call for different responses.  Currently, both the South African and U.S. governments are, at least aspirationally, committed not to accelerating polarization but to strengthening both inclusion and the institutional foundations of democracy. In such contexts, some compelling research suggests that what is called for is not fighting polarization with more polarization but lowering the temperature by fostering deliberative discourse, focused on positive, hope-evoking options. As happened once before in the USA,  the aim would be for a myriad of collaborative, problem-focused grassroots initiatives  to serve as potential building blocks for  a twenty-first-century social movement– a  movement that views cooperation in pursuit of win-win possibilities not as weakness but as key to the sustainability of thriving, open, and inclusive societies.

Virtuous circles and downward spirals  – the power of ideas & the limits of technocracy

November 15, 2021 By in Uncategorized Tags: , , Leave a comment

What will it take to shake loose the distemper of our times, and initiate a virtuous spiral of renewal? In a recent UNU-WIDER webinar, Alan Hirsch and I explored why a narrow focus on growth and good governance will not be enough to get South Africa (and, by analogy, other countries similarly trapped in a vicious cycle of disillusion and despair) back on the path of building a thriving, inclusive society.  Conventional policy discourses are well-suited to address  circumstances and  questions such as these: How to maintain rapid growth, while making it increasingly inclusive? Assuming  political and social stability,  and taking a medium-to-long-term horizon, what policy and expenditure decisions will best achieve the country’s development goals?  These are public policy challenges for a season of hope.

However,  South Africa  (and numerous other countries) no longer is in a season of hope.  Growth has ground to a halt; inequality festers; institutions decay; the threat of accelerating turmoil looms. The frontier challenge is not one of making mid-course adjustments, while sustaining momentum; it is a challenge of renewal, of setting in motion  a new virtuous spiral. Addressing this challenge needs a broader approach to crafting a way forward than is provided by the conventional tools – one that goes  beyond the technical details of policy,  and looks also at policy’s inter-relationship with perceptions, expectations and power.  The UNU-WIDER webinar and a background multi-author Carnegie paper “South Africa: When Strong Institutions and Massive Inequalities Collide” use this broader perspective to explore how South Africa might find its way back onto a path of inclusive growth.  This post lays out the underlying logic.

Perceptions and power – the ideas that people have about how the world works and their place in it – play a central role in driving the ebb and flow of economic and political momentum. As the figure below highlights,  interactions among four drivers are the fuel for virtuous (and vicious) spirals: 

  • Ideational driver #1: whether political and policy choices are perceived as zero-sum, or prioritize a search for win-win, co-operative options;
  • Ideational driver #2: perceptions across a broad swathe of a country’s citizenry as to the legitimacy and fairness of prevailing political and institutional arrangements;
  • Ideational driver #3: whether expectations of the future are optimistic or pessimistic.

And  (as influenced by each of the above)

  •  The strength of political leadership’s decision-making authority.

Consider ideational driver #1: All-too-often political discourse is framed in zero-sum, ‘my-way-or-the-highway’ terms. This is mistaken. As Bill Ferguson has spelled out in detail, an extraordinarily wide range of public challenges (from budgeting, to the governance of public agencies, to community service provision)   are better understood through the lens of co-operation and its challenges.  

What shapes the propensity to co-operate? As game theory teaches,  one key determinant of whether win-win or more narrowly zero-sum approaches predominate comprises the time horizon of protagonists. Longer time horizons, and thus repeated interactions, support co-operative outcomes. This time horizon is influenced directly by ideational drivers #2 and #3.

Ideational driver #2’s relevance is highlighted by Francis Fukuyama. Perceptions of legitimacy and fairness are foundational for a thriving society, he argues, because:

“Political power is the product not just of the resources and numbers of citizens that a society can command but also the degree to which the legitimacy of leaders and institutions is recognized. Legitimacy means that the people who make up the society recognize the fundamental justice of the system as a whole and are willing to abide by its rules….”

These perceptions are, of course, subject to change. As Albert Hirschman taught us, perceptions of fairness and legitimacy need periodic reinforcement, else hope can all too readily turn to anger – with, as per the figure, the ideational turn cascading throughout society.

Ideational driver #3 was a centerpiece of John Maynard Keynes’ analysis of the  influence of expectations of the future (and their volatility) on private investment and economic growth. As Keynes put it:

“[Private] investment depends on judgments about the future which do not rest on an adequate or secure foundation……..Our theory of the future is subject to sudden and violent changes. The practice of calmness and immobility, of certainty and security, suddenly breaks down. New fears and hopes will, without warning, take charge of human conduct…..”

