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Charles C. Griffin is senior adviser in the European and Central Asia regional office of the World Bank.

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Lives in the Balance

Brookings Institution Press

Chapter One

In a study of the effectiveness of education spending programs, the National Center for Economic Research (CIEN) in Guatemala looked at why increased school spending was not being converted into improved education results. Only half of school-age Guatemalan children complete primary school, and reading and math skills are at dismally low levels. Several problems immediately became clear as researchers surveyed parents and primary school students and teachers. Some 62 percent of head teachers reported that textbooks had not arrived in time for the start of the 2008 school year, disrupting student learning. And 73 percent of school boards surveyed reported that the school meals program did not provide enough food for students who needed it.

Rather than simply write a report, CIEN researchers decided to use their results to promote changes that would make school spending more effective. Armed with policy recommendations based on their interviews and findings, the team worked with leaders from the Ministry of Education, convincing them to shift the start of the school year from January to February so that it no longer coincided with the start of the fiscal year, a major cause of the delays in the delivery of resources. CIEN also worked with students, teachers, and parents to encourage them to monitor government performance using CIEN's findings as a baseline. While the full impact of the policy shift and community monitoring efforts will not become clear for several more years, the changes encouraged by CIEN are important steps toward improving the effectiveness of school spending-and ultimately education achievement-in Guatemala.

* * *

This book addresses the challenge of achieving efficient and equitable use of public resources in developing countries in such sectors as education and health. The way stakeholders in the international arena think about economic and social development has changed considerably in recent years. Multilateral organizations and donors now have an array of tools for evaluating problems and introducing potential solutions in public expenditures. Improved transparency and understanding of public spending have accompanied the global trend toward democratization, which has also created space for traditionally voiceless groups-poor people, excluded ethnic and religious groups, women, and others-to become more involved in development. Civil society organizations have sprung up nearly everywhere to watch government and press for change.

Chapter 2 examines what we know about government expenditures and budget execution in a broad sample of low- and middle-income countries. Donors and multilateral organizations have encouraged governments to make their public spending programs more effective. Sometimes this support has yielded improvements. All too often the results have proved disappointing.

In asking why such efforts have frequently had limited impact, and what can be done to improve results, this book takes the view that the fundamental challenge is less technocratic than political: holding political officials and public employees accountable to the wider public (who pay the taxes and use the services) for the use they make of the public resources entrusted to them.

To explore the relationship between those who run the government and the people, the book uses the "principal-agent" model, as developed in chapter 3. In its original application the model was developed to analyze the conflicts of interest that can arise when the owner of a private firm engages a professional manager to run the firm. How can the owner feel confident that the manager is making decisions for the owner's benefit rather than the manager's? How can the owner monitor the manager's actions and develop incentives that align the manager's incentives with the owner's?

When considering government accountability, it can be helpful to think of politicians and public officials as the "agents" of the general public and then to ask how effectively the public, as "principals," use a country's political system to align the agents' actions with the public's interest. Does a cabinet minister, for example, feel effective pressure and demands from (or on behalf of) the public-from an expected opponent in the next election, say, or from an active media with access to budget data, or from a parliamentary scrutiny committee-to allocate education spending fairly and effectively to primary schools across the country? Alternatively, does the minister feel motivated-and at liberty-to concentrate resources on schools in certain politically favored districts or to divert funds into private pockets, because pressures for transparency and public accountability are weakly developed?

For the pathways of accountability described in chapter 3 to work requires that information on government budgets and financial management be readily available to citizens. Chapter 4 uses data from the Open Budget Initiative of the International Budget Partnership to show how to make budgets clear and transparent and how countries are falling short.

Because enforcing accountability on the government sector is a massive task, citizens cannot generally address it effectively as individuals. Interest has therefore grown in the role of intermediary civil society organizations that can act on behalf of the population to make governments more accountable. That role is a major focus of this book and is developed primarily in chapters 5 and 6. The focus is on independent monitoring organizations-civil society organizations whose mission is to monitor government policies and services and to demand more transparent and accountable performance in public expenditure management.

A critical focus-public expenditure management

Public spending in most low- and middle-income countries falls far short of being as effective or as equitably allocated as it needs to be. In the past donors and activists have focused on increasing the quantity of resources, including aid, for development-oriented programs. In recent years they have come to understand that improving the quality of public resource use can be at least as important.

World Bank research has found that the correlation between increased spending on public services and improved outcomes is often weak. Increased spending on education has not always resulted in higher primary school completion rates, and increased spending on health is only weakly associated with lower mortality rates in children under age 5. This suggests that increased public spending needs to be accompanied by more attention to the effective and efficient use of funds to achieve significant development impact.

It is often observed that politicians can claim to be following almost any strategy to appease stakeholders such as international donors, other government leaders, and the public. But a government or ministry's true strategy and priorities are revealed by how it actually spends public money. In this spirit, and without diminishing the importance of other aspects...