 Okay, I think we're going to get started. I'm Dan Rundy. I hold the Shire Chair here at CSIS. It's really great to have this very accomplished panel joining me here for this conversation. The discussion is going to be called combating global poverty, investing in the governance and growth in nexus. We've just released a report last night that I think you guys have copies of that talks about this very important nexus of issues. I think we're really particularly appreciative of Smith Richardson Foundation who helped finance the work that we did on this important set of issues. Conor Savoy, who's in the back, was the author of the report, but also I want to recognize my friend Lee Williams, who was with us for two years at CSIS, and one of the contributing authors for the report. He has left us and has now gone to USAID and has gone into public service. So thank you, Lee, for being here, and thanks for all the work on the report. I think for this conversation, I want to just reference a couple things. One is that our bias is towards democratic governance, and we want to be working towards as donors. We want to be thinking about how we can move towards democratic governance. There's a lot of research that we talk about in the paper that refers to the fact that you want to have democratic governance. A lot of the research was referenced in USAID's new democracy, rights, and governance strategy that we helped release here a couple weeks ago. So there's been a series of thought leadership and research that's happened over the last 20 years that makes the case for democratic governance and that donors should be investing and moving in that direction. It's good for human freedom and for human prosperity. The second point I want to make is that there's been also what I describe as a little bit of a governance boomlet among donors. I think frankly, thank goodness for the UK government, the British government. We're going to be releasing the report tomorrow in London at Chatham House, and the Cameron government in particular under first Andrew Mitchell's leadership when he was the head of DFID and since then under Justine Greening has been pushing an important set of initiatives around what they call the golden thread of governance and the G8 has taken this up. So between the research and let's call it a geopolitical window, there's a boomlet, if you will, on governance. Many people think about the research of folks like Asimoglu and Robinson, why nations fail, and other thoughtful people that many of you in the audience are aware of. So we want to take advantage of this boomlet. Finally, I want to reference much of the work that's been done by the World Bank Group, doing business indicators and the investment climate work that I think my friend Dev will have a chance to refer to in his remarks. But I think that what we have is really a series of planets aligning for us to put more resources into a set of issues that are going to be important for us to combat global poverty going forward. We've oftentimes spent much of our resources and efforts on basic human needs. They're very important, but we've underfunded and under-emphasized these issues of the governance and growth nexus that we'll have a chance to discuss in detail. Both you'll have a chance to look at the paper as well as also in the discussion that we're going to have with the panel. So with that off the table, I want to ask each of my friends and panelists to make some remarks. You have their biographies in front of you, so I won't go into extensive introductions. I'm going to ask first my friend Dev, Janamitra Devon, who was the former vice president and the head of the network for finance and private sector development at the World Bank, as well as the International Finance Corporation, to make some remarks first. And then I'm going to have my friend Ambassador Jim Michael speak, who used to be the head of the DAC, which as I always describe it as the former the Major League Baseball Commission for the Development World. And then I'm going to ask my friend John Sullivan, who's the head of SIPE to speak. And then I'm going to ask my very good friend Monica Kledakis, who's at IRI and runs the governance work at IRI to speak about the work that IRI does on governance, because I think they'll all come together and I think will make a lot of sense that the four comments that you're going to hear, set of comments you're going to hear. So without further ado, I'm going to ask Dev to kick it off, Dev. Over to you. Thank you. Thank you very much, Dan. I'm going to try to bring up a few key headlines that I thought would be interesting. And I'd like to do it in two ways. One is to give some reactions to the paper itself. I know a number of you may not have read it, but I've read it cover to cover, as it were. And so I'll make a few remarks on that. And then touch on, rather than talking about the bank itself, but development institutions in general and the role that they have played in governance as well as the potential future roles that they can better engage in. I want to congratulate the authors. I think it's an excellent paper and it's about time that someone put this issue squarely on the table with regards to the necessity of good governance. I've not seen too many countries develop without such good governance. Now, there are several reasons why I really liked the general stance that this paper took. One is the fundamental belief that governance is an enabler of lots of things. It enables the development of a good business environment. It enables a good investment climate, good health delivery systems, and the list goes on and on. So it's that fundamental belief that governance can be a critical enabler is, I think, what is important. Now, alongside this, I just want to tell you anecdotally at least a story of good governance and how leadership itself is absolutely critical in delivering good governance. So we're not talking about good governance only at the civil service level, but the political leadership level. And now I know a thing or two about this because I actually come from Singapore and certainly you could argue not the bastion of democracy. They would argue differently, but this was a very interesting part. You remember historically Singapore got its independence in 1959 and they inherited an economy that was basically devastated at poverty levels at 35 percent and so on. And people don't think about that particular phase of Singapore's history. We see it now as a fairly advanced small economy. Now, when Lee Kuan Yew came in, he was the first prime minister, there was him, and he was tutored in the language of the law. So he was a lawyer by training triple triples from Cambridge University and so on. And the only other individual in his cabinet was who was tutored in something was the deputy prime minister Dr. Goh Keng Sui who had the economics. The rest of his cabinet were rebels. They just came out of the jungles, fighting against the Brits and so on. And Lee immediately realized that he could not deliver on the economics without a cabinet that at least understood the basics of economics, E-101 and law L-101. So what he did, but these were intelligent people. They were smart except that they were literature teachers and philosophers and whatnot who took the gun in order to get the Brits out of circulation. Now, so what he did with that realization that over several months, if not years, they literally, the two of them, Lee and Goh, who had the law and the economy, they coached the cabinet on the L-101 and the E-101. So the basics of law and economics were essential in running the economy. So the signaling that that scent was an absolutely critical dimension and it then resulted in good governance and whatnot down the road. Point number two I want to make, democracies link with good governance. I believe too that that is an important and critical dimension. You'll have a lot of argument on it because you can also show examples of countries that have gone ahead without the democratic institutions, as we know it, here and predominantly in the West. But I think it's a critical dimension. It is a foundational dimension of running a country well. Third point I want to make, thanks to the authors for citing doing business. I love you guys for that because it's an important document that the bank produces. I do believe in what gets measured, gets done. And that's exactly what doing business does. It forces policymakers to look at the loopholes in regulation that creates opportunities for corruption as one particular reason as to why that's a great report to look into. And the cases I think did a fantastic job as well in showcasing your argument. But perhaps most importantly, and I mentioned this to Dan earlier, the case for weaning countries away from $8 needs to be made. Now you're saying, boy, this is strange coming from a World Bank individual. But I fundamentally believe that that is important, that $8 can corrupt by building a dependency relationship. So unless those $8 are predicated by giving the necessary tools for developing countries to then take advantage of. You can throw $8 at health and at education and so on, add infinitive. And you may not have the self-sustaining ability to continue delivering on healthcare and education because they simply don't have the basic governance tools. So I would in fact argue that this is a significant point that the paper makes and that can actually be expanded even further. And you make the argument as well that look, in 1945, 1950, yes, you depended on $8, but there's a lot of, the sources of funds have changed fundamentally. I reminded my bank colleagues several times on several occasions to say that look, we lend what, $20 billion a year, which is peanuts really in terms of development. Non-ODA financing, if you just look even at remittances, remittances that go from migrant workers, et cetera, amounts to $400 billion a year. So the sources of funds have changed. The world is completely different from what it used to be. Now, a few arenas that I'm a little not concerned about, but I wish the paper did more of. And that is, it comes back to also the point about the democracy and the governance nexus. I believe in it fundamentally, but we need to find a different language of how we communicate that. We can't go around saying that look, these are the democratic institutions that work and we know best how to deliver them. And I'm not saying that the paper does that, but it's an easy trap to fall into. I do believe that the language that can facilitate is to borrow at least partially my former boss's words, Bob Zellick, of responsible stakeholders, playing a role in good governance, and you can call it responsible governance as well. That would mean having the democratic institutions as well. So it's a point of contention, and I know that there will be lots of argument on that. Now, the other thing that I would say, and I've got a few other points, but I'm going to skip it, actually, is the notion of what exactly you can do in governance. And this is where I do take issue with development organization. Development organizations such as the World Bank, the Asian Development Bank, the African Development Bank, and so on, have themselves become dependent on eight dollars. To such an extent that sometimes when you look at the lending programs of the bank or the IFC, not the IFC, but the regional development banks and whatnot, lending dollars go straight into budget activities. And you can't tell whether that dollar is actually doing the development it's supposed to do. So I question the logic in which these development institutions have hung on to after 55, 60 years of existence that needs to be some sort of a change in that dimension. Deb, you can't do that. That is my exit strategy from the think tank. I'm very dependent on that arrangement. It's surviving. Come on, you're going to ruin the whole game. Don't worry, Dan. It ain't happening. It won't happen too quickly. But I do think that questioning of how eight dollars comes in is a critical part of the agenda. Now, I wish that instead of that considerable amount of lending in the billions of dollars that goes out every year and you don't know exactly where or how it's being used, just think of this. Every year, how many new governments come in taking power in the 200 odd countries? There's quite a few. And every time a government comes in, you've got an entire civil service structure that's changing, et cetera. Probably the same in DC. But what is lacking is just knowledge of how you deliver when you're governing. That is just missing. And the problem is multiplied, especially in emerging market situations. So you've got new leaders who come in who won the political argument maybe, but they don't know what it is to lead. Or civil servants coming in and saying, well, they're responsible for this regulation, this policy, and so on. And there's absolutely no