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Political Institutions

and Economic Policy Reform

Andres Rius *
Nicolas van de Walle **

August 15, 2003

*

International Development Research Centre (Canada).

**

Department of Political Science, Michigan State University (USA); Center for
Global Development (Washington DC).

Introduction
There has been a growing recognition over the course of the last twenty years that
institutional, cultural and managerial factors weigh heavily on the course of economic
reform programs in developing countries. The first generation of reform programs
largely disregarded these factors (Stiglitz, 2000). The implicit model of decision-making
was largely apolitical, and policy makers focused almost entirely on issues of economic
design, taking the implementation of the programs almost entirely for granted.
Inevitably, policies and programs which had been designed to be implemented in a year
took three times as long. Others were simply never implemented or were reversed soon
after implementation. Finally, implementation was characterized by striking and
unexpected variation across countries, across policy areas and across time. The
problematization of implementation inevitably forced policy makers and academic
analysts of policy reform to the issues addressed in this essay. It became clear that an
array of political and institutional issues critically shaped the outcomes of reform
episodes.
A large literature has emerged on the impact of institutions on economic policy reform.
This essay will review several of the more important strands in this literature. It will
focus on political institutions, narrowly defined as the institutions that affect how the
state apparatus is constituted. It will largely ignore broader, cultural institutions, such as
religion or ethnicity, in part because of space limitations, but also simply because there is
today little agreement on their impact on policy making and policy reform in the
literature. On the other hand, by encompassing some informal patterns of political
interaction, the analysis covers aspects of what political science defines as political
culture and goes beyond formal political institutions as expressed in constitutions or the
law system.
Adapting only marginally his definitions and labels, we follow the approach of Tommasi
(2002) and view the relation between political institutions and market oriented reforms as
the relation between levels of rules (i.e., institutions).1 At the lowest level are markets,
which are themselves diverse institutions that require embedding institutions of higher
(and increasingly “political”) levels.2 The “market oriented reforms” of the 1980s and
1990s were changes in what we could consider a medium level set of rules, namely rules
that regulate the behavior of agents in the economic sphere. These rules include what we
normally call “policies” (e.g., fiscal policy, trade policy, etc.) and institutional
arrangements that determine how certain markets operate (e.g., whether there are stateowned enterprises in certain utilities market, whether a market is reserved for a single or
a few participants, what rules or regulations bind the actions of these players, etc.).
The reform of these medium level rules is this project’s object of analysis, or set of
“dependent variables”. However, to understand their change one must consider the
1

For the purposes of this paper, it is useful to define “institutions” as regularized patterns of social
interaction (as in, e.g., O’Donnell, 1994).
2
In the cited paper, Tommasi doesn’t emphasize enough the institutional nature of “markets” although it
would be fully consistent with his overall framework.

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operation of high level rules, which are those that determine who has the power, under
what procedures, to make policies or to set regulations that influence the functioning of
markets. These are the political institutions analyzed in this paper, and they are usually
reflected in the Constitution, electoral rules, and other (sometimes informal) regularized
patterns of political interaction. These institutions have an effect on the behavior of
formal political actors (i.e., mainly the executive, legislatures, courts, bureaucracies,
political parties, and all their individual members), whom we consider the key strategic
actors from the perspective of understanding policy reform.3
Specifically, we focus attention on the nature of the relationship between formal political
actors and the society at large or, for brief, “modes of representation”; the procedures by
which executive officeholders are appointed; the relative powers and responsibilities of
the executive, legislatures, and other branches of government; and (some of) the
characteristics of the party system and the internal organization of political parties that go
beyond the voters-leaders relationship. While we will treat these institutions as
exogenous independent variables that may account for the realization of economic
reforms, it is also convenient to keep in mind that in a longer term perspective they are
indeed partly determined by various –previous and simultaneous—social and economic
processes (i.e., they should also be considered endogenous).4 The chapter summarizes
some stylized facts about how they relate to policy change, from a selective literature
review.
While it is doubtlessly relevant, both from analytical and practical perspectives, to
understand the possible connections between pre-existing political institutions and the
timing and comprehensiveness of reforms, as if they occurred in discrete intervals of
time, a consensus seems to be expanding around the notion that the quality of subsequent
policies is also critical to reform effectiveness (i.e., the reforms’ ability to attain their
stated objectives) and their consolidation (Tommasi, 2002; Fanelli and Medhora, 2001;
Rodrik 2000, 2002). Whether reforms are introduced abruptly or gradually, they always
require the putting in place of a number of complementary measures over relatively
extended periods. This reflects the complexity of the socio-economic process, the
reformers’ inability to anticipate all the contingencies that an initial reform push may
trigger, and the inevitable changes in the environment that any institutional architecture
will have to confront.
3

