Policy Innovations Digital Magazine (2006-2016): Commentary: 3 Tools for Turning Fragile States into Inclusive Societies

A big reason why less developed countries fail to develop is how they structurally exclude large segments of their population from their economic, social, and political development. In my estimation, roughly 3 billion people—one out of every two in the developing world—face discrimination in how their governments and markets work. This institutional bias has a dramatic impact on access to education, security, the rule of law, and opportunity.

In my recent book on poverty and inclusive development, I look for ways to change these dynamics. I mainly focus on fragile states, and I work from two assumptions: 1. Governments don't work well, and are easily corrupted or hijacked by powerful interests; 2. Societies are divided into many different identity groups based on ethnic, religious, caste, clan, or class differences. Weak economies exacerbate these problems, making the competition for power more zero-sum (as the levers of the state are a major source of income). A weak civil society limits the options for change from below.

These assumptions change the way you analyze problems. You cannot assume that even regular elections will promote accountability and encourage leaders to introduce broadly beneficial policies. Often they are rigged, or are determined by vote buying or ethnic ties. Changes in administrations do not change the dynamic of elite-dominated politics, as in Pakistan.

What Nuhu Ribadu, former chairman of the Economic and Financial Crimes Commission in Nigeria, says about his country can be said about many poor countries around the world:

The political culture of Nigeria masquerades as a democracy, but in reality is no more than an exclusive club for a tiny elite accountable not to the millions of citizens they, in theory, represent but to an even smaller clique of power brokers, barons, and what we now inelegantly call godfathers....Imagine a system where everything that is supposed to help to strengthen the state and uphold the rule of law is instead compromised and undermines it. This is true in Nigeria, but also in Cameroon, Sudan, the Democratic Republic of the Congo (DRC), and most African nations.

Similarly, you cannot assume that economic reforms will produce competitive markets because of great differences in access to regulators, skills, and money. Rules may be sound, growth may be fast, but most of a population may not be benefiting, as was the case in Egypt before the Arab Spring and many countries across Africa.

Given such conditions, I look at power dynamics and the role of elites and then seek ways to make the latter work more for the benefit of their countries and populations.

The challenges are great, as even enlightened individuals face many obstacles—some petty, some substantial—when they try to promote an inclusive state-building agenda. Corrupt bureaucrats, self-serving politicians, regional powerbrokers, ethnic and religious leaders preaching gospels of prejudice and exclusivity: Individually and collectively, they will try to disarm or destroy anyone working to foster change.

But enlightened individuals seeking to encourage more inclusive behavior from elites are not without their own weapons. They have a trio of tools at their disposal with which they can try to advance their agenda. One tool is social cohesion—that is, the social, cultural, and psychological bonds tying all members of a society together. The more socially cohesive a state is, the more likely its leadership will act inclusively, see growth-inducing policies as in its interests, and invest in strengthening the capacity of the state.

The second tool is an inclusive pro-development ideology, a worldview that explicitly calls upon its adherents both to help all other members of a given society, including the poor, and to promote pro-growth policies.

The third tool consists of steps that can shape the incentives influencing members of the ruling clique, encouraging them to come together behind an inclusive pro-development agenda.

Social Cohesion: The Glue That Binds

The countries most likely to prioritize inclusive development are nation-states. A nation-state is naturally cohesive, its people sharing a common history, language, culture, and social system. Every day, these ties strengthen the sense of a common identity and group allegiance. The attitudes that this sense of a common destiny produces translate into governments both more oriented toward development and more concerned for the welfare of the poor. Examples of nation-states include France, Germany, Japan, and Turkey.

In the developed world, nation-states are common. In the developing world, they are relatively rare (because the borders of states were created by colonial mapmakers, not by the local people), but where they exist they tend to be far more cohesive and unified than their neighbors. By virtue of being based on a common identity, nation-states contain fewer identity-driven rivalries than are found in the rest of the developing world. They are also more resilient, better able to unite in the face of adversity rather than break down into competing factions. They are thus also less prone to conflict.

Fewer fissures also mean that fewer people are likely to be denied public services and equitable treatment at the hands of the state. Elites that see the poor as "one of us" are far more likely to ensure that they have access to schooling, employment, infrastructure, security, and opportunity.

