A Level Economics Essay 9: Governance, Growth and Development

Explain why poor governance can be an obstacle to economic growth and development in LEDCs.

Poor governance refers to the ineffective or corrupt practices of governments and institutions in managing public affairs and making policy decisions. In the context of LEDCs (Less Economically Developed Countries), weak governance can hinder economic growth and development in several ways:

1. Lack of Policy Stability: Poor governance often leads to inconsistent and unstable policies. When governments frequently change regulations, laws, and policies, it creates uncertainty for businesses and investors. This uncertainty discourages long-term investment and hampers economic growth. For example, if a government keeps altering tax laws or regulations, businesses may hesitate to make significant investments or expand their operations.

2. Corruption and Mismanagement: Weak governance is often associated with corruption and mismanagement of public resources. Corruption, such as bribery or embezzlement, diverts funds meant for public services and infrastructure development into the pockets of a few individuals. This reduces the resources available for critical investments in education, healthcare, infrastructure, and other sectors that contribute to economic growth. Moreover, mismanagement of public resources can lead to inefficient and ineffective delivery of services, further hindering development.

3. Lack of Investor Confidence: Inadequate governance practices create an environment of uncertainty and lack of transparency, deterring both domestic and foreign investors. Investors require a stable and predictable environment to invest their capital. When governance is weak, investors may be reluctant to commit their resources due to concerns about property rights, contract enforcement, and the overall business environment. As a result, LEDCs may struggle to attract the necessary investments for infrastructure development, technology transfer, and industrial expansion.

4. Limited Access to Finance: Poor governance can impede access to financial resources for individuals and businesses. Weak institutions and corrupt practices make it difficult for LEDCs to establish robust financial systems that can efficiently mobilize savings, allocate credit, and manage risks. Limited access to finance constrains entrepreneurship, stifles innovation, and hampers the growth of small and medium-sized enterprises, which are vital drivers of economic development.

5. Inefficient Public Service Delivery: Weak governance often translates into inefficient public service delivery systems. Lack of accountability and transparency can result in inadequate provision of education, healthcare, sanitation, and other essential services. These deficiencies hinder human capital development, reduce productivity, and hinder overall economic growth.

In conclusion, poor governance in LEDCs can be a significant obstacle to economic growth and development. It undermines policy stability, discourages investment, hampers access to finance, and leads to inefficient public service delivery. Addressing governance challenges by promoting transparency, accountability, and the rule of law is essential for unlocking the growth potential of LEDCs and fostering sustainable development.

The Moral Governance of Others

Nadeem F Paracha in The Dawn

In September, 22-year-old Mahsa Amini was admonished by the Guidance Patrol for ‘improperly’ wearing her hijab. She was then allegedly beaten to death. Her death triggered an unprecedented protest movement, in which women as well as men are attacking symbols of Iran’s theocracy like never before.

The protests have evolved into an open rebellion against Iran’s morality laws and against groups that the state has employed to implement these laws.

The Guidance Patrol is the successor of the Islamic Revolution Committees that were formed in 1979 to forcibly implement ‘Islamic morality’ in public spaces — especially when wearing the hijab was made compulsory in 1983. Over the years, there have been isolated protests against this law, but nothing like what Iran is witnessing today.

The protests are challenging the whole idea of ‘moral policing’ that began to be adopted by the state in many Muslim-majority countries from 1979 onwards. After Iran, moral policing units also emerged in Saudi Arabia and, from the 1990s, in Sudan, Afghanistan, Nigeria and, in certain regions of Malaysia and Indonesia.

The state gives the units powers to check and correct ‘moral digressions’, such as ‘inappropriate’ dressing (especially by women), ‘unseemly’ interaction between men and women in public, or the exhibition of any other ‘un-Islamic’ behaviour. Moral policing outfits have often been accused of using violent methods, mostly against women.

However, as morality policing organisations are now being openly challenged in Iran, recently they were disbanded in Saudi Arabia by the crown prince Muhammad bin Salman. Their presence contradicts his reformist agenda. Also, the criticism against the tactics used by the police was intensifying. Morality policing units were also dismantled in Sudan in 2019, after the overthrow of the dictator Omar al-Bashir.

