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Author Topic: Conversation with Matt Andrews on limits to externally influenced PFM reform  (Read 21135 times)

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STONE

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Hi Matt,
I'm enjoying this, thanks.

I agree with Petagny and would not wish to detract from his general point, but our system in France is an exception, of course.  Yes the reform is legally backed and the structure was implemented gradually over 5/6 years - we are not there yet though. 

What makes France exceptional is the process that led up to the legislation. It was I think a good example of building a network and perhaps a constituency and above all developing a shared vision. 

It took a long time, but things got moving when a common view was developed across left and right (including (most of) their disparate parts and the bits in between) and as both the National Assembly and the Senate worked closely with the Ministry of Finance with actors moving between the legislature and the executive and with the engagement of a lot of Enarques (now there's a network!).  There is still a need for perfectionnement (muddling through? quel horreur!) but the mannequin (structure) is (I believe) uncontested and it is now a question of couture (haute, bien sur).

I have not really looked for a write up of the case study of the reform-up-to-legislation but the MoF used to have a fair bit of history on its website.
« Last Edit: January 18, 2012, 14:17:45 GMT by Napodano »

FitzFord

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Matt,

As a follow-up to Petagny: Almost all OECD countries spend substantial amounts on performance measurement, however, none - when I last reviewed this 2 years ago - actually use the results in budget allocation. My suspicion is that France does not to this up to now.

Fitz.

harnett

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Matt

Question 9

On a different note... have you considered expanding your theme to the limits of externally influenced development (in general)?  It seems to me that the arguments you use could easily be applied as such.  There appears to be little evidence for aid being the key factor in promoting development.  Countries that have experienced improvements in key developmental areas appear to have done so outside of the "aid" ambit:  China, India, Brazil, Nicaragua (1979-85), Mozambique (mid 1970s), Costa Rica (1950s) etc.

Appleby Ghost

MA

If I may make just one comment...

Never in my time, or I should hope now, would a civil servant anywhere "muddle through".  One reflects.  One gathers statistics. One consults. One advises. And then, if absolutely necessary (pursuant to the right political decision), one implements at the appropriate juncture, that is to say, in due course and in the fullness of time.  One does not 'muddle through'.

and a question... #10
 
By a 'network' is one to understand a collective noun for 'inter-departmental committee members'?

HA
« Last Edit: January 18, 2012, 19:57:53 GMT by Appleby Ghost »

Governwell

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Answer to Question 7

Hi Fitz

I agree with your thoughts. I think that external agents could play a really important role providing outside ideas into developing country contexts. This is often the role I see outsiders playing in the experiences where I see externally influenced reform having a meaningful impact.  I think that the role you suggest is much more complex than we take it as, however. The idea that outsiders can help insiders 'see' their institutional deficiencies requires a bunch of detail: how do they do this? The idea that outsiders can bring external ideas into new contexts and help them fit these ideas to context begs a similar questipon: how do they do this?

The questions do have answers. In my opinion (and given my research) external agents can help local agents 'see' their problems by constructing problems out of issues. Using data to show the extent of money wasted in a budget regime turns the 'issue of efgficiency' into a problem, for instance. External agents can also help local agents make sense of outside ideas if they are translators of those ideas--being able to say where they came from, under what circumstances, with what demands, etc. Beyond providing such knowledge ex ante, these translators should be skilled in facilitating experimentation with hybrid solutions, learn from such, and apply lessons in future experiments until a solution is found.

My concern is that many people working in development have neither the time nor the capacity (nor the understanding) to do these tasks well. Most external agents are 'solutions' people who are introduced to offer a specific solution into a context without fully explaining such or tee-ing the discussion up by helping local people to see why it is needed.


Even when external ideas are well presented, however, this is not enough. Research shows that institutional solutoons that work are seldom pure-form reproductions of one model or example. Instead, they emerge as combinations of attributes of multiple ideas--and some of these are always internal; emanting within the reform context with pre-existing capaicty to work and legitimacy to be accepted. Th question is: How many external consultants, IMF advisors, World Bank team leaders, etc. can help present the ideas of external best practice together with internal ieas, and construct local hybrids that work. This is a great role for outsiders, but not one that I think any education or consulting opportunities teach or facilitate.

Here is a section from my forthcoming book, where I talk about issues of finding and fitting solutions and the type of agents needed for such.
....I am cutting and pasting ext from here on.

One of the emerging lessons from these experiences [of successful institutional reform] is simply that successful institutional adjustments involve the emergence of mixed-form solutions—and not what Elinor Ostrom calls “optimal” institutions (which are embodied in the idea of ‘right rules’ or ‘one-best-way’ or ‘best practice’ reforms espoused by many development 'experts').   The bottom-line is that incremental reforms focused on addressing problems frequently result in combinations of elements that work together to get the job done. In their 2002 article on institutional change, Dacin, Goodstein and Scott present a similar idea in arguing that institutional change solutions often emerge as “bricolage.”  John Campbell examines change as bricolage as well, explaining this as the process whereby actors recombine available institutional principles and practices in ways that yield change. 

Bricolaged solutions only emerge, however, when there are many options to choose from and combine. This raises a second lesson from the two cases, which emphasizes the importance of scanning broadly for reform ideas. This lesson is also apparent in Ostrom’s work, where she describes the process of finding and fitting institutional solutions as follows: “There must be the generation of new alternatives, [and] selection among new and old combinations of attributes that are successful in a particular environment.”  New and old, internal and external ideas can form a menu of alternatives to consider in the change process, but in many senses Ostrom is talking about going beyond this. New alternatives emerge when scanning processes lead to the identification of multiple alternatives with detailed descriptions of their attributes—the laws that make them work, norms that give them credibility, and cultural-cognitive mechanisms that allow them to function. In this way, scanning must provide a menu of alternatives, with the recipes included. Reformers need this detail to see which ideas match the problems being addressed, which can be introduced with extant ingredients, and what new ingredients need to be found.

