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Herbert H.

Werlin
Independent Consultant

Poor Nations, Rich Nations: A Theory of Governance


This article argues that the difference between poor countries and rich countries has to do with governance rather than resources. In emphasizing the importance of public administration in explaining economic success and failure, the author examines three general theories of governance (organizational, cultural, and structural-functional) presented in Ferrel Headys textbook in comparative administration. Political elasticity theory is introduced as a way to reconcile and overcome the weaknesses of these theories and to explain a number of unresolved questions in the literature having to do with decentralization, corruption, democracy, culture, and globalization, using comparative case studies (the Netherlands and Ghana, Singapore and Jamaica, and Japan and Nigeria). The implications of political elasticity theory for foreign aid are suggested at the conclusion, illustrated by a comparison of Spain and Mexico. What ties these case studies together is the heretofore unnoticed and/or unexplained fact that as countries prosper, political power takes on rubber-band and balloon characteristics.

Some years ago I taught an undergraduate class on political development at Howard University in Washington, DC. My students generally argued, The poor are poor because the rich are rich. They had what I called an ICRC (international, capitalist, racist conspiracy) viewpoint, and nothing I said could shake their position. While many of the demonstrators at recent International Monetary Fund/ World Bank annual meetings may not completely share this viewpoint, most seem to believe the difference between poor countries and rich countries is primarily a lack of resources. If we somehow could transfer income from the rich to the poor, the world would be better off. They apparently have in mind large grants without strings attached, forgiveness of all debt, and protection from the bad effects of globalization. I wish I could agree with such a simplistic analysis of the situation. After all, according to a recent World Development Report (World Bank 2000, 3), the average income in the richest 20 countries is 37 times the average in the poorest 20a gap that has doubled in the past 40 years. This publication goes on to note that about one-fourth of the worlds population continues to live on an income of less than $1 a day. This indicates that, despite a decade of economic growth, the dismantling of socialist economies,

extensive globalization, large amounts of foreign aid, and many donor-assisted projects, extreme poverty has not diminished. World Bank officials clearly are frustrated by their inability during the last half of the twentieth century to reduce the gap between poor and rich countries, pointing out there is no accepted theory of poverty that establishes a hierarchy of causes, nor is there any widely adopted empirical model that might serve the same purpose (White and Killick 2001, 27). In this regard, three points need to be underscored. First, the existence of extensive natural and human resources does not make much difference. Countries such as the Democratic Republic of the Congo and Angola are fabulously rich in resources but overwhelmed by poverty. Until about 1980, Das (2001, 92, 208) points out, Hong Kong (with fewer than 5 million people)
Herb Werlin retired from the University of MarylandCollege Park in 1993, having taught in the Department of Urban Studies and the Department of Government and Politics. For many years, he did research, writing, and editing for the World Bank, from which his 1998 book emerged. In addition to the University of Maryland, he has taught political science, urban studies, and public administration at the State University of New YorkStony Brook, Johns Hopkins SAIS, Hofstra, and Texas Tech. His first book (1974) on the Nairobi City Council stemmed from a 1966 political science doctoral dissertation completed at the University of CaliforniaBerkeley. Email: werlin@crosslink.net.

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earned more from its exports and had more public telephones than the whole of India (with then about 700 million people, including many who were highly educated and technologically skilled). Second, foreign aid does not do much good by itself. Egypt, for example, received $52 per capita per year from 1987 to 1996, more than twice that of other large countries with similar income levels (OED 2000, 6). Because of weak public administration, illiteracy rates remain about twice the average of comparable countries and infant mortality, about 30 percent worse. During the 1970s, Tanzania received more foreign aid per capita than any other country without escaping extreme poverty, and this high level of foreign aid continued during the 1990s, including more than 2,000 development projects (Thirkildsen 2000, 62). Third (perhaps the saddest point of all), because of poor governance, far more money goes from poor to rich countries than the poor receive in foreign aid. In undermining their own financial institutions, leaders of poor countries encourage capital flight (including money laundering) amounting to more than $1 trillion a year, equivalent to 3 percent5 percent of gross world product, according to an estimate in the Economist (April 14, 2001, 64).

nizes the literature suffers from the fact that the three general theories (organizational, cultural, and structural-functional) presented in his sixth edition are inadequate, confusing, and contradictory. The considerations that follow indicate why.

Organizational Theory
Organizational theory cannot escape the influence of Max Weber, who, according to Heady (2001, 76), linked rationality to a finely ordered system of superordination and subordination in which higher offices supervise lower ones. The trouble with Weberian theory (as with the later scientific management theories) is that politics seems to hold little interest inasmuch as obedience to commands is expected to be prompt, automatic, and unquestioning (Thompson 1961, 11). It fails to explain, first of all, the success of non-Weberian models and, secondly, the desirability of flatter, less authoritarian, and more fluid and adaptive forms of organization (Osborne and Gaebler 1992). According to Kenney and Florida (1993), the Japanese model has been successful because of its non-Weberian characteristics: self-managing work teams, job rotation, overlapping functions, flexible and limited job classifications and specialization, close alignment between work and home life, social control rather than control from above, use of persuasion rather than commands, white collarblue collar overlap, welfare corporatism, labormanagement cooperation, quality circles, innovation from below, and continual training. A recent article in the Economist (March 31, 2001, 48) points out that in Italy, the wait for a computerized scan using the public health service is six months, but only two days using the private sector. Why not, therefore, use the concept of entrepreneurial government advocated by Osborne and Gaebler (1992): decentralized, problem solving, innovative, responsive to consumer concerns, and both cooperative and competitive with the private sector: Our public sector can learn to compete, or it can stagnate and shrink, until the only customers who use public services are those who cannot afford an alternative (7).

