The emergence of the governance agenda

The emergence of the good governance agenda is the result of an historical process and of a change in terms of dominant ideas concerning the state, the markets, and civil society (Bovaird, 2005; Bovaird & Loeffler, 2003). The expectations regarding the role that public bureaucracy has to play in development and social uplift reflect these changes. While considered the leading agent after the Second World War, public bureaucracy has been profoundly challenged, starting in the 1970s under the influence of Public Choice theorists. First generation reforms and NPM are partly the expression of such ideological posture.

Although Evans et al. published their highly acclaimed “Bringing the state back in” already in 1985, it is only in the 1990s, with the example of the Asian Newly Industrialized Countries (NIC), that the gradual reconsideration of the role of the state as a key player in development emerged: it is in such context that good governance and second generation reforms are rooted.

1.1 From development administration to Second Generation Reforms

The end of the Second World War and the process of decolonization marked the beginning of international development aid (Turner & Hulme, 1997). At that time, the international aid strategy was based upon the idea that it was incumbent upon state bureaucracy to be the leading “agent for the transition to what was then known as” (Batley & Larbi, 2004, p. 2) “modernization” (Stone, 1965, as cited in Batley & Larbi, 2004, p. 2). And that was a time when modern was equated with being as advanced as western societies (Batley & Larbi, 2004).

1.1.1 The Development Administration agenda

The development administration was a discipline conceived, at least in its early days, “as a midwife for western development - creating stable and orderly change” (Dwivedi & Nef, 1982, as cited in Turner & Hulme, 1997, p. 12).

Referring to Esman (1988), Batley and Larbi, (2004, p. 2) note that, inspired by

the newly born Development Administration approach, western development agencies “favored large-scale industrial and agricultural development which (...) required a guarantee of Government involvement”. Bureaucracy and state involvement was necessary since domestic market institutions and indigenous entrepreneurs were weak and the private sector lacked “locally mobilizable capital and entrepreneurship experience and skills” (Hirschmann, 1999, p. 289).

Where such attributes exist

there was a mood of distrust of to the profit motive of such an entrepreneurial class; it was seen as a pariah group, an ex-colonial legacy, or representative of neocolonial interests. The bureaucracy, by contrast, was seen as the prime location of skills, education, organization, and initiative, a provider of public equity and generator of development (

289)

.

That “was a form of social engineering imported from the west” (Turner & Hulme, 1997, p. 12), and it was seen as “the practical application of the modernization theory” (ibid). It reflected the idea “that there were straightforward technical solutions for underdevelopment and the West possessed them” (ibid). In addition to its expected positive economic returns for the west, the development administration also had a clear political agenda, which was to fight “communism in the underdeveloped nations by engineering the transformation to capitalist modernity” (ibid).

While the modernization perspective did not entitle a monolithic approach to development, several generalizations can be made (Brinkerhoff & Crosby, 2002).

First of all, its basic assumption rested on the idea that big government was synonymous with an “expanding economy and an increasingly just society”

(Esman, 1988, as cited in Turner & Hulme, 1997, p. 12). Second, it also rested on the idea of the “elitist bias” (Turner & Hulme, 1997, p. 12) that an educated minority, i.e., technicians, politicians, and planners, “would be committed to transforming their societies into replicas of the modern Western nation-states”

(ibid). Third, as stressed by Turner and Hulme (1997) “foreign aid was the mechanism” (p. 13) by which the problem of lack of domestic administrative capability and skills would be tackled, achievable by the transfer and application of performing tools “from the west to developing countries” (ibid). Fourth, “culture was early recognized on as an impediment to the smooth functioning of Western tools and dominant Weberian models of bureaucracy” (Turner & Hulme, 1997, p.

13); administrative development needed “to overcome such cultural obstacles, which were seen as the source of bureaucratic dysfunctions” (ibid).

As early as the 1950s and 1960s, the first set of critics against the development administration started to emerge. But “this was not a matter of ideological opposition to the extension of the state” (Batley & Larbi, 2004, p. 3) as occurred during the 1980s; “it was rather a question whether the state and public administration of developing countries were structurally (not just technically), capable of acting as the agent of development”, raising “issues of the nature of

bureaucracy and the social composition of the state” (ibid). According to these critics, explain Batley and Larbi (2004, p. 3), based on the results of development projects in Africa and Asia, bureaucrats were seen as being

“biased to stability or only incremental change, were anti-development, and suppressed entrepreneurial interest”.

