Financial Express, July 26, 2013

Making government work

 India’s government works very well in some ways (functioning democracy, stability, responsiveness, and so on) but is maddeningly inept in others (improving provision of basic public services, ranging from health and education to water and electricity supplies). Lant Pritchett, formerly of the World Bank, and now at Harvard’s Kennedy School of Government, has coined a new term for this situation. He calls India a “flailing” state: “a nation-state in which the head, that is the elite institutions at the national (and in some states) level remain sound and functional but … this head is no longer reliably connected via nerves and sinews to its own limbs. In many parts of India in many sectors, the everyday actions of the field level agents of the state—policemen, engineers, teachers, health workers—are increasingly beyond the control of the administration at the national or state level.” It may be debatable whether the deterioration is in absolute terms, or relative to expectations and aspirations, but the question is what can be done to change this situation. 

Pritchett’s solution to the problem that so many have identified, and which he has so picturesquely named, is unclear. He suggests that India’s “administrative modernism” is out of step with the country’s politics and society. He argues that political competition focuses on loyalty to identity groups, rather than provision of effective public services. He suggests that India will eventually muddle through with incremental reforms and learning by doing. Here I would like to offer some different perspectives on the problem and the possible solutions.

Ultimately, as Pritchett and others have recognised, a major issue is that of weak accountability of government employees. Accountability can be internal, within an organisation (for example, to one’s boss), or external, such as to citizens as voters. There are a variety of ways in which accountability can be improved. Several years ago, OP Agarwal and TV Somanathan, themselves senior bureaucrats, suggested some structural changes for decision-making within central ministries, including letting more policy implementation be managed below the top level, providing better career incentives for performance by elite bureaucrats, and broadening the input of expertise into policy-making.

The suggested changes can, in fact, be thought of as embodying two fundamental principles, those of decentralisation and competition. Decentralisation allows for better matching of skills and tasks, at least when training is appropriately provided. Competition provides incentives, sometimes pecuniary, but sometimes non-pecuniary, for better effort. The interesting idea here is that relatively small structural changes at the very top may have significant impacts—the decentralisation envisaged is modest, just pushing some decisions one or two levels down the hierarchy. The competition envisaged is also modest—slightly more in the way of performance expectations and appraisals, plus potential and actual competition from outsiders to the bureaucracy.

Such micro reforms can, of course, be copied at the level of each state government, and would need to be. A second set of reforms, which are much more macro in nature, apply the principles of decentralisation and competition at a different scale. I would suggest that India’s so-called flailing state is very much a result of over-centralisation with respect to the different tiers of government. I would argue that more expenditure authority needs to be pushed down to the level of state governments, and from there to local governments, particularly city and town governments. Currently, the states appear to have considerable responsibilities for expenditure, and there is a view that they have failed to meet these responsibilities, necessitating more central government control through transfers with strings attached. I would argue that state governments instead need to be given more autonomy, and that more revenue authority needs to be delegated to state governments, who must then delegate further to local governments. Decentralisation is essential for creating effective external accountability, which in turn will drive internal accountability.

Of course there are issues of inequity, of corruption, and of capacity. However, each of these can be addressed directly. None of these problems is solely associated with decentralisation, and none of them should stand as a necessary difficulty of decentralisation. The initial evidence from India’s massive local government reform supports the idea that accountability and effectiveness can increase with decentralisation, even as mechanisms are needed to deal with the adverse consequences mentioned. And this has happened without giving local governments even a semblance of appropriate revenue authority.

The two suggestions for government reforms presented here—decentralisation and competition within top-level government organisations, and across tiers of government—illustrate the problem with Pritchett’s metaphor. There is not just one brain that controls nerves, sinews and limbs. Government is made of individuals with skills that can be better utilised, and that can be improved. Democratic governments ultimately serve at the pleasure of citizens, and government workers need to make that connection more explicitly. A focus on these possibilities can make government work better more rapidly than the pessimists might believe.