Beruflich Dokumente
Kultur Dokumente
http://dx.doi.org/10.1257/jel.20151239
1. Introduction
development that
ince the flourishing of institutional economics in the 1990s, some ideas on the
role of the state have come to dominate
the development literature. Although different writerssay, North and Weingast
(1989, 2000), Besley and Persson (2011),
and Acemoglu and Robinson (2012)have
different points of emphasis, there is some
commonality in this literature on the role of
*Department of Economics, University of California,
Berkeley. I am grateful to the Editor and four referees,
and to Masahiko Aoki, Vijay Joshi, Kalle Moene, Dilip
Mookherjee, and Gerard Roland for comments on earlier
drafts.
Go to http://dx.doi.org/10.1257/jel.20151239 to visit
the article page and view author disclosure statement(s).
862
863
864
formula may
not be desirable. The multiple functions of
the state and the m
ultidimensionality of its
agenda (compared to those of private firms
or markets) also imply, as well discuss, that
even when a state enterprise is inefficient in
carrying out its functions, privatization need
not always be a better solution, particularly
when contracts are necessarily incomplete.
Our focus on a broader role of the state,
multidimensionality of its functions (and
and dissonances
between objectives or mechanism designs
does not make it easy for a unified theory
or tidy, unambiguous conclusions. But as
Williamson (2000) said in a JEL survey of
institutional economics, there being many
instructive lenses for studying complex institutions, pluralism is what holds promise for
overcoming our ignorance.
The roadmap in this essay is as follows. In
section2, we start with the idea of a strong
but limited government and its various
ramifications. We concentrate in section2.1
on two related aspects of state strength suggested in the literature, one on commitment
ability and the other is political centralization.
In the context of state strength, we shall comment in section2.2 on the different ingredients of state capacity discussed in a growing
literature. In connection with limited government, we discuss in section2.3 the constraints on the executive and the role of other
accountability mechanisms. In section3, we
shall start our critique of the view discussed
in the previous two sections by pointing to
tensions and
trade-offs between different
aspects of governance recommended in the
literature. In section4, we wade into a small
part of the large literature on democracy and
development, k eeping our attention on how
areas.
Much of the analysis in this essay, as in
the literature discussed, is comparative and
historical-institutional. Although we shall
865
population.
On top of all this, there are inherent difficulties of measuring quality of public goods
and services. There are a few micro experimental studies now available, but as usual
the relevance of the conclusions faces problems in scaling up or in external validity.
There have, however, been some hopeful
beginnings of collaboration between the
policy-making and research communities in
carrying out quasi-experimental
evaluation
of micro aspects of state policies covering
large segments of the population.
Since this essay is not primarily on the
process of state formation as such, we shall
largely confine ourselves to states that have
some minimum coherence in striving for
development, and thus leave out many
important cases where internecine violence
and extreme social fragmentation have not
yet allowed the minimum conditions for
state building. While keeping in mind that
the differences in the relevant state capacity are often a matter of degree rather than
kind, we shall bypass the large and growing
literature on failed states and civil conflicts.
For a relatively recent overview piece in JEL
on civil conflicts,3 which are often associated
2In this essay, while we have not refrained from referring to some cross-country empirical exercises, the purpose is mainly to illustrate findings suggestive of interesting
correlation, not causation.
3For my own take on civil conflicts, see Bardhan (2005),
chapter 9.
866
867
868
procedures
exist for throwing the ruler out of office
for failure to keep those promises; this is a
central theme of much of the literature on
constitutional political economy. However,
some of those strong regimes in East Asia
were not at that time democratic, but over
time they had established reputational alternatives to formal commitment devices. On
the other hand, in democracies when the
so-called infant-industry protection is prolonged violating earlier commitments, there
is little popular pressure organized against it.
No conniving leader faces dismissal on this
ground, making constitutional provisions for
throwing out the ruler largely irrelevant here.
