Characterizing context – how power and institutions interact

January 30, 2023 By brianlevy387 in institutions, Uncategorized Tags: institutions, political settlements 1 Comment

Ambiguity has its uses – but only up to a point. Its limitations became evident in an early 2016 research retreat to take stock of progress in research on ‘political settlements’. The retreat (sponsored by the Effective States and Inclusive Development research programme) revealed that, beneath a shared, enthusiastic embrace of the transformative potential of political settlements analysis for development practice, were very disparate understandings of the term. Some researchers explored political settlements through the lens of power; others through the lens of institutions; others moved ambiguously between the two.

Work over the subsequent six years has, in my view, decisively resolved the ambiguity. Reflecting the intellectual evolution, this piece explores conceptually how power and institutions interact to shape a variety of distinctive contexts for development policymaking and implementation. A companion blog summarizes how the resulting typology was applied in a recent comparative evaluation of the political economy of education systems and their reform in a dozen countries, prepared for the RISE research programme.

Typologies provide a useful way of drawing sharp distinctions among a small number of heuristic patterns that, considered together, delineate a variety of contexts along which many real world polities might be aligned. My 2014 book Working with the Grain built a typology around cross-country variations in institutional characteristics. The typology laid out in the 2022 book Political Settlements and Development: Theory, Evidence, Implications gives primacy to variations in the configuration of power. (The book was a multi-author effort led by Tim Kelsall; I was one of the co-authors.) This piece integrates the two approaches, using the four variables included in Figure 1.

Kelsall et. al’s definition of a political settlement provides a useful point of departure for clarifying the relationship between power and institutions. It defines a settlement as:

“An ongoing agreement (or acquiescence) among a society’s most powerful groups over a set of political and economic institutions expected to generate for them a minimally acceptable level of benefits, which thereby ends or prevents generalized civil war and/or political and economic disorder”

While both power and institutions feature in the above definition – a settlement is reached when powerful groups agree on the ‘rules of the game’ (i.e. the institutions) that govern the settlement – the 2022 book focuses principally on the delineation of power, and its consequences. It carefully defines two aspects of power:

The social foundation (SF) characterizes who is powerful – the included socially salient groups (insiders, groups to which policy must somehow respond) as opposed to the excluded (outsiders)…along a spectrum that extends from broad (nearly all social salient groups belong) to narrow (most are excluded).
The concentration of power (PC) characterizes the extent of power – the extent of coherence in the allocation of decision-making procedures and authority among insiders, ranging from concentrated (highly coherent) to dispersed (lacking in coherence).

The book reports measures of each of PC and SF over time in forty-two countries in the global South, and uses these measures to explore statistically the causal influence of each on development. Higher levels of PC turn out to be associated with more rapid economic growth, and higher levels of SF with broad-based gains in social indicators.

Considering SF and PC from a more disaggregated perspective yields additional insights. The SF variable underscores the importance for inclusive growth of empowering excluded actors– both at an aggregate level and at more micro-levels by giving ‘voice’ to beneficiaries who are intended to benefit from social programs. The PC variable directs attention to the roles of three sets of drivers – distributional, ideational and institutional – in shaping the balance between co-operation and conflict in a country’s polity:

Distributional drivers. As per the definition of a political settlement, a necessary condition for a high PC (and thus rapid growth) is that the breadth of the SF and the distribution of economic benefits are aligned with each other. (Note that both broad SF/inclusive growth and narrow SF/unequal growth are consistent with this condition, at least in the short-to-medium term.) A loss of alignment between the distribution of power and of economic benefits is likely to result in a decline in PC, with an associated slowdown in economic growth, and rise in political polarization. (See here and here.)
Ideational drivers. As the 2022 book details (building on Ferguson 2020) political settlements can usefully be understood through the lens of collective action. Shared ideas can provide a basis for achieving co-operative outcomes to mixed-motive bargaining challenges (and thus a high PC); ideational political entrepreneurs (populist or otherwise) can destabilize a previously stable settlement. (See here and here.)
Institutional drivers. As per the definition of a political settlement, institutions (‘the rules of the game’) provide the container for a political settlement. The institutional arrangements can take a variety of distinct forms, each of which shapes interactions among stakeholders in a distinctive way. Attention to institutions is thus key to addressing a central question confronting practitioners: Given the incentives and constraints prevailing in a specific context, what might be some tractable, context-aligned entry points for improving development outcomes?

