The Pendleton Act: A Lesson for Civil Service Reform in Development

An essential component of political development is an effective public bureaucracy that can enforce rules, extract taxes and provide public services efficiently. To address the challenges associated with the public sector which have long been constraining development, all advanced economies have undergone various forms of civil service reform. The goal is to improve the effectiveness and maintain the predictability of public administration and hence public service delivery. The Pendleton Act stands out as one of the major successful cases of civil service reforms. It provides a useful framework for public sector reform in many developing economies today. The act focuses on the methods and standards for hiring and promoting people in the civil service. Before 1883, the US government had a long tradition of filling (and terminating) government positions through patronage - ‘To the victor go the spoils’- a system of rewarding friends and political allies in exchange for their support. "Men ain't in politics for nothin. They want to get somethin' out of it."

This system entails a dyadic relationship between elected politicians and their client, the civil servant. Similar clientelistic networks are prevalent in many less developed countries today in Africa, Asia, and Latin America in their worst form and even in the US in more subtle forms. They have detrimental effects in the provision of public services and other development outcomes (P. Keefer, 2007; Keefer & Vlaicu, 2008). There is considerable agreement that patronage is one of the major factors for poor and inefficient public services provision. This is essential because it determines who gets what from services including education, health and agricultural extension services.

Public administration and bureaucracy is inherently a political activity. Complete autonomy of the civil service is not practical and is not even desired. Even in the most advanced civil-service systems, discretionary appointments still occur. Furthermore, patronage systems are not by definition inefficient or corrupt (Merilee S. Grindle, 2012). But, it is necessary to shield the civil service from overt political control and provide some level of autonomy in the technical design and implementation of programs and policies. On top of attempts at changing attitudes and culture, there is a need for fundamental changes in institutions and legislatures to ensure continuity and sustainability of political developments. The Pendleton Act is such a case. The core concept is providing a charter for ‘the substitution of political criteria for merit-based criteria in the selection, retention, promotion, rewards, and disciplining of members of the public service’ (Peters and Pierre, 2004). This conveys performance-accountability on top of political accountability in the system.

Prior to the 1880’s, there were reports of mounting incompetence, graft, corruption and theft in the US public sector which set in motion widespread public demand for civil service reform. We face similar challenges in many developing countries, today. In 1883, something dramatic happened, that provided the urgency and momentum to the enactment of the Pendleton Act. Charles Guiteau, a ‘disappointed office-seeker’ assassinated President James Garfield. This set in motion one of the most effective civil service reforms. Soon after, the National Civil Service Reform League was established to coordinate reform activities. There was a conscious decision to engage in a massive public education campaign to arouse public awareness and sentiments against patronage. On January 16, 1883; despite strong resistance, the president signed the Pendleton Act into law. Successes of the Act in improving performance of public services is well documented. The hidden upshot is that it helped build a middle class that is independent of the ruling political elite, which might also serve as a power balancing mechanism.

There is an inherent temptation in policy circles as well as in academics to shadow the most contemporary fad in research. However, research often progresses steadily. Policy consensus is often reached over a long period of time, after a series of practices in various contexts and adaptations. The Pendleton case is such ideal example that has shown resilience across many countries. The UK, France, the then Prussia, Japan and many other countries have underwent similar civil service reforms. There are comparable attempts in current day Latin America. Such reforms in much of Africa, however have been lacking. The Pendleton Act provides a framework to think about civil service reform in current day developing economies.
So, what are the lessons for governance in development in current day developing economies?

• The first general lesson is looking for time tested ideas and policy structures instead of trying to catch onto the most recent research idea. Policy worthy ideas often develop steadily. 
• Initial steps towards reforming public sector should consider the recruitment and reward process earnestly. 
• It is critical to understand the existing historical context for the evolution of practices in the civil service. Strong resistance to change is often the norm than the exception in pursing such goals. Hence a prudent elite compromise is necessary for the initial success of the policy. 
• We often suggest transparency and accountability frameworks as essential components to improve the public sector performance. Yet, it is not clear how we can ensure continuity and impartiality of these initiatives so that they stand the test of time. Promoting landmark legislation and institutionalizing the process and the practice helps ensure continuity and sustainability of the program.

