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political economy analysis

Busting 5 myths on political-economy analysis

Stefan Kossoff's picture
A young Egyptian protester holding an Egyptian flag, Cairo, Egypt. Photo: Kim Eun Yeul / World Bank


“There has been a broad recognition amongst economists that “institutions matter”: poor countries are not poor because they lack resources, but because they lack effective political institutions”. Francis Fukuyama, the Origins of Political Order, Vol 1 (2009) 
 
For development professionals, there is no getting away from the fact that politics shapes the environments in which we work—that our programs can and do fail when we don’t take politics into account. But despite growing evidence that political economy analysis (PEA)  can contribute to new ways of working and ultimately better results, the politics agenda remains what Thomas Carothers calls an “almost revolution” in mainstream development practice.
 
There are many factors at play: limited staff capacity to engage with politics, bureaucratic incentives to meet lending targets, a preference for best practice solutions and institutional blueprints. Many continue to argue that it is not the business of development banks or aid agencies to analyse politics, let alone act on key findings. This resistance is posited on several arguments—or myths—which I address below.

Aid Is Politics: We Need to Act

Maya Brahmam's picture

Stefan Dercon, Chief Economist, of UK’s DFID gave a thought-provoking talk about Aid Is Politics last week, and he made the point that much of what passes as political economy analysis is pessimistic or refuses to make policy suggestions. However, people who work in development do not have that luxury. They are in a country to act, to make a contribution.

Dercon quoted Esther Duflo, “We can do lots of bad policies in good institutional settings, and lots of good policies in bad institutional settings.” He continued, “Development policy as well as aid is still about doing the ‘right things’ and not the ‘wrong things’.” What we need to admit is that the process is political. Development actions are constrained by politics today and will affect politics tomorrow.

By acting, we’re taking a stand. Therefore, we better get some of the things right. And to do that properly, we must take into account the power structures and politics that are endogenous to a particular place. We should think through economic advice based on what tomorrow will bring. This won’t be easy, but we can push for this, and by so doing, gain a better political equilibrium in the countries we advise.

Making Political Economy Practical

Rachel Ort's picture

Taking politics seriously
 
The idea political incentives play a powerful role in development—creating opportunities for change in some contexts, frustrating efforts in others—is not a new one.  For many years now, academics and aid agencies have acknowledged that the uptake and impact of best practice reforms depends, in part, on the incentives of leaders and citizens, on formal and informal institutional arrangements, on historical legacies and structural drivers.  And as a result, many aid agencies have made efforts to “take politics seriously.”

Can Aid Donors Really 'Think and Work Politically'? Plus the Dangers of 'Big Man' Thinking, and the Horrors of Political Science-Speak

Duncan Green's picture

Spent an enjoyable couple of days last week with the ‘thinking and working politically’ (TWP) crew, first at a follow up to the Delhi meeting (nothing earth shattering to report, but a research agenda is on the way – I’ll keep you posted), and then at a very moving memorial conference for the late Adrian Leftwich (right), who is something of a founding father to this current of thought.

Regular readers of this blog will know that I’m a big fan of this line of thinking: understanding and engaging with the underlying issues of power and politics should be the heart of any serious work on development.

But based on last weeks exchanges, I’ve got some concerns too – here are some reflections:

First some choice quotes:
 

Can Businesses Help Create Political Stability?

Zahid Hussain's picture

 © Simone D. McCourtie/World BankBusinesses generally stand little chance of doing well when politics is not stable. Political stability is a necessary condition for an enabling business environment. What can the business community do to help achieve sustained political stability? Experience shows more often than not they fail to do so. What keeps the private sector divided even when both their collective and personal interests are directly at stake? Such an apparent puzzle can be explained by the soft budget constraint syndrome interacting with cronyism.
 
The term “soft budget constraint” (SBC) was originally conceived by the economist, Janos Kornai. The concept has since been regularly invoked in the literature on economic transition from socialism to capitalism. Now the concept is increasingly acknowledged to be pertinent well beyond the realm of socialist and transition economies. A host of capitalist phenomena, ranging from the collapse of the banking sector of East Asian economies in the 1990s and the business rescue packages seen in the midst of the recent global financial crises can be usefully analyzed in SBC terms.
 
The syndrome is at work only when organizations can expect to be rescued from trouble, and those expectations in turn affect their behavior. The more frequently financial problems elicit support in any part of the economy, the more organizations will count on getting support themselves. The government may from time to time announce they will break with past practice and refrain henceforth from bailouts. But such announcements have little effect unless combined with some institutional change that lends credibility to their claims.
 
SBC syndrome alone cannot explain why business groups do not react collectively to political adversities. The divisive force in this process comes from cronyism.
 
Cronyism normally means some of those close to political authorities receive large economic favors. The most visible ones usually entail ownership of a business or its operation, such as the privatization of state-owned enterprises (SOEs). More frequently, however, economic entitlements are provided through privileged access to governmental favors. The most valuable are the provision of monopoly or quasi-monopoly positions and the extension of domestic credit at highly subsidized terms. Favoritism in awarding government contracts is also important and may be as significant as the others. 

