4 Channels through which Governance and Social Norms Impact on Well-being
In this section, an attempt is made to specify the precise causal linkages between various aspects of governance and social norms, and well-being. Different broad channels are identified through which governance and social norms impact on well-being. For each channel, specific causal mechanisms are posited.
It is acknowledged that what constitutes “good governance” is to some extent in the eye of the beholder, and the underlying ethical basis of good governance is not always made clear. In this paper good governance is broadly conceived as arrangements constraining the use and abuse of coercive power that are founded on individual rights, open and democratic practices, tolerance of diversity, and the rule of law. This definition is chosen on the basis both of widespread recognition in New Zealand of the intrinsic importance of these elements, and the international evidence on their importance in facilitating sustained growth in well-being. Note, however, that democratic principles and individual rights involve protection of minority interests, and preservation of autonomy for individuals and groups to organise and conduct their affairs according to their preferred norms (within the underlying framework of the rule of law).
In the Tables that follow, the channels through which good governance and social norms impact on well-being are divided into direct and indirect routes. A direct channel is one that impacts directly on a component of well-being, such as freedom of expression. An indirect route is one that works, for example, through its impact on economic output, which in turn makes possible an improvement in well-being.
Table 1 sets out the channels through which governance may impact on well-being; shows the precise mechanisms through which it is suggested each channel has its effects; and contains selected references to empirical evidence on the effects, where such evidence exists and is known. Table 2 repeats the exercise with respect to the contribution of social norms to well-being.
The section concludes with an assessment of the relevance of the empirical evidence to New Zealand.
| Channel | Mechanism | Evidence | ||
|---|---|---|---|---|
Direct routes | ||||
1 Through protecting important political, civil and individual freedoms that are themselves constitutive of well-being | Enabling institutions such as free democratic elections, an independent judiciary, legal protections for free speech and human rights; protection of minority rights | Well-being is defined as including political, civil and individual freedoms (after Sen, 1999) | ||
| 2 Through enabling greater and more informed democratic participation | Access to official information; explicit consultative mechanisms Appropriate decentralization of expenditure responsibilities to sub-national governments | Well-being is defined as including democratic participation Huther and Shah (1998) | ||
| 3 Through facilitating social interactions and economic exchange | Enabling environment for economic exchange, such as secure property rights, security of contract Enabling environment for civil society[18], such as legal framework for civil society organisations, freedom of expression, a free press, open government | Well-being is defined as including social interactions and economic exchange. For evidence on the instrumental effect of good governance on economic exchange see channel 5 below | ||
| 4 Through contributing directly to better outcomes, such as life expectancy, literacy, and the quality of the physical environment | Impact of improved “citizen voice” via a free press on equity of government policies (e.g. no mass famines have occurred in a democracy) More open, accountable, stable and effective public sector governance Less corruption strongly correlated with better physical environment Decentralization of expenditure responsibilities to sub-national governments | Sen (1999) Kaufmann, Kraay and Zoido-Lobaton (2000) World Economic Forum (2001) Huther and Shah (1998) | ||
Indirect routes | ||||
| 5. Through higher economic output | Causal relationship running from measures of quality of public sector governance to levels of per capita income | Kaufmann, Kraay and Zoido-Lobaton (2000). Hall and Jones (1999) | ||
| Corruption lowers incentives to invest on the part of both domestic and foreign investors by acting as an uncertain tax on productive activity | Mauro (1996)Shang-Jin Wei (1997)World Economic Forum (1997) | |||
| Corruption distorts the composition of government spending, away from education and towards large-scale capital projects where it is easier to extract bribes | Mauro (1996) Tanzi and Davoodi (1997) | |||
| Basic civil liberties, freedom to organise, and an active media facilitate greater citizen voice and hence more effective government | Isham, Kaufman and Pritchett (1997) | |||
| A more extensive and effective civil society is associated with higher economic output | Putnam (1993) | |||
Central bank independence leads to lower inflation and higher growth Greater transparency and accountability strengthen incentives for earlier policy adjustments, and prevent the costly accumulation of | Cukierman, Webb and Neyapti (1992) | |||
| Political and civil freedoms can facilitate the emergence of shared norms over time, such as trust and tolerance, and social values such as the importance of education or attitudes toward protecting the environment. Shared norms, in turn, facilitate the achievement of social consensus (i.e. the reduction of transactions costs) that facilitates more efficient collective action and economic exchange | See Table 2 below for discussion of the channels through which social norms impact on well-being | |||
| 6 Through strengthening state capability | Corruption and the absence of the rule of law cause taxpayers to resort to private mechanisms to protect property and enforce contracts, and are therefore correlated with a larger share of the unofficial economy in GDP | Johnson, Kaufman and Zoido-Lobaton (1998) | ||
| Virtuous and vicious circles | ||||
| 8. Interactions between political and civil freedoms, and the evolution of shared norms | The exercise of freedom is mediated by values, which are in turn influenced by public discussions and social interactions, which are themselves influenced by participatory freedoms (as suggested by Sen 1999) | See Table 2 below for discussion of the channels through which social norms impact on well-being | ||
| 9. Interactions between declining state capability and the extent of the unofficial economy | As state capability declines, taxpayers receive lower quality public services, resort to private alternatives, and shift activities underground, further weakening state capability. Process can work in reverse, although many states appear trapped in a low level equilibrium | World Bank (2000) | ||
10. Interactions between participatory democracy and basic educational skills | Democratic participation requires basic educational skills such as literacy and numeracy; widespread democratic participation, in turn, is correlated with higher education spending | Mauro (1996) | ||
| 11 Interactions between the enabling environment for civil society, and the effectiveness of government | A good enabling environment for civil society (e.g. civil liberties, government decision-making transparency) creates the space for social bonds to be created in the voluntary sector. In turn, an effective civil society can generate pressure for more effective and accountable government | Isham, Kaufman and Pritchett (1997) | ||
| 12 Interactions between a country’s constitution and social norms concerning the legitimate use of coercive power | A potential evolutionary cycle of constitutional dialogue and values (reflected in informal constitutional conventions) and formal constitutional provisions, that may under some circumstances exert mutually reinforcing pressures on government that constrain the abuse of power (as suggested by Palmer, 1993) | |||
Notes
- [18]The term “civil society” is used in a variety of ways in the literature. In general, it is used here to mean non-government and non-market organisations (often referred to as the voluntary sector) but also including the media.
