Poiic\ Risiaicu Woixixc Paiii 5196

Development Strategies
Integrating Governance and Growth
Brian Levy
Francis Fukuyama
Te World Bank
Poverty Reduction and Economic Management Vice Presidency
Public Sector Governance Unit
January 2010
WPS5196
Produced by the Research Support Team
Abstract
Te Policy Research Working Paper Series disseminates the ndings of work in progress to encourage the exchange of ideas about development
issues. An objective of the series is to get the ndings out quickly, even if the presentations are less than fully polished. Te papers carry the
names of the authors and should be cited accordingly. Te ndings, interpretations, and conclusions expressed in this paper are entirely those
of the authors. Tey do not necessarily represent the views of the International Bank for Reconstruction and Development/World Bank and
its aliated organizations, or those of the Executive Directors of the World Bank or the governments they represent.
Poiic\ Risiaicu Woixixc Paiii 5196
A frontier challenge for development strategy is to
move beyond prescribing optimal economic policies,
and insteadtaking a broad view of the interactions
between economic, political and social constraints
and dynamicsto identify entry points capable of
breaking a low-growth logjam, and initiating a virtuous
spiral of cumulative change. Te paper lays out four
distinctive sequences via which the dierent dimensions
might interact and evolve over time, and provides
country-specic illustrations of each. Each sequence is
dened by the principal focus of its initial step: 1) State
capacity building provides a platform for accelerated
growth via improved public sector performance and
enhanced credibility for investors; strengthened political
institutions and civil society come onto the agenda only
over the longer term; 2) Transformational governance has
as its entry point the reshaping of a countrys political
institutions. Accelerated growth could follow, insofar as
institutional changes enhance accountability, and reduce
Tis papera product of the Public Sector Governance Unit, Poverty Reduction and Economic Management Vice
Presidencyis part of a larger eort in the department to better address governance challenges in the design and
implementation of development strategies. Policy Research Working Papers are also posted on the Web at http://econ.
worldbank.org. Te author may be contacted at blevy@worldbank.org.
the potential for arbitrary discretionary action and
thereby shift expectations in a positive direction; 3) For
just enough governance, the initial focus is on growth
itself, with the aim of addressing specic capacity and
institutional constraints as and when they become
bindingnot seeking to anticipate and address in
advance all possible institutional constraints; 4) Bottom-
up development engages civil society as an entry point for
seeking stronger state capacity, lower corruption, better
public services, improvements in political institutions
more broadlyand a subsequent unlocking of
constraints on growth.
Te sequences should not be viewed as a technocratic
toolkit from which a putative reformer is free to choose.
Recognizing that choice is constrained by history, the
paper concludes by suggesting an approach for exploring
what might the scope for identifying practical ways
forward in specic country settings.
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DEVELOPMENT STRATEGIES: INTEGRATING GOVERNANCE AND GROWTH
Br i an Levy and Fr anci s Fukuyama
1
I: OVERVIEW

Ther e i s wi despr ead agr eement among soci al sci ent i st s t hat
devel opment i s a mul t i di mensi onal phenomenon, wi t h economi c, pol i t i cal ,
and soci al aspect s, and t hat t he di f f er ent di mensi ons of devel opment
ar e i nt er connect ed wi t h one anot her i n compl ex ways. The f act t hat
t hese di f f er ent di mensi ons exer t causal i nf l uences on one anot her woul d
suggest t hat pol i cymaker s deal i ng wi t h i ssues of nat i onal devel opment
need t o i nt egr at e economi c, pol i t i cal , and soci al appr oaches, and t o
t hi nk strategically about how t o achi eve t hei r goal s.
St r at egi c t hi nki ng i mpl i es pr i or i t i zat i on and sequenci ng, seeki ng
t o do f i r st t hat whi ch i s necessar y or hel pf ul t o achi eve l at er goal s.
A st r at egy begi ns by def i ni ng a cl ear obj ect i ve ( e. g. , ar e we ai mi ng i n
t he f i r st i nst ance at economi c gr owt h, democr at i zat i on, est abl i shment
of a r ul e of l aw, a mor e vi gor ous ci vi l soci et y?) , and t hen assesses
const r ai nt s t hat pr event t he achi evement of t hi s obj ect i ve. St r at egi c
t hi nki ng l ooks at al t er nat i ve pat hways t hat get ar ound t hose
const r ai nt s; i f t hi s i s not possi bl e, i t r equi r es t he r edi r ect i on of
ener gi es t o ot her goal s t hat ar e mor e r eal i st i cal l y achi evabl e.
Yet devel opment pol i cymaker s and pr act i t i oner s sel domt hi nk i n
t hi s manner . That i s, t hey do not i nt egr at e pol i t i cal , economi c, and
soci al st r at egi es; t hey do not set cl ear pr i or i t i es or sequence r ef or ms
over t i me; and t hey do not pay suf f i ci ent at t ent i on t o const r ai nt s.
Devel opment st r at egi es i n of f i ci al document s of t en r ead l i ke wi sh l i st s

1
Br i an Levy i s Advi sor , Gover nance at t he Wor l d Bank Gr oup; Fr anci s Fukuyama
i s t he Ber nar d L. Schwar t z Pr of essor of I nt er nat i onal Pol i t i cal Economy at t he
School of Advanced I nt er nat i onal St udi es, J ohns Hopki ns Uni ver si t y
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of al l of t he good t hi ngs t hat t he sponsor s woul d l i ke t o see happen,
wi t h l i t t l e appr eci at i on f or what needs t o be done f i r st i n or der t o
f aci l i t at e t he achi evement of ot her obj ect i ves down t he r oad.
Ther e ar e sever al r easons f or t hi s l ack of st r at egi c t hi nki ng
about devel opment . Devel opment speci al i st s t end t o be
compar t ment al i zed by academi c di sci pl i ne. Whi l e economi st s, f or
exampl e, have r ecent l y come t o t ake pol i t i cs and i nst i t ut i ons mor e
ser i ousl y, t hei r f i r st i ncl i nat i on i s usual l y not t o t hi nk about t he
pol i t i cal pr econdi t i ons f or achi evi ng economi c goal s. Conver sel y,
peopl e i n t he democr acy pr omot i on f i el d of t en do not pay at t ent i on t o
economi c i ssues, or el se r el egat e gr owt h t o a second- or der pr i or i t y.
I n t he donor communi t y, t her e i s a gr eat deal of pol i t i cal sensi t i vi t y
on t he quest i on of sequenci ng or pr i or i t i zat i on. I f one admi t s t hat
t her e i s l i t t l e chance f or a democr at i c br eakt hr ough or f or cl eani ng up
a par t i cul ar cor r upt bur eaucr acy, one appear s t o be endor si ng a bad
st at us quo.
The one st r at egi c i ssue t hat has gener at ed a subst ant i al amount
of debat e concer ns t he sequenci ng of economi c and pol i t i cal r ef or ms.
Pr oponent s of t he so- cal l ed aut hor i t ar i an t r ansi t i on l i ke Hunt i ngt on
( 1968) and Zakar i a ( 2003) have ar gued i n f avor of put t i ng economi c
devel opment and est abl i shment of a l i ber al r ul e of l aw ahead of
democr at i zat i on, gi ven t hat a st r onger causal connect i on appear s t o
exi st f r omeconomi c gr owt h t o democr acy t han t he ot her way ar ound.
Ot her s l i ke Pl at t ner ( 1999) and Car ot her s ( 2007) have ar gued t hat such
sequenci ng i s not a pr act i cal opt i on i n most cases, and t hat advocat es
of r ef or mi n devel opi ng and t r ansi t i onal count r i es usual l y want bot h
r ul e of l aw and democr acy si mul t aneousl y.
Thi s debat e i s a wor t hwhi l e one, but t oo l i mi t ed i n cer t ai n
r espect s. Ther e ar e mor e di mensi ons of devel opment t han economi c
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gr owt h and democr acy, and t her ef or e mor e ent r y poi nt s t o consi der when
desi gni ng a nat i onal devel opment st r at egy. St r at egi c t hi nki ng about
devel opment r equi r es consi der at i on of t he f ul l r ange of t hese ent r y
poi nt s, and how pr ogr ess al ong one di mensi on af f ect s pr ogr ess i n t he
ot her s.
Thi s paper suggest s a mor e compr ehensi ve f r amewor k f or t hi nki ng
about devel opment st r at egi es and f or i nt egr at i ng pol i t i cal , economi c,
and soci al pol i ci es. The next sect i on i nt r oduces each of f i ve
di mensi ons, and summar i zes br i ef l y what i s known about t hei r causal
l i nks wi t h one anot her . Sect i on I I I l ays out f our di st i nct i ve sequences
vi a whi ch t he di f f er ent di mensi ons mi ght i nt er act and evol ve over t i me.
The f i nal sect i on exami nes how t he sequences f r amewor k can ai d
devel opment deci si on- maki ng.
II: THE DIMENSIONS OF DEVELOPMENT STRATEGY
Ther e ar e f i ve br oad di mensi ons of devel opment , one economi c, one
soci al , and t hr ee pol i t i cal :
economi c gr owt h
devel opment of ci vi l soci et y
st at e- bui l di ng
l i ber al democr at i c pol i t i cal i nst i t ut i ons, i ncl udi ng bot h r ul e of
l aw and el ect or al democr acy
We wi l l di scuss each of t hese di mensi ons as ent r y poi nt s f or
devel opment , and as obj ect i ves of devel opment i n t hemsel ves.
Obvi ousl y, each of t hese di mensi ons cont ai ns wi t hi n i t sel f a vast
number of goal s and appr oaches. What we seek t o do her e i s not t o
choose one over anot her , but t o begi n t o under st and how t hey ar e
r el at ed t o one anot her .
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Economic growth. We def i ne economi c gr owt h i n a nar r ow,
t r adi t i onal sense, as i ncr easi ng per capi t a GDP. Much of t he f i el d of
devel opment economi cs has cent er ed ar ound st r at egi es f or pr omot i ng
gr owt h, and t her e have been numer ous appr oaches, f ads and or t hodoxi es
i n t hi s ar ea over t he year s. Some gr owt h st r at egi es r esul t i n a mor e
egal i t ar i an i ncome di st r i but i on t han ot her s a var i at i on t hat , as wi l l
become evi dent , can be r el evant f or t he l onger - t er msust ai nabi l i t y of a
count r y s devel opment pat h. Many East Asi an f ast devel oper s l i ke J apan,
Sout h Kor ea, and Tai wan pur sued i ndust r i al pol i ci es i nvol vi ng t ar get ed
cr edi t s and managed sect or al t r ansi t i ons. By cont r ast , t he 1980s and
90s saw t he r i se of a ver y di f f er ent appr oach, t he so- cal l ed
Washi ngt on Consensus t hat sought t o r educe st at e i nt er vent i on i n
f avor of mar ket pr i ci ng. We do not i nt end t o r ehash f ami l i ar ar gument s
over t he r el at i ve mer i t s of t hese and ot her economi c st r at egi es, except
t o not e t hat , i n addi t i on t o di f f er i ng i n t hei r i mpl i cat i ons f or i ncome
di st r i but i on, t hey have r at her di f f er ent pol i t i cal and i nst i t ut i onal
r equi r ement s. As Haggar d ( 1990) suggest s, i ndust r i al pol i ci es can be
made t o wor k, but r equi r e a subst ant i al l y gr eat er degr ee of
t echnocr at i c capaci t y t o manage pr oper l y t han ones t hat r el y on mar ket
pr i ci ng. Equal l y i mpor t ant , t hey ar e l i abl e t o capt ur e by var i ous
pol i t i cal act or s seeki ng r ent s, and have t o be car ef ul l y i nsul at ed f r om
t hem.
Development of Civil Society. Ther e i s a l ar ge body of soci al
t hought det ai l i ng t he soci al changes t hat t ake pl ace as a soci et y
shi f t s f r omone t hat i s pr i mar i l y agr i cul t ur al t o one t hat i s
i ndust r i al . I n t he f or mer , soci al r el at i onshi ps ar e of t en ascr i pt i ve
r at her t han vol unt ar y, based on ki nshi p, et hni ci t y, soci al cl ass, and
gender . Soci al hi er ar chi es ar e of t en i nher i t ed, wi t h l i t t l e
oppor t uni t i es f or i ndi vi dual s t o change t he st at us i nt o whi ch t hey wer e
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bor n. I n addi t i on, t he di vi si on of l abor i s l i mi t ed by t he smal l si ze
of t he mar ket economy and non- agr i cul t ur al sect or . A moder n ci vi l
soci et y emer ges when soci al gr oups bet ween t he f ami l y and t he st at e ar e
abl e t o f r eel y or gani ze on t he basi s of shar ed passi ons and i nt er est s.
Devel oped soci et i es r emai n hi er ar chi cal , but hi er ar chi es i deal l y ar e
mor e f l ui d and accessi bl e; soci al mobi l i t y and r epr esent at i on
i ncr eases.

