Local Governance, Economic Development and Institutions

G. Gomez, P. Knorringa, G. Gomez, P. Knorringa, Kenneth A. Loparo, Georgina M. Gómez

• Publisher: Palgrave Macmillan
• Year: 2016
• Print ISBN: 9781137557582
• eBook ISBN: 9781137557599
• Topic: Social Sciences
• Subtopic: Development Economics
• Index: Social Sciences

'Development' is what most people see as progress in the places where they live and in the ways they live. It has to do with public services, the ways to complain when these are not delivered properly, and the spaces to change power structures. It is related to the economy, the opportunities to access a secure job, a sustainable livelihood and increased welfare while caring for the planet and others. It is also linked to the institutions that allow people to live life well, using resources ethically and doing business responsibly in relation to other communities and future generations. This edited collection examines the interconnections between local governance, economic development and institutions, by focusing on what initiatives work and under what conditions they do so. Based on a variety of theories and empirical data, it presents evidence from current experiences around the world, revealed by researchers across different continents and several generations.

Part I

Local Governance: Public Development Ambitions, Decentralisation and Continued Informality

1

Governance and Development: The Importance of Legitimacy and Institutional Change

Eduardo Wills Herrera

Introduction

Bert Helmsing was a pioneer in the application of regional development theories, as well as what was later termed ‘institutional and governance approaches’ to complex problems in emergent countries such as Colombia. He was my professor at the Centro Interdisciplinario de Estudios Regionales (CIDER) at the Universidad de los Andes in Bogotá, Colombia, the first, highly successful interdisciplinary research centre for the study of regional and local development problems in Colombia. Bert played a very important role in its success with his creative research approaches to problems of development. In the early 1980s, I had the opportunity to collaborate with him in his research on the impact of the cotton agroindustry in the César region of Colombia. In that research, Bert was trying to understand the social and regional impact of the cotton value chain in the César region. Although the word governance was not common at that time, he took an institutional approach to the problem. His concerns were the implications of the value chain for the ‘campesinos’, and his desire to gain an understanding of the role of land rights on the productive systems at that time. The analysis of the spatial and regional effects on an intermediate city and an important region were also at stake. In retrospect, the result of that development process was not completely successful. Violence and social conflict erupted, and thirty years later, it has still not ended. In this chapter, I analyse a similar process that is taking place today in the Orinoco region, the last agricultural frontier of the country. I propose that the concept of legitimacy is an important element to understanding and generating a more equal and just social development process for vulnerable groups such as peasants and indigenous groups in the region.

Governance and development

Discussions about the relationship between governance and development have dramatically increased in the literature of development studies over the past years (Osborne 2010). Both concepts have been controversial, and important discussions about their meaning, relationships and significance remain. On the one hand, there is a shift from the idea of development as economic growth to approaches centred around the human being, which take on board care for the future of the planet; these approaches are known as sustainable human development theories (Brundtland 1987, Sen 2000, Ul Haq 1995). On the other hand, it is possible to identify a shift in epistemology: namely from theories based on objective knowledge of the world to approaches based on subjective experiences and feelings (Wills 2009). Additionally, governance has been proposed as a multidimensional concept that articulates actions from the state, market and civil society in the pursuit of development, whereby the state is not seen as the only or main actor in such a process. Under the concept of governance, designing new rules, promoting new norms for behaviour, enforcing the rule of law, and promoting the legitimacy of public institutions and agencies are all important elements to be considered for public policy. In governance, markets and firms play a key role and it is critical to activate deliberation and negotiation of objectives and actions by stakeholders, such as organised communities, as well as knowledge-production centres (universities) and local and regional agencies. Good governance implies the implementation of cooperative solutions for development problems through the design of more flexible, decentralised, democratic and transparent organisations, such as networks.

