I always reflect on my motivations for selecting a particular book to read especially when there are choices. In the case of the 2023 book “From Here to Denmark. The Importance of Institutions for Good Governance” by Rajat M. Nag and Harinder S. Kohli, there were five distinct reasons for making this choice. First, the book was brought to my attention by the head of the Governance Thematic Group of my retiree society, with the suggestion for the society to host a seminar with the authors. Second, I had just completed reading Paul Collier’s 2024 book “Left Behind. A New Economics for Neglected Places” with its focus on the State, Community (Agency), and Moral Leadership. Third, the legacy of three very senior Africa Regional managers and leaders with whom I worked in the World Bank, continue to resonate with me to today. Calisto, Gobind, and Benno led on the development of the strategic Africa Action Plan, and its complementary Africa Capacity Development Program. They hoped to bring attention to African institutions, governance, and certainly, the “Left Behind” sub-Continent. Fourth, my spouse’s mother and her parents migrated to the United States from Denmark, suggesting that the real Denmark as late as the early 20th century, was not the hypothetical construct of the book, i.e. a Nirvana of economic and social opportunity, political diversity and inclusivity, with good governance and strong institutions. Fifth, I have long known and admired the work of one of the book’s authors, Harinder Kohli.
The scope and tone of the book reflects the international development banking background and experiences of the authors. They politely tell the reader that the book is “not an academic work” but deliver a comprehensive 374-page treatise with 70 pages of notes, bibliography and index. The book is also appropriately spiced with the humility, caveats, and jargon of the economist and the academic. There is an argumentation and presentational style of “on one hand but not on the other”; and that many things are intertwined, linked, and consequential and therefore “matters”, leading to the proposition, hypothesis, and thesis that “institutions matter in delivering good governance.
Nag and Kohli define Governance as the process of governing a society to provide its citizens with the freedom from violence, from want, and from injustice, and noting that good governance consists of predictability, transparency, participation and accountability. They define Institutions as the rules, formal and informal, which define the framework within which human interaction takes place in a society. Institutions also set out how society will enforce these rules and are therefore context specific.
The overview in the book of the long ago diagnosed and accepted problems of development, and by now, a well-trodden taxonomy for countries including terms such as “Third World”, “South” “underdeveloped”, “developing”, “Part II”, “low-income”, “lower-middle income” and “middle-income”, etc. is quite helpful. Starting with the inadequacy of capital in Post World War II poor countries, the need to invest in physical reconstruction and infrastructure was both obvious and successful in countries that benefitted from the Marshall Plan. When physical capital proved to be only a partial solution in many countries in Africa, Asia, and South America, the preferred solution/approach or “silver bullet” at that time, was the encouragement of investment in human capital such as education and health. Sluggish or minimal economic growth led to the search for further issues and problems, and of course further “silver bullet” solutions. The lack of supportive macroeconomic policy environments in many developing countries was identified as the culprit, led to the so-called “Washington Consensus”, and ever so quickly, the push for policy and structural reforms, incentivized by the deployment of larger sized policy-based loans, credits and standbys from the international Banks and the IMF.
The partial success of policy rather than sector-based types of intervention and support meant that while both types of support were necessary and had to be stepped up, it was critical to understand better why “good” policies alone did not work as well as envisaged. The International Banks had by now, a wealth of experience with project-based specific investments, had evaluated these experiences, and could determine what worked, what worked less well, and what had failed. Similar work on policy-based support revealed that the mere formulation of good policy was not enough, there had to be competently functioning institutions to implement the policies. Nag and Kohli have looked at institutions at the State and Community levels, and those institutions that make for functioning Markets.
The book is well organized and has the trappings for a good textbook with Overviews and Summaries of each Chapter. It provides a plethora of information, citing a wide range of academic and operational studies; very brief histories of countries such as Japan, Korea, Great Britain and Denmark, Botswana and Uruguay, and their respective governance journeys; and a sufficient roundup of anthropological and social psychology, mental models, and game and behavior theory.
Overall, I liked the book and would recommend it.
Nonetheless, there are nagging questions when applying some of the authors’ theory of institutions to the context-specific environment and community of the World Bank Group (WBG) itself. For example, most readers understand that at the end of the day, it is complex and flawed human beings who make and implement the formal and informal rules of any institution. The WBG also knows that the development of human capital is an essential ingredient for sustained growth and development as evidenced in both Japan and Korea. Can the WBG not bring its inconsiderable analytical skills to partner with countries on human capital investments that go beyond formal education and health establishments and the policies and programs that intersect these? I am presuming that the WBG is perhaps already working with non-traditional partners such as Think Tanks, tech companies on AI, and digital spaces, industries, and research organizations.
Can, will, and has the WBG redefined Human Capital?
The Africa Region in the WBG systematically reviewed the capacity building funding it provided to countries in Sub-Saharan Africa over decades. The impact was evaluated as minimal. A consensus and agreement was reached that a major priority action in the region would be a major capacity building effort. The term was changed from “building” to “development” because the then President of the WBG wanted to be sure that the effort (supposedly the highest priority of his tenure) would not be on “buildings” but on “development”.
The institution of a Regional Vice Presidency (formal and informal rules of operation) did not in fact ever arrive at a true consensus or agreement. There was a special jargon that underpinned the formal and informal rules. Sayings such as “capacity is everybody’s business”; capacity building is a “cross-cutting” issue; and at a time of budget constraints, “we have to think differently and outside the box” were repeated in endless review meetings. These cliches expressed a conservative organizational tradition of sectoral staffing and budgeting. After all, “Who were the people arguing for capacity building, governance, and the prioritization of this agenda? “Where did they get their Doctorate degrees from and in what specialized and recognized sector? And finally, “Why should a Governance structure be staffed and budgeted that takes away resources from us? Paul Collier mentions in his book, the sad fate of the UK Tories, their “Leveling Up” agenda, and the attempt to implement their priority through an agency that never received a budget. The hope was that other Ministries would accept the “cross-cutting” nature of Leveling-Up and turn over resources for implementation to the Leveling-Up Ministry. It Never Happened.
Was the same true for the Governance agenda Bank-wide? Did this “highest priority” receive commensurate World Bank budget allocations?Why was this agenda funded by a Governance Partnership Facility (GPF) financed primarily by donations from the UK Department of International Development (DFID) and the Department of Foreign Affairs and Trade (Australia)?
In keeping with the silver bullet prescriptions of both Collier and Nag and Kohli, can and should the WBG finance both moral leadership and institutions?
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KEYWORDS capacity, development, governance, institutions, policy
Hello Anil,
I do think that our current and former colleagues who have thought about, written, and then worked to design, convince, develop, and ultimately implement policies and programs on governance and institutional development, are NOT all cynical people. Nor do I think that the institutions of the World Bank Group (shareholders, managers, staff) are inherently venal. What I did see during a long career, is that often good intentions (development policy and program outcomes and impact) run up against external political pressures, bureaucratic inertia, and ultimately, the behaviors and ambitions of individuals. Humans are indeed “flawed” when they don’t agree with you. So too are governments when they disagree with the advice of the World Bank.
I think we all understand that the World Bank Group’s advice on good governance is meant for poor developing countries who have no option but to tolerate the WBG, the guidance/ advice is not for the world bank group itself, its management or for its rich big shareholders.