OutreachP U T T I N G K N O W L E D G E T O W O R K F O R D E V E L O P M E N T A P R I L 2 0 1 1

D E V E L O P M E N T

Mary McNeilFounding Editor editorial Board

SwaMiNathaN S. aiyarEconomic Times of India • New Delhi • IndiaMichael coheNNew School University • New York • USAPaul collierOxford University • Oxford • UKJohN GaGePartner, Kleiner PerkinsJoSePh K. iNGraMPresident, The North-South Institute CanadaKwaMe KariKariExecutive Director, Media Foundation for West Africa • Accra • GhanaVira NaNiVSKaDirector, International Centre for Policy Studies • Kiev • UkrainePePi PatroNCatholic University • Lima • PeruJ. roBert S. PrichardGovernor, Canadian Unity Councilrafael raNGel SoStMaNNMonterrey Tech University System Monterrey • Mexico

Development OUTREACH is published three times a year by the World Bank Institute and reflects issues arising from the World Bank’s many learning programs. Articles are solicited that offer a range of viewpoints from a variety of authors worldwide and do not represent official positions of the World Bank or the views of its management.

JoSé-MaNuel BaSSatExecutive Editor

JohN P. didierSenior Editor

JuNKo SaitoManaging Editor

Moira ratchfordPublication Design

World Bank Institute Sanjay Pradhan, Vice President The World Bank 1818 H Street NW Washington, DC 20433, USA www.worldbank.org/wbi www.worldbank.org/devoutreach

ISSN 1020-797X © 2011 The World Bank InstituteThis magazine is printed on recycled paper, with vegetable-based inks.

aBout thiS iSSue

Some assert that development has been a clear success. others may argue that it has failed. Some say that it has reduced poverty levels, but that the global number of poor has grown; or that it has raised incomes but increased inequality. and the debate goes on.

the fact is that development is a complex business. and it takes time. it means integrating the multiple dynamic systems of economics, finance, politics and culture, and shaping policies that crisscross and sometimes collide. add to this recipe the ambiguities of human behavior, brittle eco-logical endowments, and random acts of nature, and the task of develop-ment becomes even more daunting. Globalization has generated enormous opportunities but at the same time created countless new challenges. Policymaking is hard. Growth is fragile.

But we continue to learn. we know that policies must not be imposed top-down, but rather gently shaped to fit each country’s need. we have seen that economic elites and academics do not have a monopoly on truth and that directives are not discourse—nor do they constitute a consensus. that people matter and that they must feature in the development debate—as citizens, not subjects.

that people who are living their own social and economic realities often know a great deal about how to make them better. their knowledge and experience are to be valued and applied and, thanks to current technology, can usefully be shared across borders.

creativity and innovation are keys to economic productivity. the best ideas often come from unexpected sources, and trading knowledge and ideas can lead to socioeconomic transformations. we know too that young people are the future and that their education will help unleash the trans-formative power of knowledge—but not without jobs to put that knowledge to work.

we have learned that markets are, well…, markets and not magic. insti-tutions, both public and private, have roles to play in organizing people and resources to achieve equitable results with efficiency and integrity.

we know also that there are many things we don’t know: how often have we disavowed “the magic bullet”? But the point is to keep learning. this is-sue of Development Outreach offers some current thinking on development policymaking as we attempt to clear new pathways to growth, equity, and human dignity.

José-Manuel Bassatexecutive editor

A P R I L 2 0 1 1 1

V O L U M E T H I R T E E N N U M B E R O N E A P R I L 2 0 1 1

GUEST EDITORIAL PathwayS to deVeloPMeNt: what we know and don’t knowRaj Nallari

froM the BloGoSPhereDevelopment 3.0 by Shantayanan Devarajan

aS a Matter of fact... 16 things you didn’t Know about africa

iN the NewS Interview with John Quiggin, author of Zombie Economics

what if we’re Not NoNGoVerNMeNtal orGaNizatioNS (NGoS)? the opportunities ahead for international development NGosDr. Kent Glenzer

deMyStifyiNG SucceSS: the new structural economics approach Justin Yifu Lin

BeiJiNG coNSeNSuS or waShiNGtoN coNSeNSuS: what explains china’s economic success? Yang Yao

