Good governance is the toughest part of ending poverty

In April the World Bank governors endorsed two historic goals: to end extreme poverty by 2030 and to ensure that prosperity is shared.

It will take a lot to end poverty: strong growth, more infrastructure investments, increased agricultural productivity, better business environments, jobs, good education, and quality health care. We have to do more of this in tough places, particularly those that are fragile and conflict-affected.

But it also takes overcoming institutional weaknesses and zero tolerance for corruption. Without improving governance it will not be possible to lift the 1.2 billion people who still live of $1.25 a day or less out of poverty and to ensure that economic growth will benefit all citizens.

Good governance and the role it plays in fighting poverty is complex. A finance minister from a resource rich but otherwise poor country told me recently that the fuel subsidies in that country, designed to protect the most vulnerable from high prices, are ultimately “anti-poor” because the rich benefit most, they are wasteful and ineffective. And another official from a middle income country described achieving shared prosperity as tough because a growing middle class has high expectations and becomes disillusioned by corruption and lack of services, making them less willing to support the state.

One World Bank analysis notes that only an estimated 8 percent of the $409 billion spent on fossil fuel subsides throughout the developing world in 2010 went to the poorest 20 percent of the population. In seven African countries the richest 20 percent receive six times more in fuel subsidy benefits then the poorest because they consume more.

In some places fuel prices are kept so low, they promote a vibrant shadow economy. In one oil-producing country, for example, an estimated $857 million is lost through fuel smuggling to higher priced markets—over $300 for every inhabitant.

Yet there are examples that show that citizens can improve governance. The “I paid a bribe” initiative which started in India is now active in a number of other developing countries. Users expose corruption with the aim to strengthen public accountability posting on a website that serves as a public shaming tool. They now can also report when they encounter an honest public servant.

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