Theories of Governance
In countering the argument that poor countries are simply impoverished by their lack of resources and the victims of globalization, I sometime suggested to my students that it is as difficult to help poor countries as it is the vagrants in American urban centers. Inasmuch as many vagrants suffer from various forms of mental illness or social pathology, it is impossible to help them become self-supporting without getting deep into their psychological and social problems. So it is with the poorest countries of the world, particularly those with average annual per capita incomes of less than $1,000. Most of these countries suffer from what I call political illness (similar to mental illnesses such as alcoholism or drug addiction), which manifests itself in improper policies, weak bureaucracies, inadequate supervision, the illegitimacy of laws and regulations, and the lack of independent spheres of power. In other words, governance is far weaker in the poor countries of the world than in the rich countries. While it is obvious to me that the inadequacy of governance rather than resources is the primary reason for the gap between poor countries and rich countries, I have struggled to develop a unified theory of governance since studying administrative theory under Dwight Waldo at the University of CaliforniaBerkeley during the early 1960s. In this regard, we owe a debt of gratitude to Ferrel Heady, who has been summarizing theories of comparative administration for more than 40 years, most recently in his 2001 textbook. However, Professor Heady clearly recog330 Public Administration Review May/June 2003, Vol. 63, No. 3

Cultural Theory
Heady (2001, 16) considers Riggss theory of prismatic society, presented in 1964, to be the most notable single contribution in comparative public administration. What Riggs recognized was that most countries operate semifeudalistic systems of government. Feudalistic is simpler to understand than prismatic, if we use the term (as suggested by Braudel 1993, 314) to refer to a social pyramid, with its obligations, its rules and its allegiances, mobilizing economic, political and military strength . Various descriptions of such systems can be found in many parts of the world. In Mexico, Cornelius and Craig (1991)

describe these interwoven chains of patronclient relationships as camarillas, suggesting that meritocratic considerations are less important than the loyalty, deference, and services that clients can provide to patrons. In their 1993 book on Africa, Callaghy and Ravenhill provide examples of crony statism. As it is described by Le Vine (1975) in Ghana, Nkrumah relied on an elaborate patronage system linking officials, with their tribes, friends, and extended families into webs of corruptionwith favors (rather than performance) as the output in return for bribes and other gifts. Those using cultural theory generally have been influenced by the work of Talcott Parsons (1951), who describes a traditional way of life as including ethnocentricity; primordial rather than functional associations; the sanctification of customs, beliefs, and practices; the discouragement of individualism; an emphasis on authority by birth rather than merit; customary rather than contractual relations; supernaturalism; the unwillingness to accept personal responsibility for development; and social rather than legal sanctions. Until people (particularly leaders) can escape a traditional way of life, they cannot substantially improve governance and living conditions. The weakness of cultural theory, as I see it, has to do with its failure to incorporate politics. For example, using the classification developed by David Apter (1971; see also Andrain 1994), Ethiopia shifted during the final 30 years of the twentieth century from a traditional to a mobilization (revolutionary Marxist-Leninist) to a reconciliation political system without fundamentally changing or improving its administration, thereby remaining extremely impoverished. Yet, it continued to operate a highly successful airline based on standard business administration textbook guidelines. While Malawis political culture under President Banda was no different from neighboring African countries, it maintained a very efficient road repair system (Msalomba 1991). In other words, when leaders are determined to transform traditional values into those required for effective administration, they are quite capable of doing so. The impact of politics on culture should be apparent from comparisons of East Germany and West Germany, North Korea and South Korea, or China and Taiwan. (My comparative case studies presented here Singapore and Jamaica, Spain and Mexicoare intended to be relevant in this regard.)

adequate input) depends on political structures capacity to perform various functions, including interest articulation, interest aggregation, rule making, rule application, rule adjudication, and communication. Heady suggests various criticisms of functionalism, particularly that the primacy of emphasis on functions should be replaced in increasing attention to structures (910). I would suggest instead that its usefulness is undermined by the failure of its proponents to differentiate political hardware (characteristics of the structure) from political software (the quality of social relationships essential for effective performance). For example, consider two articles that appeared in April 2001: one (Sullivan and Jordan) having to do with the Mexican governments failure to collect more than 11 percent of gross domestic product (as against two to three times that amount in most industrialized countries), and the other (Johnston) noting that the U.S. Internal Revenue Service had to write off $2.5 billion in 2000 because of inadequate enforcement. Regarding the IRS, I believe it is appropriate to examine the structural weaknesses that Johnston mentions: lack of staff and resources, slowness to increase pay and promotion, and the need for new and better computers. In Mexicos case, however (as amplified in the conclusion), the weakness of political software is primarily at fault because corruption here is less a sickly deviation from Weberian health, than the cartilage and collagen which holds a sprawling body politics together (Knight 1996, 231). Few Mexicans are upset by reports that businesses generally fail to pay local taxes when, as in Nuevo Laredo, three-quarters of the 1982 budget allegedly fell victim to corruption or when (as indicated in my conclusion), public services are inadequate in amount or quality (Morris 1991, 70).

