What Lessons Can Rich and Poor Countries Learn from Each Other on Improving Governance - Literature review Example

WHAT LESSONS CAN RICH AND POOR COUNTRIES LEARN FROM EACH OTHER ON IMROVING GOVERNANCE? By Name Course Instructor Institution Location Date IMPROVING GOVERNANCE According to Berliner et al (2012, pp 151), governance is the exercise of authority over a country’s economic, political and social affairs. Governance comes with a number of challenges that need to be addressed to achieve the purpose of any government (Kwon, 2014 pp 346). Among the vices that slows down or undermine governance includes the following: corruption, lack of accountability, stewardship in management of public assets, lack of transparency and lack of proper legal reforms (Benson, 2013 pp 8). Over years citizens have started to actively engage with the government and participate in governance. Aid organizations that are concerned with offering assistance to developing countries are also in the forefront to ensure that there is improving governance. Proponents of good governance argue that the key source of underdevelopment in low and medium countries (Hunsberger, 2014 pp 215). However, the rich countries have managed to improve their way of living and unlocking progress through practicing good governance. Our study will focus on a comparison between one rich country and a poor one as classified in the UNDP Human Development Index report 2014 (Blaikie, 2014 pp 67). In our study we shall look at Congo and Norway. Congo is a poor country while Norway is a rich country. The paper will focus in the following major facets that affect the state of affairs of a country. Macroeconomic management According to Skerratt (2013 pp 77), the government of rich countries like Norway has demonstrated prudence in how they manage their macroeconomics. Governments of rich countries have abstained from spending carelessly with an aim of satisfying pressures that are politically instigated. They have also refused to make spending that have a popularity gain thus being able to run a budget has no deficit. The rich countries have struggled over years to pay their debts and have established fund accounts to cater for current and future uncertainties. The prudence in fiscal planning has assisted in preventing inflation (Berliner, 2012 pp 155). They have also ensured that revenue from exports is not all converted to the local currency and spent. Such spending habit would greatly contribute to increased demand and prices, and hiking of interest rates. Such measures will obviously results to inflation making the price of that commodity anti-competitive. According to Benson (2013 pp 9) a proper macroeconomic management broadens the tax base of the government. That has allowed an extra security of the country even when the commodity faces downturns. The electorate knowing the adverse effect of such is determined to ensure that the government is accountable and practice stewardship in management of resources (Fowler, A 2014, pp 51). The rich countries have a way of also to draw revenues from other areas that are not resource based. That ensures there is a reliable source of the government that isn’t dependent of commodity price precariousness. Lessons on macroeconomics theory Firstly, the significance of quality in institutions advocates efforts in improving macroeconomics in countries such as Congo. Among the important attribute of macroeconomics that should be improved include transparency, accountability and extractive institutions. To improve the quality of the institutions the government must be concerned with the design of institution such the Ministry of Finance. That can be done by accessing technical aid. That is a question of the government making international decisions. The poor countries should enter into agreement with healthy and well intentioned donor governments. Those are governments that do not impose conditions and restrictions on the poor countries government. They can use their expertise to help government receive lofty inflows. They can also assist them to have good accountable and transparent institutions. Secondly, Congo should practice fiscal discretion and formulate a stable macroeconomic policy. The rich countries invest more in infrastructure and development of human resource. Such growth and spending increases the development of both non-resource sectors and resource linked industry (Li Brian 2015, pp33). The poor countries that are resource endowed countries should develop their markets, lack of developed infrastructure and have low pace of tertiary enrolment. In addition, the kind of development of the economy can be able to take up a lot of spending. All the projects should be regulated into white elephants that are of little economic value. The poor countries should learn from the rich on fiscal rules. They should be formulated to aid in regulating or curbing the political pressure. Thirdly, there should set up a generation funds in economies that are developing or poor. The funds should assist in absorbing capacity of the fund when the foreign exchange inflows are large and are bound for pressure on the currency or exchange rate (Hargroves 2013, pp 76). The generation fund caters for future generation that is less convincing for economies that are poor with a hope that the next cohort would gain from today’s economic decisions. In such situation, the poor countries should aim at productive investments in human capital and infrastructure. It should also be proficient in strengthening the institutions that are in place. It acts as a long term solution and gives more hope than long term solution in external funds. Transparency and accountability in the public sector should ensure that resources invested are accounted for. Industrial policy: Room for government involvement. According to Syed et al (2012, pp 17) Governments need to spend directly to industries that contribute to further growth of the economy. Such areas include infrastructure, innovation and human resources (Ntim, 2014 pp 136). The government of Norway has known the importance of a successful collaboration between public agencies and private companies. Such partnership may include transfer of technological and management skills from private entities to use in sectors of natural resources. The government should make efforts to expand and diversify the economy. Norway didn’t haste to privatize their companies. The countries that benefit from a range of natural resources ensure that their state owned companies are in a position of maximizing production. However, there are certain circumstances that warrant the presence of foreign companies. Such collaboration may result to greater benefit to the principal country than the other country in terms of increased production and development of technological know-how. Lessons on industrial policy A good liaison and collaboration in the industries between business and government is vital for successful countries. The government should offer the right incentives to donor countries with a record of resource utilization so that they give input on a