knowledge backing what they're supposed to deliver. If development institutions were to spend a significant portion of doing nothing, but providing training in an accredited fashion, everyone comes in and you are certified in the basics of administration. You keep on getting renewed with that. That would do a significant amount more in good governance. So those are some of the things that I want to just share with you with regards to development organizations. I would be incorrect in saying that they're not essential. I think the institutions like the World Bank and the IFC are absolutely critical, but it is time now to question your mode of delivery. How do you actually get these things off? And the paper, I think, makes a very good argument in support of that as well. Let me stop right here. Thanks, Dev. Thanks very much. I'm going to ask Ambassador Jim Michael to go up next, Jim. Over to you. Well, thank you very much. It's a very stimulating opening, Dev. I may want to comment on a couple of the points you made as we go forward. I'm really grateful for the chance to participate in this. I think Dan asked me to join the panel in part at least because I just recently completed my own paper on some of the same issues from a more international rather than a primarily U.S. perspective. And as I read through Connor's paper, I was looking at it with that lens and that lens caused me sometimes to say yes, but then in a couple of places, and I'll touch on some of those. You did get the second footnote. But I noticed that. I noticed that. But that's another paper. This goes on. But I do think, and I want to say at the outset that I think this paper makes an important contribution to ongoing debates about the nature of development and the responsibilities and the capabilities and constraints that affect the development process and the role of international cooperation. I really commend the author and the whole team here at CSIS. The paper correctly observes that the U.S. began shifting its development assistance focus to basic human needs in the 1970s. I guess I have to admit I was there. Was that you, Jim? No. But I was the State Department lawyer who brought the team together with aid and defense, and we put together the legislation every year. And I would note that this was a part of a broader domestic and international trend toward sector-based aid structures rather than saying technical assistance, capital projects. It was health, education, agriculture, and so on. And also an increased emphasis on popular participation and what Jim Grant used to call trickle-up development. And also this was popular with Congress. So a factor that can't be neglected. But more important, the new directions legislation didn't prevent continued U.S. support for growth-friendly economic policies or government capacity for policy implementation or strengthening democratic institutions or encouraging the private sector and civil society. And we did all those things after 1973. It wasn't just that legislation changed aid from paying attention to those foundational aspects of development. And I think there's a little bit of risk here as to what is the implication of the report's recommendations on this. I think we have to recognize that human development is the dominant focus of international development cooperation. This is the Millennium Development Goals. It's what is coming, bubbling up in the new 2015 agenda. And I think U.S. foreign policy has to be clear that we seek to advance the security and the well-being, the dignity of people, of their freedom to make choices, their opportunities to participate in economic and political life in more stable and just and prosperous societies. Now, I do think that investment in growth and governance should be integral to U.S. support of human development. And it's not an either or choice. So I'm a little concerned about, well, we'll take money away from that and we'll put it over here. I think it's really how do you put these things together so that we're supporting human development and we're doing it in a way that works and that makes sense. Now, certainly, as the paper points out, there has been a concentrated focus on a few sectoral priorities and on particular countries of national security prominence. And that concentration of energy and resources and time has to constrain U.S. ability to support growth and governance in this difficult budget environment. It is an anomaly that we have a declared national policy that says inclusive growth and democratic governance are the foundations of development, but we have a budget and, for that matter, programs and a diplomacy that don't give high priority to those foundations. Now, the paper's basic focus is what does the U.S. do about our limitations? And the principal answer seems to be that shifting of resources. And I'm a little uncomfortable about that. And I think you have to look at this in a somewhat broader context. The experience of countries that have achieved sustained high growth reveals a lot of common policies, macroeconomic stability, protection of property rights, integration into the world economy. And effective government and the capacity to implement has been an important factor in their success. I like what the growth commission said a few years ago, that government is policymaker, service provider, investor, arbitrator and employer. The choice of policies and their implementation matters a great deal for sustained high growth. But while effective government is important, the experience of the Washington consensus and the structural adjustment programs of the bank demonstrate that even good policies can't be imposed. Reformers have to have local routes. They have to come from within and be pursued in ways that reflect an intimate knowledge of the complex and changing political, economic and social circumstances within the country. So there are reasons why a lot of poor countries remain poor. And a lot of experts have looked at this. Some of them are cited in the paper. And they talk about how do you deal with this complication in trying to overcome the constraints on inclusive growth and good governance? And so you have Asimoglu and Robinson talking about extractive institutions. Or you have Douglas North talking about a closed access ardor. Or you have Mishta Khan talking about political settlements. And these are all names for situations where powerful interests exercise dominant political and economic power. And that controls the allocation of benefits. And those in power have incentives and capacities to resist change. And that makes the reform efforts a political contest. Now, the cumulative weight of history and traditions and societal values and concentrated power and incentive systems and institutional weaknesses all combined to create an inertia that impedes change. And the complex systems tend to have multiple centers of decision making. And it makes it very complicated to try to do anything to overcome that inertia. And you need ways in which to share information and build trust and enhance coordination. And again, all of this puts a premium on local knowledge and local leadership. So the consensus has emerged that development cooperation has to foster local leadership and responsibility and capacity and should strive for a best fit for each local environment rather than bring in the standard solution. And so we have the answer which your question kind of an approach. And the partnerships for development cooperation need to differentiate on where the partners are. What are the commitments and what are the capacities of the donors? What are the capacities and what are the commitments of the developing country? And that doesn't mean just governments. That means the society as a whole. Now, the practitioners have developed some flexible mechanisms that I find very interesting to facilitate self-analysis and put the local actors out in front. We have perhaps the best known is what Ricardo Hausman and Danny Rodrick and Andres Velasco did to put together their growth diagnostic and constraints analysis. But there are lots of others. And these kinds of tools that bring international experience to the service of context specific self-help by local institutions I think are a big step forward. And as the paper notes, the U.S. Partnership for Growth adopts that approach. The basic idea is to focus on how local actors define a problem and support their efforts to fashion locally feasible strategies. And a number of organizations are working in this direction. You mentioned the U.K.'s Golden Thread. DFID is now supporting something called the Effective States for Inclusive Development Research Center, which is six research institutions from developing countries as well as from the U.S. and the U.K. And there's a network on learning for capacity development, which again brings together developing countries and developed countries. It's not the donors telling the developing countries what to do. USAID is investing in research on local systems for sustainable development. Now, I think we need to give a lot of attention to this Busan Partnership for Effective Development Cooperation. The Busan Declaration expresses a consensus that's been endorsed by 160 countries, more than 60 international organizations, and a host of civil society organizations and international NGOs. And it sets out a framework. Two of the key elements in the framework, strong, sustainable, and inclusive growth, effective state and non-state institutions. I think that combination of the Busan framework provides a real opportunity for the United States to play a leading role in shaping international support for inclusive growth and effective institutions of good governance. This would emphasize the distinct features of the different countries and would foster local leadership, broadly shared knowledge, and contextually appropriate cooperation. What are you going to do in a country depends on what the country is about. I do think we have to be careful about pushing democracy and pushing governance. If you look at Busan, it's very sensitive about how it treats those issues. And there is a sensitivity in the developing countries about the Western world coming and saying, we have the answers. And I think we have to be careful about that. And at the same time we have this interest in seeing strengthening of institutions that offers an opportunity if it is approached in a collaborative partnership spirit. A word of caution. There have been some disturbing research findings about divergence between declared policies and actual practice of development cooperation actors. Nothing new here. But I would call attention to the independent evaluation of the Paris Declaration that said that capacity development has been recognized as an urgent priority for decades, but progress has been mostly slow and difficult. Are the work research done by Matt Andrews at Harvard who found a pattern of unsuccessful donor sponsored reforms that did not reflect that individualized analysis and adaptation to local circumstances but offered best practice. This is a reminder that the donor agencies also have to contend with internal incentives about why they're doing what they're doing. I repeat I'm skeptical about prospects for reshaping the foreign operations budget to take funds away from sectors and country allocations that have strong administration and congressional support. I'd prefer to begin to build internal consensus within the U.S. government on a concerted whole of government action to encourage and support capabilities and commitment in developing countries for achieving inclusive growth and good governance. I do like the idea of some pilot countries as suggested in Connors paper. I'd look for a more diverse selection rather than focus on likely winners, but I think that's a very good way to demonstrate an approach and learn how we can be more effective. And I'd like to combine the bilateral efforts with broad U.S. engagement within the Busan framework on a multilateral basis and with that increasingly diverse collection of involved countries and organizations that now make up the development community. They talk about the resources going into official development assistance. Well that's you know now less than 20 percent of the total of development finance and I think we have to take that into account. So to conclude I want to express appreciation to Conor and Dan and the whole CSIS team for calling attention to an important issue, providing a body of very useful information and proposing ways in which the focus on this governance growth nexus can advance human progress. It's an excellent beginning and I'd like to continue that dialogue with some other ideas and I hope my observations will help to sustain the momentum for addressing this challenge. Thank you. Thanks Jim, thanks very much. You've put a number of interesting topics on the table I want to return to in a conversation among