Political Elasticity Theory


Heady (2001, 34) quotes Jorgen Rasmussens supplication, O Lord, deliver us from further conceptualization and lead us not into new approaches. Although I am sympathetic, I am also convinced of the need to carry on until we can find a way out of the confusion associated with our inability to know whether public administration is helped or hurt by the dichotomies of centralization and decentralization; bureaucratization and debureaucratization; regulation and deregulation; more control and less control; privatization and public management; downsizing and rightsizing; strict guidelines and flexible guidelines; more expertise and more public input. Political elasticity theory, which was introduced in Werlin (1998) and summarized in Werlin (2000), attempts not only to reduce confusion in public administration, but also to link comparative administration to comparative politics and development studies. I will briefly summarize its five propositions:
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Structural-Functional Theory
Functionalism is associated with the writing of Gabriel Almond and James S. Coleman (1960), though Heady (2001, 8788) notes that it also goes back to the theory of Talcott Parsons and other sociologists. According to this theory, the success of political systems in maintaining political support (that is, generating enough output to attract

1. The more that governments or those in authority can integrate and alternate soft forms of political power (linking incentives to persuasion) with hard forms of political power (including disincentives and coercion), the more effective they will be. 2. As leaders integrate and alternate soft and hard forms of power, their political power takes on rubber-band and balloon characteristics, allowing them to decentralize or delegate power by various methods without losing control, and to expand their influence in ways that predictably affect the behavior of wider circles of citizens, participants, and subordinates. 3. Political elasticity depends partly on the selection of appropriate political hardware (including objective forms of organization, regulation, procedure, and technology), but mostly on the development of political software (that is, policies and practices that foster respectful relations between leaders and followers). 4. The effectiveness of political software is directly proportional to the governments success in establishing acceptable goals, hiring qualified personnel, encouraging training, delegating responsibility, stimulating motivation and competition, paying attention to morale, expanding two-way flows of communication, promoting legitimacy, maintaining supervision, cultivating contractors, protecting independent spheres of authority, and developing conflict resolution procedures. Inasmuch as a government fails to promote any of these commonsensical requirements (with appropriate variations), its efforts to reform both micro and macro administration are going to be problematic. Yet, progress can be measured on the basis of steps taken to improve any aspect of these requirements. 5. Enhancing political software requires a balance between two forms of strugglefor competitive advantage and for consensusthat are suggested in the meanings of politics found in Wolins 1960 study of political thought. Within the framework of his overarching definition of politics (the relationship of leadership to followership for the purpose of governance), measures taken to increase advantage may be considered primary politics (such as partisanship), and measures taken to build consensus may be considered secondary politics (such as statesmanship).

2. Why are rich countries more successful than poor countries in permanently changing their culture? 3. Why is classical democracy more essential than liberal democracy for economic development? 4. Why is corruption devastating for poor countries but not for rich countries? 5. Why does globalization benefit some countries far more than others? The following countriesthe Netherlands and Ghana, Singapore and Jamaica, Japan and Nigeria, and Spain and Mexicohave been selected for comparison because, using political elasticity theory, they not only help us to deal with the questions that have been raised, but also enable us to understand why governance rather than natural resources is the primary reason for the wealth and poverty of nations. In other words, I will show that Ghana, Jamaica, Nigeria, and Mexico have far more capacity for wealth than their counterparts, but they will remain far more impoverished so long as they remain politically inelastic.

Decentralization: The Netherlands and Ghana


The Netherlands is a remarkable country in many ways. It is one of the most densely populated countries of the world, with 27 percent below sea level, protected by its famous dikes. Yet, it was judged by the 1996 U.N. Human Development Report to have the best living conditions including the lowest unemployment rateswithin the European Union (Hunt 2000). For purposes of this short comparison with Ghana, I will concentrate on the fact that the Netherlands ranks third worldwide (after the United States and France) in agricultural export valuean achievement that clearly would be impossible without a high quality of governance, including a merging of centralization and decentralization. On the one hand, the Netherlands appears to be highly centralized inasmuch as the central government appoints mayors, provides more than two-thirds of municipal revenues for specific purposes, and determines the policies and guidelines for provincial and local administration (Andeweg and Irwin 1993). On the other hand, the Netherlands is also a decentralized state where local governments have considerable autonomy (Jones 1995; Toonen 1996). Within the limits set by central and provincial officials, each municipality prepares its own plans and regulations following extensive discussions, negotiations, and opportunities for objection. According to Wintle (2000, 149), under the Dutch model, the state is highly centralized, big-spending and all-powerful, but that does not and need not threaten in any way the integrity of the component units. Elastic decentralization, to use my terminology, is evident in the complex links between the private sector and

Comparative Case Studies


The justification for political elasticity theory is simply that it is more enlightening than the other theories that Heady presents as to the most interesting questions in the literature having to do with the poverty and wealth of nations: 1. Why are rich countries both more centralized and more decentralized than poor countries?
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the public sector (sometimes characterized as corporatist) that are responsible for agricultural and industrial development in the Netherlands. These links have been promoted since the 1930s by provincial institutes for economic development (van Zanden 1998, 14143). Associated with them is a tight infrastructure of agricultural research, education, rural banks, cooperatives, commercial firms, advisory councils, parastatal organizations, and extension services that encourage and facilitate new products, production techniques, and marketing opportunities. Although 80 percent of farmers are organized, they are divided among pillarized groups (Catholic, Protestant, socialist, liberal, etc.). What makes this fragmented system politically elastic is its respect for independent experts, for the judiciary (including various bodies of administrative justice and appeal), and for the existing system of formal and informal bipartite and tripartite consultations (Andeweg and Irwin 1993). Above all, there is a devotion to the politics of accommodation, pragmatism, and consensus. While Ghana has about the same population size as the Netherlands (1520 million), it has far more potential for agricultural development, considering its extensive natural resources and the foreign aid it receives. Unlike the Netherlands, where manufacturing accounts for 70 percent of merchandise export, Ghana depends on agriculture for nearly half of its gross domestic product and export earnings and 70 percent of employment (Chhibber et al. 1993, 29). Agricultural output has risen in recent years at an average rate of only 2 percent, compared to a population growth rate of 3 percent per annum (Republic of Ghana 1997). The growth of food crops, livestock, and fishing output has been particularly slow, not only causing a loss of export opportunities, but also increasing urban food insecurity (Maxwell 1999). Ghanas most lucrative agricultural product remains cocoa; however, its share of the world market has dropped from 30 percent in 1970 to about 10 percent, without much likelihood of recovery. According to a 1993 study by the Organisation for Economic Co-operation and Development (Alpine and Pickett, 69), Ghana has a clear competitive advantage in many crops (in addition to cocoa): coffee, rubber, rice, maize, sorghum, cotton, tobacco, pineapples, and oil palm. Yet, because only about half of Ghanas arable land is being cultivated, agricultural export opportunities are being missed. For example, while Ghana could be exporting more and better pineapples than Costa Rica, it managed only $5 million worth in 1994, against $45 million for Costa Rica that year. Horticultural exports certainly could be expanded, considering that Kenya (which has a much longer flying time to Europe) successfully exports horticultural products (consisting now of 70 percent of its produce), thereby reducing its reliance on coffee and tea (Economist, March 14, 2001, 56).