Governance has been studied via multiple disciplines, and it tries to articulate actions and decisions at multiple levels of government. It focuses on complex problems with the intervention of multiple actors who believe that through dialogue and negotiation, a pluralistic solution can be found. Nevertheless, despite all these important contributions, I believe that many questions related to its definition remain. It is difficult to find a coherent and integrative theory about the complex relationship between governance and development in the literature. In order to clarify the concept, it is necessary to analyse it in concrete cases and situations, and to incorporate into the debate not only the traditional views that emerged from political science and economic studies, but also other approaches coming from institutional and organisational theory. Specifically, I consider that institutional theory approaches based on sociological points of view that are centred on the concepts of legitimacy and institutional change should be considered.

In this chapter, I critically examine the concepts of governance and development and suggest that the institutional approach to organisations and social change can provide useful insights into this debate, particularly related to the understanding of how to increase the legitimacy of organisations (Suchman 1995) in the decision-making process. Max Weber (1997) originally proposed legitimacy as the ability to voluntarily obey and accept patterns of dominance and authority. Applying governance solutions to development problems implies that the state, firms and civil society organisations act cooperatively to bring about these solutions. Not only the legitimacy of the state is at stake, but also the legitimacy of private firms and civil society organisations. Legitimacy is in the eye of the beholder; it is a perception about the proper and correct actions of powerful actors, such as firms, which display dominance and authority relationships.

Legitimacy should be evaluated from the point of view of the different stakeholders that are influenced by, affected by or benefit from the actions of firms. These evaluations change over time according to the appraisals of the firms’ actions and have to be discussed and agreed upon by all the stakeholders involved. In this way, social licenses can be given by stakeholders to private firms to operate and act.

The application of this concept is particularly important for emergent countries, such as Colombia, where, during the last century, public policy was conceived as a state monopoly, and where new territories and economic sectors can be developed. I will apply the concept of governance in relation to two interesting examples. First, governance ideas are applied to a process of occupation of a frontier territory which is undergoing the expansion of commercial crops. The presence of vulnerable groups (indigenous people) in this territory needs to be taken into account amidst the expansion of private agro-industries and their development of new productive projects for biofuels. In this case, land property rights have not been clearly defined and enforced in the territory. This particular situation demands the design of institutional change processes and governance systems in order to achieve sustainable processes of development that guarantee economic outputs as well as increasing levels of well-being for the population involved.

In the second case, legitimate governance systems are discussed in relation to the management of renewable natural resources, such as water, which are critical to sustainable development. In this case, multiple agencies operate at the national, regional and local levels with conflicting interests and agendas and where strong participation by communities is beginning to take place.

I first provide a short introduction to the concept of governance. Then I introduce main ideas about institutional theory in organisational analysis, stressing the importance of the concept of legitimacy, and then apply this framework to the two problems identified. The limitations and potentials of this approach are then discussed in relation to their contribution to development processes. This is followed by a discussion of the strengths and weaknesses of the approach, and lastly, an identification of questions for future research.

The concept of governance

I define governance broadly as the exercise of power and legitimate authority under cooperative frameworks to encourage more equitable processes of development that foster the well-being of the population at stake. Cooperation here includes the three main institutional arrangements – the market, state and civil society – each of which have their particular organisational forms, namely, private firms, governmental agencies and civil society organisations, respectively. Private firms operate under the main objective of pursuing profits; governmental agencies define regulatory frameworks, provide certain services and create spaces for the collective discussion of public agencies; organised communities participate in the formulation of policies, in the implementation of civil control systems and in the provision of certain services and goods.

