Political Economy and Growth Philip Keefer Development Research Group PREM Growth Course 26 March 2009. Why not just focus on economics? . Partial reforms don’t deliver big growth bang for buck. Economic explanation: Wrong reforms (e.g., not the “bottleneck” reforms).
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Partial reforms don’t deliver big growth bang for buck.
Growth requires: Policies that give a substantial fraction of entrepreneurs access to
land and transportation
regulatory approvals and security from opportunistic behavior by government officials
When do politicians pursue these?
When political success depends more on broad public than on special interest support
When they can align incentives of public officials who implement these policies.
2 key political market imperfections (PMIs): lack of information; lack of credibility (Keefer and Khemani, WBRO 2005)
Uninformed citizens can’t hold governments accountable for poor performance.
Discourages pro-citizen (pro-growth) policies (no political credit)
Encourages pro-special interest policies (no blame).
e.g., Grossman and Helpman: special interests finance advertising to reach uninformed citizens.
Low political penalty for reneging on promises. Why?
Institutionalized parties allow broadly credible promises:
Instill collective responsibility;
Generate reputational costs from reneging
Give governments leverage over officials:
harder for officials to play divide and conquer;
appointments less likely to be cronyistic;
government-official “contracts” more credible.
Parties institutionalized if:
Voters vote for party, not just candidates.
Parties raise money.
Party members can replace party leaders.
Per capita growth ~2.5 percentage points higher in democracies with programmatic parties.
Autocrats who want to pursue growth need to bring government officials on board.
But how can they credibly promise to reward officials for success?
Institutionalization (of parties, bureaucracies, military) (Gehlbach and Keefer).
Autocrat allows large sub-group of citizens to organize
(60 million members of the Chinese Communist Party)
Increases their ability to overthrow autocrat if he reneges.
Increases their willingness to invest.
Autocrat can write pro-growth contracts with party members
Benin, Ghana: CEMs concerned with growth. Key concern: What are the incentives of political decision makers to pursue growth?
MENA: Flagship on the private sector in the region. Key concern: What are the incentives of political decision makers to encourage private investment?
African politics often characterized as “neopatrimonial” or “clientelist”.
More likely when citizen information low and no loss of credibility from slow growth.
Benin exhibits both of these traits.
Afrobarometer question on whether fees are obligatory in public primary schools, public health clinics.
65-75% answered correctly in 17 countries other than Benin.
31-51% answered correctly in Benin.
Many media outlets, but . . .
Little spent collecting news about government policies.
Governments are willing to apply pressure against critical media.
Parties not programmatic (2006, Database of Political Institutions):
60 percent of biggest parties in all democracies are programmatic.
None of Benin’s parties.
Parties unstable (not institutionalized).
~100 parties disappeared in 2005, ~75 new parties in 2007.
Youngest governing coalition (FCBE) won the most seats in 2007; oldest (PRD) lost a seat.
Citizens indifferent between parties when parties not programmatic/institutionalized.
66% of 1200 Benin respondents to the Afrobarometer survey indicate they do not feel close to any party; twice as many as in Ghana.
Politicians know parties don’t matter, so they switch often.
“I prefer to start my own party rather than accept a subordinate role in the party of another.”
Consequence: 95% of Beninese respondents: politicians rarely or never keep their promises (Ghana: 82%).
Presidents are the key decision makers in Benin.
Absence of parties means campaigns based on individual, not party characteristics.
Rely on clientelist payouts to voters and donations from special interests: attenuates incentives to pursue growth.
Difficult to govern: Can only trust those vested in president’s success since no institutionalized party.
Rules in Benin marginalize legislators.
President has sole authority to propose budgets AND (very unusual): de facto authority to declare budget amendments by deputies to be invalid, b/c cost implications insufficiently documented.
President of the National Assembly almost entirely controls agenda of Assembly and (very unusual) 2/3 vote necessary to remove him.
Deputies indicate little legislative oversight of budgets, little interest/capacity in advancing policy agendas.
Citizens have no reason to hold deputies accountable for growth failures if they’re essentially powerless to influence policy.
Increase vote threshold for parties
Increase responsibility of National Assembly for budget
Increase collection and dissemination of information about gov’t decisions.
Start with budget – currently even the National Assembly is poorly informed about budget implementation.
Make it easy for media to report on government performance.
Improve the quality of education
Current policy emphasizes quantity
Again, political market imperfections:
Afrobarometer 2005: 60% NEVER get news from newspaper vs. 14% in South Africa
Few, stable parties in Ghana (in contrast to Benin)
Quality and quantity of education
Incumbent firms favored
Incumbent workers favored
Government can’t make credible commitments to new entrants.
Source: Kee, Nicita and Olarreaga 2006
Sadaam Hussein replaced successful officers with incompetent loyalists, established competing armed forces,
Similar to observer claims about military organization throughout the region (Egypt, Syria).
Lack of intra-elite cohesion
Low growth, but discourages overthrow
Redistribute to key interests to forestall revolt.
The civil service overseeing regulatory activities can be transparently and meritocratically recruited without increasing coup threat.