HIROKAZU MIYAZAKI: I'm Hiro Miyazaki, director of the Mario Einaudi Center for International Studies. It's my great pleasure to welcome you all to this roundtable discussion. This is not just about the World Bank's flagship publication, The World Development Report, but also about some of the most pressing issues that our developing world is confronting today.
And thank you for coming, especially, look outside. It's such a beautiful day. But this is-- we are going to have a really good discussion here about the important issues [INAUDIBLE], with a stellar panel and our distinguished lecturer.
So we have a really extraordinary group of people, a panel, here. So I really don't have much to add. But if I may, I would just like to share with you just one-- something I have learned from my own scholarship on hope, that I have been writing about the role of hope in the economy. And as you probably can tell, the hope really plays a key role in development.
And what I mean by hope is the capacity to aspire or imagine beyond the status quo and what you can see in front of you and really imagine the reality and [INAUDIBLE] that reality. So this will be hope for change.
That hope is really-- can be really deeply, in a consequential way, affected by bad governance and hope for security, hope for growth, hope for equality, hope for fairness, and hope for peace, and hope for change, more broadly speaking. And that hope is really the first thing to be really undermined when governments are corrupt, inept, and misguided. And access to and participation in the public sphere or the policy arena is restricted. So I'm really looking forward to what distinguished speaker and analysts have to say about that, personally.
You have a biography of our keynote speaker in your program, so I will be brief. But I would like to welcome Luis-Felipe Lopez-Calva, co-director of this year's World Development Report. He has deep experience and expertise in poverty and inequality related issues in many of the places that we study at the Center, Europe, Asia, and Latin America.
And, in fact, I would like to say that he was prepared for all that at Cornell, where he received his PhD in economics in 19--
LUIS-FELIPE LOPEZ-CALVA: 2000.
HIROKAZU MIYAZAKI: 2000. So I'd really like to say that we are really happy to have you back here. He will speak first.
And then we'll hear from three distinguished colleagues of mine, Robert Hockett and Edward Cornell Professor of Law at Cornell Law School. He's an expert on organizational, financial, and monetary law and economics.
And from Ravi Kanbur, the PhD professor of world affairs, and a professor of applied economics and management. He's a former World Bank chief economist for Africa and past president of the Center for the Study of Economic Inequality.
And finally, Nicolas van de Walle, Maxwell M. Upson professor of government and expert on political economy of development, especially in Africa. Now please join me in welcoming Luis-Felipe Lopez-Calva.
LUIS-FELIPE LOPEZ-CALVA: Thank you very much for this opportunity. It was mentioned before, I got my PhD here at Cornell. And it is personally very, very rewarding to be back. And also, even though I have made many presentations of the report, the level of the panelists and the fact that I'm back at Cornell, and all that makes it very special for me. So thank you very much for making this possible.
So-- perfect-- during my Cornell time, I had the privilege of sitting in lectures with Ravi, with Gorsuch, and being a student of Gorsuch and Ravi. And I think a lot of the principles that we apply in the report also come from that learning that I went through here at Cornell. So I'm very proud of that.
So as you know, Gorsuch was at the World Bank. And, well, he had the idea of working on this topic. And we started talking about it. And he invited me to be part of this. I think I underestimated how difficult the challenge was going to be. But also, I think I also underestimated how rewarding it was going to be once we actually managed to put this together.
The way I sold the idea of the WDR work to the team, the way I presented it, that came from the conversation from previous WDR directors is that we should see the WDR-- the World Development Report exercise at the bank as an exercise where you try to-- you want to take stock of what we have learned about a specific theme in the last 15 to 20 years. And ideally, the aspiration would be to reshape the way you think about that topic for the next 15 to 20 years. So that tells you how challenging it is, but also how potentially impactful it could be if you succeed. And of course, only time will tell whether we succeeded.
So the main motivation for the report is the idea of policy effectiveness, how we can be more effective in giving advice to policymakers and how policymakers can be more effective in terms of the type of policies they design and implement. So the first question is, I mean, we see a lot of ineffective policies and inefficient policies as well that persist. And yet, they are very difficult to change.
We also see policies that we always claim that they are technically very well designed. And yet, they cannot be implemented. And sometimes we see policy solutions that we believe are suboptimal. Or we don't think that these policies are ideal policies. And yet, they deliver on their objectives. So I guess the question we ask is, so let's try to understand why this happens.
And if you go to talk to people, typically people say, well, you failed because you didn't follow the best practice. Or you failed because there is lack of capacity. Or one typical answer as well is, you failed because there is no political will.
So what we say in the report is, yes, these three things could be true. But having this as an answer is not enough. We want to go a little bit further and understand why policies work differently in different contexts, why capacity is not built, because capacity is stuck. But the decision to build capacity is a policy decision itself. And also, what is this incentive structure and how you can try to change that incentive structure so the political will is there to implement certain policies.
So what we will limit in the report, the normative space of the report, is basically the space for what-- when we say policies are ineffective, we have to say ineffective for what? So we define that every society-- and this is pretty much as normative as we get in the report-- every society cares about reducing violence, about increasing prosperity, and about how that prosperity is shared, and how benefits are distributed in the population. So these three are the main objectives, absence of violence, growth, and equity. And then we're going to assess policies in terms of their effectiveness to deliver on those outcomes.
But then one of the important elements in the approach to this report is that departing from the way it has been done for a long time not only in the World Bank but even in many development agencies, the idea that governance is not government. It's not only about government. So one important element is if we look at the literature, we don't-- we try to depart from this idea that you look at institutions as the object of study. And then you see how institutions evolve over time.
Rather, what we say is we want to focus on actors. And then we say, actors in society reach and sustain agreements. And what we see as institutions, as policies, are the result of those agreements that that reached among actors. And this includes the state and non-state actors. So if we understand better the nature of these agreements and the mechanisms that are used to reach and sustain those agreements, we can understand better the effectiveness of policies. This is one essential starting point of the report.
So these actors interact in a space that we call the policy arena. So understanding-- and that's why that is the point where we try to make two strands of literature meet. One is the literature on development and what are the policies that are effective for development. And we bring all the literature on coordination failures, some prisoner's dilemma, lack of cooperation, time consistency of policies with the literature on power and how power matters for the effectiveness of policies.
So the way to bring these two together, as you will see in a minute, is by trying to understand how the asymmetries in power affect the effectiveness of these policies. And again, I always mention this at the beginning, that the job we have is that we work in an institution where when you talk about power, people can only think of electricity. So the idea of bringing the concept of power at the core of understanding or effectiveness is an important element.
So when we say that we care about how agreements are reached and sustained, we want to understand three characteristics of these type of agreements. One is the idea that agreements have to be sustained over time. We call that commitment. And this is in all the vast literature on this issue.
The second is about how you enable-- how people voluntarily comply with the rules. And this is what we call cooperation. And finally, how policies can shape expectations so that people act in a way that is conducive to achieving the goal. So you need people to invest, to innovate, to save, to act in a specific way. You need to see how you are able to coordinate those expectations. And that's what we call coordination. So these three elements are going to be key to understand the effectiveness of policies.
