Linking economic growth and democratic governance

Yesterday I attended an event held by the Center for International Private Enterprise (CIPE) and Research Triangle Institute International (RTI) entitled “Exploring the Links between Economic Growth and Democratic Governance: Developing Programs That Work.” Speakers included Aaron Williams, Vice President for International Business Development at RTI; Jaroslav Romanchuck, President of the Scientific Research Mises Center and Executive Director of Strategy in Belarus; John D. Sullivan, CIPE Executive Director, and Cynthia Rozell, owner of Keyhole Resources Management. The event discussed the case for blending economic growth and democracy/governance objectives in foreign assistance.

The conference highlighted the three areas in which economic growth is important to the donor community. Economic growth:

• is essential to achieve the UN Millennium Development Goals
• is imperative to the quality of governance in a country
• serves as a measurement of progress in the area of governance, an area which is difficult to track either quantitatively or qualitatively.

A lack of economic growth in a country restrains the ability of donors to achieve reform goals, yet until very recently, the linkage between democracy and economic growth remained in the hands of academic think tanks and was not applied by donor organizations.

The barriers to linking democracy and economic growth objectives include bureaucratic confusion, stovepiping, and national policy that is focused on short term results rather than a long term strategy for reform. Conference participants emphasized that efforts are underway to remodel the architecture of US foreign assistance programs, but we are only beginning to implement ideas for improving the success rate of aid programs. RTI recommends a “blended approach” that seeks to achieve focused but multiple cross-functional objectives. Donor agencies must understand the linkages between separate development objectives to implement successful and effective reform programs, and organizations like RTI are working with agencies like USAID to help them understand these linkages. RTI recently established a Center for Governance and Economic Growth, called their “Emerge to Compete” program. It created a methodology for designing and implementing successful programs in development from an initial evidence-based analysis of problems to the evaluation and impact assessment of the programs, a strategy which Safadi Foundation will use in program development.

Cynthia Rozell gave an overview of a USAID funded case study of Uganda. As refugees began to return to their villages after a verbal peace agreement, they demanded the social services that were available in refugee camps. The study found that USAID allocated most of its resources to the direct provision of social services and greatly reduced its support for programs that create economic growth through policy, legal, and institutional reforms. When USAID realized that economic growth programs could promote the sustainable development necessary to permanently reduce poverty in the country, the agency began to work directly with local governments to reform the colonial system of local governance that the municipalities were still using. Because these systems were archaic and inefficient, militant groups were setting up parallel social service systems that competed with the municipal systems and set up a battle to deliver more services and credibility. I thought this may be somewhat relevant to the situation in Lebanon.

The study helped USAID realize that economic growth and governance go hand in hand. Improving service delivery cannot happen without promoting economic growth through policy-oriented reform. Part of the resource shift away from economic growth to service provision was contributed to congressional earmarks and reporting requirements, a fact that makes better coordination among development organizations and donors to communicate with Congress crucial.

Rising incomes and national wealth have a direct and positive impact on the transformation of political systems as a result of changes in social structure, increases in education, and the emergence of new political values that support democracy. Political and economic governance institutions necessary for economic growth are more likely to emerge in a democracy, and democracy is a driver of human development. Safadi Foundation in Lebanon has already cooperated with local governments in Al Jouma and Fneideq on agricultural extension projects. A focused strategy that aims to improve local governance while implementing these types of projects can go a long way in solidifying the basic democratic framework that is needed for Lebanon’s human development.


Other notes about the conference:

• Many development agencies focus only on leadership selection in their democracy programs, yet democratic development involves developing a sound decision-making mechanism as well, which is equally as important as going to the ballot box. The decision-making process includes public hearings in which citizens can follow the entire legislative process and have input – through contacting a representative or through a free press – on the decisions being made before they are passed into law. The emphasis on the decision-making process until recently has been lacking in democracy- and governance-focused programs.
• In the last several years, international agencies have recognized the need to identify local talent to lead reform efforts. In the past, international consultants were hired to conduct broad programs that were not tailored to fit the needs of each area they were intended to benefit.