the panelists. Thank you. I'm going to ask John Sullivan from the Center for International Private Enterprise to speak next. You're one of the two net institutions represented on the panel if I'm correct. National Endowment for Democracy has several institutions, one of which is represented by John and the other one is represented by Monica Claracus and you'll hear from them now. John. Well thank you very much Dan. I really appreciate being here and just to complete the context the title of your paper Investing in Governance and Growth Nexus. That's where I live. That's where the Center for International Private Enterprise lives because you're right we were formed as part of President Reagan's initiative at Westminster to form an American or United States tool to deal with the issue of the democratic transitions Franco, Spain, the revolution in Portugal, Greece all of which we nearly lost because we lacked an effective instrument to be able to respond to those issues and then of course we had all of Latin America rolling up. But my other parent is the US Chamber of Commerce so we are the Nexus so thank you for bringing us to to this we we feel this is an extremely important discussion and it's it's one that is it really has to be done and so I commend you and Connor and all of your colleagues for the the research you've done and I'm delighted as Jim and and Dev and Monica to be part of this I'm going to build on a lot of the remarks that Jim and Dev have already made so I'll be making some references to that but let me start off by just quoting my favorite author Douglas North as you all know Douglas North got the Nobel Prize in Economics for pointing out the obvious but in fact it's not just the macroeconomy it's not just equations it has to do with this Nexus it has to do with governance institutions the cost of doing business which is what the doing business indicators are trying to measure and my favorite sentence from Doug North it's a long one so bear with me but it has this whole paper is in one sentence okay the whole history of economic growth can be summed up in going from only being able to do transactions with people that you know trust and can deal with and have some relationship with to being able to do business with a stranger to illustrate that Newt Gingrich used the story that today's world you can use your ATM card in Berlin with perfect confidence and get the money out in in Berlin in Deutsch marks and have it credited accurately to your account here at PNC around the corner unless you're my colleague Alex Skolnikov who tried to do that in Russia at Venet Sturgbank and guess what happened to him didn't work they cleaned out his account somebody inside the bank had was selling out the pin numbers in bank account numbers this is Doug North's point though is that you've got to have all of these structures in place in order to be able to do business in order to be able to generate growth and so we're going to talk about and we have been talking about what are those things that go between personal exchange and impersonal exchange well in the paper they identify and I realize you you haven't had the opportunity to read it so let me just cite them for you four critical areas one government capacity slash effectiveness and Dan has already mentioned that they're talking about democratic governance there but government capacity and effectiveness to the rule of law three regulatory policies related to business and the investment climate the kind of things that was talking about and four barriers to entry which is something that hasn't come up but I want to bring out even more those four areas I do believe give you a nice set of overarching baskets as to what it is that this paper is about what it is the subject is about and where we need to go now just to share with you a personal anecdote for years we've been at this for about 30 years now for years when we've approached different donor agencies and I'm not picking on USAID here this is true of a lot of different donor agencies and for many years it was true especially of the bank we would go in and talk about these four areas rule of law barriers to entry the fact that we have to get the political economy going and if we were at the democracy office they would say well no you should be over at the economic growth office those are not the subjects we deal with if you go over to the economic growth office they say no we're we're doing firm level assistance we want to do mentorships entrepreneurship development accelerators incubators you know foreign direct investment you need to be back at the democracy office and so you know you're trying to do this excuse me folks you're trying to do this but there's nowhere to grab on to there's no way and they in fact at our colleagues at AID even invented a technical term for this it's called stove piping those of you who are old enough to remember your grandmother stove it had a pipe that went up so that the smoke didn't get into the house well if you have two of them they don't connect the smoke goes out the ceiling and that has been the problem it's not just that to switch to a more academic or philosophical approach Fukuyama is Frank Fukuyama is cited in the paper is saying that democracy is not really essential that what you need you can improve governance without democracy which I will grant Frank is right there are cases and we have heard the case of Singapore there's also the case of Rwanda Frank cites the case of China as another country although I think I would argue with Frank about the quality of governance across China as well as whether or not there have been some democratic reforms because I think part of the improvement in China in some of the provinces has been because of local governance reform and introducing elements of what we would call democracy not elections necessarily in fact we have been supporting a program by Professor Mao Yuxi of Unarual Institute measuring the quality of governance and the participation of governance across Chinese provinces and it shows dramatic correlations between growth and where in fact the governance qualities have been improved and where feedback mechanisms have been put into place but the point I would make and this takes me to the next one and Jim has made this eloquently is that you know okay I've got my academic hat let me take my practitioner hat off I'll put my academic hat on here we're making a mistake in trying to search for models of the natural science where we correlate and demonstrate natural law in fact the case is and this takes us back to the philosophy of science the case is in the areas that we're working in every individual situation is going to be different you're not going to be able to control all these variables we're not dealing with trying to invent penicillin what we're dealing with is variable situations Singapore has a very different situation than Mali I don't think Lee Kuan Yew could do in Mali what he did in Singapore not in this current circumstances so you have to start and this is the mantra every new site staff person the first thing they hear when they join our staff is you've got to look at answering the following question before you do a project why do things work the way they do what's going on in this country you can't as Jim said show up with your bag of tricks and say or your your handbook of solutions or your recipes this was the mistake that was made in particularly the Soviet post-soviet states and we're still paying for it to this day people showing up and saying oh well we'll just get the government out of the way and the market will emerge the market doesn't emerge the market has to be built so you have to figure out why things work the way they do and this is where I agreed if it is done a tremendous job with their political economy analysis paper which now a ideas incorporated into their new democracy program strategy so taking that kind of an approach and saying okay what's going on in this country if we have time I'll come back later to a personal anecdote about something that happened to me in Poland in 1989 that really demonstrates this then leads you to develop and to analyze the institutional environment these four critical areas the areas that Doug North and his colleagues who invented the new institutional economics have brought in you have to analyze that for the country and so what is going on in this country what are the unique aspects what are the possibilities and then the next step and this is where I think the best of the donor approaches really can demonstrate them and there have been there are some studies going on now to show this identifying these local heroes the local actors in our case we're looking for business association private business associations think tanks other organizations occasionally in a situation like Afghanistan or Iraq you have to start from scratch because there just isn't anything although there was surprisingly more in Iraq than we thought there would be but not in Afghanistan but in most cases what you want to do is find out who's there who's working on this who's committed who has demonstrated that they really want to be part of the international economy they want access to international finance they want access to supply chains there are indicators that you can use to figure out who it is that is wants to be part of the reform effort to build this nexus of governance and growth in a democratic context having done that you can then begin to put together based on what they're trying to do based on what you've found as the key leverage points for change what is possible you know it would be great if we could privatize everything in the world but you can't in every country that's not necessarily the entry point the entry point has got to be where is it that we can actually make a difference and so mobilizing these local actors the stakeholders now the one distinction I would make with my friend here is that the Washington consensus when it was originally written it's been badly misused but the original writing of it John Williamson was trying to identify what in fact the finance ministers in these Latin American countries were doing now he admits himself later that he missed a couple of key points because he had a nine point plan originally and he himself added property rights because he didn't think a nine point plan was that great an idea everybody wants a 10 point plan but if you look at John's later writing and this brings us back to barriers to entry which is what I said I wanted to really get to one of the things John talks about is the fact that he should have brought in more of the work of Hernando de Soto now I've already mentioned Doug North what people don't realize is that Hernando and his institute for liberty and democracy in Peru which is one of our case studies here really is one of the pioneers that identifying these barriers to entry because he asked himself this question why do things work the way they do when he returned to his native Switzerland from to Peru his native Peru from Switzerland he said why are all these people out on the street why don't they start shops where where are they doing these things so he said look I took off my glasses put down my books and went out and asked them and he identified the fact that they couldn't get in now today this is rather dramatically illustrated by the self emulation of Mohammed Boazizi in Tunisia but it's the same phenomena worldwide these barriers to entry and they had the solution to that and this demonstrates the nexus I think better than almost anything the solution to that is the governance issue because it is the quality of the regulatory system you've mentioned several times the doing business indicators what many people don't realize is that Simeon Jankoff and his colleagues actually base the doing business indicators on the work of Hernando de Soto because they realize that measuring what is the transactions and again this is again a direct application of Doug North's work so the tools are all there now I could go on and on as Dan knows for hours but I won't I'll end up with just a cautionary tale actually was at Busan and it was a fascinating meeting and I agree the Busan document is terrific there's a private sector paper that is part of the Busan document which promptly disappeared off the website it took us because I'm part of the business industry advisory committee to the OECD it took us almost nine months to get the private sector paper posted back on the website okay there's your commitment we got a fight for this if we want to get it now the other issue is that the global partnership for effective development cooperation I'm the private sector representative and my head's spinning the language it just goes on and on and on we have spent two years and we're now going to have in I believe May the meeting in Mexico with the ministerial and we're still arguing about it what the private sector