educatioN for educatioN . . . or for SKillS? Eric A. Hanushek

why areN’t childreN learNiNG? Abhijit V. Banerjee and Esther Duflo

technology and labor ProductivityDale Jorgenson and Khuong Vu

citieS oN the Prowl Tim Campbell

the GreeNiNG of deVeloPMeNt Carlo Carraro and Emanuele Massetti

iNduStrializatioN aNd the laNd acquiSitioN coNuNdruM Pranab Bardhan

the PoliticS of deVeloPMeNt Brian Levy

ParticiPatory deVeloPMeNt recoNSidered Ghazala Mansuri and Vijayendra Rao

ParticiPatioN MaKeS a differeNce: But not always how and where we might expect John Gaventa

deMoGraPhicS aNd deVeloPMeNt Policy by David E. Bloom and David Canning

deVeloPMeNt with a huMaN face by Archbishop Njongonkulu Ndungane

SouNdiNG Board

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A P R I L 2 0 1 1 65

By Ghazala MaNSuri aNd ViJayeNdra rao

D E V E L O P M E N T O U T R E A C H66

Over the last

two decades

development

policy has

touted civic

participation as a magic bullet

for solving problems at the

local level—from improving

livelihoods, to selecting

beneficiaries for public

programs, providing housing

after earthquakes and floods, or

improving village infrastructure.

The thinking is that involving

village or urban civic

communities in decision making

will improve accountability,

reduce inequality, and

ultimately alleviate poverty.

Note: This article draws heavily on

Localizing Development: Does Partici-

pation Work by Ghazala Mansuri and

Vijayendra Rao, forthcoming from the

World Bank in 2011.

Over the last decade, the World Bank

alone has allocated over $50 billion dol-

lars to local participatory projects, and

other multilateral agencies and bilateral

donors have together allocated a great

deal more, although specific numbers

are hard to come by.

the Search for Voice aNd accouNtaBility

the two MaiN wayS of fostering local

participation are: community based de-

velopment efforts and the decentraliza-

tion of resources and authority to local

governments.

Community Based Development

supports efforts to bring villages, urban

neighborhoods, or other household

groupings into the process of manag-

ing development resources without

relying on formally constituted local

governments. Designs for this type of

aid can range from community-based

targeting—in which communities se-

lect the project beneficiaries—to com-

munity-driven development, where

beneficiaries are involved to varying

degrees in project design and manage-

ment. Advocates for community devel-

opment believe that it enhances the ca-

pacity for collective action, builds social

capital, and strengthens the ability of

the poor to have control over decisions

that affect their lives. Consequently, it is

claimed that community development

improves the capacity of beneficiaries

to hold local governments accountable

thereby empowering the poor, improv-

ing the delivery of public services, and

increasing access to credit and liveli-

hood opportunities.

Decentralization refers to efforts to

create village and municipal govern-

ments, and strengthen them on both

the demand and supply sides. On the

demand side, decentralization strength-

ens citizens’ participation in local gov-

ernment by, for example, instituting

regular elections, improving access

to information, and fostering mecha-

nisms for deliberative decision making.

On the supply side, it is believed to en-

hance the ability of local governments

to provide services by increasing their

financial resources, strengthening the

capacity of local officials, and stream-

lining and rationalizing their adminis-

trative functions.

diSilluSioNMeNt with ParticiPatioN

uNfortuNately, policy decisions on

local participatory development have

historically been driven by fads, rather

than analysis. Passionate advocates

spark a wave of interest followed, after

a few years, by disillusionment which

gives ammunition to centralizers who

engineer a sharp reversal. In time, the

negative fallout from centralization in-

vigorates the climate for local participa-

tion. There have been, at least, two such

waves after World War II and, if current

trends continue, we may be in the early

stages of another centralizing shift.

Advocates, and the vicissitudes of

fashion, are perhaps unavoidable, but

they need to be supplemented if not

surmounted by a better informed and

analytically grounded debate.

a tarNiShed SilVer Bullet

ideally, local development policy

should be determined by a thought-

SPecial rePortS

A P R I L 2 0 1 1 67

ful, and contextually sensitive, diag-

nosis of the interrelationship between

civil society, markets and government.

