The potential role of Political Economy Analysis

Geert Laporte, Deputy Director

VIDC, Vienna, 30 January 2014

Politics and Power in International Development

1. What is ECDPM?2. Changing perceptions on the role of

politics in development3. WHAT is Political Economy Analysis

(PEA)?4. WHY is PEA needed?5. Implementation challenges

Structure presentation

Page 2

Independent foundation: Linking policy and practice in development

1. Non-partisan facilitation of dialogue and consensus building

2. Practical and policy relevant analysis3. Strong networks, partnerships, alliances…4. Capacity building in Africa to bring more

balance in the partnership with the EU5. Ambition to systematically integrate the

political dimension in development and be a change agent

ECDPM

Page 3

1. Post WOII- 1990: mainly technocratic and economic vision on development

2. 1990s-2000s: End of Cold War: more political approach to development (governance, rule of law democracy, human rights, etc) but MDGs still largely a-political

3. 2011: Busan declaration: a more political vision on development: policy coherence, role new actors, good governance etc

4. Post 2015: focus on structural transformation-inclusive growth-global power relations-peace and security-clear ambition to integrate politics in development

Changing perceptions on the role of politics in development

ECDPM Page 4

Integrating politics into development: an ongoing challenge

Cooperation becomes more political in most agencies… at least on paper…

• Increasing recognition in donor strategies and policy documents that cooperation is a highly political job (reflected in choice of countries, sectors, actors, etc)

• But still actors who tend to avoid politics from their agendas because too “risky” (charity & development foundations such as Gates )

Page 6ECDPM

Stop putting your head in the sand …It is all about politics and power…

• Lots of EC Communications all going in the same political direction: democracy, governance, human rights, working with CSOs,.. (e.g Agenda for Change)

• “More for more” in Arab world (aid and trade in exchange for political reforms)

• Financing of civil society and change actors (European Endowment for Democracy)

Example EU

ECDPM Page 8

• Risk of being normative and “imposition” of donor conditionalities (Governance facility EU)

• Risk of overestimating the role of aid in political reform processes

• Risk of using double standards (difficult to reconcile values and interests of donors)

Major inconsistencies in applying political approaches

ECDPM Page 9

• NOT the same as a ”governance analysis”(=normative and looking at formal political systems)

• NOT the same as “political analysis” (mostly done by diplomats)

• NOT the same as “policy analysis” (looking at specific policies in different sectors)

PEA “The study of the interrelationships between political and economic processes” (looking at both formal and informal institutions “behind the façade”)“Political economy as a discipline is a complex field, covering a broad array of potentially competing interests on how a country should develop”.

Agreeing on what political economy analysis (PEA) means

ECDPM Page 10

Political processes: contestation and negotiation of power, wealth and goods

Economic and financial processes, and their link with politics

Formal and informal institutions

Relations, incentives and interests of actors « under the surface »

Why do reforms fail to take root?

Need for a systemic approach with a specific focus on:

The visible world: national strategies, action plans, formal institutional structures, etc.

 

• Moving beyond the formal attributes of democracy (elections, Parliaments, etc)

• Need for more realism on the feasibility of reforms

• Identify relevant « entry points » to support real change dynamics

• spend the money wisely for better impact and structural change

• PEA in principle should not be normative

WHY political economy analysis?

ECDPM Page 12

LOOKING BEHIND THE FAÇADE …

More tools available

• Mix of tools exist already: governance assessments, mappings of CSOs, conflict analysis tools, budget support guidelines, drivers of change methodologies, Strategic Governance and Corruption Analysis (SGACA) etc

• BUT in most cases tools are quite superficial, based on formal commitments of governments and not enough attention to economic dimension of political behavior

• Tools to detect traction for reform in societies are short in terms of concrete action

Page 14ECDPM

• PEA is a “risky business” as it could fundamentally change the “technocratic” way in which donors operate

• Vested interests on both sides of the aid business might be difficult to reconcile with in-depth PEA (diplomats fear to spoil privileged relationship with government of developing country

• Spending pressure is big (0,7% target) and PEA could limit scope of action in countries with governments unwilling to change

“ It is the aid industry’s job to disburse funds and its operators are paid to do so and to maintain good relations with its client countries” (Deaton “Aid and politics”)

In PRACTICE aid agencies seem to be afraid of PEA

ECDPM Page 15

• Donor agency staff is not always well equipped to play a political role (“often we don’t have the time or resources to do PEA in a systematic way”)

• Not enough highly skilled personnel with strong knowledge of local context

PEA acts like a mirror confronting donors with their own political economy (own interests, incentives, inconsistencies, lack of capacities…) EU decision to discontinue PEAs with external support

In PRACTICE aid agencies are poorly equipped to deal with PEA

ECDPM Page 16

No shortage of reform attempts that stopped halfway or never got anywhere…

1. Integrate PEA in all aspects of the development process and cooperation (interests, power relations, incentives of the various domestic actors to change,…)

2. Change is a domestic process: get to know and support in a subtle way the actors of change

3. Look beyond the formal expressions of political systems (e.g Mali as “donor darling”)

4. Avoid normative approaches: focus on what is desirable and feasible instead of dreaming up “ideal world”

5. Look for smart incentives: reforms cannot be bought by external agencies with aid

Implementation challenges for donors

Page 18

What incentives could accelerate change?

Conclusion: Progress but also limitations to PEA

• Centrality of politics is there to stay: integrating PEA in all aspects of cooperation

• Growing demands for better tools for PEA and to operationalise these in a subtle way with respect for specificity of each country

• Engaging with partner country on PEA : how far can you go … and for what purpose…?

• PEA provides “navigation tool”… not a panacea for quick decision-making/planning

Page 20ECDPM

Concluding quotes

• Carothers: “don’t expect revolution, politics will always remain a difficult element to integrate in cooperation and aid”

• Will Hout: “Donors that take PEA seriously will become part of the political struggle. Otherwise they risk following the road to nowhere”

Page 21ECDPM

Thank yougl@ecdpm.orgwww.ecdpm.org

www.slideshare.net/ecdpm

Page 23