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Governance and Public Policy

Basic Concepts of Governance
a. Origin of the term Governance
 Greek roots, meaning “to steer”
 Governance came about as society developed from a nomadic existence to a
more settled civilization. As civilizations evolved, it became necessary for
societies within civilizations to form hierarchies for work. As population
increased, groups of people, generally elders formed rules to help each person
in the society, to benefit and to take on individual and collective responsibilities.
These groups of people were also responsible for maintaining peace, harmony
and order within a group and the collective of people. They were known as the
Government or the governing body.
 By the mid-16th century, however, government denoted a “system by which
something is governed” and by the early 18th century it further evolved to
acquire the meaning of a “governing authority.” In this process the term
governance gradually became marginalized, and by the 19th century it was
deemed to reflect an incipient archaism. For the next 100 years, it would hardly
be used as a political term. Dictionaries would define government in terms of a
governing authority, including the political order and its institutional framework,
while governance was treated as the agency and process of governing, and was
often viewed as archaic.
 However, during 1980s under economic reforms, especially under globalization
the use of term governance became popular with its emphasis on the process
and manner of governing to the notion of sustainable development. Meanwhile,
organizations such as the IMF, NGOs, the UN and its agencies, the World Bank
and international media were quick to pick up the term and use it in a variety of
ways.
 Global Governance: Lopez-Claros, A., Dahl, A., & Groff, M. (2020). A History of
Global Governance. In Global Governance and the Emergence of Global
Institutions for the 21st Century (pp. 30-64). Cambridge: Cambridge University
Press.
o The idea of bringing into being supranational organizations to resolve
disputes between states has a distinguished lineage, going as far back as
Dante Alighieri’s On World Government, Rousseau’s A Project of
Perpetual Peace and Kant’s proposal for a federation of nations
operating under the rule of law, and eventually evolving into “a perfect
civil union of mankind.”
o The League of Nations was a first attempt to pool national sovereignties
together to deal with the problem of war, a milestone in a long process
intended to strengthen the effectiveness of mechanisms of international
cooperation. The UN was initially conceived as an international entity

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founded on federalist principles, with substantial powers to enact laws

that would be binding on member states, but it emerged as a rather less
ambitious entity with two fundamental flaws: the principle of one
country–one vote in the General Assembly and the veto within the
Security Council, both undermining the democratic legitimacy of the
organization. The chapter also reviews the concerns raised by Grenville
Clark and others who thought that if member countries could not agree
upon well-defined powers that they would be willing to yield, no global
authority adequate to maintain peace would arise in our time.

b. Definition of Governance
 “The traditions and institutions by which authority in a country is exercised” –
Kaufman et al
 The way “… power is exercised through a country’s economic, political, and social
institutions.” – the World Bank’s PRSP Handbook.
 “The exercise of economic, political, and administrative authority to manage a
country’s affairs at all levels. It comprises mechanisms, processes, and institutions
through which citizens and groups articulate their interests, exercise their legal
rights, meet their obligations, and mediate their differences.” – UNDP.
 “Governance is the process of interactions through the laws, norms, power or
language of an organized society” – Mark Bevir, Governance: A very short
introduction.
 “Corporate governance involves a set of relationships between a company’s
management, its board, its shareholders and other stakeholders. Corporate
governance also provides the structure through which the objectives of the
company are set, and the means of attaining those objectives and monitoring
performance are determined.” OECD

c. Definition of Good Governance

 Good governance has 8 major characteristics. It is participatory, consensus oriented,
accountable, transparent, responsive, effective and efficient, equitable and inclusive
and follows the rule of law. It assures that corruption is minimized, the views of
minorities are taken into account and that the voices of the most vulnerable in
society are heard in decision-making. It is also responsive to the present and future
needs of society. – United Nations Economics and Social Commission for Asia and
the Pacific
 The World Bank introduced the concept in its 1992 report entitled "Governance
and Development". According to the document, good governance is an essential
complement to sound economic policies and is central to creating and sustaining
an environment which fosters strong and equitable development.
 The IMF feels that corruption within economies is caused by the ineffective
governance of the economy, either too much regulation or too little regulation.
 According to former UN Secretary-General Kofi Annan, "Good governance is
ensuring respect for human rights and the rule of law; strengthening democracy;
promoting transparency and capacity in public administration."

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unescap.org/resources/what-good-governance – UNESCAP Document on What is

Good Governance

d. Characteristics of Good Governance:

UNESCAP Document titled “What is Good Governance”

i. Participation,
 Participation by both men and women is a key cornerstone of good
governance. Participation could be either direct or through legitimate
intermediate institutions or representatives. It is important to point out
that representative democracy does not necessarily mean that the
concerns of the most vulnerable in society would be taken into
consideration in decision making. Participation needs to be informed
and organized. This means freedom of association and expression on the
one hand and an organized civil society on the other hand.
 All men and women should have a voice in decision-making, either
directly or through legitimate intermediate institutions that represent
their interests. Such broad participation is built on freedom of
association and speech, as well as capacities to participate
constructively.

ii. Rule of law,

 Good governance requires fair legal frameworks that are enforced
impartially. It also requires full protection of human rights, particularly
those of minorities. Impartial enforcement of laws requires an
independent judiciary and an impartial and incorruptible police force.
 Legal frameworks should be fair and enforced impartially, particularly
the laws on human rights.

iii. Transparency,
 Transparency means that decisions taken, and their enforcement are
done in a manner that follows rules and regulations. It also means that
information is freely available and directly accessible to those who will
be affected by such decisions and their enforcement. It also means that
enough information is provided and that it is provided in easily
understandable forms and media.
 Transparency is built on the free flow of information. Processes,
institutions, and information are directly accessible to those concerned
with them, and enough information is provided to understand and
monitor them.

iv. Responsiveness,
 Good governance requires that institutions and processes try to serve all
stakeholders within a reasonable timeframe.
 Institutions and processes try to serve all stakeholders.