A closely related commitment issue is
that of enforcing a hard budget constraint in
public-sector run or funded projects. A strong
state should be better at resisting the inevitable b
ailout pressures from interests involved
in failing projects. A weak state is unable to
make a credible commitment to terminate a
bad public project, since sunk costs in earlier
periods of investment make it sequentially
rational to refinance projects even when one
realizes down the line that they had negative
net-present value initially.11
10For
11For
political writers developed the idea of what they called the relative autonomy of the state, whereby the
12There is clear evidence that Marx himself essentially
abandoned this view after 1850. For an elaboration on this
see Elster (1985).
literature, during a
depression or financial crises this sometimes
appears in the form of a call for the state to
save capitalism from capitalists.)13 Later,
many political sociologists in and outside this
group went even beyond this, and recognized
several historical instances of the clearly vital
role of the strong state. For example, Skocpol
(1982) refers to the explanatory centrality of
states as potent and autonomous organizational actors. There are, of course, serious
constraints posed by the imperatives of the
dominant proprietary classes (after all, they
provide the main source of public revenue),
but these writers recognized that to focus
exclusively on those constraints is often to
ignore the large range of choices in goal formulation, agenda setting, and policy execution that the state leadership usually has. The
strong state thus acts neither at the behest
of, nor on behalf of, the dominant classes.
Of course in most actual situations, the
state is neither a Stackelberg leader nor a
Stackelberg follower; neither the state actors
nor the private interest groups usually have
the power to define unilaterally the parameters of their action. Both may be strategic
actors with some power to influence the
terms, and the outcome of the bargaining
game will depend on their varying bargaining strengths in different situations.
2.2 Ingredients of State Capacity
Besley and Persson (2011) associate a
weak state with a lack of state capacity, particularly fiscal, legal, and military capacity,
13Marx in Capital volume I, when discussing the
English Factory Acts, deduces the necessity of the state
as a particular form alongside and outside bourgeois society, protecting capital from its own unrestrainable passion, its werewolf hunger for surplus labor.
869
to be able to provide public goods and services (including law and order). In the burgeoning literature on state capacity, different
writers have emphasized different aspects. A
well-known line of thinking associated with
Tilly (1985) links the historical making of the
fiscal-military state in early modern Europe
with interstate wars (or threats thereof). Levi
(1988) associated state making with inducing
citizen compliance in providing revenue and
conscripts for war. Others,14 however, have
suggested that in more recent times and outside Europe, states have been formed without wars, and there have been cases where
wars have unraveled preexisting states.
In examining the ingredients of state
capacity, Evans and Rauch (1999) stressed
the importance of certain Weberian characteristics of the state bureaucracy, like meritocratic recruitment and long-term career
rewards for officials. There is also a cumulative logic of bureaucratic functioning. A long
history of continuous bureaucratic structure
in place may foster a helpful bureaucratic
culture15 or esprit de corps that can contribute to state effectiveness. Bockstette,
Chanda, and Putterman (2002) have computed an index of state antiquity (continuous territory-wide state structure above the
tribal domains over the last two millennia). It
shows that among developing countries, this
index is much lower for sub-Saharan Africa
and Latin America than for Asia, and even
in Asia the index for South Korea is several
times that for the Philippines (a country that
lacked an encompassing state before the
sixteenth-century colonization by Spain). A
cross-country statistical exercise16 shows a
14See, for example, Leander (2004), and Taylor and
Botea (2008).
15Analogous to the term democratic capital that
Persson and Tabellini (2009) have used, one may call this
historical experience of bureaucracy a kind of bureaucratic capital, though one should be careful in not stretching the definition of capital too far.
16See Bardhan (2005), chapter 1.
870
recruits to
the government (even in difficult locations),
but also, contrary to a common presupposition, they do not crowd out the intrinsic
nonpecuniary motivations18 valuable in public service.
