Governance as a Development Issue
In: Michel van Hulten & Johan Wempe, Corruption, Development Cooperation and Governance, Deventer: Saxion University, pp. 72- 84.
Is it possible or even desirable to develop a comprehensive theory of governance? In his inaugural address, Johan Wempe has answered this question positively. He even argues that such a theory will reflect the guiding principles of communities in general. Wempe does not refer to the concept of a 'theory' as an objective body of analysis, but rather as a normative system. His objective is not to explain processes of governance, or the factors that determine decisions during such a process, and their social, political, economic and cultural environment. Rather, Wempe aims at developing a set of norms and yardsticks for governance that would be applicable everywhere. That is, provided a process of governance met such criteria, the outcome would be desirable in terms of effectiveness and efficiency.
So, the basic question is, what is the best way to govern? Wempe makes a distinction between this question and another one: what is the best government? The latter question concerns institutions. Wempe, however, is interested in processes, including the relationships between various institutions in a community. So, the question can be reformulated as follows: what is the best steering or guiding mechanism in a community, whether it be a country, a municipality, a firm, a school etc.?
In his address, Wempe has covered a large area, from corporate governance and spatial planning to international development cooperation. He has not limited himself to one specific discipline, namely management theory. He has also made reference in his address to, for instance, business economics, political science and international relations theory. Such a multidisciplinary approach is indeed necessary if one is seeking a general and overarching theory.
Developing such a theory is very ambitious. I will argue that it may be over ambitious. In my view, a comprehensive normative theory of governance is neither possible nor desirable. If it were possible to develop some general criteria for good governance, applicable in all communities, they would be utterly abstract, based on heroic assumptions, and this would render the theory not meaningful as intended, but rather empty.
Wempe is aware of the potential limitations of such a theory. He argues that, wherever there is a form of organisation, it is necessary to think about roles and their alignment. He then rightly states that the governance issues that result from these roles and alignments vary according to the context of the community concerned and of its organisation. I venture that, next to the context, also the nature of an organisation and its size are two significant factors. A company principally busy producing one major commodity such as oil will require different governance procedures from those in a nation where all the citizens are striving for different blends of elements that together form their personal welfare. A large transnational company may similarly benefit from different governance procedures than a small domestic firm. A large country such as India will require different methods of decision-making than its tiny neighbour Bhutan. However, notwithstanding these limitations, Wempe argues that governance issues in different situations have certain similarities. In his opinion, the various perspectives should be brought together and the different approaches should try to learn from each other.
This is a laudable undertaking. Communities should try to learn from each other in order to avoid mistakes and to enhance the effectiveness and efficiency of the processes within these communities and the quality of their outcomes. However, as Wempe himself has sensibly cautioned, “there is only value in developing a comprehensive concept of 'governance' if the issues behind it are also similar and will benefit from a more general analysis”. Indeed, but this implies that the greater the dissimilarities, the less value there is in developing common guidelines for governance.
Let me illustrate this by following the line of reasoning in his address a little further. Wempe makes a distinction between vertical and horizontal guidance, that is guidance from the top of an organisation - for instance at the level of a government or a central command - downwards and, on the other hand, guidance based on exchanges between different actors that are not subordinate to each order in a hierarchal system: “the parties involved steer each other”. This distinction gives rise to the following reformulation of the research question: “Which arrangement of horizontal and vertical guidance, and which distribution of roles among the various organisational levels, is most suitable for resolving the issues that a community faces?”
In order to answer this question, Wempe argues that three main issues need to be resolved. First, there should be an adequate vision. In other words, in a terminology different from the one used by Wempe, that there should be a common understanding and a clear definition of the objectives of the various actors within a community, a shared welfare function for a society or a common mission statement for a company or corporation. Only when this is the case, can agreement be expected regarding a possible solution for a problem or, in other words, consensus reached regarding the direction in which the process of decision-making should be steered.
