The Political Economy of Development – Introduction

ImageRace and corruption are perhaps the most publicized problems in Guyana and too often these are labelled as anchors of our underdevelopment. To put it more precisely, it is often argued that some form of political consensus accompanied with low corruption are preconditions for growth in Guyana. This reasoning defies the world’s historical growth record and offers little scope for policy since we must await our Mandela. Our intention is not to devalue the harmful effects corruption and racism could have on society, but rather to explain why these are not the principal constraints to Guyana’s development – contrary to popular opinion.

 All forms of society face distributional conflicts, whether it be based on race, religion, sex, class or political affiliation. These social stratifications make it easy to differentiate one group from another and thus, makes it easy to change distributional outcomes. Corruption is another common and embedded phenomenon in all forms of society, whether rich or poor. These take different forms, however, from outright theft in poor states to more sophisticated forms in rich countries.  In spite of the ugly faces of corruption and racism, some countries manage to develop and endured this very demanding process. The question then is: given the commonality of the ugly faces in all societies, what causes one country to develop and the other to remain stagnant?

The core structural problem of underdeveloped societies lie in the dichotomy between a large political sector and an infant private sector. The latter necessarily means that employment opportunities are limited in the private sector – the reason poor countries are called poor.  Those that cannot find work in the private sector migrates, remain in their station or join the public sector. Ultimately, the health of the economy depends largely on the status/size of the political sector. For this reason, in poor countries growth in employment and income depends predominantly on political accumulation as opposed to capital accumulation as in rich countries. The implications of this are staggering. Essentially, in underdeveloped societies, there is little reason why politics should be in the interest of the infant private sector. The reverse is true in rich countries. By definition, these countries have large private sectors in relation to their political sectors. Many political points can be scored by a healthy economy and robust growth. This is so for the simple fact that people are mostly employed in the private sector – something that does not hold true in poor countries.

As a consequence of a comparatively large political sector, nepotism becomes rampant and distributional conflicts are intensified. The latter is exacerbated to the extent that employment in the public sector is based on some form of social stratification that leads to distributional conflicts. This is highly likely on consideration of the need to accumulate political capital through the provision of employment. In rich states, the public sector is a means to serve the public, therefore, persons who gravitate towards that sector do so primarily with the intent of serving the public. Those who set out to make money opt for the large private sector instead. In underdeveloped states, the situation is markedly different. Because the option of a large private sector is missing, persons (even those whose intent is purely based on economic rewards) are forced into the public sector. It should be clear now why certain forms of corruption and distributional conflicts are very much a part of the essence or the core of being underdeveloped. More importantly, political solutions or constitutional reforms aimed at tackling corruption and distributional problems are palliative at best for the fundamental reason that these do little to change the underlying core of underdevelopment – the large and small political and private sectors.

A strong democracy is championed as the ultimate solution to these problems. But we contend that all democracies are captured democracies. Whatever the source of the distributional conflict is, the stronger group is always politically and economically dominant – hence the captive nature of democracies all over the world. In the West, the rich dictates politics, religion governs in the Middle East and in Guyana, race fixes our political outcomes. In our view, understanding the difference between the core of underdevelopment (large and small political and private sectors) and spin offs of underdevelopment (specific forms of corruption and distributional conflicts) is the principal task of our political leadership. Consider the following.

Would stronger institutions reduce corruption? Would greater de-centralization of political power increase oversight and reduce corruption? No. Why? Because greater distribution of political power simply redistributes corruption. Why should the gainers of de-centralization be better men and women than the losers? Thus, greater calls for local government reforms and oversight institutions would not necessarily align politics within the interest of Guyana’s private sector, it simply redistributes the economic spoils of government through the veil of greater distribution of power and enhanced transparency. The calls for greater accountability, transparency and less corruption are all noble, but note carefully how these address the negative offshoots/spin offs of underdevelopment and not its causes.

Racism and discrimination, to the extent that it results in stratification, is purely a question of distribution and has nothing to do with making the right policy changes to create cycles of growth.  It is the same reason government jobs are created willy nilly with interesting titles – it is an employment scheme at work. The more government jobs created for any given level of private sector employment, the less political clout the private sector has, and less likely is politics to be within their interest. The cumulative effect is a cycle of corruption, bad policies, failed institutions, rampant migration, and endangered education institutions: in short a cycle of underdevelopment. But yet race/distribution captures a unique place within the prevailing analyses. The absence of a growth apparatus makes the question of race/distribution of principal importance and this is where it is mistakenly understood as the heart of the political economy of underdevelopment. It is essential to note that the solution is not to deliberately reduce the size of the political sector, it is a bad proposition that is made too often and mistakenly infers that big government crowds out private sectors in underdeveloped countries.

Many who contribute to the national discourse on these issues often recommend policies to achieve the West’s style of good governance. This is tantamount to saying that in order to develop, we must first be developed! We are by no means diminishing the importance of good governance; rather, we argue that policies aimed at achieving it are hardly carefully considered and effectively implemented. Secondly, problems with governance are scarcely the essence of our underdevelopment. It is the state’s capacity and not its ability to govern that we label as the culprit. State’s capacity assumes a comprehensive view and extends beyond its ability to effectively implement policies; it incorporates the choice of policies made by the state and whether these are sufficient for a structural transformation. A state’s capacity to transform the structural core of its society is the principal determinant of whether a country develops or remains stagnant in spite of the fact that all societies are beset with various forms of corruption and distributional conflicts. Interestingly, anti-corruption strategies as envisioned in the good governance agenda reduce the state’s capacity in this undertaking.

Future articles will explain how to build the state’s capacity for a structural transformation and how anti-corruption strategies reduce this capacity. 

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