In particular, it should be informed

by an understanding of civil society.

Much of the current policy literature,

particularly at the local level, seems to

ride on the assumption that solutions

to market and government failures

lie with civic groups—such as village

communities, urban neighborhood as-

sociations, credit groups, or producer’s

cooperatives. Rarely, is much thought

given to the possibility of a “civil soci-

ety failure”—that effectively organizing

groups of people to act in a way that

solves market and government failures

is itself subject to problems of coordi-

nation, asymmetric information, and

pervasive inequity—with attendant

problems of capture, free-riding and

low capacity.

Civil society failure can be broadly

thought of as a situation where collec-

tive participation operates in such a

manner that it results in a net reduction

in social welfare. This could happen be-

cause of a group’s inability to act collec-

tively. Or collective action could occur

in a well-coordinated but dysfunctional

manner that reduces the welfare of the

average citizen: think of an organized

fringe group that uses terror and vio-

lence to further its extremist ends at

high social cost.

BoNdiNG aNd BridGiNG

Such failureS can be broadly classi-

fied into bonding failures and bridging

failures. Bonding failures are internal

to the group and have less to do with

the state or markets: for instance, when

the elite within a village capture public

resources for private gain, when a com-

munity is unable to devise equitable

and efficient rules for the management

of common property, or when group

interests degenerate into persistent

intergroup violence. Bridging failures

occur when citizens are unable to or-

ganize themselves to correct for market

and government failures that have a di-

rect bearing on their lives: for example,

a community’s inability to hold service

providers and local officials account-

able for the quality of public services or

resource allocation decisions.

MaNy ShaPeS aNd SizeS

thiNKiNG aBout development policy

as taking place at the intersection of

market, government and civil society

failures, helps determine when civic

participation may or may not be the

best solution. The answers depend

heavily on the socioeconomic context

since interactions between civil so-

ciety, markets, and governments are

fundamentally conditioned by social

structures and histories that vary from

community to community, even with-

in a country or region. A policy that

works in one village may fail miserably

in another. And, perhaps ironically, ef-

fective collective action is influenced

by a cooperative infrastructure that is

provided by a strong state. It is not at

all clear that strong governments are

created by the presence of a strong civil

society. Rather, it is a chicken-and-egg

problem that does not lend itself to easy

answers. Similarly, while empowering

civic groups may often lead to good out-

comes, it is not true that civic empow-

erment is superior, in every instance,

to a purely market-based development

strategy, or a strategy that strengthens

the role of central bureaucrats. So the

decision about whether, when, and how

to promote local participation should

be made with an understanding of the

tradeoffs involved in moving decision

making to local communities—in a

particular country or region of a coun-

try, and at a particular time.

This leads to some key questions:

What makes participation work or ■

fail?

Do large sums of money for com- ■

munity groups empower the poor,

or enrich the elites?

How can we reduce civic inequality ■

and elite capture?

How can we strengthen the capacity ■

for collective action and build social

capital?

While reliable information on many

of these questions is still quite thin,

some broad patterns are emerging.

what’S the eVideNce?

deceNtralized PoVerty reduction

programs have been only marginally

more successful at targeting beneficiaries

than centrally managed ones, and there

is little evidence that they reduce pov-

erty significantly. However, local public

goods such as roads and drinking water

facilities provided through participatory

mechanisms are often of better quality,

and public services, such as schools and

community health centers function bet-

ter. The outcomes vary enormously, how-

ever, with the more unequal, poorer, less

literate, and more remote communities

generally faring much worse. Note that

these are precisely the circumstances in

which we might expect significant civil

society failures.

