In the third blog post of this five-part series, Professor Jean-Paul Faguet uses Bolivia’s experience to derive lessons for the West.   

Click here to hear Duncan Green’s interview with Jean Paul Faguet on what Bolivia tells us about rapid collapses of Political Party systems.

PART 3: Four lessons for the West

What lessons does the Bolivian experience hold for Europe, the UK and the US? A first insight is that political party systems, even those that appear successful and stable, can and do fall apart once they lose their moorings in the key issues and conflicts voters care about most. Stories of political collapse tend to be told in terms of dramatic events – wars, economic crises. These are not irrelevant, but they are also not essential. Politics can and do collapse in peacetime, and when the economy is boring. What is essential is the link between parties and social cleavage. Where it is missing, parties are doomed.

A second insight concerns the nature of these cleavages. The old worker-capitalist divide on which politics in the West has been based for a century or more appears increasingly obsolete. As manufacturing and heavy industry decline, they take with them a class of workers who strongly identify with each other against a common adversary. The changing nature of work, from a full-time, long-term commitment between employers and workers, to flexible, short-term ‘gigs’ with few benefits or guarantees, plus increasing levels of informality across rich and poor countries, is further undermining the traditional opposition. We see this throughout Europe, where parties founded to represent industrial workers cannot hope to win elections, or even retain a purpose, when “workers-as-workers” shrink to a small fraction of the economy. This is why the current turmoil in France’s Socialists is not circumstantial, but existential, and also explains many of the current ructions in UK Labour. The German Social Democratic, Dutch Labor, and other European pro-worker parties face similar long-term declines in their core vote.

American politics was historically different. The politics of a country born of very different circumstances, and with a federal structure that added new states over two centuries, was traditionally less disciplined that Europe’s and fudged ideological boundaries far more. Only in recent years have US parties aligned programmatically, with Republican and Democratic legislators and policy ideas aligned more coherently on the right and left respectively, with much less overlap than before. It is ironic that their previously more diffuse ideological stance would have left them in a stronger position vis-à-vis the cleavage shift from below they now face.

The flip side of this point is that the worker-capitalist divide was far less solidly grounded in Bolivia, of course, than in most Western countries, and politics far less institutionalized. Hence Western party systems are unlikely to collapse as suddenly as Bolivia’s did, although individual parties could.

Thirdly, Bolivia illustrates how hard parties find it to change their core values and positions, because they have invested so much in building reputations based on them. For different but complementary reasons, both politicians and activists oppose large shifts. Hence as society changes – even as a result of policies they implemented – parties tend to get left behind. Political-system change tends to take the form of replacement: new parties and movements arise and push aside established, traditional parties that are no longer relevant.

When established parties fail, what is likely to replace them? In which underlying social cleavage will a new kind of politics anchor itself? This is difficult to predict for societies where the transition is less advanced. Perhaps a new economic divide, based not on workers vs. capitalists, but some other opposition that has importance and meaning to large numbers of voters? Such a cleavage would need to be not only relevant, but competitively compelling to a large segment of the population. ‘Competitively compelling’ means attractive to voters, as political entrepreneurs create new movements and compete for adherents. Their narrative, which privileges one particular cleavage over others, must be more compelling than the narratives other parties base on alternative cleavages. And today the most compelling narratives in the West, as in Bolivia, revolve around race, ethnicity, and place.

The new politics will play out differently in different countries depending on their histories and social compositions, and on how the identitarian cleavage interacts with a distinct geographic cleavage. In countries where no group is dominant, party systems may gel around identity per se, with parties representing particular groups, perhaps with larger groups at either end and smaller coalition-makers in-between. But where one group is a majority, a new axis of competition may emerge linking this group’s party at one end with a cosmopolitan party that denies, or seeks to minimize, identity differences at the other. We see this in Europe and the US, where cosmopolitan, non- or multi-identity parties are strongest in large cities and their suburbs, while nativist, populist politicians fare best in rural areas, towns and small cities. Suitably adapted, we see it also in Bolivia, where indigenous politics is strongest in the western highlands, the seat of Bolivia’s ancient civilizations, while an opposition far less invested in race or ethnicity is strongest in the migrant-rich Eastern lowlands. This is the fourth insight.

In historical terms, this is an extraordinary reversal. The Western Enlightenment believed in the equality of mankind. Liberalism sought to overcome identity-based cleavages. In countries like the US and France, liberals built not just politics, but national identities based on shared ideals, and not skin color or cultural traditions. Parties arrayed on a left-vs-right axis were accessible to everyone, regardless of identity. For decades we have taken this as given. But it is useful to remember that an open, inclusive politics in a multi-ethnic democracy is a hard thing to pull off. The danger now for the West is that a new politics is forged around identitarian cleavages of race, religion, ethnicity, and language. This would vindicate Huntington’s “clash of civilizations” thesis (1996), and possibly mark the failure of the Liberal project.

Part 3/5 of the blog series will be posted tomorrow and will use Bolivia’s experience to derive four more lessons for the West. The five part series is based on a recent article published in the Journal of Democracy.

Professor Jean-Paul Faguet (@jpfaguet) works at the frontier between economics and politics, using quantitative and qualitative methods to investigate the institutions and organizational forms that underpin development. Specific fields include political economy, comparative politics, institutional economics, and development economics.            

The views expressed in this post are those of the author and in no way reflect those of the International Development LSE blog or the London School of Economics and Political Science.

In the fourth blog post of this five-part series, Professor Jean-Paul Faguet uses Bolivia’s experience to derive four more lessons for the West.   