would like to do would be to focus as a beginning point because it goes right to your nexus let's have a meeting a private sector dialogue meeting with the governmental ministers and the development agencies on public private dialogue let's just focus in on one thing because if if any of what we've said both Jim and myself and Deb have said and I think Monica will agree is true that you've got to mobilize the local actors that you can't come in with solutions bringing in a whole bunch of multinationals and asking them to form public private partnerships is only going to get you so far what we really need is to mobilize and to give voice to the local actors the private sector the NGOs in the countries and you can best do that by implementing and institutionalizing in Kenya they've done this and it's produced some really good results a public private dialogue platform now I realize that in a developed democracy that's called the congress well in fact in most parliamentary democracies or in countries like Rwanda or Ethiopia where they do have a public private dialogue it's really quite limited the dialogue consists of the government minister showing up saying what he wants done and asking you to check the box that's not a dialogue that's a ratification what we really need to do is to show that these public private dialogues can create the environment and that foreign direct investment lags domestic investment foreign direct investors want to come in to countries where they see a strong and thriving private sector that's vibrant that is investing and that is creating the conditions for a market economy and here's where I'll try to wrap up we've made a and this paper I think does a good job of bringing this out but one of the big big issues is that we make some fundamental assumptions about development which aren't true and one of those fundamental assumptions is that if you have a private if you have a private sector it must be a market economy not the case in many countries you'll find vibrant private sectors like Rwanda not a private economy not a not a market economy and here I would recommend the book by Bob Leighton Carl Schramm and Bommal Good Capitalism Bad Capitalism where they distinguish four different kinds of capitalism only one of which is a real market economy and a second assumption is that if you get the government out of the way the market will emerge well I've already mentioned that but it doesn't happen the market has to be built you have to build these institutions to come back to Doug North you've got to get the rule of law now getting the rule of law is by far a very difficult thing and you can see it in the case studies here in particular to the case the two case studies that I'm most familiar with are the Philippines and Peru but in Peru DeSoto spent the better part of 15 years trying to build mechanisms for these informal entrepreneurs to be able to access the rule of law to be able to get equal rights in the Philippines people like Dr. Jesse Stanislaus who was Corey Aquino's finance minister have been working at the local level for years and years to build these institutions you've got to mobilize these local forces and they've got to be at the head we can give them assistance we can give them technical assistance financial assistance and management assistance but we need them to really be the force of change in their country thanks very much John Monica Kledakis thank you for being on the panel some people might wonder why am I asking somebody from the International Republican Institute one of the four NED institutions along with the National Democratic Institute and the Solidarity Center and SITE to be on the panel but I know you had a past life at the Milam Challenge Corporation and you run the governance program at our IRI so why would I have you on this panel I'll make that the opening sort of leave that question there because I suspect you have an answer for that thanks for being here yes thank you thank you Dan for inviting me to speak on the panel thanks to my colleagues for their remarks I enjoyed the opportunity to review early versions of this paper and I encourage everyone here to read it it really is very very good and I commend Dan and Connor for all their hard work it has certainly turned into a timely and interesting final product I say interesting because it really is an interesting topic and not one that's received a lot of attention as the paper notes the DNG and economic growth communities oftentimes don't mix very well and I say timely because of USAID's new DRG strategy that others have referenced here which includes as one of its objectives the integration of governance principles along with democracy and human rights into USAID's development portfolio which of course includes economic growth this is a fairly common sense idea that a foundation of effective governance is beneficial across the board when pursuing development goals in other areas but the paper is broader in its scope as it argues that the US actually needs to shift its focus away from traditional development our activities and focus on greater institutional development what I'd like to do today is touch on two elements that are noted in the paper one is the fact that institutions matter both for governance and economic growth and the second is that development is political which means we have to pay attention to the political side of things if we're going to have sustained economic growth and others have alluded to that already today as well I'll also try to provide some examples some practical examples of how IRI has observed the nexus between democratic governance and economic growth for those of you that may not be familiar with IRI Dan mentioned sort of where we come from but we're a nonprofit non-partisan despite our name non-governmental organization that supports the advancement of democracy throughout the world we work to strengthen political parties civil society organizations the role of women and youth in politics and democratic governance and we do this primarily through trainings and consultations in line with IRI's governance work I like how the paper notes the importance of democratic governance versus good governance as good governance can theoretically exist without democracy as John mentioned Frank Fukuyama's argument but in the long run a country's not going to benefit from that sort of system eventually it will wind down and we will see it happen in China we will see it happen in Singapore I think eventually so to start with the first point that institutions matter improving governance quality governance quality means orienting government toward the needs of the many building a framework that makes development outcomes possible focusing on democratic governance which is characterized by government officials that respond to constituent needs and are held accountable for their actions means that donors and implementers like IRI and Saip and others are contributing to a sustainable system the system allows the government to provide services and facilitate actions like business registration and regulation which in turn encourage private enterprise and foreign investment economic institutions namely the regulatory environment that's been referred to determine the economic potential of a state the rules of these economic institutions and the distribution of resources are in turn determined by political institutions that are dependent on the decisions of political elites these elites are pressured and elected by constituents therefore more constituents demand accountable government officials that respond to their needs which will include health infrastructure educational benefits political elites are more likely to organize institutions that respond to these demands and as the paper states investors are more likely to take a chance on a country that has rule of law and stable infrastructural institutions contrast for example the interest of countries without significant extractive industries like jordan or those who's where the extractive industries are primarily for domestic conception like brazil and columbia with those where extractive industries are the primary source of income for countries like the gulf countries and venezuela governments in the former category show much greater interest in government reform with and without external influence because they're less likely to be able to provide the economic relief that may keep otherwise democratically minded constituents quiet countries without the ability to buy off citizens tend to be far more interested in their legitimacy vis-a-vis democracy and responsiveness than their counterparts that can provide social benefits that outweigh or make irrelevant the demands of citizens to iri a democratic governance distinguishes a system in which citizens participate in government planning and decision making while those in office respond to citizen needs with accountability and transparency these principles participation responsiveness accountability and transparency form the foundation of our governance work while most of iri's governance work is aimed at more effective political participation we have certainly observed the importance of economic development to sustain confidence and support for a democratic system of government particularly in latin america and since it's already been established in a number of writings referenced here today as well as in the paper that democratic governance is key to economic development and that institutions matter then it's clear that more work needs to be done to link democratic governance with economic development iri's work focuses on the capacity of the state to listen incorporate and respond to citizen needs which allows the system to focus on the general demands of citizens a safe environment where education and economic opportunity are prioritized allowing for domestic economic development so for some practical like a practical example in central america we implement mechanisms like omdels which are municipal offices of local economic development which allow municipal governments to directly build an institution that seeks collaborative solutions that bridge the divide between businesses and citizens these offices of economic development bring together local business leaders citizens civil society and government to develop strategic work plans and policies focused on stimulating the local economy attracting investment and creating jobs some of their initiatives include providing trade and investment information to local farmers and entrepreneurs matching labor supply with producer demand promoting the formation of key public private partnerships and attracting local and outside investment to develop unrealized potential in areas such as tourism through these offices iris been successful in building a key set of democratic governance skills and practices including creating partnerships with citizens in the design of innovative economic solutions and providing citizens with greater accessibility to government officials while simultaneously promoting accountability to citizens in the area of economic improvement this is an example obviously at a very micro level but the point is that focusing on strengthening institutions is the way to encourage sustained growth which is pretty much what everybody here has been saying moving on to the second point then that development is political the paper references Tom Carruthers and Diane deGramon's paper or rather their book their recent book development a confronts politics and they explore the importance of taking into account the political context when engaging in development work when one does not do that there can be a gap between a well-intentioned development program and its effectiveness on the ground this implementation gap prevents achieving economic growth and development and it's a little different from the implementation gap that's referenced in the paper in the paper it's discussed as the difference between laws on the books and how they function in practice but either way it's a problem we deal with this sort of gap all the time in our programs the political gap that is because if the political party's leadership is not on board for example then our trainings will likely not be well attended or will be primarily attended for the free lunch it's true that happens to us here too at TSIS all right same with our other types of our governance programs that the political will is not the political will for reform doesn't exist at the top whether it's with the mayor the governor the parliamentarian whoever it is we may be working with we can train them or their staff on all the the governance best practices in the world and it'll have little impact the other huge political issue that must be dealt with in many of the countries we work in and it hasn't really been talked about much here although it is mentioned in the paper is corruption which can