The inability of the Ghanaian government to get farmers to respond to export opportunities is the result of many factors. First, life in rural areas continues to be far worse than in urban areas, characterized by poor sanitation, inaccessible roads, polluted water, unhygienic markets, and dilapidated school buildings (Ayee 1997, 51). With only 20 percent of the rural population (compared to 70 percent of the urban population) having access to safe water, the infant mortality rate is 30 percent higher in rural than urban areas, and child mortality is 20 percent higher (Bahal et al. 1993, 25). In many parts of the country, one-fourth to one-third of the communities lack access to good roads and public transport. Because an estimated 60 percent of feeder roads are in poor condition, farmers (many of whom are women) have to spend much of their time head loading commodities and fetching water (White and Killick 2001, xx). Moreover, inadequate storage and transportation systems account for about 70 percent of the retail price of agricultural produce (Republic of Ghana 1997, 106). A second factor has to do with the weakness of local government, despite the extensive effort made to promote district assemblies that began in 1988. Under the Rawlings regime, these assemblies were never given the authority to raise funds, formulate policies, and carry out programs (Herbst 1993, 90). At the same time, they were not systematically tied to the central government in any significant way. On the one hand, the assemblies generally lacked qualified staff to perform financial planning, budgeting, revenue collection, expenditure control, and accounting. On the other hand, the staff sent by the central government tended to be inadequate in number, unqualified, poorly paid, unsupervised, and rotated every few years without regard to local needs and personal preferences. Consequently, programs such as the 1975 National Council on Women and Development, intended to help women in agriculture and rural enterprises, inevitably failed (Chao 1999, 57). Other efforts to help the poor (such as Programme of Actions to Mitigate the Social Costs of Adjustment), including mobilizing the self-help efforts of rural areas, had to be abandoned despite the willingness of many wealthy countries to mitigate the social cost of Ghanas financial reform (OED 1995, 99). A third factor accounting for political inelasticity in rural Ghana stems from the governments inability to deal with problems such as soil fertility loss, soil erosion, and deforestation (estimated to cost 4 percent of gross domestic product per year). The research and extension systems remain uncoordinated and ineffective. Much of their staff is untrained or without funds or vehicles to get to rural areas. The government has not even helped to provide fuelefficient cooking stoves, small carts, wheelbarrows, and bicycles, which could promote local artisans and small-scale industry. There is an inadequate availability of simple equipPoor Nations, Rich Nations: A Theory of Governance 333

ment for the conditioning, processing, and preserving of crops, and few farmers have access to irrigation, credit, fertilizer, insecticides, and other inputs that are taken for granted in the Netherlands. Because of the traditional tenure system (preventing individually owned land), there is little incentive for land improvement and credit provision. The factors accounting for low agricultural productivity in Ghana cannot be separated from the general weakness of governance in Ghana. At the beginning of 2001, Ghanas new head of state, John Kufuor, encountered 40 percent inflation, 50 percent interest rates, and a foreign debt of $5.8 billionabout two and a half times the value of its 1999 export of goods and services (Economist, April 28, 2001, 45). This is particularly sad because his predecessor, Jerry Rawlings, who ruled Ghana for 19 years, was considered by the World Bank to be relatively effective and responsible. Yet, efforts during the 1990s to improve the functioning of the civil service proved unsuccessful, with the management of financial resources continuing to be weak in monitoring actual expenditures, auditing, and clearly and consistently applying regulations (Africa Region 1999, 78). All of the institutions of government were affected by pervasive clientelism and personalism (thereby undermining political software) that inevitably stoked the fires of corruption (Sandbrook and Oelbaum 1997, 619).

