class 9 : resisting the rules- vested interests and identities

Why are development projects still failing

• . The rules are Ignored

  • 'Good governance' is too demanding

  • Form prioritized over function: isomorphic mimicry

  • Not enforcing wins votes: Forbearance

• 2. The rules are Imported (Aid)

  • Coordination challenges and corruption

  • Dependency and a lack of political ownership/accountability

  • Donations skewed by self-interest, geopolitics and domestic politics

• 3. The rules are Broken

  • Distortions: Short-termism, electoral cycles, concrete bias

  • Clientelism

  • Corruption, though perhaps a symptom as much as a cause

those the resist development. What we are looking at today

• 1. Powerful losers resist

• 2. Powerful winners resist

• 3. Identities resist

1. Powerful losers resist

who loses from development?

• Institutional reforms and development policies are designed to 'grow the pie'

• But change creates losers, at least in the short-run:

  • Large landowners lose access to cheap labour under extractive institutions (serfdom)

    • they resist competitive labour, urbanization etc.

    • they like to rural elitist way of life

  • 'Creative destruction' of old industries -textiles, coal mines, drivers

    • ex: those who use old technologies. example showed they actually destroyed the new technology as you need less ppl

    • ex: workers who provide diesel sabatoge and lobby that new industries fail

    • ex: pro fossil fuel companies vs climate change sustainable ones

  • Enforcement instead of Forbearance

  • Monopoly rents or corruption

    • ex: monopoly on phone companies

  • Losses can also be relative - eg. teachers, traditional village chiefs, men

    • ex: even in the most obvious gains some are unhappy

    • teachers are now seen as the last option job

1. Powerful losers resist

• Losses may be political, not economic

  • Dictators may not care if the middle class get rich

  • But they may care if they start to demand democracy and threaten revolution

• Definition: VestedInterests:

  • people who have a interest in preserving existing institutions

• Resistance raises the economic/political cost of policy implementation

  • Protests

  • Sabotage

  • Lobbying

  • Bribery/corruption

  • Veto power

• Easier to resist when the losses are concentrated on a specific group

  • when we have a small group of powerful people —> they can mobilize and stop development

1. Powerful losers resist

• Losers are often powerful - they benefited from the 'old' system

  • Concentrated wealth allows them to organize against reform

• Inequality can harm development when the rich oppose change and have the resources to block it

  • small group of people (rich) who are likely to oppose change

How do we stop losers resisting development?

• Overcoming Resistance from Losers

• Insulating the state from the political pressures of losers

  • Autonomy/discipline (the developmental state)

  • Authoritarian repression

• Historical shocks, eg. Korean War, Rwandan genocide

• Compensating losers

  • If development 'grows the pie' then the gains can be distributed to everyone

  • ex: we will pay you 100 euros every year

  • ex: social welfare systems and democracies to compensate unemployment

Why can't we always compensate losers for their losses?

• 1. Compensation may not be credible

  • The newly-rich=newly-powerful can just take everything in the future

  • Democracy and social welfare systems might help make compensation credible

• 2. Compensation may not be equivalent

  • Would you accept money to give up your career?

2. Powerful winners resist

Who are the winners from development?

• the biggest blockage of development are the winners

  • Workers benefitting from investments in physical capital -> higher productivity ->higher salaries

  • Households benefitting from cheaper food (more productive agriculture)

    • ex: more productive in making food reduces the price = higher standards of living

  • Children benefitting from better teaching(human capital)

  • Consumers benefitting from smartphones(new technologies

  = when alot ppl benefit it =

  • Definition: Policy Feedback

    • Policies and institutional reforms change future politics

      • new policies changes politics

      • Eg. Across Africa, women who possess a mobile phone are more supportive of women becoming politicians

    • (But phones don't change men's attitudes

• Winners often support continued reform:

  • Motive to extend their gains

  • Means from the newly-acquired resource

• But diffuse winners struggle to achieve collective action to push for more reform

  • Lots of citizens/consumers with a small stake

  • And difficulties in communicating and organizing2. Powerful winners resist

2. Powerful winners resist

• But some winners are concentrated:

  • Capital Investors

  • Rent-seekers

• And gain from partial reform

  • Opportunities created by the transition from old to new institutions

  • Eg. Privatization without an effective competition regulator

  • Eg. Liberalizing consumer prices but not exchange rates

• So partial reform creates new rents

  • Monopolies, uneven subsidie

  • sLack of regulation, weak police/judicia

• The winners from Policy 2 resist Policy 1

  • Using their winnings to resist further reform

2. Powerful winners resist

• The countries in Eastern Europe that carried out' intermediate' reforms seem to have suffered the greatest increases in inequality, and opposition to further reformEg. Inequality doubled in Russia

2. Powerful winners resist

Overcoming Resistance from Partial ReformWinners

• Insulating the state from the political pressures of winners

• Autonomy/discipline (the developmental state)

• Authoritarian repression

• Strengthening losers!