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v. Equity and Inclusiveness

 A society’s wellbeing depends on ensuring that all its members feel that
they have a stake in it and do not feel excluded from the mainstream of
society. This requires all groups, but particularly the most vulnerable,
have opportunities to improve or maintain their wellbeing.
 All men and women have opportunities to improve or maintain their
well-being.

vi. Effectiveness and Efficiency

 Good governance means that processes and institutions produce results
that meet the needs of society while making the best use of resources at
their disposal. The concept of efficiency in the context of good
governance also covers the sustainable use of natural resources and the
protection of the environment. Processes and institutions produce
results that meet needs while making the best use of resources.

vii. Accountability
 Accountability is a key requirement of good governance. Not only
governmental institutions but also the private sector and civil society
organizations must be accountable to the public and to their
institutional stakeholders. Who is accountable to whom varies
depending on whether decisions or actions taken are internal or
external to an organization or institution. In general, an organization or
an institution is accountable to those who will be affected by its
decisions or actions. Accountability cannot be enforced without
transparency and the rule of law.
 Decision-makers in government, the private sector and civil society
organisations are accountable to the public, as well as to institutional
stakeholders. This accountability differs depending on the organisations
and whether the decision is internal or external to an organisation.

viii. Strategic Vision and Consensus Oriented

 There are several actors and as many viewpoints in a given society. Good
governance requires mediation of the different interests in society to
reach a broad consensus in society on what is in the best interest of the
whole community and how this can be achieved. It also requires a broad
and long-term perspective on what is needed for sustainable human
development and how to achieve the goals of such development. This
can only result from an understanding of the historical, cultural and
social contexts of a given society or community.
 Leaders and the public have a broad and long-term perspective on good
governance and human development, along with a sense of what is
needed for such development. There is also an understanding of the
historical, cultural and social complexities in which that perspective is
grounded.

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 Good governance mediates differing interests to reach a broad

consensus on what is in the best interests of the group and,. where
possible, on policies and procedures.

e. Collapse/Failure of Governance: its indicators diagnostic

tools & Effects
 Governance failure may be defined as the undesirable or adverse outcome from
a governance process. It may happen during designing, planning, and
implementation of a policy. This idea is also expressed in terms of policy failure
or state failure. – Amiya Kumar Das
 Corruption as a source of failure of good governance: Corruption and good
governance are antagonistic forces which actively operate in any developed or
underdeveloped country. While corruption spreads with leaps and bounds, good
governance is to be built brick by brick. Relative strength of corruption and good
governance determines the state of success or failure of the government to
achieve development objectives within a welfare state. Corruption flourishes
when the government of a country fails to strengthen the measures of good
governance on a regular basis. Periodic attempts of defensive nature against
corruption do not produce the desired results of social welfare. In order to
introduce a strategically sound system of good governance it is necessary to
examine the meaning and methods of corruption which threatens the existence
of good governance
 Measuring Governance: Governance is a complex phenomenon which has been
subject to wide-ranging analysis and elucidation by experts from different fields
of study. Different ideological orientations associated with this concept assume
varied systems of economic and political management and have diverse
viewpoints regarding importance of institutions to governance outcomes. This
lack of clarity and consensus has made measurement of governance difficult and
even controversial to some extent.
In many ways, measurement of governance is a political endeavor. Governance
appraisals can be based on external assessments, peer assessments and self-
assessments, each of which can yield conflicting results depending on the
agenda of the agency conducting the appraisal. For example, external
assessment may be conducted by donors and international NGOs. An example of
a peer assessment is the African Peer Review Mechanism (APRM) in which all
the states within the African Union have agreed to implement an instrument to
monitor honest, Corruption As A Source Of Failure Of Good Governance And
Management In transparent, accountable and participatory government (Gruzd,
2009). Finally, self-assessments are country-led evaluations that compiled by
government agencies, civil society, independent researchers, and other
stakeholder at country level. One of the main initiatives to build a measure of
governance which has generated internationally comparable data, and which is
generally accepted as a reliable external assessment source, is the Worldwide
Governance Indicators Project.

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The project has generated data on aggregate and individual governance

indicators in 215 countries, starting in 1996 and updated yearly since 2015.
Based on over 40 data sources from over 30 different organizations the WGIs
comprise of six dimensions of governance. These dimensions include voice and
accountability, political stability and lack of violence, government
effectiveness, regulatory quality, rule of law, control of corruption. The
indicators are criticized for lacking guidance towards concrete actions, having
hidden biases and being pitched to donor agencies instead of bringing forth
concern about the poor. Nevertheless, the WGIs have spurred scholarly
research and have brought forth the experiences and opinions of organizations
and individuals seeking to play a role in Governance Reforms (Kaufmann,
Kraay & Mastruzzi, 2010).
Other established datasets measuring governance include: Bertelsmann
Transformation Index (BTI) since 2008 looks at "public sector management ,
steering capability, resource efficiency, consensus building, and international
cooperation"; Sustainable Governance Indicators (SGI), since 2009 considers
"strategic capacity, inter-ministerial coordination, policy implementation, and
institutional learning"; Institutional Profiles Database (IPD) since 2006 indicating
"civil service training, remuneration, and performance, as well as the capacity of
political authorities"; Global Integrity Report since 2004 includes "financial
disclosure, conflict of interest, merit-based recruitment, and human resources
management for the civil service".

