State of the Debate on Institutional Sustainability in Practice

In development circles, the crucial role of institutional sustainability has long been recognized, in particular on the micro level, although with a narrow definition. This situation is at least partly the result of the systematic neglect of social structure in the dominant neoclassical economic paradigm, which has sidelined institutional and evolutionary economics in the North but is not as hegemonic in development economics. In development practice, the usual understanding of institutional is synonymous with organizational, and sustainability, following a long tradition in development politics, is usually understood to mean financial or fiscal sustainability. As a consequence, the focus is on the sustainability of specific institutions (i.e., their long-term viability and effectiveness), understood as sufficient availability of effective administration and funds, called sustainable institutional capacities and financial sustainability. Such micro-level discourses refer to the institutional capability and financial sustainability of

• All kinds of development projects and organizations

•The results of local and regional self-organization (e.g., institutional capacities of nongovernment organizations [NGOs], financial sustainability of the management of microcredits)

• Public institutions (e.g., sustainable health systems, financial services, local institutions)

In each case, the focus is on the sustainable development of institutions (i.e., the durable functioning of organizations); however, few deal with institutions for sustainable development (i.e., the institutional setting in a broader sense, including mechanisms and orientations), which would be needed for the development process as a whole to be sustainable. This indicates a missed opportunity because the restructuring of organizations and legal and economic mechanisms often is mandatory in development cooperation and financial support programs (e.g., the structural adjustments). However, such conditions are oriented toward other, mostly economic objectives, instead of orienting development toward sustainability: Social and environmental demands are taken into account in specific cases but not permanently and on equal footing.

One positive example in this context is the institutional indicators for housing and sustainable settlements, again on the local level, from New Zealand. They distinguish

• The roles and responsibilities of actors

• Institutional integration

• Process organizations and management

Another example is the use of indicators in public policies in several Brazilian cities, where local policies with social and economic characteristics have been developed and implemented using political institutional indicators (Ferreira 2000).

However, usually no link to the macro level is discussed in reference to institutional sustainability. This is a pity because sustainable development is essentially a macro phe-

nomenon dealing with the global environment, global poverty, and the generations to come. In both cases, because the independent role of institutions is ignored and reduced to organizational and financial soundness on the micro level, their contribution to sustainable development is neglected. They play an increasing role in capacity building, but efforts for empowerment, capacity building and technology transfer cover only a subset of institutional development needs. Therefore, it seems important to more clearly define institutional sustainability on the macro level. Such clear definitions are no end in themselves; they will be essential for deriving indicators, that is, for making the concept operational. At least partly because of the lack of clear definitions, indicators referring to the institutional dimension are rarely applied on the macro level; some of those suggested by the UN Department of Policy Co-ordination and Sustainable Development were already dismissed in the test phase of the first set of indicators without being replaced by more suitable ones.

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