But then we say, when these actors sit at the table to negotiate what policies will be chosen and implemented, they don't come with the same bargaining power. Some of them have more power to bargain than others. And this is what we call the power asymmetries.
So typically, when we discuss policies, we have emphasized a lot the idea of information asymmetries. So what we say here is we should not care only about the information asymmetry. We should care about the power asymmetries that are manifested in this policy arena.
And we look, to make it more simple, to only three manifestations of these power asymmetries. One particular one, we call capture, which is basically some actors put some barriers to entry into the policy arena. And they basically make decisions that are in their favor. Clientelism, which is basically when the accountability relationship between officials and voters turns into a transaction. And finally, exclusion, which is this idea that only a few actors are allowed in this policy arena.
And our claim, as I will show in a minute, is that these power asymmetries break down commitment, affect cooperation and coordination. And that's what leads to policy failures.
And here, one fundamental instrument that you have to sustain disagreements is law, the rules. So we discuss this idea of form versus function in-- so if you read Chapter 3, which we call The Role of Law, we also try to bring together two strands of literature. Typically, economists, we tend to think in terms of law and economics tradition. But we also try to bring discussions in the socio-legal studies. Leaders should try to have a more positivist approach to law.
So this idea, as you can see here, that basically formal state law interacts with many other normative frames. And it is very unlikely that the law by itself is going to play the role you are expecting the law to play. So we contrast this idea of the rule of law versus what we call the role of law. And we say, law has to order behavior, has to be an instrument for contestation, has to be an instrument to order power. And if the law does not perform these functions effectively, it's very unlikely that you will have this state that we call the rule of law.
These are just some examples of gaps of implementation. So the year in which some gender quota laws were implemented, were passed in certain countries, and the time it took to actually fulfill those quotas. And there are countries where the implementation gap is still there. So it's very difficult to think, as we many times do, that by changing the law, you will get the outcome that you are expecting.
One of the background papers has these results here, just to mention two examples. The bank has this index that we call doing business. So countries try to reform the law in a way that-- so they can improve in their ranking in the doing business index. So we looked at all the changes in law that countries went through to improve their ranking in the doing business. And we tried to see whether they had an effect on the outcome they were supposed to have an effect on.
So this is the outcome. And these are the specific aspects of law that were changed. And we see that, results are very heterogeneous, but they are bunched, in many cases, around zero, so very little effect, on average, of these changes. So even though you change the forum, it's very, very unlikely that you will perform the function. And the question is, why, right?
And then there is this discussion in Chapter 3 about what Frank Fukuyama writes about, talking about what he calls "transitions to the rule of law." The argument is, we understand how countries-- I mean, we understand-- there is a lot of work in terms of how countries transition to democracy. There is little work, even though there is some work, on understanding how societies transition to the rule of law.
And the rule of law, we see it in the report as a norm in itself. The idea-- the rule of law has two characteristics, as we know it. One is the law is applied impersonally. Second is the ruler is also subject to the rule. This, as a norm, is also an agreement. The fact that the society decides that this is the way to implement the rules is also an agreement among actors.
So I will show you one. And this is only a little bit more technical but a very simple way to think about the rule of law. So the way we presented the lack of rule of law as a coordination failure. So here I follow a very simple model [INAUDIBLE]. But there is a more sophisticated model, very similar, in Jean Tirole's theory of collective reputation, the idea, basically, that agents can either behave in an extracted way or build value. And then the idea is whether they would support the idea, the agreement of having rule of law or not.
And you have a very simple game. And then you start with a share of agents who are more for the extractive versus a share of agents that are more into the idea of building value. And with a very simple solution to this problem, you find these two equilibria, because of course, the more people agree with having the rule of law, the more everybody benefits from that. So my best reaction is also to go for rule of law.
So basically, as in this type of model with multiple equilibria, what you have is one rule of law equilibrium, one with no rule of law. And of course, there is a threshold level of a proportion of populations who are in favor of that rule of law that would lead you to the right-- to the societal-- to the preferred equilibrium. So this idea of looking at the lack of rule of law as a coordination failure is something that we present in the report. And the question is how we try to understand better how societies can transition to this notion of the rule of law.
This morning, I was discussing with some students about Brazil. And some people-- Fukuyama has written about this in a book edited by Tito, Cordella, and Kaushik, the idea that, eventually, you reach the point where the share of population that are in favor of the rule of law can lead to the preferred equilibrium. And some people claim, for example that in Brazil right now, the change in the tolerance to corruption, the movements in favor of stopping the way the deals-based equilibrium may be presenting some positive signs.
So we cite Gordon Brown, who says that, "In establishing the Rule of Law, the first five centuries are always the hardest," this idea, basically, that it is a permanent struggle first. And second, the idea that the rule of law is an agreement. And the agreement has to be sustained.
So we're talking about these three elements of the agreement that I mentioned-- commitment, coordination, and cooperation-- I mean, it's-- for this audience, it's very simple to understand the difference. Basically the point, in a coordination game, you have multiple equilibria. And then the question is that interventions can lead to the preferred equilibrium. But then that is sustained because it is an equilibrium.
Whereas, in a cooperation problem, like in a prisoner's dilemma, where someone is free riding has the incentive to free ride on others, the solution to that problem might be different. And we try to classify problems differently, depending on what is the nature of this interaction, because the type of solution to that also might differ.
One example that I like that we use in the report because of the relatively clean comparison is this idea of-- this is about commitment-- the pro-cyclical spending in Chile versus Mongolia. So Mongolia had this extra revenue because of the mining. And then they decided that they wanted to prevent the spending to be too pro-cyclical. So why did they do? They asked the World Bank for advice. And the World Bank brought experts from Chile, where the fiscal rules have been applied very successfully. And they literally copied and pasted the rules from Chile.
So the good thing about this comparison is that the rules for spending of fiscal resources are exactly the same. And with exactly the same rules, the spending in Mongolia continued to be much more pro-cyclical than it is in Chile.
And then we go then to try to understand why. What is breaking down this commitment for it to be less pro-cyclical? And we find these power asymmetries in the back, in terms of certain actors not being willing to actually wait for spending more money, no?
So let's talk briefly about these three manifestations of power asymmetries. So I'll give you some examples and then briefly about what is the type of entry point for change that we discuss in the report. And then I think it would be interesting to hear the comments and open for questions.
So one issue that we insist about the contestability of the policy arena and the idea of capture, who participates in the policy arena is very important. And the idea, rather than-- and I was actually, this morning, talking about this with Gary Fields-- the idea that we don't want to-- we resisted to use the term "inclusive governance," which is everywhere, because there is no evidence that more actors participating leads to better policy.
What we wanted to insist is that the barriers to entry into the policy arena should be low. So if actors want to participate or have reasons to want to participate in this policy arena, they have the institutional channels to do it. So we did this expert survey in different countries with colleagues from varieties of democracy. This is just the simplest table of the results, where people say, so who participates? Who has an influence in that policy arena?