Democracy: Singapore and Jamaica


A social scientist looking at these two island states in the early 1960s (each with a population then of about 1.6 million and a per capita gross domestic product of $400), when independence from Great Britain was looming, might have predicted a much brighter future for Jamaica, despite problems stemming from colonial rule, racial tension, and the danger of hurricanes and earthquakes (Norris 1962). In 1960, Jamaica was the worlds primary source of bauxite and alumina. Its Industrial Development Corporation was responsible for 30 factories and more than 300 manufactured items. While its agricultural exports consisted largely of such plantation products as sugar, bananas, citrus, and coconuts, it was promoting various exotic fruits and spices, suitable for smallholder production. The countrys beauty gave it tremendous potential to attract tourists, particularly after the Cuban revolution. Jamaicas potential for export-led growth was enhanced by its geographical proximity to North America and its English-speaking workforce. At the same time, Singapore had no natural resources and was suffering from severe racial, religious, and political turmoil, intensified by its 1965 separation from Malaysia (Yew 2000). It could be described then as a somnolent, swampy fishing village (Neher 1999, 39).
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The situation now, of course, is very different, evidenced by the great disparity in per capita income: Singapore, nearly $30,000 (with 6.5 percent annual growth), and Jamaica, less than $2,500 (with negative growth for most of the last 25 years). While Singapores government has managed to eliminate persistent poverty, unemployment, and crime, Jamaicas government has been unable to break the link between high teenage pregnancy rates (40 percent), female-headed households (40 percent), school drop-out and failure rates (one-third of those from poor households), poverty (one-third of the population), and extremely high rates of ordinary and violent crime (Human and Social Development Group 1997). Whereas Singapore has been able to undertake some of the worlds best programs in public housing, public transportation, urban planning, public health, and public education, Jamaicas efforts have largely failed. Between 1965 and 1995, the World Bank lent Jamaica $1.3 billion for 62 projects, of which 52 were evaluated as unsuccessful in regard to outcome, sustainability, and institutional improvement (Caribbean Country Management Unit 2000, 19). Consequently, the Bank ceased lending to Jamaica after 1995, causing net transfers to be a negative $73 million annually. In his recent autobiography, Lee Kwan Yew (2000) is proud of the cultural engineering that occurred under his rule from 1959 to 1990, transforming a population that was largely uneducated, illiterate in English, impoverished, and without professional or technical skills into one comparable to the most advanced countries. By the end of the 1990s, 40 percent of eligible youth (compared to 5 percent in 1970) were enrolled in higher education, facilitating the annual export of $60 billion worth of high-tech products about one-third more than China exported (Economist, November 10, 2001, 11). Whereas at the beginning of Lee Kwan Yews rule, there was widespread unemployment, drug addiction, crime, gambling, prostitution, large families, high birth rates, extensive squatter settlements, and segregated ethnic communities, at the end, more than 80 percent of the 2.7 million lived in racially integrated, government-financed and subsidized apartments (which they owned, using contributions to a government pension fund). These apartments were clustered into 17 attractive estates, including parks, shopping centers, and playgrounds, and were linked by a rapid transit system and expressways to one another, to industrial areas, and to the central business district (Field and Ofari 1989). Singapores cultural engineering has been achieved through information dissemination, indoctrination or persuasion, incentives, sanctions, and coercion (Quah and Quah 1989; Tremewan 1994). Probably nowhere else in the world are state policies to organize a countrys people and to influence its values and attitudes so extensive and pervasive (Fong, Huat, and May 1989, 129). Its impact

between 1970 and 1990 has been clearest in regard to women, doubling the percentage of those aged 2529 with secondary or college education, increasing by 20 percent those in wage-earning employment, and reducing the fertility rate by 70 percent (Cheung 1990; Leete 1994). Using controversial (and even amusing) approaches, the government has not been able to reverse the negative consequences of a low birth rate. However, it has been more successful recently in quadrupling the percentage of Malay students undertaking higher education, so that a higher percentage of Malays in Singapore hold administrative or professional positions than in Malaysia, thereby also reducing their hostility toward the Chinese majority (Yew 2000, 209). Singapores capacity to reform its culture has depended on the governments ability to effect cultural change within the bureaucracy: recruiting the best and the brightest, improving salaries and working conditions, reducing staffing, discouraging corruption, and changing the values of civil servants (Quah 1994). Not only is the bureaucracy considered the most respected in Asia, but so is the judicial system, resulting in a high degree of public respect for the government (Huff 1999). The 2001 Transparency International Web site lists Singapore as among the worlds least corrupt countries. Yet, Singapore cannot be considered a liberal democracy inasmuch as the government has used a one-party system to suppress dissent, detain without trial, intimidate (employing the bankrupting libel suit) newspapers and radical trade unions, enact antidemocratic laws and administrative regulations, and undertake pork-barrel politics to discourage opposition. As explained by Mutalib (2000, 317), an illiberal, (soft) authoritarian form of governance is certainly preferable to liberal democracy because economic growth demands much sacrifice from the people, which they might not be willing to support if given the chance. The resulting ambivalence toward democracy can be found in Lee Kwan Yews recent book (2000, 304, 646). Whereas in 1992, he proclaimed in the Philippines that what a country needs is discipline more than democracy, he pointed out to a Chinese delegation to Singapore that year, that social control could not depend on discipline alone, adding, People had to have a decent life with reasonable housing and social amenities if they were to lead moral and upright lives. They had to accept the basic principles of our system of government. Political elasticity theory allows us to distinguish between primary and secondary democracy (or liberal and classical democracy) using Wolins two sides of politics: partisanship and statesmanship. Whereas primary democracy has to do with elections, multiparty systems, and majority rule (that is, when there is a meaningful struggle for competitive advantage), secondary democracy refers to the

