Trends In Governance and Reform

Tackling the Problem of Corruption

Corruption is the abuse of public trust for private gain; it is a form of steal
ING. Indexes of corruption regularly rate the incidence of corruption far higher
in developing countries than in developed countries. This is understood to
reflect both cause and effect. An absence of corruption encourages investment
and efforts to expand the pie rather than merely fight over its distribution,
and thus encourages growth; to this extent, improvements in governance, in
general, and reduction of corruption, in particular, could be means to accelerate-
ate the process of development. In addition, as societies grow wealthier, good
governance becomes more widely demanded by the population. This latter
effect makes simple correlations between income and good governance dif-
difficult to interpret: Which causes which? Poor governance practices, such as
bribery, controls over the press, and limits on civil liberties, are often found
together and are clearly mutual reinforcing. As pointed out in Chapter 2,
there is. clear evidence that good institutions such as rule of law and con
strains on elites lead to higher growth and incomes. But reform can also beget
reform. or example, when Taiwan's press obtained substantial freedoms,


many public scandals became publicised, which in tum helped generate
public pressures tor roomy the introduction of elections provided a mecha-
n ism to enforce this popular will.
The elimination ot coruption 1s important for development for several
reasons. First or all, as just noted, honest gOvernment may promote growth

corruption with public empowerms tion, the associatio te growth
corruption with pubiic empOwerment suggests that it is a direct objective oft
development (see naprer 1. Finally, the effects of corruption fall dispropor-
tionately on the po0r and ate a major restraint on their ability to escape fromn

poverty.
, The elimination of corruption and improvement of governance, in general,
can thus also be viewed as part of an antipoverty strategy. While the rich may
ay large bribes unaer corrupt regimes, the poor generally pay much larger
fractions of their incomes in bribes and other forms of extortion. In other
words, corruption may-De viewed as a regressive tax on the absolutely poor. in
addition, government for sale means government for the highest bidder. The
poor find fewer services in their communities, including poor education and
health taCıliies, when corrupion is rife. This makes it more difficult to accu
mulate the means to escape rom poverty trapS. in addition, microenterprises
of the poOr pay a much igher raction of their sales in bribes than larger furms
do, and low-income households pay a much larger percentage of their incomes
in bribes than higher-income households, as Figure 11.3 illustrates for the case
of Ecuador.

Countries that have avoided or successfully tackled corruption have
tended, on average, tO promote competition and entry in the economy, avoid-
ng too much power in the hands of large monopolies such as those in the
energy sector in many countries, and have ensured that privatized firms faced
competition; promoted civil service professionalism, with improved pay and
incentives tor public servants; made public expenditures more, transparenty
with cleárer rules of procurement and budgeting reduced immunity trom
proseciul ion of executive, legislative, and judicial figures; provided judicial
independence; established and enforced meritocratic, transparent promotion
policies; and eliminated inefhcient regulations and made needed ones more
transparent.
With many forms of corruption and differences across nations and locali-
ties, there is no single best way to fight it. Basic public monitoring even
by itself may matter, in procurement, or in local government public funds
receipts and disbursements.
Kecent experience also suggests that even in broaaiy corrupt environments,
real progress in overcoming gOvernment shortcomings 1s achievable, at least
in some contexts, through focused retorm eftorts at the local level. This may
threaten some local interests but need not threaten (or may even benetit) more
national-level interests. For example, on net urban elites probably do not
Denent rom village power abuses, or from rural teacner and health worker
ruancy, and may back retorms that address such problems. Apotential example
1ocaly based popular reforms is the Community monitorng or tocal health
acuties in Uganda as examined in B5ox 4.2. Such examples also raise the
DrOader tantalizing prospect that higher-level institutions eventualy can be
reformed from the bottom up.