And this can be an indicator of the contestability, even though, again, this is about the number of actors participating. But, certainly, you see that in certain countries, it is perceived that basically there is very little entry into that policy discussion. Whereas, in other countries, this is much more-- there are many more actors participating. And then there is also more [INAUDIBLE], because these experts survey but how this changes over time.
We mentioned, by the way, just to-- it's that I think it's a good anecdote about this contestability and who participates in the police arena-- we have this example, briefly, of the presidential house in a Latin American country, where they interview in a magazine. It has nothing to do with politics.
They interview the chef of the presidential house. And they ask him, so there was just a change in president. So you have to adapt to the new preferences of the new presidential family. And the chef said, well, it's not such a big deal, because the president changes. But the guests are always the same. And I think that's a good example of this issue of who participates in the policy arena.
Briefly, for those who don't know Fiesman's work, this is the exercise down in Indonesia. I think it's a very nice example of the value of having connections or having more influence in the policy discussion. So what Fiesman did is to construct an index of political connections, which is here in this axis. So these firms left least connected. And these firms are the most connected to President Suharto's inner circle.
And this is change in the stock price of these companies, the stock value of these companies in the market. And they looked-- they monitored these changes as Suharto's health was deteriorating. So as Suharto's health was getting worse and worse, firms that were not connected to the regime had normal market variations. Whereas firms that were connected had systematic losses in value, which is a nice way, I think, to try and see how the market is putting an economic value on the political connections, which tells us that there is something about this capture that we should be concerned about.
Of course, the discussion is how this links to inefficiency, and so on. So again, the report goes in more detail in many of these things. I'm just trying to show you the big picture of the kind of things that we did. This is just a rough association between the interaction between the index of commitment that we present with concentration of wealth at the top, where we claim that there is not causality, but an association between higher concentration of wealth at the top and less consistency of policy over time, more volatility in policy.
And one specific example that we presented in Buenos Aires recently is the case of Argentina, where there has been-- I mean, the volatility of policy has been really detrimental to development. I will not go into details about the clientelism, but we have some examples. But basically, the idea is to emphasize that this accountability mechanism between principals and agents in the political market then becomes either a transaction where you basically provide short-term benefits or rents to individuals in exchange for their vote or where certain actors are the only ones to whom politicians respond and not to others. And we look at examples of that and show how that actually affects the effectiveness of policies.
Briefly, on this, because I think it is important, we have this discussion about what is typically called the middle income trap. And from the perspective of the report, what we see is the way we propose to think about this is rather that you want to transition from one type of growth model to a different type of growth model. So think of Latin America.
So you have a growth model based on factor accumulation, investment in infrastructure, education, and so on. And then you want to transition to a model more led by productivity and innovation. What we claim is that you need to adapt certain rules to in order for that model to be successful. And if there is no adaptation of those rules, you get trapped in that transition.
And here, what we show is just that countries that have managed to move up in terms of income group in a 50-year period, it's typically associated with improvement from better indicators in terms of, for example, public sector, so less corruption, stronger constraints on the executive, less censorship of media, and more entry of civil society groups.
So briefly, to talk about the entry points, and I finish. I leave time for the discussion. So what we say is that, typically, you have thought of this right-hand side like the outcome game. So given existing rules, how these rules are applied, and then you affect development outcomes. And these development outcomes, of course, redistribute power de facto in this policy arena.
So this is the typical cycle that we look at. Actually, there is-- you can have a representation of this. For example that's [INAUDIBLE] Robinson discussion.
When we say, well, you also want-- so you also agree on changing the rules. So that's what we call the rules game. And the question is to try to understand when actors are willing to change those rules. So we look at historical examples and try to see what factors are associated with positive change in terms of the rules.
There are these three elements that are associated to the positive change that we offer. One is an effective change of incentives for the actors in the policy arena. The second is that the preferences or beliefs of these actors have reshaped. And there are many reasons why this could happen-- shocks, what we call transformational leadership, and so on. And finally, the contestability part that I discussed before, meaning basically, opening up or lifting the constraints for the entry barriers to the policy arena for new actors. And when new actors can enter the policy arena, change can happen.
So the way we look at this is that sometimes this change in the rules or the positive change in terms of governance comes from agreements among elites. So we have the example of when Franco died in Spain. We have the example of the US. We have many examples where elites actually agree on a change in rules.
So one of the hypotheses there is this idea of the insurance, in the sense that if there is more competition among elites, I want to have clear rules, because I don't want the rules to be applied against me when I am not in power. So having more competition on one of these makes it more likely that rules will be respected, and so on.
The other is changes coalitions among citizens or between citizens and elites. Apparently, the historical evidence is that there are very few, if any, examples of nonviolent change when citizens are the ones organized to bring about change. Peaceful change tends to be associated with coalitions between citizens and some members of the elite.
And finally-- and this is, I think, an important element of the report-- is the role of international actors. And again, this morning, [INAUDIBLE] in conversation with the students about this. So this idea that whether the foreign development assistance is positive or negative and all the discussion about white man's burden and all that. What we very clearly say is that change cannot be imported from abroad. So from the perspective of the report, change can only come from a new agreement among domestic actors.
So in that sense, international actors are not going to be able to bring change. Change can only happen because there is a new agreement among actors. However, you influence change by affecting the relative bargaining power of actors. So through the different instruments that you have as the international community, you either strengthen the relative power of certain actors in that domestic arena. And through that, you influence change.
So we came up with this concept that eventually we were asked to reconsider, and we removed it. But the same way that we have market failures, government failures, and so on, we called it development assistance failure. So we don't use that concept, but we have the explanation in the report, in the sense that if, through your intervention, you reinforce an equilibrium that led to the outcome you were trying to change, it's very likely that you will bring about change. So the idea is that when you intervene with different instruments as an international actor, you should try to understand whose bargaining power you are affecting and whether you are reinforcing the preexisting equilibrium or you are rebalancing. And I think that is an important element in the report.
So four final points, and with this, I conclude. And again, as I said, there is a lot of detail that we can go into. One important element in the report is this idea of, we focus on actors. And obviously, institutions as the result of those agreements among actors. We don't focus on institutions as the object of study.
Second, we emphasize that the issue is not what are the right policies? But rather, to focus more on understanding what is the policy process and trying to see whether the policy process leads to voluntary compliance, and so on, by actors. So in that sense, the best policy or the best rule is the rule that is actually respected by the actors.
Third is that we should emphasize less, even though it's important and it's useful to provide some messages, the benchmarking and trying to say, Mexico is doing like this. And it should be doing like at this other level, because if we compare Mexico to Turkey, then Mexico should be doing such things. I think we have to invest more, or we propose that we have to invest more, in understanding the country's particular historical trajectory and try to understand from there how you can influence change.
