Globalization and Development

Rethinking Interventions and Governance

Arne Bigsten

• Publisher: Routledge
• Year: 2013
• Print ISBN: 9780415635684
• eBook ISBN: 9781136201714
• Topic: Economics
• Subtopic: Development Economics
• Index: Economics

The key challenge for achieving sustained development in developing countries relates to quality of domestic governance, which in turn is strongly affected by external interventions. Domestic governance includes politics, policy formulation, institution building and policy implementation. It is important for both international and domestic agents to understand how the interplay between external interventions and domestic governance affects social and economic outcomes.

This volume presents a series of studies analysing the links between external interventions and domestic governance in the areas of economic, social and security policy. Key questions that are addressed here include:

• How do external interventions in economic, social and security areas affect domestic governance in developing countries?
• Is aid more effective in decentralised systems of government?
• What are the interactions between external interventions and domestic governance?
• How can external agents advance domestic governance?

Due to its strong focus on external interventions and domestic governance, this book will be of interest to scholars of development studies across the social sciences, in addition to the fields of economics, political science, sociology and geography.

Part I

The governance challenge

1 Introduction

Arne Bigsten¹

The ability of countries to achieve sustainable development depends on social structures, institutions, organisations, policies, geography and available resources. The effectiveness of resource usage within a country depends on domestic governance organisations and politics, policy-making and policy implementation, as well as on influences and interests that transcend state boundaries. The chapters in this volume seek to improve our understanding of how the governance structures needed for development in developing countries are affected by external interventions.

The overarching question about development is why developmental outcomes have been dramatically different across the countries of the world. Currently, there is a broad consensus in the research community (Hall and Jones 1999; Kaufmann et al. 1999; Rodrik et al. 2004; Acemoglu and Robinson 2012) that successful development fundamentally depends on policies and institutions. The explanation of Acemoglu et al. (2001, 2002) is that the countries that are the most developed at the present time are the nations that had institutions that protected property rights and generated a favourable environment for private investment at the time of the Industrial Revolution and could, therefore, seize the opportunity to industrialise. Besley and Persson (2009, 2010) argue that ‘state capacity’ in a broad sense is the key determinant of whether a country can achieve an economic take-off and improve the welfare of its citizens. The listing of the institutional requirements for growth by Rodrik (2000) is representative of the literature views regarding the determinants of development. He argues that sustained economic growth requires institutions that create markets (thus securing property rights); regulate the markets for goods, services, labour and assets (thus addressing market failures); stabilise markets (through fiscal and monetary institutions); and legitimise markets (through social-security systems and conflict management, which protect against idiosyncratic shocks).

Nonetheless, development is not predetermined, and the performance across countries with similar colonial pasts can differ greatly (Henry and Miller 2009). The question is why inefficient institutions persist in certain countries and not in others. What limits improvements in governance in developing countries? Although there is broad agreement about the institutions that are needed for development, there is a much poorer understanding of how and why policy formulation, policy implementation and institutions change over time. The scarcity of research on the evolution of these key determinants of development motivates the focus on domestic governance.

Domestic processes are crucial determinants of development, but the development of domestic institutions and policies is increasingly influenced by international interventions. There are numerous international organisations and foreign governments, and these entities intervene in, and interact with, countries in a multitude of ways. The interventions from these external agents can either expand or constrain opportunities.

Currently, it is not well understood why reforms are successful in certain instances but fail in others. The character of institutions and incentives is highly path-dependent, that is, institutions and incentives reflect history and generally change slowly (Platteau 2009). The direct transplantation of institutional frameworks from other countries can be problematic for developing nations, and each country needs to shape its institutions in accordance with local circumstances (Rodrik 2007). From this reasoning, it follows that attempts by donors and international organisations to push for reforms, without local support, can be fruitless or even counterproductive. There is a set of institutions that are important for development outcomes, but it may well be that certain types of intervention could be beneficial for one institution but harmful for another. For instance, an intervention may force a desirable change in a governmental policy but undermine the legitimacy of the government as a policymaker. Interventions can also be designed to further the aims of the intervener rather than the recipient country. These are issues that will be discussed throughout this book.

The development challenge under globalization

Since the start of the Industrial Revolution, world income has increased dramatically, but growth rates have greatly varied between regions. This pattern of development meant that inter-country inequality increased dramatically until the middle of the twentieth century; however, this disparity has since stabilised and may even have declined (Bourguignon and Morrison 2002; Milanovic 2005, 2009; Deaton 2010). For a more comprehensive picture of developmental outcomes or changes in human welfare, one must extend the analysis beyond examinations of the growth and distribution of real income. Global welfare inequality, as measured by the Gini coefficient of the UN's Human Development Index, has demonstrated a slight decline from its levels during the early 1990s (McGillivray and Markova 2010). However, regardless of the metric that is used, global inequality remains huge, and more than 80 per cent of the global income inequality is explained by the differences in the average incomes across countries.

World Bank estimates of poverty (as measured by the levels of consumption at the household level) indicate that approximately 25 per cent of the population in developing countries was living in absolute poverty (less than ‘one dollar a day’) in 2005, compared with 51 per cent in 1981 (Chen and Ravallion 2011). Poverty reductions have been very rapid in the fast-growing Asian countries; by contrast, poverty has decreased much more gradually in slow-growing Sub-Saharan Africa (declining from a peak of 58 per cent of the population in extreme poverty in the 1990s to 51 per cent in 2005). In recent years, there has been an acceleration of economic growth and poverty reduction in Sub-Saharan Africa, but the countries of this region still lag far behind the rapidly growing emerging economies of other continents.