Click here to hear Duncan Green’s interview with Jean Paul Faguet on what Bolivia tells us about rapid collapses of Political Party systems.

PART 4: Four more lessons for the West

Fifth, any new politics of identity is bound to be far more exclusive, built on categories that only some can access. This would represent a danger not just for affected societies, but for democracy as an ideal. The reason is that the sorts of compromises amongst competing factions that are necessary to make democracy work are far easier to find in economic space, where the main factions define themselves and their principal interests in economic terms. This is because technological and organizational change have a habit of increasing the size of the economic pie, facilitating positive-sum policy options that are mutually beneficial. For example, the acute revolutionary pressures faced by many Western countries in the 19^th century were allayed in large part by education, health, and welfare reforms. These hugely improved workers’ lives, but at the same time made them, and hence firms, more productive. Workers benefited and capitalists did too.

Mutually beneficial compromises are harder to find in issue-spaces defined by identity. Divisions are more rigid, and rewards more often positional, measured in terms of status. As a result, such contests tend to be zero-sum. And the definition of zero-sum games is that winners win at the expense of losers. Consider, for example, special preferences for government jobs in India and Malaysia. If Dalits and ethnic Malays are preferred, they must, by definition, be preferred over other groups; some must lose for others to gain. Parties that advocate for one group’s rights cannot simultaneously favor others too. The margin of positive-sum games is smaller in this sort of politics, and so the margin of conflict grows.

Sixth, what are likely triggers of political re-alignment in the West? In Bolivia, the trigger was a deep institutional change: radical decentralization. This significantly changed the country’s administrative arrangements, created a large new category of politicians, and transformed political incentives throughout the system (Faguet 2016). In the UK, Brexit is a larger institutional change likely to cause even greater political, economic, and administrative upheaval. Uncertainty will reign, first about what the new rules will be, and then about their likely effects, for years. The incentives of economic and political actors will change significantly; many will lose and some will win. In EU countries (and their neighbors), the collapse of the euro, or worse of the EU itself, would surely have similar effects. Such environments are treacherous for established politicians and parties. They present a wealth of opportunities for political entrepreneurs to exploit voters’ fears to disrupt the establishment and launch new discourses and parties in new dimensions of political contestation. Other triggers may yet assert themselves in Europe. But for the moment, these are the two to watch.

Seventh, how will new parties emerge? In Bolivia, as we have seen, the process was bottom-up, emerging first in rural villages and towns. This is less likely in Europe and the US, where far richer societies organize themselves differently and social relations follow different patterns. As many researchers have noted, “social capital” increases in Bolivia as one descends the social pyramid towards the poorest and least educated (Albó et al. 1990, Faguet and Ali 2009, Healey 1987). This is very much unlike the West, where the poorest in society tend to be atomized – beggars in the street – and social organization and trust rise with income and education.

In the West, by contrast, modern technologies of communication and social media have penetrated society to a much greater extent. Here, bottom-up emergence could take the form not of village association, but digital intermediation. Facebook, WhatsApp, and the rest have already shown powerful effects organizing demonstrations, affecting electoral outcomes, and even overturning governments. In the West, nativist-populist politicians have proven especially adept at using social media to identify and mobilize supporters by spreading atavistic ideas about identity, race, and the dark threat of the unknown. We see this clearly in the rise of figures like Le Pen, Trump, and Wilders. Such beliefs are easier to sustain in the cyber-vacuum of the internet, where wild-eyed accusers never quite face their accused. The dangers to the West if this type of connectivity supplants the traditional, face-to-face sort are manifest.

Eighth, why is political realignment around identity good for Bolivia, but likely bad for Europe and the US? The first answer is that we cannot yet tell if it will be good for Bolivia. The events following realignment have so far been positive because Bolivia entered the process in a deep, deep hole. It was a poor, highly unequal society, in which a coherent, historically dispossessed majority continued to be politically excluded and economically disadvantaged by a small minority. Overturning that required a kind of politics suited to the society’s principal cleavage – race, ethnicity, and language. The new politics produced a regime that proved surprisingly prudent on the macroeconomic front, and was stunningly lucky internationally, coinciding for most of its life with a natural-resource boom that swiftly lifted its boat. But tough times reveal the true character of any government. In Bolivia, this test is underway now.

The deeper answer is that the implications for the West are as different as these societies and their challenges are from Bolivia’s. The likelihood is not that the “wrong politics” is replaced with one that reflects the society better, as in Bolivia, but rather that a cleavage is created where currently only differences exist. The risk is that the politics of identity will take one of the many ways in which citizens in the West differ from one another and, through sharp, polarizing, and racist language, create a new, hard social cleavage that divides us. Remember that not so long ago, both Catholics and Jews were American Others – foreign, poor, untrustworthy – as unfit to join business associations and country clubs as to occupy the White House. Now both are mainstream liberals, conservatives, establishment stalwarts, and Americans. The mantle of otherness has moved on. That it could is a tribute to a 20^th century politics that did not ossify such differences, did not make them essential. The demise of this politics, and the rise of identity clashes, threatens to alienate us from each other even as it removes the means for finding agreement. It is a sad and dangerous turn for the West that may forever change who we are.

Part 5/5 of the blog series will be posted tomorrow and will apply the analysis of structural change to the contrasting cases of Evo vs Trump. The five part series is based on a recent article published in the Journal of Democracy.

Professor Jean-Paul Faguet (@jpfaguet) works at the frontier between economics and politics, using quantitative and qualitative methods to investigate the institutions and organizational forms that underpin development. Specific fields include political economy, comparative politics, institutional economics, and development economics.            

