Building State Capability

In response to the economic, natural, and political crisis that enveloped Indonesia from August 1997 (beginning of depreciation) to May 1998 (resignation of Soeharto), the new government announced support for a set of “safety net” (JPS) programs in July 1998 budget. These included: (a) targeted sales of subsidized rice, (b) work creation programs, (c) scholarships to students and block grants to schools, (d) targeted health care subsidies, (e) community block grants. We used cross sectional and panel data to examine the targeting of these programs. First, "static participation incidence" (the relationship between program participation and household consumption expenditures) was substantially better than a uniform transfer, but substantially worse than perfect targeting --and remarkably similar for all of the JPS programs. Second, unlike standard static incidence measures, what we define as dynamic participation incidence — the relationship between changes in consumption expenditures and program participation — was very different between the JPS programs. The employment creation programs which relied on self-selection targeting was much more likely to reach those households with large shocks to their expenditures than programs based on administrative targeting such as subsidized rice sales, scholarships, and health subsidies. Third, larger coverage does not lead to either better or worse targeting: there is no general tendency across the programs for marginal incidence to be above, or below, average incidence. Fourth, the targeting design of many of the programs was not followed strictly in implementation in all of the programs. Community and individual characteristics that were de jure irrelevant played a role in targeting in practice. In the rice program, community influence led to the program going to many more than the eligible individuals. In other programs, individual characteristics appear to have influenced targeting.

This study asks the question, “Is Black Economic Empowerment a South African growth catalyst?” It addresses the question with reference to the theoretical literature on economic and organizational structures. This literature argues that structures reflect values and influence patterns of behavior, empowerment and opportunities for economic growth. The paper shows that South Africa’s economic structures have had negative influences on both racial access and economic opportunity, creativity and responsiveness. The proposition is that transformation and growth require change in economic structures; the same BEE-induced changes will work for both goals. However, some observe that BEE is not effecting change. This raises a counter proposition that BEE will not catalyze growth. The two propositions are examined in a study of BEE responses in twenty-five JSE listed firms. The basic finding is that while firms are actively responding to BEE requirements they are also doing so within a static structural context, where firms keep looking to established networks for solutions. This limits the number of beneficiaries of BEE. It also exacerbates constraints on the number of people in these groups—especially manifesting in added pressure on skilled groups. A number of firms are also not developing vertical connections that might open opportunities for entrepreneurs. Firms that are developing vertical connections are creating capacities to bridge the network divides that exist. The payoff seems very high in these initiatives, evident in trained and screened talent, new jobs and new enterprises. These findings lead the paper into a discussion of what could be done to improve BEE—such that it does become a policy that catalyzes growth.

Governance indicators have come under fire in recent years, especially the World Governance Indicators (WGIs). Critics present these indicators as a-theoretical and biased. Critics of the critics counter that no better alternatives exist. We suggest otherwise, arguing that more appropriate 'governance' indicators will (i) have theoretical grounding, (ii) focus on specific fields of engagement, (iii) emphasize outcomes, and (iv) control for key contextual differences in comparing countries. Such measures can help indicate where countries seem to have governance problems, allowing second stage analyses of what these problems are. We present under national five mortality rates adjusted for country income groups as an example of such measure, presenting data for contextually controlled outcomes in this specific field to show where governance seems better and worse. The United States is shown up as relatively weak, whereas a country like Pakistan seems to have better governance in this sector than other low income countries. The indicator allows questions about why governance of this sector might be problematic in certain contexts and easier in others.

Firms in Africa report "regulatory and economic policy uncertainty" as a top constraint to their growth. We argue that often firms in Africa do not cope with policy rules, rather they face deals; firm-specific policy actions that can be influenced by firm actions (e.g. bribes) and characteristics (e.g. political connections). Using Enterprise Survey data we demonstrate huge variability in reported policy actions across firms notionally facing the same policy. The within-country dispersion in firm-specific policy actions is larger than the cross-national differences in average policy. We show that variability in this policy implementation uncertainty within location-sector-size cells is correlated with firm growth rates. These measures of implementation variability are more strongly related to lower firm employment growth than are measures of "average" policy action. Finally, we show that the de jure measures such as Doing Business indicators are virtually uncorrelated with ex-post firm-level responses, further evidence that deals rather than rules prevail in Africa. Strikingly, the gap between de jure and de facto conditions grows with the formal regulatory burden. The evidence also shows more burdensome processes open up more space for making deals; firms may not incur the official costs of compliance, but they still pay to avoid them. Finally, measures of institutional capacity and better governance are closely associated with perceived consistency in implementation.

