Reagan once observed that "the most terrifying words in the English language are: I'm from the government and I'm here to help." Turns out if you're trying to build a market economy the only thing worse than too much government is not enough, according to a study by Brown, Earle and Gehlbach.
Counterintuitively, their examination of privatized firms in post-Soviet Republics found that larger bureaucracies did better at creating an environment conducive to successful economic growth than smaller bureaucracies. Having enough bureaucrats to administer business permits and prevent power from becoming concentrated in the hands of just a few bureaucrats who can extort bribes at whatever price they choose turns out to be important.
Another finding may offer solace to your inner Jeffersonian. National-level bureaucracies did little to improve firm success. Having a reasonably sized bureaucracy at the regional and local level is what's important. Those are the bureaucrats that work most directly with small businesses, and are most closely engaged in constituent services.
If we look to Afghanistan we've reason to be supportive of much of the population (read constituent service) Gen. McChrystal and Amb. Eikenberry's population-centric strategy calls for. Bit of a leap? If we hope to make Afghans' lives better, we need to focus on - well, the Afghans themselves. It's a cliche by now, but higher employment reduces incentives for young men to seek their fortune with the Taliban.
The danger of this cliche is some make the leap that we could simply employ Afghans in work programs for less than the cost of our war effort there. Unfortunately that's untenable so long as the state, or a third-party enforcer like the U.S., is unable to protect the population from coercion. Think LRA-style child soldiers.
Typically only around 5% of a population takes active part in civil wars. Given how little it takes to upset the applecart, we should be sensitive to how big a challenge the stabilization project is, and how skeptical we should be that economic development alone can solve our problems in Afghanistan.
The National Solidarity Program (NSP) is an interesting experiment in improving both local governance and providing funding for local level programs that directly impact Afghans. Rather than foreign assistance being funneled through expensive contractors and foreign-national run NGOs, it goes directly from an Afghan ministry (there are pockets of competence within the government of Afghanistan) to locally-elected Community Development Councils (CDCs). CDCs are one of the few mechanisms for local governance that has escaped politicization by Karzai's government (though recent leadership changes may have endangered its independence). MIT's Andrew Beath is conducting an impact study that has found NSP to be an effective program in ways few other programs can claim.
For more on governance capacity-building in Afghanistan listen to the Institute for State Effectiveness's Clare Lockhart.
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9 years ago
Obama said something similar to Reagan in his inaugural when he said that the issue isn't whether government is to large or to small, but whether it is effective.
ReplyDeleteOn the whole, I would rather have to little than too much. Those few bureaucrats who extort bribes can become too many and have an even worse effect. Also, the more regulation, the more difficult it is for new firms to enter the market, leading to a lack of growth.
Also, people are crafty. Once you have security and stabilitiy it's not the government that enables markets by intervention or by creating an enabling enivronment. Markets will grow organically. But governments can kill markets by corruption, excessive regulation, poor monetary policy, lack of security, etc. Even an alternate currency and public services can be done elsewhere. People will use the dollar or the euro, by generators and in short, do what they need to do.
Having enough bureaucrats to administer business permits and prevent power from becoming concentrated in the hands of just a few bureaucrats who can extort bribes at whatever price they choose turns out to be important.
Government can at times be the solution, but all to often it is the problem.