Governance Theories
a. Communitarianism
 Communitarianism is a philosophy that
emphasizes the connection between the
individual and the community. Its
overriding philosophy is based upon the
belief that a person's social identity and
personality are largely molded by
community relationships, with a smaller
degree of development being placed on
individualism. Although the community
might be a family, communitarianism
usually is understood, in the wider,
philosophical sense, as a collection of
interactions, among a community of
people in each place (geographical
location), or among a community who
share an interest or who share a history.
Communitarianism usually opposes extreme individualism and rejects extreme
laissez-faire policies that deprioritize the stability of the overall community.

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 Communitarian ideas have a long history, in the West, China, and elsewhere, but
modern-day communitarianism began in the upper reaches of Anglo-American
academia in the form of a critical reaction to John Rawls’ landmark 1971 book A
Theory of Justice (Rawls 1971). Drawing primarily upon the insights of Aristotle
and Hegel, political philosophers such as Alasdair MacIntyre, Michael Sandel,
Charles Taylor and Michael Walzer disputed Rawls’ assumption that the principal
task of government is to secure and distribute fairly the liberties and economic
resources individuals need to lead freely chosen lives. These critics of liberal
theory never did identify themselves with the communitarian movement (the
communitarian label was pinned on them by others, usually critics), much less
offer a grand communitarian theory as a systematic alternative to liberalism.
Nonetheless, certain core arguments meant to contrast with liberalism’s
devaluation of community recur in the works of the four theorists named above
(Avineri & de-Shalit 1992, Bell 1993, Berten et al. 1997, Mulhall & Swift 1996,
and Rasmussen 1990), and for purposes of clarity one can distinguish between
claims of three sorts: methodological claims about the importance of tradition
and social context for moral and political reasoning, ontological or metaphysical
claims about the social nature of the self, and normative claims about the value
of community.
 https://onlinelibrary.wiley.com/doi/pdf/10.1002/ncr.4100820305 - A
Communitarian approach to local governance.

b. Decentered Theory
 Mark Bevir came up with it in 2002
 There are two leading narratives of governance. One is a neoliberal one about
markets that is inspired by rational choice. The other is a story about networks
associated with institutionalism in political science. This paper argues that both
rational choice and institutionalism rely on assumptions about our ability to
read-off people's beliefs from objective social facts about them, and yet that
these assumptions are untenable given the philosophical critique of positivism.
Hence, we need to modify our leading theories and narratives of governance.
We need to decenter them. The paper then explores the distinctive answers a
decentered theory of governance would give to questions such as: is governance
new? is governance a vague metaphor? is governance uniform? how does
governance change? and is governance failure inevitable?
 A decentered analysis of governance departs from both the neoliberal narrative
and that of governance as networks. It encourages us to understand governance
in terms of a political contest resting on competing webs of belief, and to explain
these beliefs by reference to traditions and dilemmas. In doing so, it points
toward novel perspectives on questions that recur in discussions of governance.
 A decentered theory of governance highlights not only the difficulties managers
face in controlling markets and networks but also the possibilities and dangers
markets and networks pose for democracy. It encourages us to treat governance
as an opportunity to redefine democracy. It prompts us to search for patterns of
devolution, participation, control, and accountability that better reflect our

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capacity for agency, the contingency of our identities, the importance of moral
conduct as well as moral rules, and an aspiration toward an open community.

c. Libertarian Socialism
 Libertarian socialism rejects the concept of a state.[15] It asserts that a society
based on freedom and justice can only be achieved with the abolition of
authoritarian institutions that control specific means of production and
subordinate the majority to an owning class or political and economic elite.[22]
Libertarian socialists advocate for decentralized structures based on direct
democracy and federal or confederal associations[23] such as citizens'/popular
assemblies, cooperatives, libertarian municipalism, trade unions and workers'
councils.[24][25] This is done within a general call for liberty[26] and free
association[27] through the identification, criticism and practical dismantling of
illegitimate authority in all aspects of human life. Libertarian socialism is
distinguished from the authoritarian and vanguardist approach of
Bolshevism/Leninism and the reformism of Fabianism/social democracy.
 Libertarian socialism is a Western philosophy with diverse interpretations,
although some general commonalities can be found in its many incarnations. It
advocates a worker-oriented system of production and organization in the
workplace that, in some respects, radically departs from neoclassical economics
in favour of democratic cooperatives or common ownership of the means of
production (socialism).[51] They propose that this economic system be executed
in a manner that attempts to maximize the liberty of individuals and minimize
the concentration of power or authority (libertarianism). Adherents propose
achieving this through decentralization of political and economic power, usually
involving the socialization of most large-scale private property and enterprise
(while retaining respect for personal property). Libertarian socialism tends to
deny the legitimacy of most forms of economically significant private property,
viewing capitalist property relations as a form of domination that is antagonistic
to individual freedom.
 Critique of Libertarian Socialism: Right-libertarians view socialism as involving
state ownership of the means of production. As such, they consider libertarian
socialism to be an oxymoron.[354][355] In response, the now-defunct anarchist
Internet archive Spunk Library argued that "the word 'libertarian' has been used
by anarchist socialists for far longer than the pro-free market right have been
using it. This does not, of course, prove that the term is free of contradiction.
However, as we will show below, the claim that the term is self-contractory rests
on the assumption that socialism requires the state in order to exist and that
socialism is incompatible with liberty. This assumption, as is often true of
objections to socialism, is based on a misconception of what socialism is, a
misconception that many authoritarian socialists and the state capitalism of
Soviet Russia have helped to foster. It is the term 'state socialism' which is an
oxymoron."
 A long-standing criticism of libertarianism is that it presupposes an unrealistic
and undesirable conception of individual identity and of the conditions