This last question brings us to the two institutional variables identified in Figure 1.

Variable #3 in Figure 1 can usefully be interpreted as a continuum between wholly top-down (principal-agent) governance and peer-to-peer governance among multiple principals. As its location at the power-institutions intersection in Figure 1 suggests, this continuum can be interpreted both from the perspective of institutions and of power:

As institutions, both principal-agent and multi-principal governance have been the focus of a voluminous literature (for example here, here, and here).
As power, each depicts a very different relationship among stakeholders – unequal power in the former, and interactions among relative equals in the latter. At all levels – from the micro (families; firms) to the meso (communities) to the national – horizontal governance between peers plays out very differently than hierarchical governance arrangements that link those who are powerful with those who are not.

As variable #3 suggests, high PC can thus be achieved via two distinct institutional forms – top-down, hierarchical command-and-control, or peer-to-peer resolution of horizontal challenges of collective action.

Variable #4 distinguishes among institutions according to and whether the rules of the game take the form of personized deals or impersonal rules. This distinction is given only limited attention in analyses of power (including the 2022 volume), but it is central to the contributions of Douglass North and colleagues (see here, here and here), yet. As North and colleagues argue persuasively, impersonal institutions cannot be created by fiat; they emerge as a facet of long-run processes of political, economic and social changes.

Considered together, variables #2, #3 and #4 provide the basis for a typology that distinguishes among a variety of political settlements, each with distinct institutional forms, and thus distinct, context-aligned entry points for improving development outcomes. Logically, with three variables, each aligned along a continuum, the number of possible types is large. The goal, though is not comprehensiveness, but to focus attention on a few core contexts – radically different from each other, each resonant with a familiar ‘real-world’ pattern, and each characterized by distinctive patterns of incentive and constraint, and thus distinctive entry points for improving outcomes. Figure 2 below identifies three types that meet these criteria. (In applying this framework, I have found that many countries can be interpreted as hybrid combinations of the three – but I have not come upon a fourth type that meets the tests of both real-world resonance and enough qualitative distinctiveness that it warrants inclusion as an additional category.) The paragraphs that follow elaborate on each of the types, drawing on the companion blog on education systems to signal their practical relevance.

In context A (strong dominance), power is highly concentrated, and exercised top-down – with all of the strengths of decisiveness, and the pathologies of hubris and demotivation of subordinates that can accompany this institutional mode of exercising power. The political economy of education case studies for Indonesia, Ethiopia, Nigeria, Tanzania and Vietnam illustrate some of the ways in which dominance plays out in practice. As the education research details, key to achieving gains in these contexts is to engage top-level leadership around purposes.

Context B (personalized competition) is characterized by fragmented authority: multiple centers of power, limited capacity for co-operation, and limited compliance with formal rules (including the rules necessary for the functioning of a formal bureaucracy). In this context, as education case studies for Bangladesh, Ghana, Kenya and South Africa’s Eastern Cape province illustrate – and as a broader literature has explored in depth (see here, here and here) – entry points for achieving gains come not from efforts at systems reform, but from more focused efforts to strengthen islands/pockets of effectiveness.

