Busting 5 myths on political-economy analysis


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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.

Myth 1: There is a set of development interventions called “technical aid” (e.g. in education, health, infrastructure etc.) that exist above the realm of politics and a second set called “political aid” (e.g. around elections, human rights etc.) that operate within the political realm.

We know that this is a false distinction - there is no such thing as technical or non-political aid. All aid has the potential to create winners and losers—to reinforce or challenge the political elite , the bureaucracy or society as a whole. It is very much our business to understand these effects and be sensitive to the opportunities and risks.
Myth 2: Political economy is necessarily the ‘dismal science’ of problems and constraints, rather than solutions and ways forward:

Part of the reason for doing PEA is to identify and mitigate risks; to ensure that we don’t invest in interventions that are likely to fail; and to avoid doing harm by unwittingly reinforcing elite capture or conflict. But increasingly PEA is being used in more positive, action-oriented ways:
Last year’s World Bank publication on Problem-Driven Political-Economy Analysis showcased several examples of how applied PEA has been used to generate alternative policy options and unlock longstanding political constraints – for example around power sector reform in Zambia and the use of natural resources revenues in Mongolia. Recent work by the Overseas Development Institute has shown the value of “politically smart, locally led” approaches where donors support domestic actors to broker relationships, negotiate deals, and find ways forward. This includes the Asia Foundation’s impressive work forging multi-stakeholder coalitions to progress reforms around tax, healthcare and urban land titling in the Philippines, which has yielded huge economic returns way beyond the initial small investment from USAID and others.

At DFID, we are now supporting several programs which similarly work through local actors to overcome political obstacles in a range of sectors including hydropower in Nepal, rice marketing in Myanmar, and budget and social sector reforms in Nigeria –again with encouraging results.
Myth 3: An emphasis on politics diminishes the importance of technical knowledge and specialization.

​There is not a zero-sum relationship between political economy and other sector specialization. The best PEA must be married with deep technical knowledge about the type of policies and reforms which are likely to have the biggest development returns.

The added value of PEA is it helps us all to get thinking about the “art of the possible”: the sweet spot between what is technically sound and what is politically feasible. 
Myth 4: Standards of rigor and evidence are lower in the field of political economy than other academic disciplines.

PEA done well deploys a range of quantitative and qualitative techniques to explore the underlying political drivers, constraints and opportunities for change. It is certainly true that there is scope to develop more systematic methodologies and quality benchmarks.

But it is important to recognize that PEA is not some rarefied dark art. Rather it is a vehicle for getting us to think in practical ways about how we overcome real-world development problems . PEA should be seen less as a one-off exercise conducted at a certain point in the program cycle and more as a way of working which underpins all that we do.  
 Myth 5: Taking political economy seriously is about understanding ‘them out there’ rather than ‘us in here.’

To date, most PEA has been used to understand the countries in which we work.  However—in the spirit of WDR 2015—it is important to also understand our own bureaucratic incentives, professional biases and institutional drivers. This will encourage us not only to think about old problems in new ways, but also to act differently in the pursuit of progressive social, economic and political change.
In summary, I believe that the main arguments for why we should avoid politics in our daily work are based on flawed assumptions , which are not borne out by the evidence or experience.

​But what do you think? What would it take for us to set these myths aside and push the ‘almost revolution’ a bit further?


Stefan Kossoff

Head of Profession for Governance, DFID

March 31, 2015

Couldn't agree more on Myth 3: in my experience, the most productive conversations within development agencies take place when technical knowledge is paired with an understanding of political economy conditions.
How can we better facilitate this combination in our daily work? Can development agencies provide more concerted training of technical staff in key political economy skill sets? Is there space for governance and sector staff to co-manage political economy assessments and collaborate on the design of projects? How can we set up the internal institutional incentives to make this work?

Adesinaola Odugbemi
March 27, 2015

I agree with all this. Many thanks for making the points. I think that Myth 4 is a problem even within the community of advocates for PE Analysis. The emphasis on hard, analytical, rigorous research can easily become excessive. While problem-driven analysis is unquestionably crucial, as you try to get a reform through in a particular context, or as you try to implement one, the role of precise, current political intelligence becomes fundamental. As Harold Wilson once said: " A week is a long time in politics". Using good political intelligence to make smart decisions is a central part of governance under real world conditions. Yet that approach, and those who practice it, are not yet acknowledged even by those who claim to see the point of PE Analysis. Because it is more art than science it is not seen as rigorous enough to gain admission to those hallowed halls.

March 28, 2015

Stefan and others commentators, it will be interesting to know your thoughts on whether PEA can also be a vehicle for getting us to think in practical ways about how we overcome real-world "humanitarian" challenges. Thanks

Stefan Kossoff
April 01, 2015

Wale - I certainly agree that PEA insights should be applied to real-world humanitarian challenges. Clearly, in a humanitarian crisis/emergency there is less time to invest in in-depth analysis. But that does not obviate the need to ask important questions about the potential winners/losers from humanitarian assistance, including issues around elite capture and "do no harm". Arguably PEA is even more important in these environments given the significant conflict and instability risks. As I say in the piece, all aid entails political ramifications we need to consider, and we need to be adapting and learning as we go.

Mar Introini
December 08, 2015

We cannot get rid of the negative side of politics in any financial, economic or humanitarian analysis. Also the political aspect inside the own organization brings more ineffectiveness to the system. However, leadership would be the key to overcome these boundaries, but its precisely what is currently missing. The fall of global institutions could perfectly fine be associated with this “disease” of current institutional global system.
The “almost revolution” must become a real revolution specifically on organizational culture, taking the opportunity of migration, financial & climate change crises to positioning in a different and more versatile vision of the world.
Mar Introini

February 09, 2016

Very briefly.i am agree or not agree with these myths doesnt matter as each country has its own political economy context.What matters is the missing link:working with parliaments politically,economically and technically in the manner of shortness;the less but very adressed,explanatory and conceptually...