State-building. St at e- bui l di ng i s i t sel f a mul t i - di mensi onal
phenomenon t hat i s t he pr ecur sor of and necessar y condi t i on f or ei t her
l i ber al r ul e of l aw or democr acy. We wi l l make use her e of Max Weber s
f amous def i ni t i on of t he st at e: a l egi t i mat e monopol y of f or ce over a
def i ned t er r or i t y. St at e- bui l di ng begi ns wi t h a concent r at i on of
coer ci ve power i n t he hands of t he st at e, t hr ough t he di sar mi ng or
dest r uct i on of pr i vat e mi l i t i as and t he cr eat i on of a nat i onal ar my and
pol i ce. I t al so i nvol ves def i ni ng t he st at e s t er r i t or i al ext ent ( by
ei t her i ncor por at i ng or sl oughi ng of f par t i cul ar geogr aphi cal r egi ons) ,
and ext endi ng t he r each of t he st at e s enf or cement power over t hat
t er r i t or y. Fi nal l y, st at e- bui l di ng i nvol ves cr eat i ng admi ni st r at i ve
capaci t y i n t he f or mof publ i c bur eaucr aci es. Cor e st at e f unct i ons
( beyond i nt er nal and ext er nal secur i t y) i ncl ude t he abi l i t y t o ext r act
t axes, t he abi l i t y t o budget and spend money, and t he abi l i t y t o
enf or ce t he st at e s r ul es. I n mor e est abl i shed st at es, st at e- bui l di ng
can al so r ef er t o t he expansi on of st at e f unct i ons, i mpr ovement of
st at e ef f i ci ency i n pr ovi si on of ser vi ces, and cont r ol of of f i ci al
cor r upt i on.
Liberal Democratic Political Institutions. Whi l e st at e- bui l di ng
i nvol ves t he concent r at i on of power i n t he st at e s hands, est abl i shment
of moder n pol i t i cal i nst i t ut i ons l i mi t s t hat power by r educi ng t he
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st at e s di scr et i onar y use of f or ce. The l i ber al par t of l i ber al
democr acy i s r ul e of l aw. Rul e of l aw i s t he basi s f or pr oper t y r i ght s
and t he adj udi cat i on of commer i al cl ai ms, and t hus i s key t o sust ai ned
economi c devel opment . Rul e of l aw i s al so t he basi s f or t he pr ot ect i on
of a pr i vat e spher e and i ndi vi dual human r i ght s. Legal r i ght s do not
have t o be uni ver sal ; i n some soci et i es, t hey ar e enj oyed onl y by
el i t es who benef i t f r omt he f ul l pr i vi l eges of ci t i zenshi p.
Uni ver sal i zat i on of t he r ul e of l aw per mi t s l ar ger mar ket s, gr eat er
compet i t i on, and i n t he l ong r un, mor e economi c gr owt h.
A second aspect of pol i t i cal i nst i t ut i ons i s democr acy, t hat i s,
popul ar sover ei gnt y t hr ough r egul ar mul t i par t y el ect i ons. Democr acy
can i nvol ve a number of di f f er ent mechani sms f or hol di ng gover nment s
account abl e t o t he peopl e. Besi des el ect i ons, t her e ar e ot her
mechani sms of account abi l i t y as wel l such as separ at ed power s whi ch
moni t or each ot her s behavi or , and a f r ee pr ess and ci vi l soci et y
out si de of t he f or mal pol i t i cal syst emt hat can moni t or and check t he
gover nment s per f or mance. As i n t he case of r ul e of l aw, democr acy
put s l i mi t s on t he st at e s di scr et i on and f or ces i t t o r ef l ect t he wi l l
of at l east some i mpor t ant pr opor t i on of t he peopl e.
Al l f i ve of t hese di mensi ons ar e goal s of devel opment i n
t hemsel ves, and t hey can exi st , f or t he most par t , i ndependent l y of one
anot her . That i s, one can have gr owt h wi t hout soci al devel opment , and
soci al devel opment wi t hout i ncr eases i n ei t her st at e capaci t y or
democr acy. I t i s possi bl e t o have an i l l i ber al democr acy, and a
l i ber al aut ocr acy, and bot h democr aci es and aut ocr aci es can exper i ence
ei t her l ow or hi gh gr owt h. Whi l e a r udi ment ar y st at e i s a necessar y
pr econdi t i on f or economi c gr owt h, r ul e of l aw, and democr acy, i t i s
al so possi bl e t o have some or al l of t he l at t er t hr ee condi t i ons i n a
weak st at e.
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Ther e i s a si xt h, i nt angi bl e f act or t hat i s cr i t i cal t o
devel opment , whi ch i s t he cr edi bi l i t y and l egi t i macy of t he st at e.
Cr edi bi l i t y has t o do wi t h expect at i ons t hat t he gover nment wi l l do
what i t pr omi ses, whet her t hat i s uphol di ng i ndi vi dual human r i ght s or
pr ot ect i ng t he i nt er est s of pr oper t y owner s. Legi t i macy has t o do wi t h
t he degr ee t o whi ch t he soci et y s ci t i zens bel i eve t hat t he syst emas a
whol e i s j ust , and deser vi ng of t hei r suppor t ( even i f t hey di sagr ee
wi t h cer t ai n of t he gover nment s pol i ci es) . Cr edi bi l i t y and l egi t i macy
ar e r el at ed t o t he f i ve mai n channel s of devel opment descr i bed above
whet her , f or exampl e, t he benef i t s of gr owt h ar e per cei ved t o be shar ed
- - but ar e not si mpl y cot er mi nous wi t h any of t hem. They ar i se as
bypr oduct s of t he ot her channel s, but ar e not i n t hemsel ves ent r y
poi nt s f or devel opment .
We know t hat t her e ar e cer t ai n pr esumed causal r el at i onshi ps
bet ween cer t ai n of t hese di mensi ons t hat can f or mt he basi s f or
devel opment st r at egi es. The pr esumpt i on of causal i t y i s based on a
combi nat i on of t heor et i cal r easoni ng and empi r i cal cor r el at i ons bet ween
t he di f f er ent phenomena. Though t he pr eci se causal pat hways ar e of t en
not pr eci sel y under st ood ( f or exampl e, bet ween devel opment and
democr acy) some pl ausi bl e r el at i onshi ps i ncl ude:
Between state building and growth. Basi c st at e f or mat i on i s a
pr econdi t i on f or sust ai ned gr owt h. Paul Col l i er ( 2007) has
demonst r at ed t he conver se of t hi s pr oposi t i on, namel y, t hat ci vi l war
and i nt er st at e conf l i ct have ver y negat i ve consequences f or economi c
gr owt h. Havi ng a Weber i an st at e at peace i s a pr econdi t i on not j ust
f or sust ai ned gr owt h, but f or vi r t ual l y al l of t he ot her devel opment
obj ect i ves ( f ai r di st r i but i on, r ul e of l aw, democr acy) .
Beyond est abl i shment of a st at e t hat can pr ovi de f or basi c or der ,
gr eat er admi ni st r at i ve capaci t y i s al so st r ongl y cor r el at ed wi t h
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economi c gr owt h. Thi s i s par t i cul ar l y t r ue at l ow absol ut e l evel s of
per capi t a GDP ( i . e. , l ess t hat $1000) ; whi l e i t r emai ns i mpor t ant at
hi gher l evel s of i ncome, t he i mpact may not be pr opor t i onat e. Ther e i s
al so a l ar ge l i t er at ur e l i nki ng good gover ance t o economi c gr owt h.
Ther e i s a debat e over t he di r ect i on of causal i t y her e, wi t h Sachs
mai nt ai ni ng t hat gover nance i s endogenous t o gr owt h; East er l y ( 2006)
has ar gued t hat t he causal i t y goes t he ot her way. I t woul d seeml i kel y
t hat causal i t y her e i s bi di r ect i onal , and t hat economi c gr owt h
f aci l i t at es gr eat er st at e admi ni st r at i ve capaci t y.
Between liberal rule of law and growth. Ther e i s a l ar ge
l i t er at ur e demonst r at i ng t he cor r el at i on bet ween pr oper t y r i ght s ( and a
suppor t i ng r ul e of l aw) and gr owt h ( see Acemogl u and Robi nson 2005) .
Whi l e most economi st s t ake t hi s f or gr ant ed, t her e i s an i nt er est i ng
new l i t er at ur e showi ng t hat gr owt h can al so occur under si t uat i ons
wher e pr oper t y r i ght s and r ul e of l aw ar e not uni ver sal , t hat i s, wher e
el i t es gr ant r ent s t o t hemsel ves ( see Haber , Razo, and Maur er 2003;
Khan and J omo 2000) .
Between economic growth and stable democracy. Begi nni ng wi t h
Li pset ( 1958) t her e has been a l ar ge l i t er at ur e l i nki ng devel opment and
democr acy ( Di amond 1992) . The r el at i onshi p bet ween gr owt h and
democr acy may not be l i near ; Bar r o ( 1997) shows t hat i t i s st r onger at
l ower and weaker at mi ddl e l evel s of i ncome. Pr zewor ski and Al var ez
( 1997) show t hat whi l e democr at i c t r ansi t i ons can occur at any l evel of
devel opment , t hey ar e much l ess l i kel y t o be r ever sed past a l evel of
about $6000 per capi t a. The evi dence l i nki ng democr acy t o economi c
gr owt h i s much l ess cl ear ; what t he dat a show i s a much wi der var i ance
i n t he economi c per f or mance of aut ocr aci es t han democr aci es.
Between liberal rule of law and democracy. Whi l e we do not know
of empi r i cal st udi es expl i ci t l y cor r el at i ng t hese f act or s, we pr esume
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i t must be t r ue because t her e ar e many exampl es of l i ber al democr acy,
and r el at i vel y f ew cases of l i ber al aut ocr acy ( t hough per haps mor e i n
t he past ) . Whet her a causal connect i on exi st s as Pl at t ner suggest s i s
not cl ear , but may wel l be so.
Between growth and the development of civil society. A l ot of
cl assi c soci al t heor y pr edi cat es t he emer gence of moder n ci vi l soci et y
on economi c devel opment ( see f or exampl e Gel l ner 1992) . AdamSmi t h i n
t he Wealth of Nations not es t hat t he ext ent of t he mar ket det er mi nes
t he di vi si on of l abor ; as gr owt h occur s and f i r ms t ake advant age of
economi es of scal e, soci al speci al i zat i on i ncr eases and new soci al
gr oups ( e. g. , an i ndust r i al wor ki ng cl ass) emer ge. The f l ui di t y and
open access demanded by moder n mar ket economi es under mi nes cer t ai n
t r adi t i onal f or ms of aut hor i t y and f or ces t he r epl acement of ascr i pt i ve
wi t h vol unt ar y soci al gr oups.
Between development of civil society and liberal democracy. Fr om
Tocquevi l l e onwar ds t her e has been a l ar ge body of democr at i c t heor y
ar gui ng t hat moder n l i ber al democr acy cannot exi st wi t hout a vi gor ous
ci vi l soci et y. The l at t er al l ows weak i ndi vi dual s t o pool t hei r
i nt er est s and ent er t he pol i t i cal syst em; even when soci al gr oups do
not seek pol i t i cal obj ect i ves, vol unt ar y associ at i ons have spi l l over
ef f ect s i n cr eat i ng soci al capi t al . A hi ghl y devel oped ci vi l soci et y
al so poses danger s f or democr acy as wel l : gr oups based on et hni c or
r aci al chauvi ni smspr ead i nt ol er ance; i nt er est gr oups can i nvest ef f or t
i n zer o- sumr ent seeki ng; excessi ve pol i t i ci zat i on of economi c and
soci al conf l i ct s can par al yze soci et i es and under mi ne t he l egi t i macy of
democr at i c i nst i t ut i ons. The cor r el at i on t hat exi st s bet ween economi c
gr owt h and st abl e l i ber al democr acy ( Li pset 1958; Pr zewor ski 1993) i s
pr esumabl y medi at ed by t hi s channel : gr owt h ent ai l s t he emer gence of
- 10 -
new soci al act or s who t hen demand r epr esent at i on i n a mor e open
pol i t i cal syst em.
Between the development of civil society and state-building.
Ther e ar e t wo opposi ng pr oposi t i ons as t o t he si gn of t he coef f i ci ent
t hat l i nks t hese t wo di mensi ons. Hunt i ngt on ( 1968) ar gued t hat t her e
was of t en a negat i ve r el at i onshi p bet ween t he mobi l i zat i on of new
soci al act or s and pol i t i cal or der when exi st i ng pol i t i cal i nst i t ut i ons
coul d not accommodat e t hei r demands f or par t i ci pat i on. On t he ot her
hand, cont empor ar y t hi nki ng about gover nance r ef or masser t s t hat ci vi l
soci et y, i n t he f or mof f r ee medi a and or gani zed ci t i zens gr oups, ar e
necessar y t o pr omot e t r anspar ency wi t h r egar d t o t he qual i t y of
gover nment and account abi l i t y when abuses ar e uncover ed. Pl ausi bl y,
whi ch of t hese opposi ng pr oposi t i ons i s domi nant depends on a count r y s
i nst i t ut i onal st ar t i ng poi nt wi t h t he f or mer pr oposi t i on mor e
r el evant i n set t i ngs wher e pol i t i cal i nst i t ut i ons and st at e capaci t i es
ar e especi al l y weak ( Bat es 2008) .
- 11 -
III: ENTRY POINTS AND SEQUENCES
Consi der as a st ar t i ng poi nt a l ow- i ncome count r y enj oyi ng l i t t l e
or no economi c gr owt h. As t he pol i t i cal - economi c f r amewor k out l i ned i n
t he pr evi ous sect i on suggest s, t he chal l enge f or r ef or mer s i s not t o
pr escr i be opt i mal economi c pol i ci es, but r at her - - t aki ng a br oader
vi ew of t he i nt er act i ons bet ween economi c and pol i t i cal const r ai nt s and
dynami cs - - t o i dent i f y ent r y poi nt s capabl e of br eaki ng t he l ow- gr owt h
l ogj am, and i ni t i at i ng a vi r t uous spi r al of cumul at i ve change. The
r el evant const r ai nt s, pl ausi bl e ent r y poi nt s, and subsequent dynami cs
al l ar e count r y- speci f i c. Ther e i s no one si ze f i t s al l but t her e
appear t o be a f ew over ar chi ng pat t er ns. To hel p gui de t he sear ch f or
count r y- speci f i c act i ons, t hi s sect i on wi l l l ay out f our di st i nct i ve
devel opment sequences each i ni t i at ed by di st i nct i ve ent r y poi nt s,
and wi t h di st i nct i ve subsequent pat hs.

