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Democracy, Good Governance and Economic Development

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Taiwan Journal of Democracy, Volume 3, No.1, July 2007

In the article, the report focused on the different factors of problem relate to economic growth. The report has showed that most of the problems of the economic growth were coming from governance. As the research question was asked “How important is good governance for economic growth? Can economic growth be sustained without good governance?” The main answer to this question is “In fact [our] central hypothesis…is that the primary, fundamental determinant of a country’s long-run economic performance is its social infrastructure. By social infrastructure we mean the institutions and government policies that provide the incentives for individuals and firms in an economy.” It means that each government policies must be influences to the development of economic growth, but in order to make it sustainable for long term running of economic, government need to focus on social infrastructure which it will be affected to every institution while the implementation were not following with good governance.

Good governance is very important for sustainable development of economic. “The reports correctly note that poor or inadequate governance may not always be the result of venal or rapacious leadership, but because the state may suffer from weak formal political institutions and lack the resources and capacity to manage an efficient public administration”, report said. As some of the literature reviews were raised through different concepts:

Kaufmann and Kraay draw on a large World Bank data set designed to measure the link between governance and development and to monitor the performance of countries”. They track the quality of governance from 1996 to 2003 in some two hundred countries. The quality of governance is divided into six categories aimed at capturing how governments are selected, monitored, and replaced; a government’s capacity to formulate and implement sound policies; and the respect of citizens and the state for the institutions that govern them. The good governance should consists of six measured indicators such as (a) voice and accountability,(b) political stability and lack of violence,(c) government effectiveness,(d) regulatory quality, (e) rule of law, and (f) control of corruption.

Beginning with, Roll and Talbott estimate that governmental institutions and policies explain most of the variation across nations in terms of economic development-with secure property rights, business transparency, political rights, civil liberties, and stable rule of law as significant factors accounting for developmental success. It was written in his book, Understanding the Process of Economic Change, Nobel laureate Douglass North reiterates that good institutions beget good governance.

Those two literature reviews were showing some of the components of successful economic growth would need good governance.

But, what is good governance? What types of policies and institutions have the most positive and measurable effects on improving governance? What kinds of institutional arrangements are associated with growth and poverty reduction? How best to promote and sustain good governance, especially in the world’s poorest countries? Those questions were the problem in the article which had already focused on.

The article begin with, Good governance has several characteristics. It is participatory, consensus oriented, accountable, transparent, responsive, effective, efficient, equitable, and inclusive and follows the rule of law. At a minimum, good governance requires fair legal frameworks that are enforced impartially by an independent judiciary and its decisions and enforcement are transparent or carried out in a manner that follows established rules and regulations. In short, good governance requires that institutions serve all stakeholders fairly.

The various reports raised two section of good governance which one is general emphasize “capacity development,” which includes both the building of effective states (which can deliver public goods and services to the populace and ensure peace and stability), and an empowered and responsive society which can hold states accountable for their actions. See the outcome not just input! And substantive shows the institution building, democracy, and political-economic decentralization as essential for good governance and economic development.

 

Not only are political institutions necessary for economic development more likely to exist and function effectively under democratic rule, but also the adaptive efficiencies are best sustained in democracies because institution building to promote good governance and economic development is conterminous with democracy. One of another example, “The interrelated within economic development within democratic government base on the principles of popular sovereignty; competitive political participation and representation; an independent judiciary; free, fair and regular elections; universal suffrage; freedom of expression and conscience; the universal right to form political associations and participate in the political community; inclusive citizenship; and adherence to the constitution and the rule of law”, Robert Dahl, The Dean Of Democratic Studies.

Institutions are composed of both formal (constitutions, laws, and regulations) and informal (such as social norms, customs, and traditions) rules that constrain human economic behavior. Specifically, institutions set the framework of rules and incentives that affect how people, organizations, and firms utilize resources in political and economic decision-making, or how they “play the game.” In providing specific rules of the game, political and economic institutions create the conditions that enable the functioning of a modern economy. Every market is different and, to work efficiently, each market must find the right mix of formal and informal rules and the appropriate enforcement mechanisms. Therefore, economic performance is determined not only by the kind and quality of institutions that support markets, but also it depends largely on “adaptive efficiency”-or the political system’s effectiveness in creating institutions that are productive, stable, fair, broadly accepted, and flexible enough to be changed or replaced in response to political and economic feedback.

The key, establishment of a democratic regime will also lead to the swift consolidation of democratic institutions and procedures, but some cross countries show that the ancient regime tightly bound by its own administrative and bureaucratic culture and traditions can be remarkably impervious to change. Moreover, democratization does not always mean a rupture with the past, suggesting that a formal democratic order can persist alongside authoritarianism, elitism, and social exclusion. Thus, the process of democratic consolidation can be long and arduous-as democracies can deepen, but also can remain partial, deteriorate, or altogether break down.

