Chapter 1 Introduction

Chapter 1

Introduction

R. N. Ghosh and M. A. B. Siddique

I

The question may be asked, why is it important to discuss good governance as a prerequisite for sustainable and environmentally friendly development?

The answer to the above question lies in the historical experience of failure to achieve economic growth by many countries of Africa, Asia and Latin America in the past several decades. Since the end of World War II, the economic literature on development focused attention on key economic and demographic variables that affect development. For example, it was argued, following W. A. Lewis, that low income countries did not generate sufficient domestic savings (and investment) to bring about the necessary transformation from a low to a high income economy. Hence it was argued that such low income countries needed foreign capital and know-how to overcome the savings bottle-neck. However, despite the flow of massive amounts of foreign capital to many low income countries in Asia and Africa, many of these countries failed to record any significant improvement in the standards of living of the people. Injection of foreign aid from the international financial institutions and the OECD countries had only significantly benefited minority and vested groups, who held political and economic power, in many of the low income countries. These minority and privileged groups spent their wealth on “conspicuous” consumption of imported luxury goods; and they also engineered to spend huge amounts of money on military hardware and unproductive defense

services in order to project an image of major military powers; or they spent money on “monument-building” activity such as building ultramodern towns with luxury buildings and skyscrapers for the elite class.

Demographic factors were also cited in literature to explain why low income countries were unable to develop rapidly and reach the “take off” stage. An increase in real per capita income in a country of, say, 3% every year would be completely offset by an annual population increase of 3%. Therefore, it may be argued that a strict population control policy may be the answer to overturn the process of a very slow rate of economic growth in the less developed countries. Indeed, these countries were faced with “population explosion”, not so much due to an increase in the birth rate but due to a dramatic decline in the death rate in the post-colonial period of the 1950s and 1960s.

However, the general theory of the demographic transition states that economic development itself, in its initial stage, causes a spurt in population growth, and that the birth rate would tend to decline, — along with the decline in the mortality rate, — as the process of development would reach from an initial to its final stage. While population control policy is an essential requirement for sustainable development, it is now recognized that such policy in itself, however effective it is, would not be a sufficient condition for economic growth.

By the early 1990s, there was a consensus among economists and political scientists that the failure of economic development to take place in many countries of Africa and Asia must be explained in some other way. In 1992, the World Bank published its report on Governance and Development in which it focused its attention on the topic of governance as a necessary precondition for development. In that Report the World Bank explored the meaning of governance and why it was important for long-term sustainable development. The Bank defined governance to mean the manner in which power was exercised in the management of a country’s economic and social resources for development. The 1992 Report of the World Bank concluded that if sustainable development was to take place, a transparent and predictable framework of rules and institutions for the conduct of public and private business must exist.

In a subsequent report entitled Governance: The World Bank’s Experience (1994), it was stated that “Good Governance is epitomized by

predictable, open, and enlightened policymaking (that is, transparent processes); a bureaucracy involved with a professional ethos; an executive arm of government accountable for its actions; and a strong civil society participating in public affairs; and all behaving under the rule of law”.

Indeed, it is possible to argue that good governance would need the three arms of government, viz. the executive, the legislature and the judiciary to have separation of powers. These three arms should work independently of one another; and work in a transparent manner.

Following the lead of the World Bank, a general consensus has now emerged that good governance is an important element in a complex process of economic change. Savings and investments, and population control measures cannot sustain development without efficient management of resources through good governance. To achieve a long-term process of development it is necessary to have an open, transparent and accountable administration that is free from corruption. In other words, good governance is the key to sustainable development.

II

The papers included in this volume were presented in two major international conferences, one held at the University of Western Australia (UWA) in Perth (Australia) in June, 2009, and the other that followed in Kolkata (India) in December, 2009.

The two international conferences were able to bring together a large number of participants from many countries, mainly from South and South-East Asia. Many of the participants included high officials from Australia and Asia. Thanks to a very modest contribution made by AusAid in Canberra, it was possible for the organizers of the Perth Conference to invite some distinguished participants.

The main theme of the two conferences was whether or not corruption in public office (or, in other words, the absence of good governance) might inhibit economic growth in a country. The general theme was considered in a major paper by Robin Ghosh and Abu Siddique. Although Ghosh and Siddique were primarily interested in exploring the various quantitative measures of corruption, the conclusion emerging from their paper pointed towards the long-term evil effects of corruption but argued

that a limited level of petty corruption did not necessarily have an adverse impact on economic growth, at least in the short-term. In his paper on “Corruption in Bangladesh”, Abu Siddique argued that corruption could lead to misallocation of resources, or be harmful to innovation, thereby inhibiting long-term growth.

