A number of noteworthy reports on institutional change, development, and foreign aid have been published recently. There is much agreement between them, suggesting that we have reached a tipping point in knowledge in this area. I will briefly summarize the results here and provide links for those who want to explore the subject further. Continue reading
The Limited Access Order (LAO) conceptual framework is an excellent way to understand why developing countries work the way they do, analyze their political and economic dynamics, and formulate policy ideas appropriate to their context. Its focus on power, violence, rents, and elite bargains provides far greater explanatory and predictive power than the standard template that uses developed countries as a model for how countries ought to work. As such, everyone in the development field working in a policymaking role should make use of it.
No one, including the state, has a monopoly on violence . . . An LAO reduces violence by forming a dominant coalition containing all individuals and groups with sufficient access to violence . . . The dominant coalition creates cooperation and order by limiting access to valuable resources – land, labor, and capital – or access [to] and control of valuable activities – such as contract enforcement, property right enforcement, trade, worship, and education – to elite groups . . . The creation and distribution of rents therefore secures elite loyalty to the system, which in turn protects rents, limits violence, and prevents disorder most of the time. Continue reading
In its 10-year history, the World Bank’s Doing Business Report has achieved enormous influence. The annual study, one of the flagship knowledge products of the World Bank, is the leading tool to judge the business environments of developing countries, generating huge coverage in the media every year. Several countries—such as Rwanda—have used it as a guide to design reform programs. For its part, the Bank has advised over 80 countries on reforms to regulations measured in the DB. Its influence stretches even to academia, with over 1,000 articles being published in peer-reviewed journals using data in the index.
But does it focus on the most important issues for companies in less developed countries?
The Organisation for Economic Co-operation and Development (OECD) Development Assistance Committee (DAC) and its International Network on Conflict and Fragility (INCAF) do an admirable job bringing together policymakers, collecting and synthesizing information, and helping set the agenda for donors.
But, as exemplified by Emmanuel Letouzé’s (lead author) and Juana de Catheu (co-author)’s recent report Fragile States 2013: Resource Flows and Trends in a Shifting World, its analysis of fragile states is flawed in a couple of important ways. Continue reading
Social and economic change—urbanization, increase in literacy and education, industrialization, mass media expansion—extend political consciousness, multiply political demands, broaden political participation. These changes undermine traditional sources of political authority and traditional political institutions; they enormously complicate the problems of creating new bases of political association and new political institutions combining legitimacy and effectiveness. The rates of social mobilization and the expansion of political organization are high; the rates of political organization and institutionalization are low. The result is political instability and disorder. The primary problem of politics is the lag in the development of political institutions behind social and economic change.
Richard Joseph, a Senior Fellow at the Brookings Institution and a Professor at Northwestern University, discusses a similar point in a recent article on Africa. In it, he introduces the very useful phrase “discordant development,” defining it as:
More than just “unequal development,” but rather how deepening inequalities and rapid progress juxtaposed with group distress can generate uncertainty and violent conflict.
This is a common problem in fragile states. One area moves forward while another area does not — or worse. And because countries are weakly unified, such development is highly discordant, increasing instability by how it increases the exclusion — and feelings of exclusion — of certain groups. Continue reading
Measuring how countries perform is all the rage. Everyone from the World Bank to Bertelsmann to Africa’s most famous entrepreneur does it, producing indices on things like how competitive economies are, how hungry populations are, how free the press is, how risky investments are, and how corrupt public sectors are.
Many of these indices are directly relevant for people working in development. They help countries determine how they compare with other states and where they ought to improve their performance. And they help aid agencies decide where and how to invest their resources.
Indicators tracking everything from GDP per capita to poverty to governance are ubiquitous across the field, especially among international professionals. Such numbers are used to determine need, priorities, and strategies (such as whether a government ought to be funded directly).
But do the indicators that have the greatest influence measure the right things? Are they focused on the issues that are most important to development? Can they predict how governments work or how countries will evolve in the future?
Too often, developing countries are assessed on a very narrow set of indicators, leading to an overemphasis on certain programs and “results” that have little to do with their prospects. Reducing poverty and hunger are worthwhile goals but may not reflect how well a country is doing (aid can reduce both without helping a state function better). “Good governance” may indicate good prospects, but bad governance certainly does not point to the reverse, as a long string of countries can attest to (including China, Indonesia, Cambodia, and Vietnam). GDP per capita is widely used to assess how well countries are doing (not least by the World Bank and many leading poverty analysts), but may actually be saying very little about the subject (such as when only elites benefit from natural resource wealth, as in Nigeria, Libya, and Angola).