Context C (impersonal competition) is characterized by strong formal ‘rules of the game’ intended to provide a platform both for resolving conflict among stakeholders and their goals, and for implementation. In successful, mature democracies this platform can indeed result in a shared commitment among powerful interests to craft win-win resolutions of collective action problems, and in the effective operation of public bureaucracy. However, as the education case studies of Chile, Peru, India and South Africa illustrate, the all-too-common result is instead a combination of unresolved political contestation over goals (and thus, as per Figure 2, a ‘medium-level of PC), exaggerated rule compliance and/or performative isomorphic mimicry.

More broadly, as many democracies (even seemingly mature ones) are demonstrating, polarized discourse renders impersonal competitive contexts increasingly vulnerable to a cumulative delegitimization of the public domain, and a downward spiral of institutional decay. Reversing downward spirals is a central challenge of our time. At a micro/sectoral level, as I summarize in the companion blog, the education studies offer some interesting insights as to how this might be achieved across the different contexts. At a broader level, I explored some possibilities in a comparative analysis of interactions between inequality and polarization in South Africa and the United States. Extending this analysis into a broader exploration of what it will take to turn from rage to renewal will be a central focus of my work going forward.

South Africa’s changing tolerance for inequality

April 3, 2021 By brianlevy387 in Uncategorized Tags: ethno-populism, inclusive development, inequality, institutions, South Africa Leave a comment

South Africa, along with many other countries, is struggling to renew hope in the wake of a difficult downward spiral. This struggle is the focus of our new, co-authored paper, to be launched on April 7^th at a virtual event featuring Trudi Makhaya (economic adviser to President Ramaphosa) and Harvard’s Dani Rodrik. (Here’s a link to the event.)

South Africa’s recent experience illustrates powerfully the fragility of hope. In the 1990s, the country was an iconic case of democratization. The subsequent collision between strong institutions and massive inequality makes its experience potentially of relevance not only for other middle-income countries, but also for many higher-income countries wrestling with a combination of a declining tolerance for high or rising inequality and institutions that seemed strong in the past but find their legitimacy increasingly being questioned.

In a benign scenario, ideas, institutions, and growth all reinforce a hopeful, virtuous spiral. Ideas offer hope, encouraging cooperation, the pursuit of opportunities for win-win gains. Institutions provide credibility that the bargains underpinning cooperation will be monitored and enforced. Together, ideas and institutions provide credible commitment, fueling economic growth. However, the benign scenario does not reckon with the ways in which persistent high inequality, accompanied by unresolved tensions between the distribution of economic and political power can both put pressure on institutions and catalyze a lurch from hope to anger. The consequence can be a cascading set of pressures, and an accelerating downward spiral. Turnaround calls for going beyond ‘with the grain’ approaches, and embracing a far-reaching vision and strategy of renewal.

The new paper, “South Africa: When Strong Institutions and Massive Inequalities Collide”, co-authored with Alan Hirsch, Vinothan Naidoo and Musa Nxele has been published by the Carnegie Endowment for International Peace, in collaboration with the University of Cape Town’s Nelson Mandela School of Public Governance. It will be launched on April 7^th at 10am (US East Coast time), at an open virtual event to be co-hosted by the CEIP’s Tom Carothers and Zainab Usman, and Faizel Ismail of the Mandela School, with Trudi Makhaya and Dani Rodrik as discussants. A modified version of the paper’s executive summary follows below

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For South Africa’s first fifteen years of democracy, the combination of a shared willingness among stakeholders to believe in the power of cooperation and effective institutions that helped make promises of co-operation seem credible enabled the country to move beyond counterproductive conflict and pursue win-win outcomes. Growth began to accelerate, providing the fiscal means for addressing absolute poverty (as per Table 1), and offering some new opportunities for expanding the middle class. There were, however, some stark limitations in what was achieved. The poorest four deciles remain largely unemployed or underemployed, and mostly live in rural areas (designated during the apartheid era as “reserves” or “homelands”) and informal settlements around towns or cities.

