DEMOCRATICALLY-CONTINGENT TECHNOCRACY: INDEPENDENT BUREAUCRACIES

This paper examines the impact of independent technocratic agencies on the politics of economic liberalization in developing countries. Because the process of privatizing state-owned enterprises (SOEs) in developing countries is complex and contentious, the conventional wisdom of the “Washington Consensus” over economic development is that technocrats housed in independent agencies are best suited to carry out privatization. Free from political interference, technocrats are expected to privatize SOEs based on professional calculations, not political considerations. This expectation has rarely been subject to empirical investigation, however. In this paper we argue that the effects of independent agencies on privatization of SOEs depend on the democratic contexts in which they operate. The subjects of our study are Sub-Saharan African countries that were engaged in SOE privatizations during the 1990s and early 2000s. We begin with case studies in four countries to examine the roles of technocrats in the privatization process. We find that technocrats in independent agencies were effective under autocratic regimes, but were responsible for instability and backlash in more democratic countries. Technocrats were more successful at undertaking liberalization when they were less insulated and more directly engaged in the political process in democratic contexts. Based on these case studies, we develop a model of agency independence as a signal of credible commitment by a government to international and domestic political actors. We test our model with a time series analysis of the impact of independent agencies on the extent of SOE privatization in 24 African countries. Our results contravene the conventional wisdom that supports technocratic insulation, affirm the importance of bureaucratic engagement in the democratic policy process, and culminate in a more nuanced theory of technocracy-indemocracy. i Paper prepared for the 2011 Public Management Research Conference of the Public Management Research Association, Syracuse, NY (June 2-4). This paper is work-in-progress; please do not quote or cite without permission. ii This research was supported by a fellowship at the Woodrow Wilson International Center for Scholars in Washington, D.C. and by the Research Council at Colgate University. We thank Tim Byrnes, Dean Scrimgeour, Dan Epstein, and Chad Sparber for insights, critiques and suggestions. Thanks to Patrick Johnson, Courtney Dunlaevy, and Peter Mao for research assistance. Earlier versions of this paper were presented at the Midwest Political Science Association annual conference and at research seminars at Colgate University; we thank participants in those events for their feedback. Errors remain our own. Democratically-Contingent Technocracy Teodoro and Pitcher 2 Introduction This paper examines the impact of independent technocratic agencies on the politics of economic liberalization in developing countries. Arguments about the value of technically competent, politically neutral, independent bureaucrats have a long lineage in political science. Hegel promoted the creation of a public bureaucracy with “specialized knowledge” (Cumings 1999, 85) and Weber (1978) grounded one of his ideal types of legitimate domination in the exercise of rational legal authority by bureaucrats. Woodrow Wilson (1887) famously sought to divorce public administration from politics in both theory and practice in hopes of freeing the former from the grips of the latter. After Chalmers Johnson (1982) highlighted the important role played by bureaucrats in the growth and the development of the post-World War II Japanese economy, the ideal of dispassionate, technically competent bureaucrats gained traction among advocates of economic liberalization in developing countries. Although they eschewed other elements of Johnson’s analysis of the Japanese miracle (such as the role of the state in nurturing infant industries), neoliberal policymakers and academics seized on the notion that reforms would be more successful if those who implemented them were trained “technocrats” sufficiently insulated from the push and pull of everyday politics to competently carry out their mandates (Williamson 1993; White and Bhatia 1998). New bureaucratic agencies proliferated in connection with the adoption of economic policy reforms during the 1990s and early 2000s when the neoliberal “Washington Consensus” was at its zenith. Independent central banks and privatization commissions were especially common among the raft of new agencies to emerge in developing countries during this era. At least four related ideas—sometimes explicit, often implicit—underlay the creation of these new bureaucracies. First, the process of economic liberalization is complex, requiring a high degree of technical acumen. The existence of an agency comprised of trained technocrats is expected to Democratically-Contingent Technocracy Teodoro and