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Kunal Sen, Sabyasachi Kar and Jagadish Prasad Sahu
We examine the political economy causes of India’s growth acceleration in the early 1990s, the periods of high growth in the 1990s and early 2000s, and the subsequent slowdown since 2011, drawing from the ESID conceptual framework (Pritchett and Werker 2013) and periodisation of growth episodes (Kar et al. 2013a). We argue that India’s post-reform growth experience can be separated into three distinct growth episodes. The first growth episode, from 1993 to 2002, was characterised by a set of predictable informal (and relatively open) relationships (which we call ‘ordered deals’) between political and economic elites. The second episode was from 2002 to 2010; deals in this period became increasingly closed, leading to negative feedback effects from accountability institutions, the middle class and non-elites, along with structural retrogression of the economy. The third episode, beginning in 2011, was one of an incipient growth deceleration, and was characterised by increasingly disordered deals. Our analysis of the Indian growth experience provides support for the conceptual framework we have used here and our other ESID growth studies. The wider implication of our analysis is that economic growth in most developing country contexts remains episodic and prone to collapse, as institutions do not evolve over the growth process, and in many instances, deteriorate.
Working paper 43
Tim Kelsall and Heng Seiha
Over the past 15 years, Cambodia has made significant strides in expanding effective access to free healthcare for poor people, thanks largely to ‘Health Equity Funds’ (HEFs), a multi-stakeholder health-financing mechanism. HEF operators have helped expand access, incentivise health staff, and lobby on behalf of poor patients. However, despite their successes, they have been unable convincingly to address some of the deeper-seated problems of the Cambodian health system, such as under-resourced facilities, underpaid, poorly qualified staff, and a burgeoning private sector. This paper explains this state of affairs as a product of Cambodia’s ‘political settlement’, in which relatively successful multi-stakeholder initiatives exist as ‘islands of effectiveness’ in a sea of rent-seeking and patronage. While such islands may currently be the best solution available for poor people, the deeper problems are unlikely to be solved without a shift in the political settlement itself.
Research Framing Paper No. 4
Understanding significant differences in growth trajectories and living standards across countries is a critical endeavour for development research. Massive changes in economic growth are common in developing countries, with most having experienced distinct episodes of growth acceleration, deceleration and/or collapse, leading to staggering income gains and losses over relatively short periods.
The new conceptual framework presented here moves beyond a focus on ‘what’ policies and institutions are conducive to inclusive growth, towards analysis of ‘how’ political processes shape the emergence and maintenance of these policies and institutions. It separates out analysis of the political drivers of growth acceleration from those of growth maintenance. It finds that growth acceleration is explained by the emergence of repeated personalised relationships between political and economic elites.
This framework facilitates investigations into why some countries persistently remain in miracle/stable growth regimes, while others suffer growth collapses.
Working paper 42
Bhanu Gupta and Abhiroop Mukhopadhyay
The National Rural Employment Guarantee Scheme (NREGS) in India is one of the largest public employment programmes in the developing world. It was introduced by the central government led by Indian National Congress (INC). While its implementation is, in principle, based on demand for work from households, we investigate how political competition affects intra district allocation of funds under the scheme. Using longitudinal data on funds allocated to blocks and elections held at the block level and addressing the issue of endogeneity by focusing on a subsample of blocks which had close elections, we find that the funds allocated were 22 percent higher in blocks where the INC seat share was less than 39 percent in the previous election. We provide a mechanism by for the effect by showing that the results are only true when the MP of the district, a member of the body that approves the block fund allocation, is from INC.
Research Framing Paper No. 3
Significant natural resource finds in developing countries present opportunities for growth and human development, but also challenges. The nature of the ruling coalition in a country when natural resources are discovered has implications for how and in whose interests the resources are governed. Institutional and political relationships play an important role in determining the quality of growth, as well as mediating the interactions between extraction and inclusion, which shape the contribution of natural resource finds to inclusive development.
