Civil Service Reform in Developing Countries The Limits

Civil Service Reform in Developing Countries: The Limits of the Merit Model Geoffrey Shepherd 5 th Global Forum on Re-inventing Government: Innovation and Quality in the Government of the 21 st Century Mexico City, 5 -6 November 2003 1

The issue: the merit model for civilservice reform has not taken root in developing countries • Civil services in developing countries are large, underpaid, and politicized. – Hence service delivery is inefficient and corrupt. • The consensus in the development community is on a merit model for civil-service reform (the model used by today’s advanced countries). • This model has not taken root because politics militates against it: – Patronage politics and large government. • The challenge: to move from patronage to merit: – getting merit and politics to live together. 2

Organizing principles for a civil service • Merit systems employ people on the basis of merit, protect them from undue political interference, and provide equality of access. • Patronage systems need capable people, but they overwhelmingly use public jobs to provide private payoffs. – Payoffs: for political services rendered; to reward friends and family; to shore up political support. • New Public Management principles provide options to improve the performance orientation of merit systems in the core civil service (or to change personnel systems more radically in decentralized public agencies) • Civil service systems and performance orientation: – Patronage systems contaminate efforts to improve performance. – Merit systems are pre-conditions for NPM-style options. 3

Outline of the argument 1. The merit model promotes competence and protects the civil service from political interference. But it largely fails in developing countries The evidence of history shows the conditions under which merit reforms come about and subsequently develop. Merit-based reform in developing countries is stymied by politics and by large government. What can be done? 2. 3. 4. 5. – – 6. We can improve the way we think about the problem: depoliticizing the civil service is unrealistic, re-politicizing the debate is realistic. We should eschew comprehensive merit reforms and look for selective reform opportunities that acknowledge political realities. Brazil: an example of a judicial mix of merit, politics, and pragmatism. 4

The universal model of meritbased reform: the basics • Entrance to the service based on competitive exams. • Protection of civil servants from arbitrary removal. • Protection of their political neutrality. • Policing of these rules by an independent body. 5

The universal model of meritbased reform: other features • Common features: – positions are established centrally and classified according to rank; – bureaucrats are paid a salary and pension that is determined by their rank, rather than the work that they do; – there are often impediments to external lateral entry at senior grades; – there are few points of entry, with most entering at a young age and most senior positions filled by promotion. • Divergent feature: the amount and depth of political, as opposed to merit, appointments: – Some countries (the US, Brazil) allow large numbers of more senior political appointments. 6

Merit reform in developing countries • Merit principles are often written into constitutions and laws. • But these principles are not respected in practice. • Civil-service reform has proven among the most difficult of developmental reforms to sustain, and there is little evidence that nationally- or donorinspired reform efforts have met with much success. – The example of World Bank projects: the Bank’s own analyses have admitted that success has been limited. 7

Civil-service reform: six propositions from history (1) 1. Patronage systems are not a universal evil: they fund political competition – the US in the early 19 th Century. 2. Merit reforms only come to fruition when they are moved by powerful external forces. – – Overwhelming political demands for more efficiency and less corruption in the US and UK in the 19 th Century. The French revolution and the demand for protection against the state in the 19 th Century. 3. In spite of different paths and conditions, reforms have closely converged on a similar merit model. – Helping solve the problem of credible commitment 8

Civil-service reform: six propositions from history (2) 4. 5. Reforms took a long time to be fully implemented. Merit reforms have also made the civil service into a powerful public-sector institution and interest group in its own right. Merit reforms create new tensions: 6. – – – They alleviate problems of political interference and of hierarchical control But they create incentives that reduce the efficiency and political responsiveness of civil servants. As a result, there is a continuing tension between merit-based principles and NPM-style principles that lead to greater flexibility, but can also open the way to greater politicization. 9

Why reform is difficult in developing countries: three propositions (1) 1. New interests with the need and the power to promote a more efficient and honest public administration are weak in many countries. – – Some countries are characterized by spoils systems that provide the currency of political competition. Others are characterized by the continuing vigor of traditional systems (kinship and loyalty ties, for instance) which frustrate reform movements. 10

Why reform is difficul in developing countries: three propositions (2) 2. Governments are significantly larger than in the past – – – 3. This is the result of modern ideological approaches to development, as well as the improved capacity of populations to articulate political demands. This has led to large civil services, often characterized by public welfare employment, whereby public jobs are provided to a large part of the population as a means of ensuring their political support. It has proven very difficult to reduce such high levels of employment, while these have led to fiscal crisis and personnel performance problems. Many of these large civil services have emerged as strong interest groups capable of challenging reform efforts. 11

What next? 1. Changing the mindset 1. Recognize reform failures more openly. 2. Develop a more balanced view of the relative advantages and disadvantages of merit and patronage systems. • Incorporate politics into analysis and solutions, rather than ignoring or denying it. 3. Avoid the “merit trap”: half-finished merit reforms create a political and fiscal burden, but do little for performance. 4. Rethink the issue of lifetime tenure for civil servants. 5. Assemble better evidence: history, politics, and contemporary cases of successful reform. 12

What next? 2. Alternative reform approaches outside the public administration • The long-term solution: economic and political development. • Treat excess employment (public welfare employment) as a social-security problem. • Find alternative methods of funding politics? 13