According to Amanda F. Detrick (University of Washington, 2017): “States with religious systems of government, employ morality police as a formal method of social control to expand and stabilise their rule. Morality police units enable the regime to project power into society and retain dominance by affirming religious legitimacy, suppressing dissent and enforcing socio-religious and political uniformity.”

Moral policing can also emerge as an informal method of social control. According to the French philosopher Michel Foucault, the “governance of the self” can lead to the “governance of others.” In other words, sometimes, when an individual or a group embraces an idea of morality, they may end up enforcing this idea on others. If the enforcement finds traction among a large body of people in a society, the state is likely to adopt it as policy.

For example, even though most Muslim-majority countries do not have moral policing outfits formed by the state, ever since the 1980s, vigilante groups have been known to implement ‘morality’ by force. Such enforcements have often been turned into law by governments.

In Pakistan, for years, non-state groups campaigned to oust the Ahmadiyya from the fold of Islam. At first, the state treated the campaigns as subversive. But when the campaigns began to find greater traction among the polity, especially in the Punjab, the government declared the Ahmadiyya as a non-Muslim minority.

Informal methods of social control that emerge from below have been highly successful in Pakistan. From the late 1960s, there were campaigns against nightclubs, cinemas and the sale of alcoholic beverages by right-wing vigilante groups. They were suppressed by the government. But in the late 1970s, when a government was struggling to stall a political movement against it, it suddenly agreed to close down clubs and ban alcohol. But this was a futile attempt to regain social control.

Consequently, in 1980, there were plans by the Ziaul Haq dictatorship to form state-backed moral policing units. They were to enforce gender segregation in public spaces, ‘proper’ dressing habits (especially among women), compulsory prayers in the mosques, etc. Women’s organisations saw these as a way to strengthen a myopic patriarchal ethos. Their activism deterred the dictatorship from forming moral policing squads.

However, the frequency of vigilante groups enforcing (their ideas of) morality increased. For example, a group calling itself the ‘Allah Tigers’ started to raid hotels and even homes on every New Years Eve. Technically, their actions were unlawful, but the dictatorship tolerated them and saw them as the actions of ‘common people’ who were willingly implementing the state’s ‘Islamisation’ project.

There have also been non-state groups enforcing the hijab and discouraging the celebration of events such as Valentine’s Day. Although the government and the state have not appropriated these as policy, many educational institutions have.

But formal and informal methods of social control through moral policing are not only restricted to Muslim-majority countries. Ironically, outside the myths of ancient ‘pious’ states, one of the first formal examples in this respect appeared in 19th century England.

The regular police force in 19th century England was encouraged to ‘morally regulate’ the society. To 19th century British ‘gentry’, morality was deemed a necessary part of life, in order to hold and keep social stability. The police often took action (sometimes preemptive) against alleged prostitutes, drunkenness, betting and ‘habitual’ criminals.

Nevertheless, moral policing in most Muslim and, particularly in non-Muslim regions, has largely remained informal. But it has been rather successful in influencing state institutions. For example, years of anti-abortion activism in the US finally led to an abortion ban imposed by the US Supreme Court.

Also, in many countries, non-state moral policing of content on social media and the electronic media has pushed governments to pull down websites, films and TV shows. Interestingly, informal moral policing in a non-Muslim country has been most rampant in India. Vigilante groups often emerge to enforce ‘Hindu values’. These can include action against those celebrating Valentine’s Day, to lynching those who are accused of eating beef.

Moral policing is a serious issue. Morality has mostly to do with factors rooted in religion. There may be a consensus on the more general aspects of a faith, but there are always many interpretations of various topical aspects of it. One cannot impose morality based on a single interpretation.

Instead, states need to educate citizens to embrace pluralism and tolerance and exhibit behaviour that does not create social disruption and divisions. An individual’s choices that form their moral self-governance should be respected, as long as they are not raging to turn it into the governance of others.

'Science has become Corrupted' - Delegitimising of Common Sense

 

The challenge India faces

Carillion's Directors Ticked all the Good Governance Boxes

Kate Burgess in The Financial Times



Following the collapse this week of Carillion, with less than £30m in the bank and liabilities of more than £2bn, the board of the construction company has been accused of being either deluded or just plain inept. 

