The importance of governance for development


Governance is a hard thing to measure. Even just defining what governance is can be challenging, since different perspectives exist on what variables should be included. For instance, some think of governance rather narrowly, equating it with anti-corruption. The Worldwide Governance Indicators (WGI) provide a more comprehensive answer by defining governance as a set of traditions and institutions by which authority in a country is exercised. These traditions and institutions fall into three broad categories that encompass WGI’s six dimensions of governance.

First, there are the processes by which those in authority are selected, monitored, and replaced (Voice and Accountability; Political Stability & Absence of Violence). Second, there is the issue of capacity of governments to effectively manage resources and formulate and implement sound policies (Government Effectiveness; Regulatory Quality). Third, there is the degree of respect of citizens and state for the country’s institutions that govern interactions among them (Rule of Law; Control of Corruption).

Daniel Kaufmann, the Director of Global Programs at the World Bank Institute, points out ten common fallacies concerning governance, corruption, and development. Among them probably the most striking one is the refutation of a claim that the importance of governance and anticorruption is overrated. In fact, research shows a very large development dividend countries can derive from better governance. It is estimated that if a country improves its governance from a relatively low level to an average level, it can almost triple its income per capita in the long term and reduce infant mortality and illiteracy.

As Kaufmann says, “governance is not the only thing that matters for development (…). But when governance is poor, policymaking in other areas is also compromised.”