Table 1. Some gains in reducing poverty, 1996-2011

	1996	2011
Absolute poverty, with daily hunger	28%	11%
Access to: – electricity	58%	85%
– piped water	56%	91%
Immunization coverage	68%	98%
Secondary school enrollment	50%	75%
Access to social grants (old age, child support, disability)	2.4 million	15 million

South Africa’s political settlement was built around four distinct sub-bargains:

A deal between the established (overwhelmingly white) economic elite and the country’s new political leadership. This included commitments to sustain the rule of law (including protection of private property), and to gradual ongoing economic transformation (including an elaborate program to support black economic empowerment, BEE).
A deal among the new political elites within the majority political party, the African National Congress (ANC). The ANC is a broad tent encompassing many ideological proclivities; degrees of public-spiritedness; and regional, ethnic, and economic interests. Its implicit promise was that its formal structures, plus the structures of government, would channel this diversity toward a shared national purpose.
A promise of upward mobility. One aspect was a commitment to protect the interests of new (predominantly black) middle class insiders. Another aspect was a promise that a combination of education, job creation, and an end to racial discrimination would open up readily accessible opportunities for those on the cusp of middle-class status.
A promise to reduce extreme poverty. A post-minority-rule redirection of public resources and services would benefit the whole population.

All of these sub-bargains except for the last one, which was pursued at least into the 2010s, were built on shaky foundations. Many BEE transactions straddled the boundary between rules-based and more personalized deal-making; who should participate in BEE initiatives became part of the ANC’s inter-elite conflict. Adapting to a transformed political order created new pressures for the public sector. Had South Africa been able to enjoy a combination of visionary leadership and East Asian rates of rapid economic growth for a sustained period, the expansion of opportunity throughout society might have trumped the limitations of the aspirational commitments. In reality, the country only briefly reached an annual rate of 5 percent from 2005 to 2008.

In 2009 Jacob Zuma became president, having won a bitterly contested struggle for ANC leadership. He inherited an economy that, though buffeted by the 2007/2008 financial crisis, seemingly was fundamentally sound. Indeed, in the initial years of Zuma’s presidency—which included the wildly successful, celebratory atmosphere of South Africa’s June 2010 hosting of the soccer World Cup—it seemed likely that the country would continue its positive trajectory and might even begin a new phase of renewal.

However, a hopeful scenario was overtaken by a combination of events, deep-seated ongoing challenges caused by South Africa’s continuing extreme inequality, and Jacob Zuma’s approach to leadership. The events comprised a change in presidential leadership and South Africa’s undisciplined and uncoordinated response to the global financial crisis, which short-circuited a virtuous circle of an economy and society on the mend. Subsequent to the global crisis, South Africa failed to build momentum and (contrary to other MICs) stagnated, signaling that the global shock is not sufficient to account for the subsequent reversal.

The deep-seated ongoing challenge was the country’s persistent inequality. As Table 2 details, as of the mid-2010s less than a quarter of the total population, including essentially all white South Africans, enjoyed a standard of living that was middle class or better. More than all other middle-income countries, South Africans are either affluent or poor, with limited opportunities to move up the economic ladder. There was ample reason for the majority of South Africans to feel that, notwithstanding the promises of mutual benefit, the deck remained stacked against them. This increased the vulnerability of South Africa’s political settlement.

Table 2. South Africa’s 2014 Population Distribution, by Ethnicity and Class

	Total	African	Other black	White
Chronic poor	49.5%	46.9%	2.5%	0%
Transient poor	12	10	2	0.1
Vulnerable	15	13	2	0
Middle class	20	9.5	4	6.5
Elite	3.5	0.6	0.5	2.4
% population	100%	80%	11%	9%

Source: Schotte, Zizzamia and Leibbrandt (SALDRU, 2017)

Over the course of his nine years in office, Jacob Zuma governed in an increasingly personalized way, with increasing recourse to polarizing rhetoric. When Zuma took office, many who backed him hoped that he would bring an inclusive, coalition-building, popular touch to leadership—a contrast to Mbeki’s remote, technocratic, and somewhat imperious style. In the event, Zuma proved to be a cunning, ruthless, and charismatic tactician.

