Report of the World bank on the global development 2017: “Government management and the law” not only points out and analyzes problems common for developing countries, but proposes ways in which governments and ruling elites must move in the 21st century, in order to find effective ways for solving them.
- When political means and technical decisions don’t provide desired results, this is usually due to ineffectiveness of the institutional system, and as a solution, upgrade of institutions is usually proposed. However, as experience of various countries shows, many institutional mechanisms and trajectories can facilitate development, while many other modern practices often fail. Sometimes, quick progress starts suddenly and unexpectedly. Due to this multitude of trajectories and risks it is important to underline factors, determining the effectiveness of the policy. Authors outline adherence, coordination and cooperation as the three major institutional functions, necessary for rules and resources to provide desired results”.
- Adherence inspires in the subjects a sense of trust to the means of politics, and as result they can construct their behavior accordingly. It is hard to secure conduct of a consistent policy throughout a long period. Circumstances change, goal of the policy can go beyond of political cycle, while there is a lack of resources, which lowers stimuli for conducting of the political course, selected earlier. According to economic theory of incomplete contracts, in order for political means to be trusted, there need to be methods of providing adherence”.
- “A trusted adherence to the policy of cooperation to economic growth and protection of property right, is also highly important for providing of macroeconomic stability and creating of conditions for economic growth. According to latest data, long-term economic growth is guaranteed primarily not through separate episodes of quick growth, as it was previously thought, but though the absence of episodes of decreasing production due to economic crisis or military conflict in the country (graph O.1. For economic growth there needs to be an environment in which companies and physical entities consider it safe for themselves to invest means into production activity. Such adherence can be formed in different ways. In the beginning stages of the fast-paced development of China in the 1980s successful economic growth was provided via promises to local governments, private enterprises and farmers that they will be able to keep profits to themselves, and due to this it was possible to secure trusted adherence, even though the issue of protecting of property rights just started to surface. On the other hand, in Nigeria, institutional environment didn’t provide adherence necessary for preserving of profits from extraction of natural resources with the goal of their further funneling for support of long-term development. In conditions of Nigeria, where the notion of widespread corruption gained a foothold, introduction of advanced principles of taxation policy, productive in different situations, didn’t lead to formation of trusting adherence, because government officials were guided by short-term interests. Thus, for example governors of states, unsure whether there will have the financial means in the future, had the urge to spend them as soon as possible”.
- “Coordination. At the same time, a trusting adherence alone is not enough; there needs to be coordination. A necessary condition for the process of investments and innovations – is assurance of companies and people that others too, will be making investments. Institutions can help in overcoming halts of the market mechanism, by coordinating investment decisions. A notion that ineffective coordination of investment activities may lead to delay in development, already appeared several decades ago. Lets examine the case when large corporations demonstrate higher effectiveness, but investments in them do not bring profits to separate companies, unless such companies unite into a group for simultaneous realization of investment. Size of the market may be too small for massive investments to justify themselves, unless all spheres are developing in sync, creating markets for each other. In such situation there may be two outcomes or states of balance. First, is a situation when companies don’t invest funds into large enterprises and effectiveness stays at the low level. Second, more successful outcome – is a state in which companies are able to coordinate synchronized transfer to a more effective and mass production. Such problems with coordination may occur in many situations – from financing to implementation of technologies to innovations, industrial clusters and city planning.
- “Cooperation. In the end, for policy to be effective and provide just development, there needs to be cooperation and first of all, desire from citizens to provide input into creation of public goods, and not just to rely on others to do that. The extent to which society can provide opportunities for all its members, depends on its readiness to invest into providing quality service such as healthcare, education and media, as well as guaranteeing availability of economic opportunities. In order to achieve such investments means have to be collected and redistributed. In practice, none of the countries with high level of income were able to better the situation from the point of view of social justice without considerably high taxes and government spending, whose goal is to protect people from shocks (such as illnesses and unemployment) and to decreases disproportions of the level of well-being within separate generations and between them. Moreover, for people to feel the effects of such investments, when they become adults, they need to have an access to economic opportunities, and first of all those that allow to them to fulfill themselves. For a country to be able to collect taxes, necessary for financing of investments in public goods, its citizens have to be ready to pay these taxes and cooperate. Cooperation is bolstered by adherence, since trusted provision of order of law is also necessary for expanding of opportunities and securing of equal rules of the game”.
And now a few comments regarding abovementioned quotes:
1. The fact that in Kazakhstan “politicians and technical decisions” regularly do not provide positive results, is widely known. And since, this is “often blamed on the lack of effectiveness of institutional system”, president Nazarbaev constantly “advances” government and quasi-govermental sector, changing their organizational structure, administration and functional tasks. However, the problem is the fact that Kazakhstan, has a lack of adherence coordination and cooperation, and it is unknown how to fill that deficit yet.
2. In World bank’s strong opinion; “For economic growth, there needs to be an environment in which companies and physical entities consider it safe to invest means into production activity”. This thesis is illustrated by examples of China and Nigeria, even though authors of the report could have used Kazakhstan instead.
Thus in the nineties and later, successful economic growth in the country was “provided through promises to local governments, private and enterprises and farmers that they will be able to keep profits to themselves, and due to this it was possible to ensure trusted adherence, even though the issue of protecting of property rights has just started to come up”.
However, later in Kazakhstan institutional environment didn’t provide adherence necessary for preserving of profits from extraction of natural resources with the goal of their further funneling for support of long-term development” plus there was a notion of “widespread corruption”. The “introduction of modern principles of tax-budget policy, useful in other situations, didn’t lead to formation of trusted adherence, since government officials were guided by short-term interests”.
3. Finally the biggest problem of modern Kazakhstan is lack of desire of Akorda and the ruling elite to cooperate with the society, people and compatriots. As a result, we see a lack of desire among citizens to provide an input into creation of public goods and not just rely on others to do it”. One of the consequences of this is the fact that taxes in the country are only paid under pressure, even though in World bank’s authoritative opinion, “for country to be able to collect taxes, necessary for financing of investments into public goods, its citizens have to be ready to pay these taxes and cooperate”.
World bank. 2017. Report on the global development 2017. Government administration and law. Review. World bank, Washington, DC. License: Creative Commons Attribution CC BY 3.0