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Busting 5 myths on political-economy analysis

“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 Nepalrice marketing in Myanmarand 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?


This article is published in collaboration with The World Bank’s Governance for Development Blog. Publication does not imply endorsement of views by the World Economic Forum.

Author: Stefan Kossoff is a contributor at The World Bank.

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