How the Interaction of Economic and Political Processes Affects the Development Strategies and Policies - Term Paper Example

Name Course Tutor Date Introduction In an institutional context, it is crucial to understand the different powers that stakeholders hold and the political influence they have on implementation of policies and strategies. Stakeholders have different and diverse intervention policies in the implementation of development and management. As a result, political economy is gaining popularity in use as relevant stakeholders seek to address challenges that may arise in the management of different projects. The political economy analysis uses an approach where testing of implicit and explicit underlying assumptions about interest and influence of people involved are evaluated. The analysis also looks at the way power is dispensed or asserted within an institutional context in a bid to achieve set developmental and management goals. In this view, political economy analysis focuses on investigation of how the interaction of economic and political processes in a given society or institution affect the development strategies and polices. It has the potential to have either support effects or impeding effect depending on the way it is used and how the relationship is created. Particularly, it is interested with the specific interests and incentives that influence or drive the behaviours of different stakeholders. The distribution of power and wealth between these stakeholders determines the kind of relationship they have between themselves and how it affects the developmental management strategies. It also affects future endeavours of wealth creation sustainability and transformation when necessary (Fritz, Verena, Kai Kaiser, and Brian 3). The relationship and interaction are very significant in determining how politics shape development and management in a bid to create wealth and manage change in a dynamic environment. From an international point f view, politics have become central to the issue of international development. This has called for incorporation of local politics in development and policy agendas. Donors especially have used political economy analysis to bridge gaps that hinder achievement of their goals in specific regions of interest (Fisher and Marquette 3). Looking at political economy analysis can help create an understanding of how politics plays part in institutions and to what extent it influences management and development. Key concepts in political economy analysis Political economy analysis is a broad concept and it therefore depends on the scope under which it is applied. Institutions in any given society play crucial role in shaping their well being. This institutions deal with diverse issues ranging from social, economic, financial, political, among others. There are specific political aspects of these institutions that allow development to take certain shapes through the effect they have on management. From this, the role of politics in impacting institutional change can be derived. The interaction between society, state, public and private sectors bring about the development of institutions which provide public goods and services through formal and informal processes (Langlois 384). Political economy analysis in an institutional context can therefore be evaluated using key concepts that relevant to the topic. Collective action Development depends on people with similar problems coming together and sharing insights on the issues at hand. Through this possible solutions to the problems can be collectively agreed upon and relevant support sough from different stakeholders in society. It is through cooperation of people from diverse backgrounds but with similar interest that institutions are developed in a bid to eliminate the underlying common problem. This concept is applicable in the provision of public goods and services where cooperation is paramount in achieving positive outcomes for all the stakeholders involved. Politically, there is more power in numbers due to the ability to have collective bargaining especially when fighting for rights of members (Kittel, and Hannes 270). State and society bargaining Societies and social groups have substantial levels of bargaining power with the state depending on their specific needs and requirements. Bargaining can take different forms like conflict or consensus. This is all in a bid to gain power over resources and utilising them to gain wealth and influence. It can take place either in a formal or informal manner or both. Relevant stakeholders identify issues that are relevant to them and come up with strategies to influence resources and ideas to their advantage. This has the potential of yielding either positive or negative outcomes depending on how agreements are reached or the contrary. All this is because society has different competing needs and priorities are different form diverse backgrounds. A middle point can only be reached if priorities of different social groups can be identified and agreed on in terms of collective implementation and sharing of the scarce resources. This results to formation of legitimate and stable institutions where political analysis plays important role. Fragile nations and poor countries lack the incentive power to come up with constructive bargaining strategies which is resultant of resource constraints and mismanagement (Besley, Timothy, and Coate 2612) Effective states are determined by the ability of stakeholders in different bargaining portfolios to agree on constructive agendas that receive positive responses among citizens for instance, states that have taxation regimes that are diverse and encourage economic growth and social equality among all people