Second, there should be adequate coordination between all the parties involved, and a commitment by all stakeholders to the common values implied in the adoption of a common objective or in the endorsement of the mission statement.
Third, in order to guarantee the effectiveness of the decisions taken, and to prevent them being undermined, there should be a clear division of roles: no role confusion, no abuse of dominant positions and no corruption, nepotism or preferential treatment.
The limitations of a general theory
These are sound principles of management, always to be striven for, in any society and any organisation. However, it is still a far cry from a general and comprehensive theory of good governance. The problem is that in most societies none of the three conditions are met. There is neither a common objective, nor a common commitment, nor a clear division of roles without any abuse of power. That this is not the case in Cameroon, the country that is the central object of study in the second lecture of today, by Michel van Hulten, will be self evident to most of us. However, I venture that none of the conditions are met in any country, including the Netherlands, nor in international organisations, and that any society or community, be it a firm or a university or whatever, can be characterised more by discord than by unity of purpose and commitment.
The real question for a general and comprehensive theory of governance should therefore be what to do in cases of such discord. The question is not how to prevent such discord per se, but how to avoid the discord resulting in chaos, in bad governance, in steering in the wrong direction, and achieving results that are in clear contradiction to any reasonable and possible common welfare objective.
Wempe offers three ways out.
First, he pleads in favour of a combination of horizontal and vertical governance. This goes beyond ideology and I very much agree with Wempe's plea against the ideological usage of the term governance as against government per se. He strongly argues against the view in which government is seen as an outdated and obsolete way of governing. The ideological usage of the term governance results in a definition of the concept as a purely horizontal steering mechanism that is applied jointly by private business and civil society, guiding the market and the nation, leaving only a minimal role for any form of government. Governance, in this view, supersedes 'government'. Horizontal control is better than hierarchical control, or at least that is the claim.
For about twenty-five years, this has been the neo-liberal paradigm underlying economic governance across the world. As with any one-sided approach, this ideological choice has caused more harm than good. Wempe rightly argues that any vertically oriented control measure takes responsibility away from those who are directly involved and leads to a rigid control and monitoring system, and to excessive bureaucracy. On the other hand, however, horizontal steering can lead to hazy responsibility and to activities that overlap, compete and conflict with each other and, consequently, to large inefficiencies. Corruption is just one example of such inefficiency.
In Wempe's view, the introduction of this ideologically coloured definition of 'governance', in which government more-or-less disappears and all hope is invested in the market or the social field, is a weakness. This interpretation of the term 'governance' also implies normative choices. When the term 'governance' is used, it appears that a choice is being made against the concept of government. Instead, Wempe calls for a neutral use of the term 'governance', covering both horizontal and vertical steering modalities. However, Wempe goes further, not only arguing for a sound, non-ideological definition of the term 'governance' in governance theory, but also for a combination of the two major categories of steering mechanisms in governance practice.
In order to resolve social issues, various governing arrangements should be used alongside each other. No tool that could be used in order to solve a social issue should be rejected in advance. Alongside horizontal forms of steering, forms of hierarchical and central control could also be included. It all depends on the issue to be addressed.
Second, Wempe pleads for diversity in the development of views concerning the desirable outcome of a societal process, and the direction to be taken in order to solve problems. One can go even further than this: competition amongst parties and participants in a process may help to keep them sharp and oriented towards innovation. Although this may divert attention from notions of full and common commitment, such diversity may well be beneficial in attaining a common cause.
As the third element of a comprehensive governance approach leading to a result desired by participants in the process, Wempe refers to the need to ensure a balance between uniformity and diversity: “Governance is a question of balance”. The right balance has to be found between uniformity, consistency and ambiguity in the vision. It is also a matter of finding the right balance between alignment and competition. It is all a matter of degrees. A process of governance should allow flexibility, in order to keep the system of decision-making and implementation workable, and to ensure the social dynamics.