On paper, the directors looked well qualified to steer the outsourcer. As chairman, Philip Green was a former chairman of United Utilities, the UK’s largest listed water company. Not only had he run a large contracting company, he was also a fully paid-up member of the great and good as a former adviser to then prime minister David Cameron on corporate responsibility. 

The directors did not lack experience, sitting on boards from Royal Dutch Shell to Premier Farnell. 

Alison Horner, head of the remuneration committee, was formerly operations director at Tesco and a non-executive director of Tesco Bank. The head of the audit committee was an accountant, as were three other directors. 

And none were entrenched. The chief executive, Richard Howson, who joined Carillion’s board in 2009, was the longest-serving member. 

The board ticked all the boxes in terms of good governance. Carillion’s non-executive line-up included two women. The average age of directors was about 54 years, or 57 excluding Mr Howson (48), and Zafir Khan (also 48), the finance director appointed in January last year. 

Yet just a year ago, the board cheerfully signed off statements from Mr Howson that debt would be below £300m within months. 

With hindsight, the board fell into a series of textbook traps that have, over the years, felled many a construction and contract business: 

- Failing to halt acquisitions and the build up of liabilities 

-Signing off aggressive accounting policies that allowed revenues to be booked early and costs to be delayed 

-Not tapping shareholders for help and instead continuing to pay out dividends even as cash haemorrhaged out of Carillion 

- Signing off on hefty pay packets and bonuses for top executives even when they scored zero on key performance targets introduced to instil capital discipline 

-Allowing clawback conditions to be changed a year ago, striking out corporate failure as a reason to take back bonuses 

The board had seemed to be everything UK investors might want for a youngish business in a youngish sector. Carillion may have been formed from the construction divisions of Tarmac, Wimpey, Alfred McAlpine and Mowlem, which have been around for decades, but the company itself was formed in 1999. It engaged well with investors, even those who had shorted Carillion stock. Notably, shareholders approved directors’ elections without a murmur. 

It is worrying to think the construction company’s board was such a model of good governance. If the line up had been different, would another cast of characters have done any better? 

And how many other supposedly well-run boards are presiding over impending corporate disasters elsewhere?

The Conservatives are giving us a masterclass in how not to govern

Zoe Williams in The Guardian

There is always a rueful moment following a Conservative election victory, disappointment tinged with the consolation that at least they’ll be solid. Sure, they will want to march back to a time of Victorian certainties, where if you lose it’s because you’re a loser, and if you win, it’s because you goddamn tried. But at least they will captain their vessel with competence and assurance. We might not like where it’s going, but at least we won’t drown.

Consider what good a government of any party can do, if it takes the business of statecraft seriously. It is within its power to solve the housing crisis: not chuck lump sums at the already privileged, but to undertake a building programme of breadth and vision that would change lives. It is easily within a government’s scope to make plans for energy and carbon emissions, half a century into the future. It is within a government’s purview to think radically about what people need, in order to feel optimistic about the future: not just a health service, but a great health service; not just pensions but proper social care; not just benefits but genuine security. All the life-changing architecture of citizenship has been undertaken by good government, thinking decades beyond the electoral cycle, with dreams infinitely greater than personal power.

That’s what is really crushing about our current situation: not that the political landscape was permanently scarred by a brutal act last week; not that we’ve been invited to unleash some pointless vandalism on the EU on the basis of lies from its most ardent proponents; not that all of us have been dragged into a vicious battle between ideas so hollow and limited – free-market fundamentalism versus the same with added racism – that you wouldn’t want to be detained by them for five minutes eavesdropping on the bus, let alone see them obliterate everything else in the public discourse. No, the really dispiriting thing is that we haven’t got a government.

When they’re good, governments embody civility; they can take the instinctive care that we have for one another and turn it into something solid, whether that’s a street light or a tax credit; they can turn hopes into plans; they can make people’s lives better. There were times before this referendum when it may have seemed preferable to have a government doing nothing to one as socially destructive as David Cameron’s. But it would be wrong to lose faith in politics altogether, because of the terrifying spectacle of people doing it wantonly. It is time to remind ourselves what good government can do.

