Governance, Growth and Development

Abstract

The promotion of 'good governance' has become one of the pillars of development policies proposed by a large majority of development aid agencies. It is based on the view that 'good governance' is a pre-requisite for development. The author critically reviews the relationship between governance, growth and development and draws implications that are relevant for Sub-Saharan African countries. There is today a broad agreement that governance is critical for development but much of the consensus about how governance matters is still very deficient. The liberal revolution in development economics and policy thinking that took place in the 1980s had a critical effect on the debate about the role of the state and therefore about the governance capabilities that developing countries should aim to achieve. The emerging good governance agenda defends the need in developing countries to have policies that stabilise property rights and engage in rule-of-law reforms, carry out anti-corruption and anti-rent seeking strategies, engage in democratisation and accountability reforms, and sustain these through the mobilisation of the poor through the prioritisation of pro-poor spending by governments. This paper provides a critical assessment of the theoretical and empirical basis of these approaches to governance and development. It suggests that some of these reforms may be desirable but are not implementable to a significant extent in any developing country. Instead, other governance capabilities, namely the capabilities of states to intervene effectively and address market failures, are more effective to achieve improvements in resource mobilisation and the efficiency of investment allocation.