Institutional reforms: Easy said than done

Institutional reforms are the buzzwords in developments nowadays. Daron Acemoglu and James Robinson’s best-selling Why Nations Fail is all about institutions: the balance between inclusive versus exclusive political and economic institutions would determine the development path of countries. Indeed, the full name of the book is Why Nations Fail: The Origins of Power, Prosperity, and Poverty

(I don’t quite agree with the over-simplifying theory of Acemoglu and Robinson, however. And I’m not the first one: Microsoft’s billionaire founder Bill Gates’s review of the book said that “the book is a major disappointment”, and he “found the authors’ analysis vague and simplistic” (which I agree). Acemoglu and Robinson responded in the Foreign Policy, saying that “Gates’s review is disappointing”, and asked “Did the Microsoft founder even read our book before he criticized it?” The whole debate worths another blogpost to discuss, so I will leave it for now.)

The World Bank and other development agencies are spending huge amount of money on building these institutions. Nevertheless, according to Matt Andrews, an associate professor at Harvard Kennedy School, evaluations by the multilateral and bilateral organizations reveal that “as many as 70% of reforms seem to have muted results”. But why is it so? According to Andrews, the problem is that many policymakers adopt institutional reforms to just “signal” their intent to reform, and many times these reforms use “best practice” solutions from a third country that has a different context to the one that the policymaker is facing.

I argue that these reform limits fester across the developing world because institutional reforms are commonly adopted to signal the intent to reform, not as efforts to actually change governments. The problem with reforms as signals is that they are frequently not capable of being implemented. They are devised with little attention to the contextual realities that actually shape (and constrain) change opportunities, promise overly demanding “best practice” solutions that look impressive but are commonly impossible to reproduce, and are negotiated with narrow sets of champions who seldom have enough influence to make change happen (especially with the distributed groups of agents who ultimately have to live with and implement new rules of the game).

Andrews, together with Lant Pritchett and Michael Woolcock, both of the HKS, came up with a concept called “problem-driven iterative adaptation“, or PDIA. The so-called PDIA approach 1) “focuses on solving locally nominated and defined problems in performance (rather than transplanting packaged “best practice” solutions); 2) seeks to create an authorizing environment for decision-making that encourages “positive deviance” and experimentation; 3) embeds this experimentation in tight feedback loops that facilitate rapid experiential learning; and 4) actively engages broad sets of agents “to ensure that reforms are viable, legitimate, relevant, and supportable”.

In the words of Andrews:

This type of change notes that more successful reforms are sparked by problems that people cannot ignore (not best practice solutions that outsiders say are important). The reforms emerge as groups of agents address these problems, in an iterative process of experimentation, learning and adaptation (not as singular champions commit to pre-designed reform models). Each step in the reform process allows reformers to learn more about how to solve their problem, build political support for the change process they are advocating, and establish new capacities required to implement this change.

The whole idea, I think, is extremely simple: context matters, so don’t just transplant a “best practice”. But the international development community likes to find “models” of development, and in the past decades we have witnessed “consensuses” ranging from the “Washington Consensus” to the “Beijing Consensus”. In that sense, PDIA may be just another acronym too (which academics like to create). After all, development is complicated, and people feel unsecured without having a “model” in mind. Professionals and consultants also feel obliged to sell a “best” solution because this shows their value (image a consultant comes in and says, “well, I don’t actually what is best for you”), though in the real world there may be only an “acceptable” solution. In practice, getting away from a “best practice” mentality is still easier said than done.

Comments 1

  1. CrisisMaven wrote:

    Why nations fail has almost always to do with some kind of money counterfeiting, whether electronically today (Ben’s “helicopter” and easing) or by printing like most recently in Zimbabwe or by clipping coins as in the Roman Empire and elsewhere. But no one wants to tell this narrative as it makes for uneasy relationships with those who call the big shots in the nation where one resides which has just not so much failed as to not pay for the tenure anymore. Things are really that simple.

    Posted 17 Jun 2014 at 10:39 am

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