Governments, when they are solid, maintain standards in public life. They do not panic when they’re criticised by the Daily Mail in the middle of a parliamentary term, or when a more radical party such as Ukip seems to be peeling off voters. They do not throw up their hands and offer referendums on amorphous, incomprehensible matters, because they do not sacrifice the stability of the nation for the sake of their own party, and they would not drag a whole continent into their squalid leadership battle.

But if that’s a little specific, let’s frame it more broadly: good governments insist on the decent and truthful use of statistics. They can’t enforce this – they can’t imprison their opponents for making up bogus numbers, and repeating them until half the country believes that they’re true. They can’t do much to insist that the press doesn’t twist or misrepresent the facts, doesn’t stir up hatred with relentless falsification. They can’t even make it a law, I shouldn’t think, that every time a newspaper lies about a foreigner, it has to print the correction with the same prominence as the lie. That would be far too intrusive, a bit too Leveson-y.

Yet a good government will set standards. It will tell the truth itself, and it will be trenchant about accuracy from others. It will not pander, and when it sees racist propaganda material it will say so. No general election has ever been as ugly as this referendum, as personal, as vitriolic, as full of accusations of mendacity, so that the casual voter basically has to guess who is telling the truth by how fast they’re talking and the look in their eyes (although this does give one pretty reliable answer: not Michael Gove). Good governments respect the institutions that provide sound and impartial analysis – universities, the civil service, statistics authorities – and advance their work, rather than routinely falling foul of it themselves.

Good governments, even in the teeth of internecine squabbling, continue to govern: they don’t announce a complete overhaul of prisons, then luxuriate in a six-month hiatus and leave the service wondering whether it was ever meant to be seen through. They don’t part-privatise probation and then lose interest, they don’t try to academise every school and realise the senselessness of that halfway through; they don’t pick a fight with the whole NHS that takes innumerable man-hours to solve and yields nothing but lasting unpleasantness.

Six months ago, this was, it was argued, all the opposition’s fault; a party with a slim majority was behaving like a party with a huge majority, because it knew it would face no resistance. It’s for another conversation whether the opposition has improved, but the question is moot anyway; there is nothing to oppose. The business of governing has ground to a halt, and in its place we find men arguing over whose exaggeration is the most egregious and who looks too scruffy for public life.

This is not the time to lose faith in politics; there has never been a more urgent time to rekindle faith. Remember what politics can do. We cannot conclude, from this sad episode, that its glory days are over.

Why Ukip, the Tea party and Beppe Grillo pose a threat to the mainstream

These populists are asking the right questions, but they don't have the answers. Mainstream parties must revitalise and respond

• 
• • Anthony Painter
  • guardian.co.uk, Sunday 24 March 2013 14.13 GMT

Ukip supporters with 'Thank you' leaflets in Eastleigh, where the party came second in the recent byelection. Photograph: Stefan Rousseau/PA

The rise of populism across western Europe and the US – especially in its radical right form – poses more fundamental questions for democrats than has been acknowledged. Whether we are talking about Ukip, Beppe Grillo's Five Star Movement or the Tea Party, populists of all kinds are exposing old and hidden fault lines in democracy, and mainstream democrats need a greater alertness to the nature of the threat. Modern democracy, like a hot-air balloon untethered from the ground, is suddenly floating free and its destination is not yet known.

Populists pose a basic question: why is democracy not run as the true expression of a morally pure "will of the people" against a self-serving and corrupt political, bureaucratic, plutocratic or legal elite? This is a forceful question as old as democracy itself and it reveals what has become liberal democracy's unspoken compromise – democracy is bounded by institutions, laws and constitutional limits. It is democracy through pluralism and compromise; "minorities rule" as the American democratic theorist, Robert Dahl, described it. For populists, the problem with this notion is that they have their eyes on what they perceive as the majority (it usually isn't, in fact) against constitutional, legal or international constraints that have been placed on the "general will".

Mainstream democrats take their cue from American republican democracy with its checks and balances and self-restraint. This is an impediment to the true democracy for populists. They wish to sweep away any barrier to their desired ends – whether of the left or the right.

