August 19, 2016

Good governance is not a guarantor for economic growth

There is no story in this world that does not have two sides. In the same manner, the notion of good governance is also discussed, debated and contested by scholars to arrive at its most useful meaning. Three aspects of good governance are debated, including the development strategies pursued by World Bank and International Monetary Fund (IMF), public sector reforms and issues of economic development.
The World Bank and IMF believe that an active state should foster an environment where contracts are enforced and markets can operate efficiently. This being the case, a state ought to follow pro-growth macroeconomic policies and maintain moderate sized governments, sound financial development, respect for the rule of law, openness to international trade and rises in average incomes with little systematic effect on the distribution of income.
Concerning public sector reforms, scholars argue that the initial impetus for public sector reform came from a belief that the state was too strong and too active. However, developing states often have the opposite problem—the state is too weak and inept. Therefore, fads such as ‘New Public Management’ were often especially not suitable for the developing states. Public sector reforms attempt to restrict the scope of state activity, but the main obstacle to modernisation in developing states is a lack of state strength. As a consequence, reforms often prove to be tragically improper for developing states. The pressing need in many developing states is to establish bureaucratic institutions with clear lines of accountability, impartial officials and abstract rules to guide them.
When it comes to the issues of economic development, some critics argue that the association of good governance with the economic development perpetuates ethnocentric ideas. According to such critics, good governance is not an absolute guarantor for economic growth and development. Specific development policies are required to reach this end, and the implementation of abstract concepts has to be grounded by considering regional, national and even local characteristics.


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