Cornick (2013) has classified the different
types of state capacity into technical, organizational, and political. Technical capacity
is particularly relevant, for example, in the
context of screening worthwhile public projects or monitoring the delivery to intended
beneficiaries in social programs. Information
technology has expanded the realm of possibilities here. Muralidharan, Niehaus, and
Sukhtankar (2014) evaluate the impact of a
biometrically authenticated payments infrastructure on public employment and pension programs in India, using a large-scale
experiment that randomized the rollout of
the new system over 158 subdistricts and
19 million people. They find that the new
system delivered a faster, more predictable,
and less corrupt payments process without
adversely affecting program access. These
17 However, the recent evidence of Bandiera, Pratt,
and Valletti (2009) on passive waste in public procurement
in Italy and Chong et al. (2014) on effectiveness of postal
systems across several countries suggests that bureaucratic
performance is not a matter of incentives alone.
18Ashraf, Bandiera, and Jack (2014) find experimental evidence in Zambia that financial incentives augment,
rather than crowd out, public service motivation. A somewhat contrary evidence is found in Uganda by Deserranno
(2015)
results
suggest that investing in secure
authentication and payments infrastructure
can significantly add to state capacity in
effective implementation of social programs
in developing countries. Similar issues arise
in the context of building capacities in judicial, auditing, and regulatory bodies.
Organizational capacity of a state is often
crudely measured in the empirical literature
in terms of taxGDP ratio. But, as is usually
recognized, this ratio may be relatively high
in a natural resource abundant country on
account of the resource rents, not necessarily
organizational capacity, or low in a poor
country where for independent reasons (say,
the nature of factor market imperfections),
the informal sector is large. Organizational
capacity is also related to modes of governance. For example, Bandiera, Pratt, and
Valletti (2009) show (from a policy experiment associated with a national procurement
agency in Italy) that much of the sheer wastage in public procurement arises from some
organizational modes (
top-down governance modes in public bodies perform the
worst). Organizational capacity, of course,
varies between different types of state functions. The Indian state shows extraordinary
capacity in some large episodic matters,
like organizing the complex logistics of the
worlds largest elections or the worlds second
largest Census. But it displays poor capacity
in, for example, some regular essential activities like cost-effective
political
goals of leaders. In such contexts, measures
871
common-interest
services; constraints on
the executive tend to diminish the concern
that the government is run in the interests of
a narrow group. We shall come back to the
accountability mechanisms when we discuss
democracy and development in section4.
3. A Critique of the Dominant
Institutional View
After our discussion of the different elements of strength and limits to government,
both of which are clearly important in the
process of development, we shall now provide a critique of some of the basic ideas in
this literature. Let us start with political centralization. Acemoglu and Robinson (2012)
regard this as a key inclusive p
olitical
institution along with a pluralistic distri
bution of political power. But the idea that
political centralization is an element of
political inclusiveness is rather puzzling.
Most historical instances of political centralization, either in the empire states of the
past or in the modern nation states (such
as Meiji Japan, Ataturks Turkey, and Maos
China), have been associated with less political inclusiveness in important respects.
Secondly, and a related point is that there
is actually a degree of potential conflict
between those two key political institutions
stressed by Acemoglu and Robinson. To be
sure, a certain degree of political unification
is necessary to build a coherent institutional
framework for long-term development policies. But centralization and pluralism may
not be always compatible. Pluralism in the
sense of a social idea that encourages diversity of goals and interests of a variety of
social groups can inhibit centralization and
societys collective action on long-run
872
873
productive enterprise.
In general, divided societies and polities
will have weaker common interests, and as
Besley and Persson (2011) have pointed out,
in such cases the incentive to invest in state
capacity will be less.27 In contrast, in the
postwar decades in n
ortheastern Asia and
northwestern (particularly Nordic) Europe,
relative social homogeneity and less unequal
distribution of wealth and human capital
may have made it somewhat less difficult to
enlist the support of most social groups in
25For an analysis of the difficulty of collective action
in India in terms of the large numbers and heterogeneity
of influential socioeconomic groups, see Bardhan (1984).