So the Tea Party proposes a radical reduction of the role of the federal government in the US political system. The FPÖ challenged the authority of Austrian courts with respect to upholding minority rights. Ukip demands a UK withdrawal from the EU. The Front National drives an anti-Islamic and anti-Gypsy agenda in France. Geert Wilders' PVV – following in the footsteps of Pim Fortuyn – also confronts fears over the growth of Islam and its purported incompatibility with Dutch values. Venezuela's Hugo Chavez created a parallel state and augmented his own constitutional power. Viktor Orbán's Fidesz rewrote the Hungarian constitution to give the executive more authority over the courts and to safeguard "traditional family values".

The binding element to all of these movements and parties is that they are not simply seeking to compete for ideas, policies and power but want to change the rules of the democratic game in favour of executive, majority rule. They are democrats but majority rule is their guiding force rather than a legally enshrined pluralism with minority protection. As my new Policy Network report, Democratic Stress, the Populist Signal and Extremist Threat shows, the upshot is modern (liberal) democracy in a state of stress.

Underlying the growth of these populist movements is a series of stressors that come to bear on liberal democracy and its mainstream party systems. They are socioeconomic, cultural and political in nature.

As the economy has moved away from mass production and many have lost out, socioeconomic change has loosened the ties of parties. Austerity looms large but is one factor among many. The rise of a politics of plural cultural identities catalysed by modern technology, transport, communications and media has further loosened the grip of mainstream parties on a solid and predictable base. Finally, political changes such as the expansion of the EU's acquis communautaire and the increasing comfort of mainstream parties within the system has created an opening for political challenger brands. Those challenger brands are the populists – more so than the green movement and even nationalists.

Mainstream parties have to prove that republican, pluralistic democracy, despite its frustrations and complexities, can be navigated through the trade-offs that all societies face better than populism can. More often than not, populists have simplistic and, in the worst case, highly damaging policies which if ever enacted, could cause significant harm. The desire for a return to economic growth, a sustainable welfare state or reducing debts is just as great as controlling immigration more tightly or seizing significant powers back from the EU. Mainstream parties can cope with these trade-offs between these demands and needs better than populists can – as long as they craft a viable statecraft.

Just maybe there is some truth in the populist critique of political elites – in Brussels, Washington and right through western democracies – and the way they have embedded their own self-interest in the system. Mainstream parties have lost their edge. They have grown comfortable, closed and politically nepotistic – relying on voters having nowhere else to go. That works for a while but becomes progressively more difficult to sustain. Mainstream democracy needs to become a contact sport again – with greater openness and engagement between the people and those who seek to represent them. Parties need to open up to real change and diversity.

Populism doesn't have the answers – you don't need to be Thomas Jefferson, James Madison or even Edmund Burke to see that. In many ways, however, it is posing some of the right questions. New policy approaches are necessary but not sufficient. The political mainstream needs to ask more fundamental questions of itself and its ability to govern with real legitimacy. That is if they are not to continue to age as the societies around them age. People will be left with a choice between a tired political mainstream elite and populists with all of the answers but few solutions. It's not a choice many will savour.

So you thought Britain wasn't corrupt?

Mary Dejevsky:

Two of the most deep-rooted maladies of British society are freebies among friends and jobs for the boys

Friday, 22 July 2011 The Independent

Anyone who had expected to drowse through the Home Secretary's Commons statement on the Metropolitan Police might have awoken with a start when she began with "allegations about police corruption". It was the flat, almost casual, way in which Theresa May appeared to accept at least the possibility, that surprised and the use of the actual words "police corruption". She went on to announce a review of "instances of undue influence, inappropriate contractual arrangements and other abuses of power in police relationships..."

The reason this bald catalogue shocks is that Britain has long projected an image of itself as a paragon of good governance and the rule of law, to the point where experts on such matters earn a good living advising other countries how to emulate our standards. It also happens to be an image that the vast majority of its citizens share. We regard ourselves as mercifully free of the sort of corruption that blights the lives of, say, Nigerians, Egyptians or Russians, and a cut above most southern Europeans.

That may be how we see ourselves, but it is not quite how others see us. Transparency International, an independent organisation which monitors this sort of thing, places the UK 20th in its latest (2010) corruption perception index. Overall, this may not look so bad – 178 countries are listed. Look closer, though, and you will see that the UK comes well below all the Nordic countries, below Luxembourg, Ireland and Germany, and just below the small Gulf state of Qatar. It is only marginally ahead of the United States, France and Spain. Is this where Britain should be – in 20th place, and falling?

