Foreign Aid in the Age of Populism

Political Economy Analysis from Washington to Beijing

Viktor Jakupec, Max Kelly

• Publisher: Routledge
• Year: 2019
• ISBN:
  9780429628115
• Edition: 1
• Topic: Economía
• Subtopic: Economía internacional

Across the world the Western dominated international aid system is being challenged. The rise of right-wing populism, de-globalisation, the advance of illiberal democracy and the emergence of non-Western donors onto the international stage are cutting right to the heart of the entrenched neoliberal aid paradigm. Foreign Aid in the Age of Populism explores the impact of these challenges on development aid, arguing that there is a need to bring politics back into development aid; not just the politics of economics, but power relations internally in aid organisations, in recipient nations, and between donor and recipient.

In particular, the book examines how aid agencies are using Political Economy Analysis (PEA) to inform their decision making and to push aid projects through, whilst failing to engage meaningfully with wider politics. The book provides an in-depth critical analysis of the Washington Consensus model of political economy analysis, contrasting it with the emerging Beijing Consensus, and suggesting that PEA has to be recast in order to accommodate new and emerging paradigms. A range of alternative theoretical frameworks are suggested, demonstrating how PEA could be used to provide a deeper and richer understanding of development aid interventions, and their impact and effectiveness.

This book is perfect for students and researchers of development, global politics and international relations, as well as also being useful for practitioners and policy makers within government, development aid organisations, and global institutions.

1

INTRODUCTION

Preamble

The rise of right-wing populism as a political movement in Western democracies, the emergence of illiberal democracies, the quest for de-globalisation and the advent of the Beijing Consensus are challenging the established economic orthodoxy of the neoliberal foreign aid paradigm. These challenges are driven by a pursuit of nativism, protectionism, and other socio-political factors. In short, there is a growth in re-politicisation drivers affecting Western foreign aid. Yet, despite these emerging measures, the application of Political Economy Analysis (PEA) as a catalyst for improving foreign aid effectiveness in a changing political environment remains at best an ambitious epistemic intention, and at worst a marginalised tool that is perceived by numerous foreign aid agencies as being too time-consuming, too cumbersome and too complex to implement (Duncan and Williams, 2012; Hudson and Marquette, 2015).

Prior to progressing any further, and for the purpose of a better understanding, let us briefly define the concept called ‘Political Economy Analysis’ (PEA). It would be tempting here to discuss the various approaches taken by different aid agencies concerning PEA. However, since this discussion and analysis will be provided in detail in subsequent chapters, it suffices here to offer a widely quoted description of PEA.

According to OECD DAC,

[PEA] is concerned with the interaction of political and economic processes in a society: the distribution of power and wealth between different groups and individuals, and the processes that create, sustain and transform these relationships over time.

(OECD DAC, cited in DFID, 2009, p. 1)

USAID (2016, p. 2) defines PEA at application level as

a field-research methodology used to explore not simply how things happen in an aid-recipient country, but why things happen. It results in recommendations for a Country Development Cooperation Strategy (CDCS), project or activity design, course correction during implementation, and is supported by a written report of the analysis.

Given the above USAID misconception between a method and methodology, and the diversity of definitions, which we will address in subsequent chapters, an understanding of PEA as a component of economics and politics in a context of foreign aid is not uncomplicated, but it is no more complicated than trying to understand any other everyday political and economic discussion in the media and to draw informed conclusions. However, within the foreign aid community and institutions, there is a myth that politics and economics of development, and thus PEA, are best understood by economists and governance experts (Yanguas and Hulme, 2014) and are largely inaccessible to others.

The myth concerning the supremacy of economics has, since the rise of neoliberalism in the 1970s, been perpetuated by neoliberal development economists themselves who dominate the organisational thinking within multilateral development banks¹ (MDBs) and many other donor agencies. Ironically the very same economists were able to convince the development community, namely, aid donors, recipients and practitioners that their neoliberal economic theory reflects an unquestionable, universally valid reality and needs to be adhered to in preference to any other social science theory and actuality. In an implicit as well as explicit claim that there is no alternative to neoliberal economic ideology, by sleight of hand, this belief became ‘reality’.

In addressing this economic orthodoxy, the ‘Western’ political frame within which economic decisions are made also becomes potentially implicitly accepted as the norm. However, contemporary global society is dealing with a range of fundamental changes, or challenges which impact both on the donor side, as drivers of global and local engagement with society generally, and on the recipient side in terms of both the impact of aid, and the higher-level ability of recipient nations to define their own development. In this vein, the book identifies three ‘internal’ challenges to a nation’s aid and development intentions and actions, namely, (1) illiberal democracy; (2) the rise of populism and de-globalisation; and (3) one external or global challenge – in the guise of the so-called ‘Beijing Consensus’. Although each of these is analysed in depth in later chapters, it is necessary to review the basic premise of each here, and their interrelationships, given there is so much confusion in the literature.