This paper asks how strong African Public Financial Management (PFM) has become, after a decade and more of reform. How well do African PFM systems in place now facilitate effective public financial management? Where are the next challenges and how can they be met? It analyzes recent PFM assessments in 31 governments to answer these questions, identifying patterns of strengths and weaknesses across the PFM system and across countries. In respect of the former, the study finds that budgets are made better than they are executed, practice lags behind the creation of processes and laws, and processes are stronger where concentrated actors are engaged. In respect of the latter, the study finds that different countries fall into different 'PFM performance leagues' and countries in the different leagues look very different to each other. A range of factors influence which league a country is associated with; including economic growth, stability, reform tenure and colonial heritage. On the basis of this evidence, the paper argues that existing reforms face limits that can only be overcome with adjustments in reform approach; with less focus on pushing reform technicalities and more on creating 'space' in which reform takes place, less concentration of engagements with small sets of actors and more on expanding engagements, and less emphasis on reproducing the same reform models and more on better understanding what context-appropriate reforms look like.

Development involves change, but many development initiatives produce unimpressive results. The authors ask why and consider how to close the gap between the intended change and what we actually see in the evidence. This paper presents the findings of a study, initiated by the multi-donor Global Leadership Initiative and led by the World Bank Institute (WBI), to examine leadership in the change processes of fourteen capacity development interventions in eight developing countries, through 140 in-depth structured interviews. It explores what it takes to make change happen and in particular, the role leadership plays in effecting change. The authors propose that leadership contributes to change when it builds "change space" by fostering acceptance for change, granting authority for change, introducing or freeing the abilities necessary to achieve change. This "change space" is required to ensure contextual readiness for change and foster progress through the difficult stages of the change process. An analytical framework is introduced to illustrate the dimensions of this "change space" and its limits in organizational and social change. The authors argue that a lack of "change space" in many development contexts may be overlooked, contributing to failure. The paper concludes that leadership manifests in different ways in different contexts, depending on the contextual readiness and factors that shape change and leadership opportunities; but the key characteristics of plurality, functionality, problem orientation and "change space" creation are likely to be common to all successful leadership-led change events.

"Doing Business" (DB) provides measures of the time and costs associated with fully complying with an array of business regulations. Enterprise Surveys (ES) ask a wide range of firms about their actual experiences in doing business. We use three comparable indicators in both: time to get an operating permit, time to get a construction permit, and time to import goods, to compare these distinct de jure (DB) and de facto (ES) approaches to assessing the "investment climate" in over 100 countries. Four patterns emerge in each of the three indicators. First, while the DB, of necessity, reports a single estimate of the days for compliance for each indicator, firms in the same country report wildly different times to complete the same transaction. For instance, the DB indicators says it takes 65 days to start a business in Ecuador, whereas the distribution of the 265 firms who reported getting an operating license was between a 10th percentile reporting 1 day while the 90th percentile reporting 60 days. Second, regulatory compliance appears to be "under water" as firms report actual times much less than the DB reported days. For instance, the median DB time to obtain a construction permit across all countries is 210 days, while the mean of the days firms reported was 59, the median DB-ES "under water" gap was 145 days. Third, cross-nationally there is very little association between the ES distributions and DB numbers. A naïve view of "full compliance" might suggest that actually reported days would rise one for one with DB days, but the patterns are much more complex. The de jure environment appears to only affect some firms. For instance, as the de jure DB time to get a construction permit rose across countries by 524 days (from 77 to 601) the predicted time reported by the 25th percentile "favored" firm rose by just 2.7 days. In contrast, the time reported by the "disfavored" 90th percentile firm rose by 130 days, but all of this rise comes in the lower range of the DB. Fourth, for those countries with multiple ES surveys we find little association over time, with reductions in DB days as likely to be accompanied by increases in ES days. Comparing these two measures suggests very different ways of thinking about policy versus policy implementation, about what "climate" means, and what the options for "policy reform" really are.

