17 July 2011

Is State Capacity a Political Choice? New Evidence from Bihar and Ethiopia

Two recent papers from IDS colleagues suggest that the answer to this question is “yes”. The paper by Santhosh Mathew and Mick Moore (2011) examines the weak capacity of the State of Bihar in India over the 1990-2005 period, and a paper by soon to be IDS Fellow Stephen Peterson (2011) on Public Financial Management in Ethiopia over the 1996-2010 examines the drivers of successful financial reform. The authors argue, In both cases, that deliberate and calculated political choices drove weak capacity in Bihar and strong capacity in Ethiopia.

Bihar is one of the poorest States in India, but is currently on one of the strongest upward trajectories when it comes to governance. It is also a key target of DFID resources. Mathew is a senior administrator in the State (he took a time out to complete PhD at IDS) and gives us a strong inside analysis of how and why such political choices were made.

He puts forward two principal reasons for Bihar’s poor performance:

• The type of leadership exercised by Chief Minister Yadav combined with the nature of his political coalition: to energise his political coalition of middle and lower caste groups he continually confronted the upper caste groups who were in control of state machinery

• This meant that the latter were not well disposed to helping him deliver “development” and the distribution of material resources to his core constituency. Even more importantly he undermined state capacity so as to exclude these historically powerful groups from the machinery. This meant that Bihar failed to compete for central Government money (won by other states with greater administrative capacity to fill out the forms) and that it often under-spent its own budget

Yadav’s crime was not incompetence, but the choice of where and how to deploy his considerable talents.

Ethiopia, in contrast, chose to aim for international standards when reforming its financial systems (it is now the third best in Africa and is managing the largest aid flows). In 1996 reporting on financial performance was experiencing a 6-7 year backlog, the Ethiopian Civil Service College was not teaching accounting or budgeting, and bookkeeping was single entry. That has all changed.

Peterson argues that the change was supported in the following ways:

• Ethiopian policymakers did not aspire to “summits of international best practice” but “consolidation of the basics of a firm financial plateau”
• Decentralisation, central to the survival of the ruling Tigrayan ethnic group, required effective public financial management reform, so the ownership of the reform was strong
• Public financial management was rightly regarded by the Government as a core function of the state and therefore a matter of sovereignty—an issue that donors should not drive
• The strategy of the reform did not stop at “recognise, improve and change”, but continued on to “sustain”

Both of these papers demonstrate:

• The value of the insider-outside perspective (Mathew, a skilled administrator stepping outside to a UK research organisation, and Stephenson, an American researcher, stepping inside an Ethiopian system)
• The dangers of apolitical analyses of state capacity
• The long time periods for things to get noticeably bad (Bihar) and noticeably good (Ethiopia)—there are no quick fixes
• The importance of leadership and discipline (to pursue developmental or non developmental ends)

Both papers are short and well written—I recommend them both.


Anonymous said...

Leadership and discipline are necessary traits of a country's government officials. Adding to that, financial institutions play vital role in keeping the currency strong.

Bookkeeping Adelaide

Theodore said...

I hope papers on the use of itil financial management come soon. These papers emphasizing the importance of leadership on a country's development is a good read.

Keith Swanson said...

It would be best if the results of this scientific inquiry be communicated to the people concerned. If not for immediate implementation, at least for future consideration when taking decisions with regards to financial matters of the State.