Political Economy Analysis and the Aid Industry: The Road to Nowhere?

Political-economy analysis has been a favourite instrument among donors of development aid since roughly the turn of the century. The usefulness of such forms of analysis has been emphasised because donors realised that their focus on formal aspects of the social and political organisation of countries caused them to overlook important elements of the ‘political economy’ of these countries. As a result of this, political and governance reform programmes, which had become part and parcel of the agenda of development under the Post-Washington Consensus, turned out to be much less effective than anticipated. The call for donor agencies to ‘look behind the façade’ of formal institutions in developing countries has thus come as part of the aid effectiveness agenda. It was argued that the effectiveness of development assistance policies would be enhanced if the realities of social and political power structures in developing countries were mapped and fed into the design of governance reforms targeting those countries. A more or less tacit assumption in this approach was that political-economy analysis would enable donors to identify potential pockets of resistance against the reforms that donors were advocating – hence improving the chances of getting reforms accepted.