Government as the Solution

There is no magic solution to these failures of the state, but we certainly should not accept them as inevitable. Giving the poor a voice is vital to the development process. Yet, in many developing countries, an autocratic government has stifled them. Even in developing countries with representative democracies, the political process has been hijacked: The business community, bureaucrats, politicians, and the media are full of self-congratulation about the booming private sector (e.g., on the increased penetration of cell phones). However, the image that is emblematic of many developing countries is not the cell phone, but human beings defecating in the open.

An intriguing possibility for empowering the poor can be seen in the recent rights-based approach to development in India. The coalition government led by the Congress Party has passed into law rights to information, education, and employment. There is much talk of extending this movement to cover other societal needs such as nutrition, health care, public health, and environment. Enacting a law, of course, does not automatically lead to the fulfilment of a societal need. But, it might serve to give a voice to the poor and make the government more accountable. It makes clear that public services are a universal entitlement, not a privilege to be dispensed at the government’s discretion. Once the citizens, especially the poor, understand this, they will demand these services and hold the government accountable at the local, state, and federal levels. This will force the government to deliver on its promises, which it has failed to do in the past. “The ambition goes beyond poverty alleviation to the cleansing and improvement of a rotten administrative and social system.”14 Even if the ambition is not fully realized, the rights-based movement has already focused attention on and injected urgency into India’s poverty reduction efforts.

Although government is the solution when markets fail, the reverse is not true. When the state fails, the market may be a partial complement to, but cannot be a total substitute for, government. There is no alternative viable mechanism for fulfilling its responsibilities. Only the government has the legitimate power to enforce regulation and to impose taxes to fund public services. When governments fail, the only solution is to fix them.

That said, state failure is not inevitable. We need to get away from the stereotype that governments are always bureaucratic, wasteful, and corrupt. Economist Amil Petrin argues that, while the popular stereotype is that decision making in public organizations is rigid and bureaucratic, they still allow room for flexibility and entrepreneurship.15 Several case studies demonstrate that government agencies and departments can, in fact, be creative in addressing problems.16 The challenge is to build the institutional capacity to make governments more efficient, responsive, and even entrepreneurial. The existence of some strong examples of well-run, efficient public services means governments can perform better.

The government of Singapore, for example, effectively and efficiently delivers a wide range of public services, from “basics,” such as public health and infrastructure, to “frills,” such as public libraries and public recreational facilities. Another example is the British government’s launch of a wide-ranging regulatory reform program in 2005, based on its belief that “effective and evidence-based regulations can play a critical role in correcting market failures, and provide essential protections for the general public . . . The Government is focused on striking the right balance between guaranteeing essential protections and rights are upheld and recognizing the impact of excessive regulations on businesses . . .”17 The effort focuses on five characteristics of good regulation: It is transparent, accountable, proportionate, consistent, and targeted. A new, independent Regulatory Policy Committee has been set up whose role is to advise the government on whether it is doing all it can to accurately assess the costs and benefits of regulation. The government claims, “We are on target to cut the administrative burden of existing regulation by 25 percent by 2010.”

Positive examples of government performance are not confined to developed countries. The metro system in Delhi, India, has received much praise for excellent management. The first phase of the project was completed in 2006 on budget and ahead of schedule. The system continues to be well run. Bloomberg Businessweek describes it as “nothing short of a miracle.” The EGMM program described in Chapter 6 is an innovative and effective program run by the state government of Andhra Pradesh, India.

Consider the examples of Kerala and Uttar Pradesh, two states in India, functioning under the same constitution, laws, and political system. Yet, Kerala is far ahead of Uttar Pradesh in its ability to deliver various public services (see table 7.1). Economists Jean Dreze and Amartya Sen suggest that Kerala’s success is the result of public action that promoted extensive social opportunities and the widespread equitable provision of basic public services.18

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