The Quality of Government: Corruption, Social Trust, and Inequality in International Perspectiveby Bo Rothstein
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The relationship between government, virtue, and wealth has held a special fascination since Aristotle, and the importance of each frames policy debates today in both developed and developing countries. While it’s clear that low-quality government institutions have tremendous negative effects on the health and wealth of societies, the criteria for good governance remain far from clear. In this pathbreaking book, leading political scientist Bo Rothstein provides a theoretical foundation for empirical analysis on the connection between the quality of government and important economic, political, and social outcomes. Focusing on the effects of government policies, he argues that unpredictable actions constitute a severe impediment to economic growth and development—and that a basic characteristic of quality government is impartiality in the exercise of power. This is borne out by cross-sectional analyses, experimental studies, and in-depth historical investigations. Timely and topical, The Quality of Government tackles such issues as political legitimacy, social capital, and corruption.
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The Quality of GovernmentCorruption, Social Trust, and Inequality in International Perspective
By BO ROTHSTEIN
THE UNIVERSITY OF CHICAGO PRESSCopyright © 2011 The University of Chicago
All right reserved.
Chapter OneWhat Is Quality of Government?
Drinking Water in Luanda
On June 16, 2006, the New York Times published a front-page article about Angola. The article is introduced by a large photograph showing two boys and a girl—a fair guess is they are about ten years old—fetching water from a stream that runs through what looks like an incredibly large garbage dump. The article starts this way: "In a nation whose multibillion dollar oil boom should arguably make its people rich enough to drink Evian, the water that many in this capital depend on goes by a less fancy name: Bengo. The Bengo River passes north of here, its waters dark with grit, its banks strewn with garbage." The article continues to describe how poor Angolans living in the slums of the capital, Luanda, have no option other than to use the polluted water from the Bengo River. This is the reason for one of the worst cholera epidemics to strike Africa, sickening over 43,000 people and killing more than 1,600 from February to June of 2006. Cholera is typically spread through contact with contaminated water, and according to the article, it exists everywhere in Luanda's slums. As the picture shows, "Children stripped to their underwear dance through sewage-clogged creeks and slide down garbage dumps on sleds made of sheet metal into excrement-fouled puddles." The article goes on to state that economists say the oil boom has given the Angolan government a huge budget surplus and more money than it can spend, yet it seems unable to provide the population with such basic things as the safe water and sanitation that would prevent cholera epidemics. The article concludes by citing experts from various international organizations who argue that the situation is caused by two factors—by the lack of infrastructure, exacerbated by the huge influx of people to the capital owing to the civil war that ended in 2002, and by the high level of corruption.
When the leading international anticorruption organization Transparency International published its annual Global Corruption report for 2008, the specific focus of the report, as well as its title, was "Corruption in the Water Sector." The report contains no fewer than twenty-three chapters covering more than one hundred pages analyzing this specific connection between corruption and safe water. In addition, a semipublic international organization called the Water Integrity Network, concerned with this specific problem, was established in 2006, funded by grants from the international development authorities in Germany, the Netherlands, Sweden, and Switzerland. In addition to presenting policy initiatives, this network brings together anticorruption civil society movements and water professionals. Thus, both in the media and in leading policy and advocate organizations, there is an increasing agreement that lack of safe water is a major obstacle to health and well-being in the world's population and that this problem is to a large extent caused by factors that can be defined as the quality of government (henceforth QoG).
The magnitude of the QoG problem regarding the specific issue of access to safe water can be illustrated by the following example. According to a conservative estimation by the World Health Organization, 1.2 billion people lack access to sufficient quantities of safe water, and 2.6 billion are without adequate sanitation. Consequently, 80 percent of all illnesses in the developing world are estimated to be the result of waterborne diseases, claiming the lives of 1.8 million children every year (UNDP 2006). A conservative estimate is that 12,000 people die every day from water- and sanitation-related illnesses (Cunningham and Cunningham 2008; Postel and Mastny 2005; Stålgren 2006a). An increasing number of experts who study the provision of safe water no longer see this enormous problem as one of engineering. That is, it is not the lack of technical solutions (pumps, reservoirs, dams, etc.) that is the main obstacle explaining why such large numbers of mainly poor people in developing countries lack access to safe water. Neither do they see the problem as the lack of a natural supply of clean water. Instead, the problem seems to be related to dysfunction in the structure of the legal and administrative institutions. More precisely, they see it as caused by a lack of adequate institutions for the maintenance, pricing, and distribution of rights to land and water (Anbarci, Escaleras, and Register 2009; Krause 2009; Bruns and Meinzen-Dick 2000; Meinzen-Dick 2007; Sjöstedt 2008).