We are inclined to seek one vision (one definition of the problem and one solution), an alignment of actions around a social issue (all facing in the same direction) and a clear division of roles and tasks (who does what). However, multiple views and the competition between them can often lead to fruitful solutions. People within organisations must also be capable of fulfilling multiple roles since this guarantees the flexibility needed within an organisation.
However, what is a good balance? One may agree with all the three recommendations but still not see this as a general and workable normative theory of governance. The three recommendations leave some major questions unanswered. For instance, will there be limits placed on the diversity of views concerning the 'vision', or could different views be expressed throughout the process so that a full consensus will never be reached? If so, then there is no general theory. If a general theory of governance implies the need to continuously exchange and confront views during a steering process, then the applicability of such a theory is rather limited.
Another question concerns the combination of horizontal and vertical steering. Both mechanisms are useful; they can complement and influence each other. However, where should the lines be drawn in a specific organisation? It is clear that a military peace operation requires a strong hierarchical structure, unity of vision, full commitment, no competition, unity of command and control. Meeting the objectives of a university, in the sense of creating and exchanging knowledge, requires maximum freedom for researchers, teachers and students. Wempe provides numerous examples himself: markets for consumer durables, systems of international development cooperation, health care systems, energy markets, private business corporations and so on. All of these require a market-, society- or corporation- specific approach to questions of governance. There is no general rule, and if there was to be one it should be this one: never choose an extreme - neither a central and rigid ideological opinion, nor endless and chaotic diversity - that is, neither complete and absolute centralisation, nor the anarchy of everyone for themselves.
However wise or obvious this may seem, it does not help in determining the best governance procedure in a specific setting. Is it possible to develop some further criteria that would help in identifying an optimum position between the extremes?
The optimum regime
Jan Tinbergen, the first winner of the Nobel Prize in the economic sciences gave much thought to this problem. He developed a theory on the optimum regime, or the optimum economic order. In this theory, the terms 'regime' and 'order' have the same meaning as 'system'. Tinbergen developed his theory as an economist, but his models are so general that they could, in principle, also apply to other systems of decision-making. His methodology originated in welfare economics, and is often labelled as welfare theory. He developed a number of general criteria to determine the optimum level of decision-making in the sense of maximising social welfare. To determine what constituted social welfare and what should be done to maximise this, Tinbergen had to make some explicit assumptions about what Wempe has called a 'vision'. Tinbergen developed a set of criteria for the determination of roles, and for the degree of coordination between them. (Here I am using Wempe's terminology, rather than Tinbergen's, but the questions which they address are more-or-less the same). He based these criteria on the conditions under which social welfare could be maximised. Such conditions included the absence or the complete internalisation of external effects, the containment of factors that may give rise to the emergence of a monopoly, and full market information being available to all parties.
Tinbergen presented his models as building blocks of a general theory. However, their general applicability relied on abstractions. The concept of power (other than possible monopolistic power) did not play a role. Nor did the theory deal with cultural factors, which of course may differ dramatically between countries. So, although it was a rather sophisticated theory, it was by no means a comprehensive one. If a theory concerning governance or decision-making is to be generally applicable and comprehensive, as well as meaningful, essential factors cannot be left out.
Power and culture are essential factors in theories concerning governance. In trying to incorporate these factors in a theory, we might benefit from insights gained by other disciplines, such as political science, cultural anthropology or the behavioural sciences such as psychology. Such insights might help us understand not only in which realm decisions could best be made (the public sector, the market or the realm of civil society), or what would be a better level for decision making (more or less decentralised), and how to coordinate levels and realms but, moreover, how decisions are made in a given level and realm of decision-making.