Sequence I: State Capacity Building
When a l ow- i ncome count r y i s not gr owi ng, some of t he key r easons
ar e pl ai nl y vi si bl e t o l ay ci t i zens, as wel l as exper t s. Gover nment
doesn t wor k. Pol i t i cal l eader s ar e i nept or cor r upt ( or bot h) . The
r i sks t o pr i vat e i nvest or s and ent r epr eneur s - - of f ai l ed
i nf r ast r uct ur e, of a dysf unct i onal , bur densome bur eaucr acy, of
pol i t i cal pr essur es t o shar e pr of i t s, of vi ol ence and i nst abi l i t y
gener al l y over whel many ent r epr eneur i al i nst i nct t o seek out
oppor t uni t i es f or pr oduct i ve i nvest ment .
I n envi r onment s such as t hese, a nat ur al r esponse of a count r y s
ci t i zens ( and i t s devel opment par t ner s) i s t o l ook f or pol i t i cal wi l l
f or l eader shi p r eady t o r espond t o t he publ i c i nt er est r at her t han
pr i vat e ends, t o i mpr ove pol i cy- maki ng, t o f i x t he br oken bur eaucr acy,
t o make wi se publ i c i nvest ment s, and t o put i n pl ace an envi r onment
- 12 -
capabl e of at t r act i ng pr i vat e i nvest ment . Mor e br oadl y, t he ent r y poi nt
i mpl i ci t i n t hi s f i r st of f our devel opment sequences i s t o bui l d t he
capaci t i es needed t o t r ansf or mst at e dysf unct i on i nt o st at e
ef f ect i veness.
Key transmission channels. Fi gur e 1 depi ct s how st at e capaci t y
bui l di ng pot ent i al l y coul d set i n mot i on a vi r t uous devel opment spi r al .
The f i r st st ep i s an i nvest ment i n st at e capaci t y bui l di ng. The second
st ep appl i es t hi s newl y bui l t capaci t y t o pr omot i ng economi c gr owt h.
Thi s i mpact pot ent i al l y can occur vi a t hr ee compl ement ar y channel s:
Channel 2a hi ghl i ght s t he di r ect l i nks bet ween i mpr ovement s i n
st at e per f or mance and economi c per f or mance. Bet t er pol i ci es, mor e
ef f i ci ent i nf r ast r uct ur e, a t r ansact i onal l y mor e ef f i ci ent
bur eaucr acy, t r anspar ent and par t i ci pat or y appr oaches t o ser vi ce
pr ovi si on al l of t hese can cont r i but e t o a bet t er i nvest ment
cl i mat e, and t hus pot ent i al l y t o gr owt h. I mpr ovi ng i nf r ast r uct ur e
and t he bur eaucr acy t akes t i me, wi t h l i t t l e oppor t uni t y f or
qui ck wi ns - - pol i cy, t hough, can be t ur ned ar ound qui t e
r api dl y.
Channel 2b hi ghl i ght s t he expect at i ons- dr i ven i mpact of t he
emer gence of l eader shi p per cei ved t o have t he pol i t i cal wi l l t o
bui l d st at e capaci t y. Even bef or e publ i c sect or per f or mance
act ual l y i mpr oves, cr edi bi l i t y can r i se among pr i vat e i nvest or s
as t o t he pr oduct i ve pot ent i al of t he economy wi t h t he
cr edi bi l i t y gai n i t sel f somet i mes suf f i ci ent t o achi eve r enewed
economi c act i vi t y, and an accel er at i on of gr owt h. ( One common way
- 13 -
t o secur e such cr edi bi l i t y has been t o move r api dl y t o adopt f ar -
r eachi ng st r oke of t he pen economi c r ef or ms.
2
As channel 2c suggest s, pol i t i cal l eader s can make t he capaci t y
and cr edi bi l i t y channel s mut ual l y r ei nf or ci ng by asser t i ng a
br oader commi t ment t o f ai r ness t o i ncl usi ve gr owt h wi t h
br oadl y shar ed benef i t s. I nsof ar as ci t i zens bel i eve t hi s
commi t ment , st at e l egi t i macy and st abi l i t y wi l l bot h be enhanced
cont r i but i ng mor e br oadl y t o i mpr ovement s i n t he i nvest ment
cl i mat e, and hence t o gr owt h.
)
Figure 1: State Capacity Building as an Entry Point for Development

Not e t hat none of t he channel s descr i bed above i nvol ve pol i t i cal
i nst i t ut i ons. I nsof ar as a sequence l ed by st at e capaci t y bui l di ng can

2
Thus, par adoxi cal l y, f or r easons t hat wi l l be el abor at ed l at er ,
i nsof ar as st r uct ur al adj ust ment can be sai d t o have had an i mpl i ci t
i nst i t ut i onal model , i t f i t s best wi t h t he st at e capaci t y bui l di ng
sequence t hough t he economi c r ef or mpackage of t en i ncl uded st at e-
capaci t y- dest r oyi ng el ement s.

GROWTH
CIVIL SOCIETY
DEVELOPMENT
STEP 1:
BUILD STATE
CAPACITY
POLITICAL
INSTITUTIONS
Credibility and
legitimacy
2a
2c
2b
2b & c
3
- 14 -
l ead t o t r ansf or mat i on of pol i t i cal i nst i t ut i ons, t he r out e i s a l ong-
t er mand i ndi r ect one wi t h soci al change ( vi a, say, par t i ci pat or y
appr oaches t o ser vi ce pr ovi si on, weal t h cr eat i on, and r i se of a mi ddl e
cl ass) gener at i ng new pr essur es f or t he r ul e of l aw t o manage i nt er -
el i t e conf l i ct s ( bot h bet ween f i r ms, and bet ween busi nesses and t he
st at e) , and f or pol i t i cal r ef or mmor e br oadl y. Channel 3, t he dot t ed
l i ne i n Fi gur e 1 i l l ust r at es t hi s l onger - t er mdynami c.
Experiences and challenges. Reader s f ami l i ar wi t h t he devel opment
l i t er at ur e wi l l r ecogni ze t he sequence descr i bed above as t hat of t he
devel opment al st at e . The past f i f t y year s of f er s no shor t age of
count r i es - - and pol i t i cal l eader s t hat have put t hemsel ves f or war d
as aspi r ant devel opment al st at es . I t was t he domi nant model
under l yi ng East Asi an devel opment . I t was an aspi r at i on of many Lat i n
Amer i can count r i es ( i ncl udi ng Br azi l and Mexi co) pr i or t o t he 1980s.
The f or mer cent r al l y pl anned economi es of f er ed a ( f ai l ed) r adi cal
var i ant f or much of t he t went i et h cent ur y. St i l l t oday t hough
communi smhas col l apsed, and t he i nt er nat i onal economi c and pol i t i cal
envi r onment i s ver y di f f er ent t han t hat whi ch pr evai l ed dur i ng t he r i se
of t he East Asi an devel opment al st at es - - t her e i s no shor t age of as
aspi r ant devel opment al st at es among l ow- i ncome count r i es. Exampl es
r ange f r omEt hi opi a, Rwanda and Uganda i n Af r i ca, t o Azer bai j an i n
Cent r al Asi a, and Vi et nami n Sout h East Asi a. I n each of t hese cases,
gover nment s combi ne ef f or t s t o wi n l egi t i macy by hi ghl i ght i ng t he
compet ence of t hei r r ul e, on t he one hand, wi t h a cont i nui ng war i ness
of gr eat er pol i t i cal par t i ci pat i on and account abi l i t y, on t he ot her .
Each has achi eved qui t e st r ong economi c per f or mance ( r el at i ve t o t hei r
peer s, and/ or t hei r pr ecedi ng hi st or i cal exper i ence) .
A f ew devel opment st at es have been spect acul ar l y successf ul , wi t h
Kor ea and Tai wan t wo cl assi c exampl es. I n bot h count r i es, devel opment
- 15 -
was l ed by i nt er vent i oni st , compet ent st at es t hat used pr o- act i ve
i ndust r i al pol i ci es t o f uel gr owt h. I n bot h, t he i ni t i al decades of
accel er at ed devel opment wer e under aut hor i t ar i an r ul e but i n bot h
f ai r ness pr ovi ded a basi s of l egi t i macy. Land r ef or ms assur ed r ur al
equi t y; gr owt h was or i ent ed t owar ds l abor - i nt ensi ve expor t s and so
empl oyment cr eat i ng; hi gh publ i c i nvest ment i n educat i on pr ovi ded
oppor t uni t y f or al l . And i n bot h, i ncl usi ve gr owt h set i n mot i on
pr of ound soci al t r ansf or mat i on f aci l i t at i ng t he emer gence of a mi ddl e
cl ass, and an event ual t r ansi t i on t o democr acy.
Sust ai ned success r emai ns, however , mor e t he except i on t han t he
r ul e. Two set s of caut i ons seemespeci al l y r el evant f or a devel opment
st r at egy based on bui l di ng st at e capaci t y.
A f i r st caut i on i s t hat i n t he ear l y year s of a new pol i t i cal
l eader shi p, i t can be di f f i cul t t o t el l whet her a seemi ng commi t ment t o
devel opment al i sm and associ at ed st at e capaci t y bui l di ng i s r eal , or
si mpl y a usef ul cover f or t he per pet uat i on of l ongst andi ng pat t er ns of
cor r upt , pat r i moni al r ul e. Fr omMoi i n Kenya, t o Suhar t o i n I ndonesi a
and Mar cos i n t he Phi l i ppi nes, r ecent hi st or y i s r epl et e wi t h l eader s
who have t out ed t hemsel ves as devel opment al , concent r at ed aut hor i t y
on t he basi s of i t s necessi t y f or t hei r achi evi ng devel opment al
goal s, and been shower ed wi t h l ar gesse f r oma suppor t i ve donor
communi t y onl y t o have t hei r r ei gns end i n r ecr i mi nat i on, cor r upt i on
and di sgr ace. Such r egi mes of t en use t he r het or i c of st at e capaci t y
bui l di ng as a key par t of t hei r pr ogr am: i t has t he vi r t ue of bei ng
l ong on ambi t i on and f i ne- soundi ng obj ect i ves, but suf f i ci ent l y sof t
and supposedl y l ong- t er m i n i t s i mpact t hat busy wor k can pr oceed f or
l ong per i ods of t i me bef or e i t becomes evi dent t hat not hi ng much i s
bei ng achi eved.
- 16 -
The second set of caut i ons concer ns t he move t owar ds mor e
pl ur al i st i c pol i t i cal i nst i t ut i ons ( St ep 3 i n Fi gur e 1) . As Fi gur e 1
i mpl i es, devel opment al st at es t ypi cal l y f ocus f i r st on economi c and
bur eaucr at i c r ef or ms, whi l e negl ect i ng r ef or mof pol i t i cal
i nst i t ut i ons. Kor ea and Tai wan of f er successf ul exampl es of a seemi ngl y
successf ul subsequent i nst i t ut i onal cat ch- up , but ot her t r aj ect or i es
al so ar e f easi bl e. Si ngapor e, f or exampl e, gener al l y has been
i ncl uded wi t h Kor ea and Tai wan as an exampl e of East Asi an success
but f or al l of i t s cont empor ar y economi c pr owess, unl i ke t he l at t er t wo
count r i es, Si ngapor e shows no si gn of maki ng a t r ansi t i on t o democr acy.
Al t er nat i vel y, as I ndonesi a s di f f i cul t pol i t i cal evol ut i on over t he
past decade i l l ust r at es, t he t r ansi t i on t o democr acy can be an
unusual l y f r aught af f ai r , i nsof ar as i t has t o pr oceed agai nst t he
backdr op of an ear l i er l ack of i nvest ment i n pol i t i cal i nst i t ut i ons and
associ at ed under devel opment of t he soci al expect at i ons t hat suppor t
such i nst i t ut i ons. How t hi s pr ocess wi l l pl ay out f or Chi na whet her
t he l at t er wi l l be st abl y aut hor i t ar i an, as i n Si ngapor e, make a
r el at i vel y smoot h t r ansi t i on t o democr acy, as i n Kor ea and Tai wan, or
exper i ence si gni f i cant soci al di sl ocat i on, as i n I ndonesi a i s one of
t he key gl obal i mponder abl es f or t he comi ng decades.