Patronage is central to most civil service institutions in many countries. It is critical that countries promote civil service reforms so that governments can enhance the technical expertise of their civil service, while providing greater autonomy. This is achieved through landmark legislation and practices that institutionalize clear procedures in the functioning of the civil service. The Pendleton Act provides an excellent lesson in perspective.

Legitimacy Not Democracy has been the “thing” critical for growth, but still...

There is an age old debate in the economic growth literature on whether democracy in the political realm promotes, impedes or has no effect on economic growth. It seems we might be having the wrong kind of debate. Political Legitimacy not political democracy is the critical component in economic growth, though democracy is what brings about legitimacy over the long term. The empirical literature in democracy Vs. economic growth has not still been resolved for many good reasons. There are authoritarian regimes that have registered remarkable and sustained economic growth and prominent new democracies have been seen to lurch in their growth performance. The most popular illustration of the first group is China which has sustained the fastest economic growth despite its repressive political regime. Still, many argue that, though China is still an authoritarian regime, the hike in growth is due to marginal improvements in political systems towards a more free and open economic system. This would not be a robust argument given that almost every other country has experienced possibly a greater marginal improvement in political systems than China has but have not registered commensurate growth performance. One certain observation is that countries, including both democratic and authoritarian, have been able to chronicle significant increases in their growth performance. Even after controlling for other factors, one wonders if there is something common about the political system of economies that set on faster economic growth in recent history. The debates still ensue about these elements. But, political legitimacy of governments in these nations seems to be higher than in others, even when they are authoritarian.

In 2006, a political scientist (2) calculated measures of legitimacy for 72 countries. He defined legitimacy as follows: “A state is more legitimate the more that it is treated by its citizens as rightfully holding and exercising political power”. A state must fulfill (1) three criteria to claim political legitimacy: (i) conformity to established rules, (ii) justifiability of the rules by reference to shared beliefs and (iii) the expressed consent of the people. Thus no government is legitimate unless it enjoys the consent of the governed. The most important thing needed for a regime to be legitimate is for its citizens to believe that it is. Any political system, democratic or authoritarian; can have greater legitimacy. Lock’s (1690) original claim “consent cannot be rendered except through majority rule” is in question. Whether the Chinese political elite obtained legitimacy through conformity with their principles or fear and intimidation is another discussion. But there is a predominant consensus about the higher level of legitimacy of the Chinese government. China ranked 13th among the 72 countries in Gilley’s legitimacy index, well above other developed economies including the UK, France and Australia. China is still an authoritarian party-state. Yet, the Chinese government enjoys an almost robust legitimacy across the population.

Political legitimacy tends to promote economic growth. Legitimacy tends to garner consensus and strong popular support vital for the effectiveness of growth-enhancing governmental activities. Citizens who consider their government legitimate may be more apt to venture into more productive and innovative activities. They are less prone to commit crimes, revolt or initiate an uprising and hence lessen the burden on resources for law enforcement including tax collection and criminal justice. Governments with low levels of legitimacy might allocate greater resources to law enforcement and maintenance of law and order due to the possibility of greater non-compliance. There could also be greater reliance on the property rights system if there is greater legitimacy of the state. Sustained growth and political stability by itself could create and promote government legitimacy irrespective of democratic status. This makes legitimacy endogenous to economic performance. Overall, there are numerous reasons why a more legitimate government could enhance growth.

There are risks of legitimacy without a democratic system. There are very valid fears about the long term prospects of the Chinese economic and political system especially in a very volatile and risk prone world. Legitimacy could easily be eroded and open rooms for chaos in the wake of some unanticipated shocks, economic or political. This is particularly the case if there is not a strong democratic foundation for legitimacy. The main reason the democracy-growth literature is inconclusive may be due to the wrong focus on democracy, the means, rather than legitimacy, the end. Democracy is only one way towards legitimacy that fosters growth. But, it is not the only way, at least in the short term. A legitimate government, even without a democratic system can register faster growth. Hence, the main focus should be on identifying ways to promote sustained state legitimacy. As far as systems go, a democratic process is the best and proven method to set off persistent legitimacy. In the very long run, only a democratic process ensures state legitimacy and hence economic growth. Thus, the continued discourse on democracy and growth could only be valid only if it is taking a very long term perspective or if it considers the nuances in the democracy-legitimacy-growth nexus.

