Week 9 - Politics and Institutional Reform Flashcards
What were institutions according to neoclassical economics?
institutions were a “residual”
What are institutions according to “New Institutional Economics”?
institutions are the formal and informal rules and norms that govern human behaviour
What do institutions determine?
determine whose choices matters, how choices are aggregated, how that determines the way the policy shapes rules that affect the economy
What is good governance? (World Bank)
changing institutions to unblock growth and development
What is governance?
the exercise of authority through formal and informal traditions and institutions for the common good (includes selecting, monitoring, replacing governments, sound policies and delivering public goods, respect of citisens and state for institutions that govern economic and social relations)
What is politics about and what largely ignores it?
about state power and donor approach to “good” governance largely ignores it (“everyone is interested in studying political institutions that limit or check power (democratic accountability, rule of law) but very few people pay attention to the institution that accumulates and uses power, the state”)
What does the donor approach “good” governance largely ignore?
politics
When was there a move to focus on institutions, “good governance”?
by late 1980s structural adjustment not working as anticipated (FDI not flowing, poverty increased in Africa and Latin America, conflict in Africa) although some progress in implementation (shrinking budgets and reducing number of jobs in state, liberalising economies, opening trade, privatisation)
What is the relationship between”good governance” and World Bank?
hatched as an add-on to neoliberal economic reforms
“root cause of weak economic performance in the past has been the failure of public institutions”, “good governance means public service that is efficient, a judicial system that is reliable, and an administration that is accountable to its public”
focus was on fighting corruption (state officials serve their own interest)
involves promoting “market enhancing institutional reforms” (in agriculture (price flexibility, eliminate marketing boards, credit issued at commercially attractive interest rates, private land titled, upgrade rural roads by local communities), in industry (government gets out of business, creates climate for private investment), foreign aid (channeled to countries deemed “good performers”, overall government should create an “enabling environment”)
What was the World Bank like in the first decade regarding politics and institutional reform in 1991?
conditionalities about political and administrative reform (financial accountability, information transparency, increasingly promote “participation”)
What was the World Bank like in the first decade regarding politics and institutional reform in 1997?
state role to ensure markets
What was the World Bank like in the first decade regarding politics and institutional reform in 1998?
channel aid to “good performers”
What was the World Bank like in the first decade regarding politics and institutional reform in 1999?
new focus on “poverty reduction” (prerequisite for IMF and World Bank lending, “participatory” process required for debt replied
governance broadly defined as traditions and institutions by which authority in a country is exercised (indicators mostly measure compliance with market enhancing reforms and adoption of formal democratic procedures, mostly perception-based surveys)
What is Chang’s criticism of the World Bank governance reforms?
focus mainly on institutions that limit state’s discretionary power, not on those that increase “state capacity” (most attention on institutions that permit market functioning like property rights, contract enforcement, curbing corruption)
reforms were often not adopted as expensive, resistance from elites, economic logic not understood, prejudices among state leaders against professionalism, gender, equity, etc., interdependence of some institutions
What are Chang’s conclusions on politics and institutional reform?
institutions promoted may only be possible after economic development
need to agree what “good” institutions are
takes time to establish institutions
not clear investors were demanding these “good institutions” (Western investments were flowing to China where these “good” institutions were not present, FDI was not the driver of development in most of the countries at the receiving end of good governance reforms)
premature introductions of institutions from capitalist countries had unintended consequences
What is Khan’s criticism regarding politics and institutional reform?
showed that there was no basis to conclude that the market enhancing reforms resulted in better growth (by disaggregating data to account for rich and poor country differences) –> could be reverse causality (first growth, then adoption of familiar market enhancing institutions)
What is market-enhancing governance (World Bank)?
governance to reduce transaction costs to make markets more efficient
What is required for market-enhancing governance (World Bank)?
achieve and maintain stable property rights
maintain a “good” rule of law and effective contract enforcement
minimise expropriation risk
minimise rent seeking and corruption
achieve the transparent and accountable provision of public goods in line with democratically expressed preferences
What is growth-enhancing governance (Khan)?
governance to enable catch up in a context of high-transaction costs (transfer resources to productive sectors, accelerate the absorption of new technologies)
What is required for growth-enhancing governance (Khan)?
market and non-market transfer of assets and resources to more productive sectors
manage incentives and compulsions for rapid technology acquisition and productivity enhancement
maintain political stability in a context of rapid social transformation
rents that facilitate stability and growth
public goods that facilitate stability and growth
What is a summary of growth enhancing governance?
requires technological capacity within the state
measures to ensure against “moral hazard”
growth enhancing institutions gone wrong can be destructive but can also be still make small gains
requires mechanisms to accelerate resource allocation to growth sector (land reform, licensing credit, price controls, fiscal) and accelerate technology acquisition (tax, subsidy, protection, licensing, investment zones)
What is Mkandawire criticism regarding politics and institutional reform?
institutional agenda is single task which is which is to attract FDI
instituions proposed played little role in development success stories (need institutions that can promote transformative change (“democracy” reduced to protecting property rights, reforms “cannibalised” states in Sub Saharan Africa))
“monocropping” (single blueprint of Anglo-American institutions not what Africa needs)
“monotasking” (monetarist policy to control inflation at all costs, which debilitates Central Banks and prohibits any industrial policy)
What are the theoretical challenges to “good governance” reforms from Foucauldians?
“development” as a discourse portrays “government” as a set of technical fixes, devoid of politics and power (state seen as an apolitical tool)
What are the theoretical challenges to “good governance” reforms from within?
institutions are anchored in history and cannot be changed by policy fix (natural state, where elites have privileged access to wealth and authority to limit violence and promote social order)