D E V E L O P M E N T O U T R E A C H68

Nonetheless, there appears to be

some intrinsic value to participation:

people are generally happier when con-

sulted, which may attest to the trans-

formative role of participation. We can

conclude little about this, as yet, since

most studies measure change in collec-

tive capacity quite poorly. The evidence

we do have, shows that participation

has little effect on the exercise of voice

or on community organized collective

action outside the participatory proj-

ect. Instead, some evidence points to a

decline in collective activities outside

the needs of the project.

the NewS iS Not all Bad

thiS iS Not to Say that there are no in-

stances of success, far from it. However,

successful cases tend to bring together

a set of conditions, whether through

deliberate and thoughtful policy and

design or simple good fortune, that

are not the norm for most participa-

tory development projects. Often these

are cases where community capacity,

as measured by education levels and

management experience, for example,

is high, inequality and absolute poverty

levels are low and government functions

reasonably well. This is hardly surpris-

ing. In most developing countries, low-

er tiers of government have much less

administrative or monitoring capac-

community at Shreeshitalacom lower Secondary School in Kaski, Nepal.

A P R I L 2 0 1 1 69

ity and communities most in need of

development programs are also likely

to be the least advantaged in terms of

resources and capacity. Inequalities of

wealth and power are also likely to be

more salient at the local level. Theory

suggests that decentralizing resource

allocation under such conditions can

reduce resource use efficiency, exacer-

bate horizontal inequities, and increase

rent-seeking by the locally powerful.

ProGraMS fail BecauSe...

Capture and corruption by local ■

elites is commonplace, whether par-

ticipatory projects operate within

or outside the ambit of local gov-

ernments.

Cookie-cutter rules like community ■

cofinancing are made into central

tenets of participation. Community

willingness to contribute to proj-

ects has long been seen as evidence

of the value that the poor place on

specific public goods and services,

as well as a signal of sustainability.

Most decentralized programs also

require local cofinancing, whether

through user fees and project con-

tributions or budget allocations by

local governments. This has little

basis in evidence, however. What

little evidence we do have, suggests

instead that cofinancing can reduce

coverage of the poorest, particularly

when individuals or communities

need to self-select into the program,

or when eligibility thresholds are

also decentralized. The proportion-

ally greater financial burden placed

on poorer localities, communities,

and individuals can also serve to

exacerbate horizontal inequities, in

so far as otherwise equally poor in-

dividuals or communities get lower

levels of benefits simply because

they reside in poorer areas. Com-

munities often have little capacity to

ensure bottom up accountability.

Local government officials often ■

have less experience than the center

with managing resources, and tend

to have weaker administrative ca-

pacity; and not surprisingly, poorer

areas also tend to have weaker local

governments.

Community participation projects ■

require more documentation and

adherence to rules imposed from

the outside. These can be challeng-

ing for communities with low lit-

eracy levels.

They require the ability to evaluate ■

budgets and monitor the actions of

local elites, service providers and

political agents, all of whom have

a far greater capacity to conceal in-

formation or to coerce compliance.

One could argue that the design of

participatory programs makes at

least some elite involvement, if not

elite dominance, inevitable.

Donor funded participatory projects

also come with best practice designs, ac-

companied by unrealistic timelines and

cookie cutter metrics of success, which

often serve only to reduce accountabil-

ity and stifle innovation and experi-

mentation. These problems are greater

when project implementers are also

weak, operate outside the ambit of gov-

ernment oversight, and face little po-

litical competition at the local level. In

such cases, dependence on donor funds

makes implementing agencies upward-

ly accountable to their financiers rather

than downwardly accountable to the

communities they serve. This can also

lead to some communities being over-

served to the neglect of others since

short timelines induce implementers to

funnel resources to communities which

have already been organized, have bet-

ter capacity, are located more conve-

niently, and so forth.

ProGraMS Succeed BecauSe...

So wheN doeS localizing development

work? The evidence suggests that de-

centralized outcomes are most pro-

poor when:

Mechanisms for downward ac- ■

countability have been well thought

out and have teeth.

There is a strong center capable of ■

setting eligibility criteria, building

local capacity, as needed, and ef-

fectively monitoring local resource

allocation decisions.

Projects emerge from local experi- ■

mentation and innovation rather

than best practice implants.

Efforts are made to activate civic so- ■

ciety by creating incentives, such as

audits and performance-based re-

wards, or by building the communi-

ty’s capacity to observe and sanction

through the provision of informa-

tion or training, particularly where

inequities are entrenched.

Ghazala Mansuri and Vijayendra Rao are Lead Economists in the World Bank’s Poverty Reduction and Equity and Development Economics Groups.