Notes

(1) Beetham, David. 1991. The Legitimation of Power. London: Macmillan Education LTD,.
(2) Giley, Bruce. 2006. The Determinants for State Legitimacy: Results for 72 Countries, International Political Science Review, 27(1): (2006) 47-71.
(3) Locke, John. 1690 Two Treatises of Government. London, UK.

The Next Fifty Years - Africa

Yesterday(July 30, 2013), I attended an interesting discussion on “The Next Fifty Years of the African Union” at the Brookings Institution. The event was interesting not due to the ingenuity and grand plan of the African Union for the next 50 years, but because of the interesting reflections I experienced on African economies, especially from a World Bank Economist, Marcelo Giugale. There is a lot to complain about when it comes to the African Union. Yet, for now, the focus will be on concepts that I thought were useful, issues that I believed promote a better understanding of African economies. Thus, I will attempt to summarize and opine on few outstanding points raised during the discussion.

To be fair, growth in many African countries has remained generally robust over the past few years. However, uncertainties abound about both the sustainability of the ensuing growth as well as the responsiveness of poverty to the higher growth. Growth has to be sustainable and inclusive to deliver the best outcomes. The recent fast growth has been supported by various opportunities in the continent. Mr. Marcello has brilliantly presented opportunities; challenges and the way forward for the continent. I will mostly be channeling his perspectives from the conference. There are a few points raised that surmised opportunities that Africa has and can exploit to promote future progress.

• First, Africa has registered substantial progress in demographic trends including huge reductions in child mortality and malnutrition. Infant and under-five mortality has plummeted in many countries in the region in recent years. For example, according to UNICEF (2012), Sub-Saharan Africa has seen a faster decline in its under-five mortality rate, with the annual rate of reduction doubling between 1990–2000 and 2000–2011. The demographic dividend from an increasingly youth labor force is another encouraging demographic trend.
• Second, the discovery of natural resources has helped countries such as Angola and Zambia to grow faster.
• Another break in favor of Africa is the expectation that over the coming years (as has started to appear also recently), there will be a drain of low skilled Chinese manufacturing jobs towards Africa helping unemployment problems and boosting production and exports.
• A new development in the continent that has long been undermined especially by economists is the rise of an informed youth citizenry that could ignite forces of positive change and innovation.

The most important question remains, how would Africa be able to take advantage of these boons to address its challenges and move forward in the coming fifty years? To avoid being overcome by the grandiose idea of addressing all the challenges for the coming five decades, I will address few points I assumed would be essential.

• First, is the need to transform the agricultural sector or bring forth an African Agricultural revolution. There is ample evidence and knowledge on factors that have long fraught the African version of agricultural revolution other parts of the world has experienced early on. Though the list abounds, the issue of land reform should be elevated to ensure transformation in the agricultural sector.
• Second, is the need to address the defragmentation of Africa. African goods and service markets are highly fragmented. African nations are much more integrated with the rest of the world than among themselves. The number of African banks operating in other African countries is almost nonexistent. Mr. Marcello remarked that African food and service markets remain broken even within regional customs unions. The recurrence of food shortages and hunger in many parts of Africa could have simply been avoided through integration of food markets. Africa can actually feed itself with the proper integration of these markets.
• Third, and related to the above is the infrastructure framework in Africa. There is, at best, limited effort in coordinating infrastructure projects including roads, railways and power structures that could help promote long term developments. There is a need for a smart and well-coordinated infrastructure framework. Few huge infrastructure projects have become fiscal drains for these developing economies, putting into doubt their own future sustainability as well as their efficacy in the transformation of the continent.
• Finally, over the forgone decades, Africans have been grumpy about how they have been treated unfairly by the old colonial powers and their exploitative hegemony. However, the future of Africa will depend on how they treat each other. Political elites must be forced to unlearn to value the sense of invincibility, autocracy and the freedom from accountability. Social accountability frameworks need to be developed to bring about a more inclusive and equitable governance structures. Effective governments require societies and frameworks that demand change and hold governments accountable. It would probably be smarter to preach the concept of accountability rather than the concept of ‘political’ democracy since the later tends to send an unnerving message for those already in power (pun intended!).