Pitcher 3 increase the likelihood that the process of liberalization will be concluded quickly and successfully (White and Bhatia 1998; Kayizzi-Mugerwa 2003). Second, independent bureaucracies are supposed to be a hedge against coalitional drift (Shepsle 1992): if a party in power changes hands or the government collapses, the existence of an agency increases the possibility that the process of economic liberalization will continue. Third, independent bureaucratic agencies signal to investors that a government has made a credible commitment to economic liberalization (Brune, Garrett and Kogut 2004). Fourth, insulating technocrats in an independent agency is expected to shield the process from rent seeking politicians or the distributional pressures of the reform’s domestic losers (Waterbury 1992). Are independent technocratic agencies effective in quelling conflict and delivering results? Do independent agencies conform to the theoretical models on which they were based? Do professionally-managed, politically-insulated agencies demonstrate a credible commitment to liberalization that increases the likelihood that economic reforms are carried out? To date, most theoretical and empirical research on technocratic administration of economic reform has focused on independent central banks and, to a lesser extent, on regulatory agencies in developing countries (Goodman 1991; Cukierman 1992; Franzese 1999; Broz 2002; Hallerberg 2002; Gilardi 2007). By contrast, very little empirical work has examined the role of “technocratic change teams” (as Waterbury (1992) calls them) in the privatization of state-owned enterprises (SOEs). Moreover, research on the political economy of liberalization in the developing world has focused mostly on the relationship between national governments and international development organizations like the World Bank (WB) and the International Monetary Fund (IMF). Comparatively little is known about the domestic effects of governments’ adoptions of the institutions favored by international economic organizations. Especially conspicuous by its Democratically-Contingent Technocracy Teodoro and Pitcher 4 absence is research on the relationship between technocratic institutions and democratic development. As waves of democratization and economic liberalization swept across Africa, Bienen and Herbst (1996) warned that tensions between political and economic reform would complicate and possibly frustrate both processes. Freeman’s (2002) call to study the tensions and tradeoffs between technocracy and democracy in central bank monetary policy has not received much attention in the literature on monetary policy and central bank institutions (but see Broz, 2002 and Stasavage 2003). Much less is known about the relationship between other economic liberalization agencies and democratization in the developing world. In which political contexts do insulated agencies work best or worst? Do insulated bureaucratic agencies force tradeoffs between efficiency and accountability that affect reform outcomes? The present study addresses these issues, and in so doing develops a new theory of bureaucratic politics. We examine the relationship between technocracy, democracy, and economic liberalization by analyzing the effects of independent bureaucratic agencies on the politics of privatization in Africa. Our inquiry begins with nested case studies of the SOE privatization process in four African countries. The privatization experiences in these four cases demonstrate that the effects of technocratic agencies on privatization of SOEs depend greatly on the political contexts in which they operate. Independent technocratic agencies can be highly effective in privatizing SOEs under relatively authoritarian political systems: under authoritarian conditions, investors regard the state’s commitment to privatization as highly credible, and political conditions allow for little effective resistance by opposition groups. However, in more democratic contexts, highly independent privatization agencies are less effective, and indeed can generate a political backlash that stymies both liberalization campaigns and democracy itself. Technocrats in more democratic conditions were most successful when they were less insulated and more directly engaged in the political process. Democratically-Contingent Technocracy Teodoro and Pitcher 5 Based on these cases studies, we develop a “grounded theory” (Glaser and Strauss 1967) of democratically-contingent technocracy. We begin by recognizing that independent agencies build technocratic capacity for carrying out privatization of SOEs. Then, invoking Putnam’s (1988) logic of “two-level games,” we cast a state’s creation of an independent privatization agency as a simultaneous signaling model in which a government seeking to privatize its SOEs signals its commitment to both investors and a domestic political audience. If investors and creditors regard the signal as credible, they respond by investing in former SOEs, as previ