Corruption would of course adversely affect the poorer sections of a community who would be asked to pay a bribe to get essential services like water, electricity, and health and educational services. In other words, the economic burden of corruption is disproportionately high on the economically disadvantaged people.

It is not easy to define corruption easily. Basically, if a person uses his/her public office to make private gains, it would be considered as an act of corruption. The widely accepted definition of corruption was given by UNDP in 1999 to refer to “the misuse of public power, office or authority for private benefit — through bribery, extortion, influence peddling, nepotism, fraud, speed money or embezzlement”. By definition, then, one cannot be corrupt if he/she did not have an authority to make private gains. Therefore, very poor people who hold no public office of any influence cannot be corrupt.

Indeed, corruption was widespread in the West, prior to full industrialization that led to very substantial improvements in the standards of living of the ordinary people. Petty corruption virtually disappeared in the developed countries of the West only after a very significant long-term rise in real incomes and standards of living. It is possible to argue that corruption cannot be weeded out by legislation and political posturing.

A negative impact of corruption is that it is inevitably linked with crime and eventually with the corruption of the judiciary. In a brilliant paper, Rimawan Pradiptyo has examined how corruption has spread widely in Indonesia. Pradiptyo has done a high level of original empirical research to establish his case with reference to his country.

A major finding of Pradiptyo is that the sentences passed by the judges in corruption cases in Indonesia are generally lenient towards defendants with particular occupations but harsher toward others. The Concluding chapter contains a more detailed summary of Pradiptyo’s paper.

Derek Aldcroft’s paper is the only one in the volume on Africa. He examines how what he calls negative sovereignty in many countries of Africa has impacted on good governance. He concludes that despite a very bleak picture in recent years, Africa has a great potential and that it is a rich continent both in terms of natural and human resources.

The volume includes two similar papers from two senior officials from the Police Service in West Bengal, Gautam Chakravarti (who was the Commissioner of Police in Kolkata, India) and Surajit Kar Purkayastha (who was the Inspector General of Police in West Bengal, India). In the papers they presented, they examined the regional variations in the level and impact of corruption in India. Kar Purkayastha conducts a sample survey of a cross-section of the people to find out the community’s perception of the interrelations between crime and corruption. Chakrabarti also conducts a similar sample survey.

During the discussion sessions in Kolkata in December, 2009, it became apparent that the participants in the Conference had differing views on the prevalence of corruption in India. While Robin Ghosh took the position that there was a positive correlation between appalling poverty of the people and the level of corruption, especially petty corruption, other participants took the view that the poor people are generally more honest and more God-fearing than those who are supposedly in the middle class with a better exposition to education.

III

The present volume contains a total of 10 papers. All these papers were sent to independent reviewers for assessment and then selected for publication. All authors were given an opportunity to revise their own papers before the final publication of the volume.

In presenting this volume to general readers, we are aware of the wide range of topics and areas covered in it. However, the present volume must be seen as a continuation of the research work that has been carried on by a group of dedicated researchers at the Business School at the UWA. With a modest seed grant from AusAid in Canberra in the 1990s, a small group of economists at UWA began to search for the interrelations between good governance and economic development. Such research efforts led to the

organization of an international seminar in Perth in 1996. The purpose of this seminar was to bring together leading experts from many disciplines and professions to discuss “Governance Issues and Sustainable Development in the Indian Ocean Rim Countries”.

The Seminar in 1996 led to a major publication entitled Good Governance Issues and Sustainable Development: The Indian Ocean Region (Atlantic Publishers, 1999). The present volume is complementary to the research work that was done earlier and led to the publication in 1999. The conclusion emerging from the present study is that good governance is probably an essential precondition, though not a sufficient condition, for a long-term sustainable and eco-friendly economic growth in a country.

In presenting this volume to the general public, we hope that the diverse issues raised by the different authors would provide food for thought and lead to further discussions on how crime and corruption could be prevented by good governance and thereby create a suitable environment for sustainable development.

We do regret the long delay in bringing out this publication so long — nearly 5 years after the two international conferences were held, one in Perth and the other in Kolkata. Despite this delay, we hope the papers in the present volume have considerable relevance to the situation prevailing in many of the countries of Asia and Africa today.