The focus of this paper on these formal political actors reflects the project’s broader goal of
understanding “macro reforms” and amounts to an implicit recognition of the state’s capacity to operate
with relative autonomy from the demands or pressures of interest groups or the electorate. This differences
the approach favored here from that of other “political economies” of policy change that focus on the
unmediated interactions among interest groups, or the effects of voter heterogeneity, as if the state could be
considered a mere instrument that they can utilize at will (see, e.g., Castanheira and Esfahani, 2001, for a
review). Empirical evidence discussed below –on the relatively limited role of interest groups and voters in
the initiation of reforms in developing countries—would further justify the focus and approach of this
paper. This does not detract from the relevance of those actors and their power dynamics in the process of
implementation.
4
O’Donnell (1994), for example, suggests that some political reforms of the 1980s and 1990s (e.g., about
prerogatives of executive offices vis-à-vis legislatures, or about how presidents are elected) were in fact
introduced to make it possible to undertake a certain set of economic reforms.

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we define economic policy reform specifically as the move in the 1980s and 1990s towards more market oriented economies often in the context of more open political systems (although in some countries. which constitutes a key dimension of the acquisition and maintenance of political power. to include any good or service that a politician provides to an individual in return for political support. some kind of government willingness is a necessary condition for reforms to occur. which may in some instances make it look as if a government is forced to undertake some reforms against its will. All political systems have some clientelism embedded in their political institutions. The analytical separation from the same government’s power to introduce the desired reforms is somewhat arbitrary. or exemption from various licences. although more overt and illegal forms of clientelism that subvert the rule of law tend to be limited to autocratic regimes. and a third section focuses on the capacity to sustain the reform process once it has begun. and that domestic political institutions account to a great extent for the existence of such will. The former can be termed clientelist systems. because they are characterized by the pervasive resort to political clientelism. privileged access to scarce goods such as subsidized credit. The Will to Reform We first turn to the effect of political institutions on a government’s willingness to initiate market-oriented reforms. from systems in which politicians instead appeal to constituencies through ideological and programmatic appeals and the delivery of broad public goods (Kitschelt. However. Diamond and Plattner.This essay is divided into three sections. and in what follows we seek to identify channels through which political institutions influence the likelihood of appearance of such will. taxes and fees. following this introduction. clientelist systems exist at all levels 5 We do not examine the role of conditionality in creating that willingness. one can distinguish between political systems in which politicians primarily maintain their political power and legitimacy by providing discrete private benefits to key constituencies. Khan and Jomo. A final section concludes. because such practices are hard to make compatible with institutions of vertical and horizontal accountability that exist in democratic regimes (Schedler. 1. In particular. We define clientelism broadly. This might include such things as public sector jobs. Throughout. We believe that the numerous instances of structural adjustment programs being agreed on paper but not realized in practice demonstrate that some kind of domestic resolve to undertake reforms is always needed for those to occur. it should be added. important reforms in this direction started earlier). Clientelist modes of political representation can be democratic or autocratic. 1999). 2000).5 Reform in Clientelist Systems: The nature of the relationship between politicians and the citizens of countries has an effect on the nature and quality of economic policies. We start by looking at the role of political institutions on the willingness of governments to undertake reform. Similarly. 4 . 2000. as a government that feels powerless may choose not to even propose reforms that it would intimately think are desirable. A second section then turns to the institutional factors that determine the power of governments to initiate reform.