Governance as an alternative way of governing society for development is proposed due to the failures of the state – as an exclusive actor which promoted schemes of comprehensive rationality planning such as the Master Plans – to achieve sustainable goals for development. This failure occurred alongside a lack of participation by citizens and communities in the deliberation about goals and objectives and in their implementation. State intervention was also characterised by the prevalence of corruption and centralised decision-making patterns. The traditional distinction and separation proposed by Weber (1993) of state functionaries’ private and public interests in the action of public policies did not really take place. State solutions to public problems were organised by bureaucratic structures of command and control. These solutions were discretional and hierarchical, with little involvement and participation by the actors or stakeholders concerned. The solutions tended to be reactive and based on normative definitions and the law, and incorporated rational comprehensive approaches such as Master Plans. This approach was followed by the introduction of neoliberal policies, with their openness to markets and firms, as the central idea of how to achieve economic growth and development. However, this process was characterised by market failures, particularly in emerging countries where the tendency of private firms was to create monopolies, and by its incapacity to solve social and environmental externalities. Income distribution patterns, already highly unequal in these countries, also worsened. On the other hand, communities and civil society organisations gained an important space in the definition of objectives and in the implementation of actions. Yet these organisations also presented failures: their leadership style was in many cases inconsistent with the values they proposed, they suffered from autocratic tendencies in their organisations, and freeriding among their members tended to occur. State failures (highly centralised decision-making processes and corruption), market failures (tendencies to create monopolies, incapacity to adequately solve the so-called social and environmental externalities, and the incapacity to develop fair income distribution patterns), and civil society failures (contradictions between stated values and actual behaviour in organisations) prevented development goals and objectives from being achieved.

These three institutional arrangements present advantages and disadvantages, according to the particular circumstances in which they operate and the specific situation and interests at stake. Neither one of these actors can solve the problems at hand alone: new governance arrangements are needed so that cooperative solutions can be introduced, and each actor can balance out the negative tendencies of the others. For instance, leaving private firms to operate without the clear regulatory environment and capacity of the state will only worsen a situation.

Governance is a complex and multidimensional phenomenon relating to how to govern different development processes when multiple actors are involved, and the state does not hold either the monopoly or the capacity to find a solution to a public problem. In general terms, governance implies a new power and authority regime for the governance of a particular resource, region or sector. As private firms become more relevant in governance processes, both their institutional context and their legitimacy of action become very important. A framework is necessary to describe the interaction of the different actors, usually in the context of bottom-up, trans-disciplinary, multilevel action. As actors have different interests and struggle to impose their particular views in defining and solving a public problem, governance models determine who has power, who makes decisions, how other actors make their voices heard, and how an account of results and processes is rendered.

I can state that governance regimes operate on multiple levels, as networks of multiple actors with flexible structures of authority. Under this context, it seems logical that perceptions of problems are shared, discussed and constructed to generate a consensus to act, starting from the particular interests of each actor involved. In this way, governance is oriented towards multi-stakeholder solutions through dialogue and negotiation. A new social construction of reality based on the different visions and definitions implied is required for collective action. This action should be more proactive and oriented towards covering multiple levels of analysis.

Depending on the particular context (history, traditions, customs, institutional environment) of each country, and the specific problem to be solved, a particular combination of efforts by each institutional actor (state, market, civil society) is needed. Cooperative solutions through alliances, pacts and covenants become important mechanism for governance.

The idea of good governance

The concept of governance rapidly evolved into a normative definition of good governance. This was developed mainly by international development agencies, such as the World Bank Institute (2009), which provided a normative list of what constitutes a good institution for governance (fair, transparent, responsible, participatory, inclusive, and so on). The problem with such a list is that it creates an analytical category that is too broad. For the purpose of pursuing and achieving ‘good governance’, the state has to enable a favourable regulatory, political and legal environment for development. At the same time, civil society organisations play an important role in mobilising and empowering people’s participation, and private firms create new opportunities for economic growth. Good governance can then be seen as ...

Table of contents

• Cover
• Title
• Introduction
• Part I  Local Governance: Public Development Ambitions, Decentralisation and Continued Informality
• Part II  Where Value Chains and Local Economic Development Meet: Power Asymmetries, Agency, and the Role of Trust
• Part III  How Actors Co-shape and Adapt to Evolving Institutions to Leverage Their Resources
• Index