UNDERSTANDING POLITICAL ECONOMY ANALYSIS

Mrs. Asiyati Lorraine Chiweza (PhD, MPA, BsocSc)Senior Lecturer

Chancellor College, University of MalawiDepartment of Political and Administrative Studies

P.O Box 280, ZOMBAE-mail: achiweza2001@yahoo.co.uk

27 February, 2013, Wamkulu Palace, LILONGWE

Outline of the Presentation

• What is Political Economy Analysis (PEA)• Key concepts associated with PEA• Why PEA• Group work

PEA: What is it?• PE is not a new field. It is quite old as it can be traced back to work of Adam Smith

and even beyond• Broadly defined as the study of both politics and economics particularly the

interaction between the two focusing on how political institutions, the political environment and the economic environment influence each other

• PEA has become particularly important in recent years following the dismal progress registered particularly in international development cooperation

• International aid agencies have often failed to achieve expected development targets in developing countries leading them to ask one single important question: why is this the case?

• The diagnosis is that international development cooperation has often been characterized by dips, crises and inexplicable stumbling blocks

• PEA is emerging as a potential remedy to dealing with the seemingly intractable challenges of international development experiences

• But what is PEA? PEA is not easy to define since it is defined differently by different authors although some consensus seemed to have emerged on how PEA should be defined at least in development circles

• PEA is defined as being concerned with the interaction of political and economic processes, the distribution of power and wealth between different groups and individuals, and the processes that create, sustain and transform these relationships

What is Political Economy Analysis• Is the study of both politics and economics, and specifically

the interactions between political and economic processes in society.

• It focuses on power and resources, how they are distributed and contested in different country and sector contexts, and the resulting implications for development outcomes. – Distribution of power, wealth and opportunities between

different groups and individuals, duty bearers and rights holders that are responsible for exclusion, lack of accountability and lack of responsiveness

• The political processes (cooperation, bargaining, conflict) that create, sustain and transform these relationships over time.

Key concepts associated with PEA, Tilitonse Theory of Change and their importance

• There are three key concepts that need to be understood very well in PEA and Tilitonse:

– Politics.

– Institutions

– Coalitions

Politics

• Should not be narrowly understood as ‘ndale’ i.e. Kutcherana.

• Politics should be understood as all the activities of cooperation, negotiation and conflict, within and between groups of people or societies, whereby people go about organising the use, production or distribution of resources to further their own interest

• Thus, what is political concerns “the distribution, exercise and consequences of power” which is at the core of cooperation, negotiation and conflict-making or conflict resolution processes.

• Achieving inclusion, accountability and responsiveness entails a redistribution of power through institutional change

Institutions• In PEA “institutions "are understood as rules of the game or

the ways of doing things in society and not organisations

• Institutions are understood as rules created by people to govern their regular political, economic and social interactions .

• These institutions (rules , formal and informal and values) underlie the distribution pattern and they structure incentives for actors in political, social or economic activities

– Institutions are best understood as the rules of the game which shape human behaviour in economic, social and political life

– Institutions can either be formal or informal• Formal institutions are normally understood to be written laws, regulations, legal

agreements, statutes, contracts and constitutions which are enforced by third parties

• Informal institutions are thought of as the usually unwritten norms, customary practices, standard operating procedures, routines, conventions and traditions which are often deeply embedded in culture and its associated ideology

– PEA is particularly concerned with understanding the complex mix of formal and informal institutions that shape the behaviour of groups and individuals, and the relationship between them• Permits to get beneath the formal structures to reveal the underlying interests,

incentives and institutions that enable or frustrate change• Underscores the need to know what is going behind the façade which helps to fully

discern the opportunities, incentives and obstacles to pro-poor change in a given country

Institutions Cont’d

• Institutions can be formal and explicit i.e. rules and procedures that are created, communicated and enforced through channels that are widely accepted as official e.g. Constitutional provisions, Acts of Parliament, Public Appointment guidelines, Programme Rules such as LDF, CDF etc

• Institutions can be informal and implicit i.e. rules that are socially shared, usually unwritten, and are created, communicated and enforced outside officially sanctioned channels.

Institutions Cont’d

• They include traditions and customs, values, cultural practices and other norms of behaviour that are treated as accepted ways of doing things – Big finger appointments versus democratic elections,

Bulangete la a mfumu, Chamlomo

– Cultural values of versus programme rules e.g. LDF, FISP

Institutions Cont’d

• Informal institutions give certain people or groups of people private forms of power and influence

• Informal rules operate behind, between and within the formal ones, hence substantially influencing how public power is used to make or prevent decisions that benefit some and disadvantage others.

• Their effect on formal institutions can be any one or combinations of the following: complementary, substitutive, accommodating and competing

• But they affect inclusion, accountability and responsiveness when they are substitutive or competing

ExamplesRules of guiding district allocation of Local Development Fund resources• Formal: according to need, teacher/ pupil ratios,

teacher/housing ratio etc.• Informal: equal sharing by constituency or more to

those areas that voted for me

Rules guiding selection of NICE board members• Formal: Public advertisement, public nominations etc.• Informal: Presidential appointments & prerogatives

Institutions Cont’d

• By viewing them as institutions (not as organisations) we are able to trace the mix of technical and political (interest-related) constraints that may be faced when attempting to fashion changes

• In short, this is why achieving improvements in local governance, public financial management, the control of corrupt practice, and the improvement of women’s rights, entail both political as well as technical challenges.

