A Bureaucratic Failures

As we have done in the preceding chapter, we start by considering the successful experiences of Taiwan and South Korea before attempting to understand the sources of bureaucratic failures in three in-depth case study countries. We follow a general approach to the problem of state capacity wherein it is seen as a problem of incentives and norms rooted in politics. In the words of Stuti Khemani (Reference Khemani2019: 2–3):

1 Positive Lessons from Taiwan and South Korea

Taiwan and South Korea have not only been endowed with determined and enlightened top leadership but also with an effective bureaucracy. In this respect, they were fortunate to inherit from the Japanese colonial power a modern, meritocratic, and authoritative bureaucratic structure that fitted well with the nature of the new regime. Recruitment and promotion criteria in the civil service thus continued to be based on merit, state employees received lifelong tenure, professional norms were strong, and corruption was limited. In Taiwan, moreover, the jobs of state bureaucrats down to quite low levels were now occupied by newcomers from mainland China, which automatically ensured political loyalty. Being an alien force, the new bureaucrats developed a corporate identity which was all the stronger as they had to identify their own interests with those of the state, their protector. These were obviously ideal conditions for a clean, cohesive, and competent bureaucracy. Another favourable factor consisted of the overarching responsibility of the NRC, the agency in charge of the country’s industrial policy. Made of the best experts available, it acted as a unique centre of command under the direct supervision of the supreme leader. Here, too, historical circumstances played a key role since the Taiwanese leadership learned bitter lessons from their defeat at the hands of Mao’s communists in China. Foremost among the causes identified was the existence of fragmented and politicised bureaucracy which, moreover, was too compliant with the requests of the private interests of powerful business lobbies.

There is yet another, less well-known aspect of state capacity in Taiwan, namely the administration’s approach to SMEs. Since the operation of these firms was deeply anchored in traditional, horizontal networks relying on informal contract enforcement mechanisms where interpersonal trust played a major role, the willingness of the Taiwanese authorities to allow varied forms of production organisations to prosper and to actually support SMEs without unduly interfering with their specific mode of operation, is a good example of a successful interaction between formal and informal institutions. The pivotal contribution of SMEs to the country’s growth and manufacturing exports is solid proof that this flexible approach of the government was fully justified.

In South Korea, as we have seen earlier, the commanding responsibility for economic development rested in the EPB, and the external threat posed by the close presence of the communist regime of North Korea, which benefited from an early industrial base which South Korea did not possess, was a powerful incentive to proceed fast and with maximum coherence and efficiency. Characteristically, both the NRC in Taiwan and the EPB in South Korea were modelled on the famous MITI (Ministry of International Trade and Industry) of post-war Japan. Filled with high quality and highly motivated bureaucrats – a legacy of high morals inherited from the classic bureaucrats of the pre-war period – this agency applied administrative guidance in order to push growth in a desired direction and ‘managed’ competition accordingly.Footnote ¹

Bureaucratic effectiveness in both Taiwan and South Korea stemmed from an additional source that deserves special mention: the top layers of their bureaucracies struck clever, incentive-based deals with private business firms, as though they had understood the basics of modern contract theory. Their general approach thus provided that special advantages granted to these firms (licences and permits, export loans, tax exemptions, subsidies) were conditional on their demonstrated ability to reach the objectives assigned to them (export targets, for example), and to become profitable within a reasonable span of time. Targets could be modified to allow for changes in the economic environment. Moreover, instead of awarding monopolistic positions, they tended to impose competition on the private sector so as to bring the discipline of the market to bear on its firms. In short, the stimulus of internal competition was systematically added to the stimulus of external competition. In South Korea, incentives to comply with production and export targets in heavy industry were reinforced by tournaments organised among chaebols. The government was thus able to overcome the information asymmetry which, in fully new export ventures, prevents the effective monitoring of firm performances by the executive and other state entities. For two chaebols committed to some new industrial export target, the tournament formula made it suboptimal for both not to do their best to reach their target. This is because they were keen to avoid the prospect of failure, and of practically going bankrupt, while the rival company would succeed.

Outside the industrial sector, and in line with the approach of inclusive development, careful attention was devoted to the creation of wisely conceived institutional vehicles for the active support of agricultural and rural development (training institutes, cooperatives, promotion of innovation, etc.). Worth noting here is the fact that bureaucrats carefully avoided substituting themselves for private middlemen, letting competition percolate down to local levels. At the same time, producer cooperatives were encouraged to benefit from scale economies in modern input procurement, output transport and marketing, veterinary services, training and adoption of new technologies.

It is also remarkable that the move toward economic liberalisation (and even political liberalisation in the case of Taiwan) was authoritatively imposed by the state itself. This radical policy reform was initially opposed by important sections of the population, the business community in particular. It is only at a later stage, when the benefits became more and more manifest, that trade liberalisation was gradually accepted by important group coalitions, and that the prescient decision of the state authorities was largely praised. Incidentally, this example has been used by Fernandez and Rodrik (Reference Fernandez and Rodrick1991) to illustrate their argument that, when there is uncertainty about the distribution of the costs and benefits of a reform, a radical move from above may well be justified.