Sequence II: Transformational Governance
The second devel opment sequence has as i t s ent r y poi nt an ef f or t
t o t r ansf or mt he count r y s pol i t i cal i nst i t ut i ons by st r engt heni ng t he
r ul e of l aw and est abl i shi ng democr at i c mechani sms f or sel ect i ng a
count r y s l eader s. As not ed ear l i er , t he cor r el at i on bet ween t he
qual i t y of st at e i nst i t ut i ons and per capi t a i ncome i s cl ear : When per
capi t a i ncome i s hi gh, t he r ul e of l aw, democr at i c i nst i t ut i ons and t he
publ i c bur eaucr acy al l wor k wel l . Fur t her , i n hi gh i ncome count r i es
- 17 -
t hese i nst i t ut i ons ar e mut ual l y r ei nf or ci ng, wi t h t he checks and
bal ances pr ovi ded by democr acy and t he r ul e of l aw pr ovi di ng a
cor r ect i ve mechani smt hat hel ps keep t he pol i t y f r omveer i ng t oo f ar
ast r ay, even i n t he f ace of dysf unct i onal pol i t i cal l eader shi p. Thus
bot h democr acy and t he r ul e of l aw ser ve as checks on a l eader shi p
t hat mi ght , f or exampl e, seek t o per ver t t he f unct i oni ng of t he
bur eaucr acy f or nar r ow pol i t i cal ends.
Agai nst t hat backdr op, consi der a count r y t hat has been saddl ed
endemi cal l y wi t h f act i onal i zed el i t es, and sel f - seeki ng and
unaccount abl e pol i t i cal l eader shi p. Because r ul e- boundedness i s weak, a
poor l y- f unct i oni ng bur eaucr acy i s l i kel y t o be par t of t hi s
dysf unct i onal gover nance syndr ome. Gi ven t hese endemi c weaknesses, t he
opt i on of t he count r y const r uct i ng a devel opment al st at e i s not l i kel y
t o be cr edi bl e. A nat ur al r esponse of t he count r y s ci t i zens ( and i t s
devel opment al par t ner s) i s t o f ocus on pol i t i cal i nst i t ut i ons
t hemsel ves.
Fi gur e 2 i l l ust r at es t hr ee di st i nct channel s t hr ough whi ch a
t r ansf or mat i on of pol i t i cal i nst i t ut i ons hypot het i cal l y coul d cat al yze
a vi r t uous devel opment spi r al . The f i r st channel [ st eps 2ai & 2ai i i n
Fi gur e 2] compr i ses t he di r ect i mpact of a t r ansf or mat i on of pol i t i cal
i nst i t ut i ons on cr edi bi l i t y and l egi t i macy. Thi s t r ansf or mat i on coul d
compr i se one or bot h of a move t o pol i t i cal democr acy or a
st r engt heni ng of t he r ul e of l aw:
A move t o democr acy hol ds t he pr ospect t hat el ect i ons can be a
qui ck r out e t o a r adi cal l y t r ansf or med pol i t i cal l eader shi p
wi t h l egi t i macy, wi t h a mandat e t o pur sue devel opment al l y-
or i ent ed pol i ci es, and account abl e t o ci t i zens. ( As di scussed
bel ow, ot her out comes ar e, of cour se, al so pl ausi bl e. )
- 18 -
A st r onger r ul e of l aw hol ds t he pr ospect of i nt r oduci ng i nt o t he
gover nance equat i on bot h cl ear er r ul es of t he game, and i mpar t i al
mechani sms f or moni t or i ng and enf or ci ng compl i ance wi t h t he
r ul es. Not e, t hough, t hat under t he best of ci r cumst ances, t he
t ask of bui l di ng t he capaci t y of a count r y s j ust i ce syst emi s a
l ong- t er mone. And not e al so t hat t he i ncent i ves of i ncumbent
el i t es t o suppor t t he st r engt heni ng of t hese di scr et i on-
r est r ai ni ng i nst i t ut i ons ar e l i kel y t o be mi xed.
For bot h, t he hope i s t hat i nst i t ut i onal changes wi l l enhance t he
account abi l i t y of a count r y s l eader shi p, and r educe t he pot ent i al f or
ar bi t r ar y, di scr et i onar y act i on t her eby shi f t i ng expect at i ons and
ki ck- st ar t i ng gr owt h.
The second channel l i nki ng pol i t i cal i nst i t ut i ons and gr owt h i s
vi a st at e capaci t y ( st eps 2bi & 3) .
3

3
The number i ng of t he channel s si gnal s t he possi bi l i t y t hat st eps
2ai , 2bi and 2ci can al l be di r ect l y i ni t i at ed by pol i t i cal
t r ansf or mat i on but exper i ence suggest s t hat act ual gai ns i n
bur eaucr at i c capaci t y and per cept i ons of f ai r ness t ake t i me.
Pol i t i cal t r ansf or mat i on has t he
pot ent i al t o r adi cal l y i mpr ove bot h t he i ncent i ves and t he means f or
st at e capaci t y bui l di ng. The i mpr oved i ncent i ves coul d f ol l ow f r oma
shi f t f r omsel f - seeki ng t o mor e account abl e and hence publ i c- good
or i ent ed l eader shi p, l eader shi p t hat woul d be mor e l i kel y t o i nvest i n
st at e capaci t y as a way of i mpr ovi ng devel opment per f or mance. And
i mpr oved means f or st at e capaci t y bui l di ng coul d come about because
gr eat er account abi l i t y and r ul e- boundedness ar e not onl y key i nt ended
out comes of pol i t i cal t r ansf or mat i on, t hey al so ar e i mpor t ant
r equi si t es f or a wel l - f unct i oni ng publ i c bur eaucr acy. As i n t he case of
t he devel opment al st at e, bet t er publ i c sect or capaci t y can di r ect l y
enhance gr owt h.
- 19 -