Coalitions• Coalitions: individuals, groups or organizations that

come together to achieve social, political and economic goals that they would not be ableto achieve on their own.

• Some may be formal, others may be less formal (and nameless), others may simply be loose networks of groups with similar interests and ideas.

• Coalitions are key political mechanisms for overcoming the problems of collective action that are central to governance and development

Coalitions cont’d

• Collective action problems are those ‘social dilemmas’ that arise when the rational pursuit of narrow, individual or sectional interests results in collective irrationality. These problems require institutional Solutions but the solutions can only be pushed by coalition

• TF envisages policy, advocacy coalitions that seek to influence or change institutions, policies and ideas especially in the three key result areas of the programme

PEA Key Highlights Cont’d• Coalitions are very important for transformative and

sustainable development– Imperative because development practice requires working with

others who often have a radically different and frequently unclear understandings of the context and priorities and how to pursue them

– Reforms or development interventions can only succeed if major actors are able to work together in order to overcome collective action problems

– Requires understanding of who holds power in society as the basis for forging coalitions and alliances for development and prosperity

– However, not all coalitions or alliances are pro-development; some of them are anti-development, collusive and outright predatory

– It is hence crucial to identify who are the allies and opponents, how to mobilize the former and how to win the latter around

– Leadership is thus critical in the formation of coalitions to pursue institutional and policy reform but it can also can adopt policies that actually destroy institutions or obstruct reforms

Levels of Political Economy Analysis

Macro- Country level

Sector level

Problem driven Project

level

• Country level– Approaches that aim to analyse and influence the structures, institutions, processes

and actors at the country-level e.g. Drivers of Change.– to enhance general sensitivity to country context and understanding of the broad

political-economy environment. – This can be useful to inform country planning processes but also an overview to

specific projects

• Sector level- – What are the political, economic and social forces that drive or block policy change

in specific sectors? e.g. water, agriculture, education, health – The aim is to better understand and more effectively influence the political,

economic and social structures, institutions, processes and actors determining the dynamics of sector reforms.

– to identify specific barriers and opportunities within particular sectors

• Project level– geared to understanding a particular problem at the project level, or in relation to

specific policy issue so that appropriate strategies can be taken.

Steps in a Problem Driven Political Economy Analysis: Linked to steps 2 & 4 in the concept note form

• What is the problem to be addressed. What are the challenges? e.g. persistent corruption, continued food insecurity, inequitable allocation of development resources in the districts, failure of decentralisation reform

Reflection: Problem identification

• What are the associated institutional set-up and governance arrangements? Are they capable and effective? This involves mapping of:• relevant structures, ministries, agencies and their interaction,

existing laws and regulations, policy processes• Formal and informal rules driving the given issue• How these interact to produce the challenges identified?

Institutional governance arrangements and

capacities

• Why are things this way? Why are institutional and policy arrangements not being improved? This Involves analysis of:

• Stakeholders, their interests and incentives.• Historical legacies and earlier reform processes• Social trends and forces and how they shape current stakeholder positions and

actions

Political Economy Drivers

What can be done? What actions/interventions can

be proposed?

Why PEA?• Helps development practitioners to understand what drives political behaviour,

how this shapes particular policies and programmes, who are the main winners and losers, and what the implications are for development strategies and programmes

• Supports more effective and politically feasible strategies as well as inform more realistic expectations of what can be achieved, and the risks involved

• Contributes to better results by identifying where the main opportunities and barriers for policy reform exist and how stakeholders can use their programming and influencing tools to promote positive change

• Improves project designs both by enhancing understanding of the prospects for reform in a sector or project and by indicating approaches and options that would work more effectively in the specific political and economic context

• Explains why reform champions only deliver piecemeal reforms or why reforms on paper are not implemented in practice

• Explains the likely distributional aspects of reform efforts, and improve the sustainability and quality of development interventions

• Promotes more thoughtful and effective multi-stakeholder engagement involving government on one hand and others on the other especially since government is the prime mover of institutional and policy change

• Identifies how stakeholders might work outside the state to build progressive change coalitions across civil society, the private sector and the media

Why is PEA important?

• Clearly identifies problem elements that have to be addressed– Helps in making sure that root causes of the problem and not

their symptoms are addressed

• What political economy analysis can contribute is some knowledge about the major obstacles surrounding the operation of organisations “targeted” for performance improvement.– It is able to illustrate the kinds of entry points which might make sense as a

result of this understanding.– We can begin to assess the kinds of change support which we might or

might not expect to be effective in each case.

• Ensures that interventions do not just change ‘players’ but also the rules...

• It can help in the design phase to identify appropriate assumptions, and the means for engaging with different actors around the chosen issues.

• It provides clear implications of activities/interventions

• Realistic analysis of the balance of power for and against reforms

• Ultimately it gives a fair indication of the feasibility of the project