It finally happened. After decades of evidence-based argument and critical reflection, at last the big development agencies seem to be embracing a fundamental truth: that they can’t solve the challenges facing the world today with blanket promotion of ‘best practice’ institutions and norms of good governance. They need a more targeted and context-sensitive approach.

On some level, we know what governance institutions must provide to enable a country to succeed in economic and social development. But these needs can be met in different ways. What matters is the way institutions function, not the particular form they take.

So the priority is to find the governance arrangements that work to solve development problems at hand. This means paying attention to what’s feasible and having the courage to embrace second-best, ‘good fit’ solutions when appropriate.

While these ideas have gained prominence among researchers and practitioners, in official donor literature they have remained marginal. That is, until now.

Two remarkable publications launched in late January signal, in different ways, the mainstreaming of these ideas: the World Bank’s 2017 World Development Report (WDR), Governance and the Law, and the UK Department for International Development’s (DFID) Economic Development Strategy.

WDR 2017: giving coherent meaning to ‘good fit’ approaches to governance

This report is a striking synthesis of the accumulated evidence and argument against the former ‘good governance’ orthodoxy.

It begins by setting out the genuinely universal requirements of effective governance for development under the headings: ‘commitment’, ‘coordination’ and ‘cooperation’. It then goes on to argue for the importance of a set of three ‘levers of change’ (contestability, incentives, and preferences and beliefs) and, digging deeper, three types of ‘drivers’ (elite bargains, citizen engagement and international influence).

Behind each of the headline concepts is a detailed and richly illustrated analysis. The three-level framework works well to give coherent meaning to an otherwise disparate and disputed body of historical and comparative material.

There are a few hindrances. The report’s title is unhelpful. To their credit, the authors give due attention – but no more – to the role of law, as distinct from rules and conventions in general, in the governance of development. They make some weakly justified concessions to established positions at the Bank, such as the exaggerated attention on the information-accountability nexus that is a legacy of the 2004 WDR on public services.

And the bibliography prioritises Bank-recognised types of research, to the shameful neglect of some of the earliest and most original contributions to ‘good fit’ thinking, including key works by Ha-Joon Chang,  Brian Levy and  Dani Rodrik.

But overall this hugely significant report is an intellectual tour de force that merits close engagement.

DFID’s Economic Development Strategy: putting it into practice

As is well known, even the very best WDRs do not directly drive the practice of the Bank and other large agencies. This one is therefore made even more significant by the almost simultaneous appearance of DFID’s Economic Development Strategy: Prosperity, Poverty and Meeting Global Challenges.

This publication is going to drive what DFID does, and is, in part, an account of what the department is already doing on a substantial scale. It includes a robust commitment to the principles articulated by WDR 2017.

DFID’s strategy is written, obviously, in the context of the UK government’s search for a new global role outside of the EU. The document’s overarching message is that expanding international trade and investment is a win-win for developing countries and UK business and finance, with aid playing a facilitating role.

It has some gaps, particularly with respect to protecting and extending the trade options for poor countries, as my colleagues have argued, but there is fresh thinking on a number of issues:

• the need to combat jobless growth;
• the importance of global value chains;
• the contribution of specialised development finance institutions to unlocking broader funding;
• addressing investment blockages in infrastructure;
• the greening of growth; and
• ‘leaving no one behind’.

Not only are the economics innovative, but so is the approach to selecting and supporting interventions. Drawing on a series of country diagnostic studies, DFID has been led ‘to avoid an overloaded reform agenda that tries to fix everything at once and instead to focus on what is feasible in each context and will make the greatest difference’.

In other words: good-fit reforms.

Building on recent successes in countries such as Nepal and Nigeria, DFID is going to ‘pursue a politically smart approach to economic development – basing our work on robust analysis of local politics and conflict risk so that we seize opportunities in difficult environments and stimulate investment’. Then, this conclusion:

‘We recognise that progress comes from locally-driven initiatives to solve context-specific problems and are working to make our programmes more flexible so that they learn, adapt and seize new opportunities in the course of their implementation. We will be selective in what we take forward and take well-judged risks, balancing economic development returns.’

It’s easy to read WDR 2017 and ask, so what? What do these principles actually mean for the practice of large development agencies? DFID’s Economic Development Strategy goes some way to providing that answer.