Decentralization
Decentralization has been a long-ternm trend in developed countries. The
United States, Canada, and Germany have had significant powers at the state
and local level enshrined in their constitutions. The European Union has been
proceeding-officially, at least-on the principle of "subsidiarity" meaning
that feasible decisions are made at the most local level. The United Kingdom
has decentralized authority to Scotland and Wales and also to local authorities
in England. In Italy, power has been transferred to the 20 regions and their
provinces. Local governments are closer to the urban and rural problems they
must address.
Recently, trends toward decentralization and greater urban self-govermment
have been growing in the developing world as democracy has spread in Latin
America and elsewhere, and the political process has allowed for providing
greater autonomy, notably more fiscal autonomy, for regional and local levels of


government. The constitutional retorm that has frequently accompanied democ-
ratization has in many cases provided an opportunity to codify greater local
autonomy. A major motivation of the central government has often been to
share fiscal burdens with regions and cities, but decentralization has some-
times taken on a life ot its own that has been difficult to contain.

Decentralization in Brazil to its 26 states and some 5,000 municipalities
dates at least to the 1891 constitution, but the recent period of devolution
of authority started with the constitutional reform of 1989, which gave new
authority and responsibilities to the states and developed fiscal federalism,
increasing the local share of govemment resources. The fiscal decentralization
occurred in the wake-of the debt crisis of the 1980s and the perceived need
to carry out structural adjustment by lowering the federal budget deficit and
spread some of the adjustment burden to the regions. However, many observers
consider the resources available to states and ciies too small in relation to
responsibilities, with still more burden than opportunity.
A wave of decentralization in Mexico also began in the late 1980s in the
wake of the debt crisis, alongside programs of privatization, liberalization,
and deregulation. Constitutional reforms transferred additional power-and
responsibilities-to the states and municipalities. But as in Brazil, local gov-
emments complain that they have insufficient resources to carry out their
added mandates.
A third Latin American example is the Bolivia decentralization of 1994,
which recognized local foms ot organization and citzen parucpation indigenous
and peasant organzaions have sougnt an active role under the neW system,
althougn conilict has continued. The decentralization resulted from a co
bination of pressures from local government and popular otgauzations and
rom internatiotaa 8
The experience of Senegal is a well-known example ot decentralization in
Africa. In 1996, presidents of rural councils were made more accountable to
their constituencies, and regional governments were estabsned to develop
and carry out regional development policy. Fiowever, the iscal imitations of
local government in Latin America are smal compared to th0Se taced in Senegal,
and thoroughgoing fiscal retorm remains a top prionty. There were high hopes
for the democratically elected government that came to power in 2013, and the
experience will be watched closely.
in Asia, decentralization has proceeded apace with democratization, while
long-standing democracies such as lndia have also provided greater local con-
trol, notably under india's 74th Constitutional Amendment. In China, decen-
tralization has ocCurred to SOme extent.

Development Participation

it the goal of economic growth is humarn development, then without par-
ticipation, we could have economic growth without development. lndeed,
participation -a say in development policies by the people most aitected by
them -1s arguably in itselt a chiet end of development. Participation is also
a means to further human capabilities and other goals of development, asS
denned in Chapter 1. Moreover, economic growth 1s greatly facilitated by
numan development and impossible to sustain without it. Development par-
ticipation has been shown to make projects work better. WVith genuine and full
participaien by beneficiaries on what projects are chosen and in the way that
developrnent assistance getsS used more generally, we shOuld expect less cor-
ruption and greater development results per dollar of aid spent.
Development participation has been discussed tor decades. The United
Nations has been promotng it since the 19703; it was an academic fad in the
early 1980s; and in the late 1990s, the World Bank came out vocally for devel-
opment participation. Criics have complained that when the World Bank uses
the term participatOn, it oftern seems meant as a strategy to reduce project costs
or to deflect criticistn. But the World Bank has clearly discovered the merits
of gettin8 governments and Civil society to take ownership of development
projects and retorms. Oniy then are reforms undertaken in a serious and sus
tainable way.
What are the potential objections to the principle ot genuine participahon
First, the poorest countries zieed to make some policy decisions and get some
reliet operaions up and running immediately. The highly indebted poor couln
tries that need immediate debt relief feel pressure to prepare plans quickiy and
provide littie more than nominal time for civi-society participation. Even ir tne
mechanisms of participation are already in place, it takes time to operate theny
to make sure there is sufficient voice, to aggregate the prelerences voiced, and to
work out a means of implementation. But in most cases, mechanisms of genuie