Corruption, of course, takes many forms. In some countries, bribery is so prevalent as to be tantamount to a tax. Indeed, a theory has recently been advanced that this is how it should be regarded and that it is perhaps not so reprehensible after all. In others, an unofficial tariff – ranging from a box of chocolates to a luxury holiday – dictates access to the best educational establishments, the best hospitals, the best flats. In yet other countries which would not generally be regarded as particularly corrupt, contributions to political parties constitute a perennially murky area in which even otherwise distinguished politicians have come to grief, such as the former German chancellor Helmut Kohl. You might argue that the US system of lobbying is a form of legalised corruption.

Generally, these are not ills that afflict the UK. If you live here, you can probably be fairly confident that you will not have to offer teachers a backhander for admitting your child or ensuring a decent grade. (Although I have heard tell of quite lavish gifts offered.) You will not have to pay a doctor for decent NHS treatment or a fast track up the transplant waiting list. (Although, again, there is apocrypha that hints at exceptions, and it was once intimated to me that a consideration might keep my husband classified as a UK resident when we were living abroad, so that he would still qualify for expensive drugs on the NHS.)

And you probably won't find a speed cop or parking warden suggesting that a small transaction "between us" would "fix it" before he writes out the ticket, or a frontline immigration officer nodding through someone with some crisp banknotes, but no visa, in his passport. Or election officers stuffing ballot-boxes after the polls have closed.

But you will find ways in which Britain falls very far short of Scandinavian-level probity; areas where complacency has meant a blind eye is turned to abuses, and grey zones where transactions take place that are not actually illegal, but which would – and should – embarrass one or both parties if they became public.
Several such instances emerged earlier this week when the Commons Home Affairs Committee questioned the Commissioner of the Metropolitan Police, Sir Paul Stephenson, and the Assistant Commissioner, John Yates – both of whom had just resigned – as well as the head of public affairs, Dick Fedorcio. The most blatant was Sir Paul's acceptance of hospitality from Champney's health farm.

The commissioner may have been recovering from very serious illness (as he was), he may have declared the gift in the register as required (which he said he did on his return to work), and the owner of Champney's may have been a family friend (though it is unclear how close). But the value of this gift – around half the average Briton's annual pre-tax salary – and Sir Paul's apparent inability to understand that accepting it sat uneasily with his position as the country's most senior police officer on a salary of more than £250,000, suggests a blind spot. It left the impression that there was one law, and one set of subsidised living standards, for the well connected, and another for everyone else.

Something similar applied when it came to the hiring of Neil Wallis, former deputy editor of the News of the World, as a media consultant. Despite some close questioning – notably from two sparky new female Tory MPs, Nicola Blackwood and Louise Mensch – there was precious little clarity about how Wallis actually got the job. Between the lines, however, it could be deduced that there was no open advertisement, no standard recruitment procedure, no formal interview and no public disclosure of the appointment. This was a public-sector, tax-payer funded position, yet contacts and networks appear to have been all.

What we have here are two of the most deep-rooted maladies of British society: freebies among friends and jobs for the boys. And there will be many who shrug and say that this is just how the country works. Yet these ingrained ways of doing things are part of the reason why the UK comes below Finland, Australia and Canada in TI's corruption perception index. They are also a reason, along with our segregated schools, why social mobility in Britain is so relatively poor. Advantage compounds advantage.

At root, much of the disparities come down to information and the way so much is still kept from "prying" eyes. The UK-based American journalist Heather Brooke, who has made opening up what she calls Britain's "information cartel" something of a personal crusade and whose work led to the publication of MPs' expenses, notes that records available to US journalists as a matter of course are "off-limits" here, where access to information "depends on one's wealth, power or privilege". She is right – yet the responses, when she argues this, are not all approving. Some accept that it was ever thus; others accuse her of poking her nose into places it does not belong.

Nor has the Freedom of Information Act so far brought the transformation it should have done. Quite basic information still has to be applied for. This government's efforts to open up details of department and local council spending are laudable, but there has hardly been a rush to comply. Until our patronage system is tackled, British boasts of incorruptibility will remain boasts – discredited by our 20th place on the global corruption index and our continuing fall, as those below us move to clean up their act.
m.dejevsky@independent.co.uk