How Good Governance Got a Bad Name – and Why Governance Still Matters

Author(s): 

Since the rise of governance on the development agenda in the 1990s, followed by the proliferation of governance programs, a chorus of skepticism has emerged over the efficacy of governance work.[1] Scholars like Merilee Grindle and Brian Levy caution us that the governance agenda today—encompassing public administration, rule of law, and accountability to citizens—has become “inflated” and “counterproductive.”[2] These scholars question the wisdom of donors and development practitioners who push their governance wish lists on any country that might listen. They warn about pitfalls in governance programming and rightly challenge the wisdom of a checklist approach.

Yet as we scrutinize the difficulties involved in improving governance, we must take care not to throw the baby out with the bathwater. Governance will remain a central challenge of development, not a fad. Although a healthy skepticism can sharpen the choices made around governance work, it would be a serious mistake to reject out of hand the opportunities for better governance.

Is good governance necessary?

Skeptics of the good governance agenda raise several types of questions, each of which should be addressed in turn. The first question they raise is, “Is good governance necessary?” Actually, a number of countries have grown quite rapidly despite their governance syndromes or the absence of formal institutions. Corruption does not seem to have slowed Bangladesh from growing, for example, nor has the absence of formal property rights stopped China. Some even argue that the satisfaction of elites who demand economic rents is necessary to gain their support for investment.

Instead of good governance, Grindle has proposed “good enough governance”—a minimal degree of government performance and civic engagement—as sufficient for development to occur.[3] While many factors are conducive to or associated with development, few should be held as preconditions for development, says Grindle. With a “good enough” approach, governments seek to unleash growth by fixing binding constraints at the margins. They might establish conflict resolution systems, for instance, or provide basic services.[4]

The absence of hard prerequisites, however, does not mean that governance can be discounted entirely. On balance, there is now a strong body of evidence which shows that institutions and rule of law matter tremendously to economic development.[5] Granting that episodes of high growth do occur in spite of poor institutional quality, reversals are also common in unpredictable business environments. Volatile, unaccountable government can trigger severe growth reversals, as Zimbabwe and Venezuela have experienced in recent years.

Growth is hard to sustain without institutional development, especially as economies become increasingly complex. Extended growth “requires committed, credible, and capable governments” and functioning market systems that provide incentives to firms and entrepreneurs.[6] Credible governments underwrite inclusive institutions that expand participation in the economy and individual choice.[7] In this regard, well-governed democracies have certain advantages. “Because democracies are accountable to the public rather than the elite, they are more likely than autocracies to produce public goods, invest in human capital, maintain rule of law, and protect private property rights.”[8]

Can governance be improved?

The second question is whether governance can effectively be improved through conscious effort. Despite significant research showing that governance principles matter, experts have not been able to translate those principles into reliable methods for improving governance. In practice, institutions of governance are complicated, often political, and always shaped by context. Too often, efforts to transplant governance structures into new settings result in superficial change. As Matt Andrews points out, governments frequently adopt similar forms of governance which do not perform similar functions.[9] As a case in point, many governments have adopted anti-corruption commissions along the model of Hong Kong and Singapore, but rarely if ever have replicated their success.[10]

Critics of “good governance” initiatives bemoan a tendency to impose a veneer of best-practice institutions.  Although international best-practice solutions appear optimal and efficient, they risk becoming cosmetic, or worse, distorting local practices that were working well.[11] If policies are introduced without sufficient local information and support, they are liable to run afoul of powerful incentives and interests that shape implementation. Often, best practices constitute solutions in search of a problem, solutions that were devised to meet the needs of other countries at other times.

Genuine improvements in governance, however difficult, are not impossible. Georgia managed to restructure and professionalize its dysfunctional police force after the Rose Revolution. Hong Kong and Singapore famously brought high levels of corruption under control from the mid-1970s onward. Peru formalized 1.7 million urban real estate assets between 1991 and 2007, thereby extending legally recognized property rights to poor Peruvians and contributing to political stability. Chile moved from crisis in 1973, through dictatorship, to achieve constitutionalism and democracy in the 1990s, with greater inclusion and reduced poverty.

These gains take time and are subject to setbacks. Incremental progress and informal compromise are easily overlooked. Sometimes reforms begin quietly through localized agreements. One such example is the Islands of Good Governance program in the Philippines, which recognizes public sector institutions that articulate and implement governance strategies. This program started with eight mayors who were motivated to make their cities competitive and livable, and then expanded to include another 40 local governance units. Cities like Balanga and Dipolog have been certified after implementing a balanced scorecard strategy and demonstrating achievements in areas such as public revenue generation, poverty reduction, and service delivery.[12]

Are developing countries ready for good governance?