And finally, this idea that-- and this is very-- I think it's basically Hirschman in the sense we take this idea that the development process continuously generates demand for redistribution of power, redistribution of resources. And what we say is the way you adapt at the margin to those tensions that are inherent even into the development is what explains the long-term path, rather than necessarily focusing only on shocks.
So the [INAUDIBLE] Robinson story will be critical junctures. A crisis is the only entry point for change. And we say, of course, that's a special case. But actually, you have opportunities to adapt in a more inclusive way throughout in different sectors, in different policies. And I think that adding up all these small adaptations is what explains the long-term path. So Mushtaq Khan, in LSE, when we presented, he said that the report was the manifest for incrementalists.
OK, so I think there is much more to say, but it's good that we are open for a conversation. Thank you.
RAVI KANBUR: We're going to start with you.
ROBERT HOCKETT: All right.
RAVI KANBUR: And then Nick. And then I'll say a few words and then open out. Is that correct? OK? OK, Bob.
ROBERT HOCKETT: So there's so much that could be said, as Luis-Felipe said about this year's report. It's very rich. It's a very impressive document. I'm amazed, actually, that the UN manages to produce something so thorough, so lengthy and so, again, sophisticated on an annual basis. There are many compliments, therefore, that I could give it. I think it's probably more useful for me maybe to signal one suggestion that I'm tempted to make, one critique, I suppose, that might add a bit more value.
So I think of myself as the Howard Dean or Bernie Sanders of most gatherings, in the sense that I recognize the importance of incrementalism and of compromise and of dealing with the world as it is. But I also think it's extremely important all the time to be quite mindful of what the ideals are that we ought to be striving for, what the ideal end state should be so that that way, when we change things incrementally, we can at least be more or less confident that the changes that we're making are moving in the right direction.
With that in mind, I think I would offer one maybe what I think of as a fundamental or constitutive suggestion in connection with the report. It stems from or has to do ultimately with the report's definition of governance itself, which it illustratively and, I think in many ways, helpfully describes as the process pursuant to which actors-- and then parenthetically we're told, state and non-state actors-- reach and sustain agreement.
Now as a realistic matter, I think that's probably a very good definition of what governance really amounts to, as we find it across the world. But as a matter of what sorts of ideals we ought to be striving toward, it seems to me to engage in a category error. And that error is to put public actors or state actors on the same level, so to speak, with private actors, as though within any polity, governance is essentially about a group of people who we call government officials or public officials, who are just negotiating and bargaining and dealing with other parties who we call private parties who aren't associated with government, bust as though they all have the same claims to legitimacy in making decisions that affect all of us, and as if they were all just, again, on the same level, as it were.
I think that's a category mistake for one basic reason. And it's this. I think that a public actor, or a state, to get more general still, is ultimately something that speaks or is meant to speak in the name of everybody. Whereas a private actor or an individual or even an industry group or a firm is understood legitimately to be speaking only in its own name or on its own behalf.
And it seems to me that as soon as you move from a situation in which somebody is speaking on his or her own behalf or an institution's persons are speaking on that institution's behalf, as soon as you move from that situation to one involving somebody who purports to be speaking on the behalf of everybody, all of the people who constitute a given polity, you've made a fundamental shift in perspective. You've moved to a completely different level, so to speak, of discussion. And this is, I think, very important for purposes of understanding what development is, how development should proceed, and how international organizations can best facilitate development in a couple of ways that I'll try to explain quickly and briefly.
So maybe the best way to get at what I'm talking about when I talk about these distinct levels is to reference a course that Kaushik and I actually designed together some years back, that then I've had to teach alone while he's been away, but happily now, he's back. The course is essentially on rational choice in various spheres of activity. You can think, of course, of economics or at least of microeconomics as the theory of choice under various sorts of scenarios or various situations.
And the way this particular course is structured is, basically, it takes place or it occurs over three phases. The first phase is what we call the individual case. It's essentially the theory of rational choice on the part of an individual, just an individual person acting to satisfy him or herself. And the second phase of the course concerns itself with what we think of as the interactive case, the case where various individuals are engaged in various interactions that will ultimately result in some allocation or another of some sorts of benefits or some sorts of burdens. That's essentially the game theoretic case.
But then finally, the third case or the third phase of the course concerns itself with what we think of as the collective case. And this is the case where you have more than one individual, just as in the second phase, where we're talking about this game theoretic or interactive case. Case But there's a fundamental change in perspective, because in effect, what you're talking about when you get to the collective case is a situation where you're not talking about "I" and "he." But you're talking about "I" and "you" or "we," in other words.
So in other words, you can distinguish, when it comes to economic decision making, between three sorts of situations, all of which-- each of which is tractable by reference to a pronoun, right? The individual case is the pronoun "I," the first person singular. The interactive case is essentially the first person and the third person, right? "I" and "he" or "I" and "she."
The third case, which I think is, in a way, the most important of all, uses the first person plural. It uses the pronoun "we," rather than "I" or "she" or "I" or "he." It's about us, so to speak. And in my view, again, that changes everything, because as soon as we're talking about public actors, as soon as we're talking about governments, it seems to me that we're really talking about whether there is a "we" here and whether, in fact, the actor who is acting in the name of the public is indeed acting in the name of "we," rather than just of some sort of sub-national or sub-state sectional interest, as they used to be called.
That changes everything, because I think it also changes in how we have to understand governance. It seems to me that the best way to understand governance is as basically carrying an implicit prefix. When we talk about governance at a national level, we're talking about effectively something that we might think of as collective self-governance. In other words, we're talking about what "we", as "we," are doing and what "we" as "we" ought to do.
In that sense, governance should be contrasted with another word or another term that I think I'll just call "dominion." Anytime something-- some one person or some group of people who fall short of the entirety of the polity, the entirety of all those "I's" who collectively make up a "we," we're really talking about dominion, rather than governance. We're talking about some people exercising dominion over other people, however unpleasant it might be to have to admit that or to say that or to stare it in the face. It just is the case. If you don't actually have agents who are acting in the name of a collectively politically constituted "we," then you actually have some kind of dominion going on.
Another pair of contrasting terms that I think correspond to this contrast between governance and dominion would be the rule of law on the one hand and the rule of men versus the other. Now the UNDR, I think, is very helpful in emphasizing the importance of the rule of law and then emphasizing how important it is to have rule of law, how the rule of law is both a norm in itself and is in a certain sense, a kind of prerequisite. Its realization operates as a prerequisite to the realization of other goals, other needs, other forms, or other developments that we can think of as all constituting development writ large.
The rule of law, obviously, as is well known, is contrasted with the idea of the rule of man, or the rule of people. I think maybe more helpfully, we could say that the rule of law should be contrasted with the rule of any sub-state actor or actors, right? Again, any cross-sectional interest, any individual human being, que individual human being, rather than que agent of the politically constituted "we," the full polity.
Finally, to that pair of contrasting terms, it's worth, I think, contrasting between-- or noting a contrast between two other words. One would be the word "prescription." And the other would be the word "conscription," right?