This leads to additional lessons about the scanners and scanning processes required to facilitate ‘finding and fitting’ of relevant institutional reform content. Reform ideas come from agents engaged in the change process, who act as ‘carriers’. Organizations like the World Bank have been called ‘carriers’ of external ideas, responsible for “promulgating new conceptions, standards, and practices.”  They can only provide for part of the scanning activity necessary in bricolaged situations, however. Internal agents must also be engaged, to ‘carry’ past and present ideas into the discussion about potential reform solutions. Without ‘groups of carriers’ like this, reforms are likely to be narrowly informed, which limits the potential of finding relevant “combinations of attributes” (using Ostrom’s term). 

Carriers need to do more than just propose alternative ideas, however. They must play the role of translator as well, deconstructing ideas so that reformers can determine the fit of such to context. In a practical sense, this means explaining where the idea emanated from, why it was adopted, how it was adopted, and what its core regulative, normative and cultural-cognitive content looks like. This translation is similar to a chef explaining how she cooks items on her menu and is a vital part of the finding and fitting process. It deconstructs interesting reform ideas into the constituent attributes that are ultimately combined as new hybrid solutions. It also helps inform the process of adapting these attributes to local contexts, which Rose notes is often an overlooked part of ‘best practice’ transfer:  “If a relevant programme of another country is selected for adoption, it must still be contextualized, that is, altered to suit the specifics of one's own national setting.”     

In many situations ideas are not translated well through ‘carriers’, sometimes because these agents do not know details behind the ideas they are proposing or because they do not have the time or incentive to explain such. In these cases translation can still happen, however, through the incremental process of trying ideas, experiencing mixed results, and learning from such. In referencing this approach, Elinor Ostrom argues that, “The process of choice … always involves experimentation.”   This, she notes, is because, “It is hard to find the right combination of rules that work in a particular setting” and one has to “try multiple combinations of rules and keep making small adjustments to get the systems working well.”  Experimentation allows reformers to act on ideas that emerge from the scanning process, to get a better ‘translation’ of what makes them work, and to see how they interact with other institutional elements that either pre-exist in the reform context or are being introduced through other reforms.
   
It is important to note what experimentation did and did not look like in these two examples. First, experimentation was not about performing a scientific experiment where the context is suspended (as in many randomized trials with potential policy solutions). Rather, it is about trying a real intervention in a real context, allowing on-the-ground realities to shape content in the process. Second, this is not about certain success or about proving that a specific intervention works.  It requires a willingness to accept failure of a specific idea, to take some attributes of the idea further than others, and to see lessons learned as the key emerging result. Third, experimentation requires having mechanisms to capture lessons and use such to inform future activities. It is not, therefore, about allowing a thousand flowers to bloom without focus.
« Last Edit: January 21, 2012, 19:54:19 GMT by Napodano »

Governwell

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Answer to Question 8 (and the discussion about France)

Great comment. Yes, I agree that we should think about the way in which laws are developed in countries, how people see laws and the process of change, what political structures look like, how powerful the Minister of Finance is, etc. These are all contextual factors that are important in determining what kind of change is needed and what kind of change is possible. They are not the full set of contextual factors, however. I would argue that the kind of problem being addressed matters as well (some problems require and facilitate more radical change than other, for instance), as do a set of cultural variables, and a host of variables related to capacities etc. It would be great if the PFM Board could construct a list of the 'cvontextual factors' that impact reform, and start developing stories about these.... There is a lot of experience to capture here because, frankly, we know these things matter but don'[t always know how, why, and under what conditions.

I have developed my own theory about how institutional change happens, and how context matters, and I will add a discussion on it here, for those suffering with late night sleeplenessness.

This is an excerpt from my book, discussing contextual issues and change opportunities.

Complex institutional structures always exist

‘Institutions’ entered the world of development largely because of Douglass North’s historical analytical work linking such to growth. North showed that even the most rudimentary social structures (like small scale villages) have rules of the game, even though these rules differ in size and shape across contexts and through time.  This basic observation is an important starting point for thinking about context. Institutions always exist in all contexts, in many different forms. There are no such things as clean slates on which to write change scripts.

Regulative mechanisms are the most commonly studied form in new institutional economics.  These include laws and shaming practices that are often established, monitored and enforced by third parties. They promise reward or punishment in response to different behavioral choices, constraining behavior through extrinsic means. These regulative devices differ from normative mechanisms emphasized by new institutional sociologists. These include norms and values and communicate what is considered socially acceptable.  They manifest in behaviors one would call ‘acceptable’ or ‘appropriate’ and influence agents intrinsically by evoking feelings of honor or shame with compliant and resistant actions.  A third kind of institutional manifestation is what anthropologists call cultural-cognitive mechanisms. These manifest in ideologies and scripts  that are reflected in symbols of group affiliation and belief like religion, nationality, or language. They create frames through which agents interpret the world, structuring the way information is received, processed and given meaning.  Such frames bias agents to making specific choices, regardless of the extrinsic and intrinsic incentives created by regulative and normative mechanisms.
Many authors refer to individual regulative, normative and cultural-cognitive mechanisms as ‘institutions’. Where World Bank studies discuss ‘Institutional context’, for example, they typically provide lists of laws and other regulations.  In contrast, Richard Scott does not call any one of these mechanisms an ‘institution’ on its own.  Rather, he refers to all three as ‘elements’ of institutional structures, arguing that “Institutions are comprised of regulative, normative and cultural-cognitive elements that, together with associated activities and resources, provide stability and meaning to life.”  A law on its own is not an institution. Neither is a norm, nor is a cultural-cognitive script. An institution emerges as a mix of all three.  It is like an omelet, produced when someone combines eggs, cheese and milk into a bowl, with a whisk, over heat.
 