26See, for example, Bardhan (2005) chapters 10 and 11
for a general theoretical and empirical analysis of collective
action, in particular the impact on it of inequality.
27For some
cross-country evidence on the relation
between ethno-linguistic fragmentation and governance,
see Alesina et al. (2003). The experimental evidence for
Uganda in Habyarimana et al. (2007) suggests that ethnic homogeneity facilitates coordination on public goods
provision.
874
aking short-run
m
are
cited
in
natural
resource-intensive products (like
oil, sugar, bananas, timber, and diamonds),
for example, has strengthened the political
power of plantation elites and other large
exporters who raised domestic barriers to
entry and promoted oligarchic dominance
over the state.29 More recently, globalization in the context of asymmetric international mobility of capital relative to labor has
weakened labor organizations and practices
in many countries and altered the political
equilibrium in favor of capital.30 The fall in
customs revenue and capital taxes in a more
open economy may also affect state fiscal
capacity.
4. Political Decentralization and Local
Accountability
There are
trade-offs between commitment structures and accountability processes. Political centralization, for example,
often leads to distant insulated bureaucracies
that are insensitive to local needs and concerns and that fail to tap local information,
initiative, and ingenuity. The central government, of course, may also care about winning
elections locally, but electoral sanctions are
usually more effective at the local elections
than at national or even provincial elections,
since at the latter forums multiplicity of electoral issues dilutes responsibility compared
to the narrower agenda of local elections.31
As opposed to the interjurisdictional encompassing advantage of centralization, there are
many who argue for the local accountability
and other advantages of decentralization.
These include peer-monitoring, ease of citizen participation, and relative transparency
of d
ecision making and program benefits at
29For a recent survey of these issues see Nunn and
Trefler (2014), section 5.
30For a discussion of these issues see, for example,
Rodrik (2011).
31See on this Seabright (1996).
875
and institutional issues (like malfeasance, rent seeking, shirking and absenteeism, and other
agency problems of governance) involved
in political centralization. Decentralization
also enables competition among regional
governments for mobile private capital,
which may keep them on their toes and off
excessive rent extraction. In some developing countriessay, Brazil, South Africa,
and Indonesiadecentralization has been
an integral part of the democratic transition
itself and has significantly affected the structure of subsequent development policy, particularly in the delivery of social services.
On the contrary, decentralized governance is often prone to local capture by a
collusive elite (landed oligarchy, in some
agrarian contexts), proximity making collusion easier, as James Madison worried more
than 200 years back in the Federalist Papers.
The well-known
(i)
The initial social and economic
inequality in the local area
(ii)The degree of political competition in
the area
(iii)How regular and well-functioning
the deliberative processes of local
democracy (public hearings, town
hall meetings, etc.) are
(iv)
How free the flow of information
is regarding the functioning of governments and the entitlements and
allocations at the local level. Here,
the importance of information campaigns (and media exposure) about
resources allocated to local governments and how they have been spent
and audited (if there are provisions
of periodic independent audits of
accounts) are clear.
876
35A different example of adverse effects of jurisdictional competition is given by Burgess et al. (2012), who
show evidence of how an increase in the number of political jurisdictions in Indonesian decentralization has been
associated with increased deforestation.
36See, for example, Cai and Treisman (2004) and
Slinko, Yakovlev, and Zhuravskaya (2005).
877
878
gain. Bardhan
and Yang (2004) construct some models to
show that while political competition can
yield allocative benefits for the public, it
can also generate aggregate welfare costs
by constricting the set of politically feasible public investments. Of course, in social
44For a
popular-level discussion of these cases see
Zakaria (2004). It also involves a definitional issue: in our
judgment, democracy should not be identified with just
regular elections even where the incumbent has a chance
of being defeated, but some accountability processes in
day-to-day administration and respect for basic human
problem in
public decision making.
879
880
and Frey (2015) for the Brazilian cash transfer program of Bolsa Familia.