It seems to me that we have to distinguish between an agent who prescribes something on the one hand, and an agent who simply conscripts other people's wills on the other hand. It seems to me that you have valid prescription, rather than mere conscription anytime you actually have the rule of the law, rather than the rule of man or the rule of persons or people. And prescription is what you have when you have actual governance, rather than, say, dominion.
Finally, the question then becomes, well, how do you distinguish between prescription and conscription or between the rule of law and the rule of individuals or groups or governance and dominion? I think you essentially distinguish that by distinguishing between situations in which a particular directive that's been issued sounds in some universally applicable principle, on the one hand, or sounds merely in some brute preference. Somebody is essentially enunciating of his or her will for what we all do, on the other hand.
We can distinguish between principled directives or principled imperatives, on the one hand and unprincipled directives or imperatives, i.e., name pure conscriptions, on the other hand, essentially by reference to three kinds of generality that any principles directive, any actual prescription, shows or manifests.
One is what I would call situational generality. That's to say, it's a maxim that applies to any situation resembling the current situation in respect of which a directive has been issued. Another is what I would think of as issuer generality, by which I mean, basically everybody-- I'm sorry, I'm almost out of time-- by which I mean everybody is in some sense on board with the directive. Everybody is playing some role in generating the prescription in question.
And then finally, there is the third form of generality, which I think of as recipient generality, by which I mean that the particular directive applies to everybody equally. Everybody is covered by it. So in other words, if you've essentially got a maxim that you can view everybody as, in effect, having issued and everybody also as being subject to, and at the same time, this directive applies to-- basically treats like situations as like, then you have something like principal prescription happening, rather than mere conscription. You have real governance going on. And again, what I mean by that is collective self-governance going on, rather than mere dominion of some people by other people, rather than the rule of persons, rather than the rule of law.
I think it's critical to any real development project in the long run within any polity to ensure that you actually have governance in this sense, rather than mere dominion. Otherwise, it seems to me, you're always doomed to everything is being a case of rent-seeking. Everything is being a cynical exercise of will by some people over others, while sort of clothing it in the beautiful raiment of government action. You basically have to have truly a "we" in every polity that includes everybody.
Now the unfortunate thing, of course, is that every nation that we know of, including quite conspicuously right now, unfortunately, the United States, falls far, far short of that ideal. And it's of course, doubly difficult. So it's difficult, of course, for the US, even, to live up to that ideal, let alone for a country that's just emerging from, say, a situation of dire poverty or dire instability to form a polity that's capable of self-governance in this sense. But nevertheless, it seems to me, it has to be held up as an ideal.
Finally, of course, it's doubly difficult for an institution like the United Nations, which is constituted by all of these imperfect polities, to itself become a spokes institution, let's say, a spokesperson, for this ideal. It is, after all, answerable to its very members. But it seems to me, that all of its members are at least implicitly committed to this very ideal. Anytime we talk about equality or equity or democracy or what have you, we are effectively, it seems to me, implicating that very deal. And I think it's high time that we, as a global community, held ourselves to it.
RAVI KANBUR: OK, thanks, Bob.
NICOLAS VAN DE WALLE: Great. Well, thanks to the Einaudi Center for organizing this very interesting session. And thanks to Luis-Felipe for his presentation.
This WDR is a very interesting document. It represents a master effort to explain development outcomes in terms of governance, law, and institutions in an extremely ambitious way. I recommend reading it. It's full of interesting information. Compared to some of the recent WDRs, it's meaty. It's full of examples. It's full of interesting attempts to capture these very complicated ideas with country examples and empirical variables.
The report is basically a comprehensive review of a very rich period that we've gone through the last two decades of examining the relationship between institutions and development. I want to make three comments as a result of that. I want to first talk about where it fits into this recent theorizing on the role of institutions in development, starting with the work of Douglass North.
I then want to say a word in my seven minutes on what I think its contribution is and then a similarly short word on where I think the shortfalls are which have plagued a lot of this literature, virtually from the outset.
Douglass North, first comment, was not the first scholar to point to the importance of institutions in the process of development. I'm one of the few political scientists here. And political scientists disagree on pretty much everything. But we are united by one idea, and that is that institutions matter. And that is, in other words, that institutions play an independent role in shaping societal outcomes. Maybe they're created by actors and by powerful actors. But they gain independent power, the institutions do, that are not reducible to the original actors.
Even within economics, though, North's book was not completely novel or unexpected. Still, I think it's fair to say that for most of the 1960s to the 1980s, the dominant emphasis in economic growth theory was fixated on issues as capital formation, human capital formation, and micro incentives. And North's '92 book comes in and talks really about the role of institutions.
His book states, with great elegance and clarity, that inclusive institutions that protect property rights are a precondition for growth. He is not always very clear on where these institutions come from and how related they are to the powerful actors that set them up. But he is clear that they do shape the long run development paths of these countries.
This has been evolved over 20 years of economic theory, most recently in [INAUDIBLE] Robinson's work that was mentioned earlier. And increasingly, the main institutional problem is to control the executive and to constrain the executive in a way that protects the property rights of as many people as possible.
To be sure, there have been critics about this idea that you need good institutions. That's a prerequisite of development. Jeff Sachs famously has argued that good institutions are not a prerequisite of development. Poor countries have poor institutions, he says. Rich countries have good institutions. And he views the creation of good institutions as a result of development, rather than its cause.
The original political settlements approach, notably in the work of scholars like Mushtaq Khan, which were also mentioned in the presentation, argued that the focus on institutions was wrong-headed. What was important instead were these intra-elite settlements or pro-growth agreements among a small cadre of elites, and that institutions at best represented these agreements but was never independent of these agreements.
Finally, recent work on China-- I forget the author's name-- is a pretty influential book that has just come out on how China has escaped the poverty trap, argues that institutions co-evolve with the growth process but are not a prerequisite of it. And by the way, the report is great at discussing and bringing in and filtering through a lot of this recent work.
The report really tries and, I think, largely succeeds, something that I didn't think was possible, which was to integrate the political settlements approach, which is entirely actor-based and a more Northian perspective. Institutions matter in the report. But they're largely the result of agreements among political actors.
The report also takes a nod towards inclusive institutions and participation. It actually has good things to say about elections, although I think it's a bit ambiguous on the role of these elections. I would have preferred a stronger commitment to participatory institutions as a prerequisite of development. But compared to political settlements, which Mushtaq Khan has largely dismissed participatory exercises in developing countries as a luxury they cannot afford, democracy is for rich countries, he has argued. And the report really steps away from that. But it does keep this idea of political actors being the key to these institutions. That's my first comment.
The second comment is, what is the contribution here? Well, I think there's really useful progress on these issues and a good deal of sorting through things. I mean, I learned a lot as I read it.
I think two things, in particular, are a step forward, compared to the new institutionalism of Douglass North. One is the role of elites in shaping institutions. This is something that is often implicit in the earlier literature but never made very explicit. And the motivations of the elites in shaping these agreements is, I think, elucidated in a useful way.
