Introduction • 23 what current cross-country characteristics and/or historical factors led to these menu choices; what internal factors lead governments to adopt different governing solutions. Guidance on such questions will be a much more helpful step for developing country governments in choosing from a menu of institutional reforms than asking them to undertake wholesale governance reforms as stipulated by the good governance agenda. In Chapter 6, Arthur Goldsmith challenges the view of international development agencies that developing countries can boost rates of economic growth by introducing ‘good governance’ measures. He critiques the good governance agenda (i.e. transparent, accountable, participatory governance) of these agencies as static and ahistorical; they ignore the political and economic cost of governance reforms. By carefully analysing the history of economic development, especially specific governance reforms and economic turning points in the United States, Argentina, Mauritius and Jamaica, he argues that these agencies underestimate the time and political effort required to change governance, and overestimate the economic impact. These careful case studies imply that greater transparency, accountability and participation are often results, rather than direct causes, of faster development, contrary to optimistic claims of donors and international financial institutions about how much institutions matter. Furthermore, these case studies show that seemingly deficient institutions may be a satisfactory platform for rapid growth, provided key growthinhibiting institutions are reformed pragmatically over time. For example, patronage, as a means for building loyal political support, could, at times, make governance more credible in the eyes of private investors. Likewise, clientelism and the exchange of lucrative favours could have benefits for development as they may enhance political legitimacy and stability, and, therefore, help create a conducive business climate. Similarly, ‘pork-barrel’ spending in remote regions can help create an integrated national economy. These show that impaired governance sometimes supports rather than undermines development, provided the tendency of patronage to encourage lax administration or excessive corruption can be balanced or minimized. Therefore, policymakers need to understand these processes better before counting on wholesale ‘big bang’ governance reforms for rapid growth and poverty reduction in developing countries. Goldsmith doubts the robustness of many econometric studies, claiming to find a strong causal relationship between governance reforms and economic growth. These results are mostly spurious due to the possibility of unseen joint effects. That is, instead of better governance accelerating development, both good governance and rapid growth may be consequences
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