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Winners & Losers

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"Good governance" in the form of public institutions and policies that enforce property rights and contracts, while restraining corruption, is now widely viewed to be a necessary condition for long-term economic growth (Knack and Keefer 1995; Mauro 1995). The institutions that shape the quality of public administration are an essential part of governance. Yet, reforms designed to improve public administration, while potentially beneficial for the nation as a whole, are almost certain to produce losers as well as winners (i.e., they are not Pareto-optimal). Who will "win" and who will "lose" depends, of course, upon the content of the reform and the current array of interests in the reforming country. Each situation must be evaluated separately to understand its specific characteristics; but the following stylized cases provide an indication of the types of interests that may be mobilized either for or against particular types of public administration reform.

Is the goal of reform to shrink public employment in order to reduce government expenditures?

The size of the public wage bill may be contributing to high inflation. Alternatively, it may drain an undue amount of scarce capital from priority areas for government investment (e.g., constructing schools or hospitals). See aggregate employment and wage bill concerns.  If either of these two conditions exist, an economist may easily demonstrate that the country as a whole would benefit greatly from a reduction in the number of public employees. However, it should come as no surprise that public employees, often organized in unions, hold a different view. The country as a whole might benefit, but many civil servants will surely lose. Politicians may join with public employees in opposing employment reductions if these posts constitute an important political support base.

Is the goal of reform to improve the professional quality of the civil service?

Perhaps salaries in the public sector are inadequate relative to private sector pay in order to recruit citizens with the education and skills needed to design and deliver quality public services. Alternatively, perhaps pay is generally adequate, but the wage structure provides little incentive for advancement through demonstrated high performance. (See ineffective monetary incentives and staffing in countries with limited human resources.)  Or perhaps the quality of civil service personnel suffers because recruitment is based on patronage rather than merit principles.

Proposals to increase wages would certainly engender support among civil servants. However, the ministry of finance/economy may fear its impact on inflation and the upward pressures this might place on wage negotiations in other sectors. Businesspersons may also fear a resulting tax increase to fund these higher salaries.

If introducing merit principles is the chosen remedy to improve the quality of public administration, then elected officials (particularly those in the legislature), may oppose changes that would reduce their discretion over patronage appointments.  (See perceived corruption and low public interest.)

Has the goal of reform to grant greater autonomy and demand increased accountability for service delivery?

Service delivery agencies are usually restricted in the ways they can use inputs – human, financial, and technological – to achieve policy goals. Input restraints can limit opportunities for corruption. However, these restraints can prevent local staff from putting resources to their most efficient use in providing services. (See also difficulties with autonomous agencies.)  If reformers believe that the balance should shift in favor of greater agency autonomy, these proposals may meet with opposition from elements in the legislature who fear a loss of oversight authority. For similar reasons, the same proposals may be opposed by elements of the executive branch (government).

Looking at politics                                             

All supporters and opponents are not created equal. It is important to consider whether or not any of these groups are part of the government’s current support base. Are any of the groups that stand to win or lose swing groups – i.e., groups that are critical to the government’s ability to remain in power, and able to make credible threats to shift their support to the opposition?

Additionally, do opponents of reform occupy any institutional "veto gates." Government decision makers must be able to ensure the support and cooperation of other parts of government (e.g., the legislature, judiciary, bureaucracy) that are critical to approving and implementing the reform project. Who within the government needs to approve the proposed reform for its enactment? Additionally, which organizations or groups – e.g., tax officials, law enforcement agents, government regulators, clerks – will have to perform tasks to implement the reform?

Often those who face losses from reform can be offered creative forms of compensation by grouping several various reform elements together in a single package. For example, opposition by civil servants to personnel cuts might be mitigated by a simultaneous and credible pledge to increase salaries substantially for those who remain. Similarly, key legislators might go along with an administrative reform they oppose if it is coupled with a tax reform they favor. Creative solutions are usually highly context-specific.

The illustrations above have highlighted the "natural" proponents and enemies of particular administrative and civil service reform programs. However, mobilizing support is also about identifying constituencies that would potentially support reform and convincing them through various forms of publicity and promotion that the reform is worthy of public support. Creating broad societal support for reform is a powerful weapon to disarm opponents of reform. This is particularly true in democracies, but can sway political outcomes in authoritarian regimes, as well.

The irony of aid and administrative reform                   

Aid flows, despite their good intentions, can have a perverse effect on the political economy by generating  greater resistance to change in all areas of public management, including civil service arrangements and budget processes.

There is a credible argument that unintentional or collateral damage is more prevalent than is commonly imagined. Generous external funding for reform may free governments from the need to consult with and obtain policy support from their own citizens. Likewise, large aid inflows may enable governments to bypass elected legislatures meant to exercise control over government through the power of the purse. The experience often is similar to that of governments in poor countries that depend heavily on income derived from oil or other mineral sources. By controlling these revenues directly, these governments may leave voters, taxpayers, and legislatures with little effective influence. There is strong evidence that, in these circumstances, democracy and the rule of law are especially scarce, and the overall quality of governance is unusually poor. Large foreign aid inflows can produce much the same effect: liberating governments from normal mechanisms of accountability, and helping perpetuate the poor governance that they are intended to eradicate. Even when a country has reasonable accountability mechanisms, aid can still have distorting effects if it is given without proper consideration for its impact on governance and accountability.

This argument is explored in more detail in Political Underdevelopment (Mick Moore, Institute Of Development Studies, 2000) and in Aid Dependence and the Quality of Governance: A Cross-Country Empirical Analysis (Stephen Knack, World Bank, July 2000).

Recommended readings:                                             

  • Ames, Barry. 1987. Political Survival: Politicians and Public Policy in Latin America. Berkeley: University of California Press.
  • Bresser Pereira, Luiz Carlos. 1999. "From Bureaucratic to Managerial Public Administration in Brazil." In Bresser Pereira and Peter Spink, eds., Reforming the State: M Managerial Public Administration in Latin America. Boulder: Lynne Rienner.
  • Burki, Shaid Javed, and Guillermo E. Perry.  1998.  Beyond the Washington Consensus:  Institutions Matter.  Washington, D.C.:  World Bank
  • Geddes, Barbara. 1994a. Politician’s Dilemma: Building State Capacity in Latin America. Berkeley: University of California Press
  • Johnson, Ronald N. and Gary D. Libecap. 1994. The Federal Civil Service System and the Problem of Bureaucracy. Chicago: University of Chicago Press.
  • Knack, Stephen, and Philip Keefer. 1995. "Institutions and Economic Performance: Cross-Country Tests Using Alternative Institutional Measures." Economics and Politics 7(3): 207-227.
  • Mauro, Paulo. 1995. "Corruption and Growth." Quarterly Journal of Economics 110: 681-712.

 

This page was authored by Jeffrey Rinne of the World Bank, with additional material from Prof. Bert Rockman of the University of Pittsburgh.  It was submitted on 7/20/00.

 




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