  • More democracy/competition

• Tax the winners!

• = both the losers and winners can block development

  • they can create partial reforms where they benefit but no one else does

2. Powerful winners resist

Who are the winners and who are the losers?

• Who are the winners and who are the losers?Subject to political debate/manipulation

• Resistance to vaccination

  • Personal and community benefits

  • But strongly correlated with trust in government

• Misinformation creates 'a seed of doubt'

  • About government intentions

  • About who is a winner

• Misinformation is often Disinformation

  • circulated by elites opposed to reform

  • disinformation is intentional by telling you you are winning or losing

  • today its much harder to known if you are a winner or loser

3. Identities resist

• So far, our analysis has focused purely on economic and political interests in the development process

  • But behaviour is also a question of identity:a sense of belonging to a group with shared beliefs and practice

• Modernization theory: From traditional 'ethnic 'identities to modern secular 'post-materialist 'identities

  • Ethnic identities are strong at the start of development

  • And threatened by development

    • example: Triqui in Mexico protesting against displacement

      • As a group

    • example: Identities are diverse and multiple, eg. Papua New Guinea

      • >800 languages>1000 ethnic group

      • = they can resist policies , because they operate as groups

3. Identities resist

Ethnic diversity reduces investment in public goods (Easterly and Levine 1997). Why?

• does the state homogenize groups?

• Ethnic diversity reduces investment in public goods (Easterly and Levine 1997)

  • The challenge of cooperation across identities

  • Differences in preferences

  • Lack of information about others

    • lack of trust

  • Harder to use social sanctioning to enforce informal institution

    • within out identity groups we enforce informal institutions/norms

    • ex: theres ways you can punish ppl socially without the police

    • = hard to punish diff groups if you have different social norms

  • example:

    • Diverse parts of Western Kenya receive less

      money per school pupil

    • Diverse parts of Indonesia suffer greater

      deforestation

3. Identities resist

• Ethnic diversity reduces investment in public goods(Easterly and Levine 1997)

• BUT

  • Applies only to 'politically-relevant' ethnic groups

  • Ethnic groups are divided by politicians trying to form majorities

• ex: The Chewa cooperate in Zambia but oppose eachother in Malawi

  • in zambia two groups are not in conflict= ethnic diversity isnt a problem vs in malawi they don’t get along

  • why the difference?

    • malawi is small, so these two groups are smaller. Harder to get a majority. Otherwise together they are too big vs zambia theres many groups so they can form alliances

    • ethnic diversity y is only a problem when its politicized by the political system

diversity doesn’t cause underdevelopment its discrimination

• Ethnic discrimination reduces investment in public goods(Lee 2018)

  • Biased against the less powerful ethnic groups

• Discrimination by dominant identities:

  • As pure discrimination

  • As political strategy to mobilize allies

  • As a side-effect of being more socially connected among themselves

the data makes it hard to distinguish between diversity and discrimination

• Distinguishing the diversity and discrimination hypotheses (Lee 2018)

  • Hard in places like the USA: Diversity and discrimination are correlated (cities are more diverse and have fewer dominant whites)

• We need a place where the powerful group is small and dispersed

  • Eg. Upper castes in India

    • you can’t escape your casts

• Diversity: Villages with more diversity get just as many public goods

  • diverse villages in indias aren’t a problem

• Discrimination: Villages with more upper castes DO get more public goods

  • the problem are with the lower casts where the elites don’t give enough resources to them for education and healthcare

    • 4 more hours of electricity

    • From 77% to 97% chance of having a primary school

How can we twist 'identities' to help development

• theres identities that are more positive and can help development

• Can we twist identities to promote development?

  • If people of the same identity trust each other and are more willing to invest together, we need more inclusive identities

  • Overlaying ethnic identities with civic identities

    • they are often seen as fixed, but we know its not rlly true. Identities are socially constructed

      • Eg. Subnational identities in India (Singh 2015)

        • States with a stronger subnational identity are better at providing public goods

      • Eg. In Tanzania, 'nation-building' has promoted inter-ethnic cooperation (Miguel 2004)

        • A common language (Swahili)

        • National identity in the school curriculum

        • Village councils replace tribes

        • Tanzania provides more public goods than Kenya in diverse communities

          • in kenya diversity is a challange because less inclusive vs tanzania more diversity= more inclusive

• Definition :Constructivism

  • Identities are not fixed but created by social interactions and political manipulation

    • when can create civic and higher level identities

    • ex: being dutch or being european

Conclusion

• Powerful losers resist

  • Vested interests in the old economy

  • With the resources to resist change

  • Compensation for losers must be credible

• Powerful winners resist

  • Diffuse winners have little power to sustain development

  • Concentrated winners try to preserve partial reform for rents

  • Identities resist

• Ethnic diversity impedes cooperation over investments

  • If ethnic groups are politically mobilized

  • Or is it ethnic discrimination?

  • Constructing more inclusive civic identities can help