The Evidence Debate Continues: Chris Whitty and Stefan Dercon Respond from DFID

Duncan Green's picture

Yesterday Chris Roche and Rosalind Eyben set out their concerns over the results agenda. Today Chris Whitty (left), DFID’s Director of Research and Evidence and Chief Scientific Adviser and Stefan Dercon (right), its Chief Economist, respond.

It is common ground that “No-one really believes that it is feasible for external development assistance to consist purely of ‘technical’ interventions.” Neither would anyone argue that power, politics and ideology are not central to policy and indeed day-to-day decisions. Much of the rest of yesterday’s passionate blog by Rosalind Eyben and Chris Roche sets up a series of straw men, presenting a supposed case for evidence-based approaches that is far removed from reality and in places borders on the sinister, with its implication that this is some coming together of scientists in laboratories experimenting on Africans, 1930s colonialism, and money-pinching government truth-junkies. Whilst this may work as polemic, the logical and factual base of the blog is less strong.

Rosalind and Chris start with evidence-based medicine, so let’s start in the same place. One of us (CW) started training as the last senior doctors to oppose evidence-based medicine were nearing retirement. ‘My boy’ they would say, generally with a slightly patronising pat on the arm, ‘this evidence-based medicine fad won’t last. Every patient is different, every family situation is unique; how can you generalise from a mass of data to the complexity of the human situation.” Fortunately they lost that argument. As evidence-informed approaches supplanted expert opinion the likelihood of dying from a heart attack dropped by 40% over 10 years, and the research tools which achieved this (of which randomised trials are only one) are now being used to address the problems of health and poverty in Africa and Asia.

Call for Applications: 2012 Summer Institute in Communication and Governance Reform

Johanna Martinsson's picture

The World Bank’s External Affairs Operational Communications Department, the World Bank Institute’s Governance Practice, the Annenberg School for Communication at the University of Pennsylvania, and the Annenberg School for Communication and Journalism at the University of Southern California are currently accepting applications for the 2012 Summer Institute in Communication and Governance Reform, to be held from June 16 to 27, 2012, at the University of Southern California in Los Angeles.

The 12-day course will equip participants with knowledge about the most recent advances in communication and proven techniques in reform implementation. Participants will develop core competencies essential to bringing about real change, leading to development results in a wide range of sectors.  The course seeks to impart critical skills in the following key areas:

The Political Economy of Reform: Moving from Analysis to Action - Final Report

Antonio Lambino's picture

We have reported on this blog that the Communication for Governance  and Accountability Program (CommGAP) and the World Bank Institute’s Governance Practice (WBIGV) jointly organized a two-day workshop entitled “The Political Economy of Reform: Moving from Analysis to Action”.  Held in Washington, D.C. a few months ago, the workshop sought to explore the role that Political Economy Analysis (PEA) can play in supporting and informing real-world reform efforts.  The event brought together more than fifty participants from various sectors: representatives of donor organizations, senior journalists, private firms active in development policy and practice, academics and applied researchers, and World Bank senior operational staff. 

Five Key Networks You Will Find Everywhere

Antonio Lambino's picture

 

The video posted above is the second in a series we are featuring on this blog.  The interview was conducted last June, during a learning event jointly organized by the World Bank Institute’s Governance Practice and CommGAP entitled “The Political Economy of Reform: Moving from Analysis to Action.” The event’s primary objective was to bring together relevant expertise and take stock of experiences from around the world on the ways in which political economy analyses have been and can be made more operationally relevant.  Featured in the video is Rakesh Rajani, head and founder of Twaweza (“we can make it happen” in Swahili), a “citizen-centered initiative, focusing on large-scale change in East Africa.”  From years of experience working in Kenya, Uganda, and Tanzania, Rajani describes five local networks that he has found exist everywhere in these countries:

They are organic.  They are powerful.  They go to scale.  They matter to people’s lives.  People invest in those networks.  And they would be there even if every aid dollar dried up tomorrow… And you’ll notice that those five are typically not the organizations or the institutions that development actors work with.

Political vs. Technical: A False Dichotomy

Antonio Lambino's picture

 

The interview posted above was conducted last June, during a learning event jointly organized by the World Bank Institute’s Governance Practice and CommGAP entitled “The Political Economy of Reform: Moving from Analysis to Action.”  The event’s primary objective was to bring together relevant expertise and take stock of experiences from around the world on the ways in which political economy analyses have been and can be made more operationally relevant.  In the interview, Claudia Melim-McLeod of the UNDP Oslo Governance Centre starts off with highlighting a critical issue in supporting change agents on the ground:

Technical assistance, although important, is not enough… we have to be politically savvy to be able to deliver results not only in terms of development effectiveness, but also in terms of what our partners expect us to do.


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