THE DEVELOPMENT OF INSTITUTIONS AND THE INSTITUTIONS OF DEVELOPMENT

1. THE DEVELOPMENT OF INSTITUTIONS AND THE INSTITUTIONS OF DEVELOPMENT DSA PRESENATION 8th NOVEMBER, 2008

2. THE IPPG RESEARCH CONSORTIUM • DFID FUNDED: £2.5m • SOUTHERN AND NORTHERN PARTNERS • FOCUS ON INSTITUTIONS WHICH PROMOTE OR HINDER PRO-POOR GROWTH (PPG) • BROAD APPROACH TO INSTITUTIONS • Ensemble of political and social institutions and processes which affect economic institutions and processes. • RELATIONS and INTERACTIONS OF POLITICAL AND ECONOMIC INSTITUTIONS AND THEIR EFFECTS • CROSS-DISCIPLINARY – A CHALLENGE

3. THE BIG IDEA • THE INTERACTIONS OF FORMAL AND INFORMAL POLITICAL and SOCIAL INSTITUTIONS WITH ECONOMIC INSTITUTIONS • INSTITUTIONALISM HAS STRONG EXPLANATORY TRACTION

4. SCOPE OF WORK – Africa, India and Latin America: some examples • FORMAL-INFORMAL LINKS IN NIGERIAN AGRIBUSINESS • ACCESS TO PUBLIC INFRASTRUCTURE AND GOVERNANCE IN PERU • LEGISLATIVE DEMOCRACY AND PRO-POOR GROWTH • FARMER ORGANIZATIONS AND AGRICULTRAL INSTITUTIONS IN MALI • CONTRACTS AND ENFORCEMENT IN POST-REFORM INDIA • INDIAN FOREST RIGHTS ACT AND THE POOR • STATES AND FARMERS IN AGRICULTURAL DEVELOPENT IN BOLIVIA AND NEW ZEALAND (sw) • INSTITUTIONS AND MORALITY (jm) • STATE BUSINESS RELATIONS – MORE SHORTLY

5. KEY QUESTIONS • HOW DO INSTITUTIONS FORM? • HOW DO INSTITUTIONS INTERACT • Political, social, economic • HOW DO INSTITUTIONS CHANGE? • HOW ORGNIZATIONS AND INSTITUTIONS INTERACT? • THE GROWTH + PPG EFFECT OF INSTITUTIONS? • THE POLITICAL PROCESSES WHICH SHAPE INSTITUTIUONL FORMATION AND CHANGE

6. INSTITUTIONS? • DEFINED – Durkheimian/Northian model: Rules of the game • FORMAL – laws etc. ‘parchment’ (tend to be public) • INFORMAL- norms, conventions (tend to be private) • ECONOMIC: help to solve important economic problems – e.g. property rights, transaction costs, coordination problems: formal and informal • POLITICAL: distribute power: access, use, control: formal and informal • (ALSO MORAL, SOCIAL AND CULTURAL) JM

7. ORGANIZATIONS? • DEFINED –’players’ • Sub-set of institutions • Autonomy, members, hierarchy • FORMAL – political parties, companies, clubs • INFORMAL – mafia, guanxi, factions, secret societies

8. ORGANIZATIONS AND INSTITUTIONS • ALL THESE INTERACTIONS SHAPE OUTCOMES • NEED TO GET AT THE UNDERLYING POLITICS AND POWER RELATIONS WHICH SHAPE INSTITUTIONS • MEASURE THE EFFECTS ON GROWTH

9. SOME THEMES • “Organizations are the key to understanding how societies perform, and institutions are the key to understanding how organizations form and behave” (North, Weingast and Wallis) • Political power (de jure and de facto) shapes economic institutional forms and practices (Acemoglu et al)

10. METHODS • ECONOMETRIC TECHNIQUES (KS and dw teV) • ANALYSIS OF ECONOMIC INSTITUTIONS (SW) • HISTORICAL INSTITUTIONALISM

11. HISTORICAL INSTITUTIONALISM: key ideas/concepts • MARX AND WEBER • power shapes institutions, BUT • institutions shape its use and control • PATH DEPENDENCY • CRITICAL JUNCTURES • PUNCTUATED EQUILIBRIUM

12. STATE-BUSINESS RELATIONS (SBRs) • ECONOMIC AND ECONOMETRIC ANALYSIS (KS and DW te Velde) • POLITICAL ANALYSIS

13. POLITICS OF SBRs: KEY QUESTIONS ASKED • POWER, IDEOLOGY, STRUCTURE AND ORGANIZATION OF THE STATE AND REGIME • ORGANIZATION, IDEOLOGY AND STRUCTURE OF BUSINESS SECTOR • INSTITUTIONS GOVERNING SB INTERACTIONS: • Positive or negative synergy? • Trust, transparency, credibility, consistency? • Corporatist? Collusive? Predatory? State capture?

