Developm

ent Stra

tegies

Integra

ting G

overn

ance and G

rowth

Brian Levy

Francis

Fukuya

ma

Laura BriantAlexandre Desaunay

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CONTENTS

1. INTRODUCTION

2. DIMENSIONS OF DEVELOPMENT STRATEGIES

3. SEQUENCES

4. DEVELOPMENT DECISION-MAKING

5. CONCLUSION

INTRODUCTION

• Development is a multidimensional phenomenon: political, economic, social and all are interconnected.

• Policy maker need to think strategically, meaning prioritization and sequencing.

• Strategy implies are clear goal: growth, democratization, rule of law, vigorous civil society.

INTRODUCTION

5 broad dimension of development:

-Economic growth

- Development of civil society

- State building liberal democratic political institutions (including rule of law and electoral democracy)

DIMENSIONS OF DEVELOPMENT STRATEGIES

Economic growth

• defines as increasing per capita (GDP)

• Some growth strategies result in a more egalitarian income distribution than others ( Japan, South Korea)

• Different approach in the 1980’s and 1990’s: « washington consensus  » = establishment of different policies to reduce state intervention in favor of market pricing.

DIMENSIONS OF DEVELOPMENT STRATEGIES

Development of civil society

• Definition: we have a change in a society when it shifts from an agricultural society to an industrialized one. In the former, social relationships are based on kinship, ethnicity, social class and gender.

• Social hierarchies are often inherited and very little opportunity to change status.

• Division of labor: limited given the small size of market.

• A modern society emerges when social groups between the family and the states are able to freely organize on the basis of shared passions and interests.

DIMENSIONS OF DEVELOPMENT STRATEGIES

State building

• Itself a multi-dimensional phenomenon

• State building is the precursor of and necessary condition for either liberal rule of law or democracy

• Max weber’s definition of the state: ” a legitimate monopoly of force over a defined territory”

• State building involves creating administrative capacity in the form of public bureaucracies

• Core state functions include the ability to extract taxes and the ability to budget and spent money

DIMENSIONS OF DEVELOPMENT STRATEGIES

Liberal democratic political institutions

• Establishment of Modern political institutions limits that power by reducing the state’s discretionary use of force.

• Liberal means rule of law: property rights, adjudication of commercial claims key to sustained economic development; it is also the protection of privacy, human rights. Universalization of the rule of law allows larger markets, greater competition and thus more economic growth.

• Democracy is popular sovereignty through regular multiparty elections.

• Other mechanisms of accountability such as : separated powers , free press.

SEQUENCE 1: CAPACITY-BUILDING

• Poor country without growth government doesn’t work (corruption…) High cost or risk for private investors and entrepreneurs. So first, state capability; then economic growth:

3 possible channels:

• Direct: better policies, more efficient infrastructure, efficient administration attracts investors.

• The expectation of building state increases state credibility and thus attracts investors

• If the state is “fair”, the civil society will approve it and the state will be more credible.

• Long term: growth changes the society and as we have said, this reinforce political institutions

SEQUENCE 1: CAPACITY-BUILDING

• It shows how the building state capacity can generate a virtuous development spiral

• The first step is an investment in state capacity building.

• The second step applies this newly built capacity to promoting economic growth

State capacity building as an entry point for development

SEQUENCE 1: CAPACITY-BUILDING

• Channel 2a shows the direct links between improvements in state performance and economic performance

• Channel 2b shows the expectations-driven impact of the emergence of leadership perceived « the political will » to build state capacity.

• Channel 2c highlights political leaders can make the capacity and credibility channels mutually reinforcing by asserting a broader commitment to « fairness »

SEQUENCE 2: TRANSFORMATIONAL GOVERNANCE

This consists in applying the rule of law and democracy. In developing countries, these two are mutually reinforcing.

3 channels:

• Democracy increases legitimacy and better policies.

• Rule of law: decreases uncertainty.

• Increases state capacity

• Emergence of civil society and this could increase credibility and legitimacy and thus growth

Institutional transformation as an entry point for development

SEQUENCE 2: TRANSFORMATIONAL GOVERNANCE

Figure 2 shows three distinct channels where a transformation of political institutions could generate a virtuous development

• The first channel [steps 2ai & 2aii ] show the direct impact of a transformation of political institutions on credibility and legitimacy

• The second channel (steps 2bi & 3) linking political institutions and growth through state capacity.

• The third channel (steps 2ci and 4) linking political transformation and growth works through the development of civil society

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SEQUENCE 3: ‘JUST ENOUGH’ GOVERNANCE

• Entry point: Growth

• Empirical analysis: Hausmann, Pritchett and Rodrick (2004). They found that: “moderate changes in country-specific circumstances […] can produce discontinuous economic performance”

• Goal: Sustain growth with incremental reforms to overcome crisis virtuous cycle

Sustaining growth throught incremental institutional reforms

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• Experiences: The ‘Bangladesh paradox’

Thailand

• Constraints: Economic and institutional environment can be too weak

Not all binding constraints can be eased through incremental measures

• Conclusion: Good strategy for short-term development

SEQUENCE 3: ‘JUST ENOUGH’ GOVERNANCE

SEQUENCE 4: BOTTUM-UP DEVELOPMENT

• Entry point: Civil Society

• Direct impact on political institutions and state-building:

– Liberal democraty: civil society increases demand for greater democrary

– State-building: free media and organized citizens’ groups promote transparency (quality and accountability)

Bottom-up Reform

SEQUENCE 4: BOTTUM-UP DEVELOPMENT

• In contry where the other channels are blocked but can also be a critical complementary component for the other strategies.

• Experiences: Poland

Ukraine

• Conclusion: impact on growth, state capacity and governance are not very clear in short run

HOW THE SEQUENCES INTER-RELATED

• The four sequences: « ideal types »

• Conditions change all the time reality may be a hybrid of more than one sequence

• Interaction between the sequences

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DEVELOPMENT DECISION-MAKING

• Key issue: balance between choice and constraint Example of Ethiopia choice is constrained by country-specific history and politics

• Making choice: governance reforms as development strategy

• Instrument: decision tree, to help clarify how priorities for development reform might vary depending on specific country circumstances

Your date here

Contry circumstances and development sequences: a decision tree

DEVELOPMENT DECISION-MAKING

• First block: question about current development process

Dynamic or stagnant starting

point?

Medium-term fine-turning to strengthen

lagging institutions

Can incremental reforms unlock

dynamism?

Dynamic Stagnant

DEVELOPMENT DECISION-MAKING

• Second block: arbitrage between maximum and minimum change

• Assumption: preferred option= least-disruptive one

Can incremental reforms unlock

dynamism?

Just enough governance sequence

Does the political leadership have the incentive, authority

and legitimacy to undertake

comprehensive reforms?

Yes no

DEVELOPMENT DECISION-MAKING

• third block: incentive and constraints of political leaders• But reality more complex

Does the political leadership have the incentive, authority and legitimacy to

undertake comprehensive

reforms?State bulding

sequenceDoes political

leadership have “developmental

inspirations”?

Yes No

DEVELOPMENT DECISION-MAKING

• Last block: For very dysfunctional countries civil society as entry point

Does political leadership have “developmental

inspirations”?

Transformational governance sequence

Social mobilization

yes No

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CONCLUSION

• Identification of four dynamic sequences

• This sequence framework can help guide choice, given the assumption that the preferred option is generally the least disruptive one

• Choice are constrained by country-specific circumstances

Thank you