Various scholars have embraced Scott’s approach to thinking about institutions,  positing that the three elements (with supporting practices and resources) combine to form ‘rules of the game’. Other variants of such multi-dimensional constructs are evident across the literature as well.  Greenwood and Hinings speak of “interpretive schemes” for instance, which comprise “values, norms, beliefs and rationalizations,” that, “provide both a logic and a propellant” for action.  An even broader set of authors refer to ‘institutional logics’ in describing structures of material practices and rules that emerge from and reinforce entrenched assumptions, values and beliefs.  Such approach has been used to examine a wide set of topics in particular fields of social engagement—“clusters of organizations and occupations whose boundaries, identities and interactions and defined and stabilized by shared institutional logics.”  The role of cultural-cognitive and normative mechanisms is central in such conception of an institution. These mechanisms give durability to the institutional structure and form a foundation for other elements. Evincing such thought, authors have referenced the importance of “widely shared assumptions and values”  underpinning institutional structures and also presented these elements as “master principles”  and “taken-for-granted, resilient social prescriptions.”   

Figure 3.1 illustrates the institutional structure implied in such work. It shows the institution—or logic—as an iceberg. Normative and cultural cognitive mechanisms form a base atop which regulative devices operate. Together, the three elements establish a rule that shapes the way agents think, weigh decisions, and behave. It is important to note that this kind of structure incorporates both informal and formal elements—not one or the other. The iceberg metaphor reflects this, suggesting that a large part of any institutional logic is unseen or below the water line because it is informal—implicit, unwritten and seldom visible.   The inference is that informal elements are not bad or inferior. Informality is rather a fact of institutional structure—and a fundamental one at that.   

Multiple institutional structures always exist

Research further relates the idea of ‘inter-institutional’ contexts that comprise multiple institutional structures.  Studies show that these exist across domains, varying between the marketplace, state, corporation, profession, religious community, and family.  Agents split their lives across these domains and thus continually face multiple logics. For example, doctors in religious hospitals have their perceptions, choices and behavior shaped by rules of the market, state, medical profession and religious order. Institutional structures can vary within domains as well, and in fields and organizations.  Meyer and Hammerschmidt explain that Austrian civil servants are influenced by a traditional public sector logic emphasizing process and a new managerial logic stressing results.  Purdy and Gray find two logics shaping behavior in state dispute resolution offices in the United States.  A judicial logic emphasizes clearing case loads while a public policy logic focuses agents on facilitating better-quality decisions.

In all cases logics comprise multiple elements, having some cognitive basis, normative expression and regulative form. As such, they all resemble ice-bergs like that suggested in Figure 3.1. They combine as institutional contexts that one could compare with a sea of icebergs. Some institutions in this sea may be more prominent than others, and some may be more closely related—even clashing at times. Researchers look for such characteristics when describing institutional contexts. Studies note particularly whether and to what degree some logics dominate their context, how competitive alternative logics are, and if logics seem to co-exist or clash. The Austrian study, for instance, describes the traditional public sector logic as dominant but also sees the new managerial logic as competitive.  Greenwood and Hinings explain that British municipalities conform to either of two competing logics, one favoring “corporate bureaucracy” and the other “professional bureaucracy.”  Purdy and Gray find the judicial logic co-existing with the public policy logic in dispute resolution practices.  In all examples, agents must navigate these contexts given such patterns of dominance, competition and co-existence.

Context shapes change opportunities

One wonders how institutional change happens in places where dominant institutional logics prevail. Explanations of such change vary, but most authors posit that opportunities are created—or limited—by the interplay of incumbent institutional structures or logics. Some approaches describe an equilibrium-seeking dynamic where institutions shift between logics.  Others suggest that change is driven more by political contests that may or may not bring stability, depending on whether there is consensus on a logic or mix of logics. Both perspectives emphasize the importance of pre-existing institutional orders, interruptions to such, and power plays involving agents. Both perspectives also suggest that change is most commonly limited.

Studies commonly examine change in contexts where one structure dominates the institutional order. This structure could be a singular logic or a stable amalgam of co-existing logics. Such structures typically undergo what Bartunek calls first order change, “consistent with already-present schemata.”  In essence, adjustments reinforce the incumbent logic rather than replacing it. This is a key element of path dependence theory, which posits that future institutions typically reflect those of the past. Cognitive and normative foundations of dominant mechanisms become entrenched in new scripts and symbols over time, for example, and embed themselves through repeated behavioral patterns of expanding sets of agents. Regulative mechanisms are fine-tuned to reflect such logic as well. These changes alter power relationships and capability mechanisms, locking-in the dominant logic. This logic can appear irreversible when many agents invest heavily in it over long periods. These investments become like sunk costs and decrease the willingness or ability to switch to alternative institutional structures, even though these may continue to exist.

Unless there is a disruption. This could take the form of an exogenous shock like the recent global economic crisis, or destabilizing endogenous jolts like demographic adjustments. These can be once-off events or gradually emerging disturbances. They create change opportunities if incumbent institutions cannot facilitate the resolution of emerging problems.  In such situations agents are confronted by weaknesses and contradictions in their pre-existing rules.  Faced with failing incumbent rules of the game, agents may look for second order change— replacing an incumbent logic with another alternative. 

Disruptions do not always foster radical change, however. The degree of change depends on the severity of disruption, how much it tests the legitimacy of pre-existing dominant logics, whether viable alternatives exist, and if agents are in place to struggle for and facilitate a transition. Different conditions yield different scenarios, shown in Figure 3.2:
1.   Dramatic shifts in logics—or switches—are possible when faced with disruption, but only where the legitimacy of pre-existing institutional orders is tenuous (a condition one could call weak dominance) and alternative logics are present and competitive, supported by agents capable of challenging the old order. 
2.   Where one or other condition is not met, change will be more limited. It could foster coexistence or hybridization where elements of an alternative institutional logic are introduced alongside elements of the incumbent dominant logic. This can cause uncertainty about rules of the game, supporting and motivating differing choices and behaviors.  Mixed conditions could also facilitate the emergence of a new logic altogether, however, where elements of the dominant incumbent merge with elements of new alternatives.
3.   If conditions are not met one should expect even more limited change. This could involve a limited version of layering, where visible elements of alternative logics are introduced ‘on top of’ less visible norms and cognitive scripts of incumbent structures. This layering could lead to more significant change if new elements are actually implemented and reinforced over time as additional layers of similar change.  Conversion is another option, where the pre-existing logic is preserved but power is moved from one group to another. Incumbent structures are re-directed to serve the interests of different agents and agendas in such situations.
 