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necessary for human flourishing. Opponents of libertarianism often refer to

libertarian individualism as “atomistic,” arguing that it ignores the role of family,
religious community, and state.
 Aside from the significant number of anarchist communist theorists such as
Pierre-Joseph Proudhon, Mikhail Bakunin, Peter Kropotkin and Alexander
Berkman, some important contributors to libertarian socialist theory and
philosophy would be Noam Chomsky, Daniel Guerin, and Murray Bookchin.

d. Institutionalism
 In sociology and organizational studies, institutional theory is a theory on the
deeper and more resilient aspects of social structure. It considers the processes
by which structures, including schemes, rules, norms, and routines, become
established as authoritative guidelines for social behavior.[1] Different
components of institutional theory explain how these elements are created,
diffused, adopted, and adapted over space and time; and how they fall into
decline and disuse.
 Institutional analysis is that part of the social sciences which studies how
institutions—i.e., structures and mechanisms of social order and cooperation
governing the behavior of two or more individuals—behave and function
according to both empirical rules (informal rules-in-use and norms) and also
theoretical rules (formal rules and law). This field deals with how individuals and
groups construct institutions, how institutions function in practice, and the
effects of institutions on each other, on individuals, societies and the community
at large
 Since the 1980s, however, there are cross-pollinations between the sociological
and economic traditions in institutional analysis. A new focus is to explain how
organizations and individuals within organizations make economic and
managerial decisions, particularly by investigating the non-rational, non-
economic, and non-psychological factors. This movement produced what is
known as the New Institutional Analysis.[7] The neo institutional approach has
several variants. One of them tries to improve economic models based on the
theory of public choice, and one of its applications is known as the institutional
analysis and development (IAD) framework developed by Elinor Ostrom 2009
Nobel Prize for Economics.[8] Another variant is influenced by organizational
sociology and seeks to integrate Max Weber’s work on bureaucratic mentality

e. Marxism
 Marx never clearly defined how Marxist thought will translate into a robust and
clearcut theory of Governance. Theories of governance were formulated from
Marxist teachings of Sociology and Economics.
 These theories are covered under the Regulation Theory of Governance.
 For more on Marx, see below.

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f. Neoliberalism
 Neoliberal governance, sustainable development, and local communities in the
Barents Region – Monica Tennberg et al.
 Neoliberalism – the ideology at the root of all our problems – Guardian Article
https://www.theguardian.com/books/2016/apr/15/neoliberalism-ideology-
problem-george-monbiot
 The political rationality of our time is neoliberalism, an approach to governing that
has spread in different variations across the globe in the last three decades (Harvey
2005). In simple terms, neoliberalism means the extension of market relations and
competition throughout society, including the realm of social interactions.
Neoliberalism is not an ideology, nor is it a policy; it is a governmentality for
advanced liberal societies, a set of governance practices which, as a political
rationality, also endeavours to impart sense to those practices (Larner 2000; Cotoi
2011). Neoliberalism is based on the idea of active use of freedom: the role of the
neoliberal state is to secure proper conditions for markets to function instead of
letting them operate freely as classical liberalism urges. The main elements of
neoliberal governance are support for free movement of goods, people and capital;
re-distribution of authority between governmental and non-governmental entities;
pro-market regulation; and an emphasis on social innovations that will advance
individual freedom and responsibility (Cerny et al. 2005).
 Neoliberalism in practice has been woven into a broad range of international,
national and regional plans, programmes and strategies in the form of de-regulation,
privatisation and rationalisation. However, it is many times paradoxical, a
combination of old and new practices of governance. The Nordic countries have
adopted neoliberal policies (Kuhnle 2000; Abrahamson 2010; Dahl 2012), but the
popular support for welfarestate thinking has led to the states adopting a policy of
containing rather than cutting social benefits and related costs. As a result, the
countries have entered a new era, that of the “post-welfare state”, characterised by
Kuhnle (2000, 118) as providing “a less generous state welfare and with a different
mix of welfare provisions”. In Russia, a new model of welfare is under construction,
characterised firstly by a considerable reduction of the state’s part in social policy,
secondly by an increased role for the regional and local authorities in the provision
of social services, and thirdly by substantial changes in the social position of citizens
in relation to the state. As a result, individual participation and responsibilities, as
well as the role of non-governmental organisations, have grown in providing social
services. The role of the state is still important in that it guarantees minimal social
standards. (Konstantinova 2009, 51.)
 Neoliberalism, or neo-liberalism,[1] is a term used to signify the political
reappearance of 19th-century ideas associated with free-market capitalism.[2]: 7 [3]
A prominent factor in the rise of conservative and libertarian organizations, political
parties, and think tanks, and predominantly advocated by them,[4][5] it is generally
associated with policies of economic liberalization, including privatization,
deregulation, globalization, free trade, monetarism, austerity, and reductions in
government spending in order to increase the role of the private sector in the

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economy and society.[14] The defining features of neoliberalism in both thought and
practice have been the subject of substantial scholarly debate.
 Neoliberalism has faced criticism by academics, journalists, religious leaders, and
activists from both the political left and right.[281][282] Notable critics of
neoliberalism in theory or practice include economists Joseph Stiglitz,[283] Amartya
Sen,[284] Michael Hudson,[285] Ha-Joon Chang,[286] Robert Pollin,[287] Julie
Matthaei,[288] and Richard D. Wolff;[289] linguist Noam Chomsky;[57] geographer
and anthropologist David Harvey;[80] Slovenian continental philosopher Slavoj Žižek,
[290] political activist and public intellectual Cornel West;[291] Marxist feminist Gail
Dines;[292] British musician and political activist Billy Bragg;[293] author, activist
and filmmaker Naomi Klein;[294] head of the Catholic Church Pope Francis;[295]
journalist and environmental activist George Monbiot;[296] Belgian psychologist
Paul Verhaeghe;[297] journalist and activist Chris Hedges;[298] conservative
philosopher Roger Scruton;[299] and the alter-globalization movement, including
groups such as ATTAC.
 The impact of the Great Recession in 2008 has given rise to a surge in new
scholarship that criticizes neoliberalism and seeks policy alternatives.
 Neoliberalism is commonly viewed by scholars as encouraging of globalization,[367]
which is the subject of much criticism.
 The emergence of the "precariat", a new class facing acute socio-economic
insecurity and alienation, has been attributed to the globalization of neoliberalism.
 Globalization can subvert nations' ability for self-determination