consensus building that is essential for successfully managing this competition. In the case of Singapore, I believe that, although primary democracy may be undermined, secondary democracy is evident in many ways. In my case study of Singapores public housing program (Werlin 1998), I found that government officials were remarkably responsive to changing needs and demands, and they were willing not only to listen to criticisms and suggestions, but also to fund research on existing and emerging problems. In the Straits Times, one can find quite frank criticisms, and there are other opportunities for policy input (Leong 2000). While Mutilib (2000) strongly (and rightly) suggests that Singapore should move toward more liberal democracy, he reports on the governments willingness in 1998 to revise its economic policies, taking unusual steps to swing public opinion in favor of radical reform. During a recession in the mid-1980s, employees of even profitable firms agreed to a significant reduction in salaries as a result of a tripartite advisory council composed of representatives of government, employees, and labor (Campos and Root 1996, 81). This was facilitated by vocal and frank comment on all public policies carried out in the press, parliament, public forums, and grassroots institutions (Chee 1986, 161). Likewise, in response to the 1998 Asian financial crisis, the parliamentary designated Committee on Singapores Competitiveness made a number of painful recommendations, including reducing total wage costs up to 20 percent, which were acceptable only because of the existing high quality of political software (Teen and Phan 2001, 379). In a book that is quite critical of authoritarian rule in Singapore, one of the authors (Neher 1999, 51) points out that Singapore does enjoy substantive democracy, including due process of law, equality of opportunity, and a modicum of civil liberties. Jamaica, in contrast, has maintained a vigorous twoparty system since independence, with the Peoples National Party and the opposition Jamaica Labor Party alternating in power about every 10 years. However, both political parties regularly employ criminal gangs (assisted to some extent by police and civil servants) to mobilize political support, distribute favors, and intimidate opponents. The civil service, the judicial system, and the police have lost citizens respect as their effectiveness has been undermined by inadequate pay, training, expertise, and even drug money (Hudson and Seyer 1989). The consequences of a democratic political system, in which partisanship is more apparent than statesmanship, were revealed once again July 2001, when riots broke out in the Tivoli Gardens neighborhood of West Kingston, causing much destruction, personal injury, and the loss of more than 25 lives (Gonzalez 2001). The violence came about when the police went into this community, led by Edward
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Seaga, the former prime minister and leader of the opposition Jamaica Labor Party, looking for illegal weapons. However, the origins of the violence goes back to the 1970s, when community leaders (known as dons) were armed by the parties, given control of patronage, and used as enforcers in the turf wars that divided the country. In Jamaicas case, political disorder clearly results from bad governance, rather than from such common causes of political instability as racial, religious, or ethnic differences. Because primary or liberal democracy has taken a dysfunctional form in Jamaica, it has intensified corruption, contrary to the conventional assumption. At the same time, there is not enough secondary democracy here to prevent persistent mismanagement of the economy, which manifests itself in slow growth, budgetary shortfalls, inflation, and unpayable debt. Parastatals (of which some 150 remain) have been used by the government to undermine the economy because they are monitored only in exceptional circumstances (Harrigan 1998, 17). Moreover, banks, credit unions, and insurance companies continue to be undercapitalized, undersupervised, and underregulated, with the public usually kept in the dark about this mismanagement (Dean 1998; Henke 1999). Public expenditure is hidden, first of all, from the International Monetary Fund, and, second, from the legislature and the public, indicating that these methods are linked to the workings of clientelist politics (Harrigan 1998, 17). How the resulting political inelasticity has undermined business development is indicated in a recent World Bank report (Caribbean Country Management Unit 2000) showing a connection between the factionalized civil society and the parallel system of government in inner cities on the one hand and, on the other hand, the low respect for law and order and low national pride. Until there is more evidence of classical (secondary) democracy, Jamaica certainly will be unable to escape its poverty, violence, and misery, even though, culturally, it may remain more exciting than puritanical and authoritarian Singapore.

Corruption: Japan and Nigeria


Although Japan and Nigeria are similar in population size (125 million), their wealth disparity is immenseJapan, nearly $33,000 gross national product per capita in 1999, as opposed to $330 in Nigeria (World Bank 2000). Yet, Japan has practically no natural resources, whereas Nigeria could be a wealthy country from the export of oil and natural gas alone, ignoring many other minerals found in abundance and such agricultural products as palm oil and cocoa, in which it once led the world in export value. Much of Nigerias oil and gas reserves are found in the Niger River Delta, where oil production has led to environmental disaster, violence, and anarchy (Maier 2000).
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According to a recent CIA report, there is here an almost total absence of schools, good drinking water, electricity, and medical care (Farah 2001). Despite a production of two million barrels of oil a day, motorists must wait in long lines at gasoline stations, eventually paying four times the official price. Corruption is seen as the primary cause of Nigerias poverty. In the early 1990s, it was estimated that about two-thirds of the countrys income (largely from petroleum exports, amounting annually to several billion dollars) disappeared into extrabudgetary spending (World Bank 1994, 2223; Lewis 1994, 330). Yet, corruption has also adversely affected Japan, manifesting itself most recently in an estimated trillion dollars in bank loans to troubled companies (Tett 2001, 16). Other manifestations, according to Kerr (2001), include excessive government expenditures on construction investment (twice the share of gross domestic product as the United States) and on public works (8 percent of gross domestic product, compared to 2 percent in the United States); inadequate urban planning; poor quality of housing; environmental degradation; and high deficit spending. The reasons given for Japanese corruption have to do with a pervasive and institutionalized system of bid-rigging in the construction industry (Woodall 1993, 297); various forms of gift giving to politicians and bureaucrats in return for contracts and favors (van Wolferen 1989, 134); money politics, with an estimated four times more per capita than any other country going to politicians and political groups (Johnson 1995, 215); and the amakudari system, under which retired officials are allowed to take important positions in state-owned enterprises, banks, and corporations. Whereas the impact of Nigerian corruption is economically and socially paralyzing, the impact of Japanese corruption is clearly not so, based on the fact that extreme poverty and homelessness in Japan are almost nonexistent (Economist, December 21, 1996, 46). For example, Kerr (2001, 374), who is otherwise highly critical of Japan, notes that steel firms here boast some of the worlds most efficient factories. In Nigeria, on the other hand, a large number of industrial projects, such as the Ajaokua Steel Company, do not have the purpose of production, but of enriching powerful people through kickback arrangements and money laundering. In a comparative case study of solid waste management in Tokyo and Lagos (Werlin 1998), I note a high degree of political elasticity in Japan (facilitating much more garbage recycling than in the United States) compared to political inelasticity in Nigeria, indicating there are offsetting factors regarding corruption in Japan but not in Nigeria. These factors include the high quality and integrity of the civil service; the emphasis on consensus and harmony; the role of whistle blowers, investigative journalists, official auditors, and public prosecutors;