Recent decades have been characterised by a rapid process of globalization. Most countries in Asia have been able to benefit from their integration into the world economy, which has produced higher average incomes and poverty reduction in these nations; by contrast, few countries in Sub-Saharan Africa have been able to reap similar benefits. Collier (2007) is concerned that the benefits of globalization have largely bypassed the ‘bottom billion’. At present, many African economies have significantly lower wages than their Asian competitors, but this discrepancy has thus far not resulted in a competitive advantage on the global market, owing to this region's lack of agglomeration economies, as well as its weak institutions and inadequate policies. Therefore, it is essential to conduct focused research on these issues.

The developmental challenges facing developing countries transcend economic and social factors. In particular, security and environmental quality are important welfare components in their own right, and, without proper attention to the challenges that exist in these two areas, there is a high risk that the progress that is made in social and economic dimensions cannot be sustained. There are an abundance of situations in which civil wars or environmental problems have halted or reversed socio-economic development.

Developing countries must be able to manage complex environmental problems, including the challenge of climate change. To stabilise the global level of greenhouse gases, there may be a need for the control of emissions in developing countries. Moreover, there is growing interest in the issue of how environmental change and the more frequent natural disasters associated with this change can influence politics and institutions in developing countries. It is often argued that climate-related environmental changes, such as land degradation and increased water scarcity, are likely to cause increased violence and a greater risk of political destabilisation, particularly in countries with weak governance and institutions (Schubert, Schellnhuber, and Buchmann 2007).

Developing countries, particularly in Sub-Saharan Africa, have experienced a large number of internal conflicts in recent decades, which have had serious consequences in terms of increasing human suffering and poverty. Owing to global patterns of migration, international terrorism and economic interactions, civil wars are perceived as a concern, not just for the country that is directly affected, but also for neighbouring countries and the world community (Kaldor 2006). In the instances in which local institutions have not been able to prevent conflict and restore law and order, external interventions have often been required for conflict prevention, as well as stabilisation and reconstruction efforts.

Economic development is an important factor that reduces the risk of conflict in the medium and long term. In the short term, UN peacekeeping expenditures significantly reduce the risk of renewed war, whereas elections have very little impact on the risk of renewed conflict. Peace appears to depend upon a gradual economic recovery that is sustained by an external military presence, with political design playing a somewhat subsidiary role, at least in the short term (Collier et al. 2008).

There is an increasing recognition that attention to globalised dimensions of security is an integral and crucial aspect of any national development strategy and reconstruction effort. Recently, the debate in the security-development nexus has focused on policy efforts, such as peace-building, military or humanitarian intervention, disarmament, demobilisation, reintegration and post-conflict reconstruction (Duffield 2007). Interventions, reconstruction, peace-building and security measures have been growing in Sub-Saharan Africa, but the motivations and designs underlying these practices must be better understood. One problem with the current peace-building practices of the security-development nexus is that there is little systematic evidence regarding when and why security measures, interventions and reconstruction efforts are successful.

Summary

The starting point for our research agenda is the concern about the huge global, social and economic inequalities that are manifested by widespread poverty and insecurity in developing countries. The developmental gaps between countries reflect huge inter-country variations in the quality of economic and political institutions and of governance. Despite the fact that the development research of the previous several decades has clearly revealed these issues, we have little knowledge about how governance develops or can be improved. The aim of this book is to contribute to our understanding of how governance in poor countries changes over time and, in particular, to address how domestic governance is influenced by external interventions. It is becoming increasingly clear that improvements in domestic governance structures are critical for the development of poor countries, and that a more developed understanding of the pros and cons of external intervention in these processes is required as a guide for future policy advice.

Outline of the book

The volume is divided into six parts, including this introductory portion, which contains one more chapter. In Chapter 2, we set forth an analytical framework that helps us structure the discussion of the impact of external interventions on governance. We then present research papers analysing the links and interactions between external interventions and domestic governance in the specific fields of economic, social, security and environmental policy. The final part of the book seeks to provide a synthesis of the insights obtained from the different chapters that it contains.

Note

1 I would like to thank participants in the GCGD network for inputs and contributions to this chapter. I would particularly like to thank Maria Stern, Fredrik Söderbaum, Håkan Thörn, Dick Durevall, Fredrik Carlsson, Claes Alvstam, Madelene Ostwald, Pelle Ahlerup, Sven Tengstam, Annika Lindskog, Thushyanthan Baskaran, Martin Persson, Christoph Haug, Linnéa Gelot and Jan Bachmann.

Bibliography

Acemoglu, D., S. Johnson and J. Robinson (2001), ‘Colonial origins of comparative development: An empirical investigation’, American Economic Review 91: 1369–401.

Acemoglu, D., S. Johnson and J. Robinson (2002), ‘Reversal of fortune: Geography and institutions in the making of the modern world income distribution’, Quarterly Journal of Economics 117(4): 1231–94.

Acemoglu, D. and J. A. Robinson (2012), Why Nations Fail. The origins of power, prosperity, and poverty, Profile Books, London.

Besley, T. and T. Persson (2009), ‘The origins of state capacity: Property rights, taxation, and politics’, American Economic Review 99(4): 1218–44.

Besley, T. and T. Persson (2010), ‘State capacity, conflict, and development’, Econometrica 78...

Table of contents

• Cover
• Half Title
• Routledge Studies in Development Economics
• Title Page
• Copyright Page
• Table of Contents
• List of figures
• List of tables
• Notes on contributors
• Preface
• Abbreviations
• Part I The governance challenge
• Part II Economic policy
• Part III Social policy
• Part IV Environmental policy
• Part V Security policy
• Part VI Conclusions
• Index