Is this important? Yes it is, because if anything differs amongst societies with different cultures it is the way in which decisions are taken. There are differences between rural and urban communities, between crop cultivating and cattle keeping communities, between settled communities and nomads, between agrarian, industrial and service oriented societies, between communities of endogenous peoples and migrant communities. There are differences between traditional societies and nations with full access to modern information and communication technology and a highly educated population. Further, differences exist between tribes, between castes and between religious groups. Differences exist between matriarchal and patriarchal communities, and between communitarian societies, communities with the extended family as the main constituent, and societies focused on the roles and rights of the individual. Such differences may concern issues such as the rule of law, traditional justice, land tenure systems, property rules, gender relations, social security, the position of elders in society and the relationship between people and nature. All these differences have a bearing on the way in which decisions are made. They exist. They cannot easily be changed. Efforts to change them, or to quickly bring them into line with modern Western modus operandi, are doomed to fail. Such efforts may even be counterproductive, leading to greater discord and less commitment.
For all these reasons, attempts to design a general comprehensive normative governance theory will not serve a purpose. The purpose should be to design better governance procedures for specific countries, communities and organisations. In my view, this goal could be accomplished by being very specific from the outset, and by designing steering procedures that suit individual situations. Does this mean that any more general effort would be pointless? No, because the more that is known about the shortcomings of an overarching theory, the more profound the insights will be into specific situations. Moreover, it would make sense to agree on general values, not with regard to levels and realms of decision making, nor concerning participant's roles and the coordination amongst them, but with regard to the way in which decisions are made and their possible outcomes.
My plea would be for research on governance to especially focus on questions of equity and human rights: more equal access to decision-making processes, more equal distribution of the welfare produced as a result of these decisions, and a better guarantee of the human rights of individuals as well as of minority groups in the governance structure. The design of the governance structure and procedures can be left to the countries, communities, societies and corporations themselves, provided they do not violate essential values.
A general theory of governance focusing on how decisions are made, rather than on where and by whom, will inevitably involve general criteria concerning the accountability of those who take decisions. Even in non-democratic settings, or in a society characterised by autocratic top-down decision making, rather than bottom-up participatory welfare creation by (self-)empowered people, full transparency, enabling checks and balances in the process of decision-making, will result in more sustainable outcomes.
Transparency in terms of accountability requires facts to be revealed. Facts are important, not the perceptions of the facts. Perceptions may even blur the knowledge about the facts. Worse, perceptions about wrongdoings due to bad governance may hinder redress. This is a major thesis in Michel van Hulten's address on “Perception as a Cause of Corruption”.
Corruption prevails in many countries. The case of Cameroon is well known, too well known perhaps, because the perception is that Cameroon is so corrupt that corruption in other countries is less of a problem. Van Hulten shows that this is a misconception. In absolute terms, there is more corruption in countries with more resources, and it is resources that lend themselves to corrupt practices. One cannot deny that Cameroon is still a very poor country, but does Cameroon suffer from corruption more than other poor countries in relative terms, namely as a percentage of its Gross National Product? According to the Transparency International's so-called Corruption Index, this is indeed the case: it is the most corrupt nation on earth. However, even this is questionable: the index is an index of corruption as a perceived phenomenon, not an index of corruption as a measured fact.
Van Hulten further argues that this index is based on an ill-defined concept of corruption, and that the phenomenon will manifest itself differently in different countries - rich and poor, modern and traditional - and in different cultures. This equally applies to many other elements of the overall concept of governance. Good or bad governance will manifest itself differently in different societies. Wempe's address on governance and van Hulten's paper on corruption meet each other in their context: the development of countries.
Van Hulten recognises that greed, impunity, absence of an independent judiciary, lack of democratic controls, of press freedom and of political will, weak accountability, the suppression of criticism, low salaries, poverty in general and the tradition of supporting family members and those originating from the same tribe or region, are all factors that encourage corrupt behaviour. This is an impressive list. Policies to combat poverty combined with better governance practices in general would do much to lessen the evil of corruption and reduce the damaging consequences for sustainable development. However, van Hulten, rather than focusing on policies to redress these causes of corruption, draws our attention to another problem: that the perceptions of corruption allow corruption to flourish.
