Hello again. In the previous video we introduced the concept of governance, and we saw how good governance became important in the discussion on foreign aid effectiveness. Well now we're going to examine how the World Bank, which has as its mission the funding of development program, how it attempts to measure international differences in the quality of governance. But first let me start with a little story. In 1982 Daniel Kaufman was awarded his doctorate in economics from Harvard and he joined the World Bank. Since he'd grown up in Chile, in Latin America, his first mission was to the slums of Colombia. And there he witnessed at first hand the paradox of how such wealth and such abject poverty were able to co-exist in the same country or in the same city. The answer he proceeded, less to do with economics, than with the abuse of power. Our missions to Africa served to reinforce his conviction. The problem is that the World Bank is an international body under the United Nations. This makes it difficult to openly criticize the political system of a member state. Okay. After the collapse of the Soviet Union, Kaufmann must send to the Ukraine to help oversee the reforms being put into place following the end of state directed central planning, and again he was impressed with the rampant corruption he encountered there. So he and his team began to develop indicators that helped define and measure the differences in forms and context of corruption. By this stage, Daniel Kaufmann had become director of the World Bank Institute, a research body affiliated to the World Bank. And in 1996 it published the first annual World Bank governance indicators. Now, Kaufmann's tactic was to conceal highly sensitive political questions in technocratic language. In this was only partially successful. However, it did allow him and his team to continue. So let's have a look at what these indicators were. There are six separate indicators, and they follow the political process from the formulation of policy, to its execution, and implementation. It's a three step process with two indicators for each step. Inputs into the policy process are measured by voice and accountability, and by political stability and the absence of violence. The process of making and implementing policy is measured by government effectiveness and regulatory quality. And the outputs are measured by the rule of law and control of corruption. The index is scored from +2.5 to -2.5, with zero representing the world average for that particular year. So those are the indicators. Let's have a look how they're measured now. The first thing to note is that composite indices, they combine different dimensions into one number. Now the indicators they use are survey sources, but unlike the World Values Survey, these aren't opinion polls and they're not random. The sources contain the impressions and the anecdotal evidence of outside elites and NGOs. So a lot depends on the impartiality. So that's the raw material going into the mixture. So we've got a mixture of impressions and evidence. Corruption is getting worse or on average are paid 10% in bribes. So the second step is to put all of these responses into some sort of coded rank numbers. For example one is good, seven is bad. And there again there's another subjective element. Next the various components need to be waited for their relative importance. We've already seen some of the problems that could arise from this when we looked at the Human Development Index. Well Kaufmann and his team avoided this problem by not assigning equal weights, but to give extra weights to those observations that clustered close together and therefore less to outsiders. But this has three effects; It makes the whole process less transparent, it places a lot of weight on your confidence in the World Bank team, but thirdly it does allow for the measurement of statistical error. So let's have a look at this last point. Any statistical example allows for the calculation of a measure of uncertainty or an error term. But the governance indicators are unusual because they actually do so. What it reveals is that especially at the lower end of the spectrum, error margins are surprisingly large. At the interactive site viewers are shown an outcome of a chosen indicator and it's range of error. It's set as a standard 50%. In other words there's a 50-50 chance that the result lies outside the range. The site also offers the viewers the alternative of a 95% certainty which shows an even larger range. And there again there's a 50-50 chance that it lies between those two observations. Now this wider bracket easily covers 10% of the countries surveyed. So it's not really surprising that the World Bank urges caution when using the results. Unfortunately it's a warning that's all too often ignored. Now, I like the World Bank indicators. Their site gives links to all of the sources used, it's a treasure trove for BA and MA papers. The teams also very quick to address criticism. Some critics call this attitude defensive, but I think it's always better to have two sides of the debate. But that doesn't mean that I don't share some of the criticisms that have been made. The first is that centering the indicators on a different average every year makes the comparison over time very difficult other than in terms of relative change. Second criticism, is that the sources have a bias towards business. The bank would reply that their job is to grow countries. So this requires a primacy of economic aspects, but trust is not just a question of getting the economics right. And thirdly, the bank is also biased towards market-oriented policies. It doesn't like state enterprises, it doesn't like labor market interventions, which often offer an alternative and viable path to growth. We'll come back to these criticisms later. Now one final point. Although the World Bank indices are important as the focus of debate and in the articulation of policy, the World Bank itself uses a far wider and nuanced range of data when it makes its policy. And its site offers this data free and easily accessible. So lets sum up then. In this video we've seen how the World Bank came into the business of measuring governance. We saw the structure of the indicators into inputs, processes and outputs. And we looked at how the indicators were constructed and formulated, some reservations and criticisms, and their construction and their use. Over the next three videos, we'll examine in more detail those three indicators most used by social scientists; voice and accountability (or democracy), the rule of law, and the control of corruption.