The views expressed in this post are those of the author and in no way reflect those of the International Development LSE blog or the London School of Economics and Political Science.

In the final blog post of this five-part series, Professor Jean-Paul Faguet applies the analysis of structural change to the contrasting cases of Evo vs Trump.   

Click here to hear Duncan Green’s interview with Jean Paul Faguet on what Bolivia tells us about rapid collapses of Political Party systems.

PART 5: Evo vs Trump

Lastly, what do the sweeping changes that have transformed Bolivia teach us about Trump? Here we see two strongmen, and a study in opposites. Evo Morales is, for better or for worse, an experienced politician who rose from peasant leader, through local government and Congress, to become president of Bolivia. His rise was swift, unusual, and shocked the political system. But he was no political neophyte. He had deep roots in the social organizations that have come to define his country’s politics. Donald Trump, by contrast, is a self-created, top-down political phenomenon with no roots in social organizations and no experience of politics or government.

Trumpism is a triumph of marketing and social media, but ultimately directionless. Unlike Morales and the MAS, who together transformed Bolivia’s politics, economy and society, Trump will likely be a convulsion that destroys much but leaves little behind that is new. His triumph is nonetheless a powerful sign of the advanced rot in the Republican and Democratic parties, and in the type of politics on which their continued existence depends. The resentments and frustrations that Trump so skillfully taps appear strongly rooted in nascent cleavages in American society, themselves products of globalization and automation. And these look like sharpening as the informatics revolution runs its natural course.

Like local politicians in Bolivia, Trump did not discover this analytically, but rather by trial and error, tweeting, stumbling and groping his way to victory. The dark carnival of his presidency should not blind us to the fact that the deep forces he rode to power are real. They will likely undermine the parties that dominated the 20^th century and shape the politics of the 21^st. Even as Trump burns itself out, these forces will persist. Two broad options seem likely: Either responsible politicians articulate coherent platforms around these new cleavages, or a new, possibly – dangerously – more capable strongman rides them to power. Where are these responsible politicians? And who might the next horseman be?

This five part series is based on a recent article published in the Journal of Democracy.

Professor Jean-Paul Faguet (@jpfaguet) works at the frontier between economics and politics, using quantitative and qualitative methods to investigate the institutions and organizational forms that underpin development. Specific fields include political economy, comparative politics, institutional economics, and development economics.            

The views expressed in this post are those of the author and in no way reflect those of the International Development LSE blog or the London School of Economics and Political Science.

MSc Media, Communications and Development student, Anoushka Gandhi, reflects on The Great Development Dialogue 2020 (listen again), a yearly event sponsored by the LSE’s Department of International Development to explore some of the most vexing questions in development from a cross-disciplinary perspective, and to shine a light on what the disciplines can and cannot tell us about economic and social development.

The 2020 Great Development Dialogue panel. Photo credit: LSE ID

Development is an interdisciplinary field because it touches so many aspects of everyday life that are not merely economic, but cultural, social, and most importantly, intersectional. The Development Dialogue of 2020 at LSE sought to represent the complexity of this field and about the question of land in its panel of academics. The talk featured Professor Jean-Paul Faguet as chair, with Professor Maitreesh Ghatak and Dr Gharad Bryan focusing on the economic perspective of the debate, Professor Kathryn Hochstetler focusing on political science, and Professor Deoborah James and Professor David Graeber focusing on the anthropological questions.

There were a number of stimulating questions asked during the discussion that elicited multiple responses from each participant, bringing to life new aspects on the question of land as an important resource and cultural signifier that had bearing on its role in development. Not only did Professor Faguet ask questions about the importance of land, but also on how each discipline would approach the study of land. What do different disciplinary methods bring to light about the same resource?

Professor Maitreesh Ghatak focused on land as an asset whose value can be measured as all other assets can be valued in the field of economics. In developed countries the value of land as an asset is falling, whereas in developing countries like India and China, land is still considered an important source of income. Professor Ghatak pointed out that in countries where there is no social welfare system, land acts as an asset that substitutes for all costs associated with welfare. Thus, the significance of land in this respect shows that its role changes as a country develops and its economy goes through cyclical changes. On the other hand, anthropologists such as Professor Deborah James pointed out that land is about the relationships between people. While these can be coercive relationships, as between governments that want to industrialise and the farmers that stand in their way (for reasons Dr. Ghatak stated above), land is also a signifier of prosperity and respect. Professor David Graeber also made the important distinction between land as a productive asset and land as a cultural practice – people often buy plots of land to be buried in, or to safeguard the remains of their ancestors. In the case of South Africa, the division of access to land by race prior to Apartheid, and the returning of land “to the people” after Apartheid was symbolic (although rife with complications). In this case, as Professor Hochstetler pointed out, questions of land inequality or access becomes indicative of democractic practices.

In carrying on the debate, Professor Faguet also asked questions about the different disciplines’ views on Universal Basic Income, the study of culture from economic perspectives, and the anthropological view of development. This multifaceted questioning of the many different aspects that are shaping the field of development showed that while the answers may seem simple at first, different disciplinary lenses have different goals, and this changes the very outcomes of what they study.

In the Development Dialogue of 2020 land quite literally becomes the site of multiple important debates, and that the number of stakeholders that land becomes vital to increases as we historicise questions of ownership, access and cultural significance. Taking all of these into account creates a narrative and strategy for development workers that provides a holistic picture of contexts that development takes place in. Land is not a monolithic asset, and development practices centred around it must reflect this dynamicism.

