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51 Chapter 3 The political dimension of public accountability Chapter 2 provided a diagnosis of public expenditure and financial management in developing countries, identifying progress and challenges. Despite substantial investment of time and resources by the international community to support improvements in budget management, public expenditure and financial management in many developing countries remains generally disappointing, especially at the subnational level. This is not surprising. Securing public accountability is not only a technical challenge, but also a political one. In a political system with no effective demand for transparency and accountability, efforts to promote improved techniques are unlikely to succeed. But in systems where there is demand for improved transparency and accountability, new tools can help translate demand into results. Effective demand alone does not guarantee high standards of transparency and accountability, however; also crucial are strong institutions and appropriate tools. Defining the problem Before exploring the political dimensions of accountability, it is helpful to identify the types of governance problems encountered in public financial management. The root causes of system deficiencies can be broadly categorized as corruption, inefficiency, and bad policy choices. Each requires a different set of interventions for improving the system and the outcomes. Corruption has emerged from the shadows as a critical issue for development. Led by groups like Transparency International, the campaign against corruption has raised awareness of the extent of the 52 Chapter 3 problem. Corruption is no longer excused as part of the local culture. But while awareness of the case against corruption has grown, rooting it out continues to be difficult, with progress coming one agency and one country at a time. Inefficiency, though less likely to attract the attention of international campaigners than corruption is, may account for greater losses of public resources. Because inefficiency is often the result of unqualified staff performing functions beyond their capacity, one solution is enhanced training for officials responsible for budget formulation and implementation. The final root cause of questionable public financial management—deliberate policy choices—is more problematic. How a government allocates its budget is a sovereign political decision. While international norms and standards are often applied, how much money should be spent and in which sectors depends on each country’s needs and wants. Thus, translating diagnosis into action on problems involving policy priorities is tricky, best dealt with through home-grown, domestic accountability mechanisms. Whatever the origin and nature of the problems, demand for change and the incentives it creates are key to improving public financial management systems and public expenditure outcomes. On corruption and inefficiency the international community has already taken a strong lead, and domestic organizations in many developing countries have taken up the cause with vigor, promoting transparency and minimum standards for public officials. But the international community has less influence over misguided policy decisions. While it can advise against them, that is seldom adequate. Needed is a domestic groundswell that compels governments to listen to its citizens’ demands about public expenditure outlays and social policy decisions. The remainder of this chapter presents a framework for how such citizen action could be generated and channeled to best effect. Applying the principal-agent framework to citizens seeking results from government As argued in chapter 1, achieving public accountability is ultimately a political challenge. There are different routes to accountability. This section develops the principal-agent relationship model as a framework for discussing alternative systems of accountability. The classic example of the principal-agent relationship is that of a professional manager (agent) hired to run a firm on behalf of the owner (principal). Problems can develop in the relationship if the agent’s interests differ substantially from the principal’s and if the principal cannot easily observe the agent’s performance and compel the agent to behave in accordance with the principal’s interests.1 The political dimension of public accountability 53 By extension, the principal-agent model has been used to explore the relationship between government and the public.2 The model begins with the premise that a government’s legitimacy and authority derive from the consent of those it governs. In a democracy there is an understanding that the primary purpose of government is to serve the interests of the electorate. But even in nondemocratic systems it is analytically useful to view the government (as well as specific government units or individual officials) as agents and the general public as principals and to ask how well the public is able to influence the actions of the agent. Certain aspects...


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