Political economy of the resource paradox
By Vince Musewe
“COUNTRIES that are more politically inclusive are likely to benefit from better management of natural resources and better development outcomes. More likely to benefit from well-being improvement policies that share the wealth of development through political and economic groups in a sustainable manner.
And that’s what the book called “Rents to wealth” The political economy of natural resource-based development. The book examines the political economy of the resource curse that prevails in many resource-rich countries. It presents an analytical framework for assessing the political economy and institutional environment of a country with respect to natural resource management and, on this basis, it proposes a substantial set of targeted prescriptions throughout the supply chain. value of natural resources that are technically sound and compatible with the identified objectives. underlying incentives.
The observations are that in many developing countries the extractive industry sector is both shaped by and in turn influences political, economic, societal and institutional dynamics. Understanding the political economy surrounding resource rents is therefore crucial to achieving sustainable development based on resource wealth.
Research findings have shown that many resource-dependent developing countries have short-sighted and suboptimal policies to extract resources and capture rents, and then allocate those rents in a way that often favors the private consumption of elites rather than public investment which improves growth and collective society. well-being.
A “paradox of abundance” exists in resource-poor countries, where extractive resources are not well managed and invested to improve public welfare and infrastructure, but are hijacked by a predatory coalition.
The effective national resource management value chain encompasses institutional arrangements across five key dimensions, namely: organization of the sector and awarding of contracts and licenses; regulation and control of operations; collection of taxes and fees; income distribution and management of public investments; and the implementation of sustainable development policies.
An interesting phenomenon is that political economy, shaped by years of political history and culture, plays an important role in determining a country’s extractive resource development trajectory and it is important to understand the different typologies identified in the book. Understanding the underlying “political economy typologies” allows us to better understand why things are the way they are and why we are somehow unable to transform our extractive sector and what we need to do to achieve new results.
Many times we tend to focus on economic policy as a determinant of progress, but policies are dictated by the structure, motives and dynamics of political economy and can, indeed, be rendered sterile by the exercise of narrow political interests at the expense of inclusive and participatory large-scale development.
The four underlying typologies of political economy identified in the book include:
Patrimonial rule: political economic frameworks characterized by an individualized political authority, generally based on a hierarchy of cronyism, where the exercise of power comes up against few constraints. These can be contexts of persistent instability and a high degree of political contestation with frequent rotations between conflicting groups; or they may be characterized by dictators who avoid establishing organizational arrangements that limit their actions (such as an institutionalized ruling party). These “roving bandits” are generally unlikely to make credible intertemporal commitments or protect property rights because they are unconstrained.
In patrimonial rule contexts, extraction capacity is low, constant theft from society means economic output is low, time horizons are short, and exploitation of public resources for private ends is common.
Hegemonic government: an unchallenged and institutionalized political force or one-party regime, or “stationary bandit”, which successfully monopolizes “theft” through regular taxation and in turn provides peaceful order and some degree of public goods for the society.
The degree to which the regime has to pay for other social groups (usually with a mix of particular and developmental goods) can vary and is related to the predictability of succession and the potential for revolt.
For example, in Angola, the ruling elite are able to enrich themselves with relative inattention to broader societal demands. While in Suharto-era Indonesia, some degree of large-scale growth and development was needed to secure the regime’s grip on power.
Thus, hegemonic governments can appear either predatory or relatively benevolent.
Time horizons are lengthened due to the stability of the regime; combined with greater institutionalization, this allows for credible intertemporal engagement.
Clientelist pluralism: political-economic contexts in which a certain degree of political competition takes place (mainly through electoral contests), usually on the basis of large patron-client networks.
The need to reward supporters translates into the provision of certain public goods; but reliance on the patronage distribution of particularistic goods to mobilize support undermines vertical and horizontal accountability and has self-fulfilling characteristics that lead to the under-provision of public goods that enhance collective well-being .
Time horizons are short because politics is relatively unpredictable and the degree of institutionalization (and therefore the constraints on power) is low.
Programmatic pluralism: electoral competition on the basis of programs oriented towards the improvement of collective well-being, with an emphasis on the provision of public goods at the level of society.
A higher degree of institutionalization results in integrated democratic mechanisms of horizontal and vertical accountability, facilitates the articulation and protection of property rights, and enables credible intertemporal engagement.
It is clear that any envisaged transformation of the extractive sector requires that policymakers first understand the political economy without which transformation will be nearly impossible.
Zimbabwe must transform its resource sector in order to achieve its inclusive development agenda.
- Vince Musewe is a freelance economist, you can contact him at [email protected]