According to the report by Transparency International, there are an almost infinite number of reasons that corruption and other forms of "bad governance" can be detrimental to the provision of safe water. Among these are private companies that illegally pollute natural water resources, destroying the ecological system, and that pay bribes to avoid being prosecuted and punished by the justice system. Water resources management, not least in dealing with delicate ecosystems, is often complicated both technically and conceptually and is therefore an area where different interests may collude (cf. Stålgren 2006b). In the struggle over the use of natural water resources, kickbacks as well as patronage and clientelist politics may play a large role. Similarly, ordinary people's lack of legally documented and guaranteed property rights to the land they use may prevent them from investing in necessary technical equipment (Sjöstedt 2008).
Providing safe water often requires huge investments in dams, water cleaning equipment, and sewage systems that are carried out by private contractors. Public procurement for big contracts is a well-known source of large-scale corruption, resulting in inflated costs and low quality of the construction that is eventually put in place. Many of these installations are technically very complicated, working against transparency in the procurement process. In addition, petty corruption at the point of service delivery may deter people from using safe water or make them reluctant to pay for water at all, since they may suspect the money will be stolen instead of being used to maintain the safe water equipment. Water managers may then have far too little money to keep the installations running. In some countries this is a huge problem. For example, one study from India showed that, during the previous six months, 40 percent of water customers had been making small payments to falsify meter readings and lower their water bills (Davis 2004). Similarly, a national survey in Guatemala showed that more than 15 percent of the population reported paying a bribe to get a water connection. In Bangladesh and Ecuador, "private vendors, cartels and even water mafias have been known to collude with public water officials to prevent network extension" (Sohail and Cavill 2008, 44). In subsidies for irrigation systems, many cases are also known when large and strongly organized interest groups with substantial economic resources have heavily influenced policy at the expense of "the common good" and of agents less easily organized or economically strong. For example, a study of Mexico shows that the richest 20 percent of farmers get more than 70 percent of government subsidies for irrigation (Rijsberman 2008).
Food Stands on a Caribbean Island
Lack of access to safe water is of course not the only social ill related to low quality of government. Poverty is another case, as illustrated by the following "true story": Just across the street from Vigie Airport on Saint Lucia—a captivating and stunningly beautiful island in the Caribbean, but also a relatively poor country with a per capita GDP of about US$9,000—are two run-down sheds from which coffee and food are served. Like many other local buildings on this island, the sheds, easily seen from the airport entrance, are in a really bad state. Outside, where customers eat and drink, there are no real tables or chairs, just broken stools and pallets that have been thrown over. This sad appearance guarantees that tourists hardly ever venture to these places, although they may have plenty of time (and money) to spend while waiting for their planes to leave. If you dare to use their services, you will find the local food they serve cheap and excellent. The women running these small businesses are friendly and talkative, and the location, just along the beach with a postcard view of the ocean, is absolutely stunning. A lot of tourists from the United States and Europe travel through this airport, but hardly any frequent these two small places to get a cup of coffee, a snack, or a meal, probably because they look so shabby. Instead, most tourists go to the restaurant inside the airport building, run by a global fast-food company, which is expensive and crowded, does not offer a view of the beach, and provides lousy service and really bad food.
If you ask the two women who run the coffee shops why they don't make better use of their perfect location—for example, by repairing their run-down sheds, investing in a porch, and putting out some chairs and tables to attract more business from the tourist crowd, they answer: "Great idea. I've thought about it, but there are two problems. First, although I have been here for twenty years, I don't own this piece of land. I'm a squatter, so I can be forced away by the authorities at any time. Second, if I did invest and opened a real coffee shop, I could probably never afford to pay off the health inspectors." Further conversation reveals that the women do not know if it is even possible to buy the property or get a permanent lease, and they do not know how much they would have to bribe the health inspectors.
Reading the literature about the lack of economic growth in developing countries shows that there are probably thousands of stories like this from poor or semipoor countries like Saint Lucia. The lack of predictable legal institutions that can secure property rights and curb corruption hinders many "micro businesspeople" from making investments that in all likelihood would vastly improve their (and their country's) economic situation. In the bigger picture this reflects a key theme in current political economy: the crucial role of the quality of government. Since the late 1990s, economists and political scientists alike have started to argue that dysfunctional government institutions play a central part in many of the world's most pressing economic and social problems. This is a change from many earlier theories that focused on the lack of things like technology, skills, and infrastructure. Two prominent scholars in this field, Daron Acemoglu and James Robinson, have argued that factors like technology, skills, and physical capital are just "proximate" causes behind the lack of economic development. In order to move from proximate to fundamental causes, they argue, we must ask the next question, Why do some countries have less human capital, physical capital, and technology and make worse use of their factors and opportunities? Their answer is institutions—that is, the quality of government (Acemoglu and Robinson 2008, 28). This central place for institutions and "good governance" is also different from the earlier focus on deregulation, privatization, and liberalization known as "the Washington Consensus," which dominated much of the discussion about policies for developing and former communist countries during the 1990s (Rodrik 2008).