Figure 2: Institutional Transformation as an Entry Point for Development


The t hi r d channel l i nki ng pol i t i cal t r ansf or mat i on and gr owt h
wor ks vi a t he devel opment of ci vi l soci et y ( st eps 2ci and 4) . As wi l l
be di scussed f ur t her i n t he cont ext of t he f our t h sequence, t he
t r ansf or mat i on of pol i t i cal i nst i t ut i ons and t he devel opment of ci vi l
soci et y ar e st r ongl y compl ement ar y. I nsof ar as many ci t i zens had
hi st or i cal l y di st r ust ed st at e aut hor i t y even t o t he poi nt of , at t he
l i mi t , di r ect r esi st ance, a t r ansf or mat i on of ci t i zen- st at e r el at i ons
and t he emer gence of a r i ch ar r ay of ci vi l soci et y i nst i t ut i ons coul d
enhance t he l egi t i macy of st at e i nst i t ut i ons, t her eby bol st er i ng
i nvest or conf i dence and hence gr owt h.
Not e t hat bot h channel s 2bi and 2ci ( and al so st r engt hened r ul e
of l aw) af f ect gr owt h onl y over t he l onger - t er m, and so ar e shown as
dot t ed l i nes i n t he f i gur e. Ref or mer s l ooki ng t o t r ansf or mat i onal
gover nance as a qui ck- f i x t o ki ckst ar t gr owt h must t hus r el y on ear l y
el ect i ons. I f r ef or mer s hol d and wi n t hese el ect i ons and i f t he
GROWTH
CIVIL SOCIETY
DEVELOPMENT
BUILD STATE
CAPACITY
STEP 1:
TRANSFORM
POLITICAL
INSTITUTIONS
Credibility and
legitimacy
3
4
2ai
2aii
2ci
2bi
- 20 -
el ect i ons i ndeed have a cr edi bi l i t y- enhanci ng i mpact and ki ck- st ar t
gr owt h t he t empt at i on coul d be st r ong t o enj oy t he f r ui t s of t hese
ear l y success, wi t h weakened moment umt o addr ess t he l onger - r un
i nst i t ut i onal chal l enges. Lat er sect i ons of t he paper wi l l consi der
t hi s l ast var i ant of t r ansf or mat i onal gover nance i n mor e dept h.
Experiences and challenges. To i l l ust r at e t he r el at i onshi p
bet ween pol i t i cal t r ansf or mat i on and economi c per f or mance consi der
t hr ee di ver gent set s of exper i ences. The f i r st compr i ses post - communi st
count r i es t hat have r ecent l y acceded t o t he Eur opean Uni on ( or hope t o
do so i n t he r el at i vel y near f ut ur e) . As has been wel l document ed, i n
at l east t hr ee ways t he pr ospect of j oi ni ng t he EU pr oved t o be a
power f ul engi ne of r ef or m. Fi r st , t he per cei ved benef i t of EU
member shi p pr ovi ded a power f ul i ncent i ve f or change. Second, t he EU
acquis and r el at ed pol i t i cal expect at i ons pr ovi ded a cl ear , expl i ci t
i nst i t ut i onal model f or accessi on count r i es t o f ol l ow. Thi r d, t he EU
connect i on pr ovi ded a st r ong mechani smf or si gnal i ng cr edi bl y bot h t he
di r ect i on and commi t ment of count r i es t o cont i nui ng r ef or m. The 2004
accessi on of 10 count r i es t o t he EU and t he anchor i t pr ovi ded f or
cont i nui ng, st eady, economi c per f or mance r anks as a maj or
i nst i t ut i onal success st or y gl obal l y over t he past hal f cent ur y.
A second gr oup of count r i es t hat have used i mpr oved pol i t i cal
i nst i t ut i ons t o t r ansf or mgover nance ar e i n Lat i n Amer i ca. Democr acy
was of cour se mor e deepl y r oot ed i n Lat i n Amer i can t han i n ot her par t s
of t he devel opi ng wor l d, but suf f er ed massi ve set backs wi t h t he onset
of mi l i t ar y r egi mes i n t he mi d- 1960s. Vi r t ual l y t he whol e hemi spher e
r et ur ned t o democr acy by t he ear l y 1990s, and t he quality of democr acy
has, by var i ous measur es, been st eadi l y i mpr ovi ng. Thi s i s measur abl e
by i ncr easi ng r at es of vot i ng over t he past t hr ee decades acr oss t he
cont i nent , but al so t hr ough qual i t at i ve t r ansf or mat i ons by whi ch power
- 21 -
has been pushed down t o l ower l evel s of t he pol i t i cal hi er ar chy, gi vi ng
ci t i zens gr eat er voi ce and par t i ci pat i on. Br azi l , Col ombi a, Per u,
Venezueal a, and Bol i vi a ar e among t he count r i es t hat have under gone
decent r al i zat i on pr ogr ams i n r ecent year s.
The r esul t of gr eat er ci t i zen par t i ci pat i on at l ower l evel s of
gover nment has i n many cases i ncr eased t he qual i t y of gover nance.
Bol i vi a s 1994 Law of Popul ar Par t i ci pat i on, f or exampl e, has l ed t o
t he r eal l ocat i on of publ i c r esour ces i n a pr o- poor di r ect i on. I n
Col ombi a, di r ect l y el ect ed mayor s wi t h i ncr eased muni ci pal aut onomy
have engaged i n a var i et y of i nnovat i ve pr ogr ams t o cont r ol gangs and
dr ugs. And i n Br azi l , t r adi t i onal pat r onage pol i t i cs has been cur bed
t hr ough i nnovat i ve pr ogr ams l i ke Por t o Al egr e s par t i ci pat or y
budget i ng; accor di ng t o one obser ver , Br azi l i an vot er s have devel oped
a habi t of usi ng t he bal l ot box t o puni sh mayor s or gover nor s who
devot ed a di spr opor t i onat e shar e of t hei r r evenues t o publ i c empl oyment
r at her t han ser vi ces or i nvest ment . ( Rei d, 2007, p. 292)
The t hi r d set of exper i ences compr i ses t he democr at i zi ng r ef or ms
under t aken by 40 sub- Sahar an Af r i can count r i es i n t he ear l y 1990s.
( Br at t on and van de Wal l e, 1997) Af r i ca s t r ansi t i on t o democr acy
happened as compr ehensi vel y and as r api dl y as t hat of East er n Eur ope
and t he f or mer Sovi et Uni on. The exper i ence of Sout h Af r i ca i l l ust r at es
t hat even wi t hout t he anchor of t he Eur opean Uni on democr at i zat i on can
nonet hel ess pr ovi de a spr i ngboar d f or br oader i mpr ovement s i n
devel opment per f or mance, vi a each of t he channel s i dent i f i ed i n Fi gur e
2:
The t r ansf or mat i on of expect at i ons ( st eps 2ai - > 2ai i ) t ur ned out
t o have been a sl ower pr ocess t han many had hoped. To be sur e,
l egi t i macy was hugel y enhanced vi a t he shi f t f r omapar t hei d t o
democr at i c maj or i t y r ul e i n par t because Sout h Af r i ca s
- 22 -
pol i t i cal t r ansf or mat i on t r ansl at ed r api dl y i nt o a r adi cal shi f t
of t he pat t er n of publ i c spendi ng i n f avor of t he poor maj or i t y.
But onl y af t er over a hal f - dozen post - apar t hei d year s of among
t he best managed macr o- economi c pol i ci es i n t he devel opi ng wor l d
di d mar ket s over come t hei r f ear s of i nst abi l i t y and r e- r at e Sout h
Af r i ca s cr edi t wor t hi ness upwar ds. Gr owt h accel er at ed sl owl y i n
t he l at t er 1990s t go j ust over 5%by 2007.
The i mpact of pol i t i cal t r ansf or mat i on on st at e capaci t y ( st eps
2ai => 2bi =>3) has been l ess cl ear . Sout h Af r i ca s move t o
democr acy cr eat ed t he oppor t uni t y f or a new vi si on t o mot i vat e
i t s publ i c sect or ( whi ch i n t he year s pr i or t o t he t r ansi t i on t o
maj or i t y r ul e had gone f r ombei ng t he r el ent l ess i mpl ement er s of
t he ar chi t ect ur e of apar t hei d t o become a cyni cal , demor al i zed
and sel f - seeki ng bur eaucr acy) but i t al so r equi r ed t he
bur eaucr acy t o t r ansf or mi t sel f f r oma bast i on of whi t e pr i vi l ege
i nt o a publ i c sect or whose compl exi on r esembl ed t he count r y as a
whol e.
Yet Thomas Car ot her s ( 2002) anal ysi s suggest s t hat t he Sout h Af r i can
exper i ence of democr at i zat i on suppor t i ng devel opment i s somet hi ng of an
Af r i can out l i er . He ar gues t hat t r ansi t i on t o democr acy need not be a
seaml ess pat h t o wel l - f unct i oni ng, compet i t i ve pol i t i cal and mar ket
i nst i t ut i ons but coul d set t l e i nt o ei t her of t wo l ess beni gn
syndr omes:
Dominant-power politics, where countries have limited but
still real political space, some political contestation by
opposition groups, and most of the basic institutional forms of
democracy. Yet one political grouping dominates the system in such
a way that there appears to be little prospect of alternation of
power.. The states main assets -- as a source of money, jobs,
public information (via state media) are gradually put in direct
service of the ruling party. the judiciary is typically
cowed.citizens tend to be disaffected from politics and cut off
from significant political participation beyond voting.

- 23 -
Car ot her s not es t hat Af r i ca s wave of democr at i zat i on i n t he ear l y
1990s ended up pr oduci ng many domi nant - power syst ems some cases ( e. g.
Bur ki na Faso, Camer oon, Equat or i al Gui nea, Gabon, Maur i t ani a and
Tanzani a) wher e a hi t her t o one- par t y st at e l i ber al i zed but wi t h onl y
l i mi t ed subsequent pol i t i cal openi ng, and ot her s ( e. g. Zambi a) wher e
new r egi mes ended up i n domi nant - par t y st r uct ur es. Not e t hat , f or al l
of i t s l i mi t at i ons i nsof ar as t he r enewal ( vi a par t i al democr at i zat i on)
of a domi nant power syst emenhances st at e capaci t y, gr owt h coul d
nonet hel ess accel er at e vi a t he mechani sms summar i zed i n Fi gur e 1.
In feckless pluralism, (the second syndrome) countries enjoy
alternation of power between genuinely different groupings, but
democracy remains shallow and troubled. Political participation
extends little beyond voting. Political elites from all the major
parties are perceived as corrupt, self-interested and ineffective.
The alternation of power seems only to trade the countrys problems
back and forth from one hapless side to the other.

Car ot her s not es t hat i n sub- Sahar an Af r i ca, al t er nat i on of power
r emai ns r ar e gener al l y . He r epor t s f eckl ess pl ur al i smt o be an
especi al l y common pat t er n i n Lat i n Amer i ca, and wi despr ead al so i n t he
post communi st wor l d. The pr ospect s of f eckl ess pl ur al i smgener at i ng
gr owt h vi a st at e capaci t y bui l di ng appear bl eaker t han f or t he domi nant
power pol i t i cs syndr ome. As wi l l become evi dent , t hough, i t coul d
nonet hel ess be gr owt h- enhanci ng vi a t he j ust enough gover nance
sequence t o whi ch we now t ur n.
Sequence III: Just Enough Governance; Growth as Entry Point
Bot h of t he dynami c sequences consi der ed t o t hi s poi nt have had
as t hei r f i r st st ep one or anot her ki nd of i nst i t ut i onal r ef or m.
Though t hi s f ocus on i nst i t ut i ons i s ver y di f f er ent f r omt he ear l i er
pr e- occupat i on of devel opment pr act i t i oner s wi t h economi c pol i cy, bot h
t he i nst i t ut i onal and economi c appr oaches shar e a common pr esumpt i on
namel y t hat f ar - r eachi ng r ef or mwas necessar y t o unl ock devel opment i n
- 24 -
hi t her t o poor l y- per f or mi ng count r i es. Thus, bot h i nst i t ut i onal and
economi c r ef or mer s gener al l y wer e advocat es of what wer e per cei ved as
best pr act i ce , opt i mal pol i ci es.
I n shar p cont r ast , r ecent empi r i cal wor k on gr owt h
accel er at i ons has demonst r at ed t hat f ar - r eachi ng r ef or ms ei t her
i nst i t ut i onal or economi c need not be necessar y t o ki ck- st ar t gr owt h.
Car ef ul empi r i cal anal ysi s by Hausmann, Pr i t chet t and Rodr i k ( 2004) of
dat a wor l dwi de i dent i f i ed over 80 gr owt h accel er at i ons over t he 1950-
1990 per i od t hat l ast ed f or ei ght or mor e year s . They f ound t hat
The onset of economic growth does not require deep and extensive
institutional reform Moderate changes in country-specific
circumstances (policies and institutional arrangements, often
interacting with the external environment), can produce
discontinuous changes in economic performance. ( Rodr i k,
Anal yt i c Gr owt h i nt r o, pp. 8- 9, 17) . . Once growth is set into
motion, it becomes easier to maintain a virtuous cycle with high
growth and institutional transformation feeding on each other.
(Rodrik, Getting Institutions Right, 2004, p.10)

Consi st ent wi t h t hi s pat t er n, Fi gur e 3 t hus del i neat es a t hi r d
devel opment sequence one wher e t he f i r st st ep i s t he i ni t i at i on of
gr owt h i t sel f .

- 25 -
Figure 3: Sustaining growth through incremental institutional reforms

St eps 2i - 2i i i i n Fi gur e 3 i l l ust r at e how a j ust enough
gover nance devel opment st r at egy vi r t uous cycl e mi ght evol ve
i ncr ement al l y. These st eps ar e depi ct ed by dot t ed l i nes, her e i nt ended
t o si gni f y t hat i n a st r at egy of j ust enough gover nance sust ai ni ng
gr owt h r emai ns t he pr i mar y obj ect i ve. As gr owt h pr oceeds, t hough, one
or anot her i nst i t ut i onal const r ai nt mi ght t hr eat en t o shor t - ci r cui t
expansi on per haps weaknesses i n t he del i ver y of i nf r ast r uct ur e or key
publ i c ser vi ces, per haps a r i se i n cor r upt i on as publ i c of f i ci al s seek
t hei r shar e of t he gr owi ng economi c pi e, per haps r i si ng soci al
al i enat i on wi t h a gr owi ng sense on t he par t of ci t i zens t hat gover nment
doesn t car e about t hei r ever yday pr obl ems, per haps t he need f or mor e
sophi st i cat ed l aws and i nst i t ut i ons t o under pi n an i ncr easi ngl y
sophi st i cat ed economy. Wi t h a j ust enough gover nance st r at egy, t he
goal i s not t o ant i ci pat e and addr ess i n advance al l possi bl e
i nst i t ut i onal const r ai nt s. Rat her , t he f ocus i s on addr essi ng speci f i c
capaci t y and i nst i t ut i onal const r ai nt s as and when t hey become bi ndi ng.
STEP 1:
GROWTH
CIVIL SOCIETY
DEVELOPMENT
BUILD STATE
CAPACITY
POLITICAL
INSTITUTIONS