Anoushka Gandhi is a postgraduate student currently studying MSc Media, Communications and Development at LSE. Her main interests include postcolonial critiques of development, the importance of framing in development communications, and studying structural inequalities and the problematics of the North/South divide in studies of communications, culture, development and other fields.

The views expressed in this post are those of the author and in no way reflect those of the International Development LSE blog or the London School of Economics and Political Science. 

Professor in Practice, Duncan Green, Zooms In with department scholars to find out what they’re up to in lockdown and how their research relates to the Covid-19 pandemic. The fourth Zooming In episode is with Professor Jean-Paul Faguet, who looks at examples of decentralised and centralised states around the world and compares the varying degrees of success they have had in dealing with Covid-19.

Professor Jean-Paul Faguet explains the error behind a just-published ‘Corrigendum’ to a co-authored paper on land distribution in Colombia, how the error was discovered, the extensive work the authors did to correct it, and what the implications are for their results.

It takes a certain thickness of skin to be an academic.  You have an idea, pursue it for months or (more often) years gathering and analysing evidence, connecting it to theory.  You write a paper and start presenting it to colleagues… who tear it to shreds.  Often they’re nice about it; sometimes not so much.  When you’re young it can really hurt.  But exposing your ideas to expert criticism is the point.  The honest truth is that your ideas improve enormously the more they face the dispassionate gaze of knowledgeable colleagues.  So you keep doing it, over and over, and at some point you freeze on the stage a little less often.  By the time you’ve published your paper in good journal (probably after several rounds of rejections), you can be forgiven for relaxing.  That paper you revised 9 or 17 times is done.  It’s published!  People are starting to cite it in their research.  Colleagues might disagree about interpretations or implications, but at some basic level the paper is correct.  And so you move on to your next idea.

That was us a few months ago, when colleagues at the Universidad EAFIT in Medellín wrote to enquire – very politely – whether some data in our 2020 World Development paper might be incorrect.  World Development is widely considered the leading journal in development studies, and is highly regarded in political science, economics, and other fields as well.  If true, this was a very visible blunder.  Not the sort of thing academics look forward to.

My co-authors and I looked into the matter very carefully.  The bottom line is that our EAFIT colleagues, Germán Tabares and Dr. Thomas Goda, were correct.  We made a mistake.  This post is to thank them and detail what we did to correct the mistake in a slightly longer format than the Corrigendum just published in World Development.  Our gratitude extends to the journal as well.  World Development’s requirement that we post replication data alongside the paper made this possible.  In the end, this is hopefully a constructive example of the academic system working as it should to challenge understandings and perfect our knowledge.

What’s this all about, anyway?

The paper examines Colombia’s vast land distribution scheme, which has been operating in one form or another since independence in 1821.  During that time, Colombia transferred into private hands public lands equivalent to the entire United Kingdom, twice South Korea, or six times Switzerland.  Officially at least, the process was meant to reduce landlessness and poverty.  And yet Colombia today retains one of the highest concentrations of land ownership in the world.  How can both facts be true?

Our paper shows that the effects of land distribution differed greatly across Colombia’s 1100+ municipalities.  In places where small and medium-sized farms dominate, a great deal of public land reached poor peasants.  Average farm size increased, land inequality decreased, and local development accelerated, just as you might hope.  But where land was already concentrated in the hands of a rural elite, additional distributed lands were diverted to them.  The incremental effect of ‘giving land to landless people’ was more large farms, fewer small ones, and greater plot size dispersion.  How did such perverse outcomes come about?  By itself, land distribution increases turnout, makes politics more competitive, and increases public service provision.  But where landed elites dominate, patron-client ties distort local policy and decision-making to their benefit.  In such places, giving away land to the poor actively increases inequality and poverty, and worsens local development outcomes.  The interesting implication is that the land program’s ‘side-effects’ on the distribution of power outweighed its ‘main effects’ on the distribution of land.

What about the mistake?

To obtain these results, we used data on pre-existing latifundia – large farms of 500 hectares or more.  We thought the data for this variable came from 1960, but in fact it came from 1984.  Messrs. Tabares and Goda uncovered this when they compared our replication data to their own dataset.  Once it became clear that they were right and we were wrong, we spent 3 months exploring the implications of the error for our findings, as well as figuring out how it came about in the first place – not to punish anyone, but rather to identify faulty processes and prevent their recurrence.

Next, some professional context.

A project like this takes years; the earliest version of this research dates from 2013.  We built out the dataset continuously over 7 years, gathering, comparing, cleaning and refining key indicators.  That data is all now publicly available, not least in the replication dataset.  Our initial idea was to push the analysis all the way back to 1960.  That would give us a 50-year panel – the bulk of the main reform period – on which to estimate the effects of encomienda and land distribution on broad development outcomes.  So we began working with the earliest national data series on latifundia from 1960.  Unfortunately, this data is low-quality and incomplete.  We spent a fair amount of time over several years trying to fill in those gaps and improve data quality, before finally admitting that the problems were too deep and reverting to better-known data from 1984.  Somewhere along the way, the right data acquired the wrong name.  We’re confident this was an honest mistake.

The next step was figure out the implications for our results (above).  The basic econometric problem of estimating the effects of an X variable from 1984 (and not 1960) on a Y variable from, say, 1975 is endogeneity.  You might also think of this as reverse causality.  There’s no space to explain endogeneity further here.  But the bottom line is that all results where the Y variable is from 1985 or later are unaffected by an X variable from 1984.  Those findings stand.  The other results are potentially problematic, so we re-estimated everything in the paper where the Y variable is from 1984 or earlier.