A third critique of good governance asserts that standards set by developed countries are beyond the reach of developing countries and provide inappropriate benchmarks for them. Developing countries cannot attain these exacting standards without having the necessary resources, institutional capacity, political support, and social conditions. According to this critique, countries should sequence their economic, political, and institutional changes. They should defer governance reforms until conditions become favorable.

The calls for sequencing take different forms. Common recommendations include the following: to show flexibility in selecting which institutions to fix; to tolerate informal institutions and rents; to wait until higher levels of economic development are achieved before pursuing governance reform; or to defer democracy until state capacity and a middle class are in place. Levy calls for recognizing the limits of reform. He suggests that it is easier to begin with “small-g” governance reforms, such as improvements to public service delivery, which are more politically feasible. By contrast, “Big-G” governance reforms entail building institutions of accountability, for which there is less appetite among policy elites.[13]

As appealing and helpful as sequencing arguments can be, they run the risk of omitting crucial considerations. If sequencing presumes that enlightened leaders will make appropriate governance reforms at each stage of development, the drivers of reform and political economy have been overlooked. More often than not, autocrats fail to implement reforms to sustain development because they are not held accountable.[14] In places where the economy thrives despite a poor governance environment, either the political claims on successful business grow or powerful business interests threaten to capture the state.

Sequencing involves trade-offs, and those trade-offs must be weighed. At times, the cost of deferring reforms can be unacceptably high, especially when delay reinforces privileged interests. In the transformation of post-Soviet countries, the imperative was to reform rapidly in order to cut off rent-seeking which would stall further reform.[15] When weighing trade-offs, one should not assume that democracy or governance must be sacrificed for development since the overall evidence does not support this. If sacrifices are to be made in the name of sequencing, then, the trade-offs should be expressly articulated and not imagined.

It is helpful to think of governance in a dynamic way, not only as a good that needs to be produced. Governance deals with the central, living questions of decision making and government performance. Regardless of a country’s level of development, governance entails prioritization and making authoritative decisions. Over time, the development of effective institutions helps countries to frame better, more predictable decisions.

Can a governance agenda be harmful?

The final, most serious question raised by critics is whether the pursuit of good governance can harm society. One of the stronger accusations is that premature democratization destabilizes countries, as Stephen Krasner observes in Gaza and Egypt.[16] Such cases are usually associated with rapid transition under an initial condition of weak governance. More typically, Grindle observes that, “Commitment to the good governance agenda… means resources and public energies focused on achieving this very difficult goal and we may well ask whether the resources and energy might better be focused on other aspects of development.”[17] Simply put, too many demands are placed on weak governments. From another angle, Levy cautions that social engineering of governance reforms risks disrupting otherwise functional systems. Where “virtuous circles” of growth are building momentum for institutional change, he argues that reformers should resist breaking this momentum of whatever is working.[18]

Against this need to respect local systems, one must still weigh the risks involved in ignoring governance failures. Governance failures can be hugely costly. Situations of apparent stability have at times proven completely hollow and broken down rapidly, as was the case with long-time dictatorships in Tunisia, Egypt, Libya, and Syria at the onset of the Arab Spring. In such cases and others, corruption has had pernicious effects that extend beyond transaction costs to the point of seriously subverting development objectives. Ukraine’s inability to progress despite two revolutions is in large part due to corruption and its domination by oligarchs.

It must be remembered that effective institutions of governance are essential means to create predictability and adaptability in changing societies. Grindle was not so much attacking governance per se but rather the expansion of the governance agenda to encompass a very wide range of development objectives. “The danger is overloading the development agenda, inflating what ‘must be done’ beyond the capacities of most countries.”[19] How, then, can countries navigate the building of governing capacity while balancing priority needs?

Ways forward

The chief insight offered by the critics of “good governance” is that best-practice ideals make poor guides to navigating reform in the context of developing countries. Those governance recommendations that glorify blueprints and checklists should indeed be viewed with a degree of skepticism. A heaIthy skepticism of such maximal recommendations, however, does not preclude the possibility of improving governance, of moving in the direction of “better governance.” The search for alternative governance models to meet citizens’ needs will remain an integral part of development.

Here are five tips for pursuing better governance:

  1. Build governance practices as demand-driven responses to locally-identified problems.[20] International solutions should not precede local problems. A demand-driven approach targets resources better, engages stakeholders around real interests and concerns, and increases the likelihood of a good institutional fit with local practice.
  1. Proceed step by step with reform, experimenting and learning from each iteration. A “with-the-grain” approach implies working through learning and political processes rather than skipping straight to prescribed ideals.[21] An iterative approach differs from rigid sequencing because it does not assume that governance must be traded off.
  1. In conditions of weak governance, build on islands of good governance or “second-best,” locally devised institutions. Build on what works. Governance can be built on emerging practices instead of replacing them.
  1. Explore and expand the space for feasible reforms. To be sure, many reforms are not politically feasible. Even so, seek wedge issues and new coalitions that can broaden discussion and alter the political economy.
  1. Utilize processes of democratic governance such as consultation, advocacy, and dialogue to search for solutions. These processes require a degree of freedom and openness but nevertheless can be used in the absence of fully fledged democratic institutions. Processes that produce agreement and results can later be institutionalized and opened up to wider participation.

