1 Civil Service Reform in Developing Countries: Why Is It Going Badly? Geoffrey Shepherd 11th International Anti-Corruption Conference Seoul, Korea Panel: Depoliticizing the Civil Service, Tuesday 27 May, 2003

2 The issue: the consensus model for civil- service reform has not taken root in developing countries Large, underpaid, politicized civil services in developing countries. –Hence inefficient and corrupt service delivery. Consensus in the development community on a merit model for civil-service reform (the model used by today’s advanced countries). This model has not taken root because politics militates against it. The challenge: getting realistic by getting merit and politics to live together.

3 Outline of the argument 1.The merit model promotes competence and protects the civil service from political interference. 2.But it largely fails in developing countries 3.The evidence of history shows the conditions under which merit reforms come about and subsequently develop. 4.Merit-based reform in developing countries is stymied by politics and by large government. 5.What can be done? –We can improve the way we think about the problem: de- politicizing the civil service is unrealistic, re-politicizing the debate is realistic. –We should eschew comprehensive merit reforms and look for selective reform opportunities that acknowledge political realities. 6.Brazil: an example of a judicial mix of merit, politics, and pragmatism.

4 The universal model of merit- based reform: the basics Entrance to the service based on competitive exams. Protection of civil servants from arbitrary removal. Protection of their political neutrality. Policing of these rules by an independent body.

5 The universal model of merit- based reform: other features Common features: –positions are established centrally and classified according to rank; –bureaucrats are paid a salary and pension that is determined by their rank, rather than the work that they do; –there are often impediments to external lateral entry at senior grades; –there are few points of entry, with most entering at a young age and most senior positions filled by promotion. Divergent feature: the amount and depth of political, as opposed to merit, appointments: –the US system allows large numbers of political appointments.

6 Merit reform in developing countries Merit principles are often written into constitutions and laws. But these principles are not respected in practice. Civil-service reform has proven among the most difficult of developmental reforms to sustain, and there is little evidence that nationally- or donor- inspired reform efforts have met with much success. –The Example of World Bank Projects: the Bank’s own analyses have admitted that success has been limited.

7 Civil-service reform: six propositions from history (1) 1.Patronage systems are not a universal evil: they fund political competition –the US in the 19 th Century. 2.Merit reforms only come to fruition when they are moved by powerful external forces. –Overwhelming political demands for more efficiency and less corruption in the US and UK in the 19 th Century. –The French revolution and the demand for protection against the state in the 19 th Century. 3.In spite of different paths and conditions, reforms have closely converged on a similar merit model. This is no accident

8 Civil-service reform: six propositions from history (2) 4.Reforms took a long time to be fully implemented. 5.Merit reforms have also made the civil service into a powerful public-sector institution and interest group in its own right. 6.Merit reforms create new tensions: –They alleviate problems of political interference and of hierarchical control –But they create incentives that reduce the efficiency and political responsiveness of civil servants. –As a result, there is a continuing tension between merit-based principles and “managerialist” principles that lead to greater flexibility, but also often open the way to greater politicization.

9 Why reform is difficult in developing countries: three propositions (1) 1.New interests with the need and the power to promote a more efficient and honest public administration are weak in many countries. –Some of these are characterized by spoils systems that provide the currency of political competition. –Others are characterized by the continuing vigor of traditional systems (kinship ties, for instance) which frustrate reform movements.

10 Why reform is difficul in developing countries: three propositions (2) 2.Governments are significantly larger than in the past –This is the result of modern ideological approaches to development, as well as the improved capacity of populations to articulate political demands. –This has led to large civil services, often characterized by public welfare employment, whereby public jobs are provided to a large part of the population as a means of ensuring their political support. –It has proven very difficult to reduce such high levels of employment, while these have led to fiscal crisis and personnel performance problems. 3.Many of these large civil services have emerged as strong interest groups capable of challenging reform efforts.

11 What next? 1. changing the mindset 1.Recognize reform failures more openly. 2.Develop a more balanced view of the relative advantages and disadvantages of merit and patronage systems. Incorporate politics into analysis and solutions, rather than ignoring or denying it. 3.Avoid the “merit trap”: half-finished merit reforms create a political and fiscal burden, but do little for performance. 4.Rethink the issue of lifetime tenure for civil servants. 5.Assemble better evidence: history, politics, and contemporary cases of successful reform.

12 What next? 2. alternative reform approaches outside the public administration The long-term solution: economic and political development. Treat excess employment (public welfare employment) as a social-security problem. Find alternative methods of funding politics?

13 What next? 3. selective reform approaches inside the public administration Hybrid senior appointments: enlarge the scope for patronage employment at senior levels, but apply merit rules and controls. –Brazil as an example. Agency “graduation”: key agencies graduate within a universal set of merit and modernization rules. Enclaves: key agencies are modernized within an ad hoc set of merit and modernization rules.

14 Brazil: mixing civil service and political appointments The Career system: –Has rigorous merit entry, strong esprit de corps. –Favors “elite” careers in key ministries. (e.g. tax administration, public finances, audit, trade). –Has weak performance/efficiency incentives. Political appointments (DAS): –System has legislated ceiling on numbers and covers six levels below Minister. –Ministries propose and Presidency vets. –No tenure, no pension. –Permanent civil servants can become DAS, then return to old jobs. –At top 3 levels half of DAS are civil service, half are private. Patronage at the Federal level is limited.

15 Brazil: a long and evolutionary process Civil-service regime created as a rigid Weberian system in 1930s. Dilution of rigid hierarchy from 1967 onwards (military government) in favor of decentralization to autonomous agencies for greater managerial flexibility. –This led to perceived abuses, loss of central control. Hence new rigidities in 1988 Constitution (return to civilian rule): –Extension of tenure and pension obligations onwards: Cardoso government rebuilds the civil service: –selective development of specific careers –measures to ensure a strong regime of political appointments : Cardoso government’s attempt to introduce executive agencies: –Proposal to remove tenure from public employees in Executive Agencies. –Limited results due to perceptions of loss of central fiscal control, public unions’ resistance to proposed changes in labor regime.

16 Brazil: some conclusions Brazil is well served today by competent, honest, and accountable public servants. Professionalization (capacity building + attaining political independence) has been a long process (70 years). Brazil has a large reservoir of capable people Changing rules was not enough: continuity and competence: –1930s to 1980s: the authoritarian developmental state pushed professionalization. –Since 1988: growth of popular demand for honest and effective civil servants. –The importance of competent organizations. A sensible approach to mixing merit and politics: –A hybrid and deep system of political appointments. –Selective approach to Careers. There is a constant, never-fully-resolved tension of political protection versus efficiency. –The bad rigidities: tenure combined with the pay/pension trap. –The more bearable rigidities: weak incentives for efficiency.