Myerson (2013) has stressed how democratic decentralization can improve opportunities and incentives for local leaders to build
reputations for using public funds responsibly, and may even reduce political entry barriers for them in national elections. Some of
these reputation incentives linked with local
development have been built into the career
promotion schemes in China, even without democracy. In general, on the relation
between political systems and development,
a great deal of institutional conditions and
contingencies are involved, and under the
circumstances it is easy to see that democracy (or the lack of it, for that matter) is neither necessary nor sufficient for economic
development. At the same time, going back
to the ChinaIndia case, one cannot deny a
basic comparative political feature related to
the source of legitimacy. The pragmatic and
professional Chinese leadership often show
the ability to take quick and decisive actions
more than the elected Indian leaders, but
in the face of crisis or political shocks, the
former often overreact, suppress information, and act heavy-handedly,
institutions. Analogous to the varieties of capitalism literature where Hall and Soskice
(2001) pointed to the qualitative differences
between
Anglo-American liberal market
economies and the coordinated market
economies of Germany and Scandinavia, it
may be important to bring out the varieties of
developmental roles of the state in terms of
liberal market support vis--vis coordination.
The large political sociology literature on
the
so-called developmental state of East
Asia is suggestive and descriptive but
with exceptions like Evans (1995)not
always analytically clear about the mechanisms involved. Aoki, Murdock, and
Okuno-Fujiwara (1997) have more fruit
fully described the deal between the state
and large business conglomerates in South
Korea and Japan as assuring some form
of
cooperation-contingent rent that will
accrue to the latter in exchange for playing
a role in the state coordination efforts. In
this perspective,48 economic development
in these countries was not founded just on
institutions that secure property rights and
enforce contractsno doubt very important
for long-term investmentbut on a state that
helped to foster coordination (particularly in
financial markets in early stages of industrialization), facilitate interdependent investment decisions in orchestrated networks of
producers and suppliers, establish public
development banks and other institutions for
long-term industrial finance, and nudge firms
to upgrade their technology and move into
sectors that fit with a national vision of development goals. Enabling and
encouraging
such coordination is fundamentally different
from protecting property rights.
48This
881
The recent literature on industrial policy has the virtue of recognizing this. But
industrial policy has to be dissociated from
the old-fashioned
882
firms in
Egypt, finds substantial learning effects.
Harrison and
Rodriguez-Clare (2010)
have recommended a whole range of soft
industrial policies, not incompatible with
WTO regulations (like encouraging R&D,
extension services, vocational training, supporting collective action for self-help
in
business clusters, improving regulations and
883
with some form of market discipline is therefore necessary to curb excessive rent creation.
But as Rodrik (2008b) has pointed out, some
amount of rent generation may be indispensable to preserve what he calls second-best
institutions, when first-best institutional rules
or best practices are not feasible in the usual
political-economy context of developing
52Even in e
arly-modern West European history,
there are cases where patrimonial, rather than Weberian
impersonal rule-bound,
Netherlands.
53This term originated in its negative use by anarchists
and other socialists, but with more positive use by Vladimir
Lenin and his followers.
884
or hybrid
sectors.
885
886
by
organizational reforms and incentive
designs, they are often called upon to undertake functions that are too complex for the
private sector to perform. Privatizing these
functions may even make things worse, as
private firms are not capable of coping with
the transaction and governance costs of the
complex and
multidimensional issues that
state agencies must handle. Hart, Shleifer,
and Vishny (1997) give an example from
the issue of prison privatization to make
the general point that when a government
contracts out a service to a private provider
the
noncontractible aspects of the service
quality are likely to suffer. The dilemma in
public-sector administrative reform is that in
the context of m
ultidimensionality of goals
and tasks and h
ard-to-measure outcomes,
it is difficult to devise high-powered
n
oncooperative interactions, disciplining
inefficiency, and rewarding high-valued
59See,
887
of diminishing returns
in technological advances.
