Sometimes, development approaches work. Policies are adopted, implemented, and – perhaps not perfectly, but overall – have the expected effects. Sometimes, they don’t work. Policies are debated and delayed for years. They are undermined during implementation, are quickly back-tracked in the face of stronger-than-expected opposition, or are implemented, but end up triggering negative and unexpected consequences. There are also constraints related to fiscal resources and capacity. However, political economy dynamics often play a decisive role with regards to whether these constraints are addressed, or conversely, remain in place.
Many countries have seen growth and poverty reduction in recent years. The turn of global dynamics in favor of poorer countries has been remarkable. At the same time, the list of development challenges remains long. Environmental degradation, improving congestion and pollution in cities, developing and maintaining infrastructure networks, from power, to roads, to water, and ensuring that growth is shared rather than associated with sharply widening socio-economic disparities all remain high on the agenda. In an increasing number of countries, political stability itself remains at risk.
Since the mid-2000s, a growing number of teams across the Bank have undertaken political economy analyses (PEA). This is consistent with the Bank’s overall effort to find solutions that provide not only a good technical fit, but are likely to be more feasible given various stakeholder interests and incentives. PEA takes into account limited institutional capacities, risks of elite capture, and the frequent failure of expected collective action.
What typically prompts teams to undertake political economy analysis? Often, it is a sense that understanding the technical side alone is insufficient for the challenge at hand. Moreover, government counterparts themselves get frustrated by the political economy dynamics they face – such as resistance to reforms from influential stakeholders who stand to lose or constant political influencing of spending decisions which makes it difficult for ministries to pursue agreed upon strategies and priorities. They may therefore appreciate a Bank team’s effort to consider not only the technical side of the solution, but also the strategy for ‘making reforms happen’. The challenge that Bank teams then face is how to develop the analysis in a way that leads to a good quality and operationally useful output.
The new edited volume on Problem-driven Political Economy Analysis: the World Bank’s Experience  (Fritz, Levy, & Ort 2014)* takes stock of what has been learned over the past five to ten years. It includes eight cases – from different regions and sectors – ranging from the development of commercial agriculture in Ghana, power sector reforms in the Dominican Republic, decentralization of health services and roads in the Philippines, to fiscal stabilization efforts during a mining-sector boom in Mongolia. First set out in a Problem-driven governance and political economy analysis: Good practice framework  (Fritz, Kaizer, & Levy 2009), a ‘problem-driven’ approach means starting from a specific issue rather than focusing on a broad analysis. Such a focus gives the analysis a clear scope and helps arriving at conclusions and recommendations that are actionable for Bank teams and/or the government counterparts.
The volume’s main intention is to provide easy access to good practice examples of political economy analysis and to set out emerging cross-country and cross sectoral lessons. It seeks to give useful inputs for teams embarking on their own political economy analysis, as well as for managers— both on the sector and the country team side—who have to decide whether to encourage teams to invest scarce resources into political economy analysis, and who provide guidance to teams on how to maximize the usefulness and impact of such work.
Among the lessons learned, the following stand out:
Looking across cases studied, a political economy perspective suggests a middle ground between ‘one size fits all’ and ‘every country/situation is unique’ – and finds typical political economy challenges that recur in certain sectors. For example, as the Philippines, Papua New Guinea and Sierra Leone chapters illustrate, the geographic allocation of funding for roads is typically influenced by political considerations and connections (between central and local level politicians). The chapters on Zambia and the Dominican Republic show that low power tariffs easily become entrenched and tariff increases are likely to be opposed by elites, urban middle classes, and other groups. These sector dynamics share similarities even though the two countries – one low and one middle income – are very different overall. Moving forward, it may be useful to develop better knowledge about ‘what has worked’ in addressing such recurring challenges in various sectors.
Good ‘evidencing’ of political economy analysis is not easy, but can be done. An often heard concern about political economy is that it can be difficult to substantiate and ‘evidence’ the story line. The volume assembles a range of evidencing options. These include careful process tracing, a targeted review of the evolution in a particular sector, reviewing price and fiscal dynamics and how they affect stakeholder interests, a close analysis of legal and regulatory provisions and how they are applied, commissioning surveys that capture the views and experience of relevant groups, or comparing information about service delivery with that on electoral results. The challenge each piece of analysis is to strike the right balance between the scope of the questions to be answered, the resources available, and the rigor of evidencing. Learning about what evidence is most effective and how best to find it is important to inform such trade-offs, and can make it easier, e.g. to cover a similar issue in another country.
It is important to connect the dots between national level decision-making and the specific development challenges being analyzed. As the chapters indicate, a problem-driven focus has clear benefits for the operational relevance of the analytic work. However, focusing solely on sector dynamics can make the analysis too narrow — cross-cutting interests often influence sector specific policy choices. Having some foundational analysis of country-level dynamics (possibly produced as an input for a country strategy) that teams focused on specific issues can draw on, can help ‘connect the dots’ between the specifics and the bigger picture political economy dynamics.
- Good quality and impactful political economy analysis requires attention from managers. Managers play an important role in ensuring that analysis is integrated with overall work in a given sector. Furthermore, country managers and directors must decide how to share the analysis with government counterparts and whether to make potentially sensitive analysis available to country team members and other stakeholders. Moreover, both country and sector/practice managers influence what follow up actions are taken – (a) whether to implement approaches that are ‘second best’ from a technical perspective but have better political economy feasibility and robustness, (b) how to communicate the pros and cons of policy options, or (c) what potential ‘quick wins’ to prioritize in the policy dialogue as a way to build reform commitment. All of these potential follow up actions are likely to work only if they are part of a deliberate approach brought together by country and sector/practice managers. Finally, the volume is one contribution to the accumulating knowledge management around political economy analysis. A range of additional materials can be found at Governance and Public Sector Management: Political Economy . For additional materials outside the World Bank Group, consult the GSRDC.org  website.
To become a member of the WBG’s Political Economy Community of Practice, please send an email to: Rachel Ort (firstname.lastname@example.org ) and Sakuntela Akmeemana (email@example.com ).
* The volume was formally launced last January 9, 2014. Presenters iincluded Verena Fritz, Senior Public Sector Specialist, AFTP2, Brian LevySenior Adjunct Professor of International Development, Johns Hopkins SAIS, and Tom Carothers, Vice President for Studies, Carnegie Endowment for International Peace.