2 Key Aspects of Bureaucratic Failures in Bangladesh, Benin and Tanzania

That the experiences of Taiwan and South Korea were rather exceptional is borne out by our case study material. A major institutional deficiency appears to be a serious lack of coordination between different ministries, resulting in confused, overlapping, and poorly enforced regulations. This problem is often ascribed to poor information-sharing, itself caused by the absence of good communication equipment. Here, we want to stress another aspect more in line with a political economy approach. In the very logic of political patronage, members of the government are inclined to view their ministry as their own fief, that is, they see it as a source of rents which should naturally accrue to them for personal appropriation and for redistribution to the network of their supporters and brokers. Combined with funds obtained from state budgets and from business oligarchs (see Chapter 8), rents extracted from the bureaucracy through appropriate channelling up help politicians to meet the costs of electoral competition and nurse a constituency between elections.Footnote ² Under these conditions, the sharing of information and any form of cooperation between different parts of the executive tend to be obstructed with the effect of seriously undermining the coherence and the effectiveness of development policies. These problems of coordination come on top of the costs potentially arising from the fact that the generation of illicit income may conflict with economic efficiency.Footnote ³

Land laws and their implementation in Benin are an example that comes to mind here. Reforms of land tenure have proven unbelievably complex, volatile, and non-monotonous, and one important reason is to be found in the assignment of responsibility for land regulation to multiple agencies and the continuous shifts of missions between these agencies. The Ministry of Agriculture, the Ministry of Town Planning, and the Ministry of Finance have been the main contenders for playing a major role in dealing with land matters. At a lower level, rural municipalities have strongly resisted against attempts to reduce their own land prerogatives. For example, thanks to their efforts, missions that belonged to the National Agency for Land Administration under a law were shifted to them under a subsequent law. They also successfully opposed the officialisation of rural land transactions, which would have implied the end of sale conventions of which they were in charge. In the same way as the customs service and the tax administration, the land administration is the object of fierce political struggles because of the huge rents that its control can potentially create. Decisions in these strategic public sectors represent high stakes for powerful groups – such as traders and businessmen for the former two, and notaries, barristers, architects, and land surveyors for the latter – which are therefore ready to pay for obtaining decisions to their liking. Payments are direct when they are made in the form of bribes to officials in charge, or indirect if they consist of donations to the political party that is in control of the administration or the service concerned.

When elections are won by different parties, or by different factions belonging to the same (dominant) party, time-varying allocations of key ministries or public agencies will not bring an end to corruption as long as the political game continues to be played according to the rules of clientelistic politics. What may change, however, are the laws and regulations enacted by the ruling government. And this is a serious problem to the extent that changing laws and regulations are susceptible of causing uncertainty, itself a source of disincentives to invest. This possibility is again illustrated by land legislation in Benin where new laws involved backtracking on previous ones, or introduced additional confusion.

Another reason why land laws are unenforced in Benin lies in a misalignment between the law and state capacity: this happens when a complex law is enacted for which the state does not have the administrative resources required for effective implementation. Politics may also play a role here if complicated laws are enacted in the full knowledge that their implementation will be difficult, or if they serve to satisfy contradictory interest groups without much concern for the actual enforceability of the legal compromise. The latter possibility is especially likely when formal rules aimed at uniformising and simplifying the diverse customary practices and norms found on the ground run counter to informal and local power structures. The difficulty to reconcile the two points of view illustrates one key issue of nation-building as mentioned in Chapter 8. It not only concerns land matters but also family and other spheres of everyday life. Conflicts thus easily erupt when formal laws are guided by international norms borrowed from advanced Western countries, which exert direct and indirect pressures on poor countries for their adoption.

As examples, we can think of all the laws that confront deep-rooted informal or customary practices, such as laws that prohibit early age marriage or polygamy (as in many West African countries), and laws that prohibit rural land sales above a certain (low) threshold, impose official authorisation for the purpose of buying rural lands, or mandate the owner of an uncultivated landholding to rent it out (as in Benin). In these instances, institutional dysfunction at the state level arises not from sleaze and rent-seeking but from ideological motives or external pressures to adopt laws which, being ill-conceived and out of touch with reality, are almost doomed to be unenforceable. Bureaucrats in charge of their implementation face an impossible task, or they are compelled to resort to brutal force which people will try their best to circumvent through various stratagems. In these instances, prescriptions emanating from international organisations and foreign donors are doomed to yield disappointing effects. The root cause lies in a lack of political economy perspective.

In Tanzania, coordination failures at the level of the administration bear strong similarities to those noted for Benin. In land matters, for example, laws are even more complex and confusing than in Benin, which is partly due to unresolved tensions and swinging moves between two objectives: protecting small and medium landholders and encouraging investment by large agro-processing export companies. Such tensions are institutionally reflected in the existence of a dual tenure system that will be explained later. Institutional overlaps are found at the levels of both the land administration and the land dispute settlement systems. To illustrate the former, while land officers in the local government authorities are paid by, and report to, superiors in the Ministry of Land, Housing, and Human Settlement Development (MLHHSD), they simultaneously execute functions for local governments, which are themselves under the responsibility of the President’s Office. As for the latter, at the lower level the village land councils and the ward tribunals are under the responsibility of the local government authority, but right above, the District Land and Housing Tribunals (DLHT) are governed by the Ministry, and at the top, the High Court (Land Division) and the Court of Appeal are under the judiciary. By contravening the principle of separation of powers, this institutional set-up creates serious problems of accountability.

