World Development Report 2017: Governance and the Law

"[W]ho bargains, who is excluded, and what barriers block entry to the policy arena determine the selection and implementation of policies and, consequently, their impact on development outcomes."

This World Bank report looks beyond purely technical solutions and identifies commitment, coordination, and cooperation as 3 key functions of institutions for development. It also emphasises citizens' role in fostering effective governance. It reveals that governance can mitigate, even overcome, power asymmetries to bring about more effective policy interventions that achieve sustainable improvements in security, growth, and equity. This happens by shifting the incentives of those with power, reshaping their preferences in favour of good outcomes, and taking into account the interests of previously excluded participants. These changes can come about through bargains among elites and greater citizen engagement, as well as by international actors supporting rules that strengthen coalitions for reform.

Based on 2 years of extensive research and consultations in many countries, the report proposes principles to guide reform and change the dynamics of governance for equitable development. The main messages of the report are:

• To be effective, policies must guarantee credible commitment, support coordination, and promote cooperation:
  1. Bolster commitment to policies in the face of changing circumstances. This would help, for example, in cases where decision makers spend windfall revenues instead of saving them for the future, or when leaders renege on peacebuilding agreements in the absence of binding enforcement.
  2. Enhance coordination to change expectations and elicit social desirable actions by all. Challenges occur in many contexts, from finance to industrial clusters and urban planning. Financial stability, for example, relies on beliefs about credibility. Despite the rationale for leaving their money in the bank during times of distress, the public may rush to withdraw their deposits if they believe that others will too – ultimately causing the banks to lose liquidity and crash.
  3. Encourage cooperation: Effective policies help promote cooperation by limiting opportunistic behaviour such as tax evasion - often through credible mechanisms of rewards or penalties. Individuals may have incentives to behave opportunistically. Not paying taxes does not prevent them from enjoying public services that others are funding. Similarly, when groups fail to benefit from policies or feel short-changed (for example, by low-quality public services), it can further weaken compliance.
• Power asymmetries can undermine policy effectiveness. The unequal distribution of power in the policy arena can lead to exclusion, capture, and clientelism. (For example, one type of clientelism involves public officials "buying" votes from citizens in exchange for (usually) short-term benefits such as transfers or subsidies.)
• Change is possible. Elites, citizens, and international actors can promote change by shifting incentives, reshaping preferences and beliefs, and enhancing the contestability of the decision making process.
• Three guiding principles for rethinking governance for development are:
  1. Think not only about the form of institutions, but also about their functions.
  2. Think not only about capacity building, but also about power asymmetries.
  3. Think not only about the rule of law, but also about the role of law. ("By its nature, law is a device that provides a particular language, structure, and formality for ordering social affairs. However, just like policy making, state law does not operate in a vacuum. It interacts with many other normative and legal frameworks, both formal and informal, ranging from customary law to social norms and economic transactional systems. Although every society aspires to the 'rule of law' - where rules are applied impersonally and the ruler is also subject to the rules - the rule of law in itself is a norm: it is achieved when the principles of law become a shared value among people in society. This sharing is the result of a long historical process and simply cannot be instilled overnight.")

One chapter (8) analyses the role that ordinary citizens play in driving processes of societal transformation and institutional change. Surveying historical and contemporary experiences, it argues that citizens face collective action problems that prevent them from bargaining effectively and holding government accountable. To strengthen their influence in the policy arena, citizens need to engage through multiple mechanisms designed to solve collective action problems, including voting, political parties, social movements, civic associations, and other less conventional spaces for policy deliberation. Because all these expressions of collective action are imperfect, it is their strategic combination that maximises the chances to promote change and make governments more responsive to citizens' needs. As this chapter shows, citizen-led change is possible, but it is often a difficult and long-term process fraught with uncertainties. In India, grassroots organisations spent 10 years scaling up local mobilisation efforts, translating rural activism into a multistakeholder coalition for reform, and finally shifting the incentives of state authorities toward the adoption and implementation of right to information legislation. The analysis in this chapter highlights multiple drivers whose interaction can contribute to lower barriers to collective action and facilitate citizen mobilisation through the mechanisms just identified. For instance, institutions that enhance contestability in the policy arena - such as media regulations, political finance regulations, and constitutional provisions that establish mechanisms to protect citizens' rights - can create an enabling environment for citizen agency by facilitating cooperation and promoting more inclusive and equitable bargaining spaces. While often the outcome of elite bargains, these institutions can nevertheless open up opportunities for previously marginalised groups to mobilize and bargain for their collective interests.

One case in the report highlights the central role that the media can play as an agent of accountability. By publicising information that is reliable and salient for citizens, the media can change the incentives of elites by increasing the costs of certain behaviour or policy decisions, reshape preferences and beliefs, and make the policy arena more contestable. But precisely because of their role, the media can be captured by powerful interests and undermine - rather than support - possible entry points for change. "Media content is often decided by elites. The effect of media bias as an instrument to reduce contestability, reinforce prior beliefs, and increase polarization among social groups is well documented in the literature....Elites can also use the media as a coordinating device for propaganda purposes and - in extreme cases - for repression....Under certain circumstances, new social media can counteract elite control of the media market....Social media can be effective in generating sudden spikes of protests and in coordinating uprising, but they alone cannot yield sustained representation of interests and promote social change (Ackland and Tanaka 2015). According to the World Development Report 2016: Digital Dividends (World Bank 2016), 'analog' complements are needed to maximize the potential of social media as drivers of change. Political and social organizations can act as such complements (see chapter 8)."

Overviews of the report are available in English, French, Portuguese, Russian, and Spanish; click here and scroll down to access these documents and other portions of the report in PDF format. The full report then includes:

Part I: Rethinking governance for development: A conceptual framework

• Chapter 1: Governance for development: The challenges
• Chapter 2: Enhancing governance for development: Why policies fail
  • Spotlight 1: Corruption
  • Spotlight 2: The governance challenges of managing risks
• Chapter 3: The role of law
  • Spotlight 3: How do effective and equitable legal institutions emerge

Part II: Governance for development

• Chapter 4: Governance for security
• Spotlight 4: Wartime governance
• Spotlight 5: Crime
• Chapter 5: Governance for growth
  • Spotlight 6: The middle-income trap
  • Spotlight 7: Public-private partnerships
• Chapter 6: Governance for equity
  • Spotlight 8: Service delivery: Education and health

Part III: Drivers of change

• Chapter 7: Elite bargaining and adaptation
  • Spotlight 9: Decentralization
  • Spotlight 10: Public service reform
• Chapter 8: Citizens as agents of change
  • Spotlight 11: From transparency to accountability through citizen engagement
  • Spotlight 12: The media
• Chapter 9: Governance in an interconnected world
  • Spotlight 13: Illicit financial flows