Post-2015 Consensus: Governance and Institutions Perspective, Kraay

Perspective Paper

Summary

Hildebrand raises a number of concerns about possible SDGs in the area of governance, which can be summarised as:

• Governance is difficult to define
• Governance is difficult to measure
• The effect of good governance on development outcomes is not well-documented
• The effectiveness of aid-financed interventions to promote good governance are not clear

While these points are all valid, I argue that they do not make governance targets either infeasible or undesirable. My argument is simply that there were similarly serious challenges to the MDG to ‘eradicate extreme poverty’, but this did not stop it being adopted and becoming a highly visible ‘flagship’ MDG. Allowing the perfect to be the enemy of the good risks missing the opportunity to have a  governance SDG  that renews international emphasis on the importance of good governance, both as intrinsically desirable and as a means to achieving other development goals.

Definitions:  Despite the conceptual and definitional challenges, the international community operationalized the goal of eliminating extreme poverty by setting three specific targets: to halve the proportion of people living on less than $1.25 per day, to achieve “full and productive employment and decent work for all” and to halve the proportion of people suffering from hunger. A similar case can be made regarding governance. Despite the profusion of definitions, it is possible to identify a few common themes that are amenable to measurement. Most of them emphasise the importance of a capable state, operating under the rule of law, which is able to provide an array of public goods and be held accountable for failure to deliver them.

Measurement:  Agreeing to define ‘extreme poverty’ in terms of the proportion of people living on less than $1.25 a day raises immense practical measurement challenges. Measuring governance similarly poses a wide range of practical challenges. The first important one is to strike an appropriate balance between subjective measures of perception of governance quality and corresponding objective measures. Despite the pejorative labelling of ‘soft’ data in the case of surveys, both types of data can play an important role. Perceptions matter, as people will not, for example use the police or court services properly if they see them as corrupt. In contrast, ‘hard’ indicators of laws or regulations on corrupt practices may not be useful without knowing how well they are enforced. The second important issue is to acknowledge and quantify measurement error in governance indices.

Links to Development:  While the empirical evidence linking good governance with development is not yet fully conclusive, there was similarly little hard evidence for a causal link from high poverty to subsequent reduced growth. However, this did not prevent poverty reduction goals being set. Both the poverty MDG, and a possible governance SDG,  may be seen as aspirational targets  When viewed as an aspirational target, it should be broad and ambitious.

Links to Aid:  Hildebrand also discusses the very mixed evidence on the efficacy of aid in promoting governance reforms. However, similar lack of strong evidence at the time between aid and growth – the main source of poverty reduction -- did not prevent adoption of the poverty reduction target. It is also true that, for both poverty and governance – some barriers to progress represent domestic policy failures, which could be corrected without the need for international aid.

A governance SDG is an opportunity to set a challenge for developed and developing countries alike to work towards a broad aspirational goal.