A second group of critics against the development administration emerged as a result of experiences also in Sub-Saharan Africa, in “which the state apparatus maintains only a tenuous hold over society, lacking legitimacy and therefore the capacity to enforce policy” (Batley & Larbi, 2004, p. 3). This has often been associated with the idea of patrimonialist states “where leaders exercise their own interests through the official apparatus and patron-client networks, or (...) militaristic regimes” (ibid).

Finally, as noted by Batley and Larbi (2004, p. 4), a third group of critics came from the neo-Marxist and dependency theory, which claimed that “the apparatus of the state (the bureaucracy and military) [were] subordinated to non-national interests, particularly to international capital”. This type of critique, add the scholars referring to the work of Collier (1979) “was used to explain the rise of various forms of authoritarian rule in the 1970s (...) and the post-colonial over-developed state in South Asia” (ibid). In such spirit, conclude the authors, “far from being an agent of development, the state was seen as an agent of underdevelopment or distorted development” (ibid).

Facing poor performance and profound criticism, the development administration was in “crisis” (Brinkerhoff & Coston, 1999, p. 356) and the academic community associated with the discipline “entered a period of self-criticism” (Turner &

Hulme, 1997, p. 15). In the 1970s, development administration finally began to question its theoretical assumptions, but, by that time, it was too late (ibid).

1.1.2 The First generation reforms: changing the rules

The mid-1970s marked a resurgence of neo-liberal ideology, triggered by the deception of the Keynesian welfare model and the international economic recession (Larbi, 1999a). Such international environment was exacerbated, stress Bartley and Larbi (2004, p. 4), by the emergence of military regimes, despotic and authoritarian states, and a “deep pessimism about the scope for development skepticism about the state’s role”.

In the west, “neo-classical economists (...) gained considerable influence in policy circles and were also pointing to inefficiency and ineffectiveness in the public sector” (Turner & Hulme, 1997, p. 18), and claiming that state should be

“rolled back” (ibid). As noted by Turned and Hulme (1997), according to the new economic orthodoxy, governments were no longer considered the main actor to achieving development; they were, on the contrary, considered as the obstacle to it.

In a political and economic context characterized by dramatic fiscal pressure that called for drastic public spending cuts (Heredia & Schneider, 1998, p. 1), Public Choice theorists, notes Larbi (1999b, p. 3) referring to Chapman (1979), put forward the argument that the “reward system in the public sector did not promote effective performance and that politicians and bureaucrats had no incentive to control costs”.

Larbi (1999b, p. 3), referring to leading Public Choice theorists (Niskanen, 1971 and Downs, 1967) notes that, according to this theoretical school of thought, in the “absence of any automatic disciplining mechanism (i.e., market forces), government agencies [would] oversupply collective goods because of bureaucrat budget maximization practices”; this would inevitably lead “to an expansion of governmental functions” and in the size of the bureaucracy (p. 4).

Table 8: First generation reforms: changing the rules Main objective Crisis management: reducing inflation and restoring growth;

contingency reforms

Instruments Drastic budget cuts, tax reform, price liberalization, trade and foreign investment liberalization, deregulation, social funds and safety nets, autonomous contracting agencies, privatization

Actors Presidency, economic cabinet, central bank, multilateral financial institutions, private financial groups, foreign portfolio investors Source: Adapted from Naim (1995) and the World Bank (1997), as illustrated in Santiso (2003, p.

7). Insulated Economic Policymaking and democratic governance: the paradox of second generation reforms in Argentina and Brazil. SAIS Working Paper Series

On the public management side, Public Choice theories encouraged the emergence of new management theories and practices which, a few years later, would be labeled as New Public Management (Hood, 1991) and which drew heavily on the innovations and trends in private sector management (Pollitt &

Bouckaert, 2004). As the main objective of the NPM was to address the issue of public bureaucracy inefficiency with private market tools, the “old distinction between public and private management became blurred” (Turner & Hulme, 1997, p. 18).

In developing countries, as noted by Turner and Hulme (1997, p. 18), “the dissemination of this model (...) was undertaken by enthusiastic western advocates and influential multilateral institutions such as the World Bank and the IMF”. Both institutions also “became the main propagators of the Washington Consensus, a panoply of precepts to do with the liberalization, privatization and stabilization of economies, and the reduction of the role and scale of the public sector” (Batley & Larbi, 2004, p. 5). As pointed out by Hildebrand and Grindle (1994), “the notion of a minimalist role for the state, largely defined in terms of what it should not do” (p. 7).

