By Nadeem M.
Development Studies Program, University of Melbourne, Australia
Image Attribute: Decentralization diagram, via Wikimedia Commons
Good governance: What is new in the concept?
The idea of decentralization, once introduced by the donor nations, became an essential part of academic discourses as well . It was after the failure of structural adjustment policies for economic growth that the concept of good governance was added to the agenda of the donor community . It was thought that the failure was due to bad institutional arrangements, corruption, and lack of accountability of the government institutions, or in short bad governance. In this context, it was claimed that unless more inclusive, appropriate and modern market-oriented institutions were introduced in the less-developed world, economic growth and poverty reduction would not be possible . Strengthening local governance and making it more responsive, transparent and democratic through various decentralization and devolution plans were, therefore, considered an important component of aid based on good governance .
According to Morten Boas, before being studied at the international level, the term governance was employed in a broader sense within academic literature . For example, it was widely used in relationship to the micro-behaviors of firms within business studies literature . More recently, the term referred mainly to running governments and other public agencies or private agencies with social purposes .
Rosenau argues that governance encompasses the activities of the governments, but it also includes non-state channels through which policies are pursued and implemented . Amongst many other channels, the most important are the civil society and the market .
Aubut held a view that defining governance is problematic as there is no single agreed-upon definition available . It can convey ‘different meaning depending who uses the term’. Whatever meanings different writers attribute to the concept, there is a general tendency to assume that western concepts of governance are universally applicable. Warning against such a trend, Doornbos asserted that the applicability of the western notions of good governance might not be applicable universally . The cultural contexts, therefore, should be taken into consideration. The following discussion further reviews the different approaches to good governance.
Knack understood governance in a limited sense as applying to institutions only (state as well non-state). This is because during the 1980s there was a significant emphasis on the role of institutions in development within the policy debate . North in this context stated that ‘institutions are the rules of the game and the incentive structure of society . It is believed that economic growth and development depend upon the quality of institutions fostered by the government. Thus the confidence of economic agents is raised and they see more incentives to invest in the future . As Stern et al pointed out, countries that have combined institutional improvements with market-oriented policy reforms and greater engagement with the world economy saw their per capita incomes grow in the 1990s at the rapid pace of 5 percent per year” .
On the other hand, writers such as Manor and Crook , while acknowledging the importance of institutions, have argued that the quality of governance also depends on the politicians and bureaucrats. They stress that politicians and bureaucrats’ use of power and authority through available institutions significantly determine the end results. Good governance, therefore, not only depends on the quality of institutions but the integrity and capacity of the politicians and bureaucrats. This idea of good governance has been greatly promoted by the World Bank since the early 1990s. Aubut, therefore, argued that the most common definition of governance is the World Bank’s: ‘the manner in which power is exercised in the management of a country’s economic and social resources for development’ . The World Bank also refers to good governance as ‘sound development management’ and sees it as ‘central to creating and sustaining an environment which fosters the strong and equitable development and it is an essential complement to sound economic policies’ .
The OECD’s definition reflects the same ideas as the World Bank but has more emphasis on democratization and reduction in military spending in developing countries . For OECD rule of law, public sector management, control of corruption, and reduction of military spending within developing countries are important aspects of good governance .
While the ‘definitions of governance preferred by different institutions and countries vary to some degree, they do convey the notion that quality of institutions and public management is a key to successfully developing the less-developed countries’ . The common thread that runs through all these definitions is that ‘good governance’ involves institutions, channels, and networks from outside the government in the provision of public goods. Civil society in this picture of governance stands prominent and is a significant part of the ‘good governance’ paradigm. Its role is not merely to monitor state activities and act as a watchdog, but also to help create social capital considered important for participation, empowerment and economic growth .
Vibrant civil society has become a symbol of democracy in this context. Graphical representation of the ‘good governance’ model, according to the aforementioned definitions, can, therefore, be represented by a triangle, with the state, the market and civil society each occupying one side. This picture of ‘good governance’ is quite different from the ‘good government’ paradigm that represented the era of the centralized state during the Cold War period. During this period centralized governance and state were considered to be the engine of growth; now it is the same centralized governance and state that is considered to be the main obstacle towards economic growth . However, such a model is entirely endogenous and ignores exogenous factors such as the world economy and international politics.
Decentralization: Linchpin of Good Governance
In light of the above definitions that are an outcome of global trends in governance, decentralization of power and authority is considered to be a key to achieving more democracy at the grassroots level by policy analysts, international financial institutions, and donor countries. This is also a major condition for development aid provided by the international donors. As democratization generally has become a central concept introduced by the donor countries and international financial institutions in the developing world in both reality and international donor thinking, democratic decentralization has also taken on increased importance. Being a major component of the ‘good governance’ package, democratic decentralization is generally defined as a strategy that brings service delivery closer to consumers, improves the responsiveness of the central government to public demands and thereby reduces poverty, improves the efficiency and quality of public services and empowers lower units to become more involved. Most importantly, it significantly adds to a democratic culture at the local level .