g. Rational Choice Theory

 Rational choice theory refers to a set of guidelines that help understand economic
and social behavior.[1] The theory originated in the eighteenth century and can be
traced back to political economist and philosopher, Adam Smith.[2] The theory
postulates that an individual will perform a cost-benefit analysis to determine
whether an option is right for them.[3] It also suggests that an individual's self-
driven rational actions will help better the overall economy. Rational choice theory
looks at three concepts: rational actors, self-interest, and the invisible hand.
 Rational choice theorists argue that institutions structure people’s strategic
interactions with one another; stable institutions influence individuals’ actions by
giving them reasonable expectations about the outcome of the varied courses of
action from which they might choose.

h. Regulation Theory
 Just as sociological institutionalism sometimes draws on systems theory, so historical
institutionalism sometimes draws on Marxist state theory. The main approach to
governance derived from Marxism is, however, regulation theory. Karl Marx argued
that capitalism is unstable because it leads to capital overaccumulation and class
struggle. Regulation theorists examine the ways in which different varieties of
capitalism attempt to manage these instabilities. They study forms of governance in
relation to changes in the way these instabilities are masked.

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 Typically, regulation theorists locate the new governance in relation to a broader

socioeconomic shift from Fordism to post-Fordism. Fordism refers to a combination
of “intensive accumulation” and “monopolistic regulation”—a combination
associated with the mass production pioneered by Henry Ford in the 1920s.
Intensive accumulation rested on processes of mass production such as
mechanization, the intensification of work, the detailed division of tasks, and the use
of semiskilled labour. Monopolistic regulation involved monopoly pricing, the
recognition of trade unions, the indexing of wages to productivity, corporatist
tendencies in government, and monetary policies to manage the demand for
commodities. According to regulation theorists, intensive accumulation and
monopolistic regulation temporarily created a virtuous circle: mass production
created economies of scale, thereby leading to a rise in productivity; increased
productivity led to increased wages and so greater consumer demand; the growth in
demand meant greater profits because of the full utilization of capacity; and the
increased profits were used to improve the technology of mass production, creating
further economies of scale and so starting the whole circle going again.
 Regulation theorists ascribe the end of Fordism to various causes. Productivity gains
decreased because of the social and technical limits to Fordism. Globalization made
the management of national economies increasingly difficult. Increased state
expenditure produced inflation and state overload. Competition among capitalists
shifted the norms of consumption away from the standardized commodities
associated with mass production. All of these causes contributed to the end of not
only Fordism but also the bureaucratic Keynesian welfare state associated with it.
Although regulation theorists can be reluctant to engage in speculations about the
future, they generally associate the new post-Fordist era with the globalization of
capital, neoliberal politics, contracting out, public-private partnerships, and the
regulatory state.

Governance Indicators laid by World

Bank/IMF/UNESCO/UNDP/ADB, their Explanation &
Application Level in Pakistan
Overview of Pakistan’s Performance on the Worldwide Governance
Indicators:
In Pakistan, the goals of freedom of expression, freedom of association, and the presence of media free
from any outside influence are yet to be achieved. Pakistan’s score on “Voice & Accountability” during
the dictatorship of General Pervez Musharaf was -0.95 in 2007 which improved to -0.69 in 2017.
However during the rule (2018-2022) of Pakistan Tehreek-e-Insaf (PTI), the ranking declined to 17 points
—rating was -0.84 in 2021.

The World Bank’s latest Worldwide Governance Indicators, based on data from 2016, rank Pakistan in
the 29th percentile for government effectiveness, the 27th percentile for regulatory quality, the 20th
percentile for rule of law, and the 19th percentile for control of corruption

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Wilson Center Document on Good Governance and Institutions in

Pakistan
https://www.wilsoncenter.org/sites/default/files/media/documents/publication/2018-06-
pakistansinstitutions.pdf -

Available evidence across countries suggests a positive relationship between good governance and
economic growth. An IMF empirical study from 2003 found that governance has a statistically significant
impact on GDP per capita across 93 countries and governance explains nearly 75 percent of cross-
country variations in income per head.12 An Asian Development Bank study from 201013 shows that
developing Asian economies with government effectiveness, regulatory quality, and rule of law scoring
above the global mean (after controlling for per capita income) grew faster on average during 1998–
2008 than those economies scoring below the global mean. The authors conclude that good governance
is associated with both a higher level of per capita GDP and higher rates of GDP growth over time.
Numerous other studies have demonstrated the linkages between good governance and healthy
economic growth. A 1998 World Bank study explicitly linked governance to the notion of institutions,
defining it as “all aspects of the exercise of authority through formal and informal institutions in the
management of the resource endowment of a state.” The World Bank study found a high correlation
between governance quality and per capita income. The positive correlation between the 10-year
economic growth rate and governance quality supports the argument that good governance is an
important determinant of economic development. A later World Bank study found a direct causal effect
from better governance to higher per capita income across 175 countries between 2000 and 2001.15 A
negative causal effect is found from per capita income to governance, implying that improvements in
governance are unlikely to occur merely as a consequence of development. One scholar has reported
that better maintenance of the rule of law and political stability affect economic growth.16 Other
research finds that the rule of law indicator is positively and significantly correlated with the growth in
per capita incomes of the poorest quintile.17 A 2004 Asian Development Bank study18 discovered that
political stability and rule of law exhibit negative and significant relation with inequality as measured by
the Gini coefficient. World Bank analysis19 concludes that rule of law and accountability were both
positively correlated with growth. Some research argues that pro-poor reforms cannot have the
intended impact unless there are significant changes in the institutions of governance.20 Cross-country
studies have demonstrated that political instability, corruption, poor bureaucratic quality, absence of rule
of law, and expropriation risk are strongly correlated with lower investment and growth rates

