Civil Liberties, Democracy, and the Performance of Government Projects

• Author: Lant Pritchett/Daniel Kaufmann
• Position: Senior Economist in the World Bank's Development Research Group/Lead Economist in the World Bank's Development Research Group
• Pages: 26-29

How does the extent of civil liberties and democracy in a country affect the performance of its government's investment projects and, more generally, the government's effectiveness?

Page 26

EMPIRICAL analysis demonstrates that the extent of civil liberties in a country affects the performance of a government's investment projects. This finding contributes to accumulating evidence that the degree to which citizens' "voices" in the public sphere are repressed or are allowed to be "heard" has an important influence on whether the accountability necessary for government efficacy will be created. In what is perhaps a surprising contrast, there is no clear relationship between indicators of electoral politics or "democracy" and the performance of government investments.

What, how, and how well?

The interrelationship between governments and economic development and poverty reduction is enormously complex. Three questions are relevant to politicians, policymakers, and their advisors: what should governments do; how should government decisions be made; and how well will governments be able to carry out their choices? In a wide variety of situations, it may be that the how well question is much more important than the what, since how well a government spends its resources may be more important than how much or what it spends its money on.

This article reports on new evidence that links how government decisions are made and how well they perform. This is obviously a broad set of questions, which we narrow to the relationship between overall rankings of countries' political characteristics-in particular, the degree of civil liberties and the extent of democracy -and the performance of the set of government investment projects financed by the World Bank. Two indicators of a project's success were used: the project's economic rate of return, which is determined after project completion, and a simple rating indicating whether the project accomplished its developmental objectives.

One might think that Bank researchers would investigate the success or failure of Bank projects to examine the Bank's performance. Although evaluators at the Bank do use such indicators for that purpose, data on the success of Bank-financed projects also serve as indicators of borrower country performance, for three reasons.

First, the projects financed by the World Bank are undertaken by the borrowing country's government, which is responsible for project implementation. Governments chose to undertake these projects (although all of them must meet the Bank's internal criteria for financing). Hence comparisons of ex post success indicate how well governments carry out projects they chose, rather than judging what projects they chose.

Page 27

Second, the data give a unique ranking of project success on a comparable basis for a large number of countries. Most countries rarely evaluate systematically their own investment projects, much less do so in a way that would permit their findings to be compared with those of evaluations done by other countries. While there is a great deal of imprecision in the art of project assessment, the rankings obtained are fairly reliable indicators of success or failure.

Third, since the World Bank is a multilateral institution with written guidelines, procedures, and consistent methodologies that apply to all member country borrowers, it is unlikely that differences between countries in the success of Bank-supported projects are mainly a consequence of inconsistent actions of the Bank.

Results

The study on which this article is drawn (see reference) did not construct a new measure of civil liberties but instead relied on four different cross-national rankings. One, undertaken by Freedom House, ranks countries annually based on a checklist of 14 criteria, which include media free of censorship, open public discussion, freedom of assembly and demonstration, and personal social rights (for example, the right to travel and the right to own property). Another rating...