14. ILLUSTRATED IN STATE BUSINESS RELATIONS IN MALAWI - politics • BANDA ERA • PARTY-STATE DOMINATION • PREDATORY STATE (PRESS Corporation) • Dependent, weak, penetrated private sector • Weak Business Association (MCCCI) • DEMOCRATIZATION (Critical juncture? • Little change • Path dependency

15. CONTRAST WITH MAURITIUS • GROWTH COALITION • State, business, sugar interests • Institutionally structured cooperation • STATE AND BUSINESS COMMITMENTS AND COMMON STRATEGY • REMARKABLE GROWTH • HAS TO BE EXPLAINED POLITICALLY

16. THE EFFECTS OF STATE BUSINESS RELATIONS ON ECONOMIC GROWTH IN AFRICA • Researchers have long examined the factors that contribute to economic growth. • The new challenge that the IPPG programme has addressed is to examine how state–business relations (SBR) affect economic performance in sub Saharan Africa • We have undertaken the measurement and the growth enhancing impact of SBRs both at the macro (country) level and the micro (firm) level for a large number of African countries.

17. Measuring SBRs Macro-level: In order to measure SBRs and assess its importance for economic performance, we need to measure the essence of SBRs. • the way in which the private sector is organised vis-à-vis the public sector • the way in which the government is organised vis-à-vis the private sector • the practice and institutionalisation of SBRs • the avoidance of harmful collusive behaviour. Micro-level: Anorganised private sector, which is measurable at micro level as membership of business associations.

20. The Effects of SBRs on Economic Growth • We used the index developed on the basis of measuring SBR and estimate standard growth regressions in dynamic panel form for 10 African countries over the period 1970-2004 using annual data, controlling for more conventionally used measures of institutional quality in the empirical literature. • The results show that effective state-business relationships contribute significantly to economic growth in Sub-Saharan Africa – countries which have shown improvements in state-business relationships have witnessed higher economic growth, controlling for other determinants of economic growth. • The index of SBRs has advanced significantly and began to improve before the pick up in growth (though different conditions applied in different countries).

21. Micro Level Evidence • The micro level regressions for Zambia used the enterprise survey data of the World Bank Group. • We find that membership of a business association enhances Zambian firm performance in the form of productivity improvements in the range of 37 to 41 percent. • Subsequent work used the enterprise survey data of the World Bank Group for seven African countries, independently as well as in a panel of African firms. • The results show that being a member of a business association improves firm performance in the form of total factor productivity improvements on average between 25 to 35 percent. • This finding is robust to including other variables that are commonly used to describe the investment climate, and robust to using estimates of productivity that account for endogeneity problems.

23. The Institutional Features of Uneven Territorial Development in Latin America • Economic and social inequalities are deep rooted characteristics of Latin American societies. • Less attention paid in the literature to differences in economic inequality across regions within the continent. • Yet inter-regional within-country inequality can explain a substantial proportion of overall economic and social inequality in Latin America. • A set of IPPG projects conducted by the IPPG partner, RIMISP, have examined the institutional architecture that given rise to different outcomes in poverty reduction and economic growth in territories within countries, with case-studies of uneven territorial development being conducted in Chile, Ecuador and Peru .

24. Main Findings of the Uneven Territorial Development research • Complex economic institutions such as the use of contracts in small-holder agriculture emerge in the territories that witness pro-poor growth, and these complex economic institutions give rise to more dynamic agricultural development in these territories. • However, not all households benefit from the emergence of these new economic institutions. • The ability of some households to access the new institutional arrangements seem to be related to initial endowments in land and literacy along with supporting political institutions that allow these households to engage in collective action. • Both economic and political institutions seem to matter in explaining uneven territorial development in Latin America, and it is in their interaction that one can see why some regions do better in inclusive growth than others.

25. CONCLUSIONS • PREMATURE FOR BIG GENERALIZATIONS, but • POWER OF INSTITUTIONAL ANALYSIS • CROSS-DISCIPLINARITY • FORMAL-INFORMAL INTERACTIONS VITAL • ORGANIZATIONS AND INSTITUTIONS • INTERACTIONS ACROSS PUBLIC PRIVATE DIVIDE

26. Morality and Institutions: an exploration John Morton, NRI, University of Greenwich and IPPG Consortium

27. Starting points • Literature on the importance of trust to development of markets • But also intuitions about morality, or the sense of “justice” or “fairness”, acting as a brake on, or as a basis of a critique of, market institutions • The latter, and particularly the moral judgements of the rural poor, are the main focus, but the paper is exploratory and a work in progress

28. Three general comments • Moral judgements made in non-western societies stem at least partly from “traditional cultures”, and that they show very wide and surprising variations • They often contradict conceptions of morality in “western society” in general, the orthodoxies of development agencies, and the assumptions of economics • These judgements and contradictions with development discourses often have practical impacts for the performance of economic institutions at local-level - various sorts of institutional failure, unintended effects of institutions and/or open resistance to them - and ultimately for growth