A new branch of economics, coined by Douglass North as New Institutional Economics, has identified
institutional capabilities that states need to make markets function efficiently. North22 has defined
institutions as “humanly devised constraints that structure political, economic, and social interactions
and include the laws, rules, customs, [and] norms constructed to advance and preserve social order.”
Regarding the connection between institutions and economic development, his view is as follows:

How do we account for poverty in the midst of plenty? We must create incentives for people to invest in
more efficient technology, increase their skills, and organize efficient markets. Such incentives are
embodied in institutions.

Other analysts demonstrate that institutions determine the fate of nations. Success comes when political
and economic institutions are “inclusive” and pluralistic, creating incentives for everyone to invest in the
future.

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Nations fail when institutions are “extractive,” protecting the political and economic power of only a
small elite that takes income from everyone else. Institutions that promote good governance and
facilitate broad-based and inclusive growth have come to occupy the current consensus on development
strategy. According to one study,24 good institutions ensure two desirable outcomes: relatively equal
access to economic opportunity (a level playing field) and the likelihood that those who provide labor or
capital are appropriately rewarded and their property rights are protected.

Among the components of good governance, human capital is associated with both economic growth
and equity. In a study on human capital and economic growth, the authors,25 using data for the 1996 to
2011 period for 134 countries, found strong evidence that the relationship between human capital and
economic growth is much less pronounced in countries with a low quality of governance. Preconditions
in the form of good governance are necessary for an educated labor force to contribute to the economic
growth of a country. Weak governance indicated by deteriorated law and order conditions, corruption,
and maladministration result in an inefficient utilization of human resources.

Researchers have explored linkages between governance and pro-poor growth in Pakistan for the period
of 1996 to 2005.26 This analysis indicates that governance indicators have low scores and rank at the
lowest possible percentile as compared to other countries. The results of this study show a strong link
between governance indicators and pro-poor growth. The authors’ econometric analysis shows a strong
relationship between good governance and reductions in poverty and income inequality.

The model of an elitist economy that was articulated in Pakistan: The Economy of an Elitist State”27 sets
out the historical context and drivers of the capture of the state and rigging of markets in Pakistan. It is
postulated that a narrow elite constituting about 1 to 2 percent of the population has used the state and
markets for political power and self-enrichment to the neglect of the majority of the population,
particularly the poor and the less privileged segments of society. This small minority has thus been able
to enjoy this unjust accumulation of wealth in the midst of widespread poverty and squalor. In the
absence of a neutral umpire, markets are rigged by the elites for their own advantage and thus market
outcomes and resource allocations are inefficient. The state, which should be ensuring the equitable
distribution of gains from economic growth, is also controlled by the same elite that evades taxes and
appropriates public expenditures for its own benefit. Inequities—whether interpersonal, regional, or
gender-focused— become commonplace in such an environment. Access to the institutions that deliver
public goods and services is intermediated by the elite through a patronage-based system.

a. Voice and Accountability

b. Political Stability and Absence of Violence
Undue interferences in the affairs of executive by the judiciary and military have
damaged the already fragile democratic fabric. It has promoted political instability
and/or politically motivated violence and the scourge of terrorism. Accordingly, the
score against “Political Stability and Absence of Violence/Terrorism” worsened to -2.64
in 2009, mainly because of increased terrorism—a result of faulty policies of General
Pervez Musharraf. However, due to a major operation against terrorists in 2014 under
Pakistan Muslim League (Nawaz) by the army, with strong public and political support,
Pakistan witnessed significant improvement in 2018, securing ranking of -2.27.
Continuous monitoring and operations against terrorist groups by Pakistan’s security

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agencies and United States’ exit from Afghanistan played a significant role in improving
our ranking for this indicator—in 2021 it improved to -1.67.

c. Government Effectiveness
Factors like quality of public services, civil services and degree of its independence from
political pressures as well as the quality of policy formulations and their implementation
play a key role in developing citizens’ confidence in governments and institutions.
Successive governments in Pakistan—civil and military alike—have failed on these
accounts. India and Pakistan inherited similar governance structures on independence.
India has progressed significantly as its score for “Government effectiveness” improved
from -0.11 in 1996 to 0.28 in 2021, whereas Pakistan’s score was .0.68 in 1996 and -0.4
in 2021.

d. Regulatory Authorities & their Quality

Regulatory Quality in Pakistan: The average value for Pakistan during that period was
-0.64 points with a minimum of -0.91 points in 2004 and a maximum of -0.48 points in
1998. The latest value from 2020 is -0.72 points. For comparison, the world average in
2020 based on 192 countries is -0.02 points.

e. Rule of Law
One critical dimension is “rule of law”, which indicates the extent to which citizens have
confidence in institutions and governments, and to the extent they comply with rules
and regulations. In this regard, the role/performance of police and the courts is very
important. “Rule of law” still seems to be an alien concept in Pakistan where law
enforcement agencies have little or no respect/regard for the law, while courts have
failed to enforce the same. Unfortunately, there is a clear dichotomy/discrimination in
the treatment of various classes of society by both the police and courts. In 1996,
Pakistan’s score was -0.64 and after almost 25 years it stands at 0.63 in 2021.