the active role of local governments and interest groups; and the public intolerance of dishonesty within the public bureaucracy (Johnson 1995). In a recent issue of Japan Quarterly, two articles (one by Hiromitsu, the other by Takeshi) explore factors that may have increased police corruption: slush funds, amakadari considerations, protective or cover-up procedures, etc. Yet, the Japanese police continue to enjoy a high degree of public esteem. Reflecting the social tradition of respect for the police, police officers see their work not only as a career, but as a way of life that goes beyond income or even family (Takeshi 2000, 47). While this professional pride is clearly not enough to prevent police corruption, it does suggest a difference between police corruption in Japan and in Nigeria. Whereas the Japanese police are under various types of control, the Nigerian police are clearly not, so that in Japan, police misbehavior is considered scandalous, while in Nigeria, it is standard operating procedureso much so the police are nicknamed Kill and Go (Kerr 2001, 199). This means that, instead of the soft forms of political power (persuasion and incentives) commonly and effectively used in Japan, force remains both a prevalent method of governance in Nigeria and, at the same time, largely ineffective (Agbese 1990, 244). This difference between Japanese and Nigerian corruption takes us back to the two subdivisions of politics used for political elasticity theory (the struggle for competitive advantage or primary politics and the struggle for consensus or secondary politics). Whereas primary corruption (which exists in Japan) indicates excessive partisanship or greed, secondary corruption (prevalent in Nigeria) reflects the governments inability to control or mitigate this situation. As an analogy, we might think of basketball fouling under two situations: one in which there is normal refereeing, so that fouling is meaningful, punishable, and tolerable, and the other in which refereeing is corrupt, causing fouling to be pervasive, essential, and destigmatized. This concept of corruption suggests a balance between greed and governance. The weaker the governance, the more dangerous and dysfunctional the manifestations of greed. Because secondary corruption undermines an already weak governmental system, it requires fundamental political reform before punitive measures can be effective.

pressure to get loans out and projects going, regardless of their merit or likelihood of success. Strings are certainly attached (particularly for structural adjustment lending), but they are usually ineffective. There is a saying that the more impoverished a country (or individual) is, the more tightly closed is the door to reform, with the lock having to be opened from the inside. While I believe that a heavy-handed approach would be counterproductive, the following approaches (Werlin 1998) might be experimented with: (1) requiring prior reform making sure, for example, that a country has the capacity to repair old roads before new roads are financed; (2) intensifying pressureterminating ineffective projects following the dissemination of explanatory reports and the holding of public hearings; and (3) promoting competitiongetting countries at similar levels of per capita income to compete for project support based on their quality of governance. As William Easterly (2001, 118), a senior World Bank official, courageously advocates, aid should increase with policy performance, so that governments have an incentive to pursue good policies. I also have in mind making debt relief contingent on a competitive process after the amounts available to each eligible country are announced. Each country would be expected to determine its quantifiable goals, strategies for achieving them, and timetables for doing so. Taking into account the governmental improvements of this country in comparison to those of other highly indebted or impoverished countries, evaluators (led perhaps by Transparency International, the worlds leading anticorruption organization) would periodically announce how much countries would receive, together with justifications. Less successful countries would be invited to keep trying for complete debt elimination. The objective would be to make debt relief or forgiveness a prize to be worked for, rather than a gift to be waited for. Otherwise, it (along with other forms of foreign aid) is likely to be wasted, if not counterproductive, as my final comparative case study indicates.

Globalization: Spain and Mexico


Spain emerged from its civil war and World War II probably even more impoverished than Mexico (Salmon 1995, 23). Its per capita income was only $443 in 1963, which was less than Mexico at $450 (in 1985 dollars) in 1800 (Landes 1999, 292). Manufacturing was limited, trade was discouraged, and the balance of trade was in deficit. Currency was overvalued, inflation was high, and the infrastructure, poor. Moreover, unlike Mexico, with extensive oil reserves and minerals, Spain lacked enough financial resources to purchase needed sources of energy and raw materials. While the governments of both Spain and Mexico gradually abandoned economic autarchy after 1960including
Poor Nations, Rich Nations: A Theory of Governance 337

Conclusion: The Implications for Foreign Aid


Because poor countries suffer from inadequate governance rather than inadequate resources, foreign aid agencies tend to be too soft rather than too hard in their assistance programs. At the World Bank (with which I have had the most experience), staff continue to be under great

