Part III: Addressing Governance Constraints

Part III shifts the focus from the broad macro-dynamics of how governance and growth interact to the specifics of micro-level governance initiatives – less as ends in themselves than as means to address binding constraints on development. It examines a variety of different approaches to reform, each better adapted to some country circumstances than to others.

Potential governance interventions can be unbundled across two dimensions: whether the approach is comprehensive or incremental; and whether the focus is on hierarchical (“principal-agent”) or horizontal (“principal-principal”) improvements. This gives us two types of comprehensive reforms: hierarchical reforms which focus on system-wide strengthening of the public bureaucracy; and horizontal reforms which focus on strengthening checks and balances institutions (targeting improvements in electoral systems, and in the capabilities of the judiciary, parliament and other non-executive institutions of accountability). Taken together, these comprise the agenda of ‘good governance’ reform.

If they were implemented effectively, comprehensive ‘good governance’ reforms would, of course, remove binding governance constraints to development. However, comprehensive reform only will gain traction if it is compatible with prevailing political and institutional arrangements, and windows of opportunity for far-reaching change are rare. In most places, most of the time, the incentives, authority and long-term horizon needed for comprehensive reform to take hold will be lacking. In these latter settings, finding a ‘good fit’ calls for a different set of reform options.

A principal goal of Part III is to explore options for easing governance constraints to continuing forward momentum on growth and development in settings where there is little prospect of a great leap forward to good governance. This search is especially relevant for countries where politics is open and competitive, but power is fragmented and contested, time horizons are short, and the rules of the game are personalized. As the chapters in Part III explore, incremental governance initiatives offer the best prospects for getting development in this latter group of countries.

Chapter 8 explores conceptually how to achieve a ‘good fit’ — which conditions are more propitious for top-down public sector reform to succeed, and which are such that incremental and multi-stakeholder approaches are more likely to add value. Chapters 9 and 10 explore multi-stakeholder approaches empirically. Chapter 9 uses the examples of basic education and community-driven development to assess the potential of transparency and participation initiatives to address weaknesses in top-down public service provision. Chapter 10 explores some ways in which multi-stakeholder engagement can support private sector development.

To be sure, an incremental approach lacks the bold allure of comprehensive governance reform. But, as per Parts I and II of this book, the case for incrementalism is based on a different theory of change, one where micro-level initiatives provide a platform for the emergence of ‘islands of effectiveness’ within a broader sea of dysfunction — securing some gains in the short term, and serving as a platform for cumulative gains over the longer-run in both governance and poverty reduction. Paradoxically, it is in these more micro-level incremental initiatives that the human factor – the scope for public entrepreneurship – becomes especially relevant. Public entrepreneurs with the commitment, skill and staying power to build both internal capabilities and external alliances play a central role in enabling islands of effectiveness to take root within a broadly dysfunctional public sector.

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