framework for development in the poor countries (Fowler, 2013 pp 90). The poor countries have over time failed in improving governance through efficiency of industrial relations. In the rich countries thy have developed a sense where people can interact and negotiate. That has resulted to more results and growth of the industry. They can therefore assist them in offering technical aid, good relations between both the public and private sectors and support for institutions and governance. Institutions According to (Blaikie, 2014, pp 71) Institution is vital for a country to develop and grow into a high ranking country in terms of the economy. Institution quality is a factor that has contributed to policy implementation (Hulme, 2015 pp 88). The rich countries have steadfast private-sector institutions such as an independent judiciary, property rights, independent institutions that ensures there is checks and balances and a civil service reputed for its proficiency and integrity. Lessons on institution The significance of quality in institutions advocates efforts in improving governance in countries that have adequate resources. Among the importance attribute of governance that should be improved include transparency, accountability and extractive industries (Donatiello, 2015 pp 78). To improve the quality of the institutions the government must be concerned with the design of the institution. That can be done by accessing technical aid. That is a question of the government making international decisions. There is a poor state of institutions in countries that are not doing well in terms of the economy. That can generate chief inefficiencies due to the poor state and capacity of institutions. Such institutions can facilitate a culture of greed and corruption in the side of the officials such that they can make unrestricted decisions without the need to account for them. The government should have a role to ensure that they curb the vice. Personnel working in the public service The public service in Congo is highly corrupt with government agencies in the forefront (Deininger, 2013 pp 77). Police force is highly corrupt and the judiciary that is expected to deliver justice in the court is also marred with challenges. In Norway, corruption is abhorred in the public service therefore promoting a good culture that protects the growth of the economy (Hunsberger, 2014 pp 250). Lessons on public servant Improving governance involve having honest people, good quality products and proficient institutions. The only thing that can help achieve this is through capacity building (Blaikie, 2014 pp 70). That will help in both developing the skills of the personnel involved in dissemination of services. The officials involved in both the public and private sector should ensure that there is efficiency in their respective agencies (Alles, 2012, pp 105). Independent institutions like the Non governmental institutions should ensure that they are independent as they practice their oversight role (Hennion, 2015 pp 151). They should also abide by the international codes and initiatives that involve an alliance of governments, civil society, international organizations and private companies (Rindermann 2015, pp 101). Such initiatives include the Extractive Industries Transparency Initiative (EITI). Technical capacity building Technology is the use of advanced equipment and tools to perform a task faster and even much better (Ayre, 2013, pp 44). In Norway, they use modern technology in conduct of business and operation of their industries. In Congo and other poor countries, they lack technical knowhow on exploitation of their resources and largely depend on foreign companies (Faguet 2014, pp 11). Lessons on technological resource building There are critical lessons that the poor countries but endowed with resources ought to learn from the rich countries (Tricker, 2015 pp 67). The rich countries have improved their technology so as to handle intricate technical details that is involved in the extraction of resources. The poor countries should also develop their personal capacity and potential source of revenue. That should be done through improving the education level of citizens. That will assist the poor countries to develop human capital and also enhance institutions capacity (Hargroves 2013, pp 67). The rich countries have a learning process where they can assist the poor countries with experience on how they have become successful on areas of expertise (Alles, 2012, pp 103). The important areas they can get assistance include geological and tax system capacity, implementation of fiscal rules, entering into partnership that are beneficial to the running of the company and civil service. The poor countries should also ensure that they develop their technological might. Technological spillovers from the developed or rather the rich countries should be of benefit to the poor countries (Sachs 2012, pp 2207). This should help the poor countries to be able to handle pressure that comes from the rich countries when they seek to exploit their petroleum and energy sectors. The government should also be able to handle pressure from more developed countries when they seek to exploit their resources (Speer, 2012 pp 41). Political stability Development of the poor countries can only happen when there is political stability. In Congo there is always people fighting over resources (Ayre, 2013 pp 34). There must be political consensus-building between the government and the opposition to cease-fire. The leaders should ensure that the electorates are not disjointed so as to avoid a situation of conflict (Krasner, 2014 pp 130). The policies crafted by government should be that which benefit a large population and regions (Hargroves 2013, pp 71). The government should also support the media and civil society who expose the evils committed by high ranking staffs. Lessons on political stability Policies that have been successful implemented in Norway can be useful to improve the welfare of countries that are poor or middle level economies (Lin, et al, 2015 pp 67). However, various factors such as political culture, policy adaptations and economic environment should be considered (Faguet 2014, pp 12). Some of the resource rich countries are overwhelmingly poor with pitiable human growth indicators. The rich countries should give advice on the kind of policies useful in emerging resource-rich nations. Congo can derive valuable lessons regarding institutions and how they carry on their politics. Rich countries understand well the dynamics of politics and institution building and thus can make valuable recommendations on bettering the institution (Rindermann 2012, pp 103). Conclusion The rich and poor countries have a lot to learn from each other on improving governance. In the study we have analyzed various factors that can lead to a country improving on their governance such as ensuring there is political stability in the country. The study has also explored on measures that the governments should take to improve their governance. 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