National leaders have tried to use a variety of unifying forces to overcome the problems posed by ethnic and religious diversity within their country's borders. Tanzania has adopted Swahili as its national language; Senegal has celebrated its unique Islamic and African cultural heritages; Pakistan has attempted to forge an Islamic identity.

These efforts to build a common identity can succeed only if they are multigenerational and multidimensional. The young must be educated from an early age in languages, symbols, and ideas that everyone within the country can accept. The media must cultivate a shared self-image and show a population how it differs from its neighbors. Government officials must consistently display no favoritism toward any group. Steps must be taken to institutionalize cooperation between the country's different ethnic and religious groups.

None of this is likely to be achieved easily or without opposition. In states that lack a sense of national identity, the ties that bind individuals to their own groups are powerful. "Spoilers"—those who seek to wreck efforts at reform—will try to undermine unity by appealing to ethnic, religious, tribal, or clan divisions. But each enlightened member of the elite can resist spoilers and promote cohesion in his or her own sphere of influence. A television producer can create programs that promote a common culture. A leader of a political, economic, or social group can make its activities and membership more inclusive. A teacher can work to eliminate prejudice among students. A public official can try to ensure that schools are funded equitably throughout the country. A judge offered a bribe to rule against a disadvantaged group can refuse to accept it.

Inclusive Ideologies

While the process of building social cohesion takes generations, inclusive ideologies can impact the thinking and behavior of elites within decades, even years, inspiring concrete action to help the poor.

One of the best historical examples of an ideological impulse that helped the poor can be found in those countries that have embraced the "developmental state" ideology pioneered by Germany and Japan in the nineteenth century and since adopted and adapted by countries as diverse as China, Singapore, and Rwanda. This ideology centers on a national modernizing mission driven by inclusive growth and the building up of the state in ways thought to quicken economic transformation.

By emphasizing the need for unity in the face of external threats and promising faster growth that will enrich both elites and the masses, the leaders of these countries have been able to put together broad coalitions and push through major reforms that some powerful interests might otherwise have been able to obstruct. Although the developmental state ideology has often led to some unsavory practices (such as the repression of opponents), it has also consistently yielded governments that see great value in education, basic healthcare, infrastructure, entrepreneurship, wealth creation, and a robust government apparatus—all of which benefit the poor tremendously. It also extols the value of social cohesion, which is why many of the same states that embrace the developmental state approach also actively promote social cohesion.

By providing ample benefits in exchange for loyalty to the state and model, the developmental state ideology has helped defuse potentially divisive ethnic, religious, and geographical divisions. It has also reduced the incentive for anyone to develop and disseminate an alternative ideology, one likely to produce division, exclusion, and destabilization. Growth begets growth, itself becoming a driver of change. The greater the opportunity to make money legitimately, the readier people will be to turn away from exclusionary politics and corrupt practices.

The power of political, religious, or cultural precepts can be harnessed in numerous ways. For instance, members of the elite who want to nurture more inclusive and development-oriented states could take some of the following steps:

• Work together with other prominent members of the elite to develop a national vision of unity and progress.
• Urge opinion leaders who have the ear of the top members of the elite to emphasize that promoting inclusive development is the duty of any responsible leader. Muslim and Christian clerics, for example, could be encouraged to take a hard line against any individual who repeatedly acts in ways that harm the poor or the development of society.
• Establish a governance academy where both current and future leaders can be not only educated in public administration but also imbued with a sense of duty to adopt and implement inclusive pro-development policies.
• Institute a financially attractive "governance prize" that can be awarded with much fanfare to a number of public servants every year for their work on behalf of the poor and good government.
• Partner with leaders of neighboring countries or regional organizations to espouse a more inclusive development model. Peer pressure can be very powerful—which is one reason why in 2007 tycoon Mo Ibrahim created the Ibrahim Index of African Governance, which measures the quality of government on the continent and aims to pressure leaders to raise performance.

Incentives

Even the most inspirational and eloquent of leaders can do only so much to persuade members of the elite to embrace inclusive development as an idea. Inclusive leaders have to find creative ways to reconfigure the incentives that currently make many members of the elite hostile toward development and social inclusion.