These three scenarios suggest that different conditions affect the degree to which institutional change emerges, even through disruption. In all cases more disruption allows more change. Change is greatest in the Logic Switch scenario given weak dominance, competing alternatives and powerful change agents. Change is more limited in the Coexistence and Hybridization scenarios, given mixed conditions. Change is most limited in the Layering or Conversion scenarios where conditions are not conducive to significant short-term adjustment. As argued, layering could lead to deeper change if reinforced by similar reforms over time, where new layers actually create room for additional change.
Most authors would argue that these last two limited change scenarios are a more likely outcome of institutional adjustment when a dominant logic is in place, even in the face of significant disruption. This is partly because informal dimensions of incumbent logics change slowly, if at all. Mauro Guillen notes such in stating that logics are “deeply rooted in collective understandings and cultural practice, and resilient in the face of changing circumstance.”  As a result, one is likely to find informal elements of incumbent logics holding on even when regulative mechanisms appear to change.

External reformers commonly overlook context 

There is reason to believe that many external reform designers will discount the influence this kind of contextual complexity has on reform, at least in the design phase. The very idea of institutional reform assumes “that institutions can be purposefully created or re-created by rational agents.”  This is an intoxicating assumption for those working in development, who may consider themselves the ‘rational agents’ capable of manipulating the way developing countries work. Such thinking is implicit in the ‘Cargo Cult’ concept discussed by some postcolonial theorists.  This refers to a belief “that development is something that flies in from the outside” to overwhelm and improve the inefficient ways of developing countries.  All that is needed to effect change is the superior outside idea and influence.

Such thinking is reflected in Peter Evans’ description of how reforms work in development:  “International organizations, local policy makers, and private consultants combine to enforce the presumption that the most advanced countries have already discovered the one best institutional blueprint for development and that its applicability transcends national cultures and circumstances.”   Such thought runs through many discussions of institutional reform in development, and the mechanisms used to assess governments. Reforms are typically presented in overwhelmingly positive ways, as initiatives where “the right institutional framework [can] unlock a nation’s wealth potential.”  Constructs like the World Governance Indicators give the same message, promoting a confidence in outside ideas as powerful, generic solutions. This confidence helps to explain chapter one’s finding that reform designers advocate more and more reform when evidence suggests a less than 50-50 chance of success. Contexts in which reform does not work are disparaged as having weak leadership, but not given more attention. The assumption is that superior externally sourced solutions will eventually prevail if local leaders allow them to.

This idea of a Cargo Cult does not hold across all development, however. Many designers of external reforms do see the importance of local context in the change process. The push to introduce contextualized Poverty Reduction Strategy Papers is one indication of this, as is the continued emphasis on country ‘ownership’.  Institutional reform strategies, handbooks and evaluations produced by organizations like the World Bank also routinely cite the important influence context has on reform.
 
Contextual factors are seldom detailed, defined, or deciphered in such references, however.  This is partly because of an inability to see and map context. There is something to be said for the fact that a large part of any institutional logic is informal and difficult to see. One cannot expect external reform designers to identify informal institutional elements falling below the iceberg’s water-line given the limited engagement they enjoy in target countries. Reform projects in organizations like the IMF and World Bank are designed with limited budgets in periods ranging from six to eighteen months, often by ‘experts’ with limited country experience who fly in and out of the reforming context every six months. Their government counterparts are often in narrow technical agencies at the head of economic agencies like the Ministry of Finance. It is questionable how much these agents can speak to the country’s political and cultural contexts, partly because these contexts usually stretch beyond their reach and also because many institutional elements are invisible even to those affected by them. This is particularly the case for most dominant structures, which are taken-for-granted and hence enjoy low visibility.  Furthermore, reform engagements typically focus on the solutions and not the problems, with pressure to finalize program documents for specific, ambitious, and linear reform programs. This constrains discussion about contextual problems or the cultural roots of such. As Peter Evans says, “Arenas that are less accessible and less transparent … are ignored, almost of necessity.” 

Getting serious about context

There are many stories where external reform designers overlook contextual factors that ultimately limited the space for change. Consider Andrew Wilder’s account of recurring failure in Pakistani civil service reform.  Citing a former finance secretary, he notes that external agencies working in Pakistan treat civil service reform as “a technical exercise” in which “problems are reduced to boxes and then solutions are found to fit into the boxes.” The finance secretary concludes that, “The political and cultural contexts are lost in these exercises” which is a problem because of the “inherently political nature of civil service reform.” Consider also Indonesia’s insolvency law, which suffered premature failure because it was never “socialized”  into the context.  Bemoaning such results, Melbourne University’s Roman Tomasic notes that “multilateral agency expectations and timeframes may not always be in accord with local realities.” 

In these and other situations reforms ran into trouble when they encountered a cluttered institutional context comprising multiple logics—iceberg-like structures combining regulative, normative and cultural-cognitive mechanisms. Contexts with strongly dominant logics and weak alternatives failed to accommodate the intended institutional change, even though there was disruption that many may have thought always facilitates adjustments. The problem was that contexts actually provided limited space for change. The conditions were much like those in the left column of Table 3.1, which shows ‘small hole conditions’ that limit the size of a potential reform peg. When external agents overlook contextual conditions, they assume that all situations have large holes, shown to the right, and accommodate a high degree of change. Unfortunately, this is often not the case, and small hole conditions undermine reform attempts.