To be sure. Kitschelt (2000) identifies rich countries and well established stable democracies such as Japan. 1999) Finally. Clearly illegal forms of clientelism are much less common and criminalized on a regular basis. In some countries. In other countries. 1997. In these countries. 2000. In some countries. Thus. Policies may be adopted to address a specific political objective. The United States is thus supposed to have 4 million patronage positions in state and local governments (Theobald. Political clientelism is nonetheless much more pervasive and inefficient in many of the middle and low income countries currently undertaking economic reform. In the US. the manner in which policies are 5 . Africa and Asia. it appears to shape all governmental activity. and Kochanek. the redistributive nature of clientelist systems can also be quite different across political systems. in which pervasive clientelism has persisted as a key feature of the interaction between political parties and the citizenry. on the other hand. 1999. Fox. 1994.of economic development. clientelism is limited to a relatively small strata of elites. On the other hand. and Africa (Bratton and van de Walle. for instance. it rarely takes the form of patronage and instead consists mostly of rent seeking and corruption which benefits a very small proportion of the wealthiest segments of the population. Political elites resort to patronage. Coronel. political parties are not distinguished in terms of policy platforms or ideology. et al. Grindle. most clientelism is codified and regulated. to be doled out by the party that controls the White House (Ingraham. 1996. and it serves to integrate relatively disadvantaged strata of the population in to the modern economy Political clientelism shapes the government’s economic policies. (Bayart. If and when there are elections. even though they are more likely to predominate at low levels of economic development. federal political appointees are fixed in number and carefully scrutinized. or pork barrel spending strategically to gain and maintain political support. the nature of clientelism varies across political systems. 2000. in Latin America. which can also be influenced by ideology. In other countries. so much as by the zealousness with which they promise to deliver certain private goods to key constituencies. the clientelism is circumscribed in level and scope. various clientelistic practices represent the dominant form of political exchange. 1993). 1992). 1997. Tangri. government officials engage openly in illegal activities and subvert the rule of law on behalf of their political clients. 1982). to the detriment of other potential government objectives. Nonetheless. such as reducing poverty or increasing literacy. Austria and Italy.000 “political appointments”. rather than just “grey area” policies of favoritism and privileged access. At an extreme. observers have emphasized the salience of political clientelism in Latin American politics (Martz. and Jackson and Rosberg. while the federal government retains about 3. Hutchcroft. 1995). in Asia (Jomo and Kahn. in these countries. It can also vary in the extent to which it includes completely illegal activities. It is of course far from the only factor which shapes policies. for instance. A first criteria of differentiation concerns just how pervasive it is. and Hagopian. in a number of states. the dominant form of clientelism is patronage. Ames. 1998. 1996). 1997. rent seeking.

Similarly. at least in part because of efforts by these elements to delay or subvert improvements. encouraging public spending. because the elimination of tariffs will eliminate rent seeking opportunities. some governments find trade liberalization difficult. and under-financed judicial sectors. for instance. the predilection for clientelism can have a sharp impact on reform. It has become quite clear that on the contrary. even though the government credit agency runs a big deficit. first. clientelism increases the size of the public sector. In some low-income states. simply because each promotes patronage and rent seeking. 6 . Bienen (1990) and others have noted. State retrenchment undermines patronage. government consumption and government regulation. because it would interfere with their own rent seeking activities. the government continues to regulate interest rates and credit to the agricultural sector.implemented. The lower the capacity. for instance. The early literature on economic reform largely denied the salience of clientelism to policy reform outcomes. the more corrupt elements in government are able to get away with various forms of malfeasance (Rose-Ackerman. or the political rewards to be gained from granting protection to domestic businesses. the political importance of clientelism represents the primary source of opposition to economic policy reform in many countries. In turn. the primary reason the government finds it difficult to liberalize rural credit is that the agency is a substantial source of patronage for the government party. corrupt elements have an incentive to lower the level of state capacity in order to escape detection and punishment. it is hard to avoid the conclusion that elites at the very pinnacle of the state apparatus are ambivalent about institutional capacity. the success of structural adjustment requires the prior structural adjustment of the region’s political systems because many African governments are so dependent on clientelism for their survival that they would not countenance significant policy reform. often can be traced to the clientelistic objectives they serve. In sum. while liberalization eliminates the size of economic rents. All components of economic reform do not affect clientelism equally or in the same way. but there are few which do not in some manner. and the survival of policies long after they have proven to be unable to reach the desirable public policy goals that motivated them. We return to these issues in the last section below. In these states. a negative synergy typically exists between government capacity and pervasive clientelism. while the big farmers who are the primary beneficiaries of the policy are an important source of support for the party. lax book-keeping. repayment rates are low and the poorest peasants do not have access to the credit system. inaccurate statistical collection systems. Whatever the merits of the initial policy objectives. Instead. they were often designed as if the state apparatus was an apolitical set of organizations devoted to maximizing the general welfare and having enough administrative capacity to identify appropriate programs and carry them out without difficulty. 1999). Given clientelistic concerns. low capacity persists despite substantial foreign technical assistance. such as the selling of import licenses. Corruption and rent seeking are facilitated by inadequate accounting standards. as Rodrik (1998). Second. As Jeffrey Herbst (1991) has remarked about Sub Saharan Africa. On balance.

