It’s power asymmetry, stupid: Lessons from the 2017 World Development Report on Governance and the Law

Across the globe, states frequently fail to adopt “first-best” policies, fail to implement technically sound policies, and persist in implementing inefficient and regressive policies. In Mongolia, for example, the government copied rules for the management of natural resource revenue from the Netherlands and Chile, but continued to spend pro-cyclically in ways that undermined public expenditures when commodity prices fell (see Figure 1). In Kenya, “best practice” contractual arrangements to prevent teacher absenteeism were poorly implemented and did not improve learning outcomes. In Brazil, low quality public services led to massive street protests in 2013 despite a decade of economic growth and poverty reduction. And in Pakistan, state lending continues to support economically inefficient firms while starving productive firms of capital. Governance failures are depressingly commonplace.

Figure 1: Similar rules in Mongolia and Chile, vastly different results

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Why does sound technical advice—based on better data, more information about practices elsewhere, and increasingly more robust evaluation methodologies—so infrequently translate into more effective development policies? The 2017 World Development Report on Governance and the Law (WDR 2017) argues that policy ineffectiveness stems from power asymmetries that undermine the functional effectiveness of institutions. Defining “governance” as the process through which state and non-state actors interact to reach and sustain agreements, the WDR 2017 shows how a better understanding of this process can bring about more effective policy interventions to improve development outcomes. 

A functional approach—the three C’s

Copying formal rules and institutional designs frequently fails to achieve intended outcomes; in more jargony terms, isomorphic mimicry doesn’t work. But while it has become de rigueur in certain development circles to argue for a functional approach to development, a framework for such an approach has not emerged. To fill this gap, the WDR 2017 defines three particular functions that underlie policy effectiveness: commitment, coordination, and cooperation. Laws and institutional forms matter only to the extent that they are able to generate these functions to shape actor behavior.

In Mongolia, laws to ensure countercyclical fiscal behavior were ignored precisely when they were needed, a commitment failure. In under-industrialized countries, coordination of investments can spur “big push” industrialization; state control of finance can facilitate this coordination role, as in South Korea, but can also underperform market-based coordination, as in Pakistan. In Brazil, upper middle class reliance on private services led to an unwillingness to contribute to the provision of public goods that would benefit the poor and the growing middle class, a cooperation breakdown.

Figure 2: A simple framework for a complicated problem

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Power, not just capacity

The interests and the relative power of the state and non-state actors who interact to design and implement policies shape the effective performance of these three functions. Unhealthy power asymmetries can lead to persistent policy failure through exclusion, capture, and clientelism. When certain groups are systematically excluded from decisionmaking, “exit” and violence may become rational responses, as in the case of street protests and rioting in Brazil. When politically connected firms capture policies and regulations to make them reflect narrow interests, policies to coordinate efficient investments are ignored, resources are misallocated, and growth is stunted, as in Pakistan. When clientelistic exchanges of short-term benefits for votes prevent the emergence of programmatic party platforms, the poor, with higher discount rates for the present, suffer disproportionately, as in the case of teacher absenteeism in Kenya. 

Change is possible—through elite bargains, citizen agency, and, sometimes, external influence

Power asymmetries can be self-reinforcing, leading to vicious cycles that make entry points for effective policymaking difficult to find. But persistence is overhyped. Indeed, every developed country has evolved out of unequal and unjust systems, though it has done so slowly—it is not realistic to try to “get to Denmark” overnight. The WDR 2017 examines how the agency of elites, citizens, and international actors can incrementally expand the set of effective implementable policies. Ultimately, this requires changes in the incentives of actors to pursue reforms, a shift in actors’ preferences and beliefs, and changes in the way decisionmaking occurs to enable contestability by marginalized actors.

When citizens of the United Kingdom received letters informing them that most of their neighbors had already paid their taxes, changing their beliefs, tax compliance (cooperation) increased. In Brazil, the replacement of paper ballots with electronic ballots effectively shifted the balance of power toward previously disengaged illiterate voters, increasing contestability by de facto enfranchising more than 10 percent of the electorate, resulting in increased spending on public health care. And the International Commission against Impunity in Guatemala provided an external credible commitment that changed incentives and made it possible to prosecute criminal networks. It takes patience, but the many examples cataloged in the WDR show that progress is possible.

Doing development better

Based on these insights, the WDR 2017 proposes a new way of doing development. Part of this involves challenging the common excuses that development practitioners often give for policy ineffectiveness. Instead of complaining that policies fail because they don’t conform to “best practice,” we should ask why policies that work in one context fail in another. In other words, how do the context-specific functional challenges and interests of those in power differ? Rather than lament that policies fail because of a “lack of capacity,” we must ask why those in power have chosen not to invest in relevant capacity. Capacity at any juncture may be a stock, but over time it reflects the priorities of those in power, giving rise to “pockets of effectiveness” and explaining underinvestment in agencies that can challenge the status quo (e.g., statistical offices in Africa).

Perhaps most importantly, though, rather than giving up because of a “lack of political will,” policies have to be formulated so that they have the buy-in of the actors who implement them. If policies are incompatible with the incentives faced by those in power, we should not be surprised when they fail to achieve intended results.

There is no excuse for ignoring what those in power will do.

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