There are various ways in which reforms would be improved if context was better considered in design. One could imagine that the selection of where and when to do reform would be sharpened, for example. Fewer institutional reforms would be initiated in contexts with small-hole conditions—where governments and societies may not be ready for change. A greater sense of context could also help inform expectations of reform, and help guide processes of implementation and oversight. Reform designers aware of the importance of context could factor in regular assessments of the factors named in Table 3.1, for instance, monitoring context and not just progress with technical content in reforms. Finally, one could imagine a sense of context assisting in defining reform content itself. Reforms initiated in large-hole settings would be fashioned to support viable alternative logics that have emerged in such contexts, for instance. Reforms initiated in small-hole conditions could be shaped to increase the size of the reform space itself—introducing alternative ideas, gathering potential agents of change, or helping to interpret disruptions as sources of change.

Indonesian insolvency reforms discussed in the introduction might have focused on strengthening informal dispute resolution mechanisms instead of creating more formal laws, for instance.  Informal mechanisms were ostensibly a more viable and accepted mechanism given the context, and their medium-term use could have bought time for government to properly develop a more legitimate court system. Similarly, Malawi’s anticorruption activities could have stressed the role of agencies promoting the new anticorruption logic (churches, for instance) rather than betting on change in the traditional conservator of the old corruption logic (the executive). External agencies could have required that Argentina’s legislature actively debate the causes of fiscal profligacy instead of just rubber stamping reforms proposed by the executive.

An awareness of context could also help external reform designers ensure that their interventions do not undermine change opportunities. A sizeable literature argues that the international aid community impacts the politics of development when it engages in institutional reforms.   Some argue, for instance, that loans from international organizations can contribute to and reinforce dominant logics of soft budget constraints.  Others suggest that external funding for reforms can strengthen a logic of corruption by adding to sources of cheap rent.  These perspectives are controversial. They need not be, however. If one considers the theory of institutional change behind Table 3.1 it is obvious that external engagements can shift a situation from potentially large-hole to small-hole conditions. Loans can stabilize an otherwise disrupted context, for instance, reinforce a dominant logic that would instead be tenuous, or support agents who are unlikely to change the status quo. A mix of these effects was arguably evident in Argentina and Malawi, where donors tempered the severity of disruptions and ultimately facilitated layering or conversion instead of more far-reaching institutional change.

Such argument suggests that external reform designers should better account for context than they have done in the past. Think, perhaps, of project preparation processes that allow one to assess the size of the hole in which reform pegs are planned to fit. This, arguably, is the role political economy analysis is slated to play in project design. Such analysis is surely a good thing, and it is positive to see increasing numbers of reforms informed by perspectives on politics. There are some high quality analyses emerging in this tradition,  but many emphasize contemporary politics only, ignoring the historically embedded logics that may be driving behavior. There is also a tendency to focus on political figures or parties, and not the systemic structural mechanisms in which such actors are embedded. One wonders how political economy studies could actually comment on such mechanisms in even the best case scenario, given their hidden, taken-for-granted nature. Studies can only speak about what is seen, so should be expected to overlook ‘below the water’ content in this institutional icebergs driving behavior. 

The value of external contextual assessments is also questionable because of inevitable external bias in such, which can reinforce an ignorance of the real context. In discussing this point, Kate Kenny notes that external agencies are increasingly recognizing the importance of considering context when designing reforms. She points to a widely held belief that “despite the many differences” it is fully possible for external reform designers to come to know and understand “the Other.”   Often, she notes, this understanding is slated to be “achieved through the project methodology.” Methods involving categorization, quantification and sense-making are always tinged with bias, however. Kenny speaks of a bias towards having ‘binomial’ representations in development. There are experts (in the aid agencies) and non-experts (in the countries), for instance, and good politicians (who support external reforms) and problematic politicians (who do not). Kenny argues that analyses fostering such biased perspectives “ensure that organization members [in external entities] remain blind to their inherent assumptions.” 

Given such problems, this book argues that written studies by outsiders are probably not the best entry point for concerns about context. Chapter seven suggests a different course of action. Reforms should focus on the disruptive problems that emerge in particular countries, and designs should allow contextual complexities to reveal themselves while addressing these problems. This requires an approach to institutional reform that acknowledges the endogenous nature of such and seeks to develop and implement designs actively, through a problem solving process, in the context, with local agents occupying the driving seat. This is proposed as the only way in which contextual factors can really be effectively accounted for in institutional reforms.

Even when context is accounted for, however, externally influenced reforms could yield limited results—especially if they still emphasize ‘reform as signals’. The next chapter argues that such reforms do not only overlook context. They also over-specify externally sourced practices as generic solutions, but over-simplify what these require to work.


« Last Edit: January 21, 2012, 20:07:26 GMT by Napodano »

Governwell

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Comments on France and on performance management in Europe and beyond

The French example interests me a lot. The most interesting thing is how so many french speaking African countries introduced PEFA-endorsed reforms (like multi-year budgeting) before France. Benin, Guinea, Niger, etc. had adopted this and other reforms before France. Obvioulsy 'adoption' did not mean much in these places. And 'adoption' of many reforms does not mean that much, including performance management reform. I like Don Moynihan's book on performance management in the USA, where he looks at the reasons agencies adopt performance info and the use of such. He paints a picture of many external pressures--of coercion and mimesis--just as I see in development. Under such conditions performance information has been developed but not used in many places, so yes I agree with the comment about it.

France may look different, however, although I have no first hand experience to speak of. I do know that some countries have adopted aspects of performance management over time, as the context provided opportunities, and in functional ways. Renate Meyer and Gerhard Hammerschmidt wrote a great set of articles on this in respct of Austria, for instance. The story in such cases may be that some agents find use for performance info and introduce and use it, even if the rest of the administration does not.