Examples of multiplicity and overlap of institutions are easily found in other parts of public administration, too. Thus, the National Land Use Planning Commission is largely redundant with the Direction of Urban and Rural Affairs in the Ministry of Agriculture. There is a clear lack of cooperation between the Tanzanian Revenue Authority, responsible for tax collection, and the Minister of Finance, which lays out the tax schedules. Furthermore, the production and distribution of electricity is managed by a public monopoly, Tanesco, but is regulated in parallel by the Ministry of Mining and a regulatory agency (Ewura), the missions of which are overlapping. As a last example, the demarcation between the mandates of local government executives and those of officers appointed by the central government is often blurred, while the relationships between local government authorities, the prime minister’s office, the Minister of Finance and various other ministries are extremely intricate. If it is sometimes hard to retrace the origins of these dysfunctions, the effects are almost always negative. Thus, Ewura may have its recommendations – for instance, about the pricing of electricity – overturned by a President fiat although they had been grounded in serious work performed by excellent experts. And firm managers do not tire of complaining that they must obtain approval from an abnormally large number of government agencies before they can market a new product or service.

Turning now to Bangladesh, we find a country plagued by essentially the same problems as those discussed above. To illustrate, the education sector is riddled with confusing and sometimes conflicting divisions of responsibility between multiple actors. Thus, with respect to primary schools, overall ministerial control lacks effectiveness because three main ministries and several smaller authorities are entrusted with management roles. Added to this dysfunction are tensions and contradictions arising from the devolution of responsibility across central, regional, and local authorities. In these conditions, chains of responsibility and accountability are unclear.

It is typically because the multiplication of ill-coordinated agencies, departments or services obeys the need to create and entrench niches where rents can be earned by state agents that reforming the public administration faces stiff resistance. Thus, in spite of two Public Service Reform Programmes, no clear sign of consistent progress has been detected. The culture of recruitment of personnel on other grounds than ability and skills, or of promotion based on seniority or partisan links rather than merit, has largely persisted. In addition, shirking behaviour, embezzlement of state resources, and bribe-taking remain widespread. Poor peer monitoring and absent or perfunctory supervision are the most immediate causes of this predicament.

Besides a lack of coordination between different ministries and administrative units (which is again particularly evident in land matters), pervasive corruption at all levels of the civil service, and low transparency of decision processes, an additional problem undermining state capacity is the frequent meddling of the highest state authority in administrative decisions, such as we have seen for Ewura in Tanzania’s electricity sector. The financial sector, which is severely dysfunctional, epitomises the adverse effect of this last factor. In particular, the lack of even formal autonomy of the central bank is perhaps the most egregious example of institutional impediments to development in Bangladesh. The governor of the Bangladesh Bank is thus in a clearly subordinate position vis-à-vis the government and the president and, given the tight links between state and business, vis-à-vis private bankers as well. Subservience to private interests has become even more pronounced as the Bangladesh Association of (private sector) Banks, the BAB, has recently gained increasing political influence. As a consequence, regulation of the whole banking sector is essentially ad hoc and typically unable to control the numerous malpractices committed by the country’s commercial banks. The dual authority ruling over the banking system – state-owned banks are governed by the Banking Division of the Ministry of Finance while private banks are under the purview of the central bank, itself under the thumb of the presidency – is an additional factor causing ineffectiveness in the regulation of the whole sector.

In the light of these major institutional failures, it is not surprising that the banking sector in Bangladesh, despite its undeniable role in financing the expansion of the textile industry, has shown very poor management performance. In 2017, Bangladesh thus occupied a miserable 147th position out of 179 countries according to the international Z-score, an indicator of the probability of default of the entire banking system. Its Z-score was also the lowest among South Asian countries. The main factor responsible for this disastrous situation is the low quality of the sector’s lending operations, which is itself the result of regulatory and policy capture: bankers are subject to political pressures to grant unproductive loans, or loans which they know will never be repaid by the borrowers. In addition, cases of embezzlement through legal insider lending – that is, to the bank’s owners or their family – have been reported. In such an unhealthy environment, NPLs is a major concern: while representing 25 per cent of outstanding loans in the early 1990s, their proportion shot up to an astronomical 41 per cent in 2000.

Effective reform measures were then taken, in part under the pressure of the IMF, but also as part of an anti-corruption policy led at that time by the BNP government. As a result, the ratio was successfully brought down to a reassuringly low figure of 6 per cent by the late 2000s. However, because the root cause of the problem, which lies in the political system of patronage prevailing in the country, was left untouched, the downward trend was soon reversed as the proportion of NPLs practically doubled during the following decade. Even more worryingly, while NPLs tended to be initially concentrated in state-owned banks, they have soon started to spread to private commercial banks too. Besides negatively affecting the banks’ prudential ratios, these bad loans have forced the banks to raise their borrower rates, thus discouraging private investments outside the privileged sectors (the textile industry, in particular), which have continuously enjoyed exceptionally favourable terms. To this shortcoming, we must add the frequent need for monetary injection in state-owned banks or in the bailouts of private banks.