Decentralization has been classified into four types: privatization; delegation and de-concentration, or administrative decentralization; fiscal decentralization; and devolution or democratic decentralization. Most scholars, governments, and aid agencies particularly favor the devolutionary form of decentralization these days, and its popularity arises from interrelated factors . It is believed people are becoming disillusioned with the existing centralized systems of governance that could not deliver. They believe them to be inequitable, unrepresentative, poorly performing, and failing to provide them with a voice to influence decisions that affect them. Decentralization, therefore, is seen as effectively addressing these issues. Secondly, decentralization is an outcome of what Huntington called the ‘third wave’ of democratization. This third wave saw a doubling of the number of democracies in the world during 1974-1995 and has since continued . This trend shares with decentralization the idea that the decision-making power should be devolved to the local officials and elected representatives who are closer to the people being served. Furthermore, officials should be accountable to the people, primarily through popular elections at the local level. The United Nations Development Program reflects this sentiment in the statement that decentralization is an integral part of the logic of democratization .
Thirdly, the argument from economics and the managerial sciences that date back to Adam Smith concerning the efficiency of local government strongly recommends devolutionary forms of decentralization . According to this argument, an improved supply of goods and services to individuals is achieved through aggregation of local preferences in small, devolved units of government. The claim is that local governments are more responsive to local demand compared to supply-driven central bureaucracies, and are in a better position to mobilize local resources and populations . Once increase in productive efficiencies is achieved it will result in allocative efficiency secured through increased accountability of local governments to citizens, fewer levels of bureaucracy, and better knowledge of local costs. All these factors converge in the notion of good governance that has become so pervasive in recent years . Getting the policies right is not enough. Getting the institutions right is also important. This, however, is not possible without decentralization of power and authority.
Before the end of the Cold War, the centralized/commandist paradigm of governance was regarded as ‘good governance’ . The reasons were diverse; however they all, in some ways, related to the interwar years and the post-World War II economic and political situation. The countries that fought the two world centralized power and resources, and the one’s victorious after the Second World War ‘in close collaboration with large-scale industry and the unions, carried on a war economy with spectacular results’, gaining more confidence in the centralized form of governance .
On the economic front, the success of centralized governments in the West in overcoming the great economic depression of 1930 enhanced their confidence in centralized governance. The economic boom after the Second World War and successful creation of widely popular new social welfare systems; the incredible economic growth of the USSR between the 1930s and the 1960s; the experience of economic war planning in Nazi Germany and the United States; Keynesian demand management guarantees in Europe after the war: these factors all created a sociopolitical environment in which there was widespread consensus around belief in the efficacy of centralized approaches to governance .
Such an outlook was quite obviously adopted by many countries in Asia and Africa, especially in colonized countries gaining independence after 1945. For example, in the case of the Indian subcontinent, the leadership of both the Indian National Congress and the Muslim League essentially believed in centralized governance. The case of Pakistan seems to be even extreme. The Pakistani state, unlike European nation states, became an overdeveloped authoritarian state .
In the post-World War II period, economic security became a new security paradigm, not only in USA but the world over. In the period after 1945, the state was still powerful enough in the First World to regulate capital, as capital had not yet transcended the state. The Keynesian economic paradigm was still prevalent . However, in the latter phase of globalization that started after Soviet disintegration (characterized by increased internationalization of production, the ‘information revolution’ and the pre-eminence of neoliberal social policy), the importance of a centralized state apparatus started diminishing; consequently, the neo-liberal economic paradigm gradually replaced Keynesian models.
In a new world situation much more complex in nature than what prevailed during the Cold War, it became difficult for old centralized governance approaches to deal with the challenges of managing and governing new trends of economic development. This was a time when governments in the developed world came up with decentralized patterns of governance, endorsed by the neo-liberal economic paradigm that was already opposed to the Keynesian concept of state intervention adopted by centralized governments.
The World Bank, after supporting a centralized concept of governance for about four decades and financing military rulers in the Third World, also came up with the idea that decentralization of governance was an important aspect of ‘good governance’. It was claimed that the economic crises of most Third-World countries in Asia and Africa lay in their practices of bad governance. It was therefore considered important to link decentralization as an important condition of future aid .
Citation: Nadeem M (2016) Analyzing Good Governance and Decentralization in Developing Countries. J Pol Sci Pub Aff 4:209. doi:10.4172/2332-0761.1000209
Copyright: © 2016 Nadeem M. This is an excerpt taken from an open-access article distributed under the terms of the Creative Commons Attribution License.
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