participation are nOt in place; doing so may take years, even with the 
eration of natonai 8OvemmCht and iocal power brokers
Second, unheaithy and unskilled people
pate effectively in development projects, let alone have a full voice in the dec
sions that attect thCm. A third objection is the c
ying to Survivc 1hey may receive a low ne po0r are busy
mean they nave tme available for volunteor w cos not
women. 1 hey work long hours in botlh oco s 1s especally true of
they cannot aftord altematves to hOusehold production. They may reason
ably vieW expectations that they participate
and developing-cOunay 8ovemments need to develop ways to reward par
ticapatton, Dut a biS part of the problem is
for participation in the tield. Ihese three objections suggest that participation
may nave limits.
Distinctions between different types of participation are a valuable start
ng pout dd tdve cen suB8ested by a number of authors. For example,
Jonort ttpnotr examine degrees of participation along three
dimensio1s: Kintas or paricipation (n decision making, implementation, ben
efits, and evaluation), 1denhty of participants (including residents, leaders,
government personnel, and toreign personnel), and hoW participation occurs
(the basis, form, extent, and effect of participation). David Deshler and
Donald Sock distinguish "genuine participation, which can include elther
citizen control or cooperation, with delegated power or partherslp agree
ments Derween citzens and agencies, from "pseudo-participation," which can
mciude placation, consultation, or information without power sharing, as well
as therapPy and manipulation. The deeper problem is that genuine partici-
pation 1s often not in the interests of national or local government officials and
other elites.

probabiy not able to partici-

c acvity and at home because

tnremunerated labor. Donors

t is the superticiality or what passes

Many NGOs are committed, at least on paper, to the more complete forms
of participation, and aid is often channeled thrOugn these organizatnons. But
NGO staf often perceive, rightiy or wrongy, that beneticiaries do not have
the skills and experience needed to make furndamental decisions or admin-
ister projects efficiently. Administrative competence of benericiaries is a less
tangible Outcome than, 1or exampie, the percentage ot farimers Who get linked
up to irrigation canals; so staft, even with the best of motives, may not view
genuine participation as a priority but more as a distraction. It is also obvious
that staff owe their livelihoods to development work and do not have a mate-
Tial interest in working themselves out or a job. Ihus, voluntary failure may
again be present, and staft are motivated to encourage parhcipation as long as
t increases the eftiCier:cy ot the project, but not necessarily Deyond that point.
Such a level of participation may bring benetits, Dut Tiot normally the socially
transformation benetits of genuine participation
Sarah White reports on an NGO in the Philippines that was committed to
genuine participation in theory and enatbled local people to develop and con-
troll their own organisation. But when this organisation wanted to bypass the
TONG and interact directiy with donor, the Wouldn't not allow it to do so.
Victoria Kitchener reports on a normal education project run by Angolan
(ave the Children/FDC in Burkina Faso). Participation itselt is one of the six
Objectives of the project, to "increase community participation in educational

PART TWO Problems and Policies: Domestic

decision making, and in the management ot educational activities." Participant.
pants are expected to play an active role in recruiting teachers and student
determining curriculum, building and maintaining the schoolhouse, and ay-
1ng costs Such as teacher salaries. Overall, the projects woodlot rank very hioh ?
participation typologies such as that of Cohen and Uphot, providing for suh
substantial participation in decision making, implementation, Benefits, and eval-
nation. But at the manse time, Kitchener notes an undertone or planner-centred
participation, especially in the emphasis on the responsibilities of beneficial-
rise. To fieldworkers, participation comes with an obligation that recipients
give something in rerun-payment, in a sense tor the benefits of a project:
financial, in-kind, or at least the donation of time. But participants naturally
resent this requirement, at least in a context of paternalism. typically, villagers
cannot afford to repudiate the GO; they do benefit from the assistance but
lack the resources to continue the project on their own.""
Genuine public participation at all levels provides a foundation for dem
Autocratic and responsive government. Participation will not cure all of the ills
of government, including the limits of democracy itselt, but it will go some
distance to alleviating the ills of the politics of development policy retorm.
Unfortunately, the rhetoric is still well ahead of the reality on the ground.

A Three-legged Stool We may conclude, then, that successful economic
development requires improved functioning of the public, private, and citizen
sectors. Each has serious weaknesses that must be addressed. Each leg of this
"three-legged stool" needs strengthening. At the same time, each plays an
essential and complementary role in attaining balanced, shared, and sustainable
development.