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Author Topic: Conversation with Shanta Devarajan, Chief VP, MENA, Economics, World Bank  (Read 10841 times)

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SDevarajan

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Re: Conversation with Shanta Devarajan, Chief VP, MENA, Economics, World Bank
« Reply #15 on: February 25, 2015, 14:09:41 GMT »
Reply to John Short (Question #4):

John, while I agree with the thrust of your comment, I would question the distinction you make between the policymaking environment and the technical aspects of delivering policies.  Often, this distinction is part of the problem.  The policymaking environment (especially if driven or dominated by external actors, such as aid donors) yields policies that are not implementable.  Your example of program budgeting is a case in point.  I think the policymaking environment should be infused with people (like yourself?) who have a clear sense of what is feasible and what is not, and these questions should be asked of those designing the policies beforehand.  There is a second, related problem with the distinction.  Both policy design and its implementation are replete with political interests.  Some of these political interests are shrewd enough to realize that they can "give up" something in the policy design phase, only to recapture it in the implementation phase.  For instance, those opposed to labor regulations may agree to a tightening of these regulations in the policymaking process, knowing full well that the new regulations will never be enforced.
« Last Edit: February 25, 2015, 16:36:56 GMT by Napodano »

SDevarajan

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Re: Conversation with Shanta Devarajan, Chief VP, MENA, Economics, World Bank
« Reply #16 on: February 25, 2015, 14:22:13 GMT »
Reply to Lewis Hawke (Question #6): 

Lewis, I would agree that a systems approach can take us a long way towards identifying the distortions in the system and ways in which they could be remedied (and the political obstacles therein).  But two words of caution:  First, I'm not sure the systems approach you have in mind (which derives from PFM) can capture all the distortions, or even some of the major ones.  For instance, about 80 percent of health spending (even by poor people) for curative care is in the private sector.  A system approach that follows where public money is allocated would miss this salient fact (the Minister of Health in one country where we derived this result couldn't believe it, until we pointed out that all the information he was getting was about the use of the public clinics in the country).  Secondly, while everyone would agree that a systems approach is better than a piecemeal approach, the former is often seen as complex, time-consuming and expensive.  And there is pressure "to get something done."  So agencies opt for the piecemeal approach, saying that they will eventually get to the systemic approach.  This is where what you call the "straw man" comes in.  The piecemeal approach sometimes exacerbates the existing distortion (for instance, we make sure the public money reaches the public clinics, even if the doctor's never there and it represents only 20 percent of health spending.  This same money could be better spent on genuine public goods, such as immunization or better sanitation).  The net result is that the system gets so distorted that a systemic approach is too difficult.  Shanta
« Last Edit: February 25, 2015, 16:39:10 GMT by Napodano »

SDevarajan

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Re: Conversation with Shanta Devarajan, Chief VP, MENA, Economics, World Bank
« Reply #17 on: February 25, 2015, 14:28:37 GMT »
Response to Orlando (Question #7): 

Orlando, before asking for ideas that link these initiatives, create ownership and donor support, we should ask:  What is the rigorous evidence that these initiatives improve outcomes?  My understanding of the literature is that rigorous impact evaluations of such initiatives are quite few (see my paper with Khemani and Walton in the World Bank Research Observer, 2013).  While we would all like to see more openness, transparency and citizen engagement, we need these rigorous impact evaluations so that we know how these initiatives affect outcomes.  Once we understand the channels, we can then develop an overarching idea that could bring citizens, governments and donors together.  I don't think we are there yet.  Shanta
« Last Edit: February 25, 2015, 16:44:31 GMT by Napodano »

SDevarajan

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Re: Conversation with Shanta Devarajan, Chief VP, MENA, Economics, World Bank
« Reply #18 on: February 25, 2015, 14:48:13 GMT »
Reply to Stone (Question #8): 

Dear Stone:  You're right.  I don't understand the cultural references (I don't even know what a Kanbur index of 1 means--and he's a good friend of mine!)  Nevertheless, I'll attempt to answer your question which, as you suggest, is similar to Lewis'.  I think it's dangerous for PFM people to be uninterested (or even disinterested) in policy content, because good PFM in a misguided policy environment can make matters worse.  When you look at the huge misallocations of public resources (health spending on hospitals--which benefits the rich disproportionately--dwarfs spending on public goods such as immunization), it is a disservice to society to make the funds allocated to hospitals flow better.  And if you think that nothing can be done about these policies because they are the result of a political process (where the non-poor have greater voice), then the same can be said about PFM because, as you know, that too is susceptible to political pressures (ask any local budget officer).  So I would say that the Bricoleurs should take on the design and review of policy with the same vigor that they take on PFM.  Shanta
« Last Edit: February 25, 2015, 16:45:08 GMT by Napodano »

