Politics matters for development

Abstract

Satisfying the key requirements for development depends upon broad and deep institutional reforms. However, by their very nature, these "institutional" or so-called "second generation" reforms are considerably more complex to implement than the "first generation" macroeconomic reforms (Naím, 1995). Enhancing the management of public sector institutions, creating a more independent and effective judiciary, and establishing regulatory frameworks usually involves coordination and agreement among a wide array of public institutions and societal actors and a series of legislative and bureaucratic actions over a long period of time. Clearly much is at stake for society in the creation and reform of regulatory frameworks, in the redesign of service delivery systems, and in the restructuring of public sector institutions. Such changes inevitably entail taking on powerful interests and privileging certain social groups or interests and disadvantaging others. If the benefits of institutional change end up being captured by relatively narrow interests then larger societal groups, such as consumers, workers, and entrepreneurs, will suffer. Public sector administration reforms, like enhancing governmental transparency, controlling corruption, establishing a professional civil service, etc. require incumbent politicians to relinquish instruments of power and to open up their conduct and decisions to more intense public scrutiny.

Thus, in the process of creating, implementing, and sustaining sound institutions it is clear that politics matter. If rules are to be adopted and public sector organizations refashioned in a way that they work to the benefit of all citizens and are viewed as legitimate, then an open process of decision-making is required in which the interests and preferences of a wide range of stakeholders are considered. Efficient "market" institutions would appear to require political institutions that are able to ensure both that fair and efficient rules are created and that rules are even-handedly and consistently enforced and adjudicated. Given the impossibility of universal blueprints, the creation and maintenance of institutions depends upon broad and effective citizen participation through well-developed representative institutions.

The Latin American region's relatively low and volatile economic growth rate and unyielding poverty levels appear to be attributable in great part to continued "institutional" deficiencies. However, at their root, these "institutional" weaknesses reflect and are reinforced by problems of democratic governability. Without changes in the rules and conduct of democracy it is doubtful that major improvements can be made in the quality of institutions or, by extension, in the pace of economic and social progress.

More possibilities are open to the region in this regard than shifting from presidentialism to parliamentarism as some have recommended. That such a transformation has not been seriously considered in most countries of the region is a reflection of its lack of resonance with the culture and traditions of the region, which also could suggest that it would be unworkable if chosen. But, within presidentialism a broad range of institutional differences affect the performance of democracy, including, to name merely a few, the extent of the president's constitutional powers, the nature of the election system, the nature of the party system, and the ways that judges are appointed. The interrelationship among such institutional factors plays an important, though not exclusive role, in shaping how democracies perform. It is worthwhile to carefully study the impact of such institutions and what impact the democratic reforms of the past decades is having or is likely to have on the functioning of democracies in the region.