severely hinder the previously mentioned economic and political institutions in addition to rendering many development programs ineffective corruption makes institutions less relevant and the investing environment less stable or attractive political institutions that are unable to prevent corruption by political elites or even their regular civil servants means there exists a irrelevant regulatory environment and as the paper has highlighted without a reliable regulatory environment meaning without the rule of law businesses especially foreign ones are unlikely to invest and local entrepreneurs face a significantly higher risk in our work at IRI we use mechanisms such as a one-stop shop or a transparency office to help reduce the opportunities for corruption a one-stop shop allows for interaction with fewer bureaucrats to get routine business like business registration or tax payments accomplished and a transparency office ensures that information like tax assessment procurement rules or legal requirements is more accessible to interested citizens preventing misinformation by corrupt officials IRI trains civil servants alongside elected officials as dev mentioned don't just work in one level you need to work with both directly addressing the implementation gap by making sure they understand their specific role within the city the county or the country and ensuring that the political will for reform exists before conducting our programs while this approach is important for the anti-corruption mechanisms I mentioned it's actually critical for all of our programs to ensure that we invest in people and institutions that are likely to be willing and able to sustain reforms still IRI's work focuses primarily on strengthening governance political processes and citizen participation with only some of our work having an economic benefit so to answer the question before this panel how the U.S. can better integrate governance and growth programs into the foreign assistance agenda and we talked about this little bit before we came out development agencies such as USAID have to start actually operationalizing what is in their strategy by reducing the separation the stove piping between economic development work and governance work and focus on strengthening institutions as a means of laying the foundation for long-term economic growth I think I'll end with that Thanks very much Monica as you can see now you all understand why I asked Monica to be on this panel thank you very very much thanks for doing that I've got a couple of comments and questions as I listen to all of you that I want to put to you all and then I'll open it up for a conversation with the audience but one was some of the comments that Monica just made about the issue of political will we reference in our recommendations let's identify a group of countries and I think what we're implying is let's identify countries that have the political will and ability to do this talk a little bit if each of you could talk a little bit about the issue of political will and what it means and from each of your perspectives and then also if I could ask get you just a comment on this issue of corruption we didn't touch much on it in any of the comments but I do think my experience both having lived overseas and elsewhere is that at the very least corruption can really negatively impact a reform agenda at the very least it reduces the credibility and legitimacy of elected governments and certainly makes it far more difficult for publics to go along with with difficult change or heavy lifts or it makes it far less possible and certainly there's their cost of corruption as well in terms of in terms of economic growth and the opportunity cost and we'll be doing a report on that in January but if you could talk about that and then finally if each of you could just talk about this issue of contextually appropriate interventions now I may be tempted to say we know best and maybe on my weekends I say that but I'm you know not on my day job and not necessarily should we be doing that in terms of our assistance work because we are often in the persuasion business we're asking people to make change and persuading people to make change so if you could each talk about this issue of contextually appropriate interventions because I do think if we do go in and say we've got this answer we've got the answer now what's your question and certainly or and some of I think is oftentimes driven by supply driven assistance where we only have cheeseburgers and you know cheeseburgers and I don't know and chicken salad when they don't need cheeseburgers or chicken salad but that's what we've got on the menu because that's what various interest groups have come up with finally let me just make one other point that you might want to one of you some of you might want to address which is okay if this is so compelling and we all agree with this why is it so politically difficult in the United States whether through the congressional process or through the bureaucratic process which I think Jim what was your point which to say well maybe it's not going to get changed to the Congress but perhaps it's just about it's about persuading a set of stakeholders in the bureaucratic system of the aid bureaucracy to raise this on the priority scale what's it going to take if we've got a G8 that's signed onto this and we've got the UK is saying this is good and we've got 20 years of sort of significant research that says this is the right thing to do why is it that this ultimately gets the crumbs in this process I'll put those those are four big questions you don't have to answer all of them but I'll just ask each of you to go down the panel and answer each of your any or some of them in turn so I'll ask John to go first and we'll just go down the panel then we'll open it up John? Okay well I think I touched on some of these but let me build on it the political will issue and I couldn't agree more and that's what I was referring to with local actors in our case when we say political will we're not waiting for somebody to ride in on a white horse that's got the answer and is the right person for the job it's great when that happens but it's also extraordinarily rare what you want as in the case of Peru they elected this leftist named Ubal Ubal Ubal Ubal Ubal who ended up governing from the right why why did he end up governing from the right well because that's where the local political actors and when I say political I mean not just the political parties but the business associations and others we're all pointing them saying If you do what you say you're going to do, you're going to tank this country. Fortunately, he listened. His family apparently didn't like it because they wrote a long article in the Peruvian paper and it showed up in the U.S. paper criticizing father, uncle, brother, whatever it was. The whole family came out against him. But Peru is doing pretty well as a result. There's a pretty awkward Thanksgiving dinner. Exactly. Guess who else did the same thing? Lula in Brazil. Cardoso in Brazil. I mean, if you can mobilize sufficient information, sufficient numbers of people, and demonstrate through the political process. Now, that doesn't always happen. You often get people elected who end up thinking they are Erasmus of Rotterdam. Erasmus, by the way, was the last person that did know everything that there was to know at the time. Since then, we haven't had one. But a lot of people don't know that. So we've got to remind them that they're not Erasmus. So on political will, I agree, you've got to mobilize constituencies. And that's a big part of what our work is. We have something called one example of a program that does. This is the National Business Agenda. It was based on the White House conference on small business that President Carter did. We're not coming in and saying you should do all the things that were in the White House conference on small business. We're saying use the process. The process is transferable. Hold meetings with stakeholders. In our case, small and medium firms, larger firms around the country identify the issues. But most importantly, get them to identify the solutions. What is going to benefit you at the face of the firm? We'll leave it to the World Bank and the IMF to come in and diagnose the economy. What's going to help your firm? What's going to get you to hire some more people? What's going to get you some more sales? What's going to get you integrated into value chains? And if we can identify those things, don't tell me you need tax reform. Where do you need it? What? What specifically do you want? And then you put together an agenda based on all of these. And the process, even if you knew the answers at the beginning, you still go through the process. Because by going through the process, you're doing the mobilization. You're building the constituencies for change. And I think it's not unique to business. We've got to find ways to do that with others. Now the issue of corruption is fundamental to our work. And we look at corruption as having two sides. The supply side and demand side. And you can define it in different ways. My friend Danny Kaufman, who's worked a lot in this area, takes the opposite approach to me. But to me, the demand side is coming from the government. The supply side is coming from the private sector. So we begin by acknowledging that the private sector is part of the problem. But we also are now working on trying to communicate to the private sector. We've got programs like this in Thailand, the Philippines, Russia, Colombia, and a number of other countries. If you want to integrate into value chains, look at Walmart, look at Siemens, look at these other companies. They cannot integrate you if you're not compliant. If you do not have a good ethics program, if you do not have internal controls, if you can't demonstrate that, you're not going to be able to integrate into supply chains. And companies like GE and Karambatia, who's here in Washington, will tell you this, as would Ben Heineman, who's their chief ethics officer, won't even pay facilitation payments, which are legal. And we can come back to this if there's interest. In the United States, facilitation payments are still legal. In Britain, they're not. But here they are. Those companies won't even pay facilitation payments. A facilitation payment is one that allows you to bring something into the port, for example. It's a small payment. But they won't even do that because they say it opens the door. And once you open the door, it's really hard to close it again. So this issue of the role of the private sector, and the private sector's also got to figure out how, what are the enabling factors of corruption? And this is where I come back to what Monica said. One-stop shops are great. Electronic systems are even better. The corruption involved in getting a driver's license in Russia dropped dramatically when they put it online. Serbia, some tremendous reforms put into place by Boris Begovic, which we can, I can give you information on if you like. Now that takes us to the issue of context and contextualizing it. And I think what I've said demonstrates the need to contextualize. If you can't put it into terms that people understand, let me give you the most dramatic example that I can, and I promise this will be short. We were introducing the OECD Corporate Governance Principles, which are very similar to the principles that Monica was talking about, into Egypt in the 1998. And one of the speakers pointed out to me, we had a room that was, some of the people spoke English and didn't, so we had the best translators we could find from, we have an office in Cairo. Still do, fortunately. But we had the best translators we could find, and this speaker came over to me and said, you realize that half of the room can't understand anything that's being said? And I said, why? Are our translators that bad? He said, no, there's no word for governance in Arabic. It took two years, working with the Arab Islamic Institute, with Amr Musa, who at the time was the head of the Arab League, to have hearings, to get people together, because in Arabic, and this is the context, in Arabic, if you're going to use slang, that's fine. But if you want it to be in modern standard Arabic, it has to have a Quranic root. And to have a Quranic root, because the language, the door was shut when the Quran was published, no more new words. So you have to have a Quranic root. To get the Quranic root, you have to have Islamic scholars, bless it. So we now have a decree, an actual decree with a stamp signed by all the Islamic scholars from the Islamic Institute, decreeing that now and forever more the word for governance is haqama. And that word is now spreading through the region. We were very, very pleased that our partners were able to get this done. But the difficulty of getting somebody in Yemen to understand what somebody in