Secondly, on the nature of institutions, the relationship between formal and informal institutions, I think the report really takes an important step forward.
A final comment, what remains messy? And let's be clear, this is maybe a series of unresolvable issues. But I see really two problems. One is, I'm not sure that one can use the apparatus advance in the report to make any kind of prediction about where the right kinds of institutions are next going to appear.
The argument that institutions can take any form and play the same function reminds me a lot of structural functionalism, an old theory that students probably have never heard of but which argued famously that all development requires certain institutions to perform certain tasks. But that these institutions can take different and varying forms. The problem then is, how do you know when you have these institutions, other than in the fact that they have sponsored growth? And the approach becomes largely unfalsifiable.
I think there's a lot of this kind of circularity in the agreement. And it's very hard to know-- the report very rarely points to demonstrations of success that are not directly linked to the success itself.
Secondly, the policy implications, how do you nudge societies to move towards better institutions? It seems to me, the report, and I think the presentation today, as well, tended to lose confidence a little bit when it came to the prescriptive side. Now in a way, as an academic, in particular, this doesn't bother me that much, since I think these are incredibly difficult issues. But it is striking, coming from a policy document, how little attention in the document is devoted to policy prescriptions. And I'll stop there. Thank you.
RAVI KANBUR: Thanks.
Well, we want to have some discussion, so I'll be very, very brief. So 20 years ago, I returned from the World Bank, having read the World Development Report 20 years ago. And Kaushik said, there's this great student, Luis-Felipe. Let's go on his committee, and so on. So that's the definition of academic age, when your students have their own World Development Report 20 years later.
So again, I won't repeat very much, a great report. And we've already had some input to it. We organized a mid-term review of the report.
The one thing I want to pick up, really, both from what Bob said and Nick said is, who do we think this report is for? Who do we think this report is influencing? Who do we think this is-- what's happening here?
And I guess I come back to economists when they-- what do economists think they're doing when they do policy prescriptions? Well, we have a model of the economy of some sort. And you may quarrel with it, but it's a model. And then we have an objective function. And typically, for economists, the objective function is some sort of benthamite objective function where it's the greatest good or the greatest number. It's a combination of the size of the pie and the distribution of the pie.
It's wrong to say that economists don't care about the distribution of the pie. But it's that notion. It's the size and the distribution. And you weight the two together. And then you suggest various interventions, which when you feed through the economic model, gives rise to an output. And then you weigh an outcome. And you weigh the size of the pie and the distribution. And you say, this should be done or that should not be done.
And I put it to you when you scratch beneath the surface, that is really what economists have in their DNA. And essentially, we think of ourselves as being the philosopher kings. And the notion of philosopher king, as you know, goes back to Plato. He said that, in order for things to work well in Kallipolis, philosophers should become kings. And kings should become philosophers. In other words, reason has to be married to the power to implement. And the power to implement has to be married to reason. So that's how we think of it, OK?
Of course, the main criticism is, how do you know that what you're suggesting in this thing will actually happen, will actually go? And James Buchanan very famously said-- the Nobel Prize winning economist, James Buchanan-- "Economists should cease proffering policy advice as if they were employed by a benevolent despot,"-- the philosopher king, in other words. "And they should look to the structure within which political decisions are made." And of course, that is part of this exercise, which is that we have to see what the institutions are, et cetera, et cetera.
But then it comes-- that my question then is, what do we think we're doing when we give policy advice? Who do we think we're giving this to? And this goes back to the-- is there a "we"? w Actually, it's a question of "I" pretending to be "we" in this case, because we are the philosopher kings. And we say, this is the right way to proceed.
And I've come across a lot-- and there are a lot of people here with policy experience, and so on-- is when you say to a finance minister, you should do this and this. And he says, I can't do it. I can't do it. Actually, the easy one, he says, I can't do it, because I don't have the implementation capacity. I can't. I don't have the tax inspectors to do what-- the more difficult thing, if I do this, I'm going to put this group against me. And I can't do this either.
And the question is, how do we then respond to that, when the finance minister says that? Do we then say, well, you're a special interest group, or you're whatever, and so on? Or do we then incorporate that? But if we incorporate that into-- don't forget, we are still using as our objective function the size of the pie and the distribution of the pie. We're just complicating the model of the economy a little bit more, so to speak. OK? And that, to me, is a real problem for me. And I've struggled with this a lot and other people [INAUDIBLE]. And I put it to you, Luis-Felipe, how do you struggle with it, is my question.
So I'll stop there and open it out for discussion, because I think we really should hear from the audience in terms of their perspectives. OK, folks, any observations from the audience? And then we'll go to a response from Luis-Felipe.
Good, well, fine. Yeah? No. Luis-Felipe, you can respond, and then we'll do it around.
LUIS-FELIPE LOPEZ-CALVA: OK. Thank you very much. As I say, I mean, this is extremely valuable to continue the conversation about these issues. And I think he's starting a little bit from what Ravi mentioned. And he said that the notion of having a less instrumental perspective, I guess, that's the way a real-- maybe I'm oversimplifying-- but the idea that we could be a little more normative and say, actually, there are actors who are supposed to represent the common good.
But that gets closer to the discussion about this idea of what is good governance. And actually, in a way, the good governance is this idea that, effectively, those who have delegated power have the incentives to pursue the common good.
I think we deliberately-- I mean, in reports, we start by acknowledging that this is the normative case. But we try to give more of an instrumental perspective on how, through these interactions with different actors, you can actually achieve those common goals, even when you start from a perspective in which not necessarily the actors, in their preferences, have this common good. But rather, to try to start like the primitive is actually how you reshape the preference of these actors so, actually, they pursue the common good.
And there was a lot of discussion about that. And there is, for example, one spotlight on what we call ungoverned spaces that was very controversial, because in a way, what you are saying is that there is no such thing as an ungoverned space. And some, for example, people in the board from the Middle East were saying, so basically, you are legitimizing the fact that a non-state actor is taking control of the territory.
And what we're saying from the instrumental perspective, we're not necessarily saying that we are legitimizing that. But rather, that we are acknowledging that, in some cases, non-state actors actually have the control over the territory. So I was, last week, presenting in Colombia, for example. And in the context of the peace agreements, we were discussing this notion that it would be very difficult for the government to achieve the peace agreement they reached without having gone through a process in which the state regained the presence and the control over the territory.
So I know. I take your point, and I think we could have run that a more normative way. There are also reasons, to be honest, within the political economy of the bank itself that will prevent it from being so normative. And I think there are also intellectual reasons to believe. Like, for example, you will see a report on governance that doesn't mention the word "democracy," which is something we have been criticized for.
But as I always say, we talk about the constitutive elements of democracy and how they matter for long-term achievement of development goals. We talk about the importance of voting. And you say that we could have been more explicit about the fundamental value of participatory processes, including voting.
But in the Citizen Engagement chapter, we say, there are four ways in which citizens can influence policy-- voting, political organization, social organization, and public deliberation. And what we argue, and we go one by one, discussing why some of them can actually fail in their capacity to shape the outcomes, precisely to make those who have delegated power internalize the common good.