(5)
Similarly, the experience in the
many recent cases of P
PPs in large
infrastructural
projects
needs
to be critically examined, in the
light of initial enthusiasm and
recent onset of disillusion, in some
cases.
(6)In the discussion of political accountability, the original hope from decentralization and devolution of power
tried in many developing countries
has faded somewhat on account of
the various capture and dysfunctionality issues raised in section 4. The
empirical findings are mixed, primarily because the political and institutional context of decentralization, and
888
(7)
The puzzle of how the Chinese
authoritarian system has been able,
in general, to maintain some sort of a
balance between patronage and political loyalty considerations in career
promotion, on the one hand, and a
reasonably competent meritocracy,
on the other (as we have noted in section4), needs more analysis from historical and current case studies. This
balance has been difficult to achieve in
other autocracies.
(8)An important, yet largely unresolved,
issue is to find clear directions from
empirical data about when democratic
processes lead to long-term
889
890
891
Political Centralization in P
re-colonial Africa.
Journal of Comparative Economics 41 (1): 621.
Parker, David, and Colin Kirkpatrick. 2005. Privatisation in Developing Countries: A Review of the
Evidence and the Policy Lessons. Journal of Development Studies 41 (4): 51341.
Persson, Petra, and Ekaterina Zhuravskaya. 2016. The
Limits of Career Concerns in Federalism: Evidence
from China. Journal of the European Economic
Association 14 (2): 33874.
Persson, Torsten, Gerard Roland, and Guido Tabellini.
1997. Separation of Powers and Political Accountability. Quarterly Journal of Economics 112 (4):
11631202.
Persson, Torsten, and Guido Tabellini. 2009. Democratic Capital: The Nexus of Political and Economic
Change. American Economic Journal: Macroeconomics 1 (2): 88126.
Pincus, Steven C. A., and James A. Robinson. 2011.
What Really Happened during the Glorious Revolution? National Bureau of Economic Research
Working Paper 17206.
Qian, Yingyi, and Gerard Roland. 1998. Federalism
and the Soft Budget Constraint. American Economic Review 88 (5): 114362.
Qian, Yingyi, and Barry R. Weingast. 1997. Federalism
as a Commitment to Reserving Market Incentives.
Journal of Economic Perspectives 11 (4): 8392.
Rasul, Imran, and Daniel Rogger. Forthcoming. Management of Bureaucrats and Public Service Delivery:
Evidence from the Nigerian Civil Service. Economic
Journal.
Ray, Debraj, and Rajiv Vohra. 2014. Coalition Formation. In Handbook of Game Theory, Volume 4, edited
by H. Peyton Young and Shmuel Zamir, 239326.
Amsterdam and Boston: Elsevier, North-Holland.
Robinson, James A., and Thierry Verdier. 2013. The
Political Economy of Clientelism. Scandinavian
Journal of Economics 115 (2): 26091.
Rodden, Jonathan, and Susan R
ose-Ackerman. 1997.
Does Federalism Preserve Markets? Virginia Law
Review 83 (7): 152172.
Rodrik, Dani. 1992. Political Economy and Development Policy. European Economic Review 36 (23):
32936.
Rodrik, Dani. 2008a. Normalizing Industrial Policy.
Commission on Growth and Development Working
Paper 3.
Rodrik, Dani. 2008b.
Second-Best Institutions.
American Economic Review 98 (2): 100104.
Rodrik, Dani. 2011. The Globalization Paradox:
Democracy and the Future of the World Economy.
New York and London: W. W. Norton and Company.
Sabel, Charles, Eduardo
Fernndez-Arias, Ricardo
Hausmann, Andrs
Rodriguez-Clare, and Ernesto
Stein, eds. 2012. Export Pioneers in Latin America.
Washington, DC: Inter-American Development Bank.
Seabright, Paul. 1996. Accountability and Decentralisation in Government: An Incomplete
Contracts
Model. European Economic Review 40 (1):
6189.
892