B The Role of Incentives and Norms: The Example of Education

Education is a key factor of development, and it is even more true today for poor countries in need of production niches in high-value-added products and services. It is undeniable that enrolment rates at various levels of the education sector have significantly increased in many of these countries during the last decades. However, the achievement of high rates of enrolment and completion of different cycles is a smokescreen if the level of skills acquired in the education process remains low. In blatant contrast to South Korea and Taiwan, where education has been remarkably performing at low, medium, and high levels and in technical and scientific fields in particular, our sample of four poor countries exhibit dismal education records if we judge by learning outcomes. Especially worrying are the indicators measuring literacy, numeracy, and writing skills for children who have completed primary school. This situation, sometimes termed as one of ‘learning crisis’, is not exceptional since similar results have been found for other countries, particularly in India and Pakistan, which are close neighbours of Bangladesh. The latter country will receive special attention in a later subsection.

In what follows, we discuss the causes of poor performances in education under three different headings: weak state capacity, absenteeism, and low teacher quality. Before addressing this task, it is worth stressing that in all these respects, Taiwan and South Korea have done very well. In particular, from the beginning of the development process, education has been considered a top priority by the political rulers. Moreover, an effective and coherent administration was put in place to manage it and monitor its progress. Equally noteworthy is the strong demand for education among Taiwanese and Korean citizens, whose preferences are highly skewed toward their children’s training. This implies that, as in many East Asian countries, parents, and even poor parents, are ready to incur substantial sacrifices in order that their children can get proper education and raise their income prospects in life. Given the foregoing characteristics, it is not surprising that both the quality and the social status of teachers in this region of the world are remarkably high, and that teachers and school directors exert great efforts toward fulfilling their duties.

1 Weak State Capacity and Institutional Dysfunction

The education sector is typically an area where it is uneasy to disentangle institutional dysfunction from limited state capacity (stricto sensu). Still, a useful distinction is between input amounts and the efficiency in their use. In many developing countries, including our sample countries, because of insufficient state budgets allocated to this sector, input indicators reflect a situation plainly unfavourable to education quality: very high pupil-teacher ratios, a very high number of pupils per classroom, shortage of teaching material, a low number of schools forcing many children to travel long distances, and so on. Except when the country is too poor to finance a vibrant education sector, and therefore needs external assistance, deficient funding of the school system is attributable to low public spending, as a result of low general taxation and/or the low ranking of education in the list of government priorities. While Mozambique, where international donors provide key financial support for education, offers a good illustration of the former situation, Bangladesh comes to mind as a striking example of the latter. In Bangladesh, indeed, not only is general taxation exceptionally low as a percentage of GDP, so strong are the pressures of powerful business lobbies on the government to limit taxes, but the country also devotes comparatively small amounts of public money to education, primary education in particular. The consequence of these two features combined is that Bangladesh has one of the lowest ratios of public expenditure on primary education to GDP in the world (significantly less than 1 per cent). Interestingly, major actors in the country formally agree that this situation ought to be remedied and taxes significantly increased. Yet, in practice, everyone behaves as though they are satisfied with the present equilibrium characterised by low taxes and low public expenditures. This is because, as in a prisoner’s dilemma, everyone would like the other actors to bear the brunt of higher taxes while benefiting from better public goods.

The institutional dimension of the human capital problem lies in the effectiveness with which inputs, however small or large, are used in the education process. Institutional dysfunction generally arises from deficient incentives, absent or weak professional norms, and the power structure. In the following, we illustrate these three possibilities under the headings of two major problems: absenteeism of teachers and school directors, and poor teacher quality and training.

2 Absenteeism of Teachers and School Directors

A recurrent and distressing cause of low education performances is the pervasive absenteeism of teachers and school directors, as well as their lack of punctuality. While the rate of teacher absenteeism in the primary schools was relatively low in Bangladesh in 2006 (16 per cent compared to 25 per cent in India), it was estimated to be as high as 31 per cent in a survey of Tanzania’s schools in 2014. The latter figure is of the same order as the rate of 27 per cent observed in Uganda, but in 2006 (Chaudhury et al., Reference Chaudhury, Hammer, Kremer, Muralidharan and Halsey Rogers2006). In Mozambique, the situation is even worse, with a rate of around 45 per cent for both primary school teachers and directors in the same year. In addition to being frequently absent, teachers in these schools have a bad habit of arriving late, or leaving early, so that many pupils in the country are losing more than 50 per cent of the learning time they are entitled to, as a result of late start times, early closing, and extended recesses. These are astronomical figures, and the question immediately arises as to what are the reasons behind such widespread non-compliance with contractual obligations on the part of frontline agents of the education system. Note that the situation appears significantly grimmer in the heath sector: the rates of absenteeism estimated for primary health centres in 2006 are thus much higher than in primary schools, implying rates reaching 40 per cent in India and Indonesia, 37 per cent in Uganda, and 35 per cent in Bangladesh (Chaudhury et al., Reference Chaudhury, Hammer, Kremer, Muralidharan and Halsey Rogers2006).