This new approach examines the specific relationships of scale, space and time that characterise the natural resource sector. At its core is the interaction between economic development, political settlements and political coalitions. It introduces two elements of dynamism: patterns of economic development ultimately modify class structures in ways that cannot be easily controlled by dominant coalitions; and such change itself contributes to further modification of the forms of economic development occurring.
Research Framing Paper No. 2
Although politics is now widely seen as critical in shaping the quality of service provision in developing countries, this recognition has yet to be integrated within the conceptual frameworks that shape research and action in the field.
A new approach aims to offer insights which open up new terrain for action. It extends the World Bank’s ‘accountability framework’ to include three ‘vertical’ levels, emphasising the ways in which political settlements and governance arrangements influence organisational behaviour. This multi-level framework takes specific public service provision agencies as the unit of analysis, with a focus on performance, exploring the sectoral manifestation of political settlements and drivers of organisational behaviour. This enables comparative analysis across multiple sectors and multiple countries in order to better understand variations in performance.
Research Framing Paper No. 1
A significant gap exists between the political settlements literature and the mainstream feminist literature on women in politics. Until recently, feminist political analysis has not engaged effectively with the insights offered by the new literature on political settlements, particularly regarding the extent to which informal and clientelistic forms of politics closely shape the prospects for women’s empowerment.
Combining these two bodies of literature is therefore significant for generating a deeper understanding of how politics shapes the possibilities for greater inclusion of women and promotion of gender equity in development policies, processes and outcomes in developing country contexts. This approach also has relevance for understanding how other marginalised groups may propose alternative interpretations of inclusive development and how these are negotiated.
Working paper 41
Abdul-Gafaru Abdulai and David Hulme
Through an analysis of Ghana’s HIPC Fund, which was established as part of the Poverty Reduction Strategy Papers (PRSP) process, this paper shows how aid-financed efforts to reduce regional inequality in Ghana have failed. Dominant political elites agreed to policies of regional inequality reduction to access aid funding, but, once approved, such funds were allocated on quite different criteria in ways that marginalised the poorest. Analyses here reinforce the growing recognition that developmental outcomes in most poor countries are not shaped so much by the design of ‘good’ policies per se, but more importantly by the power relationships within which policy-implementing institutions are embedded. Aid donors seem unable to fully grasp this important lesson, and so their capacity to contribute to reducing regional inequality remains limited.
Working Paper 40
Jonathan Said and Khwima Singini
Since independence Malawi has failed to translate initial periods of economic growth (growth acceleration regimes) into sustained long-term growth (growth maintenance). This paper assesses why this has been the case and what feedback loops have existed between growth, the political settlement and institutions. This is done by assessing Malawi’s: (1) deals space – are business-government deals credible and open to many, or not credible and closed? (2) rent space – where do political elites source money for their political objectives? (3) product space – to what extent does Malawi’s product base organically spur economic growth? Malawi’s long-term growth problem is that the rent space for the political elite remains too heavily tied to the ‘powerbroker’ business elite that have a low propensity to invest and support exported-oriented reforms. There is relatively little alignment of political rents to ‘magicians’ (value adders and job creators), rentiers (except mining and cotton) and workhorses (the poor). Developmental interest is increasing, though this comes about in dribs and drabs when politicians want growth, so that support is stop-and-go and lacks the continuity necessary to overcome major structural challenges to structural transformation and growth maintenance. This suggests that the nature of growth going forward will be volatile, with a number of booms and crises in short-term growth. While long-term growth is likely to remain positive, driven by improvements in technology, the financial sector, energy and regional integration, it is unlikely to be strong enough in the next eight years to support the welfare requirements of the burgeoning population so as to allow Malawi to maintain high long-term growth. Altering this route would probably involve the disintegration of Malawi’s deeply embedded patronage and clientelist political settlement through the emergence of a developmental dominant party or the easing of political pressures currently caused by a five-year democratic term in which the largest voter group is rural, subsistence farmers, who are too far removed from the government’s policy-making process.