At the minimum, democratic structures such as parliaments and legislatures must represent the interests of all citizens and provide a system of checks and balances, as well as oversee and impose clear constitutional limits on executive authority. Democracy is held by regular, competitive, multiparty elections. It is no accident that countries that have reached the highest level of economic performance across generations are all stable democracies. However, the article has focused on the quality of democracy remains poor in most settings. However, the report has stressed that in order to develop country, they need to foster the constitutional liberty rather than democracy. No doubt, the experiences of the proverbial developmental states offer evidence that efficacious state capacity and good governance can be achieved in developmental authoritarian regimes.

The article reported democracy nation (quasi-states) is simply recognized as legal sovereign entities despite the fact that they lack many of the attributes of a functioning government. Regardless of the label, these states pose formidable problems for democratic governance, economic development, and global stability, as they are unable to provide effective legitimate rule or to deliver essential public goods such as security, law and order, education, and other essential services. In such settings of lawlessness, violence, and impunity, where the “state” lacks even the most basic attributes of sovereignty, the challenge is to literally transform the “state” into an effective and responsible sovereign. Democratic state and nation building is a two-pronged process, which include creating or strengthening core governmental institutions such as the security apparatus, judiciaries, economic agencies, and social-welfare systems, including education and health care. Finally, the governance deficit is a problem not only in weak and failed states. Many functioning states also face challenges to effective governance. To reverse this process and consolidate good governance and the rule of law requires building state capacity.

The report has express that decentralized systems of government have three different levels of government (a national level, a regional level, and a local level), in general, decentralization implies devolution of power (which may include the transfer of resources, responsibilities for public services, or decision-making authority) away from the central government to political and administrative jurisdictions below the center. Clearly, democracy is strengthened when its formal representative institutions are supplemented by vibrant and participatory civic associations. Decentralized governance can help revitalize associational life, long stifled under various forms of centralized and authoritarian rule. The report has raised a lot of examples from various political trends with the different of government infrastructures in each country.

In conclusion, the democracy is one of the other sides to promote economic growth. However, the way of real development growth of economic will become long run; it must be need good governance. The ability to respond effectively to these challenges depends much on each country’s institutional endowment. Building and strengthening these institutional endowments is a precondition for good governance. Good governance is not only the key to the promotion of human rights and protection of civil liberties, but also good governance is highly correlated with economic development and the potential to deliver significant improvements in living standards; however, many countries around the world still need more responsibilities to promote good governance because failing and post-conflicts still be existed from time to time.

Summary Taiwan Journal of Democracy, Volume 3, No.1, July 2007 In the article, the report focused on the different factors of problem relate to economic growth. The report has showed that most of the problems of the economic growth were coming from governance. As the research question was asked “How important is good governance for economic growth? Can economic growth be sustained without good governance?” The main answer to this question is “In fact [our] central hypothesis…is that the primary, fundamental determinant of a country’s long-run economic performance is its social infrastructure. By social infrastructure we mean the institutions and government policies that provide the incentives for individuals and firms in an economy.” It means that each government policies must be influences to the development of economic growth, but in order to make it sustainable for long term running of economic, government need to focus on social infrastructure which it will be affected to every institution while the implementation were not following with good governance. Good governance is very important for sustainable development of economic. “The reports correctly note that poor or inadequate governance may not always be the result of venal or rapacious leadership, but because the state may suffer from weak formal political institutions and lack the resources and capacity to manage an efficient public administration”, report said. As some of the literature reviews were raised through different concepts: “Kaufmann and Kraay draw on a large World Bank data set designed to measure the link between governance and development and to monitor the performance of countries”. They track the quality of governance from 1996 to 2003 in some two hundred countries. The quality of governance is divided into six categories aimed at capturing how governments are selected, monitored, and replaced; a government’s capacity to formulate and implement sound policies; and the respect of citizens and the state for the institutions that govern them. The good governance should consists of six measured indicators such as (a) voice and accountability,(b) political stability and lack of violence,(c) government effectiveness,(d) regulatory quality, (e) rule of law, and (f) control of corruption. Beginning with, Roll and Talbott estimate that governmental institutions and policies explain most of the variation across nations in terms of economic development-with secure property rights, business transparency, political rights, civil liberties, and stable rule of law as significant factors accounting for developmental success. It was written in his book, Understanding the Process of Economic Change, Nobel laureate Douglass North reiterates that good institutions beget good governance. Those two literature reviews were showing some of the components of successful economic growth would need good governance. But, what is good governance? What types of policies and institutions have the most positive and measurable effects on improving governance? What kinds of institutional arrangements are associated with growth and poverty reduction? How best to promote and sustain good governance, especially in the world’s poorest countries? Those questions were the problem in the article which had already focused on. The article begin with, Good governance…

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