What next? 3. Selective reform approaches inside the public administration • Hybrid senior appointments: enlarge the scope for patronage employment at senior levels, but apply merit rules and controls. – Brazil as an example. • Agency “graduation”: key agencies graduate within a universal set of merit and modernization rules. • Enclaves: key agencies are modernized within an ad hoc set of merit and modernization rules. 14

Brazil’s federal civil service: some lessons from success 15

Brazil: mixing civil service and political appointments • The Career system: – Has rigorous merit entry, strong esprit de corps. – Favors “elite” careers in key ministries. (e. g. tax administration, public finances, audit, trade). – Has weak performance/efficiency incentives. • Political appointments (DAS): – System has legislated ceiling on numbers and covers six levels below Minister. – Ministries propose and Presidency vets. – No tenure, no pension. – Permanent civil servants can become DAS, then return to old jobs. – At top 3 levels half of DAS are civil service, half are private. • Patronage politics at the Federal level is limited. 16

Brazilian reform: a long and painful process • Civil-service regime created as a rigid Weberian system in 1930 s. • Dilution of rigid hierarchy from 1967 onwards (military government) in favor of decentralization to autonomous agencies for greater managerial flexibility. – This led to perceived abuses, loss of central control. • Hence new rigidities in 1988 Constitution (return to civilian rule): – Extension of tenure and pension obligations. • 1995 onwards: Cardoso government rebuilds the civil service: – selective development of specific careers – measures to ensure a strong regime of political appointments. • 1995 -98: Cardoso government’s attempt to introduce executive agencies: – Proposal to remove tenure from public employees in Executive Agencies. – Limited results due to perceptions of loss of central fiscal control, public unions’ resistance to proposed changes in labor regime. 17

Brazil: some conclusions • Brazil is well served today by competent, honest, and accountable public servants. • Professionalization (capacity building + attaining political independence) has been a long process (70 years), and is still not yet over. • Brazil has a large reservoir of capable people • Changing rules was not enough - continuity and competence: – 1930 s to 1980 s: the authoritarian developmental state pushed professionalization. – Since 1988: growth of popular demand for honest and effective civil servants. – The importance of competent public organizations. • A sensible approach to mixing merit and politics: – A hybrid and deep system of political appointments. – Selective approach to Careers. • There is a constant, never-fully-resolved tension of political protection versus efficiency. – The bad rigidities (the merit trap): tenure combined with the pay/pension trap. – The more bearable rigidities: weak incentives for efficiency. 18

Table 1: Comparing Civil-Service Systems: Management Principles Patronage system (traditional) Patronage system (modern) Merit system Entrance criteria Based on loyalty/affinities and, to a varying extent, merit. Informally based on loyalty/affinities, formally on merit criteria (see merit column) Competitive, transparent process open to all citizens. Tenure and relation to political principals Tenure last no longer than the political principal’s term in office. Most appointments on political/ welfare grounds. Lifetime tenure, with removal only through due process, protects political neutrality. Remuneration Less rigid pay structure. Sometimes political contributions from pay, or political services, are required. Formal pay structures undermined by variety of allowances, supplements, etc. Political contributions and services often required. Relatively rigid pay structure based largely on rank (rather than work done); sometimes back-loading of rewards (e. g. Japan). Same as merit system. Positions are established centrally and classified according to rank. Position classification Lateral entry points (internal or external labor market) Senior appointments Management Many countries have flexible approaches to political appointments. New-Public-Management options Pay structure based on work done, with some element of reward for performance. There are often impediments to external lateral entry at senior grades; there are few points of entry, with most entering at a young age and most senior positions filled by promotion. Impediments to external entry are loosened, especially at more senior levels. The amount and depth of political (as opposed to merit) appointments is limited in most OECD systems. US, notably, allows large numbers of political appointments. Senior posts are subject to contractual (performance) conditions and tenure is removed Management is centralized, often with an independent body managing appointments. Decentralization of management. 19

Table 2: Comparing Civil-Ser ice Systems: the External Environment Political arrangements and the civilservice system Labor-market conditions and the civilservice system Patronage system (traditional) Patronage system (modern) Merit system New-Public-Management options Spoils systems fund politics (by rewarding for political loyalty, services) or affinity systems (kin, elites, etc. ). Traditional spoils systems can be formal (codified) systems. Modern spoils systems are informal, hidden behind formal merit systems. Informal patronage politics are based on spoils systems, affinity systems, or public-welfareemployment policies (government as employer-oflast-resort). Merit systems arise under mature democracies with checks and balances and where political parties are funded independently of civil -service spoils. Merit civil services protect their privileges, acquire a corporate identity, and become an interest group. A merit system, by protecting civil servants from politicians, promotes credible commitment, but at the risk of shirking and inefficiency. NPM options have mostly been applied where merit systems are entrenched, not to change them fundamentally, but to modify them partially. Regimes more akin to privatesector personnel systems have been applied in non-core agencies (e, g, executive agencies), while core agencies have retained most elements of a merit system. NPM options seek to bring back accountability to politicians and promote efficiency, but at the risk of politicization. Scarcity of “modern-sector” jobs. Poorly functioning labor markets, and scarcities of qualified people. Well-functioning labor markets, but many civil services function as internal labor markets, insulated from the national market. 20