A first possible cause is low, or irregularly paid salaries, which compel these agents to take up side jobs that distract them from their first duties. But this cannot be a complete explanation since the phenomenon can be observed in situations where the teacher salaries are well above the average local earnings. A second explanation is the absence of professional norms ensuring that the agent is internally punished when not fulfilling duties, say, by feeling guilt or shame in front of peers, parents, and others. In this respect, there are obvious differences between South Asia, Africa, and some countries of Latin America, on the one hand, and East Asia where education is highly prized, on the other hand.

A third explanation is the absence of effective monitoring, which entails the consequence that defaulting agents cannot be externally punished, thus encouraging them to act with impunity. This mechanism is likely to be interlinked with the previous one in the following sense: adequate social norms are prevented from emerging if a dutiful teacher who starts by abiding by the contract gets discouraged by seeing that others around him/her are not sanctioned upon violation of the terms of the contract. In game-theoretic terms, agents follow a behaviour of conditional reciprocity, and the bad equilibrium in which everybody feels free to act according to own selfish interests comes into existence.

A fourth way to understand school dysfunction rests on individually rational behaviour. Thus, if many people do not perceive significant returns to education for their children – typically because they live in a region where there are no job prospects in the formal sector of the economy – they will not send them regularly to school, especially so if they can employ them at home and/or teachers are badly trained and, hence, of low quality (see the next subsection). As a consequence, parents may not consider teachers as socially useful specialists, and the latter lose their own motivation to regularly attend to their duties. In these conditions, professional norms of regular attendance fail to get established. In other words, a link is likely to exist between the formation (and maintenance) of norms and the intensity of the demand for education.

Finally, contract-breakers may feel protected by locally powerful people who can even be the instigator of the fraud. The existence of so-called ‘ghost schools’ and ‘ghost teachers’ in Pakistan, from which Bangladesh actually seceded in 1971, illustrates this possibility, showing that not only may education fail to be a priority, but it may also be actively opposed by local strongmen. The latter need not be necessarily religious leaders opposed to secular education and favouring religious teaching in madrasas (Malik et al., Reference Malik, Mirza, Platteau, Faguet and Sarmistha2021). They may also be traditional landlords eager to prevent the emancipation of their dependents lest they should develop ‘unrealistic expectations’ and cause a shortage of cheap agricultural labour (Martin, Reference Martin2016: 87). In such instances, school dysfunction is not (necessarily) caused by a lack of spontaneous demand for education, but by deliberate attempts by powerful people to repress it.

When they act as political leaders or brokers, reactionary landlords may go as far as diverting school buildings from their intended function by using them as cowsheds, farm buildings, accommodation for some relatives, and the like (Martin, Reference Martin2016: 133).Footnote ⁴ Teachers themselves are then ‘ghost teachers’ who rarely turn up for their duty, and place false entries into the attendance registers (Reference Martin2016: 88). Their time and energies are diverted to other uses that serve the interests of their patrons who protect them from disciplinary action (see Zahab, Reference Zahab2020: 82, and Gazdar, Reference Gazdar2000, for quantitative evidence). In some cases, primary school teacher posts are sold by politicians and officials for large amounts of money, thus inducing the beneficiaries to take side jobs to repay their loans (Hasnain, Reference Hasnain2008: 137). Also, it may happen that teachers surrender as much as half their salaries in order to escape the duty of attending school because they are essentially happy with the reward consisting of the lumpsum pension of 2–3 lakhs which they receive at the end of their careers (Martin, Reference Martin2016: 80).

In the presence of flawed monitoring by state authorities (school inspectors), a frequently proposed solution consists for schools to be monitored by stakeholders comprising parents of the pupils, in particular. Nowadays, this solution is promoted by many scholars, including economists. In Mozambique, for example, school councils (CEs) have been set up to precisely supervise school activities and denounce failures. And, yet, the results have fallen short of expectations. The underlying reasons are several, but two deserve special mention in the context of the present discussion. To begin with, members of CEs may lose their motivations to attend CE sessions because they do not derive any material gain, typically in the form of per diems, from their participation. This type of behaviour would be largely unthinkable in East Asia and in Western advanced countries, because members of school committees are either intrinsically motivated or attach a high value to improvements from which their own children will benefit. Next is typically a power-related problem: CEs frequently complain that children may suffer from reprisals by teachers and school managers if they point to unjustified absences, lack of punctuality, and abuses of power or to non-transparency in the use of school funds. As a result, the CEs risk being pseudo-participative institutions whose members are coaxed to accept what is decided by the school board, thus being reduced to a simple role of rubber stamping. In the same logic, school directors may exert their power and influence to bring a compliant person to the CE presidency.