And what we say is, you need all of them, because in different circumstances-- and I think in many countries, we are seeing that. They play a different role. Sometimes voting is ineffective. You have political registrations that can constrain power. Or you can have social movements to constrain power. Or you can have public deliberation to reshape the preference.
We insisted in the public deliberation part, because I think that the most traditional literature in political science is about aggregation of preferences. And this idea that you can also reshape preferences through public debate was something we wanted to emphasize. So even though we're not normative, I would argue that we do have a very strong case for democratic instruments to be very valuable in shaping with outcomes.
But we have to-- we deliberately tried to do it from a more instrumental perspective, even though at the beginning, where knowledge of these things matters. So even when we talk about rights, and so on, somebody, actually, in the consultation said, it's interesting to see World Bank using the word "rights" without being preceded by the word "property." And I think that was an interesting point.
So that's one element. The other is that maybe we could have emphasized a little bit more, but it's there, the idea of the corporation being driven by legitimacy and the discussion of legitimacy, because I think that also leads to this-- even though we say form and function, and we say function matters more than form, I think the issue of legitimacy is at the core of the whole discussion.
And then we talk about process legitimacy versus outcome legitimacy. And this is, for example, when you talk about states that are less "democratic" in the iterational sense, but they deliver in terms of the outcomes, we still insist there is a legitimacy deficit through process. But that also helps us respond to Sachs. When Sachs says, well, poor countries have bad institutions. So somebody has to come and deliver the outcomes. And then they will start building.
What we say is, in context in which commitment capacity is weak, in terms of building outcome legitimacy, you have to build legitimacy through process. And maybe by having more instruments or participation and so on, you can try to generate dynamics of people being willing to abide by the rules. So this micro perspective on how you can try to trigger positive dynamics in terms of people being willing to be part of the social contract.
And I finalize by talking about this idea of what is called in the report how do you experience the state and how that matters for your willingness to cooperate. I think maybe there is this book on experiencing the state, where am weighing one chapter, for example, the idea of how Nehru, in India, talked about this big infrastructure project as being the-- in the public imaginary, it was the symbol of development and the dams, big constructions.
But then the idea is to look at how a community actually perceives the construction of this big infrastructure. And it's a completely different story in how this community perceives the state through these investments. Well, the idea that you actually wanted to create this idea of development through state action, you are actually creating an idea of the state as a threat. So we talk about this, because I think it's very important to understand when you talk about public service and then you put the chapter, and so on. How people experience the state really matters for their willingness to respond positively to cooperation.
One comment on when you talk with policymakers, and policymakers tell you, I cannot do this because there is this interest group that is going to block it. I think-- I mean, we don't have recipes for that, of course. But I think there are some ideas on how to try to think carefully about the power imbalance that you are facing and how you can have certain instruments to try to, at least at the margins, rebalance.
Something that Shanta, who will be here tomorrow, has been insisting that we mention in the report, for example, is the incumbent bias in terms of how international organizations interact with governments in the sense that you deliver knowledge and financing. And you deliver it to the incumbent in the domestic context.
So basically, you are reinforcing the power of the incumbent, because you are giving these two things bundled. And Shanta has been insisting that we mention this in the report, that maybe we, as the World Bank, and many other institutions, could make a better effort in trying to deliver knowledge and information in a more competitively neutral way.
I mean, the instrument requires that the financing goes, of course, to the incumbent. But you can have a much better-- you would do a much better job in trying to deliver information, knowledge, and trying to actually create spaces for deliberation so you can actually bring other actors into the policy discussion. Maybe that is something-- a little bit of the more prescriptive thing that we say. But I think there was a deliberate decision also not to go into prescriptions because of the difficulty of the matter. And I think it's very context-specific.
RAVI KANBUR: I have I have just one observation on this, because there are quite a few boxes and things with titles like "advice to reformers." And, of course, every World Development Report has that. And that's the point.
So first of all, what do we mean by "reformer"? Presumably, it's somebody who has the same objective functions as you. There are many reformers who you wouldn't want to be seen dead collaborating with. So that's point one.
So first of all, you identify somebody who has the same objective function, so to speak, as you. That's the reformer. That's a good reformer that you want to work with.
And then one gives advice to reformers, what exactly is one doing? So you're going to this finance minister, let's say, who is at the top of the greasy pole, precisely because he or she understands all the inner nuances of how this thing works. And then we say, well, what you should be doing is having this type of institution or that type of institution.
So it could be that the person says, oh, I never thought of that. This is really fantastic, whatever. I will say, I haven't had that reaction. Typically, the person would say, if I did this, I'll be strung up in the streets.
That's when, I suppose, the outsiders have to decide, is this our type of reformer? Or is this not? So those are the things that certainly I struggle with And I'm sure other people in the in the room struggle with. But when one says, "advice to reformers," that then leads to a certain change.
But anyway, are there other observations? Or Nick and Bob-- yes, Kaushik, please.
AUDIENCE: I actually have a comment from what you were just talking about. From my policy experience, there's something that you encounter all the time. Very concretely, one example was when the oil price was being put on a market-- oh, so sorry, I didn't see this.
But there was something, market pricing of oil. There was a reaction from-- very similar to what you're saying from the Finance Minister of India-- saying that tomorrow there will be a proper strike across the country. What do you advise me on how do I handle that, if you're going to allow oil prices to go out on the market floor?
From which I thought that, really, one important thing that you ought to do is have just the president, the reformer, the political leader addressing the people. Let opinions form. And this has been written, of course, endlessly. But from my own policy experience, I feel that we talk too few times directly to the people. And that is something that you need to do through these documents and otherwise. People who put the restrictions on the policymakers and the reformers, which prevent them from doing, you do need to make an even greater effort to reach out to them.
RAVI KANBUR: So Bob, Nick, did you have any further thoughts?
ROBERT HOCKETT: Yeah. I mean, just a quick one. I mean, I think Kaushik's point is exceedingly well taken here. I think we've got into a habit of essentially accepting things more or less as they are and then trying to optimize what can be done, given things as they are. And again, one doesn't want to be uncompromising all the time. Or else, when ends up being marginalized and just looked at like a scold.
But nevertheless, it does seem to be important to just keep hammering away whenever possible at the fact that institutions as we currently find them, and allocations of power as we currently find them, and the way of doing things that we currently encounter, in many ways, falls very far short of any kind of-- what you would expect to happen in any sort of ideal polity where indeed every citizen is an equal of every other citizen and where government agents truly are agents of all of us, again, a politically constituted "we."
And one way of reminding ourselves of the need to keep making that kind of appeal, it seems to me, is to do something along the lines of precisely what Kaushik noted. Speak directly to the people.
Another way to do it, I think-- I find this helpful in all sorts of situations-- is act as though you assume that any government official you're talking to actually does believe in these very ideals. And speak to that better person who's sort of buried within that person.