Tunisia was saying about governance, and not just corporate governance, governance writ large, was fundamental. You couldn't do it. Now, why is it so difficult to get people in the aid agencies to understand this? They don't get out much, Dan. You know, they stick in their bungalows. They really, I mean, it's surprising, but we end up coming and visiting countries, and I don't care whether we're talking about DFID or the others. I think the bank does a little bit better, but that's because they've got a lot of local hires. You end up going to the countries, and you often end up briefing the people that are resident there about what you've just gone through in terms of meeting with your partners, and you bring your partners in, and they do the briefings. But we need to find ways to create feedback systems because I don't think enough of the local experience makes its way back into the agencies. They're so busy with their aid memoirs, their papers, their strategies, their SF-162s, all the other stuff that they've got to do that they just don't get out much. Maybe I'm wrong, Jim. You tell me. Jim. Okay, thanks. Let me just a two-finger response on that. I think that this is one of the reasons why it is so important that you say rebuild the internal capacity to carry out development cooperation and not have to be writing all those papers and filling out all those reports and having to wait for an implementer who is a contractor or an NGO coming to tell them what's going on because they don't have the people to engage. And I come from a time when we had maybe two agriculture officers and two economists and one could write the paper while the other one was out in the field and a lot of aid people out in the field who very much knew what was going on and when you came they could tell you what was going on and introduce you to the people that you ought to be talking to. So I think this is part of the rebuilding of AID that will address that. And anyway, that takes us a long way from these four questions that Dan has posed. But I think it's an important development. Political will. I don't like to say political will. It carries with it an image that you can turn it on and turn it off. And I think I prefer to talk about commitment capability and accountability as kind of a three-quartered stool of effective development. You have to have a political leadership commitment and it can't be that night on the White Horse it can't be the minister who's in power this month who everybody loves. It has to be a recognition that there's, this is what did Eleanor Ostrom say, polycentric decision-making in complex systems. That's what you have in governance is you have complex systems with polycentric decision-making and you have to find that critical mass of political commitment, not just at the top but at various levels and branching out into various parts. But what keeps that commitment going in part is having capability within the institutions and having accountability because there's communication, there's information, there's awareness of what is going on that kind of holds them accountable. And what is the worst situation, the toughest one for doing something that is contextually appropriate is when there's very little evidence of that commitment. There's very little capability within the institutions of kind of a public acceptance of that without much demand going on for change. And those are hard situations to deal with but I think that obviously you have to have those three elements to get to progress. Now corruption, I think, John mentioned incentives. If you want to be part of the value chain with Wal-Mart or Siemens, you better have the ability to perform. Incentive is obviously important. I like to think of corruption as a part of institutional effectiveness. And what I like best are some of the things I've been involved in that introduce the idea of institutional integrity and where you find, again, the commitment and you work on capability and you help institutions be places where people want to go work, people want to show up in the morning, they're proud of the place where they work, they do a good job. And I've seen that in countries that have had a lot of corruption where you see institutions where people are absolutely committed not to engage in the convenience payments, facilitation payments or whatever because that's not who they are. That's not their organization. So I think corruption has to be dealt with in a context. I think you go in and say, we're going to help you stop being corrupt. That doesn't work very well. And corruption is part of that. It's much more likely to work. How to give this contextually appropriate interventions? I think, again, this maybe gets back into the governance of the democracy. I mean, Paul Collier had a chapter in one of his books that was called Democracy in Dangerous Places. When the fighting stops, do you have an election immediately the next day? And that you can take good governance and you can trace much of the elements of good governance back to the universal declaration of human rights. And in that, you get the ideas of the people and the accountability dimension of good governance. And I think that contextually appropriate depends on the facts of that case. And you look at the situation, do you do the same kind of things in Haiti that you do in Costa Rica? No, you don't. Do you do the same kinds of things in Rwanda that you do in Ghana? They're very different situations. And that you have to have that knowledge of what is going on in the country that you refer to. I think it is best if you have local actors participating in that analysis and that assessment and helping you to learn. And then you engage in the policy dialogue and you look for where is the commitment, where is the capability, where is the accountability, what are the problems, what do people care about, what do they want? We just had a recent, was it, whose opinion poll was this? Pew, I think, looking at Africa, looking at Latin America, what are people interested in, what are the issues? You have to look at popular opinion, you have to look at lead opinion, you have to look at government policies to make judgments. But I think you have to have, I used the term differentiated partnerships 20 years ago and I think, I've seen that picked up now in some EU documentation, but I think you have to differentiate based on the facts of the case. You don't try to run before you can walk in looking at what the situation is. Douglas North again, in a paper he did with some colleagues for the World Bank, talked about donors coming in and trying to bring in concepts of impersonal treatment of individuals, not based on who they're related to and who they know, and democratic processes in countries that are limited access orders and they think differently and it doesn't work and then the donors say, no political will, it's their fault. And he says maybe it's the donors fault for coming in with an inappropriate solution to a problem that they didn't have but not being responsive to the problem that they did have. And I think very much that you have to not put countries in the boxes and say we know what they need but rather, and this goes for the, does economic growth proceed, democracy does, in the long term there's a strong correlation between democratic societies and working economies and growing economies. But as to the bumps along the way and the paths to that, I think it varies all over the place. I think in Latin America, as John mentioned, when we saw the democratic transition coming in the late 1970s, early 1980s, it went different ways in different countries. I think Mexico, the economic reforms paved the way for the political opening. I think other countries, the political opening paved the way for the economic opening and you have to take each country as it is and not fitting any preconceived models that we might have. Jim, let me just push you on one thing on your comments about, on this issue that we raised in the paper about, well, we may want to shift resources towards governance and that may not be a winner and I'm not disputing that. We wanted to see if people were paying attention when we wrote that and we knew it would be a little bit controversial. But could you talk a little bit about, okay, if we all agree that this is so important, why can't we get the U.S. political money allocation process or the bureaucratic people time and money allocation process to say this is so important. If you look at the country of Tanzania, we have more or less a $500 million a year budget of which we spend $10 million on governance, $80 million on agriculture-related activities, not related to land tenure reform, which is, you know, there's basically, they're sort of, they used to be socialists until about two weeks ago, if I'm under, you know, maybe three, we spend $400 million on HIV-AIDS. So could you walk me through why, just maybe briefly, and it's a longer conversation, but I think it's one of the elephants in the room here is, could you just, okay, if we can't get folks to shift money away, what is, what's the strategy for which we're going to, and I'm not saying it's huge amounts more money and I'm not saying we should rob all of Peter to pay Paul, but talk to me a little bit about why is this so difficult? Is it because it's not compelling? It's not, it doesn't pull up the heartstrings because maybe it's sleep inducing to talk about barriers to entry and regulatory reform on the Hill. What is it about this that's so difficult? I think that when you put it into the foreign aid context, it makes it more difficult because you have champions for education. You know, the answer to development is education. You have people who are champions for health and you have these country situations, which are so compelling because of the national security dimension that they, that they, that they involve. And getting beyond those to the kinds of issues we're talking about this morning has been difficult forever. I think you don't start by saying, let's put this into an aid context and let's put it into a change the budget context. I think it is rather a matter of broader government policy. This, you know, we had a meeting in this room, I believe, talking about the QDDR two long ago. Here's a good subject. How do you bring together the different parts of our government and to engage the assets that are represented by our private sector, by our NGO community to see this as something that is in the interest of the developing world and in the interests of the United States and work on getting this integrated more into the foreign policy objectives of the United States. I think you can find this, if you look at the national security strategy, you'll see it. If you look at the global development policy, you'll see it. But the implementation is where I think the work is needed and I think this can be done more effectively if it is broader. If it is not, we'll give you resources and you will do this. I don't see that donor recipient frame as the way to advance sustained growth and good governance. I think it's a broader foreign policy issue. Jim, I don't disagree with you, but let me put on the table perhaps something slightly provocative in saying that I think there's a political correctness in Washington about we need to have broad-based economic growth and we should have good governance or democratic governance. But when push comes to shove, people quickly go back to their corners and say, well, don't touch my pet rock over here. Don't touch my pet rock over there. Maybe I'm wrong. I know that you've got a two-finger, but let me ask Jim if you could just... Am I wrong in saying that? It's so complicated. Maybe it's not fair for me to... I framed it in a particular way and I recognize I'm framing it in a particular way. I don't think I can give you the shard answer to that. I think John's smarter than I am. Fair enough. I'm just more opinionated. The answer is yes. The answer is, and we've seen it in sitcoms since the 1950s. It's not my job. It's not my job. My job is this, and I want to keep my job doing this. And here's my position description, and it doesn't include this. And, you know, that's why, and we had talked earlier about the contrast between the ease with which our program, which is at your Nexus, can walk in the door and talk to people at MEPI, which is a new entity, versus talking to some other agencies. When you start something new, and we often recommend this in our approaches overseas, don't try necessarily to reform the agency that you've got. It would be better to blow it up and start from scratch and create a new one. Because it is really difficult to mobilize and to overcome the bureaucratic structures, the stovepipes, the position descriptions, the SF-162s, and so on. Whereas if you start from scratch and say, okay, reinvent this. You take Larry Garber and say, Larry, reinvent this. He can reinvent it, but can he