But first.6 Assuming that it is possible and reasonable to distinguish democratic from nondemocratic regimes based on a minimum set of procedural characteristics (based. but in part because rentseeking motivations are not fully legitimate. given macro-economic disequilibria. Brinks and Pérez-Liñán. It was at some point expected by analysts that non-democratic regimes could be better placed to initiate such reforms. e. various multi-country studies using different methodologies and a range of detailed case studies. The ambivalence to get rid of useful clientelistic political instruments may well explain why governments are so willing to delay economic reform programs long after it has become clear that the old policy is not achieving its goals. also Collier and Levitsky. 7 . by a broad franchise.. This is of course not the only reason that governments are ambivalent about reform. and the references therein). 2001. 1995). often opposition will be expressed in the form of more subtle manipulation and cooptation of the reform process. but such political considerations clearly play a role in the decision-making of many governments. we must turn our attention to the effect of formal political institutions on economic decision-making.g. since they will tend to believe that these are necessary to maintain the political support of key constituencies even as the economy deteriorates. Clientelistic dynamics within the state apparatus will shape the implementation of policy reform.Thus. the more important clientelism is to the survival of the regime. often compared to nonreforming democracies. What may seem irrational from an economic point of view is perfectly rational from a political point of view. 6 The literature on how to define “democracy” conceptually. the question logically follows of whether any of these two broad types can be assumed to have a greater propensity to consider adopting market oriented reforms. We return to the very important issue of the power to pass and sustain reforms in the next section. the more it will be hesitant to undertake orthodox economic reform programs.g.. have brought about a consensus on the fact that authoritarian governments have no advantage over democracies when it comes to initiating and implementing comprehensive reforms (Maravall. or that the old policy is no longer sustainable. and how to classify political systems practically. enjoying freedom of organization and expression). on whether the head of government and legislature are chosen in free and fair elections. as we discuss below. but it is worth considering first what is known about the willingness of autocratic and democratic governments to initiate them. and Chile under Pinochet was cited as a paradigmatic example. 1996). Mainwaring. Democracies and Dictators: The world’s states also vary in the extent to which their institutions are democratic. is massive and will not be examined here (see. Indeed. the more clientelistic governments will be wedded to their patronage and pork barrel spending activities. 1995. e. However. the more the overall economic situation deteriorates. There will be cases of outright opposition to reform. The expectation that authoritarian governments would be more disposed to initiating market oriented reforms (the “authoritarian advantage” hypothesis) was based on the assumption that a main impediment to reform was the political activation of social interests hurt by those changes in policies (Geddes. and the references therein.

Nevertheless. For reasons that are discussed below. slow-maturation reforms with diffuse benefits. Maravall.One of the main explanations for the failure of the authoritarian advantage hypothesis is that authoritarian governments are not excluded in principle for having a vested interest in an interventionist status quo. Democratic political leeders with a long career built around the construction and management of the state apparatus may fell little attracted to reform what provides them with resources to preserve or increase their political power (see section 1). On conditionality see. see Nelson (1990) and the various analytical contributions compiled in Sturzenneger and Tommasi (1998).g. 1995.e. In any case. the authoritarian advantage hypothesis has not flown well either when it comes to considering the power of governments to implementing what they have decided that they want. parties) and with a relatively balanced record of access to power.. e.8 However. may enjoy greater autonomy to.. and with the groups benefiting from the (statist) status quo. One should not overestimate. Geddes (1994) argues that reforms are more likely to be initiated (by insiders) when there are fewer political actors (i. and therefore they will avoid them as would some democratically elected officials (Geddes. It may be useful to consider that reform agendas may be put forward by political “insiders” or “outsiders”. 1994. while some could have expected that the agendas of pro-liberalization advocates could have a better chance of moving forward in an environment with more concentrated power and less room for opposing interests to question them. 8 It is worth mentioning that the number and cooperative tendencies of political actors may be strongly correlated with the degree of institutionalization of the party system. 455). although their access to power is generally neither a necessary nor a sufficient condition for those reforms to occur. In particular. Geddes (1995) has pointed out that political leaders who have had little or no relation with the state apparatus. it appears that their chances of 7 On crises and reforms.g. undermining the economic institutional architecture associated with an old “establishment” they have been excluded from. and that the conditions that would facilitate the initiation of reforms by each of these types would be different. Rius. those countries where the military have an economic stake in existing state-owned-enterprises). Kahler (1992). Democratic competition would lead the system to react to signals that certain policies are becoming dysfunctional (more on this below). but before delving into that it is worth examining how the reformist will would emerge in democratic polities. 1993. 2003). and even have an interest in. 8 . but neither underestimate the role of balance of payments difficulties and conditionality. e.. On the other hand. 1995). which makes it easier for them to solve the collective action problems involved in introducing long-lasting. authoritarian governments can have strong ties to interests hurt by the market oriented reforms (as in. p. “one of the most surprising findings of our case studies is the degree to which interest groups fail to account for the initiation … of policy reform” (Bates and Krueger.7 In particular. crises –actual or anticipated—and the incentives created by political competition and the risk of losing elections may induce insiders to revise their old ways (Geddes. See Mainwaring and Scully (1995). and cooperation among political actors (explicit or tacit) would make it possible for the reform effort to be initiated and sustained. These leaders may therefore be more prone to initiate market oriented reforms.