Indicators on state fragility can easily miss the mark. The Failed States Index, for instance, completely failed to pick up the fault lines that threaten many Middle Eastern countries before the Arab Spring brought them into the open. The 2011 FSI ranked Syria as the 48th most fragile state in the world, but its complex ethnic and religious landscape has always made it far more fragile than it appeared. In 2012, Syria plummeted down to 23rd in the FSI. Next year, it will inevitably be much worse. Bahrain and Libya did not even make the ranking before 2011.
Many of the most important development issues are not included in major indices because they are not easily measured or are simply not considered as important as they ought to be.
In Fixing Fragile States, I wrote:
Development describes a complex process that transforms both the way people think and behave and the system of how they work together. Although economics drives development, politics plays a far greater role in the key take-off stages, with social, business, and government modernization inextricably linked as the process advances.
Do we ever measure how well a people work together? How institutionalized politics is (something quite different than democracy and “good governance”)? How cohesive a population is?
Assessing a country’s political dynamics may not be easy—especially if the goal is to measure it numerically—but is arguably more important than the majority of the indicators we currently use. The right kind of assessment ought to better gauge how resilient a country is, how prone to conflict it is, how stable its current political system is, how likely its elites are to work together to promote progress. All these things help us understand a country’s overall prospects in a way that few existing indicators can.
Measuring politics and political development requires creating a set of indices that reflect—or at least depend upon—the nature of sociopolitical dynamics, the degree of social / political / economic inclusiveness, the institutionalization of the state, the robustness of the rule of law, the level of social capital, the capacity of societies to create wealth (separate from natural resources), and the ability of government to get things done (which may not reflect existing governance scores).
What would these indicators look like? The new assessment criteria would seek to answer questions such as:
1) How great are group-based (ethnic, religious, caste, clan, etc.) economic, political, and cultural horizontal inequities?
2) How equitable is public spending?
3) How equitable are markets?
4) How equitable is the rule of law? Do elites or particular groups have systemic advantages over others?
5) How effective is public authority and the rule of law (taking into account a variety of mechanisms to achieve these)?
6) How inclusive is the concept of citizenship?
7) How equitable is the system of property rights?
8 ) How inclusive and poverty reducing is growth?
9) How diversified is the economy and exports (which depends on the robustness of institutions)?
10) Is political succession institutionalized and predictable?
11) How much does politics revolve around political parties and policies (rather than ethnicity and patronage)?
12) How much do political leaders depend on group identities to gain, hold onto, or compete for power?
13) How well do formal institutions (such as laws) reflect informal institutions? How widely accepted are these? How well do they penetrate society (as opposed to existing above it)?
14) How much investment is going into large factories (which are more risky than other investments)?
15) What is the level of political risk to invest in labor-intensive businesses (which require more effort and are more beneficial to a population)?
16) Is the economy producing an adequate number of jobs for young people?
17) How well can the government implement the policies it puts into place (if a road is supposed to be built, does it? How good is it?)?
18) How well can the government project authority across distance (is it as effective in outlying districts as it is in the capital)?
19) Are the government’s capacity and the country’s economic prospects keeping up with increases in education, urbanization, and the expectations of the population?
20) Are levels of dissatisfaction/frustration rising among powerful out of power actors (elites, identity group leaders, youth leaders, religious leaders, etc.)?
Some of these questions could be turned into indicators very easily (the data is available). Others could be turned into indicators by substituting another data source (for instance, tracking how well a government delivers public services at various distances from the capital will give a decent account of how well it projects authority). Many may be hard to assess, and require a more a concerted effort involving more spending on research and analysis.
If politics and political development mattered as much as they should, more effort would be made to create and use such indicators. Without these, we are flying blind, trying to understand the terrain using the wrong instruments.
Economists dominate the development field, but politics is more important to promoting it. This contradiction explains why the policies often recommended by international institutions (such as the World Bank) do not sufficiently take into account the local political, social, and institutional context.
The problem is echoed in other fields, with some blaming the inability of economists to understand institutions and politics as a contributing factor to the 2008 financial crisis. Continue reading