Draft World Bank Report Stresses Governance Role

1 August 2016

By Toby McIntosh

A draft World Bank report stresses that more attention be paid to national political dynamics and power sources when designing development programs.

“Policies can be blocked, captured, or rendered ineffective because their design did not account for asymmetries in bargaining power,” the report emphasizes, calling for more intensified and sophisticated evaluation.

The 415-page report, obtained by FreedomInfo.org, proposes three new principles:

– “think of function, not only form”

– “think of power, not only capacity”

– “think of the role of law, not only the rule of law.”

The “Yellow Cover Draft,” dated June 24, 2016, is under review and still being revised within the Bank, but has been shared unofficially outside the Bank. Freedominfo.org received its copy anonymously.

The previous World Development Reports, done annually on strategic topics, involve deep synthesization of available academic research and some detailed case reporting. The reports’ broad messages often stimulate wide debate within and outside the institution and this one touches on a particularly sensitive area.

“Governance” was chosen in late 2015 as the focus of WDR2017 and will be published in late 2016. The three-pages of acknowledgements testify to the size of the effort involved, beginning with a 24-person Bank research team headed by Luis F. López-Calva and Yongmei Zhou. Thanks are offered to a 14-person advisory panel, mention made of dozens of consultation events and appreciation given to more than 250 persons.

Setting out the broad challenge to be addressed, the report says:

Policies do not occur in a vacuum. Rather they take place in complex political and social settings, in which individuals and groups with unequal bargaining power interact within changing rules as they pursue conflicting interests. The process of these interactions—governance—is fundamental to the study and practice of development.

Although not subject to a formal consultation, the draft report has found its way outside the Bank. Early reviews within the non-governmental organization world have been somewhat critical. Amid concerns about the Bank’s commitment to a governance agenda, an informal coalition of NGO leaders will be meeting this week in Washington with the head of the Bank’s governance practice. (See July 28 FreedomInfo.org report.)

Three Key Messages

At times using examples, and relying extensively on academic research, the report says development programs fail “too often” because they were not designed with enough appreciation for complex political environments.

The report citing three “key messages.”

  •  “Successful reforms are not about `best practice’ or `best fit,” according to “Key message 1, which states, “When designing policies, it is important to assess the key constraints to commitment, cooperation and coordination which stand in the way of promoting development.
  •  “Key message 2” says, “Policy effectiveness can be improved by finding the best ways to strengthen incentives, enhance the contestability of the policy design and implementation process, and to understand and reshape preferences and beliefs.”
  •  “Key message 3,” states: “Changes to promote more equitable development can be difficult to achieve, as groups who have less control over resources (such as those at the bottom of the income distribution) systematically have less bargaining power to influence decisions. However, change is possible if elites, citizens, and international actors work together to build pro-development reform coalitions.”

The report’s “definition of governance in action,” is:

Policy design and implementation reflects not only the choices made by the policymaker; rather, it is the result of a bargaining process among several actors that often have different degrees of influence, different incentives, and different preferences. The failure of good policies on paper to perform their intended function and the persistence of bad ones is often not the result of policy makers’ lack of resources or knowledge. Rather it is the result of actions by powerful actors to block the adoption or undermine the implementation of policies that enhance welfare, for fear that such new policies might reduce their relative power now or in the future.

Analysis, Not Prescriptions

Stressing the importance of better analysis, the report recognizes the difficulties in challenging power structures on topics such as income quality. While the authors hint strongly at the value of combatting power imbalances, they avoids sounding a battle cry.

The report recounts multiple examples of how program failures resulted from unanticipated reactions, but it does not suggest how the specific failures could have been avoided.

The report acknowledges at one point “that relaxing the power constraint and changing the policy arena is difficult because those currently in power have incentives not to introduce reforms that would limit their power.” But “change can happen,” the report continues, examining topics such as voting and “bottom-up and top-down pressures.”

One of the longest chapters looks at the role of law and the characteristics of well-functioning legal institutions.

One conclusion:

Law is not, however, simply a tool of the powerful. Scholars have noted a global trend the increased use of law and legal instruments as an important site for bargaining, enshrining and challenging policies and their implementation from transnational business regulation to environmental impacts to political transitions.

Power Grip

The report applies the governance analysis framework to three core development outcomes: security, growth and equity.

On the later topic, for example, the report says that “commitment to broad-based redistribution may be weak when power imbalances are strong,” and that “collective action to improve citizen participation and reduce the capture of the policy-making and policy implementation processes is essential to adopt and sustain equity-enhancing reforms.”

The chapter on growth concludes in part:

In conclusion, there are ways to alter both policy and institutional design that can reduce the harm from capture. In terms of policy design, it is important to think pragmatically about the risk of undue influence and identify implementable policies—if not first-best ones. Another lesson is to avoid policies that look good in the short term but could later end up reinforcing the power of dominant groups that could block further reforms.

Chapter 7 examines “when and how elites allow for the participation of new actors to bargain over policies, including due to changes in incentives or preferences.”

Chapter 8 discusses “when elite bargains are not conducive to more accountability to citizens, disadvantaged groups may mobilize in order to have more voice in society.”

Chapter 9 looking at the role of international donors and processes in influencing the domestic policy arena. It addresses subjects including transnational rules and regulation, human rights standards and foreign aid.

Walk the Walk?

The report does not address specific mechanisms the Bank might use to improve analysis of political dynamics or get into the costs and benefits of acting on the basis of resulting political insights. The final sentence says:

In summary, timing, pacing, and synchronizing a governance reform agenda to take into account the openings and constraints presented by shifting domestic and foreign balances of power are key to the ability to foreign aid to induce and sustain pro-development governance reforms.

Perhaps the real last word comes in a short essay commissioned by the Bank from Thomas Carothers, Vice President for Studies, Carnegie Endowment for International Peace. “The past ten years have seen a striking rise in discussions of politics and power in development policy circles,” he begins, ending:

A strong sense of “at last” accompanies this push to take politics in development seriously—relief that outdated, artificial walls created in the early days of development assistance are finally being dismantled. Yet changing developmental practice is hard. Many of the operational imperatives that arise from greater attention to politics and power—such as the need to increase flexibility of implementation, tolerate greater risk and ambiguity, devolve power from aid providers to aid partners, and avoid simplistic linear schemes for measuring results—run up against long-established bureaucratic structures, practices, and habits. In addition, taking politics seriously in development points directly to the need to challenge the interests of the power holders that control institutions— something that many development organizations have still not yet decided they are willing to do, especially in the current global environment of heightened sensitivity in many countries over national sovereignty. The development community is talking the talk of politics. How much it will walk the walk is not yet clear.

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In this column, Washington, D.C.-based journalist Toby J. McIntosh reports on the latest developments in information disclosure in International Financial and Trade Institutions (IFTI).
Contact: freeinfo@gwu.edu or
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