In many nations today the state has little capability to carry out even basic functions like security, policing, regulation or core service delivery. Enhancing this capability, especially in fragile states, is a long-term task: countries like Haiti or Liberia will take many decades to reach even a moderate capability country like India, and millennia to reach the capability of Singapore. Short-term programmatic efforts to build administrative capability in these countries are thus unlikely to be able to demonstrate actual success, yet billions of dollars continue to be spent on such activities. What techniques enable states to "buy time" to enable reforms to work, to mask non-accomplishment, or to actively resist or deflect the internal and external pressures for improvement? How do donor and recipient countries manage to engage in the logics of "development" for so long and yet consistently acquire so little administrative capability? We document two such techniques: (a) systemic isomorphic mimicry, wherein the outward forms(appearances, structures) of functional states and organizations elsewhere are adopted to camouflage a persistent lack of function; and (b) premature load bearing, in which indigenous learning, the legitimacy of change and the support of key political constituencies are undercut by the routine placement of highly unrealistic expectations on fledging systems. We conclude with some suggestions for sabotaging these techniques.

Many reform initiatives in developing countries fail to achieve sustained improvements in performance because they are merely isomorphic mimicry—that is, governments and organizations pretend to reform by changing what policies or organizations look like rather than what they actually do. The flow of development resources and legitimacy without demonstrated improvements in performance, however, undermines the impetus for effective action to build state capability or improve performance. This dynamic facilitates 'capability traps' in which state capability stagnates, or even deteriorates, over long periods of time despite governments remaining engaged in developmental rhetoric and continuing to receive development resources. How can countries escape capability traps? We propose an approach, Problem-Driven Iterative Adaptation (PDIA), based on four core principles, each of which stands in sharp contrast with the standard approaches. First, PDIA focuses on solving locally nominated and defined problems in performance (as opposed to transplanting pre-conceived and packaged "best practice" solutions). Second, it seeks to create an 'authorizing environment' for decision-making that encourages 'positive deviance' and experimentation (as opposed to designing projects and programs and then requiring agents to implement them exactly as designed). Third, it embeds this experimentation in tight feedback loops that facilitate rapid experiential learning (as opposed to enduring long lag times in learning from ex post "evaluation"). Fourth, it actively engages broad sets of agents to ensure that reforms are viable, legitimate, relevant and supportable (as opposed to a narrow set of external experts promoting the "top down" diffusion of innovation).

Learning profiles that track changes in student skills per year of schooling often find shockingly low learning gains. Using data from three recent studies in South Asia and Africa, we show that a majority of students spend years of instruction with no progress on basics. We argue shallow learning profiles are in part the result of curricular paces moving much faster than the pace of learning. To demonstrate the consequences of a gap between the curriculum and student mastery, we construct a simple, formal model, which portrays learning as the result of a match between student skill and instructional levels, rather than the standard (if implicit) assumption that all children learn the same from the same instruction. A simulation shows that two countries with exactly the same potential learning could have massively divergent learning outcomes, just because of a gap between curricular and actual pace—and the country which goes faster has much lower cumulative learning. We also show that our simple simulation model of curricular gaps can replicate existing experimental findings, many of which are otherwise puzzling. Paradoxically, learning could go faster if curricula and teachers were to slow down.

There is an inherent tension between implementing organizations—which have specific objectives and narrow missions and mandates—and executive organizations—which provide resources to multiple implementing organizations. Ministries of finance/planning/budgeting allocate across ministries and projects/programmes within ministries, development organizations allocate across sectors (and countries), foundations or philanthropies allocate across programmes/grantees. Implementing organizations typically try to do the best they can with the funds they have and attract more resources, while executive organizations have to decide what and who to fund. Monitoring and Evaluation (M&E) has always been an element of the accountability of implementing organizations to their funders. There has been a recent trend towards much greater rigor in evaluations to isolate causal impacts of projects and programmes and more ‘evidence base’ approaches to accountability and budget allocations. Here we extend the basic idea of rigorous impact evaluation—the use of a valid counter-factual to make judgments about causality—to emphasize that the techniques of impact evaluation can be directly useful to implementing organizations (as opposed to impact evaluation being seen by implementing organizations as only an external threat to their funding). We introduce structured experiential learning (which we add to M&E to get MeE) which allows implementing agencies to actively and rigorously search across alternative project designs using the monitoring data that provides real time performance information with direct feedback into the decision loops of project design and implementation. Our argument is that within-project variations in design can serve as their own counter-factual and this dramatically reduces the incremental cost of evaluation and increases the direct usefulness of evaluation to implementing agencies. The right combination of M, e, and E provides the right space for innovation and organizational capability building while at the same time providing accountability and an evidence base for funding agencies.

