improve the
investment
climate,
strengthen the
rule of law, or
fight corruption
fail because
they make the
wrong starting
assumption.
C H A p T E R 7 c o n c l U s I o n s a n D I m P l I c at I o n s f o r P o l I c y m a k e r s
ii) Relations between holders of political power and holders of economic power are central to creating effective, accountable public authority. Informal relations between politicians and investors that build on common interests can compensate for weak formal property rights and contract enforcement, and boost investment in the short-to- medium term. External policymakers might have a role in facilitating dialogue and supporting collective action by business associations. iii) Different types of public sector reform can influence the opportunities for collective actors to shape policy and organise effective monitoring of service delivery. Involvement at significant moments of policy reform can enhance opportunities for effective ongoing engagement. Formal participatory mechanisms may be less important as channels for policy influence than informal networks and relationships. Policymakers should be alert to ways in which the design of public programmes influences the scope for collective action.
iv) Informal (‘traditional’) local governance institutions are persistent, influential and very diverse. The extent to which they exercise effective and acceptable public authority reflects both their origins, and the contemporary institutional context in which they operate.
Efforts to improve local governance need to take account of this diversity. Some informal local governance institutions can work synergistically with formal institutions; in other cases they may undermine or weaken them. Looking at the origins of ILGIs might provide a useful guide for better targeting of development programmes. v) Case studies from Ghana, Kenya and Ethiopia provide evidence about the relationship between taxation and accountability that indicates the type of tax reform that should enhance the quality of governance. Governments’ need for tax revenue has driven implicit or explicit bargaining with citizens; tax compliance has been greater under more popular governments whereas deep unpopularity can starve governments of revenue, and in some cases hasten their demise. Tax reform should prioritise equity, transparency and improved collection.
vi) Formal mechanisms for managing natural resource revenues (for example through fiscal decentralisation, earmarking or revenue- sharing formulas) will not work well if they take insufficient account of the political and institutional context. Policymakers need to take account of pre-existing institutions and sub-national political dynamics before offering advice on the management of natural resource revenues.
vii) Evidence from São Paulo and Mexico City suggests that new
concepts of political representation are emerging from the activity of civil society actors, operating within participatory governance
mechanisms rather than formal electoral channels or membership organisations. These should be explored on their own terms before assessing their compatibility with democratic norms and processes. All these findings have policy implications. In some cases (for example, in relation to tax reform) they are quite detailed and have already stimulated significant policy action. However the value of this research for policymakers does not reside only – or even primarily – in a list of policy messages. Indeed, reducing the findings to such a list would be to miss the point that all of them underline the need for a fundamental reassessment of existing assumptions and preconceptions about governance and development. That is what the next section is about.
7.3 An upside-down view of governance
The meta finding – that informal institutions and personalised relationships are pervasive and powerful and can contribute to
progressive outcomes – is itself an illustration of the benefit of closing off mental models based on OECD experience. But each of the research streams reveals more specific benefits in terms of reversing or challenging conventional assumptions, or identifying unexpected actors or processes at work. For example:
·
Chapter 2 shows how the current global environment is quite different from the one in which Western state building took place, creating a new and historically unprecedented set of challenges, which have until recently been neglected by international donors (this is starting to change, partly in response to the Phase 1 CFS research).·
Chapter 3 challenges conventional assumptions about the importance of legal arrangements to protect property rights and enforce contracts, and highlights the unexpected role of personalised arrangements in building trust and common understanding, thus reducing risks and facilitating targeted problem solving.·
Chapter 4 calls into question the importance of autonomy for civil society actors, and shows that creating participatory mechanisms will not necessarily result in collective action. It also identifies some unexpected reformers.·
Chapter 5 challenges biases for or against ‘traditional’ institutions.·
Chapter 6 reinforces Phase 1 messages that tax should be seen not just as a fiscal issue but as a governance issue, and that how tax is collected matters, as well as how much.Turning the picture upside down has been fundamental in identifying the original CFS research questions, and prompting detailed investigation of very informal arrangements, networks and relationships. This in turn has