in the country. Understanding institutions Institutionalism can take place in a form or an informal manner. Collective action arrangements are the basis under which institutions are formed. In the informal perspectives rules and regulation are unwritten and they are recognised generally by the society relevant to them. They are understood through norms and social relationships that exist within the specific social society. Communication and enforcement is usually in channels that are unsanctioned or officially recognised. Political economy aims at understanding the complexity of the institutions, whether formal or informal by analysing their management and practices that determine how their activities and development agendas are accrued out. The formality and informality of the institutions play a significant role in determining their coherence and understanding of issues that need to be tackled for the interest of different stakeholders that rely on them (Golding, Peter, and Graham 70). Political elites and incentives Elites are people of influence and power when it comes to solving institutional problems and engaging in development activities. Elites hold power politically, socially, economically and hence have immense influence towards the shape that institutional development takes. Political economy analysis therefore seeks to evaluate the effect that these elites have in shaping institutions and their activities. The shape they take is usually dependent on political, economic, and resource incentives that these elites avail to the institutions (Laffont and Jean-Jacques 3). The management of institutions and their development also depends on approaches used by elites. If elites concentrate on self enrichment and empowerment as opposed to nurturing public economic growth and welfare, them the development of institutions may be impeded. Apart from tangible factors that elites hold on institutions, their values, reputations, ideologies also shape institutions. The interests of elites form a basis for evaluation of whether institutions are either weak or strong. Political leadership also plays a crucial role in shaping management of institution and their development. Leadership entails the ability to influence people into taking intended action through motivation and provision of a conducive atmosphere. In this view, leaders in institutions should have the ability to influence stakeholder and have them follow and support them in their initiatives and strategies. Leaders mobilise resources and relevant support systems that are necessary to see the goals of institutions realised. They can do this by making collaboration and coalitions with other institutions that support their policies. The political process of leadership is crucial in determining the how leaders in specific portfolios shape and influence development and management (Langlois and Richard 384) . Both academic and practical literature have collectively recognised that development is a political process in a majority of its key aspects according to a development White Paper published in 2006, the fight against poverty and the need for institutional change and development cannot be achieved without analysis of accountability and governance in a political aspect.in this regard, political economy analysis is crucial in understanding institutionalism and the dynamics that revolve around it. Approaches/Tools for conducting political economy analysis In recent years the scope of political economy analysis has taken various approaches. Each of the tools applied have their own limitations and strengths. In this context, political economy analysis has major uses that institutions can utilise. At the macro level country analysis political economy analysis assists policy makers in their planning endeavours by enabling them to come up with strategic ways of dealing with management and developmental issues. This way national institutions can actively carry out their mandate by utilising the results of analyses.at the national or country level, the scope of the analysis is wide as the interests of the whole public and people with a lot of diversity are addressed. The analysis provides strategic policy measures that could be used to appeal to all stakeholders by handling their problems sin a manner that they understand, given the scarcity of resources and merit of priorities (Thelen 6). Another use for the analysis is in sectorial levels analysis. It helps in identification of hindrances and barriers that prevent development and management practices in in institutions. This analysis takes a more specific approach as it looks at specific sectors such as health or education and analyses the underlying political factors that affect them. It also provides a chance for identifying opportunities that management could use to foster development and achievement of benchmarks in these specific sectors. Political economy analysis could also be used to create an understanding of an underlying problem and hence gear all efforts towards solving it. In this perspective, a specific problem is singled out and identified for solution seeking endeavours. The problem may be specific to a given development initiative by an institution or a specific policy. Sectorial analysis and problem based analysis take place after the macro analyses has been comprehensively analysed and all aspects put in order to facilitate development at lower levels. Therefore, the macro analysis may prevent progress at lower levels depending on pore and authority structures within these institutions (Zhang 992). Country, sector and problem levels At the country level analyses, there are various factors that influence incentives for change and the ability of intuitional management