Perceptions and facts
Perceptions of facts may differ from the facts themselves. This is a truism. Wrong perceptions of a problem will always obstruct possible solutions to a problem. This is another truism. So, arguing methodologically, van Hulten may well be right when stating that the widely held opinion that Cameroon is the most corrupt country on earth has become a self-fulfilling prophesy. That is, it is not a description of a fact that is the result of a process, but the cause.
However, this is quite a bold statement. Van Hulten argues that the Corruption Perception Index, which is rarely disputed by international policymakers, is based on a selective use of sources. Moreover, he argues that the index is biased towards the views of a select group of respondents, most of them well-paid, expatriate businessmen: Anglophone, male, urban and educated in Western thinking. This is a devastating comment, and one which calls for a complete overhaul of the research method. This is one of van Hulten's major recommendations: focus on facts, not on perceptions. I couldn't agree more. The recommendation is in line with my earlier plea: please focus on specifics, not on general theories and systems.
Ranking countries belongs to the category of overarching and general approaches to a problem. The outcome results from what in statistics is called a cross-section analysis, as against a time series analysis. In the former, countries are compared to one another. In the latter, the situation in a country is compared with the situation at different points in time. Getting facts and figures over time is more laborious than comparing only the most recent international data. At a time when it was hardly possible to get adequate series of historical data, researchers had to make do with cross-sectional approaches. However, as van Hulten argues, nowadays many more facts and figures are readily available. This applies both to data on corruption and to other data that are relevant when researching a process of change and development. However, still too much research, and too many pronouncements, are based on cross-sectional analysis. This may be due to a certain laziness amongst some researchers, it may also reflect a bias towards modern, Western, benchmarks.
The resulting associations and rankings may satisfy culturally prejudiced commentators, but for practical purposes they do not amount to much. Why would inhabitants of Cameroon consider it important to know that the situation in their country is better or worse than in Togo, let alone in the Netherlands? They are living in Cameroon, not elsewhere, and hardly have the opportunity to go to a country that is 'better off'. However, the citizens of Cameroon will consider it much more relevant to know that the situation in their country has deteriorated or improved compared with the situation several years before, and that the trend is positive or negative. They may be able to benefit from that knowledge, for instance by trying to reverse or strengthen the trend.
Ranking on the basis of perceptions is even worse. Such rankings are nothing more than toys. Ranking by outsiders, so called experts, is always subjective. The choice of criteria tends to be selective. Judging whether a criterion has been met involves a personal opinion and will thus be somewhat arbitrary. Weighing and blending the resulting qualifications into a single overall indicator will inevitably depend on the views and backgrounds of those involved. The result is a lottery.
However, ranking by insiders, the inhabitants, is inherently impossible: while they know well the place where they live, they hardly know places where thy do not live and work. While they can rank subsequent manifestations of their own living conditions, comparing these with a reality unknown to them is a purely theoretical exercise, a chimera. Moreover, as I argued above, why would they want to do so? What is the point?
As far as corruption in Cameroon is concerned, van Hulten shows that the expatriate perceptions seem to agree with the revealed experiences of a selective group of polled inhabitants. A further analysis also shows that, using broad categories rather than a very precise ranking order, one could conclude that Cameroon is indeed a very corrupt country and that recently there has only been some slight improvement. According to van Hulten, the official Cameroonian policy to address corruption is inadequate and so selective and politicised that, rather than being a possible solution, it has become part of the problem.
The practice of ranking is also part of the problem. Rankings are not only pointless, they can become counterproductive. As van Hulten has argued, it is not the reality of corruption that makes a country appear corrupt. No, the opposite is true: the 'look' of a country, its perception as a corrupt nation, will result in behaviour that reinforces this image. Parties with dishonourable intentions will jump on the bandwagon, and try to seize the apparent opportunities, which will result in even more corruption. Clean parties will shy away, and turn to less corrupt countries. In doing so, opportunities will be missed to reverse the negative trend.
