Deciphering the good governance prescription

For almost two decades, Dhaka's vibrant think-tank ecosystem has almost unanimously endorsed the idea that for Bangladesh to economically transform itself, attaining good governance through the creation of sound institutions is a fundamental precondition. At the outset, this prescription has an incredible intellectual appeal. And it is mostly due to how good governance is largely understood and perceived by people at large. It is also inherently related to how an average person makes sense of the real world, where we use anecdotes and simple correlations to form an understanding of issues. The case for good governance and its role in shaping economic performance of nations is also influenced by similar dynamics.  After all, has anyone ever visited an advanced industrialised nation where governance is poor? Does that not mean that for any society to economically transform itself, attaining good governance is a pre-requisite? Or, is good governance and all its associated institutional structure is the product of the socio-economic modernisation that economic growth brings?

Of course, if governance is the all-important missing puzzle that will help nations break out of chains of poverty and economic backwardness, where should one start? More precisely, how do we expect well intentioned policymakers to address this Holy Grail? Is there a rule book for fixing governance? This is actually a complicated endeavour – mostly because how governance itself is defined.

The idea of 'good governance' is overarching, but there is a broad agreement that governance is about how authority is exercised over a country's economic, political and social affairs. Yet, plainly speaking, this can come to mean that a political space avails a vibrant participatory democratic fabric with rule of law and human rights. It also involves creating a capable bureaucracy that is effective in delivering public service and managing the economy. The idea can even be stretched to include that the policy framework is sensitive to climate justice, which involves remaining sensitive to the needs and prospects of future generations while we address our own economic concerns. And for the political left, a well governed polity ensures that the socio-economic space benefits from equality of opportunity.

This overarching, and to an extent overwhelming, notion of what governance is ought to be also turns the good governance prescription for economic transformation into a tautology. I mean, if a nation is successful in achieving democratic participation, human rights and rule of law and also simultaneously enjoys a bureaucracy that is capable in providing public goods efficiently, then haven't we already achieved some kind of utopia? Does that not mean that we are implicitly demanding a nation to achieve utopia to trigger economic transformation? Is this a pragmatic position? Or, do we need a more feasible starting point? Surely, policymakers in developing countries needs to understand what exact set of actions are more important for economic transformation than others?  This involves pinpointing the exact governance challenges that are more growth binding than others. And only then, one can start unthreading governance challenges step by step to create sustainable supporting conditions for economic transformation.

So, what exact dimensions of governance appear more critical for triggering developmental take-off? Does the economic experience of countries that have achieved fundamental transformation in recent decades hold any clue? If we examine the economic journey of countries of the East Asian miracle, and also other Asian success stories, where radical economic leaps were taken in just few decades, it is possible to pinpoint some of the institutions and governance dimensions that appear more critical.

For instance, the growth story of South Korea, Singapore, Taiwan, Hong Kong, and later China, Malaysia and Vietnam exemplify that countries can sustain rapid economic transformation without harnessing political governance or institutions that favour broad distribution of political power or legal institutions that can offer rule of law in the Western sense. The Chinese case, where average economic growth has been over 9 percent for more than four decades between 1970 and 2010 is probably a vivid example of this phenomenon. The common thread, however, which explains these economic journeys, is the simultaneous availability of 'state capacity' with 'growth-conducive economic policies'.

More specifically, developing a state – i.e. a bureaucratic apparatus – that is effective in offering public order, macroeconomic stability and mobilising resources to finance public goods such as infrastructure, etc. is viewed to be critical role in guiding and fuelling economic transformation. Moreover, this is only possible when merit-based appointment is complemented with a public-sector incentive structure that allows the public sector to not only attract the best of minds, but also manages to squeeze out of them – the best of performance. The issue of merit-based appointment is also important because it insulates the public administration from blind patronage-based appointment, without which there is a grave risk that underperforming policies can be made to appear productive to appease political masters.

But, institutions associated with an effective state-apparatus on their own will not deliver the much-aspired economic miracle. The choice of policies is also pertinent since an ill-conceived policy implemented by a highly efficient administration can become extremely counter-productive – as indicated by Mao's Cultural Revolution.  So, what policies hold the key? As one can prudently infer from East Asian economic miracle, policies that help offer macro-economic stability, sound property rights, mobilise investments in human and physical capital, and use international market for promoting exports played a central role in fuelling their respective economic performance. Nevertheless, country-specific factors will also mean that each nation will need to design and implement slightly altered policy options. But, the mentioned list could be thought of as a basic starting point for any country.

Thus, in the context of Bangladesh, the challenge of moving forward is to avoid the temptation of doing everything at the same time, but rather understand and address specific governance challenges that are holding us back. Consequently, a wholesale governance reform is neither necessary nor feasible. Rather, what is needed are efforts that can help the state apparatus develop effectiveness in ensuring public order, macroeconomic stability and resources mobilisation for investments in necessary human and physical capital. In effect, developing a modern effective state is, perhaps, the central governance challenge facing policymakers in Bangladesh. And if we are looking for a place to start, then working step by step to develop a modern effective state is an issue of first order importance.