Being audited hurts corrupt incumbents. In the 2004 election corrupt incum-
bents were 12 percentage points less likely and honest incumbents were 13
percentage points more likely to be elected if their audit was revealed before
the election. Minor interventions at the margin here made a significant differ-
ence and there was scope for improving the functioning of institutions even in
relatively hostile environments.
Think about demand as well as supply
Many of the factors we have identified in this book as being important drivers
of economic growth, such as education, health, family planning services,
investment and technology, can be considered (and reformed) from both the
demand and supply sides. We need to ask whether education is better promoted
by increasing the supply of teachers and schools, or by stimulating the demand
of parents for better education by offering incentives to encourage them to send
girls to school, or by raising the salaries of employees with education?
William Easterly has argued in a string of influential publications that the
poor should be viewed not as helpless recipients of aid but as experts at surviv-
ing in poverty. He argues that governments should stop pushing services onto
the poor but rather empower the poor to demand health and education through
their own actions. Other supply-side solutions have included incentives to
increase savings or opening up an economy to international financial markets
to increase the supply of resources available for firms to borrow and invest.
Supply-side solutions may fail because policy-makers do not consider demand.
Family planning services, Easterly (2001) argues, have often failed because
they fail to address the reasons people want children, such as high rates of child
mortality or the need for children to work in subsistence agriculture. Fertility
is high because people want lots of children and offering them a cheap means
to reduce fertility will have no impact. Improving the supply of investible
resources with more savings and FDI, as noted in the first principle above, will
have no impact on investment if there are no incentives for firms or households
to invest. Empowering citizens’ groups to hold service providers accountable
has been a key policy recommendation based on these arguments. An example
would be empowering local communities to hire and fire teachers previously
accountable to distant central government bureaucracies. The local beneficiar-
ies are those most likely to be hurt by bad services; the local inhabitants are
also likely to have much better information than distant bureaucracies as to the
underlying cause of poor services.
The diagnostic results of these kinds of empowerment effort remain gener-
ally disappointing. Chapter 6 illustrated the results of an effort to generate some
of that countervailing pressure by giving greater control over public- service
recruitment and pay to poor beneficiaries. The assumption was that the poor
need public services so have an incentive to monitor service providers and by
living in the local community would be better able to monitor the services and
Conclusion: Eight Principles for Policy-Makers 299