SDevarajan

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Re: Conversation with Shanta Devarajan, Chief VP, MENA, Economics, World Bank
« Reply #19 on: February 25, 2015, 14:52:16 GMT »
Answer to Question #9: 

Fitz, some of the CE work inside and outside the Bank involves financial planning, management and assessment.  For example, the work on citizen budgeting.  But even if it didn't, I don't think this is the main problem.  That is that, even when citizens are engaged, by for instance giving their opinion or information about a program or policy, it isn't clear what sanctions they can place on politicians if their voices aren't heard.  Until and unless CE looks at the relationship between politicians and citizens, and how all this information can be used to strengthen that accountability (of politicians by citizens), I'm not sure it will take us very far.
« Last Edit: February 25, 2015, 16:46:52 GMT by Napodano »

Gord Evans

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Re: Conversation with Shanta Devarajan, Chief VP, MENA, Economics, World Bank
« Reply #20 on: February 25, 2015, 16:35:12 GMT »
Question #10

Excellent topic.  While avoiding econosemantics on whether a particular good is rivalous, excludable, prone to free riderism, etc., it is interesting to look back at how the notion of what could or should be provided by the public and private sectors has changed over the years and the underlying assumptions. 

In the 1950s through the early 1960s, governments pretty much conformed to the principled view where armies, lighthouses and a few other things should be run by government and not much else.  Private sector companies did not need Government Relations Departments, other than those companies which were partaking in the fabled military-industrial complex. 

Beginning in the mid 1960s through the 1970s – yes, I’m that old and still vaguely sentient – there was an emerging belief that government could and should solve societal problems.  In the US, the War on Poverty was launched and civil rights legislation enacted.  In Canada and Europe, we were rapidly constructing the social safety net and welfare state, as well as setting up all sorts of state-owned enterprises.  At this point in time, the rationale for government intervention was both expansive (asserting human rights; reducing inequality) and competitive (doing something more cheaply and efficiently than the private sector).   In fact, Canada established its own national oil company (since privatized) simply because we didn’t trust the intentions of the US multinationals (mistrust Exxon; say it ain’t so).  By this time, private sector companies were scrambling to establish Government Relations Departments.

In the 1980s through the 1990s, first with Reagan and Thatcher and then with, shudder, the NPM onslaught, the all-out assault on government revenue, aka waste and red tape and job-killing taxes on high-income earners, began in earnest.  We needed to reform ourselves, ideologically and structurally.  Hello Washington consensus.  Now, the principles of what was appropriate for government to do began to produce a much narrower list of core governmental functions. So we privatized, divested, contracted out and found many, many ways to reclassify what was formerly a government function into something that could be delivered by the private sector alone, under contract, or in partnership.  Schools, military operations, jails, hospitals, highways were all fair game.  The rationale flipped from the proactive 60s/70s: Given the inherent efficiency of the private sector, government functions should be transferred outright or deconstructed and parcelled out to the private sector whenever a business case could be made for such an action.  Functional reviews were ascendant.  Many business cases were made.  Meanwhile, a new government industry based on contract oversight and PPP coordination was born. 

In many ways, similar beliefs, trends and organizing principles continued throughout the 2000s and 2010s.  We still certainly intuitively believe that government intervention should be restricted to things the private sector cannot or will not do.  Which is a highly circuitous route back to Shanta’s opening statement concerning what governments should not do (e.g., university education).  But it is interesting to flip the question and ask if there are things that the private sector should not do.  In Canada, airport security is clearly a private sector activity, whereas in post-9/11 USA it is definitely something that, although the private sector can do (they were doing it up until then), it has now been deemed something that they should not do.  Back in Ontario, Canada, we have been debating for ages whether to privatize the massive state-run monopoly on selling liquor.  But successive governments, right and left wing, keep hemming and hawing because it makes a ton of money and has phenomenal buying power.  In fact, I attended the Cabinet discussion where the Premier who had promised to privatize the liquor board, on being presented with the cost-benefit analysis, said “We really should sell it, but we can’t afford to.”  So, I think the word “should,” with respect to public policy, should be understood as a malleable, ever-mutating, context and era-sensitive construct. 