The paper describes in detail three successive turns that set in motion what looked to be an accelerating downward spiral of decline:

Rising pressure on institutions, sparked by the continuing ambiguities and unresolved tensions in the bargains between economic and political elites, and among the various influential sub-groups within the ANC itself.
A rising tide of disillusion when per capita income growth entered and remained in negative territory. Zero-sum contestation over public positions and resources at the national, provincial and local levels became acute. Those on the cusp of the formal economy found themselves unable to consolidate middle-class status; unemployment steadily increased.
An ideational turn toward anger, catalyzed by both genuine grievance and political opportunism. In the face of thwarted opportunity, an increasing number of South Africa’s population came to see the privilege enjoyed by the mostly white economic elite—and the tide of apparent corruption that seemed to be the only way that new elites could share in that privilege—as a provocation. In turn, opportunistic ethno-populist political entrepreneurs sought to use the disillusion to strengthen their position within inter-elite political struggles.

All the elements seemed to be in place for a fourth turn – a rapidly accelerating cumulative slide, with weakened economic performance, institutional decay, anger and ethno-populism feeding on one another. The December 2017 election of Cyril Ramaphosa as leader of the ANC and his subsequent accession to the country’s presidency signaled a pause to this slide. However, three years later, President Ramaphosa has not been able to move decisively beyond a promise to “stop the rot” and offer a renewed positive vision. Hard hit also by the Covid-19 pandemic, the country is not out of the woods.

What has been missing so far has been a vision capable of renewing hope across South African society. The path of least resistance for established elites would be to return to “the basics,” reembracing the trajectory of the Mandela and Mbeki presidencies. However, for reasons detailed in the paper, such a muddling-through scenario is unlikely to have the broad-based political support needed for it to be sustainable over the medium term.

The paper suggests a credible promise of upward mobility for a wide spectrum of society as the centerpiece of a next-generation inclusive development strategy for South Africa. In the first fifteen or so years of democracy, the elimination of racial barriers and the country’s accelerating growth were sufficient to usher in a season of hope. However, once the low-hanging fruit of the opportunity opened up by the end of apartheid’s racial privileges was gone, the limited economic prospects of those outside the elite became evident. A credible promise of upward mobility would offer a vision of hope and possibility for better lives across society as a whole, renewing perceptions as to the legitimacy of the social and economic order. (The paper details some aspects of a strategy along these lines.)

South Africa’s experience suggests four potentially useful propositions for the many countries struggling to maintain a positive social, political, and economic trajectory in the face of a declining tolerance for high or rising inequality.

The trajectory of change is a knife-edge. There is the potential to set in motion virtuous circles of positive interactions among ideas, institutions, and economic growth. At the same time, there is a substantial risk that unaddressed distributional imbalances can set in motion a cumulative downward spiral of decline.

Ideas matter—a hopeful vision of change, when combined with a “good enough” responsiveness to distributional concerns, can be sufficient to launch a positive trajectory.

Both ideas and institutions can be shields against adversity—but only up to a point. Hopeful ideas can evoke positive agency and help mobilize for collective action. Institutions can function as shock absorbers. However, both need reinforcement, including ongoing attention to festering imbalances.

Initiating a new cycle of renewal requires a set of ideas and actions which address in a “good enough” way the imbalances which had resulted in derailment.

Leadership needs to risk of mobilizing new coalitions capable of overcoming the vested interests that stymie inclusive change. Can South Africa’s leadership—and can leadership in other countries, where a similar sense of disillusion has taken hold—summon the necessary boldness to rise to this challenge?