The error does not affect any of the findings on land inequality, the structure of landholding, or public goods, services and taxes, all of which rely on post-1984 data.  It does affect results for UBN (our measure of overall development; table 4) and electoral outcomes (tables 5 & 6), where we used data going back to the 1970s.  Hence we re-estimated those models dropping pre-1984 data on the dependent (Y) variable.  All of that is attached below and appears in the Corrigendum.

The good news is that the new results are very similar.

For UBN (table 4), the headline finding that public land distribution reduces unsatisfied needs (and hence increases development) remains, with high levels of significance and coefficients of somewhat larger magnitude.  The interaction of that term with latifundia retains its sign and magnitude, but loses statistical significance.  We think this is because the loss of 815 observations (out of 3,260) reduces the precision of our estimates, increasing standard errors from around 0.40 to 0.85.  Our interpretation of these results is substantively the same, though with more caution attached to the interaction term.  The new figure 6, which relies on these estimates, is basically identical to the original.  This is because all of the “action” is in the highest two deciles, where estimated effects continue to be significant and are, if anything, slightly larger in magnitude than before.

New estimates for voter turnout (table 5) are essentially identical, despite 39-42% fewer observations, with coefficients on the main land distribution variable that are slightly larger than before.  In new estimates for political concentration in municipal elections (table 6), the land distribution variable loses some significance for electoral margins of victory, but remains the same for winning party support.  All of the signs are unchanged.  There is no change in the interaction term.  For lower house elections, the land distribution variable loses significance across the board, but the land distribution*latifundia interaction term gains significance in models 6, 7 and 8.  The latter implies that latifundistas counteract the beneficial effects of land distribution in places where they are abundant, as found elsewhere in the paper.  Once again, we think the differences in estimates are due to a loss of statistical power from a 42-45% reduction in sample size.  Overall, our interpretation of the new results is substantively the same, although more cautious in the case of table 6.

Stepping back from the detail, what’s the bottom line?

All of our main findings on the effects of land distribution and latifundia on inequality, the structure of landholding, and development are either unaffected by our mistake or go through in the new estimations.  Many of our secondary results also go through despite being based on around 40% less data, but others lose statistical significance.  Although the effects of the latter seem to be of the same magnitude and direction as before, we interpret them with more caution.

Lastly, in the course of all of this we discovered an additional, typographical error in the last full sentence of p.15 (final dates), which should instead read:

We employ a fixed effects seemingly unrelated regressions (SUR) model to examine the relationship between land distribution and latifundia on per capita public investment, public service expenditure, and tax revenues for the period 1985-2010.

Our thanks again to Germán Tabares and Dr. Thomas Goda for bringing the data error to our attention.  The investigation that followed was difficult, but unexpectedly rewarding in the end.  Our sincere apologies to readers of World Development for both errors, and for any inconvenience they have caused.

Reference

Faguet, J.P., F. Sánchez and J. Villaveces. 2020. “The Perversion of Public Land Distribution by Landed Elites: Power, Inequality and Development in Colombia.” World Development, 136: 1-23.

The views expressed in this post are those of the author and in no way reflect those of the International Development LSE blog or the London School of Economics and Political Science.

Featured image credit: mohamed_hassan via Pixabay

Ahead of the release of ‘Decentralised Governance: Crafting Effective Democracies Around the World’, Dilip Mookherjee brings together some of the arguments against decentralisation of welfare programme. The book launch for Decentralised Governance will take place at LSE today from 6.30-7.30pm.

The first phase of modern economic development between 1950-1990 was characterised mostly by centralised, top-down development programmes. Planning, execution and service delivery were delegated to a bureaucracy appointed by and accountable to a central government at either the federal or state level. However, there was growing disenchantment with this system owing to targeting failures, leakages, losses, corruption, and the lack of responsiveness to local needs. Consequently, the last three decades witnessed a shift towards decentralised, bottom-up implementation where authority was shifted to local government officials elected by local citizens. The primary motivation was to bring information about local needs and capacities into decision-making and align the incentives of officials more closely with the interests of local citizens.

The argument that decentralisation enhances state accountability is, however, highly controversial. Counterarguments have been made by designers of both the US and Indian constitutions, on the ground that local governments are more prone to ‘capture’ by local elites compared with central governments, especially in areas of high inequality and poverty. These arguments are complemented by additional concerns that local democracy tends to be characterised by higher levels of political clientelism, wherein local incumbents manipulate allocation of benefits to loyal supporters or swing voters to increase chances of being re-elected. A large literature (reviewed in Mansuri and Rao (2013) and Mookherjee (2015)) has documented systematic evidence of such problems and how they have distorted allocation of benefits both within and across local communities. This motivates a reappraisal of the choice between centralised and decentralised governance mechanisms, and the exploration of possible hybrid forms which might perform better.

Efforts at ‘recentralisation’

Some countries have recently experimented with ‘recentralisation’ initiatives, which have enhanced monitoring or reduced discretion provided to local government officials, often utilising emerging new technology and ‘big data’ capabilities of central governments. Examples of this include field experiments with ‘e-governance’ by MGNREGA, a large employment and social insurance programme operating in different Indian states (Banerjee et al. 2019, Muralidharan et al. 2016, 2020). These experiments achieved varying degrees of success in reducing leakages and corruption. Moreover, they were not aimed at reducing partisan or personal biases of local government officials in the allocation of benefits, either within or across communities.