Sorry for the long-winded tour down governance memory lane, but let’s close with that poor troglodytic PFM analyst who is analyzing potentially useless program expenditures somewhere in the bowels of the Ministry of Finance.  They may be tracking a structurally unsound activity, but at least they periodically surface with some evidence to be considered by those who decide what governments should or should not do, at least for now.  Cheers.   
« Last Edit: February 25, 2015, 16:51:38 GMT by Napodano »

FitzFord

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Re: Conversation with Shanta Devarajan, Chief VP, MENA, Economics, World Bank
« Reply #21 on: February 25, 2015, 18:42:48 GMT »
This discussion is now engaging in some of the deeper and more difficult substantive and strategic arenas and what may be potentially feasible solutions to issues with which we all, in practice, have grappled with and must continue to wrestle. In order to extend this richness further, Shanta has agreed to continue our discussion beyond Friday to over the weekend, until Monday. Despite my salivating, I am going to wait for someone else to contribute, before jumping back into the fray.

Fitz.
« Last Edit: February 26, 2015, 06:49:05 GMT by Napodano »

STONE

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Re: Conversation with Shanta Devarajan, Chief VP, MENA, Economics, World Bank
« Reply #22 on: February 25, 2015, 21:15:26 GMT »
Shanta,  I am so sorry; I meant to say a Kanbur 'number' of 1.  And Ravi, would surely, but gently, on the one hand, chide an ageing former student for such a mistake, and on the other hand, and surely as gently, point out that he relishes having a Devarajan number of 1. Simon

Glen Wright

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Re: Conversation with Shanta Devarajan, Chief VP, MENA, Economics, World Bank
« Reply #23 on: February 26, 2015, 05:39:49 GMT »
Question #11

Greetings Shanta:  Thanks for this opportunity to learn more about the issues of PFM reform. My question is simply this:

How much of the fault of the poor performance in implementing PFM (program budgeting, MTEF, etc) is due to the lack of building an adequate foundation (accounting systems, statistics, etc) for implementing program budgeting, etc, by the donors (WB, etc) through the bottom level technical assistance as opposed to funding consultants who go in and attempt to implement a high level budget method that should be the culmination of the PFM as opposed to starting with Program Budgeting, MTEF.  Are we constructing the roof before we have the foundation of the house.  Who is responsible for this.
« Last Edit: February 26, 2015, 06:50:02 GMT by Napodano »

harnett

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Re: Conversation with Shanta Devarajan, Chief VP, MENA, Economics, World Bank
« Reply #24 on: February 26, 2015, 13:19:25 GMT »
Question #12

Shanta

We seem to have established that as technicians we can organise a reasonable PFM system but political economy really determines how that is used.  I am drawn to the words of the premier fighter against corruption in the world, Eva Joly - http://en.wikipedia.org/wiki/Eva_Joly - who in a BBC interview last year suggested that "It's people's money and this is why it is serious and this is what it's all about, all time, all over the world.  It is how to get public money become private.  How can I get my pumps into the public money to enrich myself."  http://www.bbc.co.uk/programmes/b04dm116  .  If this is her view of politicians and business leaders in general, then it would suggest that well-functioning PFM systems are almost irrelevant given the state of world political economy.  To bring this down to the level we experience as practitioners, I have conducted many PEFAs where the architecture for procurement in a country is world class (often driven by donors), but the implementation of that architecture is, by many accounts, riven by corruption.  Eva also suggests in this interview that corruption has not improved over the past 10 years (a period in which PFM architecture has presumably improved for many countries).  So I was wondering where you stand in terms of perceptions of corruption and legalised capture of public funds for private business and political economy.  Certainly in Britain, we have seen massive transfers of public funds to private business through PPIs, privatisation of NHS services, rail networks, bank bailouts and then the greyer area of tax evasion wrt Starbucks, Apple, Amazon and others with the most recent schemes of HSBC now up for legal scrutiny.  And.... at the same time we see a reduction in the quality of public services, despite the targets etc. of PFM systems etc.  And the Uk is not unusual in this regard!

On this note I find Gord's contribution essential.  His history of solutions to services being predominantly targeted by the public or private sector also correlates to concentrations of wealth on the planet (I bow to Piketty's analysis!).  So I will suggest that a logical conclusion of Gord's analysis may well be a greater role for the public sector, if only in "bridling" the private sector.