And if it turns out that that person is doing things all the time that fall short of this ideal, notwithstanding the fact that you're talking to him or her as if he or she believed in these ideals and was pursuing them, the contrast between what you're complimenting them for or assuming of them on the one hand and that what they really are on the other, presumably will become increasingly unbearable to that person, him or herself.
He or she is going to realize, oh, my god, I I'm a hypocrite. Here I am nodding along with this person's complimenting of me for assuming that I share these basic values. And yet, my god, what I did yesterday is completely out of conformity with these values. What I did yesterday was entirely for myself or entirely again for some sort of sectional interest that bought me, rather than for the polity as a whole.
So it seems to me that it's worth constantly keeping that ideal in mind and using various strategies to ensure that it's always salient, whether we're preaching it on the one hand or whether we're just talking to people saying, well, just between you and I, of course, as another person who believes in democracy and the rule of law and that no one citizen is better than another citizen or no one citizen is categorically more deserving of benefits or of burdens on another citizen, I think that such and such would be a great idea. And as soon as you say to somebody or talk to somebody that way, like, oh, yeah, you're a fellow sharer of this particular ideal, that itself, it seems to me, puts pressure on that person to act more in conformity with it.
AUDIENCE: Hi. I'll keep it really short. I'm currently a PhD student in applied economics and management and one of Ravi's students. I had a question which was broadly based on the process of developing the Development Report, because you're privy to that. You're on the inside. And I was wondering if you could answer this question.
Going back to what Kaushik said and what Ravi said about the political economy and decision making, and how the objective function can become a little more complicated when other factors are involved. Even when you're working on the Development Report, the World Bank is not a group of just technical government-specific. It's a politicized process as well.
So I was wondering how that experience has been for you while working on the HDR. Also, going back to the point that you made during your presentation about return [INAUDIBLE], which was contentious. And if you see that, and I think you said that [INAUDIBLE], according to [INAUDIBLE] as the influence of outside actors, and if that can form [INAUDIBLE] process. Have you or the-- have you thought about how that might impact your organic [INAUDIBLE] within specific countries?
RAVI KANBUR: Let's have a comment from Ernest, and then you can respond. Ernest, did I get you? Could we have the mic here? Bring the mic here.
AUDIENCE: One more.
RAVI KANBUR: One more. I'm exhausted.
AUDIENCE: Thank you very much, yes. The one point I will have this evening is that the leadership, the rule of leaders, I believe [INAUDIBLE] where we assume that the [INAUDIBLE] assume, provided by him or her. And then he comes back or she comes back with an excuse or [INAUDIBLE].
I would have thought that the proper response from the [INAUDIBLE] would be, well, [INAUDIBLE] some resistance from this interest group or that interest group. But [INAUDIBLE]. That's leadership, really. And then that's something that I find increasingly difficult to find at the [INAUDIBLE] parts of the world, here in Africa, where they won't take responsibility.
And we see how they invest your money, in the different interest groups. [INAUDIBLE] on that. So they build resistance. We accept it. We live with it. How can a report like this, one, by some kind of-- or how to manage these kinds of difficult situations, where we are [INAUDIBLE]?
RAVI KANBUR: Thanks. So Luis-Felipe, we are coming to the end of the thing. But why don't you respond to those two questions? Are there any other questions from the audience? No. OK, so Luis-Felipe, why don't you conclude it?
LUIS-FELIPE LOPEZ-CALVA: So one point that I think is interesting about Professor Hockett's comment about you are talking to the better self of the person you are talking to. No, but that assumes that there is a set of values that, in principle, should be shared. And I was in a retreat two weeks ago, regional managers and directors. And one country director was saying, I'm facing a government that, really, it's not that they don't want to do it. They don't share our values.
So the question that he was asking to the team was saying, so should we find opportunistically and try to support those things in which we also believe? Or should we just refrain from interacting with them, because actually, they do not share our values? Honestly, they don't believe that they should be pursuing the same goals as we think they should be pursuing. And I think that's even a more difficult challenge. But anyway, so that's a very interesting discussion.
The comment on the process of the preparation of the WDR itself-- and we can talk a bit more about that-- if I understand correctly, your comment, I think, shows is a step forward, I think, for the bank and for many other [INAUDIBLE], but particularly for the bank. When we go and present this to other development practitioners who are partners for the bank, many of them say, yes, as also was said before. Many of these issues were already in the literature.
But the fact that the bank talks about this openly in its main flagship report also opens the door for other actors to start talking about this issue and the importance of these aspects for the effectiveness of policies. So that made the process difficult internally. But I would say that, internally, within the bank, it's a natural process of discussion, but also externally. But I can tell you that many of our partners have seen the fact that the bank is talking about these issues as a very positive step forward.
They use also now the process of internalizing this and the way we think within the bank. So there is a process that we call operationalization process, whose first step is to-- Shanta calls it, putting this in the water system so people actually think differently about how to provide advice and all these elements of what it actually means to provide advice and to whom and who are the actors you want to interact with and bring more into the discussion.
And one final point about the leadership, we do talk about this when we talk about reshaping the preferences and the beliefs of society. And we talk about leadership as the literature does. We talk about transactional leaders, who are people who can read the nature of the game and turn zero sum games into positive sum games and reach deals and may get things done versus leaders who are more transformational leaders, who are the ones who have the capacity to really reshape the way people think or put people together in terms of one specific objective.
So we discuss that. But we also acknowledge that we don't know how to create leaders. So there are some hypotheses. So Roger Myerson claims that decentralization is the best way to eventually have a "lab" for leaders, because then local leaders become, eventually, national leaders. And then by natural competition, you are supposed to have better quality of leadership if there are more possibilities to develop leadership. But this is an idea that has not been tested. You really don't know how to.
So we talk about the fact that we acknowledge that leadership can be very important in these processes. But also, it's very difficult to give advice in terms of leadership, because we don't know how to create leaders.
RAVI KANBUR: Well, friends, it's really great that one of our own has led this year's World Development Report. So let's congratulate him and our speakers.
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The Einaudi Center for International Studies hosted a roundtable on September 25, 2017 to discuss The World Development Report of 2017. The keynote speaker was Luis-Felipe Lopez-Calva who has been the Lead Economist and Regional Poverty Advisor in the European and Central Asian region and, until 2013, was Lead Economist in the Poverty, Equity and Gender Unit in the Latin America and Caribbean PREM Directorate at the World Bank.
Luis-Felipe Lopez-Calva served as Chief Economist for Latin America and the Caribbean at the United Nations Development Program (UNDP) from 2007 to 2010. He has been an Ivy League Exchange Scholar in the Economics Department at Harvard University, as well as Visiting Scholar at the Center for International Development at Stanford University and the World Institute for Development Economics Research (WIDER).
Panelists included Robert Hockett, Edward Cornell Professor of Law, Ravi Kanbur, T.H. Lee Professor of World Affairs, Professor of Economics, and Nicolas van de Walle, Maxwell M. Upson Professor of Government.