Public Management and Administration - Owen E.hughes

Public Management in Developing Countries 229
A major part of the new public management as applied to developing countries
is the increased attention paid to what governments do. If in the traditional
model government was large and all-powerful, developing countries would
have to accept a facilitative role and not a role that was more direct. In its World
Development Report of 1997 the World Bank argued:
An effective state is vital for the provision of the goods and services – and the rules and
institutions – that allow markets to flourish and people to lead healthier, happier lives.
Without it, sustainable development, both economic and social, is impossible. Many said
much the same thing fifty years ago, but then they tended to mean that development had
to be state-provided. The message of experience since then is rather different: that the
state is central to economic and social development, not as a direct provider of growth but
as a partner, catalyst, and facilitator.
Markets were to be encouraged, not discouraged, and the role of government
was as a facilitator in economic development rather than a competitor.
The role of government was seen by the World Bank as: (i) establishing a
foundation of law; (ii) maintaining a non-distortionary policy environment,
including macroeconomic stability; (iii) investing in basic social services and
infrastructure; (iv) protecting the vulnerable and (v) protecting the environment.
A foundation of law is required for markets to work at all. This includes
establishment of property rights, protection of property rights from criminals
and a fair and reasonable judiciary. Corruption is a problem of the law and it is
one that eventually reduces the ability of entrepreneurs to prosper. Markets can
only work if there is enforcement of contracts through the legal system. Some
certainty is needed in economic policy to encourage investment, the absence of
which makes it hard for any country to engage in growth. Infrastructure is
needed as well and may have to be government provided. As Grindle argues
(2000, pp. 180–1):
In most countries, introducing a market economy also required major institutional innovations,
such as the development of independent central banks and tax agencies, stock
markets, and regulatory bodies for privatized industries and financial institutions. In addition,
many countries undertook institutional changes to improve legal guarantees for contracts
and property rights, essential underpinnings of capitalist economies. In comparison
with policy changes, most of which could be introduced and take effect in the short term,
institutional changes required time and ongoing effort to train staff and later the behavior
of economic agents to reflect new rules for economic transactions.
The role of government was to change from that of the post-independence
period, but was also quite different from the small government approach tried
in the 1970s and 1980s. Stiglitz argues there is a new agenda for development
(2001, p. 346):
It sees governments and markets as complements rather than substitutes. It takes as
dogma neither that markets by themselves will ensure desirable outcomes nor that the
absence of a market, or some related market failure, requires government to assume