Political Economy Analysis – A step forward for social accountability and development, or three steps back? Part I
Political Economy Analysis (PEA) is the latest buzz concept in social accountability (SAcc) circles and in development policy. Donors are all rushing to apply it to their programming. Civil society groups are clamouring to include it in their funding proposals. But what is it? And how does it take governance and development practice forward? My concern is that it may not. It may in fact detract from a systemic focus, which is needed to solve governance and development challenges.
Let’s be clear, mainstream PEA is underpinned by Rational Choice Theory (RCT) and represents an extension of the same narrow premises that have informed economic models of development policy for decades. The starting point is the assertion that all humans are rationally self-interested actors. The “minimal government” approach in the 1980s took this quite literally as the grounds for arguing that there was little need for government; if left to themselves, competition between these self-seeking actors leads to economic growth. All that people need are a few negative rights to protect their individual freedoms (primarily from state interference). New Institutional Economics (NIE), which is based on RCT, modified but didn’t challenge this argument when it came on the scene in the 1990s and insisted that government institutions are indispensable for economic growth. They provide the “rules of the game” needed to protect private property, to enforce contracts, exchange information and ensure cooperation between these competing self-interested actors.
Public Choice Theory (PCT), however, which spawned mainstream PEA in the late 2000’s, takes the RCT argument to its logical conclusion. PCT asks: What do you expect; If all people are self-interested then politicians and bureaucrats must be self-interested too. If we want to understand why they take decisions, choose to implement or bypass policies or institutional rules, then we need to understand their incentives or expected “payoffs”. PCT simply shifts the focus from institutional rules to the reasons why rules aren’t implemented; rent seeking (lobbying activities intended to obtain special privileges from government such as restrictions on imports, protective tariffs etc.), special interest groups, logrolling (vote selling), pork barrel legislation (securing local investments for vocal interest groups with costs that are met by national or federal governments), and other Machiavellian efforts at getting re-elected.
The timing of the emergence of PEA is worth thinking about. PCT and its economic modelling of self-interested political behaviour has been kicking about in development policy backrooms since the 1960s. But PEA seems to have gained mainstream credence after the global financial crisis of 2007/2008 (with a significant drop in aid volumes between 2005 and 2007). Was this mere coincidence? Is it also just a coincidence that the focus of mainstream PEA is problem (or issue)-based instead of trying to understand the systemic basis for effective governance in developing countries? Was it purely fortuitous that, around 2009, when the first mainstream models of PEA began to emerge, the goal of good governance and development was scaled back to “good enough governance” and the focus shifted from securing the optimal conditions for development to finding “politically feasible” solutions to aid programming “problems”?
This could all be interpreted as a convenient way for donor countries to back-out of previous commitments (including the Paris Declaration, and Accra and Busan High Level Summits) to align their aid with the strengthening of domestic governance institutions and public finance management systems. Will the increasing influence of PEA herald a shift back to project funding rather than institution building and harmonised programme support? A trend has already been reported in countries like Mozambique where donors are reverting to individual project funding. Perhaps a political economy analysis of the emergence of mainstream PEA itself is needed?
This said, perhaps the real danger of the mainstream PEA approach to socially accountable governance and development policy is the risk it runs of throwing out the baby with the bathwater. What PEA helps encourage, which I welcome, is a focus on vested interests and how these help explain the implementation or bypassing of formal institutional rules or their subversion and substitution by informal rules. What it doesn’t offer is any understanding of the underlying processes that are required in order to make socially accountable governance institutions work in the first place.
My question is: What if human development is not just about facilitating people’s ability to engage in economic activity and to access markets? What if people have basic sets of human needs -needs for flourishing and functioning, and not just physiological needs? What if they are driven by concerns to meet these needs instead of being pre-programmed to pursue self-interested payoffs? What if there is something else, aside from institutions, and compliance with institutional rules, that explain the success or failure of governments in progressively realizing people’s basic needs and their positive rights? I think there is. For public policies to be successfully implemented in ways that address priority needs and rights requires public resource management processes that enable institutions to translate policies into services that meet citizen’s needs.
These processes include (although they may not be limited to):
- assessing what people’s priority needs are (including their physiological, functioning and flourishing needs) and developing policies to achieve them
- grouping activities and programmes together into strategic plans to meet these needs
- planning to gather the resources necessary to fund these strategic plans
- allocating resources to plans
- collecting revenues
- controlling and reporting on spending
- controlling and reporting on performance in implementing plans
- taking preventative and corrective action to ensure resources are used effectively to meet needs
- auditing effectiveness and exercising rigorous oversight
Without these processes, and more specifically, without building the capacity to render these processes socially accountable, there is no way of reliably transforming available public resources into goods and services that meet human needs and rights. What do you think? Do you agree with this analysis of mainstream PEA approaches? In my next post, I will go on to explain an alternative approach to improving governance and development outcomes. This approach includes a focus on institutions, processes and the capacities of supply and demand actors, as well as their vested interests and power relations between them. Let’s keep this discussion going!