implement it? But if you give him something new to create let's just start from scratch. And there's a fair amount of academic evidence that this is true as well. Just on that point, I mean, I think one of the problems has been, and so I'm a pro-AID and a lot of my biases is there's been a series of conclusions that aid is not fixable. And so what we've said is we'll create MCC or we'll create PEPFAR or we'll spin OPIC out in the 70s or we'll spin out TDA in the 80s. And so then we wake up one morning and say we have 25 aid agencies doing this stuff because we've basically said, well, this isn't fixable for a variety of reasons. So my argument was I'm not sure we need 25 aid agencies to do all this stuff. And I'd like, you know, my hope would be is that we empower, you know, a smaller number or one agency to do this stuff. But I've had a happy career at CSIS staying away from the org chart discussion per se. But I would say that I agree with your general premise, John, and I appreciate your openness to be opinionated. And so I welcome you to be opinionated about this, if you would, if you would comment. In particular, I'd be interested in your view about, okay, if this is so great and we buy all this stuff, why the heck is this so hard to see either more people time and money put into this and I have my views, and I think we've all heard what my views are about that. Just one interjection. I'm not the only one that had that opinion. Ronald Reagan did as well. That's why he said, let's do the National Endowment for Democracy. That's exactly, no, that's exactly right. And so, John, you're not alone at all. I think if you look over the last 30 or 40 years, I think, me too. But I would say that my sense is that if you look across the last 40 years, there's been a variety of very smart, serious people who've looked at this and said, okay, I want to get something done and I don't agree with how the current structure is set up and it's too hard to fix it. So I'm going to do something outside of it and going back to the NICS administration. Monica. I'm not sure what to add to all that because we all live in Washington. We all know the bureaucracy. We've all lived with the bureaucracies. I worked on the Hill as well in a prior life for a long time. So I've seen that process as well. And I think, yes, the bureaucracies are entrenched, bureaucrats are entrenched. It doesn't matter where they are. It's very difficult to change. And that is why I believe MCC was created and all the other things you just mentioned were created. And on the one hand, that is not a bad thing because, for example, I think MCC is doing very good work. But on the other hand, of course, it's not ideal. You don't want 25 agencies out there. But because it is what it is, and I don't know that there's any realistic chance of changing that anytime soon, because of the pet rock issue as well and the Hill has their own interests and interest groups have their interests. It's very, very difficult. I think we cannot have an argument. I mean, I think it's in theory the idea that, well, let's just shift funds from this pot to that pot. I think that's very unlikely when those pots are called health or education or other similar topics. It's just not going to happen. And so instead, I think, you know, kind of sort of like what Jim was talking about, sort of combining, I mean, really what I think could work without having to shift those funds is if AID or whoever is doing a health project or an education project, you know, require that there be a governance element to it, to its administration, you know, not just give the dollars or give the services, but actually have a governance element that would professionalize how it's done and institutionalize it in the field, on the ground, by the country, not by us, so that they can continue doing it later. And so it's not so much about moving the money, but moving maybe the people or combining the people, combining the implementers. I mean, and really the implementers are like us, you know, and others like us, that rather than us, IRI or NDI, going in and doing a governance program, you know, we'd have to partner up with... Scythe. Yes, oh my goodness, yes, Scythe. Or, you know... Or save the children, yes, or save the children, you know, or some group that would be less obvious maybe and have us work together and do the work combined, so. Okay, Dev, I know this has been a USG-centric conversation, but I suspect that in your past life at the World Bank as well, how did you make the case for... A, responding to any of the comments I put on the table or questions, but how did you make the case for either the sorts of activities that were in your remit at the bank because I suspect there's a bureaucratic fight for resources within the bank group? How did you make those arguments and what sort of pushback did you get? I'd be curious about that as well. Thanks, Dan. And look, I want to... It's been a very intriguing discussion, and I think there's more than one way to skin the cat, first, and the... And we sort of fundamentally need to question whether the only way is through the aid arenas. Look, the world has changed. And why aren't we thinking about new ways of influencing political will, gaining access to pull and push the knowledge out? Look, I may have come from Singapore, but I've lived in this country for 30 years, and I'm very American now. And I think this is one of the reasons why I think this country is... It's a great country because it's not always gone for the obvious solutions. Think of the changes that are taking place. You've got an internet revolution that's obviously been going on for 20 years, but the penetration rate of that is 28, 30%. You've got still 4 billion, 5 billion people left to come on stream with that. And why I'm bringing this up is that there are new modes to reach people. Whatever happened to citizen pressure? Well, we saw it in the Arab Spring. And not only did we see it in the Arab Spring, we're seeing it here, on what citizen pressure can do to change fundamentally how government behaves and reacts. That's just one example. So my question is, are we... And by the way, the key audience of that is the young, not the old fogies, like us excluding you. I resemble that remark. But I really think that that pressure can still be utilized and promoted. You mentioned in your paper about what the role of foreign students coming into this country has been. Are we doing enough there to influence foreign students who are going to be the future leaders in these countries? Much of the changes that you're seeing in Africa is a result of that. Students who have been trained in the U.S. Look, I faced it myself. I got corrupted by the U.S. I came down here, I loved it at Indiana and I found it difficult to adjust back to Singapore. You drank the Kool-Aid. I drank the Kool-Aid. Look, what I mean down here is that let's not assume that the only way is through the typical bodies, U.S. aid and the World Bank and such. I think it's just completely changed now such that we've got to be bolder in arranging new ways to get into it. This, in fact, has been one of the frustrations in the bank. The bank is no different from U.S. aid. You've got bureaucrats who love writing their papers and they write fantastic papers. But the question of infiltrating, if I can use that word, to our client states with new knowledge, with practical know-how, with influencing an incoming political leadership early on. And in many ways, I think U.S. presidents have been most useful when they're out of office after they finish their terms because they have been able to influence leaders coming, new leaders coming up and so on, but it's done in the background. And there's a lot of value in things like that. We can't just constantly look to see what the monetization is or the direct monetization. And I'm not suggesting that you don't do that. I mean, the U.S. aid has to make specific changes to give more credence to issues in governance and whatnot. No question about that. But there are also, I think the bigger win is coming from a number of these changes that are taking place right now. And how we galvanize our own resources in a wider perspective makes a difference. It really does. Thanks a lot, Dev. You all have been very patient. So I'd like to take a couple of comments and questions. Okay, thank you. Thank you. My friend Stuart, I want to hear from this gentleman back here with the very nice red scarf. I want to get one of those. And then I'd like to have a little gender balance here. If not, I'm going to get it. Okay, and my friend Charlie as well. So we'll start with those three. Start with Stuart from my friend, Stuart from the MCC. Hi, good morning. Edgy Monica, you'll be glad to know that we are increasingly including governance components within the big infrastructure investments. And so there's some hope. This is a very quick comment to lead to a question. And Damien, it's one of my hobby horses that I think one of the problem, one of the reasons there's less allure to financing activities in the broad governance, lower form area is that those of us who've been working in this field, in my case 30 some years now, there tends to be an aversion to looking at the economics of the reforms that they bring. That is when I got to MCC, we were looking at a justice project to make it very real. The economists say, but wait a minute, you can't measure the economic benefit of this. I say, give me a couple of hours and I'll get back to you with a chart so you can understand it. And so you can do things, but I think there tends to be a failure of those. Perhaps it's because we're lawyers and we're reversed to looking at those numbers and funny Greek letters. But I think one of the things we might do better is look at and sell, to use a crude word, the actual economic impact, the economic rate of return, if you're talking about a project, of these sorts of investments and the very specific poverty reduction outcome. Not the outputs of X people, X judges trained or X laws changed, but what does it do and show it in numbers that have dollar signs by it, even if it's an imperfect measurement and a partial measurement. But I'm curious to know your thoughts on greater utilization of those kind of economic tools in the work in law and governance that many of us involved in. We'll do this World Bank style and I'll get a couple more comments of the gentleman with the scarf. Hi there, my name is Prosser Sterling. I'm from Oracle Corporation. Thanks a lot for your comments. I have a very fundamental question and that is the value of the development dollar. We're talking about development. I think the panel has been fixated on aid and donor agencies and perhaps this paper is too. At the end of it, it does talk about the international context and the multilateral development bank context. So my question is since a lot of these bilateral agencies are pretty much arms of foreign policy and there are many different bilateral agencies, the Nordics have a different flavor than Japan that has a different flavor than US, that has a different flavor than Australia. And they're giving the money away. It's a gift, they're giving it away. How is this development dollar, dollar for dollar, different than a multilateral loaned dollar? The subtitle of this paper is Investing in Governance and Growth Nexus. So is a client country, is a recipient country more likely to achieve more positive results if they are borrowing money that they have to pay back mostly? And in essence, they're investing in themselves. Is the governance end result, might that be more positive than the end result of a given dollar? Okay, Charlie Pondicelli. Hi, Charlie Pondicelli, among other things, I teach a course at Catholic University on the economic aspects if you will of community development, community development within the economic development framework. I worry sometimes about the relativism that can creep in when the focus becomes, okay, we have to be sensitive and focus on contextually appropriate mechanisms versus the kind of the tools in the toolkit that come out of the work of so much of what you all have been involved in, I think of the World Bank's doing business, but the women business and the law report, I think of the Heritage Foundation's Economic Development, the Freedom House Freedom in the World Checklist, so that there are some basic diagnostics, albeit those that, of course, one size is not going to fit all. So I wondered about that, how we kind of avoid the relativism and Jim had made the interesting but fleeting reference to how the roots of good governance can be traced to the Universal Declaration of Human Rights. And what is the role anyway of the United Nations? Is it becoming less relevant or I don't think it's becoming more relevant in terms of this nexus between governance and growth? So it's kind of a couple different questions rolled into one. Thanks, Charlie. Okay, I'll