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For the authors’ presentation, and Trudi Makhaya and Dani Rodrik’s perspectives on the paper, join the co-sponsored Carnegie and Mandela School event, on April 7th or view the session (via this link) at some later time

Puzzling over ‘anti-corruption’

November 17, 2014 By brianlevy387 in anti-corruption, corruption, development, governance, institutions Tags: anti-corruption commisssions;, clientelism; limited access orders, development, Francis Fukuyama, institutions 8 Comments

I’ve been puzzling (yet again!) over the usefulness of anti-corruption as an entry point for engagement by civil society, donors and other developmental champions. Always and everywhere, behaving ethically is surely crucial to meet the most important test of all — the “look oneself in the mirror every morning” test. The question for activists is not whether we should model ethical behavior — an obvious “yes” — but what are the pros and cons of an anti-corruption ‘framing’. I list below three analytically strong arguments against using anti-corruption as an entry point– but also one compelling argument for its use. It would be terrific if this post could get some fresh new conversation underway on the dilemma.

Here (to establish that I’m not coming at this as an apologist) is the argument ‘for’ focusing on anti-corruption. Impunity is corrosive. It can over time destroy a country’s entire development platform. In the absence of sustained vigilance, some political leaders might find themselves wading, step by incremental step, deeper and deeper into the mire of corruption – setting a tone at the top which progressively pervades layer after layer of a country’s institutions. The absence of a strong anti-corruption voice in society can help ‘enable’ this type of downward slide.

But here are the three arguments against leading with an ‘anti-corruption’ focus:

First is the logic of ‘limited access orders’ — as laid out in landmark work by Nobel-prize winning economist Douglass North and his co-authors. They show compellingly that in the large majority of countries today (and historically everywhere), before impersonal institutions have taken root, personalized deal-making among elites is the basis for political stability. They argue also that the development of a country’s institutions and its economy are interdependent, and that the process evolves incrementally. Taken together, as they argue, these insights suggest that “transplanting institutions [can] undermine the political arrangements maintaining stability, [and can] unleash disorder, making the society significantly worse off.”
Second is the logic of clientelism – spelled out in useful detail by Francis Fukuyama in his recent book, Political Order and Political Decay. Fukuyama argues that the allocation of public sector jobs to political allies will almost inevitably be present in societies that democratize before they build strong state capability. He suggests that in settings with democratic contestation but without a capable state “clientelism should be considered an early form of democratic accountability and be distinguished from other forms of corruption – or indeed not considered a form of corruption at all.”
Third is the central importance of the ‘capacity to co-operate’ in achieving development outcomes – and, as per the path-breaking work of Elinor Ostrom (another Nobel-prize winner), the role of encouraging trust and mutual learning in building this capacity. In a world where (as she puts it) “there are some saints and some sinners, but mostly regular folk capable of both types of behavior….norms can evolve to support co-operation.” As Ostrom’s good practice principles for effective co-operation suggest, co-operation and trust are built by a combination of close monitoring and encouraging people to put their ‘best foot’ forward, even in the face of imperfection, not by punitive admonition. [Chapter 8 of my book, Working with the Grain includes a comprehensive discussion of how we can bring Ostrom’s insights more into the mainstream of the development policy and implementation discourse; more information about the book is available on this website.]

A few years ago, I began asking colleagues within the development community how one might tell the difference between those political and bureaucratic leaders who were doing what was necessary to achieve developmental goals in settings where formal institutions were weak – and those who had crossed over to the ‘dark side’ of impunity and predation. It took many months before I finally came across a colleague who (based on his many years of experience in an African country which had experienced both types of leadership) provided a compelling answer. “It’s easy”, he said. “In the former case, the informal rules of the game are clear, and the leaders play by them. In the latter, the rules are not clear – and, whatever, they might be, they do not apply to the leaders themselves”.

Compelling, yes – but how can activists translate the above into a strategy which provides a ‘tripwire’ in the face of impunity but, at the same time, sustains a positive discourse for the development endeavor as a whole? Reflections appreciated – and more on this in subsequent posts….