Political economy analysis at the crossroads of illiberalism and populism

We identify illiberalism as a challenge in its own right. However, when one turns to the academic literature and other forms of public discourse, it becomes evident that there is a trend to conflate (1) liberalism and democracy (i.e. liberal democracy) and (2) populism and illiberalism. Concerning the former, Rosenblatt (2018) notes, ‘[o]ne common mistake is to conflate liberalism with democracy. The two concepts are not synonyms. For most of their history, they have not even been compatible’ (n.p.). As far as the latter is concerned, the academic literature usually refers to illiberal democracy, rather than to illiberalism.

Zakaria (1997, 2016) made an important distinction between democracy and liberalism, constructs that are often conflated. He sees democracy as a process for electing leaders through popular participation. However, stating that a state is democratic does not say anything about how it is actually governed. Liberalism defines norms, values and practices that form political life. A liberal state perceives individual rights as paramount. It protects the individual not only against the abuses of autocracy or dictatorship but also against the maltreats of democratic majorities.

In contrast, illiberalism imposes limitations on liberal freedoms, such as greater restrictions on freedom of assembly and speech, constraints on the press, performs reprisals against political opponents, and practises oppression of minorities. All of this may be perceived as immoral and evil, but they are not necessarily undemocratic. In short, illiberalism may be conceived and practised as illiberal democracy, or it may provide a political basis for the strengthening of the power of a democratically elected autocrat or dictator.

Let us turn to populism. According to Mudde (2004, 2007, 2017) and Moffitt (2017), populism in political sciences is the idea that the society is divided into two groups, which disagree with each other. One is the group denoted as ‘the pure people’, and the other is ‘the corrupt elite’. In short, a populist leader, irrespective if elected through a democratic electoral process or otherwise, uses as the political platform the unification of the ‘will of people’ and defends the ‘pure people’ against their enemy, namely, the ‘the corrupt elite’. As we may see from the above, however short discussion, populism does not equate to illiberalism.

Turning now back to the impact on neoliberalism and PEA, claims for the supremacy of neoliberal economics disguised as reality lead to a belief among many foreign aid practitioners that PEA is enigmatic and should be best left to the economists and governance ‘experts’. The organisational thinking within donor organisations concerning PEA does not appear to be much different. Because it is shrouded in a political-economic myth, the application or enactment of PEA is sporadic at best. Interestingly, PEA as an evaluation method is not part of the institutionalised project cycle and, when it is used, the findings are more often than not seen as inconsequential and, at worst, as a potential hindrance to the ‘cult of efficiency’ (Stein, 2001) which governs foreign aid interventions.

To complicate matters further, there is an ambiguity about PEA as a concept. Different foreign aid agencies have taken different approaches to PEA, for example, by atomising PEA activities and foci into macro-, meso-, and micro-levels, or country, sector, or problem levels, but without a clear epistemic justification. In doing so, donor organisations are projecting a hope that this fragmentation will potentially harvest greater operationally relevant findings. There is little if any epistemic justification offered for this segmented approach, and, unsurprisingly, there is at surface level a lack of clear indication of ‘relevant findings’. Against this, deeper-level analysis of the PEA reports made available by the foreign aid agencies, a different picture emerges. PEA appears to be an evaluation tool that provides benefits to the donor agency to achieve their aims and to maintain advantageous power relationships vis-à-vis the recipients.

Against this background, and for the purposes of a better understanding, this book will attempt to de-mystify the political economy analysis of foreign aid. In doing so we will focus on three intertwined themes within the PEA, namely, (1) the existing deficiencies of PEA; (2) the emerging global challenges to the existing economic dogma governing the current foreign aid agenda and thus PEA; and (3) the need for the re-politicisation of PEA.

The discussions concerning the deficiencies of PEA will focus on the de-politicisation of PEA thus operationalised as a simple ‘tick-box’ technicist-mechanistic process. This discourse is further grounded in contemporary political and economic context. The book highlights what we consider to be the critical global challenges. With reference to global challenges, the discussion will concentrate on the impact of populism, illiberalism, de-globalisation and the emergence of the Beijing Consensus on established MDBs and foreign aid. In this context, we argue that major foreign aid institutions have thus far failed to address the reality of the above-mentioned emerging challenges in any significant way. If anything, the MDBs, it appears, have, by adopting the ‘business as usual’ approach, disguised the reality of the political and economic changes affecting the foreign aid world. While challenges identified as core in this book exclude perhaps the greatest challenge to humanity in the twenty-first century, namely, climate change, the aim of this book is to critically analyse the conceptualisation, and implementation of political and economic factors in the pursuit of sustainable human development, currently driven by the UN Sustainable Development Goals. Political and economic context drives decisions which impact not only society, but the global environment, and therefore the role of PEA in international development decision-making, and implementation is critical for all aspects of a sustainable future.