It is pertinent to mention that while discussing the situation relating to ‘Rule of Law in
Pakistan’, the Report specifically points out: “In recent years, the courts have played a
more activist role in Pakistan’s politics, using the power of judicial review to overturn
legislation passed by parliament, including the 21st Amendment to the Constitution
(2015). Since then, the courts have also been accused of working with the military
establishment to prosecute opposition politicians belonging to the PML-N, but have also,
on occasion, asserted their independence by ruling against the military’s interests, as
was the case in the conviction of General Musharraf for high treason in December 2019”.

f. Control of Corruption
Crisis of Good Governance and Failure of Corruption Prevention in
Pakistan
In Pakistan, corruption has spread with leaps and bounds while in comparison initiatives
to improve governance have been weak and uneven, ultimately culminating in arrested
development and lost opportunities. In the context of the leaked Panama Papers, both
the ruling and opposition parties in Pakistan have leveled serious charges of corruption

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against each other. The judiciary is playing its part in giving verdict on the matter, even
though it faces serious challenges in carrying out a fair investigation due to all kinds of
pressures being exerted by entrenched interest groups.

Mega corruption scandals of mind-boggling proportions regularly surface, often

exposing the collusion between top political leadership and bureaucracy. For example,
an accountability court indicted former federal minister of petroleum Dr. Asim Hussain
and an ex-secretary petroleum Ejaz Chaudhry in a corruption reference of over Rs. 460
billion including misappropriation of quota in fertilizer scam, land fraud and money
laundering between 2010 and 2013. There are multiple examples of grand corruption
and collusion in higher judiciary, top military, powerful media houses and business
magnates. For example, the case of former Chief Justice of Pakistan, Iftikhar Chaudhry's
son allegedly taking money from a real-estate tycoon, Malik Riaz Hussain, in exchange
for favorable court decisions. The Asghar Khan case where it was ruled that Gen (retd)
Aslam Beg and Lt-Gen (retd) Asad Durrani had doled out money to politicians for
manipulating the results of 1990 elections. The AXACT fake degree scandal, in which a
sitting judge admitted to receiving Rs.5 million in bribe to acquit BOL TV ‟s CEO Shoaib
Shaikh.
Yet the perpetrators of grand corruption are seldom punished to the extent of their
crime due to widespread petty corruption in government and judiciary. As Javaid (2010)
has observed "there is breakdown of law and order because of pervasive corruption in
police and lower judiciary meaning that the influential, the wealthy and the mighty have
a fair chance of getting away with whatever they do, if they pay the right price at the
right stage". The Pakistani society on the whole tolerates corruption and as a result, The
Global Integrity Score Card (2010) shows that despite having a strong anti-corruption
legal framework, implementation of corruption prevention policy in Pakistan is very
weak.
Such is evident from Worldwide Governance Indicators (WGI) (2015) dataset which
shows Control of Corruption as the second weakest area of governance in Pakistan after
Absence of Terrorism. Marginal gains in corruption control in 2015 since 2010 are offset
by marginal deterioration in Rule of Law during same time period. Overall score in terms
of Government Effectiveness and Regulatory Quality in 2015 remains in the 30th
percentile, which is low in comparison with other lower middle-income countries. The
only silver lining is in the Voice and Accountability area, which has shown some
improvement since 2005.
Governance failures in Pakistan are embedded in the country’s colonial past. British rule
in the Sub-continent linked accountability to the colonial masters instead of the citizens
thus restricting independence of the civil service (Ismail and Rizvi, 2010). But the real
issue here, as also pointed out by Hussain, & Hussain, (1993), is the inability of the
system to reform civil structures and to devise a strategy for strengthening democratic
institutions. Over the course of its political history, Pakistan has witnessed repeated
military interventions as well as the covert control of foreign hegemonic powers. This
has resulted in constant experimentation with the administrative systems and prevented
a natural evolution of responsive governance systems. Moreover, failure of governance
can also be attributed to the political stronghold of the feudal lords, the industrial

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bourgeoisie as well as elements in the military and bureaucratic establishment who

together find it in their self-interest to perpetuate an anti-development status quo.
Successive governments find it most convenient to place the blame on "wrong policies"
of formers regimes to explain their governance failures. The solution then is to simply do
away with institutions and systems established by past regimes, prosecute its
sympathizers and sink massive funds in establishing new institutions and initiating new
development projects. Other cosmetic changes are made in laws of the country to
appease the development community.
Any meaningful change is often thwarted as these laws are not implemented in their
true spirit. Such is the control of vested interests and incompetent officials in Pakistan
that even the best laws cannot address the glaring inequity in the provision of
education, health, civic services and infrastructure. Lop-sided priorities of leaders are
obvious. For example, building metros and high-speed trains, distribution of laptops and
other show-case projects instead of fixing fundamental issues of energy and water
crises, non-competitiveness of industry and problems with empowering the poor
masses. Maintenance of Law and Order, which is a fundamental duty of the state, has
also been extremely problematic in Pakistan. While the tentacles of terrorism have
spread throughout the world, Pakistan suffers most from its consequences despite
having an international image of sponsoring this heinous activity. The perception of poor
law and order in Pakistan reduces foreign investment further damaging a fragile
economy. Finally, governance reforms need to address the issue of climate change which
will affect future generations. Yet in Pakistan, despite the ever-growing environment-
related policies and institutions, pollution is growing at an alarming rate (Faisal, 2017). In
the final analysis of corruption and failure of good governance in Pakistan, it can be
stated that it is up to the People to make choices which are good for the country and not
only for self-interest. Electing honest leadership and forcing public sector managers to
remain ethical will eventually ensure accountability and meaningful governance reforms.