The combination of structural adjustments programs, SAP and NPM techniques, inspired by the private sector is nowadays termed as the first generation reforms. While it is generally admitted that economic and administrative structural changes are required to ensure sustainable development in both developing and high income countries (Grindle, 2005; Rodrik, 2004, 2005), the SAP have been widely criticized for their impacts in developing countries and this mainly for three reasons (Batley & Larbi, 2004; Turner & Hulme, 1997).

First, as pointed out by Batley and Larbi (2004, p. 5), there is an issue related to

“ownership, [which refers] to who conceives, drives and supports the reforms”.

As noted by the two scholars, countries such as the UK, that also had to implement SAP in 1976, “were able to mould the pace and nature of their responses and did so with the compliance of their electorates”. Less developed states, on the contrary, have adopted the SAP in the absence of an enabling, democratic, pluralistic domestic institutional environment, leaving international bilateral and multilateral agencies to determine the implementation agenda (ibid).

The second reason why the SAP have been criticized, explain Batley and Larbi (2004, p. 5), is because of the “uniformity of application”, based on the fallacious idea that one size fits all. The SAP were, in fact, implemented in countries with very different cultural and historical backgrounds, institutional frameworks, and political and social structures, “whose only common feature was debt” (ibid).

The third reason concerns the fact “that adjustment has often been implemented in an unbalanced way” (Batley & Larbi, 2004, p. 6) in relation to policy targets and implementation pace, “leading to deeper crisis and poverty” with also profound consequences in terms of social inequality.

1.1.3 The Second generation reforms: changing institutions

In the early 1990s, following the criticisms against first generation reforms, and supported by an international environment ideologically less polarized and more favorable toward pragmatism, the “international reform agenda was modified in various ways” (Batley & Larbi, 2004, p. 6).

The new agenda is known as the second generation reforms and finds its intellectual roots in the institutional schools whose supporters strongly advocated that the state and the institutions matter for the performance of society (see, for instance, Burki & Perry, 1998; Evans, 1995, 2004; Evans et al., 1985; WB, 1997a).

The main modifications of the reform agenda were two-fold. Firstly, the goal of the second generation reforms was “extended from freeing market forces and making economies efficient to directly addressing poverty” (Batley & Larbi, 2004, p. 6). In this regard, the “support of donors and governments was to be coordinated through international development targets and comprehensive development frameworks, whose main mechanism was country-specific poverty reduction strategies” (ibid).

Secondly, the “early 1990s saw recognition that market development and poverty reduction depended on effective states” (Batley & Larbi, 2004, p. 6)⁶. This represented a radical change in the development agenda that followed nearly twenty years of strong and sustainable development of Asian Newly Industrialized Countries – NIC.

As noted by Turner and Hulme (1997), the Asian NIC success story “is not simply the triumph of the market, but also has much to do with strong state

6 See, for instance: The World Bank. (1993). The East Asian Miracle: Economic Growth and Public Policy. Oxford University Press.

institutions” (p. 49).

Table 9: Second generation reforms: changing institutions Main objective “Improving social conditions and competitiveness; maintaining

macroeconomic stability; structural reforms”

Instruments Civil service reform, restructuring of social ministries, judicial reform, modernizing of the legislature, upgrading of regulatory capacity, improving tax collection, large-scale privatization, restructuring central-local government relationships

Actors Presidency and cabinet, legislature, civil service, Judiciary, unions, political parties, civil society and media, state and local governments, private sector, multilateral financial institutions

Source: Adapted from Naim (1995) and the World Bank (1997a), as illustrated in Santiso (2003, p.

7). Insulated Economic Policymaking and democratic governance: the paradox of second generation reforms in Argentina and Brazil. SAIS Working Paper Series.

While SAP “addressed the state essentially as something to minimize by cutting back the responsibilities, expenses and size of the public sector” (Batley & Larbi, 2004, p. 6), scholars and researchers started to acknowledge that “the argument that the size of the public sector needed to be drastically reduced had probably been taken too far” (Israel, 1990, p. 3).

It is in such spirit that the WB published, in 1997, The State in a Changing World in which it claimed “the state is central to economic and social development, not as direct provider of growth but as a partner, catalyst and facilitator” and “the state development has failed, but so will stateless development” (WB, 1997a, p.

iii). Thus, the second round of reforms represents the attempt to engage development efforts to “change institutions which structure political and economic life” (WB, 2000, p. 94).

The policy agenda that aims at achieving these institutional changes is called good governance.