Kim Bettcher leads the Center for International Private Enterprise’s knowledge management initiative, which captures lessons learned in democratic and economic institution-building around the world. The initiative shares strategies, best practices, and lessons with an international network of reform leaders. Bettcher has written and edited numerous resources for CIPE, especially toolkits on public-private dialogue and anti-corruption, a report on Creating the Environment for Entrepreneurial Success, three case study collections, the CIPE Guide to Governance Reform, and CIPE’s 25-Year Impact Evaluation. Bettcher has published articles in the Harvard Business Review, Party Politics, SAIS Review, and the Business History Review. He has taught as an adjunct professor at George Mason University's School of Public Policy and was previously a research associate at Harvard Business School. Bettcher holds a PhD in political science from Johns Hopkins University and a bachelor’s degree from Harvard College.


End Notes:
[1] Jomo Kwame Sundaram and Anis Chowdhury, eds., Is Good Governance Good for Development? United Nations Series on Development (London: Bloomsbury Academic, 2012).
[2] Merilee S. Grindle, “Good Governance: The Inflation of an Idea,” Center for International Development Working Paper No. 202 (Harvard University, October 2010); Brian Levy, Working with the Grain: Integrating Governance and Growth in Development Strategies (Oxford University Press, 2014).
[3] Merilee S. Grindle, “Good Enough Governance: Poverty Reduction and Reform in Developing Countries,” Governance 17, no. 4 (October 2004).
[4] Merilee S. Grindle, “Good Enough Governance Revisited,” Development Policy Review 25, no. 5 (2007).
[5] Daron Acemoglu, Simon Johnson, and James A. Robinson, “The Colonial Origins of Comparative Development: An Empirical Investigation,” American Economic Review 91, no. 5 (December 2001).
[6] Commission on Growth and Development, The Growth Report: Strategies for Sustained Growth and Inclusive Development (Washington, DC: The World Bank, 2008).
[7] Daron Acemoglu and James A. Robinson, Why Nations Fail: The Origins of Power, Prosperity, and Poverty (New York: Crown Business, 2012).
[8] Boris Begović, “How Democracy Influences Growth,” CIPE Economic Reform Feature Service (July 1, 2013); Daron Acemoglu, Suresh Naidu, Pascual Restrepo, and James A. Robinson, “Democracy Does Cause Growth,” forthcoming in Journal of Political Economy.
[9] Matt Andrews, “Good Governance Scripts: Will Compliance Improve Form or Functionality?” in Jomo Kwame Sundaram and Anis Chowdhury, eds., Is Good Governance Good for Development? United Nations Series on Development (London: Bloomsbury Academic, 2012).
[10] Indonesia’s KPK may prove itself as another example of an effective anti-corruption commission.
[11] Dani Rodrik, “Second-Best Institutions,” National Bureau of Economic Research Working Paper 14050, June 2008.
[12] Jesus P. Estanislao, It Can Be Done: Bright Spots in the Governance Reform Movement in the Philippines (Manila: Institute for Solidarity in Asia, 2016); John Morrell, “Instituting Improvements in Public Governance in the Philippines,” in Strategies for Policy Reform: Case Studies in Achieving Democracy That Delivers Through Better Governance (Washington, DC: CIPE, 2015).
[13] Brian Levy, “The Case for Principled Agnosticism,” Journal of Democracy 21, no. 4 (October 2010).
[14] Thomas Carothers, “The ‘Sequencing’ Fallacy,” Journal of Democracy 18, no. 1 (January 2007).
[15] Anders Åslund, How Capitalism Was Built: The Transformation of Central and Eastern Europe, Russia, the Caucasus, and Central Asia, 2nd edition (Cambridge University Press, 2013).
[16] Stephen D. Krasner, “Seeking ‘Good-Enough-Governance’ – Not Democracy,” Reuters blog, September 22, 2013.
[17] Grindle, “Good Governance: The Inflation of an Idea.”
[18] Levy, Working with the Grain.
[19] Grindle, “Good Governance: The Inflation of an Idea.”
[20] See for example the Problem Driven Iterative Adaptation approach of the Center for International Development at Harvard University.
[21] Levy, Working with the Grain.

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