2i

2iii



2ii
3
- 26 -
Sust ai ni ng gr owt h t hus becomes somet hi ng of a hi gh- wi r e act
cont i nual cr i si s management , endl essl y put t i ng out f i r es i n an
envi r onment whi ch t o t he casual obser ver seems qui t e dysf unct i onal , but
nonet hel ess def i es t he odds by sust ai ni ng cont i nui ng dynami sm.
Not e t hat t he j ust enough gover nance sequence shoul d not be
const r ued as a r el at i vel y pai nl ess ( i f ner ve- wr acki ng) devel opment
st r at egy. For one t hi ng, t her e ar e mul t i pl e count r i es wher e t he
economi c envi r onment i s t oo dysf unct i onal , and i nst i t ut i ons ar e t oo
weak, f or i ncr ement al r ef or ms t o be enough t o ki ckst ar t gr owt h. For
anot her , not al l bi ndi ng const r ai nt s can necessar i l y be eased t hr ough
i ncr ement al measur es. Mor eover , as gr owt h pr oceeds, soci et y changes
pr of oundl y wi t h new pr essur es, and new oppor t uni t i es bui l di ng up. At
some poi nt channel 3 ( i dent i cal i n Fi gur es 1 and 3) i s l i kel y t o become
domi nant l ayi ng t he st age f or a non- i ncr ement al t r ansf or mat i on of
pol i t i cal i nst i t ut i ons.
Experiences and challenges. The Bangl adesh par adox of f er s a
vi vi d exampl e of t he r el evance of a j ust enough gover nance
devel opment st r at egy. Over t he past decade, Bangl adesh has made maj or
gai ns i n devel opment per f or mance. I n t he t hr ee decades si nce t he
count r y s i ndependence i n t he ear l y 1970s, per capi t a i ncome has mor e
t han doubl ed; t he pover t y r at e has f al l en f r om70 t o 40 per cent ; chi l d
i mmuni zat i on r at es have r i sen f r omnegl i gi bl e l evel s t o cl ose t o 80
peer cent ; l i f e expect ancy at bi r t h has gone f r om45 t o 63 year s. ( Wor l d
Bank, 2006) Yet over t he same per i od, t he count r y al so r at ed
consi st ent l y as among t he most cor r upt i n t he wor l d: Ot her gover nance
i ndi cat or s al so r at ed poor l y. Key t o Bangl adesh s par adoxi cal
achi evement wer e a ser i es of j ust enough devel opment r ef or ms: good
macr o- economi c management , t ar get ed t r ade pol i cy r ef or ms whi ch pr ovi ded
j ust enough openness t o enabl e a t ake- of f of t he gar ment expor t sect or
- 27 -
( and si mi l ar l y- f ocused pol i ci es whi ch f aci l i t at ed t ake- of f s i n ot her
speci f i c sect or s)
4
A si mi l ar combi nat i on of seemi ngl y chaot i c gover nance and
i mpr ovi ng economi c per f or mance i s evi dent i n ot her count r i es. Consi der
Thai l and, whi ch si nce t he 1980s has been one of t he exempl ar s of t he
East Asi a Mi r acl e but whi ch never ( i t s st r ong Mi ni st r y of Fi nance
asi de) exhi bi t ed t he same l evel s of st at e capaci t y as, say, Kor ea and
Tai wan, and whi ch over t he past decade has t r aver sed a wi ndi ng pat h
f r ommi l i t ar y r ul e t o f ar - r eachi ng const i t ut i onal r ef or m, r i si ng
cor r upt i on and popul i sm, a r ever si on t o mi l i t ar y r ul e, f ol l owed by
anot her r ound of const i t ut i onal debat e. The 1997 East Asi an f i nanci al
cr i si s t empor ar y hal t ed Thai l and s al most t wo- decade- l ong gr owt h sur ge,
but ( despi t e pol i t i cal and economi c t ur bul ence) by 2002 i t had pi cked
up agai n t o an annual r at e above 5%wher e i t has r emai ned.
pl us st r ong ci vi c engagement vi a an unusual l y
st r ong r ol e f or t he count r y s wel l - devel oped non- gover nment al
i nst i t ut i ons i n t he pr ovi si on of publ i c ser vi ces. Thi s st r ong over al l
per f or mance has occur r ed agai nst t he backdr op of cont i nui ng cr i si s
whi ch i ncl uded, i n t he t wel ve mont hs pr i or t o compl et i on ( i n ear l y
2008) of an i ni t i al dr af t of t hi s paper , a chaot i c l ead- i n t o a
pr esi dent i al el ect i on, subsequent l y abor t ed by a de f act o mi l i t ar y
coup; t he ar r est on cor r upt i on char ges of t he count r y s t wo l eadi ng
pol i t i ci ans; and r epeat ed ambi gui t y as t o when and how t he mi l i t ar y
aut hor i t i es wi l l r est or e democr acy, r esul t i ng i n a new r ound of st r eet
pr ot est s. Thr oughout , gr owt h has cont i nued.

4
Two exampl es whi ch r esul t ed i n maj or gai ns i n r ur al i ncomes
compr i se t he i nt r oduct i on of a wi nt er r i ce cr op, and expansi on i n
aquacul t ur e. Remi t t ances compr i sed anot her key sour ce of economi c
gr owt h.
- 28 -
I n t he shor t - t er m, t oo, Kenya seemed t o i l l ust r at e t he pot ency of
j ust enough gover nance . I n 2001, t he count r y wi t nessed t he el ect or al
def eat of a cor r upt l ong- t er mi ncumbent , Dani el Ar ap Moi , and t he
pr omi se of f ar - r eachi ng const i t ut i onal r ef or m. I nst ead, const i t ut i onal
r ef or mst al l ed and, wi t hi n t hr ee year s of t he exi t of Moi , t he
count r y was subj ect ed t o a new r ound of hi gh- pr of i l e al l egat i ons of
cor r upt i on agai nst t he successor gover nment . Nonet hel ess, t he oust er of
Moi pr oved suf f i ci ent t o t r i gger i mpr oved economi c per f or mance, wi t h
gr owt h - - whi ch had st ubbor nl y r emai ned bel ow 3%pr i or t o 2003 - -
accel er at i ng t o 6%by 2006. Yet t he t ur nar ound seemi ngl y was shor t -
l i ved, wi t h r enewed pol i t i cal t ur bul ence over t aki ng t he count r y i n t he
af t er mat h of bi t t er di sput es over who won a 2008 pr esi dent i al el ect i on.
The Bangl adesh, Kenya and Thai l and exampl es poi nt t o a puzzl e vi s- -
vi s a j ust enough gover nance devel opment st r at egy: what i s t he l ong-
r un t r end and what i s t he shor t - r un noi se ? I s t he t r end sust ai nabl e
devel opment - - wi t h gover nance weakness t he noi se i n t he syst em? Or
i s t he seemi ngl y st r ong gr owt h si mpl y a shor t - t er mbubbl e wi t h
gover nance t ur bul ence si gnal i ng t he hazar ds ahead? Cer t ai nl y, HPRs
empi r i cal anal ysi s conf i r ms t hat many gr owt h accel er at i ons ar e
f ol l owed by subsequent r ever sal s. I ndeed, nat ur al r esour ce dr i ven
booml et s i n par t i cul ar ar e not or i ous f or t he capaci t y dest r uct i on t hey
can i nf l i ct on f r agi l e publ i c sect or s as t he pr ospect of huge r ent s
i nduces a count r y s el i t es t o under mi ne al r eady f r agi l e i nst i t ut i ons of
account abi l i t y.
Yet f or al l t he caveat s, gr owt h i n each of t he t hr ee exampl es
si gnal s t hat , at l east i n some ci r cumst ances t hose wher e t he
under l yi ng gr owt h dr i ver s ar e st r ong and/ or capaci t y and i nst i t ut i onal
const r ai nt s ar e not over whel mi ngl y const r ai ni ng - - j ust enough
gover nance woul d appear t o be a vi abl e shor t - t er mdevel opment
- 29 -
st r at egy. A compl ex economy r equi r es compl ex i nst i t ut i ons so at some
poi nt , t he l onger t er mconst r ai nt s wi l l need t o be addr essed. Even so,
as Fi gur e 3 suggest s, t he l onger a j ust enough gover nance st r at egy
can be sust ai ned, t he br oader i s l i kel y t o be t he const i t uency wi t h a
st ake i n st r onger i nst i t ut i ons, and hence t he bet t er may be t he
pr ospect s f or mor e f ar - r eachi ng i nst i t ut i onal r ef or m.

Sequence IV: Bottom-up Development; Civil Society as Entry Point
Ther e ar e many cases i n whi ch vi r t ual l y al l channel s except f or ci vi l
soci et y ar e bl ocked: t her e i s l i t t l e or no economi c gr owt h; st at e
capaci t y i s weak and gover nment cor r upt ; democr acy and r ul e of l aw ar e
ei t her non- exi st ent or not r eadi l y f i xabl e because pol i t i cal power i s
i n t he hands of act or s wi t h no desi r e t o change t he st at us quo. I n
t hi s case, t he pr i mar y dr i ver of devel opment wi l l be t he mobi l i zat i on
of ci vi l soci et y, whi ch wi l l i ncr ease demands f or gr eat er democr acy and
r ul e of l aw, as wel l as a st at e t hat can del i ver basi c publ i c ser vi ces.
The ef f ect of t hi s sequence on economi c gr owt h i s of t en i ndi r ect .
Ci vi l soci et y of t en demands pol i t i cal r epr esent at i on r at her t han gr owt h
i n t he f i r st i nst ance, whi l e aut hor i t ar i an or nomi nal l y democr at i c
r ul er s of t ent i mes hope t hey can buy of f pot ent i al opponent s t hr ough
t hei r abi l i t y t o del i ver gr owt h.
I t mi ght be t empt i ng t o t hi nk about bot t om- up devel opment as a ki nd
of r esi dual st r at egy t o be pur sued onl y when al l ot her channel s ar e
bl ocked. ( Thi s i s t he way t hat i t appear s i n t he deci si on t r ee at t he
end of t he ar t i cl e. ) I n f act , pr omot i ng t he devel opment of ci vi l
soci et y i s an end i n i t sel f , and can be a cr i t i cal compl ement ar y
component t o sever al of t he ot her st r at egi es. Thi s i s cl ear est i n t he
case of t he t r ansf or mat i onal gover nance sequence. Whi l e some f or ms of
democr acy pr omot i on i nvol ve r est r uct ur i ng democr at i c and r ul e of l aw
- 30 -
i nst i t ut i ons t hr ough const i t ut i onal change, or st r engt heni ng f or mal
i nst i t ut i ons l i ke cour t syst ems or pol i t i cal par t i es, most
pr act i t i oner s i n t he democr acy pr omot i on f i el d devot e consi der abl e
ener gy t o t he devel opment of a vi gor ous ci vi l soci et y l abor uni ons,
wat chdog gr oups, busi ness r oundt abl es, medi a or gani zat i ons, and t he
l i ke because t hey ar e assumed t o be par t of a br oader l i ber al
democr at i c pol i t i cal or der .
Experiences and Challenges. Ther e ar e a number of cases wher e
bot t om- up devel opment of ci vi l soci et y was t he pr i mar y r out e t o
devel opment . For exampl e, Pol and dur i ng t he 1980s was a communi st
count r y t hat had a nascent ci vi l soci et y, i n t he f or mof an i ndependent
t r ade uni on ( Sol i dar i t y) , pr i vat e agr i cul t ur e, and t he Cat hol i c Chur ch.
Nei t her r api d economi c gr owt h nor t op- down pol i t i cal change appear ed
possi bl e, but i n 1989, t he t hawi ng of Col d War r el at i onshi ps suddenl y
made possi bl e a dr amat i c br eakt hr ough t o l i ber al democr acy and a mar ket
economy. Pol and had a consi der abl e advant age over ot her post - communi st
st at es i n maki ng t hi s t r ansi t i on because i t had soci al act or s out si de
t he par t y nomenklatura t hat coul d f i l l t he ensui ng pol i t i cal vacuum.
Ukr ai ne was ar guabl y anot her count r y i n a si t uat i on wher e al l
channel s but t he ci vi l soci et y r out e wer e bl ocked i n t he f i r st year s of
t he 21
st
cent ur y. Ukr ai ne had nomi nal l y democr at i c pol i t i cal
i nst i t ut i ons, but r ul e of l aw was ver y weak, and t he pol i t i cal pr ocess
heavi l y mani pul at ed behi nd t he scenes by var i ous ol i gar chs and shadowy
economi c act or s. Al l br anches of t he st at e l acked capaci t y and
cor r upt i on was r ampant . Ukr ai ne s f or mal i nst i t ut i ons had r ecei ved
consi der abl e ext er nal suppor t f r omout si de donor s dur i ng t he 1990s,
ver y l i t t l e of whi ch had any evi dent i mpact on t hei r per f or mance.
Whi l e economi c gr owt h had r esumed by 2002, i t was due l ess t o good
- 31 -
economi c pol i cy t han t o f avor abl e ext er nal condi t i ons whi ch af f ect ed
vi r t ual l y al l count r i es i n t he gl obal economy i n t hat per i od.
Under t hese ci r cumst ances, pol i t i cal change occur r ed not t hr ough
r ef or mof exi st i ng i nst i t ut i ons, but by mobi l i zat i on of ci vi l soci et y
t hat put pr essur e on t he gover nment t o open up t he pol i t i cal pr ocess
and make i t sel f mor e genui nel y account abl e. The Or ange Revol ut i on of
December 2004 occur r ed when t he i ncumbent pr esi dent sought t o
mani pul at e t he vot e f or a new pr esi dent , a f r aud t hat was document ed by
el ect i on obser ver s and t hen publ i ci zed by Ukr ai ne s nascent i ndependent
medi a. Ci vi l soci et y gr oups wer e suf f i ci ent l y mobi l i zed t o pr ot est
t hese r esul t s and put enough pr essur e on t he gover nment t o f or ce a
second el ect i on, whi ch br ought t he Or ange coal i t i on t o power .