Interactions between expectations and growth on the one hand, and ideational drivers #1 and #2 on the other,  are two-way.   In one direction: rapid growth (especially when it is inclusive) enhances opportunities, fuels hope and lengthens the time horizons of both emerging elites and non-elites. In the other: a more co-operative orientation among elites and enhanced perceptions of legitimacy and fairness on the part of a broad swathe of society each can bring greater optimism as to what the future may hold, thereby helping to fuel private investment.

The fourth driver – the decision-making authority of political leadership – both fuels and is fueled by the other three. As the figure suggests,  political leaders can support a virtuous circle by being decisive in their decision-making. The degree of decisiveness depends, in part, on how a leader chooses to lead. It also depends on the context within which that leader is embedded: Hopeful expectations; commitments among elites to co-operate, despite their differences; and a perception across society that the rules of the game are legitimate and fair – all of these add to the ability of political leaders to effect change.

How to get a virtuous spiral underway? This takes more than understanding the drivers and their interdependencies – the crucial challenge is  to identify entry points capable of providing sufficient momentum to kickstart the process. Momentum won’t be shifted by yet another round of pronouncements of policy intent. Their limitation isn’t only one of the unlikelihood of action, there is  a chicken-and-egg problem.  Even were the standard menu of growth, governance and inclusive reforms to be implemented, it would take some time for them to have a discernible effect on peoples’ lives – but until that effect is evident, the reforms will do little to move the needle on the ideational drivers. And the medium-run on which reform packages focus is unlikely to arrive unless action is sufficiently bold to shift expectations.

One way to rapidly reshape expectations is to address directly the challenge of fairness and legitimacy. How to do so in ways that fuel hope rather than fear, anger, recrimination and pushback by elites threatened by change? Key in the South African context is for reforms along the lines of what we call in the Carnegie paper ‘growth-compatible redress’.  Such redress would include initiatives that can make an immediate difference in the lives of the marginalized, complemented (or perhaps even superseded) by approaches to  redress that are sustainable and supportive of investment in capabilities over the longer-term, thereby helping to accelerate upward mobility – with the package underpinned by more conventional policy and governance reforms. (Appendix B of the Carnegie paper, pp. 73-76, provides more detail of what such reforms might comprise.)

Expectations might also be shifted in virtuous-circle-initiating ways through action on the leadership and governance fronts. While rebuilding institutional capacity takes time, credible signals that the game has changed can be sent quickly, and can rapidly alter incentives and behavior. Bold actions that leaders might take to signal such a shift could include:

  • A willingness to work in coalition with rivals – as a potent and highly visible way to strengthen mutual accountability.
  • A corresponding willingness to  break loose from the deadweight of so-called allies stuck in endless stale discourses whose practical consequence is a reproduction of the status quo and a defense of narrow parochial interests. And
  • A broader invitation for a new kind of active citizenship across a broad range of stakeholders – one that prioritizes co-operation around win-win possibilities.

(Click here for some additional discussion of these options.)

As an economist by training, I know that it can be discomfiting to turn attention away from the seemingly solid ground of technocratic discourse towards the more squishy terrain of perceptions and power. Yet doing the same thing again and again and expecting a different result the next time is not a recipe for success. Can societies stuck in a deep hole  of disillusion, anger and despair find the political and policy imagination and moral courage to do things differently? 

 Here is a link to a recording of  the 2 November, 2021 UNU-WIDER webinar with Alan Hirsch, “When Good Governance is Not Enough: Can South Africa Meet the Challenge of Economic Inclusion”

Inclusion and growth can reinforce one another – South Africa’s false dilemma

August 18, 2021 By in Uncategorized Tags: , , Leave a comment

What economic policies are pro-growth? In recent weeks, a heated debate has been raging in South Africa over the pros and cons of a basic income grant. Underlying this debate are some radically different views as to the relationship between growth and inclusion. The debate revolves less around whether accelerated growth is a necessary part of any hopeful way forward for South Africa – on that there is broad agreement –  and more around questions of what it will take to kickstart growth  and, indeed, whether growth plus the existing package of social policies can adequately address the challenge of inclusion.