3 Low Teacher Quality and Training

To a large extent, teacher quality depends on recruitment procedures and training (in addition to decent salaries). That these determinants are often distorted is starkly testified by the experience of Bangladesh. There, the recruitment of teachers is often biased by the leakage of the written exams on the basis of which selection is made. Moreover, the payment of bribes may decide which teachers will be transferred to Dhaka, the capital city, which is equivalent to a big promotion. In many poor countries, teacher training is strongly deficient with the consequence that the level of skills of, say, primary school teachers, is hardly higher than among the pupils. The reasons for this sorry state of affairs may vary. In countries such as Mexico, the main culprit is the teacher trade union, which staunchly opposes the skill upgrading of the profession. Being politically well connected, it is able to block or derail training reforms although they are manifestly in the general interest. The backtracking on these reforms by the present president, Lopez Obrador, who is himself close to the teacher trade union, attests to the possible influence of politics on teacher quality.

In another scenario, teacher training is undermined by severe budget cuts, which reflects the low priority that education quality receives at central state level or even among international donors. Thus, in Mozambique, the fast-track teacher training model, which abruptly reduced the number of years of training for primary teachers from three to just one, was seen as a way to increase the number of teachers in a short span of time without raising the burden of salary expenses (since salaries are calculated according to the length of the training period). If it helped contain the increase in pupil–teacher ratios, the reform had the devastating effect of supplying teachers with insufficient skills in reading, writing, and arithmetic. In Benin, within the framework of the Structural Adjustment Programme of the years 1989–92, the imposed downsizing of the public sector led to a severe reduction of the education budget. This caused, inter alia, a doubling of the pupil–teacher ratios in the poor, northern part of the country with catastrophic effects on teaching quality.

4 An Inspiring Experience

An inspiring experience to which we want to draw attention in concluding our discussion of education problems is taken from an innovative approach adopted in the city of Sobral in Brazil’s poor, north-eastern state of Ceara. Before the start of the programme, only about half of children could read by the time they finished primary school. After its completion, twelve Cearan school systems ranked among Brazil’s twenty best. The key elements of success are: (i) the ending of the practice whereby city governments appointed their friends and political allies to serve as school principals, and its replacement by selection procedures exclusively based on merit (as assessed in interviews and tests); (ii) the priority given to enhancing teacher training with, in particular, the strictly enforced obligation for every teacher to spend a day per month in training; (iii) the systematic application of city-wide tests in math and Portuguese for all grades by local professionals, and the payment of bonuses to teachers who succeeded in hitting minimum targets; (iv) the setting of the absolute requirement that children must master basic literacy before they can enter the third grade (when they are aged eight or nine); (v) the devolution to cities of greater power to run their own schools; and, finally, (vi) the linking of a (small) part of the budget allocated to each city to improvements achieved in school results.

Perhaps even more decisive was an element of the policy environment. Sobral benefited from its unusually stable politics: the same political team has run the city for twenty-five years, and education was kept a priority during this whole period (Economist, 2021: 33–4). This condition sharply contrasts with the constant changes of education policy in a country such as Mozambique, particularly in matters of teacher training. The main lesson to draw from the Ceara experience is that success in improving educational performances very much depends on a bundle of conditions rather than a single factor. This is negatively confirmed by a recent randomised control trial which found no effect on student outcomes and teacher attendance of a scheme allowing high-performing teachers to receive their preferred posting in Uganda (Cohen et al., Reference Cohen, Dal Bo, Finan, Omala and Schönholzer2021).

C Lack of Independence and Effectiveness of the Judiciary

Since the judiciary is a critical part of the law enforcement mechanism, its functioning must play an important role in any assessment of a country’s state capacity. Another issue is the degree of independence of the judiciary. Clearly, in Taiwan and South Korea the authoritarian nature of the regime meant that the judiciary was not independent of the executive, at least in matters involving freedom of expression, political organisation, and human rights. On the other hand, rights and obligations pertaining to the economic and the family spheres were effectively enforced, and this proved to be important for the smooth running of the economy and the harmonious life of the society. An independent judiciary in the full sense of the term was to wait until later, after the basis for sustainable growth and development had been built. Almost by definition, ‘developmentalism’ places higher priority on the modern transformation of the economy than on full democratisation of the society; the idea being that successful modernisation would naturally lead to the democratisation of a society, while the reverse does not necessarily follow (Okuno-Fujiwara, Reference Okuno-Fujiwara, Aoki, Kim and Okuno-Fujiwara1997: 403).

In two in-depth case studies that we conducted, Tanzania and Bangladesh, special attention has been devoted to the functioning of the judiciary system. The analysis reveals that not only is this system highly dysfunctional, but also its flaws go beyond problems of insufficient staffing, out-of-date equipment, archaic procedures, huge backlogs of pending cases, and poor communication of information. In evidence is the pervasive presence of corrupt practices and the meddling of powerful actors in the treatment of judiciary affairs, including day-to-day matters pertaining to the civilian and commercial domains of the law. It is therefore not surprising that there is such a strong distrust in judiciary institutions and the magistrates in many poor countries: people tend to believe that judicial decisions are biased in favour of those who are well connected to politicians or rich enough to afford paying bribes.