to achieve development in the respective portfolios. First, the structures that are present in a country to support institutional activities determine the extent of development. Examples of structures include economic, social, resource endowment, demographics and technology (GSDRC). These structures are the facilitators of activities and policies that are applied in the institutions. Institutions themselves also matter in term of formality and informality. This determines the ability to influence the allocation of structures and resources to support their activities. Formal institutions tend to have structured ways of receiving resources from relevant authorities and stakeholders. This is also dependent on the ability of institutions to bargain and support their claims in order to receive a share of the limited resources meant for competing demands. The formality of institution or the lack of it tends to shape the way political influence take place in the institutions. This also forms the basis for existence of conflict and how they are solved (Do and Levchenko 1490). Agency also plays a significant role in development and management of these institutions. This revolves around individuals who act as representatives of social groups or groups of stakeholders. Agents in this case include political leaders, donors, trade unions, civil servant among others. The three aspects can be termed as the main determinants or drivers for change within institutions Previous analysis of political economy did not evaluate the processes comprehensively and hence decisive conclusions could not be made. This provided a limited scope of explaining how political economy analysis operated in terms of developmental perspective. In terms of a political perspective, the developmental framework decision making process has element that act as guidelines (Du Gay, Paul, and Michael 17. First, the historical sociocultural environment that determine current status and needs for development should be adequately evaluated and understood. Secondly the current pressures and needs for development from relevant stakeholders and social groups that demand change in positive development. Finally, processes applied formally and informally through decisions that are finally made and in progress to the implementation stage. Implementation politics also determine outcomes and implications that are realised both in the short run and in the long run (Schumpeter 11). Critique of political economy analysis The concept of political economy analysis has received critique from different avenue due its approaches to institutionalism and development. One of the most renowned critics of the concept is Carl Marx. The critique states that capital economy would collapse in case of a crisis. Critiques view that political economise analysis can only operate in a capitalist environment. The method of immanent critique is used to criticise the concept to show the shortcomings of the approach. The criticism claims that democracy is not considered in the approach (Bartels and Larry 4). Those who do not have bargaining power or collective abilities are left out in institutional development. Therefore the approach only caters for those able to raise concerns in an identifiable way among the elite. This leaves vulnerable societies without social necessary social requirements. The method is and substance are also criticised in terms of applicability and long terms effects. The approach has also bee criticized due to its limit of scope, given that it only applies to matters that have political aspects in nature. Conclusion In determining development within institutions, politics play a crucial role in determining how management plays its roles. It has been widely accepted that politics have determine the shape hat polices and developmental strategies. Political economy analysis is concerned with how social institutions and groups come together to influence change driven by stakeholders such as the state. Allocation off economic resources to cater for competing needs relies on the strategies and bargaining abilities. Political elites also determine the way resources are allocated through their influence on people. Elites also apply strategies depending on whether their goals are public or self oriented. Bibliography Bartels, Larry M. Unequal democracy: The political economy of the new gilded age. Princeton University Press, 2009. Besley, Timothy, and Stephen Coate. "Centralized versus decentralized provision of local public goods: a political economy approach." Journal of public economics 87.12 (2003): 2611-2637. Do, Quy-Toan and Andrei A Levchenko. "Trade, inequality, and the political economy of institutions." Journal of Economic Theory 144.4 (2009): 1489-1520. Du Gay, Paul, and Michael Pryke, eds. Cultural economy: cultural analysis and commercial life. Sage, 2002. GSDRC. Governanace, Socail Development, Humanaitarian Conflict . 2013. 9 November 2013 . Golding, Peter, and Graham Murdock. "Culture, communications and political economy." Mass media and society 3 (2000): 70-92. Fisher , Jonathan and Heather Marquette. 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"A view from behavioral political economy on China's institutional change." China Economic Review 23 (2012): 991-1002. Do, Quy-Toan and Andrei A Levchenko. "Trade, inequality, and the political economy of institutions." Journal of Economic Theory 144.4 (2009): 1489-1520. Thelen, Kathleen . How Institutions Evolve: The Political Economy of Skills in Germany, Britain, the United States, and Japan. Cambridge : Cambridge University Press, 2004. Zhang, Yongjing. "A view from behavioral political economy on China's institutional change." China Economic Review 23 (2012): 991-1002. Read More