Having spent the better part of four decades wrestling with this conundrum, I couldn’t resist adding my two-cents-worth to the debate,  in a piece published earlier this month in The Conversation.  This blog piece reproduces part of that piece – and also locates the argument in a broader context.

That growth and inclusion are in tension with one another is commonplace – but the tension plays out to an extreme extent in South Africa. In an April 2021 discussion of  economic policy in South Africa, Harvard University’s Dani Rodrik reflected on:

“…the inadequacy of prevailing economic ideas to effectively address the structural problems that the South African economy faces – a mismatch between what South Africa produces, and what the country’s factor endowments are.  South Africa’s production structure largely is biased towards skill-intensive sectors, while the labor force largely is unskilled…..”

“[A crucial challenge] is to stimulate labor-intensive production…..This is structural transformation in reverse – low-skill activities tend to be non-tradeable, and generally have lower total factor productivity… It requires an industrial policy that promotes productive employment of a very different kind,  the kinds of things we don’t normally associate with industrial competitiveness:  relatively low-productivity activities; small and medium enterprises;  perhaps informal activities that are mostly service-oriented.  This takes us into such new terrain that it is not entirely clear how to proceed….. we don’t know a lot about how to do it…..”.

Rodrik usefully locates South Africa’s challenge within the context of the contemporary globalized economy. However, the dilemma confronting South Africa hardly is new. As Jonny Steinberg put it in a recent article in Business Day:

“South Africa’s labour markets have been unable to provide work for the able-bodied for two generations now. There is no reason to believe they will provide work for all…..”

Three decades ago, I wrote a piece (the first in the World Bank’s informal working paper series on the South Africa economy) that laid out the dilemma, and explored the possibility of addressing it via the promotion of labor-intensive, light manufacturing. (Actually, my pre-occupation with the dilemma dates back to a  SALDRU working paper I wrote in 1981). As I put it the 1992 piece:

“South African manufacturing increasingly has failed to generate jobs, with virtually no increase in employment between 1976 and 1988.  This failure cannot simply be attributed to a poor overall growth performance….. Indeed, between 1976 and 1981 manufacturing growth was associated almost entirely with an increase in capital input, with the capital-labor ratio increasing by almost 75% and virtually no growth in employment….”

The working paper went on to propose:

“….  a strategy for fostering labor-intensive, export-oriented growth….[focused on]…. the upmarket segments of labor-demanding activities….. Policy initiatives may be an important source of encouragement for South Africa’s private sector to invest in the acquisition of competitive capability in labor-rather than capital-intensive sectors of industry.”

Those ideas failed to gain traction at the time I championed them – and indeed, as Rodrik implies, confront an even less propitious global environment in the 2020s. Steinberg describes vividly the contemporary challenge:

“We could go on pretending that we live in the 1960s, and that our welfare system really is for the frail. Or we could say the days of full employment are just around the corner. But that takes us into dubious ethical terrain. Like Vladimir and Estragon, we can keep waiting for Godot while generations of South Africans live and die.”

What, then, is to be done? As I explored in the article in The Conversation (and reproduce in what follows),  in South Africa’s current circumstances pro-inclusion policies may be necessary to kickstart growth.  Albert Hirschman’s classic analysis of  Latin America’s ‘changing tolerance for inequality’ lays out the logic:

““It can happen that society’s tolerance for increasing disparities may initially be substantial [for example, South Africa in the first fifteen years of democracy] post-1994…..] Tolerance for inequality  is extended in the expectation that eventually the disparities will narrow again. … Nonrealization of the expectation that my turn will soon come will at some point result in my ‘becoming furious’ that is, in my turning into an enemy of the established order……

Hirschman distinguished between:

“Two principal tasks or functions  [that] must be accomplished in the course of the growth process. The first is the unbalancing function, the entrepreneurial function, the accumulation function…… Increasing social and income inequalities are an important part of this picture.”

Once hope has curdled into anger and despair, renewing growth will depend on :

the ‘equlibrating’ distributive, or reform function… to correct some of these imbalances,  to improve the welfare and position of groups that have been neglected or squeezed, and at redistribution of wealth and income in general.”

Viewed from this perspective, employment subsidies, basic income grants and other social interventions to address poverty and improve prospects for upward mobility  all become part of an (extended) pro-growth policy.  These don’t come free. They  will require both a move away from pro-austerity fiscal policies, and (in time) some tax increases on higher-income earners  – with the latter dependent for their legitimacy  on the likely effectiveness with which the public sector implements the social agenda. (For more on this last,  see a second recent article in The Conversation – also elaborated in THIS upcoming companion blog piece).  

