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We
review key issues in worldwide governance, and
present new empirical findings. On average,
the evidence shows scant if any progress in
good governance worldwide, in controlling corruption,
and in improved institutional quality—although
there is variance across countries. Further,
the empirical findings and analysis point to
the private sector as influencing public governance,
thereby challenging traditional notions of the
functioning of politicians, the public sector,
and the determinants of the investment climate.
These, in turn, argue for revisiting conventional
approaches to promote institutional reform.
In
particular, we propose that the usefulness of
anti-corruption 'campaigns', creation of new
institutions or passage of laws, as well as
much of the traditional public sector management
and legal reform approaches, may have been over-rated,
particularly for many emerging markets. We argue
that further focus on external accountability
approaches is required, focusing on: i) transparency
mechanisms; ii) institutionalizing the use of
empirically-based monitoring tools; iii) participatory
'voice' and collective action approaches, and,
iv) incentive-driven mechanisms at the systemic,
organizational and individual level. If they
will play a much larger role, at the expense
of legal or related measures by fiat (or merely
within the executive branch), progress could
take place in: i) providing systems conducive
to more effective checks and balances on traditional
public institutions, ii) ameliorating the extent
of capture of state institutions and policies
by vested interests of the elite, and, iii)
leveling the 'influence' playing field.
Thus,
understanding particular political dynamics,
which will vary from setting to setting, and
whose manifestations may include particular
forms of state capture, influence, and party
finance, is now key to formulate realistic programs
focused on the specific priorities identified
within each country. Distilling the concrete
implications of the 'influence institutions'
within a country is key for formulating realistic
reform measures. This requires probing deeper
into the private-public sector governance links,
as well as the unbundling governance and corruption
so to understand the relative extent, costs,
and implications of different manifestations
in each particular setting.
Specific
recommendations regarding governance strategies
in the next stage are provided. Supporting these
concrete implications, the paper features new
data on governance, inequality of influence,
corruption, and state capture, as well as their
effects on economic outcomes.
This
article draws from the author's contribution
to the World Economic Forum's Global
Competitiveness Report 2002-2003, Chapter
3.6: "Governance Crossroads".
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