« Last Edit: January 21, 2012, 19:50:42 GMT by Napodano »

Governwell

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Answer to Question 9

Yes, I have adopted this as a way of looking at development more generally. And yes I also agree that most countries progress when there is a strong endogenous influence. But I also hold to the idea that external influence matters a lot. This is because developing countries grow to be part of the global economy (so the need to engage externally grows when the countries progress) and also because there are lots of great ideas externally (which gets to the role that external sources can play--bringing new ideas in, helping locvals make sense of their problems, etc.)
« Last Edit: January 21, 2012, 19:54:59 GMT by Napodano »

Governwell

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Answer to Question 10, and HA's comments on 'muddling through'

When I talk about a network I am referring to the idea of an interconnected social group. The PFM Board is an example. the connections between agents in this group could be direct or indirect, via degrees of separation, informal (through personal relationships), or formal (through committees or organizational hierarchies). So it is not the same as an inter-organizational committee although such committee would be part of a network. The members of that committee would bring second degree connections to their staffs, bosses, and political leadership, making the entire network much larger. Theorists find that agents play differnet roles depending on their different connections... some easy reading on this is Malcolm Gladwell's "The Tipping Point"

In terms of muddling through. I do not mean muddled, and I don't mean that officials pursue things without focus or sense. I am rather relating to Charles Lindblom's idea of incremental change, whereby processes of reflection, experimentation, learning, adaptation and combination of new and old ideas lead to the gradual emergence of new institutional strcutures and policies.  This relates very well to the description of French reform... and the approach you say adminstrators take to change--thoughtful, incremental, step by step...

Here is a simple description of my thinking:

Successful reform experiences that take time and involve multiple steps that build on each other remind one of well heeled theoretical arguments about how policy and institutional solutions often emerge; as a puzzle, over time, given the accumulation of many individual pieces.  Modern versions of such perspective are commonly called incrementalism or gradualism, and attributed primarily to Charles Lindblom.  In what is also termed ‘muddling through’, the approach holds that groups typically ‘find’ institutional solutions through a series of small, incremental steps. These steps are relatively cheap and have the prospect of early success, or quick wins. Both of these are important in contexts where change faces opposition, which is usually the case with institutional change in development. The small steps also help flush out contextual challenges, including those that emerge in response to the interventions themselves. This approach is especially relevant in uncertain and complex contexts where reformers are unsure of what the problems and solutions are. A gradual step-by-step reform that incorporates active opportunities to reflect on experience is particularly appropriate in such situations. Elinor Ostrom finds this in many of her complex research contexts, where the combination of ‘muddling through’ and “efforts to learn and the capacity to adapt … [have] contribute[d] to the emergence of effective” institutional solutions.   
« Last Edit: January 21, 2012, 19:56:17 GMT by Napodano »

Governwell

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More on question 8

The question of strong and weak ministers of finance etc. is relevant to all of us, but the issues go beyond this. They are pretty evident in the USA where there is no conventional minister of finance and the budget comes out at least officially through the Congress. So, how does reform work here? Recent articles on the subject look at the problems of executive budgeting in the USA and the way in which these kinds of issues impact reform possibilities. I have observed that the issues of separation of powers, limited government etc. that lie behind the US model creat an illogical set of tensions that make reform really hard to do. This is me trying t get to the deep factors influencing and shaping opportunities for change.

See
http://faculty.cbpp.uaa.alaska.edu/afgjp/PADM601%20Fall%202011/(Il)logics%20of%20Federal%20Budgeting.pdf (also attached below)
and
http://aspanational.wordpress.com/2011/08/04/the-budget-deal-a-repeat-phenomena/
« Last Edit: January 22, 2012, 07:51:44 GMT by Napodano »

STONE

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Matt,
In your reply to Question 8 you insert a very interesting extract from your book which will be keeping a lot of members busy for some time.  I think we'll all be looking forward to chapter 7 (where you will suggest a course of action?).  In that extract you refer to local agents in the driving seat.  I can't help recalling, from about 10 years ago, a Budget Director in Africa  commenting on the EFAs' continuing stress on the importance of 'locals' (they didn't specify them as 'agents' in those days) being in the driving seat by noting that 'locals will always be in the driving seat: the relevant issue is whether they will be wearing a cap or not'.

I hope we boarders don't lose sight of your request for us to come up with examples of how we have addressed contextual factors. 

I also wonder how one can measure/assess changes in the attention span of external actors.


sybihida

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Hi Matt,

This is an interesting subject, and I have really enjoyed it, even reading it during the night. As part of the local staff at the time of changing the budget process in Albania I want to add a comment.

External vs. internal/local: Working for about ten years at the Ministry of Finance of Albania, many times I have experienced the situation when high officials at the MoF, including Ministers, have used the expression “we are doing it because it is required from our international advisers”.  What I mean by this is the 'predominant perception' that dictates reforms. Credibility is an issue here; it’s difficult for local officials to undertake a reform without referring it to a good example or to the advice of some clever people working in international institutions, even it is well designed. It should be praised from somebody else.

The project of changing budget process in Albania is an interesting case: First, it started from external influence, including DFID, WB, and IMF. It took many years to be accepted (de facto) form local staff that together with external advisors achieved a successful end. In fact, it is not the end, but the beginning of new area of budgeting. Moving to an output oriented budgeting has affected the manner how the budget is discussed even in the Assembly/Parliament.  The discussions on the performance of the budget are done in terms of outputs rather than in terms of money. Most of the MPs discussed the performance of budget 2010 not in terms of money, but in terms of achievements (outputs). This is good achievement, and thanks to external advisors.

The question (Question 11) that remains is if this new situation is a new norm or just external influence inertia? Is there a need for an external push?

Thanks,

Sybi
« Last Edit: January 24, 2012, 08:03:49 GMT by Napodano »

Glen Wright

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This is an interesting discussion and one that I have followed the past few days with interest. 