The US economy: From inclusive growth to an inequality-fueling doomsday machine

July 27, 2021 By in Uncategorized Tags: Leave a comment

Economic inequality and political polarization fuel one another. Recent, co-authored work explored how the collision between strong institutions,  massive inequality and toxic institutions is playing out in South Africa. What relevance might the South Africa experience have for the USA’s current struggle with toxic polarization?

[As part of an ongoing research project on the above question, I’ve immersed myself in recent literature and data as to trends and drivers of US inequality. Though I’d thought myself to be quite well-informed, I found the USA’s economic transformation to be way more far-reaching (with potentially more dire consequences) than I had realized. Perhaps this summary overview will be of interest. Regardless, at this quite early stage of the comparative research, feedback on the way I have summarized and interpreted the evidence on US inequality will be especially useful.]

Driven by a combination of globalization, technological changes, policy choices and changes in norms and institutions, the United States economy has undergone far-reaching structural changes and distributional shifts. Figure 1 (from Branko Milanovic, using the LIS data set)  provides an overview of the distributional shifts, using the Gini coefficient as the summary measure of inequality (higher being more unequal); it distinguishes between gross inequality (income before taxes and transfers) and net inequality (disposable per capita income).  As the figure shows, US inequality has been on the rise since the end of the 1970s.

Figure 2 and Tables 1 and 2 give a more granular perspective of the transformation of the US economy from an inclusive-growth engine into an inequality-generating doomsday machine. The machine has three speeds: accelerating income growth at the top end of the distribution; good-enough dynamism for an upper-middle class educated elite, enabling it to more-or-less hold its own; stagnation or decline for almost everyone else.

As Figure 2 signals, between 1946 and 1980 pre-tax real income grew at an annual average of about 2% across all segments of the distribution, other than the very top where income growth was slower. However, subsequent to 1980, growth became concentrated in the top 1 percent of the distribution and, within that, in the top 0.01 percent of the distribution. As per Emmanuel Saez and Gabriel Zucman (who constructed the figure), between 1980 and 2018,  “for the bottom 50 percent as a whole, growth in pre-tax income [between 1980 and 2018]  has been only 0.2 percent per year. Excluding the elderly (aged 65 or more), average bottom 50 percent pre-tax income has declined slightly since 1980.”

Table 1 compares the distribution of pre-tax income in 1979 and 2019 (data are from the World Inequality Database).  Between 1979 and 2019, the US economy almost trebled in size.  Over that time, the share of (pre-tax) income  accruing to the top 10 percent rose from 34.7 to 45.5 percent (with 8 of the 11 point gain going to the top 1 percent). As the right-hand column of the table signals, 51.5%of the total increment in real income over the 40-year period  went to the most affluent 10 percent; less than 10 percent of the gains accrued to the bottom half of the population.

Disaggregating further, Table 2 draws on data from the Congressional Research Service to summarize changes in earnings between 1979 and 2019 for the representative (median) employee, across a variety of employment categories,. Over the 40-year-period, median earnings for employees with an advanced degree increased by 27 percent; for all women, median earnings increased by 28.9%. Men and workers without an advanced degree did not fare well: the median hourly wage for men was stagnant; earnings for the median employee with less than a Bachelor’s degree declined.  Combining two sub-groups (the combination is one with particular salience for political economy analysis of America’s current travails…..),  between 1979 and 2014, the real earnings of the median white male employee in the 25-54 age range with less than a college degree fell by 23.4 percent.

What accounts for the far-reaching distributional changes between 1979 and 2019? The data in Figure 2 and Table 1 are for pre-tax income, so the explanation cannot be found in policy-driven changes in taxes and transfers. Nor do accelerating globalization and far-reaching technological change provide an adequate explanation:  Europe also was affected by changes in technology and trade; however, as shown in Figure 3 (published by The Economist, using WID data), its (pre-tax) distributional changes were far more modest.