An issue not addressed in this literature, however, is more exactly what makes some government institutions better than others, or What is quality of government? Although a number of empirical indexes and measures have been developed and used heavily by many prominent international organizations as well as by researchers, there is a troubling lack of conceptual precision in this approach (Thomas 2009; Andrews 2008). Most troubling is that it is detached from normative political theories about justice, the proper role of the state, and democracy. It should be obvious that as soon as one puts terms like "good" or "quality" into a definition, it is impossible to refrain from discussing the normative issues about what should count as "good" that have been raised in political philosophy. The same argument can be made for the concept of corruption that is usually defined as the "misuse" or "abuse" of public power for private gain. It goes without saying that one cannot understand what should count as "misuse" or "abuse" of a public position without referring to a normative standard for the proper role of the state and what type of moral standards citizens have the right to expect when public power is exercised (Lundquist 1999; Thompson 2005). I want to emphasize that this is not a question about internal academic civilities. Without a foundation in a set of universal ethical standards, translating an approach like the "good governance" agenda into policies risks ending up in mindless utilitarianism where basic human rights of (often poor) people are sacrificed in the name of some overall utility (Talbott 2005).
A central aim of this book is to propose that a key feature of quality of government, based on a specific normative and behavioral criterion, is impartiality in the exercise of public authority. The argument is that democracy, which concerns access to government power, cannot be a sufficient criterion of quality of government. If QoG merely equaled democracy, the importance of the way power is exercised by government authorities would be left out.
Conceptualizing Quality of Government: A Critique
The story from Saint Lucia highlights that it is not necessarily the lack of entrepreneurship or resources in human or physical capital that hinders economic development, but the low quality of the government institutions that implement laws and policies (Helpman 2008; Clague et al. 1999; Easterly 2001; Easterly and Levine 2003; Evans and Rauch 1999; Hall and Jones 1999; Knack and Keefer 1997; Kornai and Rose-Ackerman 2004; Rodrik, Subramanian, and Trebbi 2004; North, Wallis, and Weingast 2009). Not being able to predict government action when it reaches you and the lack of accurate information about what government bureaucrats can and cannot do to you are central ingredients of this problem (cf. Evans 2005; Lange 2005).
But the rapid growth in research on "good governance" in recent years has not been concerned only with growth and economic development. The "quality of government" factor has also been argued to have substantial effects on a number of important noneconomic phenomena, both at the individual level—such as subjective happiness (Frey and Stutzer 2000; Helliwell and Huang 2008) and citizen support for government (Anderson and Tverdova 2003)—and at the societal level, such as the incidence of civil war (Fearon and Laitin 2003; Öberg and Melander 2010) and democratic stability (Mungiu-Pippidi 2006; Rose and Shin 2001; Zakaria 2003). This emphasis on the quality of government institutions also stands in stark contrast to neoclassical economics that focused primarily on deregulation and "getting prices right" by establishing free markets. The problem with this approach has been captured poignantly by Dani Rodrik in a report presented to the International Monetary Fund in 1999:
The encounter between neo-classical economics and developing societies served to reveal the institutional underpinnings of market economies. A clearly delineated system of property rights, a regulatory apparatus curbing the worst forms of fraud, anti-competitive behavior, and moral hazard, a moderately cohesive society exhibiting trust and social cooperation, social and political institutions that mitigate risk and manage social conflicts, the rule of law and clean government—these are social arrangements that economists usually take for granted, but which are conspicuous by their absence in poor countries.... Hence it became clear that incentives would not work or generate perverse results in the absence of adequate institutions. (Rodrik 2007, 153)
Excerpted from The Quality of Government by BO ROTHSTEIN Copyright © 2011 by The University of Chicago. Excerpted by permission of THE UNIVERSITY OF CHICAGO PRESS. All rights reserved. No part of this excerpt may be reproduced or reprinted without permission in writing from the publisher.
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Meet the Author
Bo Rothstein is the August Röhss Chair in Political Science at the University of Gothenburg in Sweden. He is the author of several books, including, most recently, Social Traps and the Problem of Trust.
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