I tell you what has irked me about some of this externally influenced PFM reforms that I have witnessed and unfortunately participated in over the past two decades in the transition countries of CEE, later in Africa and Asia.  External donors have played something of a double game on this.  I have seen instances where the WB goes in and does a PFM, closes the project, and within a few months, the EC, DFID, USAID, or some other donor comes along and starts up the same program with the same components, methods, etc.  The donors sort of take turns in these countries doing these programs.  Sometimes they build on what has been done, but in many cases they try to start all over and throw out all that has been done.  The poor donor recipient doesn't know what to do with this revolving door of donors. 

My question (Question 12) is: has this been your experience or observation?

A second observation is seems there has been more attention by the external donors on the substance of their assistance, with these Paris Agreement, etc, and not enough on how the donors should coordinate their approaches and methodologies.  Question 13: Is this your observation as well?

« Last Edit: January 24, 2012, 13:45:50 GMT by Napodano »

petagny

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Question 13

I'm not wishing to question the importance of the dimensions of reform Matt has drawn attention (which seem spot on), but should we also not under-estimate the importance of luck and patience in the reform equation? Being in the right place, at the right time and with an attractive menu of ideas (and recipes) seems to have been important in the Albanian case that Sybi describes. Patience is also critical: DFID were supporting PFM reform in Albania for around 10 years in total. These also seems to have been a lot of these factors in the Ethiopian case (see attached article by Stephen Peterson).

You win some and you (more often) lose some, but when you win the pay-out is big! (Not an original thought I'm afraid, but I forget who made it first  - in rather more elegant terms, I'm sure).

At some levels at least, the kind of arguments Matt seems to be making are beginning to gain some traction in the donor organisations (even if not fully aligned with Matt's thinking). Here's a quote from a post yesterday by Richard Allen and Francesco Grigoli on the IMF PFM Blog referring to some research they have been doing for the World Bank on enhancing the capability of central finance agencies:

'...the study supports recent thinking that “best fit,” “good enough governance” and second-best solutions, as opposed to “best practice” solutions, provide a better approach to reform, and that there is a need to take account of the institutional environment as well as technical conditions. Technical solutions should be proposed only after a detailed review of institutions has been carried out. Solutions should be tailored to the specific political and institutional environment of the country concerned.'

The question is whether these approaches will have an impact on front-line aid delivery, where disbursement rates are still the most watched performance measure and where more in-depth analysis of context might seem like just more grit in the works.
« Last Edit: January 24, 2012, 16:08:27 GMT by Napodano »

Governwell

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Response to Stone (Simon?)...

I am glad the extract is not too heavy. It is an example of me trying to create a frame through which one can make sense of the way context matters, and how reforms can best address contextual issues. I have added the conclusion from Chaptr 7 below, so you can get a sense of the way I think reforms can be improved. Essentially, I think the best way of dealing with contextual complexity is by drawing attention to problems that become windows that internal folks use to examine their situations, see the weaknesses of incumbent mechanisms, and look for alternatives.

I liked your story about the Budget Director looking for his hat... In my opinion he is right in saying that 'he is always in the driving seat' but this doesn't mean the car he is in is the one that is doing reform. I have never seen a government that actively says it is not for reform, or a donor-driven project that lacks the 'signature' of a Minister to suggest it is 'owned' -- but I have seen many of these reforms fail because they ultimately were not driven by insiders or owned locally.

This is partly because contextual factors limit the engagement of locals in externally motivated change processes, partly because the external changes are not locally developed and translated, and partly because the folks that do own reforms locally are often in narrow groups that have limited connection with what I call then deconcentrated or distributed agents that ultimately have to implement In essence, effective reform requires a budget director with a bus driver's hat...and a busload of PFM folks from all over government

Here is the conclusion of chapter 7...on 'problem led' reforms as the way of flushing out contextual constraints:

Institutional reforms can be improved through problem-led learning

These examples contribute to this chapter’s basic argument: Externally influenced institutional reforms are more successful when they foster problem-led learning. This happens when interventions exhibit a ‘problem focus’ and ‘flexibility’ in design and implementation. These characteristics help to ensure that projects fit in complex contexts. They help construct issues as problems that garner attention and become vehicles through which the need for change can be seen and addressed. These problems provoke a reflection on contextual constraints that is necessary to instigate change. They also guide efforts to revise or abandon problematic incumbents. This de-institutionalization creates space for new institutions. Finally, problems motivate a search, within the context, for viable alternatives to replace faulty incumbents—a contextually fitted approach to pre-institutionalization that ensures initial ‘solutions’ fit political and capacity realities.

Readers may question this argument, positing that institutional change is facilitated as effectively by positive opportunities—when reform is presented as an innovative way of doing better. Roy Greenwood and colleagues examined a change process that began with such motivation, to Canada’s accounting profession.  They found that the failure to articulate reform in the language of problems led to indifference to change. When change was articulated as a response to a generalized threat faced by the accounting profession, however, it became more accepted and even urgently and broadly demanded. These findings echo with various examples in the sample of 44 health projects and analyzed in this chapter. Many ‘better’ institutions—laws, procedures, standards of care, and ways of thinking—were met with indifference. They offered opportunities for improvement, but would have been better framed as ways of overcoming problems and avoiding failure. A problem focus provides such frame. 