An emerging consensus emphasizes the role of ‘pre-distributional’ policies, norms and institutions in accounting for much of the US-Europe distributional divergence.   Here is how  Lucas Chancel (at the Paris School of Economics and co-director of the World Inequality Database ) made the case in a chapter in Olivier Blanchard and Dani Rodrik’s recent co-edited book,   Combating Inequality:

“To understand the US-EU inequality gap one must look at policies impacting pretax income growth….(specifically) inequality differences in access to higher education and training…. differences in the organization of health systems…. in labor market institutions (including minimum wage rules, the power of trade unions and collective bargaining agreements to set wages at the sectoral level)…and the distribution of power in corporate governance bodies.”

Back in 2007, Paul Krugman provided an early, quote-worthy interpretation of the US experience along related lines:

“Surely deindustrialization must explain the decline of unions….Except that it doesn’t. Most of the decline in union membership comes from a collapse of unionization within manufacturing, from 39 percent of workers in 1973 to 13 percent in 2005…..Business interests, which seemed to have reached an accommodation with the labor movement in the 1960s, went on the offensive against unions beginning in the 1970s….hardball tactics….at least one in every twenty workers who voted for a union was illegally fired….” (p. 150)

“CEOs have seen their income rise from about thirty times that of the average worker in 1970 to more than three hundred times as much [in 2005]…… [This change] is largely due to changes in institutions,  and in norms such as the once powerful but now weak belief that having the boss make vastly more than the workers is bad for morale…. The existence of powerful unions acted as a restraint on the incomes of both management and stockholders.….. Unions that might once have walked out to protest against executive bonuses had been crushed by years of union-busting” (p. 145).

Finally, we come to the impact on inequality of fiscal policy.  Figure 4  reports on trends in taxation across the earnings distribution, disaggregating within the top 1%; it uses a comprehensive data set that incorporates federal, state and local tax. Here is how Saez and Zucman (who constructed the figure) describe the resulting pattern:

“The US tax system used to be slightly progressive for the bottom 99 percent of the income distribution, but highly progressive within the top 1 percent….In 1950, for example, the top 10 percent, excluding the top 1 percent, paid average taxes rates of around 25 percent, while the top 0.01 percent paid almost 70 percent of its income in taxes. In 2018, the US tax system looks like a giant flat tax that becomes regressive at the very top end”.

The path from the tax progressivity of the 1950s to the current regime has been circuitous and somewhat opaque. Data on trends in average effective Federal tax rates since 1979 show that the top rate shifted  with the political winds.  Back in 1979, the average effective Federal tax rate paid by the top 1 percent on income of all types (ie the percentage of total taxable income of the top 1% actually paid in Federal taxes) was 35 percent. By 1986, after the Reagan tax cuts, it had fallen to 25 percent. In the mid-1990s, the Clinton years, it was back up to 35 percent. It fell again (to 28 percent) during the George W. Bush presidency. It was back up to 33 percent under Obama – and then down again, in the Trump years, to 25.4 percent.

The rates of taxation on corporate profits also influence distributional outcomes. The Federal corporate tax rate declined from  45 percent in the late 1970s, to 35 percent from the latter 1980s until 2017, and then to 21 percent in the Trump years. Decisions as to whether and how to incorporate untaxed and undistributed corporate profits affects estimates of the extent of overall tax progressivity. Saez and Zucman assign these profits to the underlying shareholders. Having done so, they conclude that the system becomes increasingly regressive, “because of the demise of the federal corporate tax, which in 2018 collected only 1.5 percent of national income, down from 5-7 percent in the 1950s”.

On the expenditure side, as Figure 1 illustrated, redistributive fiscal policy can help reduce the Gini coefficient,. Back in 2007, Krugman estimated that:

“The United States spends less than 3% of GDP on programs that reduce inequality among those under 65.  To match what Canada does we would have to spend additional 2.5%; to match what most of Europe does would require an extra 4% of GDP; to match the Scandinavian countries, and additional 9%.”

Health care reforms aside, as of this writing the USA commitment to a  stronger set of inequality-reducing programs has not changed for the better.

In sum, for about three decades after the Second World War, the American economy seemed to be a well-oiled machine that, notwithstanding many political ups-and-downs, continually produced broad-based growth. Then things changed. While real GDP nearly trebled between 1979 and 2019, more than half of the gains went to the top 10 percent; their pre-tax real income almost quadrupled, and their effective real tax rates declined. About one in five dollars of their gains was paid in taxes. Meanwhile, for broad swathes of the labor force (males especially), real hourly earnings declined.  Even without (yet) delving into the specific political economy causal mechanisms,  that economic polarization of this magnitude has been accompanied by accelerating political polarization  should come as no surprise.