Title: Political Economy in Practice at the Bank
1Political Economy in Practice at the Bank
2Why is political economy critical?
- A complete understanding of the governance
environment in a given country must include an
understanding of the political process, and not
merely a better understanding of public
administration - What is the nature of the political seas and
sea bottoms through which a country team seeks
to navigate its ship of development assistance? - CTs cannot devote all of their attention to their
program of assistance narrowly defined, i.e. to
the ship and what is inside it. - CTs must also consider the relationship between
the ship and the seas through which it sails.
3- The Banks work is embedded in a larger societal
context that often affects its outcomes in
unforeseen ways. These include - The political process and the institutions within
which that process plays itself out (arguably the
most important dimension of this larger societal
context) - But also
- A countrys social structure -- especially the
extent to which society is a peasant based
agrarian society or urbanized one. - The structure and configuration of cultures (i.e.
ethnicity) and language. - Informal practices (e.g. and especially
clientelist networks and patronage) as well as
formal ones. - History
- Each society IS unique, and therefore one size
does not fit all.
4Good governance has many dimensions entry
points
- Institutional Checks Balances
- Independent, effective judiciary
- Legislative oversight
- Decentralization with accountability
- Global initiatives OECD Convention, anti-money
laundering, WCO
- Political Accountability
- Political competition, credible political parties
- Transparency in party financing
- Disclosure of parliamentary votes
- Asset declaration, conflict-of-interest rules
- Civil Society Voice Participation
- Freedom of information
- Public hearings on draft laws
- Media/NGOs
- Community empowerment
- Report cards, client surveys
- Competitive Private Sector
- Economic policies
- Restructuring of monopolies
- Effective, streamlined regulation
- Robust financial systems
- Corporate governance
- Collective business associations
- Public Sector Management
- Meritocratic civil service with adequate pay
- Public expenditure, financial management,
procurement - Tax and customs
- Frontline service delivery (health, education,
infrastructure)
5Part IIIs Politics Bankable? Philip Keefers
PREM Learning PresentationAdapted
6Why do politics matter?
- Politicians are the ultimate arbiters of
welfare-enhancing, growth-promoting, equitable
policies. - They are the ultimate arbiters of success of
foreign assistance. - The political economy question
- What are the incentives of politicians to pursue
development-oriented policies?
7The paradox
- Efficient public goods and broad public policies
(e.g. regulation) are critical to development. - Government incentives are therefore more
pro-development the more they favor these over
rent-seeking and private good provision. - The paradox when politicians prefer policies
that benefit fewer people, when with the same
resources they could choose policies that benefit
more people.
8Priority questions for addressing the paradox in
development policy
- The primary development question what
interventions improve political incentives to
pursue development-oriented policies? - The secondary question How can we design sector
interventions to be compatible with political
incentives? - The tertiary question How can we build
constituencies for reform? - The quaternary question are key decision
makers supportive of reform?
9Some reasons why politicians systematically
ignore reform information
- Political market imperfections information
- We cant expect political accountability for
development outcomes when - public doesnt know what political decisions were
made - public cant observe outcome of decisions.
- public cant observe the impact of decisions on
their welfare. - Most donor interventions do not increase citizen
info others fail to provide the right kind of
info. - They should informed citizens (exposed to
media) much more likely to receive transfers
(India, US) (probably) more likely to demand
public goods.
10Reasons why politicians ignore reform credibility
- Political market imperfections credibility
- Politics is not about policy/public goods in poor
countries - high tax/high redistribution vs. low tax/low
redistribution competition in social service
delivery versus no competition deregulation
versus regulation. - Why?
- Politicians cannot credibly promise high quality
public goods, public policy to most citizens.
Can sometimes credibly promise populist transfers
(free power) to most citizens. Can usually
credibly promise clientelist benefits (pork
barrel, jobs in government) to a few citizens. - Hence, few programmatic political parties in poor
countries - at best, we see populist reputations (e.g., free
power) more often, purely clientelist
(vote-buying/vote blocs/jobs in gov).
11Reasons why politicians ignore reform
polarization
- Political market imperfections social
polarization - Citizen polarization leads them to care more
about who benefits from policy than the welfare
effects of policy. - Related to credibility and information in
credibility- and information-free environments,
promises to co-religionists most credible,
easiest to monitor. - Donors pay insufficient attention to how they
might mitigate (1) the political factors that
exacerbate polarization and (2) effects of
polarization on implementation of reforms. - But they should substantial evidence (Kenya, US,
etc.) that public good provision suffers in
multi-ethnic settings.
