Enhancing State Capacity for Effective Governance

Key Points

• Bad governance is always associated with corruption, while good governance is more than just the absence of corruption. Good governance is having adequate state capacity to enable and support government activities and deliver public goods. State capacity is mainly human capacity.
• Public agencies are not as effective as private sector organizations due to immunity to bankruptcy and the lack of incentives to perform better. Therefore, it is crucial to align the incentives of public agents/bureaucrats to enhance efficiency.
• The economist’s approach advocates aligning incentives, emphasizing performance management, privatization, New Public Management, competition, and exit options. Meanwhile, social psychologists underscore the power of norms, internal motivations, and pride in driving performance.
• Corruption is a significant hurdle in the quality of governance. While decentralization and transparency play pivotal roles, they alone are not sufficient. Klitgaard’s formula demonstrates that reducing monopoly, and discretion, and enhancing accountability can effectively combat corruption.
• There is no one-size-fits-all approach to bureaucratic autonomy. The level of discretion needed depends on factors like state capacity, training, and professionalism. High-capacity agencies may require more autonomy, while lower-capacity ones may need clearer rules.