Governance Redux: The Empirical Challenge by D. Kaufmann (2004), Chapter in Global Competitiveness Report 2003-2004, World Economic Forum		(177 kb)
Building from the 2002/03 contribution to the Global Competitiveness Report ("Governance Crossroads"), this paper argues that governance continues to be at a crossroad, its underperformance being evident in most regions and across many countries. This ('governance policy gap') contrasts with the strides that have been made in many countries in improving the content of macro-economic policies for well over a decade. Firms from emerging economies single out corruption and excessive bureaucracy among the top constraints to their business operations, while excessive bureaucracy and the tax regime are identified as top constraints by the respondent firms from the OECD. Neither inflation nor the exchange rate regime are rated as important constraints. Many countries currently have levels of governance that are insufficient to support their income levels and/or growth path, namely they experience a 'governance deficit', which we suggest it can be quantified. We also review work analyzing the deeper determinants of governance, and find that in lower income countries the origins of a country's legal system may not matter significantly. Further, we empirically evaluate political dimensions of governance, such as the extent of 'capture' and undue influence by some politically connected powerful firms in shaping the regulations, laws and policies in a country. Unequal influence is closely associated with poor public and financial governance performance. Finally, this firm-level dataset permits the construction of a governance database at the city level, and initial results of an empirical exploration of determinants of city-level governance are presented. A key implication of this chapter refers to the focus on policies aimed at the nexus between corporate strategies and public governance—-emphasizing prevention, external accountability and transparency mechanisms—and challenges the value of traditional measures within the public sector (such as passing laws by fiat or creating new Anti-Corruption Commissions). Access the World Economic Forum's Global Competitiveness Report website.

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Readers' Comments:

In large democracies, say, like India, in every election the politicians promise the moon and do not deliver. The recent Congress and left Coalition Government of India talked tall about "delivery mechanisms" just when they took over from their predecessors in April' 04, and have been mum ever since. The captains of the industry recently, though much of it seen as a lukewarm approach, pressed for Political Responsibility Law (PRL) in November' 04 nothing is heard about it afterwards. There is no Consumer Movement worth the name in the country. The vote bank politics are now stooping to unprecedented levels of malpractices and corruption. India needs decentralization in order that politicians and public become more sensitized to Governance or lack of it. There are only (Indian Indian Institutes of Management (IIMS), there is hardly any Institute of Public Policy. It appears the vested interests in political parties and captains of industry are in collusion to dump a whole generation of people with too many problems to sort out every day, with result they lose their sense, their political consciousness and their "worth" as a voter.

Indian Politicians are also using in subtle ways "financial sleight of hand" or sorts. Example, their pro-poor programs encourage corruption (in the absence of delivery mechanisms), their programs of distributing cash to raise people from below poverty level (BPL) to Above Poverty level (ABL) would in the present shape lead to dissipation rather than asset creation. As much as US 10 billion is going to be spent by the politicians and bureaucrats in the next five years. The middle class toil hard endlessly, and myred in problems, their political consciousness in numbed, voiceless they have become impotent subjects who are cheated by political worthies even during the pre-election by announcement of sops only to remain on paper. Not a single political scam has reached its logical culmination of punishment of the culprits. The builder politician nexus is yet another major problem. It is said that "when the level of turbulence in a river is high, you cannot construct a Dam". In India corruption levels have reached such proportions that people are losing faith in democracy.

There is no national leader worth the name who can rally the masses behind him. Only constitutional reforms to usher in smaller administrative units by greater decentralization of the monolithic central administration can combat the current massive corruption levels to some extent. India borrows on an average US$ 3 billion per annum from the World Bank, and as aspiring to be World Power seeking a plan in the UN Security Council. By what kinds of Accountability can UN intervene in situations like this, people are crying for development. Peace and disarmament can be better achieved if the utterly corrupt political tribe all over the world are made accountable to the UN or a Regional Body (not SAARC) but by UN Economic Commission for South Asia, home to almost 25% of the World Population. Terrorism can be combated better by Development targeted with clinical precision in the right direction. If the politicians suppress people's aspirations for far too long in the name of politics of their genre, faith or cult imposed top rather than people's aspirations-they are bound to collapse. The International Community must cooperate and close the coffers of Swiss Bank accounts for unscrupulous political mafias who want to siphon off people's wealth and amass billions in tax havens.

My suggestions is Decentralize, put all Public Projects/Private Partnerships on the Websites, including the Government Gazette Notifications and right concept to technical feasibility and thereon from tendering to final implementation and completion of the project always to be inaugurated by the poor not the politicians. This is what people should fight for as their "Right for Information"