membership in the World Bank, International Monetary Fund, and the Organisation for Economic Co-operation and Developmentthey fully embraced globalization during and after the 1980s. Spains entry into the European Community in 1986 was seen, not merely as ending its isolation and restoring it to its rightful place in Europe, but also as part of an overall process of economic modernization that would induce Spain to adjust its economy to the competitive economies of the Community (Carr 1987, 10). In addition to other economic reforms, Mexico drastically reduced tariffs and rigid controls on foreign investment, joined the General Agreement on Tariffs and Trade (GATT), entered into the North American Free Trade Agreement (NAFTA), and signed trade agreements with many Latin American countries. During the 1990s, with the expansion of the maquilas (industries, also called maquiladoras or factories, begun during the 1960s in the border areas) into a national manufacturing arrangement, Mexico had the highest rate of export growth in the world, making it the worlds eighth-largest exporter (Levy and Bruhn 2001, 11). In 199899, it sold about $35 billion in high-tech productsnearly as much as China, which has more than 10 times Mexicos population (Economist, November 10, 2001, 12). Unfortunately, Mexico has not benefited nearly as much as Spain from globalization: Its gross domestic product per capita is currently about 25 percent of Spains, and its purchasing power parity with the United States, half that of Spain (Economist 2001, 164, 202). In 1995, 42.5 percent of the Mexican population lived on less than $2 a day, whereas there was no reported percentage then below the poverty line in Spain (World Bank 2000, 281). While Spain has experienced high levels of unemployment, reaching 13.4 percent in early 2001, it does not have Mexicos huge informal sector, amounting to an estimated 60 percent of the economically active population, largely lacking the social safety provisions found in Europe (Peters 2000, 163). Because nearly three-fourths of all Mexican households in 1996 were considered at least somewhat impoverished, the expectation that NAFTA membership would reduce illegal migration to the United States (where wages are 10 times higher) proved illusory. Moreover, globalization has increased income inequality in Mexico, where the top 20 percent of households expanded their share of total income from 49.5 percent in 1984 to 58.2 percent (compared to 40.3 percent for their Spanish counterparts), leaving Mexico with one of the most unequal distributions in the world (Peters 2000, 183). It also has intensified territorial polarization, in which the states south of Mexico City are largely excluded from export activities. On the Human Development Index (which combines per capita income, health, and adult literacy statistics), Spain scores 89.4, and Mexico, 78.6 (Economist 2001, 26).
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However, one can point to indications of a greater disparity in living conditions (OECD 2001). Mexicos illiteracy rate remains at about 13 percent, compared to about 3 percent in Spain. Whereas only half of Mexican children make it through primary school, more than 80 percent do so in Spain. At the primary and secondary levels, Mexicos annual expenditure per student is about one-third that of Spain. While almost all Spaniards now have access to adequate water sources and sanitation, the comparative shares for Mexico are 83 percent and 66 percent. Mexicos infant mortality rate (per 1,000 live births) is six times higher (30 compared to 5). Transparency Internationals 2001 Corruption Perception Index is one indication of the greater weakness of governance in Mexico than Spain, putting Mexico at 3.7 (slightly higher than Egypt) and Spain at 7.0 (slightly below Japan). The other available comparison comes from two OECD reports having to do with regulatory reform (with 1999 covering Mexico and 2000, Spain). The 1999 report notes that the enforcement of regulations is problematic in Mexico (15152), adding, Complex and unclear regulation, and difficulties at the judicial level with interpretation and enforcement, have meant that Mexican regulation has long been the source of considerable uncertainty and confusion to the citizen. While emphasizing existing weaknesses, the 2000 report concludes (104), Over 20 years, Spain has experienced a process of social, political, and economic change of a magnitude seen in few other OECD countries, bringing Spain considerably closer to the mainstream of regulatory practices in the OECD. In his study of a number of ministries, Heywood (1998, 114) finds that highly paid and qualified functionaries and economists have been at the heart of Spains economic modernization. In contrast, the OECD (1998, 113) reported that Mexico does not have a true civil service as that term is understood in other OECD countries, with the exception of a few Ministries, and that management and training are very inadequate. Because about a third of officials are affected by the sexenio system (the change in government every six years), those who gain power consider it their right to partake of the systems spoils (Morris 1991, 73). Insofar as there are few evaluations, either inside or outside government, of how well it performs, contracts tend to be mismanaged or handled corruptly (Economist, May 12, 2001, 42). This may partly account for the fact that in 1997, about 60 percent of Mexican roads were unpaved, compared to only about 10 percent in Spain (World Fact Book 2001, http://www.bartleby.com/151/). Moreover, inasmuch as the handling of contracts for construction work in the health care sector are given out by the central authorities for patronage purposes and, as such, are seldom

monitored, dams and major networks have been neglected, causing leaks, a loss of water for consumption and irrigation, and inadequate cost recovery (OECD 1998, 50, 53). Professor Robert A. Pastor (2001) of Emory University, a leading expert on the North American Community, has advocated providing a level of assistance to Mexico similar to what the European Union offers to its poorest members (2 percent4 percent of their gross domestic product). I would support such assistance, from which Spain has greatly benefited, if it were carefully linked on a step-bystep basis (with publicly available annual progress reports) to improvements in governance, particularly those needed for political software development. Mexicos experience with World Banksupported foreign aid so far has not been very good, based on studies of the World Banks Operations Evaluation Department. When World Bank staff pointed out during the 1970s and early 1980s that the Bank was lending more to Mexico than was consistent with its absorptive capacity, they found themselves undercut by management tendency to over-rule them on appeal by the Mexicans (OED 1994, xxxviii). While evaluations of the World Banks projects in Mexico during the 1990s, according to its 2001 OED report, were relatively positive, they had mixed or unsatisfactory results in water supply and sanitation, agriculture, and environmental issues. Above all, this report emphasized the fact that insufficient attention has been paid to areas such as civil service reform, legal and judicial reform, tax administration, financial management and accountability, or anti-corruption (18). Vincente Fox, who came to power in July 2000 as the head of an opposition party, seems sincerely anxious to reduce corruption (Economist, May 12, 2001, 42). Because he faces great internal opposition in doing so, he probably would welcome the sort of outside pressure advocated here as political leverage. In this regard, Transparency International is already monitoring the comptrollers office and scrutinizing the handling of large contracts. The experience of the Peruvian Sunat project (improving tax collecting) during the 1990s suggests the importance of requiring the country to show a real willingness to reform before providing assistance: identifying needed positions, requiring staff to take examinations to compete for these positions, and giving salaries comparable to those in the private sector (Werlin 1998, 327). However, for foreign aid to be useful in reforming Mexican public administration, it must be strongly supported by the public. I cannot predict what the response will be. Instead, I am simply saying that, in order for political power to become elastic (with rubber-band and balloon characteristics), there must be a higher quality of political software (as is apparent in Spain, but not yet in Mexico).

A Final Note
While I have put less emphasis on geography, history, and culture in explaining the wealth and poverty of nations (as indicated in my comparative case studies) than does David Landes (1999), I ultimately agree with him that the lesson of history is that the most successful cures for poverty come from within (523), adding, no empowerment is so effective as self-empowerment. In suggesting that this can happen rather quickly (as it has in Singapore and Spain), I introduce an optimistic note into the political development literature to reduce the pessimism encountered among those critical of globalization and structural adjustment lending (de Rivero 2001).

Poor Nations, Rich Nations: A Theory of Governance 339

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