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Submitted by Sanjay N. Vani on
Most PS reform articles/papers are increasingly emphasizing the importance of “political economy” analysis before designing any reform interventions. Although in theory it is hard to argue against the importance of understanding political undercurrents and needs of different stakeholders before designing a reform plan, I have yet to see significant mass of evidence to support this theory in the form successful interventions which were designed after careful political economy analysis. Most articles/papers that have underscored the importance of political economy have done so on the basis of analysis of failed interventions or retrofitting successful interventions with political economy analysis done subsequently. There is absence of a critical mass of examples where interventions were designed after careful analysis of the political economy while rejecting certain options that weren’t supported by the conclusions of the PE analysis. Thus the counterfactual has been proven – that most failed reforms lacked a proper political economy analysis. However, a mass of evidence in the form of successful reforms that were preceded by careful analysis of political economy is missing. There are a number of examples of successful reforms that actually go counter to the conclusions of political economy analysis – the liberalization of the Indian economy in early nineties is one such example. The powerful industrial lobby feared liberalization would weaken their dominant position, the bureaucracy feared losing power, the political rulers feared the killing of the golden goose, and the mass of poor India had much less say in the matter. Given this intense opposition by powerful lobbies, political economy analysis would have warned against unleashing liberalization in India. But in reality, the liberalization of the economy has catapulted India onto the world-stage. So the point that I am making is let us not impose a blanket requirement to carry out political economy analysis in the design of each and every PS reform project supported by the Bank.