If politics is the problem, how can external actors be part of the solution? New World Bank paper

August 2, 2016

     By Duncan Green     

house-of-cards-netflixThe new paper comes from Shanta Devarajan, the Bank’s Chief Economist for the Middle East and North Africa Region, (recently drafted in to help get the WDR to the finishing line) and Stuti Khemani, Senior Economist at its Development Research Group.

The World Bank seems currently to be awash with fascinating reflections and rethinking on politics and power. This one’s big message is perfectly captured in the title and abstract (my comments in italics):

‘Despite a large body of research and evidence on the policies and institutions needed to generate growth and reduce poverty, many governments fail to adopt these policies or establish the institutions. Research advances since the 1990s have explained this syndrome, which this paper generically calls “government failure,” in terms of the incentives facing politicians, and the underlying political institutions that lead to those incentives.

[starts off by acknowledging that it’s all about the politics, and requires a shift away from the purely technocratic ‘first best’ thinking the Bank has often shown in the past]

Meanwhile, development assistance, which is intended to generate growth and reduce poverty, has hardly changed since the 1950s, when it was thought that the problem was one of market failure. Most assistance is still delivered to governments, in the form of finance and knowledge that are bundled together as a “project.”

[this is pretty powerful stuff. For decades aid has been targeting the wrong thing, and is trapped in the straitjacket of ‘the project’. That combination has actually made matters worse in some cases, by shovelling money and kudos to failed institutions]

This paper proposes a new model of development assistance that can help societies transition to better institutions. Specifically, the paper suggests that knowledge be provided to citizens to build their capacity to select and sanction leaders who have the political will and legitimacy to deliver the public goods needed for development.

Shanta and Stuti fig 2

[the authors think donors should opt for a much more modest and general ‘enabling environment’ approach, getting information to citizens but acknowledging that what happens next is down to domestic politics, and largely out of their hands]

As for the financial transfer, which for various reasons has to be delivered to governments, the paper proposes that this be provided in a lump sum manner (that is, not linked to individual projects), conditional on the government following broadly favorable policies and making information available to citizens.

[Donors need to go back to general budget support to governments, with political conditionalities linked to the enabling environment point]

So much for the abstract. A few thoughts on the rest of the paper (only 22 pages, so even I’ve read it).

There is a clarion call for humility from donors faced with the reality of complex political and social systems:

‘There is an inherent hubris in assuming that external actors will have the capacity to identify the appropriate entry points and engineer reforms in the right direction, simultaneously solving both the technical policy problem and that of adapting it to political constraints.  Ex ante, there is little reason to believe that the selected entry points are the right ones; they may make the situation worse. The incentives of donor organizations to show results and count reforms as success are further reasons to search for other approaches that do not depend entirely upon external agencies’ getting both the economics and the politics right.’

At a time when many researchers lament the deterioration in the quality of democracy and accountability in many countries, and considering Shanta works on the Middle East, the authors are strikingly upbeat.

‘During the past three and a half decades, the distribution of political institutions across countries has steadily shifted towards greater political engagement. (see graph) Political engagement within countries is also growing through elections at the local level.’

The thinking reflects Stuti Khemani’s recent book, Making Politics Work for Development, which argues that the

They can change the status quo, not donors

Only they know how to change the status quo, not donors

best lens for understanding government failure is not democracy v authoritarianism, but ‘political engagement’, defined as ‘the participation of citizens in selecting and sanctioning the leaders who wield power in government, including by entering themselves as contenders for leadership.’ That engagement happens under both democratic and non-democratic governments, albeit in different ways.

That’s all pretty high-level stuff – what are the implications for work on the ground?

‘For development assistance to be effective, the tradition of “bundling” knowledge and financial assistance—in a project, for instance—has to be abandoned.  Knowledge assistance should be provided to citizens to help them in holding the government accountable.  External actors should target transparency to nourish the growing forces of political engagement. External agents have technical capacity for generating new data and credible information through politically independent expert analysis. This technical advantage stands in sharp contrast to their lack of such advantage when it comes to building capacity and organizations for collective action from the outside.

What is different about the recommendation here is the importance of communicating to citizens, in ways that effectively shift citizens’ political beliefs and behavior on the basis of technical evidence. The traditional policy approach has treated leaders as the sole audience of expert analysis, and has treated communication to citizens as a matter not requiring scientific investigation. Communicating information to influence beliefs and political behavioral norms requires an understanding of the institutions within which and through which citizens form these beliefs.’

I found this all very thought-provoking in at least two big areas. First, should donors be doing more politics or less? The authors argue that outsiders are simply unable to get involved in the detail of domestic politics for reasons both Safeguards-image-IAP-554x370of knowledge and politics (interference). They should therefore concentrate on creating an enabling environment through knowledge and its dissemination.

But the opposite conclusion, shown in Thinking and Working Politically, Doing Development Differently etc, is that donors can indeed get involved, but need to be far smarter and more immersed in local contexts to be able to do so.

Second, if you are sceptical about the Bank, this looks suspiciously like an abdication of responsibility. There’s (another) big row going on in Washington at the moment, with NGOs claiming that the Bank is watering down the social and environmental safeguards on its lending (Oxfam agrees). This paper could easily provide the intellectual justification for this – ‘hey we can’t do politics so let’s replace all those safeguards with some vague (and easily fakeable) conditions on transparency and information, then bung grants to governments, no questions asked.’

As usual, I’ve got feet planted firmly on both sides of the fence on both of these dilemmas. Painful, but I’m getting used to it.