Day 3: Framework Session – Elite Capture and Political Economy

Professor Gerard Padro i Miquel (Research Programme Director, IGC State Programme and Professor of Economics, LSE) presented the framework session on elite capture and political economy. He began by stating that rich countries tend to have better institutions, but that this correlation does not yield immediate returns – they tend to be long-term investments which suffer from measurement differences across countries. Even the concept of “good institutions” is malleable e.g. the autocracy vs democracy debate.

Padro chose to frame the debate by mapping two aspects of the policy determination process: accountability and aggregation of preferences. The issue of accountability, between politicians and citizens as a whole, is the traditional focus of research into governance failures. He looked into three accountability failures: information asymmetries, procedural flaws (such as rigged elections) and clientelism. He then went on to look at the issue of aggregation, highlighting two failures: ethnic politics and a lack of definition of individual preferences.

This framework was then used to analyse the issue of elite capture. He looked at two main types of elites: political elites (who control political power) and economic elites (who capture rents/industries). These two intermix in practice but normally fall under Padro’s two categories above. Political elites normally fall under accountability – wanting to stay in power and building clientelist structures and controlling the media to do so. Economic elites control preferences – their interests are disproportionately considered by those in political power which encourages friendly regulation/labour relations.

Padro finished his talk by focusing on the negative implications of elite capture. At the local level, there are distributional problems, while at the country level, there are barriers to entry in the political and economic markets which can constrain growth. So, what can outside actors do about this? Donors tend to avoid the issue by focusing on non-controversial issues such as service delivery of education and health. They also favour traditionally “good” policies such as trade openness, but these policies can help entrench the power of elites.

The session chair, Professor Eric Werker (Country Director, IGC Liberia and Associate Professor, Harvard Business School) then provided some comments. He presented work with Lant Pritchett (2012) which looked at four types of economic interests: magicians, rentiers, workhorses and powerbrokers, all of whom operate within different markets with different interests. He interestingly focused on firms who have political access and will therefore favour individual deals over far-reaching reform (which will restrict their own interests).

Finally, there were a number of interesting comments from the discussant, Nicholas Waddell (Governance Adviser, Growth Team, DFID). He particularly focused on how a donor could operate within this environment while encouraging elites to relax their capture and align their interests with the interests of the country as a whole.

The session was then opened to the floor with a prevailing focus on the interest of developed countries in maintaining the status quo, and a challenge to the IGC to tackle more of these complex issues.

By Helen Sims, Communications Coordinator, IGC London Hub