29. Structure of the presentation • Extended case-studies • Other themes and examples • Exploration of the literature • Moral economy and social protest • Social anthropology • Economics, economic sociology and political economy • Conclusions and implications

30. Extended case-studies • Restrictions on exchange among the Tiv – scorn for those who sold prestige goods for subsistence goods • Shop-keeping on the Red Sea Coast: Prohibitions on usury, high expectations of easy credit, widespread and tolerated business failure • Moral judgements on the management of an irrigation scheme in Mali

31. Other themes and examples • Expectation of mutual aid between neighbours – can mobilise or deter investment • The just price and mistrust of intermediary trade • Attachment to non-market models of land tenure • Refusal to accept the rules of official co-operatives • Acceptance of “corruption” in the bureacracy

32. Some emerging methodological points • Need for ethnographic context • Difficulty of separating “moral” judgements from self-interest: strategic nature of moral utterances • Difficulty of distinguishing group solidarity, group self-interest, and compliance with group norms • Difficulty of disentangling informant judgements from analyst judgements

33. Moral economy and social protest • EP Thompson’s “The Moral Economy of the English Crowd in the 18th Century”: • Social restraints on profit and on exporting local produce • Inspired popular protest (“riots”) and governed their conduct • For Thompson, an economy composed of morals and an economy that was good • Scott’s “The Moral Economy of the Peasant”: • A morality emphasising avoiding destitution in bad years over maximising income in good years • Explains peasant acquiescence in institutions like sharecropping, and resistance when the moral economy is breached • Moral economy viewed as determined by production risk and unmediated by culture

34. Morality in anthropology: definitions • “Morality” has rarely been an explicit or central concern of social anthropology • A shortage of anthropological literature on how to analyse, contextualise and discuss moral judgements made at an everyday level • If defined too narrowly “morality” is of limited use for comparative work, if defined too it broadly becomes subsumed by “culture” • Pocock follows Midgley: morality is a way of reasoning with a certain source of seriousness and importance and a direct connection to our central purposes • This blocks an attempt to equate the moral with the universal, or deny the title of morality to the solidarity of small groups • Allows a view of morality that goes beyond systems of rules

35. Morality in anthropology: away from norms • Humphrey; “the Mongolians’ construction of morality places greater weight on the ‘practices of the self’ than on the issues raised by following rules. One of the most fundamental ways of cultivating the self is through the discourse of exemplars” • Jakobson-Widding: overlap with “manners”, even when the stakes are high • But anthropological literature gives a sense of stressing continuity over change

36. Economics, economic sociology and political economy • Issues of morality are a subset of broader issues of relationship of economy and society • Two contrary trends: • Critique of neoclassical economy through the concept of embeddedness: often starting from a “Great Transformation” from pre-market to market societies • NIE extending economic reasoning into institutional and social analysis

37. New Institutional Economics • Institutions are “rules of the game”, evolving as “efficient solutions to economic problems” • This invokes questions of morality as compliance with these rules or norms • Williamson and Ensminger talk of levels of institutions, from formal to “informal institutions, customs, traditions, norms, religions”, with feedback loops and associated timescales for change • In this view moral norms are themselves institutions, but informal, deep-seated and slow-changing • But can morality be subsumed in “norms” (see the anthropological literature) and therefore in “institutions”? • Are moralities what bind institutions to people’s sense of what is important, serious and central to them – thereby giving institutions traction?

38. “Embeddedness” and moral economy • Embeddedness of economy in society associated with pre-”Great Transformation societies”, but has relevance to market economies • But debates on usefulness of “embeddedness” metaphor; does it understate the constitution of the economic by the social and cultural? • Does it downplay the morality of moral norms, and the importance of moral economy as a normative critique?

39. Trust and the development of markets • A general theme of trust as a pre-condition for markets • A distinction between “selective”, small-community trust and generalised trust • Is generalised trust a slow-changing cultural substrate and a precondition for building effective large-scale markets? • Or can it be built by effective and well-governed institutions?

40. Morality in research and the need for reflexivity • An analysis of morality cannot bracket out the analyst’s own moral values • This is accentuated in development, where moral visions are central but often obscured • Specific examples within agricultural/rural development: do we defend smallholders and their values or look to a massive shift to commercial agriculture in the name of prosperity and feeding a growing population? • But even if we do not share smallholder moral visions, we must still contend with them as social facts

41. Conclusions… • Two concerns within development • Morality/trust as a foundation for a market economy • Moralities as critiques and brakes on the development of market economies, and of bureaucratic development • Morality is diverse in content, “style” and overlaps with other domains of society. It is also about agency, not just about compliance. • What is defining is seriousness and centrality – this is what gives morality traction • The study of morality must be reflexive

42. …and implications for development research • Need for an anthropological approach – but that has costs • Need for attention to language and its strategic uses • Need for “thick description”, case-studies and narratives • Need for organising research on morality within broader development research endeavours, but with its own reflection on methodology