I have always been interested in institutions, although I haven’t always been aware of it. As a child I remember wondering about the logic which underlay the admonition to keep one’s elbows off the dining table. I never dared ask, as my father was somewhat authoritarian. I remember thinking to myself, well, who says so? Where is this written down? It was certainly not in the Bible, one of the few books in our household, of which we owned multiple copies in many different versions. Then there was the rule about not having a bath for at least 30 minutes after a meal. At least that had some (limited) logic as one may – I don’t know – somehow get cramp and drown.
Today, and for the last twenty-five years or so, institutions and how they affect political, economic and social life are a major focus of my job. Which rules are obeyed and which ones are ignored, and why? What are the norms and values of a society? How do they play out in collective life?
I am confident today, in 2019, after all that has been written and published about the power of institutions, that most of us who work in ‘development’ (certainly the couple of dozen or so people that may be reading this blog) think hard about the role of institutions when we make country visits. I am aware that it can be a profound mistake to reach early judgments, let alone conclusions, regarding the structure and patterning of institutions in any country. But I must admit I cannot help myself. On the journey from the airport to the hotel in town, my attention is always focused overwhelmingly on the traffic, and drivers’ behavior. It is both fascinating and telling.
Take Jakarta. The huge beating heart of Indonesia. 30 million people live in the journey-to-work area. And it shows. Every time I arrive it seems that all 30 million of its denizens are on their journey-to-work. Despite significant road investment, traffic is log-jammed. This is where it gets interesting. How do drivers respond? To what extent are the formal rules of the road followed? What happens when they are not?
The most telling behavior is at cross-roads with traffic lights (robots to some of you). Traffic-lights are only very loosely ‘obeyed’. Each and every driver will – until it is no longer possible – ignore the red lights and enter the ‘no-go’ zone at the heart of the cross-road, even when they cannot exit on the far side. This of course prevents the cross-ways traffic from moving. So, it slows everyone down. A moments reflection tells you that this is a classic collective action problem. It is in the interests of each individual driver to make as much progress as they can. If they obey the red light they will be passed by a horde of cars and thus lose considerable ground. It makes sense for them to plough on into the middle of the cross-roads and inch their way forward, and just ignore the blockage. It is only when all drivers simultaneously stop at the red light at the moment it changes to red will the blockage be removed and all drivers will benefit. But there is no incentive for any individual driver to be the ‘first mover’ (well the ‘first stopper’ anyway). Just the opposite in fact.
Once the traffic starts moving – and if one is lucky enough to be on a two- or three-lane main road – another norm stands out. I was always taught to drive between the white lines on such roads. They are called lanes. One stays in one’s lane. In Jakarta the white lines are there for a different reason. They are direction finders. One drives with the white line underneath the middle of one’s car. Doing so maximizes the options as one comes up to the next blockage. Not only does it prevent cars behind from overtaking (or undertaking) it gives one the choice of veering left or right into the lane with the shortest queue right at the last moment. Again, individual interest dominates over collective interest.
The difference with Australia could not be starker. Here (certainly in law-abiding Canberra) there is an absolute strictness in following the formal laws of the road. There is little, if any, forgiveness if they are broken. In Jakarta the opposite applies. There is little or no respect for the formal rules of the road, but huge tolerance and forgiveness. Drivers appear unfazed when their route across the junction is blocked by drivers who do not stop at the lights. There is no irritated hooting when a car cuts across one’s path; indeed, in most cases drivers will slow down and let them in most courteously.
I know which set of institutions I prefer but others clearly have different views. Who am I to try to shift these rules and these norms?
Working paper Five, now uploaded on the Governance Soapbox website, is a slightly updated version of a paper I drafted in 2005, at the request of the DFID’s then Chief Economist, professor Adrian Wood. Adrian was, in my view, the most effective and influential Chief Economist DFID ever had. He had a broad range of interests, was encouraging to all staff, and grappled with the operational realities of delivering better development assistance. He asked me to write something about state-building, institutions and capacity development. This is what emerged.
The paper is not about why institutions matter. That is taken for granted. The paper is about different categories of institutions, and why the ones that are most susceptible to influence by development agencies are the ones least likely to bring about fundamental change – and conversely, why the institutions which donors can influence are the least important in changing the norms and values that really matter (like stopping at red lights and keeping one’s elbows off the table….).
The paper builds on Fukuyama’s four-fold categorization of institutions:
- organisational design and management;
- political system design;
- the basis of legitimation; and
- cultural and structural factors.
Fukuyama argues that it is only organisational design and management that are, in any way ‘transferable’, while the other three are both more influential in influencing individual and collective behavior, and less open to planned external action.
The paper has two broad conclusions. The first conclusion is that we (donors) need to be far less hubristic: we need to accept that we just do not know whether one set of (successful) rules and norms will work in a different context. We need to appreciate that we cannot say with any degree of confidence that a specific rule or norm will be effective in another context. The second conclusion is that, given donors are so wedded to the attempt to influence organisational design and management, we need to be far more informed and critical about the specific nature of the changes being proposed. There is a body of knowledge about ‘capacity development’ that donors appear to be intent on ignoring that should not be ignored. But it needs to be appreciated and understood first.
 In the Northian, ‘rules of the game’ sense