"Leadership" is not a common topic for research in international development. In recent years, however, prominent studies like the 2008 Growth Commission Report noted the importance of leadership in development. This and other studies focused on individual leaders—or heroes—when referencing what leaders did to foster development. The current article asks if heroes really lead development. It deconstructs the implied theory behind a ‘hero orthodoxy’ into four hypotheses; about how change happens in development, who leads it, how it emerges, and how it is bought to completion. Through a qualitative study of twelve interventions in contexts like Afghanistan, Sierra Leone and Kosovo, the article shows that these hypotheses are too simple to really help explain who leads development. It appears that change is complex and requires complex multi-agent leadership interventions.

Leadership is an under-studied topic in the international development literature. When the topic is broached it is usually in support of what might be called a "hero orthodoxy:" One or other individual is identified as the hero of a specific achievement. The current article offers a three part argument why this orthodoxy is problematic and wrong for many developing countries, however. It suggests first that heroes have not emerged in many countries for a long period and individuals who may have been considered heroes in the past often turned out less than heroic. It posits second that heroes are actually at least as much the product of their contexts as they turned out to be the shapers of such. It proposes third that the stories about hero-leaders doing special things mask the way such special things emerge from the complex interactions of many actors—some important and some mundane. Leadership, it appears, is about multi-agent groups and not single-agent autocrats. The conclusion posits that romantic notions of heroic-leadership in development become less convincing when one appreciates these three arguments. It calls development theorists and practitioners to go beyond the heroic-leader perspective.

Governments can play great roles in their countries, regions, and cities; facilitating or leading the resolution of festering problems and opening new pathways for progress. Examples are more numerous than one might imagine and raise an important question: How do governments get great? This paper identifies 10 cases of great governments to answer 4 dimensions of this question: What kinds of interventions or changes help governments achieve greatness? Who leads these interventions or changes, and how? When do the interventions occur, and why? How are these changes sustained and implemented to ensure they yield results? The paper suggests two sets of answers to these concerns, combining such into rival theories that could explain how governments get great: "Solution and leader driven change" (SLDC) and "Problem driven iterative adaptation"(PDIA). It proposes using these two theories in future research about how governments foster the kinds of achievements one could call great and argues this research should employ a version of Theory Guided Process Tracking (TGPT) called systematic process analysis.

International organizations like the International Monetary Fund and World Bank have been supporting reform initiatives in developing country governments since at least the 1980s. Various authors have criticized this support, arguing that international organizations use their influence to impose common models of government on developing countries—infringing on the sovereignty of these nations and frustrating domestic processes of finding and fitting government structures to local contexts. Some suggest that a modern new public management model of government is being imposed on developing countries, whereas others claim that developing countries are being forced to adopt a broad-brush neoliberal script. Such claims are seldom reinforced by empirical evidence showing the extent or nature of this influence, however. This leaves one asking, "Do international organizations really shape government solutions in developing countries?" This article explores such question and finds that international organizations do have a major (and growing) influence on government structures in developing countries and that this influence does impose a common model on these countries.

The approach of 2015, the target date of the Millennium Development Goals, sets the stage for a global reengagement on the question of "what is development?" We argue that the post-2015 development framework for development should include Millennium Development Ideals which put into measurable form the high aspirations countries have for the well-being of their citizens. Standing alone, low bar targets like the existing Millennium Development Goals "define development down" and put at risk both domestic and global coalitions to support to an inclusive development agenda. Measuring development progress exclusively by low bar targets creates the illusion that specific targeted programs can be an adequate substitute for a broad national and global development agenda.