Other research reports the results of experiments or simulations of reforms in Kenya (Hoffman et al. 2017), Brazil (Finan and Mazzocco 2021) and in Indian states such as West Bengal (Mookherjee and Nath 2021) which used formula-based grants instead of relying on the discretion of officials in intermediate layers of government to allocate funds across different areas under their jurisdiction. However, last-mile delivery within local communities continued to be delegated to elected officials. The results of these reforms also appear to have been mixed. In Kenya and Brazil, the inter-community allocation biases associated with elite capture were moderated, but at the cost of increasing local corruption. In India, formula-based grants failed to improve pro-poor targeting owing to limited information about the scale of benefits administered by local governments, which form the base of the formula used. Intra-community mistargeting continued to arise from delegation of last-mile delivery within communities.

More far-reaching recentralisation initiatives were undertaken in Pakistan (Habeeb and Vyborny 2021) and Indonesia (Banerjee et al. 2021). These eliminated the scope for discretion of local officials at all levels by directly delivering benefits to citizens predicted to fall below a poverty line based on an asset-based proxy-means test (PMT) formula¹. The Indian government has also initiated a switch from traditional welfare programmes to direct benefit transfers. These reforms necessitate investment in a country-wide administrative database of individuals, households and assets, combined with registration of beneficiaries and direct delivery mechanisms through bank accounts or mobile phones. The improvements in targeting of these programs appear to be impressive, and therefore raise interesting new questions about the feasibility or desirability of other developing countries adopting them.

Issues with direct benefit transfer programmes

Direct benefit transfer programmes indicate a transition to a Western-style social security system where the central government administers most private transfers programmes, with the role of local government restricted to the provision of local infrastructure and collective goods such as education and health. Besides the advantage of limiting scope for elite capture, corruption, clientelism and misallocation of welfare benefits, the system would become more transparent and make citizens less dependent on local intermediaries. Moreover, benefits would be portable across locations: entitlement to welfare benefits would not be jeopardised because of migration between districts or states.

One concern with direct benefit transfer programmes could be the adequacy of asset-based PMT measures in accurately measuring poverty, since they ignore temporary shocks experienced by households. Recent assessments of the extent to which local government officials are well-informed about household level shocks and respond with benefit allocations are mixed (Basurto et al. 2019, Trachtman et al. 2021). However, there is scope for augmenting PMT-based allocations to incorporate locality-based environmental shocks.

A more substantive concern deals with the feasibility and accuracy of centralised administrative databases and e-delivery mechanisms. To what extent can poor countries with low state capacity develop and operate such systems effectively? There is a need to understand better how Pakistan and Indonesia managed to develop and operate these systems.

A final concern is the potential implications of such far-reaching recentralisation programmes for fiscal federalism and the balance of political power between central and regional governments. Cheema et al. (2006) have described how successive waves of decentralisation and recentralisation in Pakistan were related to the conflict between authoritarian rulers at the central level and populist democrats at the regional level. Should direct benefit transfers be administered by state or central governments? To what extent can the central government be trusted to abide by the PMT-based formula for benefit transfers, instead of manipulating actual transfers to undermine the power of regional governments governed by different parties? These questions await further discussion and research.

This article is a summary of the forthcoming chapter ‘Decentralized targeting of transfer programmes: A reassessment’, in Jean-Paul Faguet and Sarmistha Pal (eds), Decentralised Governance: Crafting Effective Democracies Around the World, London, LSE Press.

The views expressed in this post are those of the author and do not reflect those of the International Development LSE blog or the London School of Economics and Political Science.

This article was first published on Ideas for India.

To celebrate the publication of Decentralised Governance, the book’s co-editor, Professor Jean-Paul Faguet, considers its core ideas, a big, fundamental issue that is almost never acknowledged by the enormous decentralisation literature, but which one way or another affects almost all of its results.

Decentralisation is a huge phenomenon across all of the world’s regions, cultures, income levels, and politico-administrative systems. It began in the aftermath of decolonization and built through the 1980s and ‘90s.

Around the early 2000s, many of us working in the field thought the decentralisation wave was cresting. Pranab Bardhan and Dilip Mookherjee produced a seminal book – Decentralization and Local Governance in Developing Countries – which took stock of what we knew about the different types of decentralisation in developing countries. But to the surprise of many of us, the decentralisation wave continued to build. All around the world, there were more reforms at different levels of devolution with greater creativity about the technologies employed.

At about the same time, a huge amount of new, finer-grained data on not just fiscal flows, but also political, social, and cultural variables became available across many developing countries, permitting us to ask difficult, nuanced questions that could not be answered before.

The book which Sarmistha Pal and I have recently edited and published with LSE Press, Decentralised Governance: Crafting Effective Democracies Around The World, takes advantage of this new evidence to take stock of the state of knowledge on decentralisation in the world today, with a special focus on governance and democracy-building in developing countries. Its chapters include thematic, critical surveys of recent advances in decentralisation, combined with focused, cutting-edge empirical studies. Empirical chapters include broad cross-country studies as well as detailed explorations of Bangladesh, India, Pakistan, China, Indonesia, Ghana, Kenya and Colombia. We’re proud to include a range of  authors in this new volume, including younger scholars alongside some of the most influential and established thinkers in the field. Many of these authors are themselves from developing countries and their papers employ the latest evidence and methods to explore complex issues analytically with a blend of qualitative and quantitative data.