It was not my intention to discourse on a complete list of issues facing the continent. But, this was only an attempt to highlight few fundamental issues raised during the discussion and those, I believed, need further deliberation. It is my strongest conviction that Africa faces enormous possibilities. But, whether we take advantage of these possibilities depends not on the rise of some enlightened leader or champion but on a more informed and enlightened citizenry. A more informed citizenry is much more conducive for progress, even in the absence of a complete democracy. To achieve this, we have to be able to put useful information in the hands of people in a way they understand.

President Obama’s visit to Africa: Much Ado About Something?

In his first presidential visit to Africa in 2009, President Obama told Africans to stop blaming colonization or neo-colonialism for their problems. In an exceptional stride from his predecessors, he has stressed that Africans should own their challenges and destinies. When Obama was elected, many Africans were overzealous about an American president of African origin and hence possibly (mistakenly) strong engagement in Africa. This huge expectation has led to huge disappointments given the president’s poor record even in comparison to his two immediate predecessors Bill Clinton and George Bush who have embarked on signature programs to address challenges in trade (AGOA) and HIV/AIDS. One overriding explanation for the African omission in the past few years is the fact that US Foreign policy towards Africa and across the world has been overshadowed by the fight against terrorism. Governments, however authoritarian, have received backing from the US government so long as they are “fighting terrorism” in one way or another. The Ethiopian government is a good case in point.

Just like the first visit (unfortunately), many in Africa have high expectations that the president will hopefully address big issues such as human right abuses, corruption, flawed elections, continued harassment and abuse of journalists and civil society groups. There is also heightened expectation that the president commits to examine his support for tyrannical governments and their parties. Many argue that America’s national interests are better served with more democratic and open governments than otherwise, hence providing a win-win scenario for the American as well as African populaces.

The president has rightly remarked that it is up to Africans to solve their own problems. Rightly so, they should take the responsibility to address their own issues. As one commentator has put it, ‘let’s not forget that he is not the president of Africa, rather that of the United States of America’. Still, one can never deny the huge leverage the US government has in enhancing and also possibly hindering positive developments in Africa. Hence the president’s visit to Africa could be much ado about something as far as the president commits to his rhetoric and pomposity.

Zimbabwe’s Innovative 'Cattle Bank'

Zimbabweans has ventured into a new kind of banking ‘Cattle Banking’. Though, informal credit markets in livestock has existed in Africa, this is the first of its kind as part of the formal banking scheme. This new venture, started by TN Bank Zimbabwe Limited is expected to ease liquidity constraints for ordinary farmers who own cattle. It works similar to a traditional bank, only that cattle is used as a collateral and is kept with the creditor till further arrangements are worked out. The bank inspects the cattle, assesses their monetary worth and provides cash loans. In return to the cattle deposits, farmers collect a 10% interest a year on the value of the livestock which can later be paid either in cash or livestock. "Cattle banking is the only way owners can get monetary value for their animals without having to sell them," indicated the TN Bank executive. This scheme is also expected to safeguard assets, especially livestock from the extremely high inflation rate the country suffers from.

Though actual economic impacts of this new innovation are yet to be seen, it is a great step forward in alleviating a major constraint of the poor with respect to access to credit.

Source: AP

Same Land, Different politics - The US - Mexican Border, Seen From Space.

Image courtesy of Chris Hadfield.

