Wednesday, May 06, 2009
"On Goverance " by Dani Rodrik
"Good governance by which I mean transparency, accountability, rule of law and bureaucratic competence and effectiveness, is clearly desirable as an objective in itself. We might even say that good governance is what development is all about. Fine and good.
The problem here is that I doubt economists - whether in or outside the World Bank - have much to say on how to achieve governance - as-an-end. On the other hand, we often also refer to govenrnace in an insturmental sense : better governance. We say, should enhance investmetn and entrepreneurship - and through these , stimulate economic growth. Except that we actually do not know that it does.
Al the evidence we have on the relationship between good goverancne and growth is about the long-term : there is virtually no evidence that improved governance stimulateds growth over the time horizons that policy makers care about.
And the experience of countries such as Vietnam, China and Combodia - all of which are the cases of high growth with very poor governance according to standard criteria ( like YSR Govt in Andhra Pradesh between 2004-2009? ) - should make us sceptical that there is such a relationship. So how can economists conribute ? Where economists have comparative advantage is in designing institutional arrangements for the specific policy reforms targeted at binding growth constraints 0 whether in trade, monetary policy, or education. This agenda differs quite a bit from the broad-brush governance agenda on which discussion tends to focus.
Dani Rodrik - ' On Governance'
The problem here is that I doubt economists - whether in or outside the World Bank - have much to say on how to achieve governance - as-an-end. On the other hand, we often also refer to govenrnace in an insturmental sense : better governance. We say, should enhance investmetn and entrepreneurship - and through these , stimulate economic growth. Except that we actually do not know that it does.
Al the evidence we have on the relationship between good goverancne and growth is about the long-term : there is virtually no evidence that improved governance stimulateds growth over the time horizons that policy makers care about.
And the experience of countries such as Vietnam, China and Combodia - all of which are the cases of high growth with very poor governance according to standard criteria ( like YSR Govt in Andhra Pradesh between 2004-2009? ) - should make us sceptical that there is such a relationship. So how can economists conribute ? Where economists have comparative advantage is in designing institutional arrangements for the specific policy reforms targeted at binding growth constraints 0 whether in trade, monetary policy, or education. This agenda differs quite a bit from the broad-brush governance agenda on which discussion tends to focus.
Dani Rodrik - ' On Governance'