You (maybe) intimated your view, Shanta, with respect to your remarks on education.  Maybe you could expand on your thoughts and in the context of the above perceptions of corruption.
« Last Edit: February 26, 2015, 13:25:10 GMT by Napodano »

SDevarajan

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Re: Conversation with Shanta Devarajan, Chief VP, MENA, Economics, World Bank
« Reply #25 on: February 28, 2015, 15:49:36 GMT »
Reply to Gord Evans, Question #10: 

Thanks very much for that succinct Cook's Tour of public economics through time.  A few comments. 

First, the rationale for government intervention has always been twofold: efficiency (market failures), and equity.  Musgrave's book also includes a third rationale, stabilization, but that's not relevant to our discussion now. 

Second, when there is a rationale for government intervention (efficiency or equity), it is important to ask whether government should only finance the activity, or both finance and provide it.  I think this was the discussion around air traffic control, prisons and the like in North America in the 2000s.  The issue here is whether the incentives within government lead to inferior outcomes in areas where there is a legitimate rationale for public intervention.  One area which has interested me for a long time is education.  The rationale for government intervention in primary education say, is that there is an externality associated with having a literate and numerate population.  I benefit from your having an education, and vice-versa.  But this externality only means that government should finance (strictly speaking, subsidize) education.  And we find that, when government also provides education, the incentives in public schools is such that you have high rates of teacher absenteeism (25 percent in India, for example).  So an alternative is for government to continue to finance education, but then contract the teaching out to whoever is most efficient at providing it.  It's interesting that Bangladesh does precisely this for its secondary education, and has better outcomes than neighboring India.  Of course, as you say, this requires having the capacity to design and monitor contracts, something that a weak government may not have.  The bottom line is that we have to balance market failure (the rationale for government intervention) with government failure (the incentives that lead, even legitimate government activities to under-perform). 
« Last Edit: February 28, 2015, 18:44:25 GMT by Napodano »

SDevarajan

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Re: Conversation with Shanta Devarajan, Chief VP, MENA, Economics, World Bank
« Reply #26 on: February 28, 2015, 15:57:35 GMT »
Reply to Harnett, Question 12:

Fully agree.  This is corruption.  In other  writings, I have called teacher and doctor absenteeism "quiet corruption", because it doesn't make the headlines, and yet hurts poor people more than the latest financial scandal.  That said, I'm not sure if calling it corruption actually helps us do something about it.  I prefer to start with the desired outcomes (educated children, health citizens, etc) and point out that government is failing to reach these outcomes.  Then you can have a fruitful discussion about incentives and systemic problems, without necessarily implying that something illegal is going on and someone should go to jail! 
« Last Edit: February 28, 2015, 18:45:20 GMT by Napodano »

FitzFord

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Re: Conversation with Shanta Devarajan, Chief VP, MENA, Economics, World Bank
« Reply #27 on: February 28, 2015, 23:14:30 GMT »
Question 13

Shanta,

Your answer to the last post opens a door that I have found interesting. I would be interested in the response you have developed for when you are confronted with this argument: The culture here will not allow this proposed system. The fact that different cultures ave developed and cemented into their own operating system. India and China are good examples. Most of us in this arena (including me) believe in transparency, because it empowers the population with the ability to hold their governments to account because an explicit promise was made and the results (and reasons for failure or success) are apparent. We (including me) spend a great deal of time thinking through how to have (usually) transparent systems so that those who fulfill this promise would be rewarded and those unable to deliver are removed. Do we, the outsiders, apply the punishment (right!) or do we expose the failure,to promote local punishment. And, if there is no local punishment?

Fitz.
« Last Edit: March 01, 2015, 12:16:33 GMT by Napodano »

SDevarajan

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Reply to Question 13

Fitz, you always ask the hard questions.  On questions of transparency and making knowledge available to the public, I find the "culture" argument hollow.  When I know something, I have an obligation to share it with people to whom it may be important, whether other people think it's culturally sensitive or not.  This is the principle I have practiced throughout my career.  It hasn't been easy. I've had finance ministers  (and one head of state) calling the president of the World Bank to complain about me.  And people inside the Bank thinking I want to foment revolutions.  But unless I adhere to this principle, I wouldn't be able to live with myself.  Besides, our clients are the world's poor. Governments are intermediaries, and what I'm trying to do is make them better intermediaries.   

As this is the final post, I want to thank all the participants. I've learned a lot from your thoughtful comments and questions, and look forward to the next occasion.  Shanta
« Last Edit: March 02, 2015, 07:55:48 GMT by Napodano »

 

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