Expeditiousness of the judiciary system is low in Tanzania, at least if we judge from the situation of land dispute settlements. Backlog of cases and delay in settlement of land disputes are among the problems most often mentioned in relation to land administration. What needs to be stressed is that, in land and other matters, slowness of public decision making feeds corruption, as bribes are often demanded by officials on the ground that they know ways of speeding up delivery. In countries such as Tanzania and Benin, practices of bribe-taking persist in spite of the display of public notices in offices, warning that such practices are strictly forbidden (which we could verify by ourselves), and in spite of official anti-corruption campaigns.

As attested by testimonies in relation to Bangladesh, the situation may even be worse in the sense that lengthy procedures and various other tricks may be part of a delaying tactics intended for extracting illegal payments from both plaintiffs and defendants. Clerks, advocates, and judges are those whose strategic positions allow them to demand additional payments allegedly meant to ‘accelerate’ the resolution of the case. There is thus widespread suspicion that actors along the enforcement chain often indulge in practices evoking piracy: they artificially create the problem which they then pretend to be able to solve against illegal dues. The difference with the aforementioned situations where slowness of delivery of public goods or services feeds corruption is that in the present case corruption is born of calculated prevarication or fabricated administrative problems; that is, it is the result of malevolent manipulation.

Another salient dysfunction of the judiciary is caused by the meddling of powerful people in judiciary decisions. Bribes are not necessarily involved since political interventions may be part of an implicit contract of political patronage. This is attested by evidence collected in Pakistan. Thus, Lyon (Reference Lyon2019) argues that one important reason why a Pakistani landlord may decide to engage in politics is to get a serious land conflict settled in his favour with the help of powerful politicians at district level. As for Martin (Reference Martin2016) and Mohmand (Reference Mohmand2019), they cite meaningful anecdotal evidence attesting that a political patronage system anchored at the village level enables landowners connected to a political machine to secure the recognition of their perceived rights, at the cost of bribing or intimidating judges if needed. This is especially true of the entrenched dynastic elite, which lord over hierarchically organised patron-client networks that they use as trustworthy voting blocs to endorse their favoured politicians (Malik et al., Reference Malik, Mirza, Platteau, Faguet and Sarmistha2021).

What bears special emphasis is the deleterious effect of political interventions on professional norms inside the judiciary system. If Big Men can influence judicial decisions and derive direct or indirect advantages from their action, why should even low-ranking officials refrain from drawing small perks from their position? The situation is even worse when the appointment and/or the promotion of judges are the outcome of political and politicised decisions. In Bangladesh, this is true at the highest level of the judicial system since judges of the Supreme Court are nominated by the Ministry of Law, Justice and Parliamentary Affairs, itself vulnerable to high-level political pressures aimed at keeping political rivals at bay and buttressing the ruling political regime.

Delving deeper into the case of Bangladesh, it is possible to figure out how, based on perceptions and opinions of a sample of respondents, this country performs in comparative terms. Assessment of judiciary fairness relies on three indicators extracted from the Rule of Law Index of the World Justice Project (2019): while the first two measure the extent of inequality in access to the courts and in the treatment of the cases, respectively, the third one tries to capture the degree of corruption and bribery of the judges. Essentially, they converge to show that Bangladesh does not fare very well along the three dimensions considered. Where it performs especially poorly (with a rank of 115 among 126 countries) is in regard of the second indicator (measuring the degree of discrimination in case treatment) for which it nevertheless does slightly better than its two big South Asian neighbours, India (ranked 117) and Pakistan (ranked 118).

When the expeditiousness of the judicial procedures is measured by the backlog of pending cases, the picture which emerges is rather dismal. Civil court cases resolved during a recent year (2018) represent a significantly smaller number than the total number of cases received and filed, implying an increase in the backlog. This is clearly not a new or transient phenomenon since at the end of the year 2018, more than one-fourth of the total backlog of civil cases consisted of cases that had been pending for more than five years. A similar deterioration is observed when considering the total number of civil and criminal cases, and, interestingly, case backlogging is especially important in the three most prosperous administrative divisions of the country. Among the chief reasons behind this worrying situation are the shortage of judges and the ineffectiveness of the judicial procedures which continue to be based on manual paperwork and even require the judges to write by hand the statements of witnesses.

The lack of independence of the judiciary vis-à-vis the executive is harder to estimate, and evidence is unavoidably piecemeal. A rare exception is nevertheless the detailed and rather unique study of Mehmood and Seror (Reference Mehmood and Seror2019) for Pakistan.Footnote ⁵ They argue that meddling of the executive in judicial matters does not mean that all types of judgments are biased. Decisions most liable to be influenced by such interference concern cases where resources valuable to politicians are directly or indirectly at stake (think of expropriation of private property by government agencies, for example). They thus show that the rise of religious landowning elites, taken as a proxy of democratic regression, has increased the incidence of court rulings in favour of the government for cases involving land disputes with the government, and for cases involving violation of human rights. In contrast, no effect is detected for ordinary criminal cases such as thefts. Moreover, democratic regression has reduced the quality of judicial decisions as measured by case delay (the difference between the year of the case decision and the filing year) and by merit, as proxied by a dummy indicating whether the decision was based on evidence rather than technical or procedural grounds.