ask the panelists just to respond to those comments or questions and we'll start with you, John. We'll just go down the row here. Well, to start with the last point, I agree that there are benchmarks out there and that's not what we want to be contextually sensitive to, whether it's Freedom House or doing business or the others, although this implementation gap is a real issue. We found that in Russia. You know, you can get really good marks on some of these things, but when you go to Sochi, it ain't the way it happens. It isn't working that way at the local level. So you've got to look at the context that these measures are in. But the contextual issue is, how do you then get the people in the country to say, okay, how are we going to get here? It's the journey, not the destination. It's the journey. How are we going to get there? Which road do we go down first? How are we going to mobilize people? And you have to let it be their idea. You have to let it have local ownership. So yes, the destination is definitely there. In terms of the impact of the dollar, I think, I'm not sure that there's a one-size-fits-all answer to that. There are an awful lot of countries and people that have worked at the World Bank a long time have assured me that they recognize this, that there was this game going on and the game was, well, we're going to borrow this and we'll promise to do all these things. But then we don't do them and, you know, okay, well, here's your money back, but we're not going to actually do this. But give us the next tranche anyway. Now, how is that much different than, you know, the AID funds flowing in and supporting the health system? I don't know that there's a big difference there. And I think it's probably, again, case by case, I don't think you're going to find a one-size-fits-all solution. You know, if you're a consumer and you're a smart consumer in the U.S., do you do better off with your credit card than you would with food stamps? I don't know. I think it depends a lot on the context, on the individual economic reform agenda in that country and on the people that are doing it. What was the first question? It was about Stuart's question about how do we make the case for impact? Oh, measuring impact. I think measuring impact is extremely important. It's also very difficult to do in some cases. Yes, you can come up with, you know, the first distinction you make is the difference between an indicator and a measure. You know, a thermometer is a measure. It tells you exactly what the temperature is. The doing business indicators are indicators. They give you a sense of where things are. So if you're willing to accept indicators, you can probably get there a lot faster. But one of the things that we do is that rather than trying to measure jobs created, etc., we have produced a, and it's on our website, we produced a 25-year impact report of all the projects that we've done for 25 years. And what we did was we used, every project has a specific objective. So we ranked those objectives in terms of where they accomplished. And one of the ways that we measured whether they were accomplished was the degree of institutional change that occurred. Now, getting from institutional change saying, okay, Hernando de Soto lowered the entry barriers in Peru from 289 days for a sole proprietor to two days. Okay, what is the direct impact of that? In that case, we were able to generate some numbers. 300,000 firms registered within a 10-year period. When you can do that, you really have a powerful argument. There's no question. It is not necessarily the case that you can do it on every indicator. So you've got to come up with indicators where you can say, okay, what's the institutional change? What is the, if you train, we've got a program where we educate 44,000 Afghan kids every year on entrepreneurship. It's not just the number of firms that are created that is the outcome. It's the attitude change as well. So we give them all tests. We look at the degree, the difference. We have control groups and so on. There's a lot of different ways that you can go about it, but yes, it is very powerful. Okay, Jim. Do you have a finger on that? First on how to make the case for impact. I want to throw a cautionary word here. And one is that over the past five years, and I said this a little earlier as well, over the past five years with the economic circumstances as they were, a number of the traditional donors had obviously to show account for how their $8 has been used. And that is a positive, as well as a negative on that particular dimension. And the positive is obviously this means showing results. So when the World Bank gets donor funding from DFID or whatever, we need to show results. The negative on that is that the short-term influences take over. As to what you can immediately intervene and show the results rather than the long-term governance type of issues. Because you don't get to see the results immediately on changes for governance. So there's a bit of a compromise that takes place and I worry about it. The second thing that I want to address and I'm not sure which question it's answering, but with regards to aid money, I think it was your question and where that is going. I fundamentally question $8. If you take an institution like or any of the multilaterals, there's been an enormous amount of knowledge that they have gained. Now, that knowledge has not been distilled enough to push out. So instead of lending where frequently we don't know what the results of that is, I've always asked this question, I said, boy, if we were to do a valuation of the World Bank right now, what is its value? And I constantly come back to the fact that it's got 65 years of knowledge of development. Knowledge on corruption, knowledge on business climate improvements and so on. What if we package these differently, right, in order to push knowledge out, right, alongside with capability building and so on, would we have a bigger win? And I don't know what the answer to that is, but I think that converting multilateral institutions in today's world toward away from lending institutions toward capability building institutions would probably get you a lot more bang for the buck. Sorry, Jim, if you would just push the button. Well, Stuart's point about measurement of impact is really key, but I share the frustration. I've looked at macro econometric studies that say, well, if this reform had been adopted in the legal system, property rights would be better protected, and the impact on GNP five years later would be 0.2%. But it's not very convincing analysis. It's proving the unknown, and the indicators for governance, rule of law are in a process of formulation, but the UN has 135 indicators for measuring rule of law, and everybody has their own. The World Justice Project has the rule of law index. You have Danny Kaufman's rule of law item in the global governance indicators. The difference in you look at health, for example, or education, everybody knows what youth literacy means. It's 18 to 25-year-olds, not 16 to 30-year-olds. Everybody uses the same measure around the world, and all the statisticians and all the ministries around the world have set up some capability. Now, the data may not be great everywhere, but that's what they're all measuring. Infant mortality. Everybody knows what that means. It's under one. And everybody measures the same way. For governance, we don't have that yet. I think it's important that we keep working at it and try to get some measures that gain international acceptance that can allow us to do the kinds of things that Stuart recommends, but it's still a struggle to get to the point where we have the right indicators that everybody agrees on. The value of the development tower, I agree with Deb a lot that this knowledge, and Jim Wolflinson used to talk about the knowledge bank rather than the money dispensing bank, is very, very important. And grants versus loans, you know, you can talk to Japanese development people and they'll say loans are better and you talk to AID people and they'll say grants are better. And those of us who went through the debt crisis and the HIPAA process and all of that, you know, lending money to countries that are broke is not necessarily going to work and it's very so much again. It's very dependent on the local context as to what is appropriate in terms of support. I think that the idea that we used to have, you know, go back to the 1950s and 60s about the Herodomor model of two gaps of savings and investment and all that and that the development was a matter of capital infusions, nobody believes that anymore. And so I think that maybe this idea of the value of the amount of money spent is seen as less significant. The economic aspects of community development and basic diagnostics. I mentioned that there are some diagnostics that have been developed that are collaborative. It's not, we have come up with a formula for measuring you and you measure up or don't measure up to what we think. Well, I'm going to say so what? Who cares? But if you find that interest in the country in which you can combine the international experience that Deb was talking about with the interest of the people within the country who want to take some leadership and deal with these issues and use that knowledge to reach their own conclusions and devise their own strategies with international support as maybe needed, that's much more likely to be successful. So I think that having something that is contextually appropriate doesn't really mean relativism and what else do we have here? Is that it? You got it. Okay. If I may, you made a point earlier as to why is it so difficult to get some of the recommendations that you're coming up with through USAID. Part of it is political. Because these are difficult things to do first. I recall in the bank years ago we did try to put a governance indicator and it was squash politically. Women, business and the law, and I take pride in that because it was something that I moved on very hard when I was in the bank. And the political challenges, I mean when you're sitting with the executive directors of 26 different countries down there and who are not representing the institution but who are representing their own country's interests. It's a huge challenge. So governance involves changing institutions like the bank and other aid organizations. On WBL, I wanted to do a ranking on it. It says it'll be even more powerful and we couldn't move an inch on that because of the fight on doing business. But what we ended up doing on WBL just as a case in point was we said well let's just publish the laws that are in the books of those countries. That's all women business and the law is. To show up to countries to say that look, your country does not allow property rights for women and it's published. It is page whatever it is that you're on. And getting this out puts the pressure on them. And so you do get the changes. So what I'm saying is that the politics sometimes is difficult but it's not as if you can't overcome them. There are other tools that can be used in driving it forward. Monica, you have the last word. Well I don't want to repeat a lot of what has been said but I actually just want to react to Stuart's comment because well MCC's been a leader on evaluation, on economic rates of return prior to even starting programs and not being afraid of demonstrating whether the results have been good or not always so good. And I think it serves as an excellent role model to other agencies. And I think as a result of MCC's leadership on this issue the environment has really changed in DC with regard to M&E and it's been very challenging for organizations like ours. I'm sure for Cype as well but those of us that work in a field that's a little less tangible than infrastructure and other projects like that. But we have to do it. And so we used to demonstrate our success by numbers of people trained. That's laughable now. That doesn't say anything about what we've done other than that we had 30 people in a room. And so we've had to adjust our mentality. We've had to become more rigorous in our thinking about how to show impact of programs that aren't necessarily that easy to demonstrate impact on. But it can be done and there are ways and it takes good hard thinking and effort. And so yes, I think it would be great if I think it would make it an easier sell as you say to connect the more easily quantifiable effects of programs if you did that on the government side as well. I think it would be hard. I think it would require a cultural shift. But I think it's something that could be very beneficial. I want to thank Connor Savoy, the author. I want to thank Lee Williams, one of the contributing authors. Thank you, Lee, for being here and thanks for your efforts on making the paper what it was. And I want to thank the panel. Thank you all very much. Thank you, David.