Therefore, we argue that there is a lack of political foundation within the current PEA concept, and at the same time there is a failure of the neoliberal paradigm in foreign aid. One of the reasons for this phenomenon is that neoliberal economists are to a large extent the gate-keepers of foreign aid policies within orthodox MDBs and bilateral aid agencies. They exert immense influence not only so far the policy decision-making process within their organisations is concerned, but also on recipient governments. They have amassed significant power and influence concerning foreign aid allocation and conditionalities throughout the developing world. In short, the neoliberal economists fulfil a censorship role of the paradigm they subscribe to, and the majority of donor governments provide the relevant support for the sustainability of the existing neoliberal economic paradigm. They dismiss any critique of neoliberal economics, invoking the Thatcherite doctrine that ‘there is no alternative’ (Berlinski, 2008). However, in order to make PEA politically, economically and socially more responsive and relevant to donors and recipients, there is a need to recast PEA through a critical engagement with conceptual and theoretical underpinnings, going beyond uncritical acceptance of neoliberal economic orthodoxy. Thus, we have (re-)located PEA within a theoretical framework of international political economy.

The structure of the book

In the Zeitgeist of populism as an anti-neoliberal political, economic and social movement, this book opens in Chapter 1 with a broad discussion concerning the foreign aid agenda, that is dominated by a globalised neoliberal economic growth paradigm. This chapter analyses in brief the shortcomings of this ‘Western’-led development orthodoxy in a political and economic context which is challenging these foundations. Based on these challenges the authors address the ‘why’ and ‘how’ PEA should be recast through a paradigm shift and introduce the rationale for International Political Economy (IPE) as a theoretical framework for PEA. This chapter sets the comprehensive argument for a critical revision to and recasting of PEA as a concept limited in most cases to analysing the economic policies, transforming it into a tool that provides a critical analysis of politics as central notion of human development.

Chapter 2, Chapter 3 and Chapter 4 discuss PEA in more detail by exploring the emergence of PEA as a tool to address the growing recognition of the impact of political factors on development interventions and their impact (or lack thereof). These three chapters address understandings of and the use of PEA in diverse institutions, and present critiques of PEA at multiple levels within international development. Chapter 2 focuses on the need for a critical revision to PEA. It argues for recasting PEA from its current conceptualisation, limited in most cases to analysing the politics of economics, to a tool that provides a critical analysis of politics as the central foundation. Chapter 3 explores what has been identified as both definitional and conceptual deficiencies in PEA as it is currently practised. Chapter 3 unpacks the operationalisation of PEA by key donors and explores related concepts that take a more critical approach, including Doing Development Differently, and Thinking and Working Politically. The discussions conclude with an analysis of the shifting ground of PEA in theory and practice in response to critiques to date, highlighting the lack of engagement with contemporary political and economic challenges, namely, the rise of populism, and illiberal democracies, the emergence of a de-globalisation narrative and the challenge to ‘Western’-led development orthodoxy (the Washington Consensus), by the so-called Beijing Consensus. In Chapter 4 the authors ‘unpack’ PEA as it is practised by major MDBs including the World Bank, and the Asian Development Bank (ADB) and bilateral aid agencies such as the UK’s Department for International Development (DFID) and the Swedish International Development Cooperation Agency (SIDA). Commonalities and the development of ideas are tracked through the use of tools and methods employed by these agencies. Drawing on critiques of PEA in previous chapters, and the contemporary use of PEA, the chapter explores alternative approaches both conceptually and practically to explore...

Table of contents

• Cover
• Half Title
• Series Page
• Title Page
• Copyright Page
• Table of contents
• About the authors
• Abbreviations
• 1. Introduction
• 2. Political Economy Analysis: A distorted view of reality
• 3. Political Economy Analysis: Deficiencies and critiques
• 4. Unpacking political economy analysis in a foreign aid context
• 5. Populism: Challenging socio-economic orthodoxy
• 6. The challenge of illiberal democracy
• 7. De-globalisation: Challenging the foreign aid agenda
• 8. The Beijing Consensus: Challenging the dominant Washington Consensus
• 9. The politicisation of Political Economy Analysis
• 10. (Re)locating Political Economy Analysis: Theoretical constructs and practical undertakings
• 11. Foreign aid: Political Economy Analysis at the crossroads
• Index