Figure 4: Bottom-Up Reform


Though t he dot t ed l i nes i n Fi gur e 4 suggest how ci vi l soci et y
devel opment l eadi ng t o bot t om- up democr at i zat i on mi ght suppor t gr owt h,
i n pr act i ce t he economi c consequences ar e not cl ear , at l east i n t he
GROWTH
STEP 1: DEVELOP
CIVIL SOCIETY

BUILD STATE
CAPACITY
POLITICAL
INSTITUTIONS
Credibility
and
legitimacy

2ii

2aii
2i

- 32 -
shor t r un, any mor e t han t hey ar e f or t r ansf or mat i onal gover nance.
Ukr ai ne has done wel l economi cal l y f or most of t he per i od si nce t he
Or ange Revol ut i on, but t hat i mpr ovement i n per f or mance was dr i ven by
ext er nal f act or s and l i kel y woul d have occur r ed even i n t he absence of
democr at i c change. Nor i s i t cl ear t hat st at e capaci t y has i ncr eased,
as l evel s of cor r upt i on r emai n hi gh. On t he ot her hand, Ukr ai ne t oday
has a f r eer and mor e open medi a t han nei ghbor i ng Russi a, somet hi ng one
pr esumes woul d benef i t gover nment account abi l i t y i n t he l ong r un.

How the Sequences Inter-relate
The f our sequences descr i bed above ar e concept ual const r uct s
i deal t ypes used t o br i ng anal yt i cal or der t o messy, mul t i - f acet ed
r eal i t y. The ai mi s t o hi ghl i ght some key f eat ur es of count r y- l evel
pr ocesses, not t o suggest t hat t hese f eat ur es capt ur e t he whol e of a
count r y s devel opment evol ut i on. On t he cont r ar y, t her e ar e l i kel y be
var i at i ons over t i me as t o whi ch of t he f our sequences best
char act er i zes a count r y s devel opment dynami cs. And, at any poi nt i n
t i me t he r eal i t y may be a hybr i d of mor e t han one sequence.
Consi der how condi t i ons change over t i me. As al r eady not ed, t he
st at e capaci t y bui l di ng sequence seems hi ghl y l i kel y t o evol ve over
t i me i nt o somet hi ng di f f er ent , i nsof ar as i t s success cr eat es new
economi c act or s t hat seek mor e compl ex and open economi c and pol i t i cal
i nst i t ut i ons t han a st at e- cent r i c model of devel opment can pr ovi de.
Si mi l ar l y, a j ust enough gover nance t r aj ect or y i s l i kel y t o be
t empor ar y, ei t her because, as wi t h st at e capaci t y bui l di ng, i t s success
gener at es demand f or mor e r obust i nst i t ut i ons, or because i t comes up
agai nst an i nst i t ut i onal const r ai nt t hat cannot be eased i ncr ement al l y.
Onl y t he t r ansf or mat i onal gover nance sequence of f er s ( i n t heor y) t he
pr ospect of l ong- t er mi nst i t ut i onal st abi l i t y al t hough t hi s
- 33 -
pr esupposes unusual l y f ar - r eachi ng and ef f ect i ve i nst i t ut i onal r ef or ms
up- f r ont .
Now consi der t he ext ent t o whi ch t he f our sequences i ndeed ar e
di st i nct f r omone anot her . The di f f er ences bet ween st at e capaci t y
bui l di ng and j ust enough gover nance ar e st ar k: t he f or mer i s t op- down,
t i ght l y- cont r ol l ed and i nsof ar as i t i s i mpl ement ed ef f ect i vel y
hi ghl y or der l y; t he l at t er i s haphazar d, seemi ngl y chaot i c. The
st r engt hs of one ar e t he weaknesses of t he ot her . Onl y i n set t i ngs i n
whi ch a br oad r ange of i nst i t ut i ons ar e al r eady mat ur e mi ght t hey be
per cei ved t o conver ge t hough, at t hat poi nt , nei t her st at e capaci t y
bui l di ng, nor j ust enough gover nance accur at el y descr i be t he
r eal i t i es on t he gr ound.
Over l ap bet ween t he t r ansf or mat i onal gover nance and bot t om- up
r ef or m sequences on t he one hand, and t he ot her t wo sequences on t he
ot her i s best under st ood t hr ough t he l ens of Car ot her s t wo par t i al
var i ant s of i nst i t ut i onal t r ansf or mat i on i nt r oduced ear l i er . I nsof ar
as t r ansf or mat i on of pol i t i cal i nst i t ut i ons and of ci vi l soci et y
r esul t s i n t he de f act o domi nance of pol i t i cal act or s who per cei ve
t hemsel ves t o enj oy st abl e i ncumbency and t ake a l ong- t er mvi ew i . e.
Car ot her s domi nant power pol i t i cs var i ant - - t he r esul t coul d
appr oxi mat e qui t e cl osel y t he st at e capaci t y bui l di ng sequence. But
i nsof ar as t he democr at i c and ci vi l soci et y t r ansf or mat i ons ar e mor e
t ur bul ent i . e. l ook mor e l i ke f eckl ess pl ur al i sm- - t hey mi ght
nonet hel ess unl ock a dysf unct i onal equi l i br i um. Thi s coul d hel p
unl eash qui t e r api d economi c gr owt h, wi t h t he r esul t i ng chaot i c
dynami smr esembl i ng qui t e cl osel y t he j ust enough gover nance
sequence.
Thi s l ast set of over l aps suggest s t he f ol l owi ng specul at i on as
t o t he r el evance of t r ansf or mat i onal gover nance i n at l east some l ow-
- 34 -
i ncome devel opi ng count r i es. As Car ot her s hi ghl i ght s, of t en t he
out come of ef f or t s t o f ost er t r ansf or mat i onal gover nance f al l s shor t
of i ni t i al ambi t i ous i nt ent i ons. But mi ght i t be t oo negat i ve t o
descr i be t he r esul t s as dysf unct i onal ? Per haps i n many l ow- i ncome
count r i es t r ansf or mat i onal gover nance mi ght bet t er be vi ewed as
cat al yt i c as a ( r i sky) pat h t o t he st at e capaci t y bui l di ng or j ust
enough gover nance dynami c sequences. Per haps, i n such count r i es,
economi c gr owt h, combi ned wi t h a seemi ng excess of or der or a seemi ng
excess of chaos may be i n t he ( medi um- t er m) nat ur e of t hi ngs, r at her
t han an aber r at i on t hat r equi r es f i xi ng .

IV: THE SEQUENCES FRAMEWORK AND DEVELOPMENT DECISION-MAKING
Thi s f i nal sect i on expl or es how t he sequences f r amewor k, l ai d out
i n Sect i on I I I can ai d devel opment deci si on- maki ng. A key under l yi ng
i ssue i s t he bal ance bet ween choi ce and const r ai nt : how much scope do
pol i cymaker s have t o choose whi ch r out e a count r y pur sues and how
much i s hi st or i cal l y condi t i oned, i s pat h dependent ? To mot i vat e t hi s
quest i on consi der t he i l l ust r at i ve exampl es of Et hi opi a, Kor ea and
Chi na.
5
Over t he past f our decades, Et hi opi a has l ur ched f r omsemi - f eudal
monar chy, t o har d- l i ne communi st , t o mar ket - or i ent ed moder ni zer . Yet
t hr oughout , t he seemi ngl y t r ansf or med pol i t y has been hi ghl y
cent r al i zed, bui l di ng on t he i nher i t ed f oundat i ons of cent ur i es of t op-


5
The use of t hese t hr ee exampl es shoul d not be t aken t o suggest t hat
l ow- i ncome count r i es gener al l y t hr i ve by begi nni ng f i r st wi t h t he st at e
capaci t y bui l di ng sequence. That hypot hesi s does not account f or Bangl adesh s
success wi t h j ust enough gover nance , or f or t he ki ckst ar t t hat
t r ansf or mat i onal gover nance pr ovi ded t o Kenya. I ndeed, syst emat i c dat a anal ysi s
poi nt s t o a wi de di ver si t y of i nst i t ut i onal st ar t i ng poi nt s among l ow- i ncome
count r i es. See t he appendi x Appl yi ng t he I ndi cat or s a Typol ogy of Count r i es
i n Levy ( 2007) .

- 35 -
down monar chi cal cont r ol , and cor r espondi ngl y pr of oundl y hi er ar chi cal
soci al r el at i ons. Ar guabl y, pat h dependence account s f or t he r epeat ed
t ur n of Et hi opi a s pol i t i cal l eader s t o st at e capaci t y bui l di ng as t he
count r y s pr ef er r ed devel opment st r at egy.
Thr ough t o t he mi d- 1980s Kor ea al so was an exempl ar of a t op- down
devel opment al st at e, bui l t ( as i n Et hi opi a) on a cent ur i es- l ong hi st or y
of cent r al i zed cont r ol . ( Hender son, 1968) Yet over t he past t wo
decades, Kor ea i ncr easi ngl y has br oken f r omi t s t op- down, st at e- cent r i c
l egacy and t r ansi t ed i nt o an open, democr at i c soci et y, gover ned by
i ncr easi ngl y r obust checks and bal ances i nst i t ut i ons. Pr ot agoni st s of
det er mi ni st i c pat h dependence mi ght i nt er pr et Kor ea s t r ansf or mat i on
l ess as a r esul t of det er mi ned pol i t i cal l eader shi p t han as endogenous
adapt at i on, a consequence of economi c success. But t her e i s no get t i ng
away f r omt he r ol e of l eader shi p i n account i ng f or Chi na s ast oni shi ng
evol ut i on over t he past sevent y year s f r omt he col l apse of war l or di sm
i n t he f ace of a communi st - l ed peasant r evol ut i on, t o f ai l ed Maoi st
exper i ment at i on, t o Deng Xi aopi ng s 1978 exhor t at i on t hat t o get r i ch
i s gl or i ous , whi ch cat al yzed a gl obal l y unpr ecedent ed gr owt h sur ge
al l , of cour se, wi t hi n a br oader f r ame of r obust , deepl y r oot ed cent r al
st at e capaci t y.
Cer t ai nl y, as t hese t hr ee exampl es suggest , t he sequences
f r amewor k l ai d out i n Sect i on I I I shoul d not be vi ewed as a
t echnocr at i c t ool ki t f r omwhi ch a put at i ve r ef or mer i s f r ee t o choose
and i mpl ement hi s pr ef er r ed opt i on. On t he cont r ar y, t o a si gni f i cant
but not whol l y det er mi ned ext ent , choi ce i s const r ai ned, wi t h
count r y- speci f i c hi st or y and pol i t i cs shapi ng t he t r aj ect or y of change.
Recogni zi ng t hat hi st or y const r ai ns opt i ons, what i s t he scope f or
maneuver , f or i ni t i at i ng or sust ai ni ng cumul at i ve pr ocesses t hat can
move devel opment f or war d? The f i nal subsect i on of t hi s paper expl or es
- 36 -
how t he br oad per spect i ve pr ovi ded by t he sequences f r amewor k can hel p
addr ess t hi s quest i on i n a way t hat suppor t s mor e ski l l f ul devel opment
deci si on- maki ng.