Authoritarian Growth Regimes, If Any will only be Short-lived

The Economist magazine hosted a debate between two prominent individuals: William Easterly, Professor of Economics at NYU and Dambisa Moyo, contributing editor to CNBC. They debated on the economic prospects of emerging economies for 2013 and the significance of political institutions in the process. If you just look at their profiles, you would assume that W. Easterly will always be right and Dambisa Moyo would usually be wrong when each is in opposite sides. My observation is you are probably right, at least in this specific case. Let me present why I presume so.



Traditional neoclassical models of growth and development of the 1950’s and 1960's explain the differences in per capita income between countries using differences in capital accumulation and factor productivity. They don’t presume that differences in income are explained by institutions but by savings, capital accumulation and investments. Dambisa’s central argument rests on these traditional theories that, “serious macroeconomics” of these emerging economies: debt-to-GDP ratio, the quantity and quality of labor and capital, total factor productivity, efficiency of capital and labor use, etc explain the differences. However, economic theory and empirics have come a long way from this traditional understanding of the economic dynamics of countries especially emerging economies. It suffices to recall the failures of the structural adjustment program and other similar programs that undermined the significance of existing political and socio-economic frameworks which are detrimental in a nation’s economic growth to understand the limitations of such approaches. Yes, capital is critical. Yes, labor is very important. True, an acceptable level of debt and deficit is important. Yet, it’s a far cry to rely on these factors to engineer development especially in the developing world. Empirical research has shown that economic institutions that largely rely on political institutions such as property rights, elite capture in the allocation of resources and economic opportunities are central.

The structure of political institutions and the state machinery determines the structure of these economic institutions. If the state machinery is set up in order to maintain the power and prestige of a selected few elites, it would be a fantasy to expect economic progress of any kind except for those in power. If there is any progress, it’s only in the interest of the reigning political elites and would be short-lived. Because, when a disproportionate balance is observed against the interest of those in power, it can always be reversed if deemed a threat. Experience has shown that bad states have failed their nation a repeated number of times. And, that is the greatest demonstration of why political institutions are the most critical elements in growth and development. The urge to maintain political power by the ruling elite has dominated the urge to foster economic growth. It is no mere coincidence that in 2011, the Democratic Republic of the Congo, Liberia, Zimbabwe, Burundi, Eritrea, Central African Republic, Niger, Sierra Leone, Malawi, Togo, Madagascar, Afghanistan, Guinea, Mozambique, Ethiopia, Mali, Guinea-Bissau and Uganda are the poorest nations on earth. The case of North Korea and South Korea is the closest thing to a natural experiment sufficient in its own right to understand the significance of political institutions in economic growth.

The poorest economies mentioned above have one thing in common. They have or had the most autocratic dictators in recent history. These governments tried to establish political and economic infrastructures that would benefit their kin and partners. In these economies, banks offer loans to party affiliates and wealthy associates. Competition, innovation and creativity are severely stalled and discouraged since jobs, land and access to other relevant infrastructure will be controlled by supporters and associates of the ruling party. Critical economic opportunities including jobs, better education and access to credit will be confined to party affiliates. A country might still grow when these elites invest, but it is only going to be short-lived and inadequate. This process eventually builds a scheme of intricate institutions that would preserve the power structure. The challenges are further exacerbated and sustained when the political parties are based on ethnic categories. Hence, the urge to protect and intensify economic and political power by the ruling elites would dampen any sensible effort for long term economic growth.

Similar debates in Development Economics are often elusive and fail to appreciate the precise linkages between economic growth and political institutions. The debate in “Democracy Vs. Development”, “Politics Vs. Development” and “Governance Vs. Development” which is usually mixed up and intricate needs to be clear and devoid of any mystifying jargons. It has become frequent observation, that most of the debates are nebulous and highly jargonized and devoid of empirical evidence. This has been aggravated by a continued reliance on ad-hoc cross country regressions. Such regressions, in addition to the econometric challenges, have proven to convey no substantive information in terms of explaining the causal linkages. A more effective approach is to examine the local or micro level linkages between political/governance institutions and economic outcomes.

I want to conclude by asserting that authoritarian growth regimes if any would only be short lived.