The prevailing aid orthodoxy works well enough in stable environments, but is ill-equipped to navigate contexts of volatility and fragility. The orthodox approach is adept at solving straightforward technical or logistical problems (paving roads, building schools, immunizing children), but often struggles or outright fails when faced with complex, adaptive challenges (fighting corruption, upholding the rule of law, establishing democratic institutions). South Sudan, the world’s newest country, presents a post-conflict environment full of complex, adaptive challenges. Prior to the signing of the Comprehensive Peace Agreement (CPA) in 2005 South Sudan had no formal institutions of self-governance. During the CPA period and after independence in 2011, foreign development agencies have contributed billions of dollars of aid and technical assistance to "build capacity" in the nascent Government of South Sudan (GoSS). The donors utilized approaches and mechanisms of support that at least nominally reflect the prevailing aid orthodoxy. We argue that orthodox state building and capacity building more or less failed in South Sudan, leaving the world’s newest country mired in a "capability trap" (Andrews, et al 2012). Despite countless trainings, workshops, reforms, and a large corps of foreign technical assistants embedded within state ministries, there is an absence of real change, and GoSS now "looks like a state" but performs as anything but. The challenges presented by this new, complicated, post-conflict country demand innovative approaches to building state capability which go beyond importing "best practice" solutions while feigning "client ownership." We explore one such approach to disruptive innovation that has emerged: Problem Driven Iterative Adaptation (PDIA). To escape from the world's newest capability trap, South Sudan’s government and its international donors must challenge themselves to imagine innovative paths to state building, which diverge from "business as usual" and attempt to create something that lasts.

Public sector reforms are commonplace in developing countries. Much of the literature about these reforms reflects on their failures. This paper asks about the successes and investigates which of two competing theories best explain why some reforms exhibit such positive deviance. These theories are called 'solution and leader driven change' (SLDC) and 'problem driven iterative adaptation' (PDIA). They are used to analyze data emerging from a case survey involving thirty cases from Princeton University's Innovations for Successful Society (ISS) program. The bulk of evidence from this study supports a PDIA explanation, but there is reason to believe that SLDC hypotheses also have value. It seems that PDIA and SLDC are two viable paths through which positive deviance can emerge; although PDIA seems to provide the wider path for more positive deviance.

This paper begins by noting that Uganda has been a public sector reform leader in Africa. It has pursued reforms actively and consistently for three decades now, and has produced many laws, processes and structures that are 'best in class' in Africa (and beyond). The problem is that many of the reforms have been limited to these kinds of gains—producing new institutional forms that function poorly and yield limited impacts. Various kinds of data showed—in various areas (civil service and public administration, public financial management, revenue management, procurement, and anti-corruption)—that laws are often not being implemented, processes are being poorly executed, and there is insufficient follow-up to make sure that new mechanisms work as intended. The paper suggests that government should reframe its reform agenda to address these limitations and close the gaps between what Uganda’s system looks like and how it functions.

The proposed approach to doing reform in the future is called problem-driven iterative adaptation (PDIA) and builds on past reform activity (rather than proposing an entirely new set of solutions). PDIA will require Ugandans to work together and own their reform processes more actively than ever, coming to terms with the problems they face and working iteratively—in broad groups—to find and fit local solutions to these problems.

Many public sector reforms in developing countries fail to make governments more functional. This is typically because reforms introduce new solutions that do not fit the contexts in which they are being placed. This situation reflects what has recently been called the 'capability trap' in development—which results in many interventions producing new forms that are not functional in states across the globe. The work on capability traps suggests that reforms can yield more functional influence in even the most complex states, however; if reformers adopt non-traditional approaches to doing reform. In particular, the work suggests that reforms will tend to be more contextually fitted if: (i) They are driven by problems that agents in the context care about; and (ii) They are introduced iteratively—through a stepwise process where ideas are tried and lessons are learned and used to adapt (or fit) ideas to context.

The capability traps work embeds these ideas into an approach to doing reform called Problem Driven Iterative Adaptation (PDIA). This approach has deep roots in various literatures but many observers still ask how PDIA-type reforms could work to foster successful reform in complex hierarchical developing country governments and whether these approaches really help foster reforms that better fit such complex contexts. This paper responds to such question by describing an action research study where PDIA is being used to retell a story of reform that has to date been limited. The action research study is in Mozambique’s judicial sector and will examine whether and how a problem driven iterative approach can (i) flush out the contextual factors that often limit reform success, (ii) provide a viable route to find and fit reforms that actually foster greater functionality, and (iii) promote the authority needed to ensure change is implemented and institutionalized.