Arrogance or hypocrisy?
The possibly perverse impact of subjective qualifications and rankings had not struck me until van Hulten drew my attention to this aspect. However, such consequences seem entirely plausible. There is some resemblance with another practice: withholding development assistance from a country for the reason that it is perceived as having 'bad governance'. Rather than conceiving good or improved governance as an outcome of a comprehensive development policy that should be supported with external assistance, it has become customary to consider good governance as a precondition for rendering such assistance. This is perverse. There is no reason for a country with good governance, which will earn it good credit ratings and hence access to international financial markets, to be rewarded with scarce soft money which could otherwise be used to strengthen other countries' capacities to improve governance and combat corruption.
Using the donor's subjective perceptions of good governance, including the level of corruption, in a developing country as a precondition for entering into a development cooperation relationship is rather naive because the outcome is the opposite of what is claimed as desirable. So, it is short-sighted. Further, it could also be labelled as arrogant, and based on Western perceptions of good and bad. Maybe, however, such a perverse result is the very intention. Maybe the blurring of roles, the upholding of non-transparent governance procedures and the possibility to compete using bribes continues to serve Western parties in their dealings with market partners in developing countries such as Cameroon? If this is the case, it reflects not naivety or arrogance but hypocrisy.
Is this too bold an assumption? I do not think so. Despite the generally accepted definition of corruption as 'abuse of public or entrusted office to serve private interests', it is mainly poor and developing nations that fair badly in corruption indices. However, what about the rich and powerful western countries? Is their use of entrusted power so beyond reproach that they deserve their high rankings? The definition is not the issue; it is the selective choice of indicators for the abuse of entrusted power, the measurement of compliance and the weighing of the results.
The character, the level and the spread of corruption depend on the culture and traditions of a country, its political system and the organisation of its markets. The latter involves the ways and means used to control investment, trade, finance, enterprise, natural resources and land use systems. Weighing the performance of western countries and those in Africa in terms of governance, corruption and the abuse of entrusted power that results in distorting the public interest has to go beyond a comparison between bribing authorities in Africa and the fraudulent activities of construction companies in Western countries. The present international crisis on the world's financial markets is due to greed, speculation, perverse bonus schemes, manipulation of risks and the clouding of transparency. The damage done is no less than the losses due to traditional corruption.
In addition to this, we could refer to the selective setting of priorities by administrative and political bodies as a result of lobbying by moneyed interest groups. In principle, one-sided representation of interests can be contained through a system of checks and balances, such as parliaments and the media, but, in western countries, these institutions have increasingly become part of the power system itself. Due to this, we witness economic behaviour that risks the wellbeing of future generations due to the selfish accumulation of present wealth, resulting in pollution of the atmosphere and climate change. We witness unfair trade practices, showing a clear disregard for poorer and weaker countries. We see strong support from western countries for bad governments, provided the latter continue to serve western commercial or security interests. Bribes that have been paid to companies and authorities in developing countries are still tax deductible in many Western countries. All this is seen and documented but, so far, it has not been incorporated in ranking corruption and power abuse.
However, this speaking with two tongues seems to be increasingly noted by opinion leaders and by young people belonging to a new self-conscious generation in Asia, Africa, Latin America and the Middle East. This is bound to have consequences for future relations between them and people in the West.
In his address, Wempe has discussed development - including international development cooperation - as a governance issue. It is, in fact, the title of his address. Van Hulten, discussing corruption as a form of governance, has argued along the same lines. In his address, van Hulten has shown that both corruption itself and the perceptions of corruption have a negative impact on the development of a nation. Indeed, development is, amongst other things, a governance issue. In my reflection on both addresses, I have argued that the opposite is also true: governance and corruption are development issues.
I hope that Saxion, in developing a curriculum and a research programme on governance and international development will put this mutual relationship high on its agenda.
Saxion Academy of Governance and Law
Deventer, 7 November 2008