Making Choices: Governance Reforms as Development Strategy
Fi gur e 4 suggest s a deci si on t r ee t o hel p cl ar i f y how pr i or i t i es
f or devel opment r ef or mmi ght var y dependi ng on speci f i c count r y
ci r cumst ances. The f i r st f or k i n t he deci si on t r ee di st i ngui shes among
count r i es accor di ng t o t hei r cur r ent devel opment per f or mance. I s a
count r y s cur r ent , shor t - t er mdevel opment t r aj ect or y a post i ve one i n
whi ch case t he chal l enge i s t o sust ai n an ongoi ng pr ocess? Or i s t he
chal l enge t o ki ckst ar t devel opment f r oma mor e st uck pl ace?
For count r i es al r eady on a dynami c pat h, t he key poi nt of
depar t ur e shoul d be t o sust ai n exi st i ng moment um, on t he pr i nci pl e t hat
i f i t ai n t br oke, don t f i x i t . Fol l owi ng t hi s admoni t i on i s not as
easy as i t sounds. For r easons t hat shoul d now be cl ear , t he gover nance
r eal i t i es even i n t he most dynami c of l ow- i ncome count r i es of t en wi l l
be pr of oundl y unset t l i ng: per haps an under si de of weak account abi l i t y
al ongsi de a domi nant bur eaucr acy; per haps a panopl y of dysf unct i ons,
each t hr eat eni ng i mmi nent l y t o shor t - ci r cui t dysf unct i on. Cer t ai nl y,
over t he medi um- t er mt he weaknesses wi l l need t o be addr essed but an
excessi ve, t oo- r api d r esponse coul d i t sel f r i sk shor t - ci r cui t i ng t he
moment umal r eady under way. Country-specific political economy analysis
will be key to assessing where the balance of risk lies as between
doing too much or too little to address continuing weaknesses.
I n deci di ng how t o pr oceed, a f i r st st ep mi ght be t o expl or e t he
ext ent t o whi ch endogenous pr ocesses al r eady ar e i nduci ng r ef or ms of
l aggi ng i nst i t ut i ons whet her , f or exampl e, count r i es movi ng al ong a
st at e capaci t y bui l di ng t r aj ect or y al so ar e
- 37 -
Figure 5: Country Circumstances and Development Sequences A Decision Tree


- 38 -
begi nni ng t o i nvest i n st r engt heni ng checks and bal ances i nst i t ut i ons.
I f t hi s i s not happeni ng, devel opment r ef or mer s mi ght usef ul l y i ni t i at e
wor k on t he l aggi ng gover nance di mensi ons pr oceedi ng i ncr ement al l y so
as not t o ki l l t he goose cur r ent l y l ayi ng gol den eggs.
The second maj or br anch of Fi gur e 5 l ays out opt i ons f or l ow-
i ncome count r i es st uck wi t h st agnant economi es. A key j udgment
under l i es r ef or mchoi ces vi s- - vi s t hi s gr oup of count r i es: Shoul d t he
agenda f or r ef or mpush i nst i t ut i onal change t o t he maxi mumext ent
f easi bl e or seek, r at her , t he mi ni mumchanges necessar y t o ki ckst ar t
dynami smi n a speci f i c count r y set t i ng? Compar i ng t he f our devel opment
sequences, t r ansf or mat i onal gover nance gener al l y cal l s f or t he most
f ar - r eachi ng up- f r ont changes, and j ust - enough gover nance t he l east
f ar - r eachi ng, wi t h st at e capaci t y bui l di ng and ci vi l soci et y
devel opment ( dependi ng how i t i s appr oached) somewher e i n bet ween. The
deci si on t r ee i n Fi gur e 5 i s const r uct ed on t he assumpt i on t hat t he
pr ef er r ed opt i on gener al l y i s t he l east - di sr upt i ve one t hat i s capabl e
of unl ocki ng dynami sm, gi ven a count r y s speci f i c ci r cumst ances. Thi s
assumpt i on al i gns wel l wi t h t he sequences f r amewor k, whi ch under scor es
t hat causat i on i s cumul at i ve, and t hat a wel l - chosen f i r st st ep can
br i ng a cascade of dynami smi n i t s wake. ( The assumpt i on i s
cont est abl e, of cour se; ot her s mi ght pr ef er r at her t o maxi mi ze
r ef or ms whi l e a wi ndow of oppor t uni t y i s open. The j udgment s al ways
ar e count r y- speci f i c; t her e can be no f i xed f or mul a. )
Thus, f or l ow- i ncome count r i es mi r ed i n st agnat i on, a key i ni t i al
quest i on i s whet her or not i ncr ement al r ef or ms can unl ock dynami sm.
6

6
The bi ndi ng const r ai nt s appr oach t o r ef or m, pr oposed by
Hausmann, Rodr i k and Vel asco ( 2006) of f er s a pr omi si ng anal yt i cal
st ar t i ng poi nt f or addr essi ng t hi s quest i on.
As
t he deci si on t r ee suggest s, j ust enough gover nance i s t he obvi ous way
- 39 -
f or war d i n count r i es whose pol i t i cal economy of f er s onl y scope f or
r ef or mon t he mar gi n and wher e i ncr ement al i smcan wor k. I f bot h
i ncr ement al and non- i ncr ement al opt i ons ar e pol i t i cal l y f easi bl e, t he
choi ce i s mor e cont est abl e.
For st agnant count r i es wher e i ncr ement al r ef or ms ar e unl i kel y t o
unl ock dynami sm, t he r el evant quest i ons concer n t he i ncent i ves and
const r ai nt s of pol i t i cal l eader s. The deci si on t r ee suggest s t wo
opt i ons f or r ef or mi st l eader s. Wher e t hey enj oy t he l egi t i macy and
aut hor i t y as wel l as desi r e t o under t ake f ar - r eachi ng pr o-
devel opment r ef or ms, t he l east i nst i t ut i onal l y di sr upt i ve opt i on woul d
be t o f ocus on st at e capaci t y bui l di ng and, per haps, al so associ at ed
ef f or t s t o f ost er f ar - r eachi ng economi c r ef or m. But as t he no br anch
of t hi s l ast f or k i n t he deci si on- t r ee suggest s, even wi l l i ng l eader s
may not enj oy t he r equi si t e aut hor i t y and l egi t i macy. I n such set t i ngs,
t r ansf or mat i onal gover nance , i ncl udi ng act i vel y f ost er i ng t he
devel opment of ci vi l soci et y, comes ont o t he agenda as an ent r y poi nt
capabl e of ki ckst ar t i ng devel opment dynami sm.
I n pr act i ce, of cour se, pol i t i cal l eader s seeki ng t o ki ckst ar t
devel opment vi a an i nst i t ut i onal r ef or msequence ( of ei t her t he st at e
capaci t y bui l di ng or t r ansf or mat i onal var i et y) conf r ont a mor e compl ex
cal cul us and mor e of a cont i nuumof opt i ons - - t han t he heur i st i c
f r amewor k of Fi gur e 5 suggest s. How bol dl y t r ansf or mat i onal shoul d
t hei r i nst i t ut i onal r ef or mef f or t s be? And f or how l ong? Even i f
l eader s enj oy t he l egi t i macy needed f or st at e capaci t y bui l di ng and
associ at ed bol d economi c r ef or m, mi ght t her e nonet hel ess be a case f or
a bol der , mor e t r ansf or mat i ve appr oach t o gover nance t o l ock- i n
change whi l e a wi ndow of oppor t uni t y i s open? Conver sel y, even i f
l egi t i macy seems t o be l acki ng, l eader s mi ght choose t o push ahead
- 40 -
al ong t he st at e capaci t y bui l di ng/ economi c r ef or mbr anch i n t he hope
t hat success wi l l yi el d pol i t i cal di vi dends down t he r oad.
Car ef ul pol i t i cal economy assessment s of t he i nt er est s and l i kel y
r esponses of i nf l uent i al soci al act or s can hel p suppor t deci si on-
maki ng. Al so key wi l l be a r eadi ness t o adapt f l exi bl y as t he r ef or m
st r at egy unf ol ds. I ndeed, as suggest ed ear l i er , even wher e a count r y
st ar t s out wi t h a bol d st r at egy of i nst i t ut i onal change, i t may t ur n
out t o be sust ai ned onl y t o t he poi nt t hat t he economy accel er at es a
de f act o r ever si on t o j ust enough gover nance , and hence a l ess f ar -
r eachi ng depar t ur e f r omt he count r y s hi st or i cal ( pat h dependent )
t r aj ect or y t han mi ght i ni t i al l y have been i nt ended.
The f i nal f or k i n t he deci si on t r ee compr i ses count r i es t hat ar e
st uck deep i n a pi t of dysf unct i on wi t h a st agnant economy, and
decayi ng ( or even, at t he l i mi t , col l apsi ng) i nst i t ut i ons, f r agment ed
aut hor i t y, and non- devel opment al l eader shi p. I n such set t i ngs, t he
deci si on- t r ee suggest s t hat ci vi l soci et y devel opment emer ges as t he
pr ef er r ed ent r y poi nt . For ext er nal act or s, wi t h l ess di r ect l y at
st ake, t he r el evant appr oaches gener al l y shoul d be appr opr i at el y modest
and devel opment al l y- or i ent ed. I nt er vent i ons ( t ypi cal l y donor -
suppor t ed) t o f ost er ci vi l soci et y by channel i ng r esour ces di r ect l y t o
communi t i es, and engagi ng ser vi ce user s and communi t i es i n over seei ng
how t he r esour ces ar e used, can be qui t e ef f ect i ve i n hel pi ng t o
al l evi at e pover t y. They mi ght al so pl ant val uabl e seeds of soci al
l ear ni ng as t o di f f er ent ways of handl i ng r el at i onshi ps bet ween a
count r y s el i t es and i t s br oader popul ace. But hi st or y suggest s t hat
such modest appr oaches ar e unl i kel y t o unl ock devel opment al dynami smi n
pr of oundl y dysf unct i onal set t i ngs. I n t hese l at t er set t i ngs, f ar -
r eachi ng domest i cal l y- dr i ven soci al and pol i t i cal mobi l i zat i on has
pr oven deci si ve. Exampl es i ncl ude: At at ur k s moder ni zat i on of Tur key;
- 41 -
Chi na s communi st - l ed peasant r evol ut i on; Kor ea s mi l i t ar y gover nment ;
col oni al i ndependence movement s; t he f al l of Pr esi dent Mar cos; t he
col l apse of communi smi n East er n Eur ope and t he f or mer Sovi et Uni on;
Sout h Af r i ca s t r ansf or mat i on f r omapar t hei d t o democr acy; t he
yel l ow or ange and r ose r evol ut i ons i n Geor gi a, Ukr ai ne and t he
Kyr gyz Republ i c et c et c. Some of t hese ai med t o f ost er devel opment vi a
a st at e capaci t y bui l di ng sequence; ot her s vi a t r ansf or mat i onal
gover nance. Consi der at i on of t he dr i ver s of f ar - r eachi ng soci al and
pol i t i cal mobi l i zat i on and i t s di ver gent t r aj ect or i es, pr ospect s and
r i sks - - , f al l s out si de t he scope of t he pr esent paper .

Concluding Comments
The past f i f t een year s have seen an expl osi on of i nt er est among
bot h schol ar s and pr act i t i oner s i n gover nance, and i t s l i nk t o l ong- r un
devel opment per f or mance. Our goal i n t hi s paper has been t o cont r i but e
t o t hi s di scour se by l ayi ng out a f r amewor k t hat hi ghl i ght s t he
i nt er act i ons bet ween gover nance and gr owt h, of f er s a br oad vi ew of t he
di ver se st r at egi c choi ces avai l abl e t o devel opment deci si on- maker s, and
hel ps cl ar i f y how t he pr ef er r ed choi ce mi ght be condi t i oned by a
count r y s uni que hi st or i cal ci r cumst ances. We i dent i f y f our di st i nct i ve
dynami c sequences, whi ch di f f er f r omone anot her bot h i n t hei r poi nt s
of ent r y and, mor e br oadl y, i n what comes bef or e what as devel opment
unf ol ds. We expl or e how t hi s sequences f r amewor k can hel p gui de
choi ce, gi ven t he assumpt i on t hat t he pr ef er r ed opt i on gener al l y i s t he
l east di sr upt i ve one t hat i s capabl e of unl ocki ng dynami sm, gi ven a
count r y s speci f i c ci r cumst ances. Ot her assumpt i ons al so ar e pl ausi bl e.
And even wi t h our assumpt i on, t her e i s much r oomf or di sagr eement as t o
a count r y s pr ef er r ed devel opment st r at egy i n par t because t he
- 42 -
dynami c sequences ar e heur i st i c const r uct s, wi t h t he r eal i t y l i kel y t o
be a hybr i d of mor e t han one sequence.
Our hope i s t hat by maki ng expl i ci t mul t i pl e dynami c sequences - -
and how deci si on- maker s choi ces among t hemmi ght var y accor di ng t o a
combi nat i on of count r y- speci f i c empi r i cal r eal i t i es and pr ef er ences as
bet ween i ncr ement al and non- i ncr ement al change we have hel ped l ay t he
gr oundwor k f or a new gener at i on of empi r i cal wor k on t he r el at i onshi p
bet ween gover nance and devel opment . We ar e awar e t hat some r eader s wi l l
f i nd t hi s paper excessi vel y sweepi ng, i nsuf f i ci ent l y anchor ed
empi r i cal l y, si mpl i st i c. But we wor r y l ess about t hese r i sks t han t he
al t er nat i ve t hat seems al l t oo common i n t he cur r ent di scour se: par t i al
appr oaches; cooki e- cut t er r ecommendat i ons t hat f ai l t o account f or
count r i es r adi cal l y di spar at e ci r cumst ances; i nat t ent i on t o dynami c
pr ocesses, t o cumul at i ve causat i on.


- 43 -
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