Different circumstances call for different strategies. Where a state is relatively robust, the pro-reform coalition may be able to negotiate with opponents to accept a pro-growth deal. Offering compensation, whether financial or in some other form, may help to bring potential spoilers on board. Various forms of popular pressure—from taxpayer protests to campaigns by coalitions—may also overcome elite resistance to change. But where the state is weak and society is fragmented into a series of patronage networks, the pro-reform group may have to be much more creative if they are to co-opt powerful forces.

Latin American countries such as Brazil, Argentina, Chile, and Mexico offer good examples of how reform coalitions can be constructed in relatively robust states. Each was able to make politically difficult market-oriented reforms (such as trade liberalization, privatization, and the reduction of subsidies) in the late 1990s. The advent of economic crisis—brought on by the Asian financial crisis—spurred events, but significantly changing the regulatory environment of the previous 40 years would not have been possible without the development of a broad consensus among important actors. A substantial shift in both elite preferences and the opinions of ordinary voters—important as the countries democratized—helped forge a consensus in favor of policy reform.

In the end, enough influential members of the elite—including politicians, union leaders, and well-placed business people—became convinced of the need for the reforms and had enough backing within their constituencies to support them. The net result was both a surge in growth and a marked reduction in poverty in the countries that sustained their reforms over time.

Indonesia under Suharto shows how reform coalitions can be constructed in less robust states. The role of local businesses was extremely important. Suharto was able to fashion a stable, fast-growing regime based on an alliance committed to inclusive development between himself, the military, and business within a relatively short period. Corruption was widespread, but major investment projects were protected by a system of centralized bribe collecting that protected property rights, reduced uncertainty about costs, and even ensured a degree of predictability concerning returns.

Simultaneously, the regime sought to court the rural masses (who had supported the previous government) and introduced policies that helped the poor. Between 1966 and 1997, Indonesia was one of the fastest-expanding economies in the world, creating millions of manufacturing jobs, becoming self-sufficient in rice, and achieving major advances in education and literacy. Incomes grew at 4.5 percent a year between 1965 and 1990, while the proportion of Indonesians living in poverty fell from almost two-thirds in 1975 to just over one-tenth in 1995.

How can business, community, and religious leaders convince political leaders to act more inclusively? How can pro-reform forces grow larger, stronger, and more cohesive? How can they use their power to change the incentives shaping those who control power? Many options present themselves:

• Encouraging leaders to create a legacy that future generations both at home and abroad will applaud.

• Creating partnerships between business associations, political parties, and trade unions to promote a pro-growth agenda that benefits a wide range of people, as occurred in several Latin American countries in the late 1990s.
• Developing a network of reform advocates from across the political spectrum to share ideas, forge new relationships, and work together toward common goals.
• Uniting dispersed, disaggregated, and therefore weak political forces into a stronger, consolidated movement that can press for policies that benefit the poor, such as better schooling and more rural roads. Indigenous groups have banded together in the Andes countries to create large political parties (and other groupings) with enough clout to force governments to introduce inclusive policies.
• Reorienting a political party, business association, or activist group currently structured around patronage, ethnic, or regional bases toward an issue or interest-based agenda that encompasses a broader grouping of peoples.
• Strengthening mechanisms that hold leaders accountable for their actions. Establishing nongovernmental organizations that monitor public policy, spending, corruption, and inequities in public expenditures can increase transparency and give the public greater ability to influence their leaders. So can strengthening independent media and the skills of investigative journalists.

Combining the Three Tools

These three tools for persuading elites to adopt an inclusive state-building agenda can be used separately but have much more effect when combined. After all, they are mutually reinforcing. Reform champions need to determine what tools they have available and how best to use them.

They can do this by asking questions about the people whose support they need: What interests do key members of the elite share with the poor? How can the elite be encouraged to act more inclusively and to adopt a long-term development-oriented perspective? What is shaping the relationship between politicians and investors and how might their common interests be funneled towards productive investment? What ideology might be used to help spur action toward more inclusive and development-oriented behavior? What common elements (language, history, etc.) might be used to strengthen national cohesion? What are the elite's major sources of income and prestige and how might these be better used to encourage more inclusive publicly minded action?

Answers to these questions should be factored into the development of a practical plan that promises to spur inclusive development, reward the elite enough so they stay committed to the process, and starts a virtuous circle that can benefit more and more people over time.