12Program design implications
- Information components already in some
programs/projects citizen report cards, PETS
dissemination, media outreach - Often fail to provide information crucial to
political accountability - outcome info (benchmarking of school/health
performance) info on decision process (e.g., how
much money approved, by whom). - Cutting-edge PMI analysis identifies nitty-gritty
design elements that make the difference between
no impact and substantial improvement - Education services in Uttar Pradesh no impact of
best practice interventions to encourage
better-informed participation in public services.
New PMI-informed design being tested in
Karnataka decentralization operation. - Use PMI analysis to turn impact evaluation from a
device by donors to hold governments and
themselves accountable to a device that allows
citizens to hold governments accountable.
13Program design implications
- CDDs rely on local governance to improve
service delivery. - PRSPs build local ownership for reform agenda.
- However, PMIs need not be fewer at the local
level (Khemani, et al.). - Most successful CDD KDP-Indonesia. Donors
participate in ongoing governance, however. CDD
approach usually seen as a substitute for donor
oversight. - PRSPs have no/limited effect on PMIs, but these
determine who owns what. Uninformed citizens
in non-credible environments cannot own reform.
- CDDs and PRSPs need to focus on credibility,
information. - E.g. Directly, CDDs do nothing for credibility
of national policy makers may help indirectly by
building up credible local challengers to
national politicians.
14Implications for monitoring
- Track whether politicians are investing political
capital in promises to provide public goods. - Track whether citizens have info. to monitor
these promises. - Use supervision strategically to improve
credibility of governments to citizens to
substitute for accountability where PMIs are high
and citizen leverage over government officials
low. - Increase supervision budgets where
accountability is low reduce where high.
15What Donor Role?
- Donor conditionality and support to specific
leaders can be counter-productive it can
undermine leaders credibility to their own
citizens. - In the extreme case what should we advise
military-led governments who get rid of corrupt
political parties? - Currently we hope that economic reforms are
self-sustaining. - Problem Chile is rare.
- Instead, more country-specific analysis needed on
dynamics of political parties, and how
reputation-building for public goods can be
supported. - Assist non-democratic governments (that are so
disposed) to lay the groundwork for or at least
understand the importance and characteristics of
accountable political parties.
16Part III Brief Examples
17Morocco Summary of Results
- Current Outcome indicates the results of the
anticipated stakeholder dynamics on the issue
given model results and analysis. - Opportunity for Reform indicates changes in
approach and strategies to overcome
implementation challenges given model results and
analysis.
18Utility of the general findings
- () Need to change our partnership strategy!
- () Reform is more/less difficult than we thought
depending on the issue! - (-) Some specific results did not make sense!
- (-) Pool of experts too limited!
- (-) Potential courses of action unclear
19Overall lessons
- Stakeholder analysis should come at early stage
- Enlarge the circle of champions beyond line
ministry (focus on Ag Ministry big mistake) - Get to understand the dynamic rather than the
static reform process - Pro-reformers use the radical Bank position to
help craft a compromise - Better to train Bank staff to conduct the
analysis rather than having consultants carry the
task (skill mix and relation with client) .
20Laos
- Primacy of Political Order, Fragility, State
weakness - Monolithic vs. fragmented state -- state as arena
of negotiation esp. at realigning moments - Incomplete state formation nationalism, economic
prosperity/hemmed in, capacity - (soft state)
- Coming transition
- unraveling regime consistency for several reasons
21Three Bank Choices
- a) Muddle through status quo
- Perfectly legitimate/reasonable in public
management - NPEP a muddle through script not necessarily bad
- b) Selective-strategic reform areas
- Two track problem service delivery and
institutional change - 1. Public resource management
- 2. Capacity Enhancement
- gtgt Find Constituency for reform Need for
unequivocal preference for reform
22c) Positioning for State Transformation
- Disturbing Query why are we in Laos?
- change to how we do business differently
- Â Beyond 3-4 Year CAS, beyond NPEP
- Absence of Governance and macro-political reforms
(transparency, accountability, citizen tests of
accountability) in CAS would miss opportunity - Creative use of AAA to affect agenda
- Access to where power resides, building trust
(less leverage) to move macro-political reform
information, SE Asia models bottom wont fall
23Ethiopia
- Post-election violence, threats donor withdrawal,
WB CAS budget support - Review team to examine appropriate of strategy
- Deep divisions, swing to single party dynamic,
party businesses, weak parliament - Move to ISN, move to PBS Protection of Basic
Services, via decentralization
24Kenya
- New government, Anti-corruption, uneven
performance - Anglo-leasing scandal a less than savory
kitchen cabinet - What else to do, other than rant rave?
- Rapid response note on wounded executives
code of ethics work - Result leadership code for new cabinet,
integration of leadership/code in Bank TA
25Overall Lessons
- Not so much whether to do, but how and do well
(integration) - Not so much smart production but smart
consumption (management) - Incentives staff vs. managers
- Retail/country case driven vs. wholesale/framework
driven - Resources exist, other donors keen