Unfortunately, there are no systematic data available to explore the influence of politicians on judicial decisions for civil cases. As argued above, we expect civil judgments to be biased toward the clients of powerful local politicians in contexts dominated by political patronage. Are reforms showing promising results? In Bangladesh, the mode of appointment of the judges, which is critical for their independence, has apparently improved since this prerogative has been taken away from the Public Service Commission, and actual implementation seems to have occurred in 2007. Yet there is lingering doubt about the extent to which in actual practice the judges are appointed for their competence and experience rather than their political loyalty. If we go by the reform experience of Pakistan, however, it is possible to entertain hope for progress: an important reform consisting in the appointment of judges by peers rather than the executive appears to have produced significant effects in the form of more expeditious and less skewed decisions (Mehmood and Seror, Reference Mehmood and Seror2019).

A Rights over Business Assets

Together with governance failures, the weakness of property rights is the main generic institutional obstacle against development, which economists repeatedly point out in their writings on the subject. The central argument is that absent or fuzzy property rights impede investment and growth both because they cause uncertainty about who will benefit from the investment effort and because, by preventing asset collateralisation, they make access to credit difficult or impossible. Perhaps the most egregious example of such an adverse effect is the high risk of politically motivated expropriation following a change of ruler, or a change of mood of the present ruler, in autocratic regimes. There is ample historical and contemporary evidence of this possibility as attested by the many instances in which, on the spurious ground of tax evasion, oligarchs have been suddenly dispossessed of their wealth and even thrown into jail.Footnote ⁶ Examples run from the Ottoman empire – where reaching positions close to the sultan (the post of the sultan’s treasurer, in particular) was a dangerous step that could be quickly followed by demotion, arrest, and execution – to today’s countries of the ex-communist world (Russia, Georgia, and the Central Asian Republics, for example) or the developing world (India, China, Malaysia, South Africa, etc.).

The examples of Taiwan and South Korea nonetheless show that this is not a necessary attribute of autocratic regimes. Enlightened autocrats are indeed able to internalise the negative long-term effects of violations of private property rights on their country’s development, and they therefore stand as their strong guarantor. It is true that expropriation or nationalisation of business assets was an impending threat in Taiwan and, even more so, in South Korea. However, the threat would be executed only if a breach of contract was clearly committed by the business owner in his dealings with the state authorities. In other words, the risk of expropriation was predictable. As far as land property rights are concerned, the creation of a cadastral survey was one the priorities set by the Japanese authorities, which early on during the colonial period wanted to boost tax revenue and facilitate land transactions (Cheng, Reference Cheng2001: 20; Chu, Reference Chu1999: 15). On the occasion of the radical land reforms carried out by the independent governments of Taiwan and South Korea, these rights were duly revamped.

In our small sample of country case studies, Benin and Bangladesh are clear cases where property rights of Big Men are uncertain. The logic is plain: their rights are secure as long as the right political ruler, the one whom they have supported, is in power. In Benin, Ajavon bitterly experienced this logic after his defeat against Talon, who himself had to go into exile after his defeat against President Boni. Diversifying political support is the obvious way of avoiding or mitigating the expropriation risk, yet this may be an impossible tactic in strongly polarised political universes. Just think of Bangladesh where, until recently, a person of importance was compelled to choose either of the two available political sides, the AL and the BNP. Accusations of treachery or duplicity were easily proffered against anyone who appeared to play a double game. The risk is equally high for businesspeople belonging to ethnic minorities, as testified by the aforementioned fate of the Gupta family in South Africa or the expulsion of all Indian entrepreneurs and merchants from Uganda under Idi Amin Dada.

It is therefore not surprising that wealthy Indian, Chinese, or Lebanese entrepreneurs tend to adopt cautious behaviour when they enter into the political game, which is almost inevitable in most countries. One frequently observed tactic consists of sharing ownership with powerful local politicians-cum-businessmen. In Malaysia, for example, many of the bigger Chinese business interests have chosen to co-opt influential politicians from the dominant party (UMNO), as well as former civil servants from the dominant ethnic group, as directors and shareholders of their companies (Jomo and Gomez, Reference Jomo, Gomez, Aoki, Kim and Okuno-Fujiwara1997: 364). In the specific case of Malaysia, this tactic was especially appropriate as the Industrial Coordination Act (ICA) of 1974–5 provided that the development of the manufacturing sector should be aligned with the ethnic redistributive policies that the Malay political elite demanded with a view to achieving interethnic economic parity. (Until then, Malay businessmen had been essentially concentrated in agriculture and the public sector.) As a result, ‘both Chinese and foreign companies began to actively solicit business ties with politically influential Malays willing to lend their names for a price without taking on executive roles after becoming owners and directors of the companies’ (Bowie, Reference Bowie1991: 103–4, as cited by Jomo and Gomez, Reference Jomo, Gomez, Aoki, Kim and Okuno-Fujiwara1997: 363).Footnote ⁷

In South Africa, to take another example, Indian-born entrepreneurs, the Gupta brothers, befriended the highly corrupt President Zuma and went into business with his son, Duduzane.

B Land Rights

Before delving into the intricacies of land laws, it is useful to describe the major types of land conflicts observed in our four in-depth case study countries, and to decipher their root causes.