One of the key ideas that underpins all our analysis is the recognition that decentralisation is not ‘a thing’. It is many things. It is not a switch one can flip with results that are predictable and symmetric. Rather – and by definition – decentralisation generates a heterogeneity of responses that, in any particular dimension (e.g. education, health, transportation), differ from one another as much as the underlying districts, provinces, municipalities, etc. differ from one another. Any country that decentralises should expect not one tidy outcome replicated in many localities, but rather a wide variety of outcomes that range from the strongly negative, through the null (“no change”), all the way to highly positive responses. Such heterogeneity is not a problem. It’s the way decentralisation is supposed to work. Indeed, in a deep sense it’s why you do it.

This idea is tied to wealth of conceptual and methodological insights that we’re only beginning to comprehend. For over 50 years, researchers asked questions of the type: Is decentralisation good or bad for X?, where X was some important policy-related outcome, such as primary enrolment rates, access to water and sanitation, or levels of corruption. Such studies approached decentralisation as if it were a technocratic issue. They treated the specifics of reform – the many decisions about how to unpick centralised public services and decentralise which components to what levels – as if these were given, choosing instead to compare ‘the effects of decentralisation’ across countries.

Researchers were not entirely unaware of these issues. Their methodological stance was always more a convenience than an assertion of principle. But it coloured the empirical literature all the same, affecting what questions were asked, and how studies were structured. Only recently have researchers began to internalise that the many decisions about how to decentralise precisely which state functions are not fundamentally technocratic issues. They are political issues everywhere, all the time.

Jean-Paul Faguet is a co-editor and contributing author to Decentralised Governance: Crafting Effective Democracies Around The World. This book is free to read and download  from the LSE Press website via Open Access publishing.

Further reading

Dilip Mokherjee, Decentralised targeting of transfer programmes: A reassessment

1. Anirban Mitra and Sarmistha Pal, Impact of fiscal decentralisation and ethnic heterogeneity on choice of local polity
2. Zaki Wahhaj and Abu S. Shonchoy, Birth Registration in the Developing World: Bridging the gap between policy and practice

The views expressed in this post are those of the author and do not reflect those of the International Development LSE blog, the London School of Economics and Political Science, or the European External Action Service. The blog is based on the author’s dissertation.

This article was first published with the LSE Press Blog.

Image credit: A quick Gephi based visualisation of the data burden imposed on local government by central government. Tony Hirst via Flickr.

In this second blog post exploring key ideas in Decentralised Governance: Crafting Effective Democracies Around the World, co-editor, Professor Jean-Paul Faguet, explores the complex relationship between politics and decentralisation.

As my previous blog post ‘What Decentralisation is, and what it is not’ argues, decentralisation is not a simple technocratic reform, but rather: (i) highly complex, and (ii) always political.

Decentralisation’s political effects are carefully considered in chapter 4 of Decentralised Governance, ‘Realising the promise of partial decentralisation’, where its authors, Shanta Devarajan and Stuti Khemani, point out that decisions to decentralise are often taken by leaders seeking political advantage. They are implemented – or not – by officials whose power and status will be directly affected by reform.

Democratic accountability and government responsiveness can be greatly improved with effective decentralisation. This is achieved through the simple but profound expedient of changing the incentives that local officials face. In a centralise regime, local officials’ incentives are upward-pointing, towards national authorities. By devolving power and resources to locally-elected administrations, decentralisation re-orients officials’ incentives downwards, towards local voters. This is one of the simplest but most powerful lessons of 50 years of reform. In so doing, decentralisation ultimately affects not only local but also national public goods, as well as the responsiveness and accountability of the entire state.

Done correctly, decentralisation should make local governments better attuned to local economic conditions. This should, in turn, help boost economic growth. And the sum of many localities boosting economic growth is stronger national-level growth.

But this concept of decentralisation being ‘done correctly’ hides more than it reveals. As we pointed out in the previous blog post, countries decentralise in very different ways, devolving different sets of powers over different public services to different levels of subnational government, with different revenue-raising powers and different degrees of subnational democracy. The reason for this is deeply political. Any decentralisation programme entails winners and losers, and how the programme is designed and implemented will largely determine who those winners and losers are, as well as the size of their gains and losses. Countries have different kinds of political parties and movements. Those movements throw up different kinds of leaders. And such actors inhabit different political equilibria. This is why the types of decentralisations that get implemented can vary hugely from one country to another.

Analysing the political nature of decentralisation in chapter 4 of Decentralised Governance leads its authors, Devarajan and Khemani, to the striking conclusion that most decentralisations are partial. Not only are they not full expressions of some similar underlying blueprint, they are not even full expressions of the diverse blueprints that national reformers publicly declare or write into law. Politics systematically gets in the way of a full, clean implementation.

By definition, decentralisation requires centralised administrations to hand over power and resources to lower-level politicians with independent mandates. Put simply, central officials often don’t want to do this. They’d rather keep power and resources in their own hands. So they fight a rear-guard action to limit, or even undo, reform. The extent and nature of the reform that is finally implemented is the equilibrium outcome of many battles between those who want to make reform and those who want to stop it.

The upshot of this conflict between central officials and lower-level politicians is that most decentralisations are incomplete in the sense that economic theory would predict, and often feature large mismatches between devolved responsibilities and accountability. These partial decentralisations nonetheless represent political equilibria that balance competing forces, making it difficult to change them at the margins.

But Devarajan and Khemani also show that politics provides strong grounds for hope. In many countries that have decentralised, greater contestation in local elections has led to improved service delivery. This is because decentralisation often leads to more, better people getting involved in local politics. Reform shines a brighter light on local governance and brings more information into the public realm. As a result, citizens are better able and willing to judge officials’ performance. This leads to greater accountability, better governance, and faster development.