Employing a problem focus in reforms is like ensuring a carpenter keeps his eye on the hole he is trying to fill, noting both opportunities and constraints it poses for peg design as well as the importance of filling the hole as a final objective. It is not good enough to create a poorly fitted peg that does not solve the problem. Project flexibility allows the same carpenter to learn progressively about what peg to create and how to fit it, ensuring effective functionality regardless of form. When combined in a reform setting, the two characteristics can accommodate significant institutional change. Table 7.2 contrasts such approach with the more common solution-driven isomorphism discussed in chapters four and six. Reading from top to bottom, the right hand column shows basic ways in which problem-led learning can draw attention to disruption, contribute to the weakening of incumbents, and motivate the search for alternatives. Combined with the way problems draw groups of agents together, these effects all foster what chapter three called ‘large hole conditions’ conducive to a high degree of institutional change. Isomorphic approaches, in contrast, foster ‘small hole conditions’. They emphasize ‘solution mimicry’ instead of problem solving, provide little impetus for reflection on incumbents, and de-motivate the search for in-context alternatives. As argued in chapters five and six, agents engaged in such change are often located in narrow cohorts at the organization’s boundary, allowing just enough external influence to ensure the organization looks legitimate without really having to change (as per strategic decoupling). Change is limited to the visible dimensions as a result, and reforms are limited to making organizations look better than they are.

The discussion behind Table 7.2 informs four ways in which external agents might improve the way they do institutional reform in developing countries, and overcome constraints related to context. First, they should promote a problem focus in everything they do, using data and the like to help local actors see festering issues as problems. Second, they should create opportunities for local actors to reflect on their problems, without pressure for specific solutions. Third, they should support local initiatives to question dominant incumbents, and to create an urgency about adjusting faulty incumbents. Fourth, they should help local actors see that problems can be solved, and put in place flexible pathways towards finding alternatives to status-quo mechanisms. Finally, they foster groupings of internal actors through all of these actors, helping convene and connect agents who may not ordinarily engage with each other but hold different pieces of the change puzzle.

This chapter used examples from health sector projects to illustrate that externally influenced reforms can foster such problem-led learning. The relative success of projects pursued using this approach speaks to its value. One should note, however, that many of the cases cited as successful reforms in this discussion may not have led to significant institutional changes in the project period. Getting 7 percent of Burundi’s sexually active population to use condoms may not constitute a deep change for many readers. Such examples are evidence of a growing awareness that change is needed, however, and reflect challenges to incumbent structures and attempts to bolster alternative structures. These are the early steps in institutional change. Realistically, these steps may by the most one should expect to achieve from external reforms working through three, four or five year projects—especially in difficult contexts that often prove un-ready for more expansive change.

The hope of many externally influenced reforms is surely that additional steps will build on these kinds of gains, endogenously or with further outside support, and lead over time to expanded possibilities for change. This is like facilitating change in small steps, as repeated acts of layered change (shown as step 1 in Figure 7.2, a revised version of Figure 3.2 discussed in chapter three). These steps are the feasible starting points in contexts where incumbent institutional mechanisms dominate, alternatives have yet to be identified and capacitated, and there are only narrow groups of agents engaged in change. If these steps are built upon they may ultimately lead to greater change opportunities, as the creation of new hybrids and maybe even complete shifts in logics. These steps are shown as ‘2’ and ‘3’ in the figure.
 
 Figure 7.2 is intended to show that change is iterative, and involves creating more contextual opportunity over time—and then acting on such opportunity. Much like a carpenter may work to make a hole larger so that it can fit a larger peg. It is important to note that problem-led learning is central to this prolonged change process and not just the early steps. As an example, Tulio Falleti’s study of health sector reform in Brazil indicates that an accumulation of responses to problems yielded significant change over decades.   Reforms transpired and deepened over this time as agents drew attention to emerging problems associated with the weak national health system. These problems were dynamic, changing shape and severity as the country decentralized and service demands grew. The overall reform has involved decades of responses to such problems, leading ultimately to far reaching change in the size, shape, and orientation of Brazil’s health sector.
 
Such process typifies endogenous institutional change in many contexts. The introductory examples of Norwegian and Swedish public financial management reforms are good examples. So is the history of change in the United States civil service system, which has involved many incremental interventions provoked by problems.  Patronage was considered an important aspect of such system until the problems of low-merit bureaucrats and the assassination of President James A. Garfield led to change in 1882, for instance. The assassination was a ‘focusing act’ that drew attention to patronage as problem, not just an issue. Nearly sixty years later, concerns over the political activity of civil servants also flared into a problem that facilitated the Hatch Act.  Perceived problems with civil service activities again emerged in the 1970s, leading to far-reaching reforms at the end of that decade as well.
These examples are intended to provide a contrast with the experience in many developing countries. Governments in these contexts commonly face pressures to introduce a range of externally defined ‘best practice’ reforms in short periods across health sectors, public financial management domains, civil service regimes, and beyond. Bolivia stands out as an example, where externally influenced reforms decentralized the government, professionalized the civil service, and introduced performance management in the period between 1988 and 2002.  The country had been a centralized military dictatorship before this, with entrenched patronage. These systems ultimately proved resistant to much of the proposed reform and Bolivia was criticized for failing in its commitment to reform.  In retrospect it seems that a better explanation was that many Bolivians did not see their incumbent systems as problems and hence did not choose to change these systems.  Repeated efforts to introduce these deep and extensive reforms routinely fail, and fail to build on opportunities for change that do in fact exist.

The example is meant to show that externally influenced institutional reforms often assume that change can happen in deep ways, across multiple domains, over short periods of time, on the strength of interventions that introduce externally identified best practices. This assumption does not reflect typical patterns of institutional change, however, or the way in which contextual realities create opportunities for adjustment. Opportunities arise as issues turn into problems, often over long periods, provoking reflection on deficiencies in incumbent structures, de-institutionalization of these, and a search for new alternatives. This process takes time, is typically incremental, and cannot be downplayed. It is naïve to think that reforms demanded and designed from the outside can short-circuit such process and force through reforms across governments in short periods.   Externally influenced reforms can, however, play a role in facilitating genuine change processes, or contributing at important points when such processes are already under-way, through interventions with a ‘problem’ focus and ‘flexibility’. Such interventions should be underpinned by patience and humble expectations, however, and a commitment to empower endogenous institutional change mechanisms as the ultimate goal.
« Last Edit: January 25, 2012, 08:33:34 GMT by Napodano »

 

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