Public Policy and Planning Institutions and their role in

Planning
a. History of Economic Planning in Pakistan
Period of economic coordination (1947 – 1953): Pakistan’s first planning board was
established in 1950 with main emphasis on agriculture. Unfortunately, that plan was not
well implemented on time. There were no targets fixed for the plan and the planning
machinery was so weak to tackle with implementation. Therefore, the economic
planning efforts during this period was a complete failure.

Period of planning board (1953 – 1958): The planning board of Pakistan was renamed as
Planning Commission in 1953. The planning commission was facing the following
serious problems:

 Shortage of trained staff,

 Non-availability of accurate and reliable data,
 Uncertain conditions in the planning machinery

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 It was regarded as a rivalry between Ministry of Finance and the State Bank of
Pakistan
 Political instability
 Annual economic planning was never seriously followed
 Most of the economic advices were rejected by implementing authorities
 Economic priorities were not given due importance
 Budget decisions were also distorted

During this period, the First Five-Year Plan was made. Its implementation suffered due
to rapid changes in government and a lack of political support.

Period of planning commission (1958 – 1968): The third period of the planning process
began in October 1958 with the assumption of power by the military government of
Ayub Khan. The new regime chooses to make economic development through a marked
economy and reliance of the private sector as its primary objective. The new
government gave proper attention to achieve the following targets:

 Rapid industrialization in the country,

 Removal of food shortage,
 Removal of political instability, and
 To overcome the problem of deficit of balance of payment.

The status of the Planning Commission was raised to a Division in the President’s
secretariat. The President himself assumed the chairmanship of the Planning
Commission and Deputy Chairman, with the ex-officio status of a minister, was made the
operational head of the Commission. Provincial planning department was organised.
The Planning Commission was also provided the secretariat for National Economic
Council (NEC) which looked after the day-to-day work of NEC and was also responsible
for final approval for annual development.

During this period the Second Five-Year Plan (1960-65) was made. It was so successful
that Pakistan led to an example for hunger nations of the world. But unfortunately
Pakistan had to fight war against India in 1965. Then there was a hue and cry against
Ayub government and another government got the power.

Period of decline of planning commission (1968 – 1977): This is the period of decline of
Planning Commission as an important decision-making body coincided with the fall of
Ayub Khan’s government. During the Yahya Khan period (1969 – 1971), the serious
planning on national level was completely ignored. The Third Five-Year Plan (1965 –
1970) was virtually abandoned by the Yahya Khan’s government. In 1970, the Fourth
Five-Year Plan (1970 – 1975) was made and it was also a big failure because of the worst
political conditions and instable government policies. In 1972, the newly elected
government of Z. A. Bhutto decided to run the economy through annual planning, rather
than through a comprehensive five-year plan. During the same year, the Planning
Commission was placed directly under the control of Ministry of Finance as a Division.
During the period from 1972 to 1977, the Planning Commission, with very less powers,

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have very few favourable economic decisions. In other words, the Planning Commission
was powerless and ineffective.

Period of revival of planning commission (1978 – 1988): After taking charge of the
government, the Zia-ul-Haq’s regime emphasised on the needs of five-year plans. In
early 1980s, the Zia government took steps to revive the Planning Commission as an
effective and authoritative economic decision-making body.

During this period, two Five-Year Plans were formulated, i.e., Fifth and Sixth. In 1978,
the Fifth Five-Year Plan to cover the period of 1978 – 1983 was published. But the
Government failed to pursue the plan mainly because of uncertain political as well as
economic conditions at that time. The Sixth Five-Year Plan was formulated in 1983 to
cover the period 1983 – 1988. At that time, Dr. Mahbub-ul-Haq was the Finance
Minister. He formulated the plan and because of his great efforts, this plan was a
success. During his tenure, the Planning Commission has played a vital role in effectively
formulating and implementing the economic planning. Not only the Sixth Five-Year Plan,
but also the annual plans were formulated by the Planning Commission.

The period of (1988 – 1999): The period of 1988 to 1999 the period of political and
economic instability. During this period, four elected governments were dismissed by
the President on the charges of corruption. The role of Planning Commission was over-
shadowed by political decisions. Its role was just limited to the preparation and
submission of reports. It has nothing to do with the implementation of planning.

The Seventh Five-Year Plan was formulated during the Zia-ul-Haq period. But after his
death, in 1988, the newly elected government of Benazir Bhutto took over the charge
and so the Seventh Five-Year Plan has never been implemented. After the fall of
Benazir’s government in 1990, Nawaz Sharif’s government came into power. During his
tenure, he introduced privatisation, deregulation, and economic reform aimed at
reducing structural impediments to sound economic development. His top priority was
to denationalise some 115 public industrial enterprises, abolishing the government's
monopoly in the financial sector, and selling utilities to private interests. Although the
Nawaz Sharif government made considerable progress in liberalising the economy, but it
failed to address the problem of a growing budget deficit, which in turn led to a loss of
confidence in the government on the part of foreign aid donors. In 1993, the Nawaz
Sharif government was dismissed by the President on the charges of corruption. In the
parliamentary elections of 1993, Benazir Bhutto, once again, became the Prime Minister
of Pakistan. Meanwhile, the so-called Seventh Five-Year Plan period came to an end. In
1994, the Planning Commission publish the Eighth Five-Year Plan to cover the period
1993 – 1998. In November 1996, once again, the PPP government was dismissed by the
President on corruption charges. The parliamentary election was held in 1997 and, once
again, Mian Nawaz Sharif elected as the Prime Minister of Pakistan. The targets of
Eighth Five-Year Plan were also not well achieved. For example, the target of wheat was
set at 18.3 million tons which could not be achieved by 1996-97 when its actual
production was 16.6 million tons. It was achieved in the last year of the plan but it again
slipped down to 17.8 million tons in the following year. Similarly the target of non-

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