Towards a Political Economy of the Institutional Quality Indicators

The recent proliferation of good governance indicators builds on an idea that has come to be widely accepted among development scholars and practitioners: the way in which power is exercised through political, economic and social institutions conditions the country's chances to develop sustainably and equitably. Just as Kaufmann and his team claim, the general consensus seems to be that "governance quality matters". In line with this assertion, developing countries are periodically diagnosed, evaluated, classified, compared and even ranked by a multiplicity of initiatives that aim to measure the various dimensions of good governance. These exercises have significant practical consequences, because good governance assessments and rankings are used to make business and political decisions that affect countries in a very direct way. In addition, the notion of good governance has a prescriptive aspect that derives from the values that inspire it: the democratic legitimacy of rulers, citizen participation, government accountability, transparency in the management of public affairs, the articulation of public and private interests, conflict resolution according to law, and State effectiveness in the provision of public goods and services as well as in the promotion of equitable growth. These values constitute by themselves a reform agenda for which promotion good governance indicators have great potential that remains somewhat unexploited. Highly aggregate indicators have been extremely useful for showing positive correlations between good governance and economic growth or poverty reduction indicators. Thus, they have called the attention of practitioners and decision makers to the importance of good governance for development, which constitutes an important practical contribution. Now that we know that institutions matter, we still have to determine which institutions matter the most for which results. Moving forward towards these sorts of explanations will probably require the use of more disaggregate indicators that allow us to identify-specific institutions and processes that might be affecting the general results of the institutional framework. These tools have the advantage of making information available that can aid in the detection of concrete weaknesses in a country's institutional design or its implementation. Therefore, they also show a greater potential to be used by policymakers as well as by civil society organizations interested in promoting a good governance agenda by identifying specific problems and contributing to the development of concrete solutions.