But in decentralisation, politics is not everything.  In recent decades, a great deal of experimentation has occurred in explicitly non-political realms, known as mechanism design, which I shall explore in the next blog post.

Further reading

1. Jean-Paul Faguet, What Decentralisation is, and What it is Not [Please add link]
2. Dilip Mokherjee, Decentralised targeting of transfer programmes: A reassessment
3. Anirban Mitra and Sarmistha Pal, Impact of fiscal decentralisation and ethnic heterogeneity on choice of local polity
4. Zaki Wahhaj and Abu S. Shonchoy, Birth Registration in the Developing World: Bridging the gap between policy and practic

The views expressed in this post are those of the author and do not reflect those of the International Development LSE blog or the London School of Economics and Political Science.

Image credit: Pekka Nikrus via Flickr.

In this third blog post exploring key ideas in Decentralised Governance: Crafting Effective Democracies Around the World, co-editor, Professor Jean-Paul Faguet, discusses the importance of mechanisms for implementing decentralisation and why now, more than ever, we need to improve governance around the world.

Understanding the politics behind specific decentralised reforms helps us understand why they vary across countries in so many important dimensions, and also why most decentralisations are incomplete. This post turns to a third big theme that runs through Decentralised Governance: mechanism design, and what all of this has taught us as the book’s editors.

In my previous two blog posts, I argue that decentralisation is always substantially a political issue. However, successful governance is not solely a question of politics. In addition to devolving power and resources, effective decentralisation also implies adapting structures, rules, norms, and behaviours to new actors and dynamics that a centralised system may not have contemplated. Decentralised Governance refers to this broad set of issues as mechanism design.

In chapter 2, I present detailed efficiency criteria for deciding which powers to decentralise to which level of government, and how to design tax and transfer systems that can adequately fund the public expenditure systems that result. These are the tools of what is often called intergovernmental relations; we might call them ‘broad mechanisms’. In theoretical terms, those insights largely summarised the state of play as the 1990s ended.

In chapter 3, Dilip Mookherjee brings that story forward to the present day, focusing on the surprising number of policy experiments and technocratic innovations that have been trialled across a wide array of countries in recent years, which have changed the game in fundamental ways.

Effective decentralisation also implies adapting structures, rules, norms, and behaviours to new actors and dynamics that a centralised system may not have contemplated.

Recent innovations include the issuing of biometric identification cards in India, where they have been used to verify beneficiaries of employment programs. This has reduced programme leakages from ‘ghost beneficiaries’ by 41%. Beneficiaries were paid more quickly, and reported earnings rose 24%. Most impressively of all, these results were achieved at no additional cost.

Mookherjee also identifies the mechanism of hiring non-elite citizens as monitors to help reduce elite capture of public benefits. As part of these efforts, programme management is often contracted out to NGOs or private firms. In some instances, formula-bound programmes reduce the authority of locally-elected officials to allocate public funds, in effect replacing politics with technocracy in the name of greater targeting precision.

Integrating ideas from across these experiences, Mookherjee suggests a big data approach to the decentralised provision of services and benefits that makes use of survey data to predict the level of poverty of each individual in a country. Benefits could then be distributed via a nationwide ID system with biometric identification, combined with electronic transfers to low-cost bank accounts or mobile phones. Such a system could improve pro-poor targeting significantly at very low cost, while reducing losses and distortions due to capture, corruption, and bureaucratic inefficiency.

All of these measures are examples of technocratic alternatives to decentralised politics that achieve some of the same outcomes, but in very different, non-political ways.

Concluding thoughts

Decentralisation is not in itself a good or bad thing. Designed strategically to take advantage of the insights offered in this book on politics and mechanism design, it can promote democracy, efficiency, and accountability. We can say that with confidence, because it is documented in our book.

The low-hanging fruit available to first-order decentralisation theory was largely plucked by previous generations of thinkers.

First-order theorising is of little use in this field. Decentralisation is complicated. Reformers face a daunting set of choices as they design and execute real decentralisation programmes. The low-hanging fruit available to first-order decentralisation theory was largely plucked by previous generations of thinkers. The issues that remain are complicated and nuanced; potential solutions are highly contingent. These ‘details’ are not only not trivial, they are crucial if decentralisation is to fit a country’s challenges.

Getting decentralisation right is difficult, but also immensely valuable because it can improve the quality of a country’s governance. But how do we ‘get decentralisation right’? The short answer is via a combination of political and technocratic measures that work with the grain of national and subnational incentives to target resources and hold public officials to account.

The chapters in this book shine a light on how to do this. They answer questions about when and why decentralisation works across the globe under very different conditions, what it can achieve when it works, and when and why it often fails.

We must think harder about the power and the potential of decentralisation. A casual glance around the world shows that citizens are unhappy. Democracy is stumbling everywhere. If we are serious about responding to political unrest, we need to consider alternatives that generate better, more effective governance. It’s a big challenge that has never been more important.

Further reading

1. Jean-Paul Faguet, 1. What Decentralisation is, and What it is Not
2. Jean-Paul Faguet, 2. Decentralisation ‘done correctly’
3. Dilip Mokherjee, Decentralised targeting of transfer programmes: A reassessment
4. Anirban Mitra and Sarmistha Pal, Impact of fiscal decentralisation and ethnic heterogeneity on choice of local polity
5. Zaki Wahhaj and Abu S. Shonchoy, Birth Registration in the Developing World: Bridging the gap between policy and practice

The views expressed in this post are those of the author and do not reflect those of the International Development LSE blog or the London School of Economics and Political Science.

This article was first published with the LSE Press Blog.

Image credit: Pxhere