We return to these aspects in the next sections. by running a successful campaign requiring almost no party structure and perhaps taking advantage of a crisis context in which older political figures and organizations may have become discredited (such as. 1995). veto power.9 Somewhat paradoxically. The reformist agenda may move faster and farther if these leaders find themselves in an office with significant constitutional legislative prerogatives (decree power. but the same ease in rapidly passing innovations may reflect a lack or weakness of the “checks and balances” that would be valuable for the system to keep on improving medium level rules which are always by force incomplete and in need of elaboration. for example. associated with a conservative political outlook. in the Peru that elected Fujimori for his first tenure).10 This 9 Mainwaring and Scully (1995) define an institutionalized party system as one where there is stability in the rules and nature of inter-party competition.g. they may be outsiders to the official “national” machinery of highly institutionalized parties. One initial point to be made is that market-oriented reforms have been.. it has been argued that polar situations in terms of party institutionalization may have similar effects on the opportunities for the kind of “outsiders” that are more likely to initiate a reform process. major parties have stable roots in society.acceding to power are related with a key feature of the party system. major political actors accord legitimacy to the electoral process and to parties. namely its institutionalization (Mainwaring and Scully. their labels help structure political preferences and they tend to be consistent in their relative ideological positioning. and there is a tendency towards routinization of intraparty procedures (i. in the Argentina and the Peronist party that placed Menem in the Casa Rosada).. These would be politically savvy but until then peripheral figures. e. First.e. Finally. and such an evolution lead to a situation in which senior figures are increasingly recruited from technical elites with limited ties to the old statist regime and strong reformist agendas (such as. party organizations matter). 10 There are two issues related to the legitimacy of the association: (i) whether it’s empirically true that market-oriented reforms are more frequently espoused by conservative political actors. 9 .. but belong to relatively powerful –if sometimes marginalized—local political machineries. Finally. in the Mexico that saw Carlos Salinas become the PRI’s candidate and country’s president). whose chances may also be increased by a crisis situation (such as. exclusive right of legislative introduction). It is important to note that the features that make it easier for “unspoiled” political leaders to accede to power in crisis situations –low institutionalization and/or fragmented parties—may themselves make it harder for these same leaders to reach cooperative agreements with other political forces to consolidate and perfect an initial set of reforms. e. legitimately or unjustifiedly. they may be able to seize power in a system in which party institutionalization is extremely low. Those reform-prone outsiders may come to power through alternative conduits. extremely institutionalized parties may evolve into highly professionalized ones (perhaps reflecting the dominance of certain intra-party machineries over others). Second. Three such mechanisms are suggested by Geddes (1995). and (ii) whether.g. an important feature of the party system that may affect the likelihood of reformist leadership acceding to power and proposing market-oriented reforms is its ideological makeup.

either among elites or the electorate.. 1991). and those effects may be mediated by other features of the political institutional environment (such as. where parties align themselves along a left-right continuum (or labor-conservative. in Brazil under the Partido dos Trabalhadores).g. their effects on the will to reform are ambiguous. In these cases. and they will not face such an intense political opposition. e.has several possible implications for the appearance of a reformist will. In these cases. These dynamics that were characteristic of some Latin American countries may become more widespread with political competition and alternation in power in former communist countries. 1995. Strong ideological stances may also be a hindrance even in dominant party systems. 2000). and where it may be harder to predict where in the political landscape a market-oriented agenda could emerge. because they may be better able to convince some otherwise reluctant interest groups of their need. the presence of a reformist will in some political actors may not be enough to prompt reform initiation. a leftist ideology is obviously neither a necessary nor a sufficient condition for reform initiation. A second effect of ideologies on willingness to reform refers to the possibility that leftleaning political parties may find it easier than parties of the political right to respond to socio-economic challenges with market-oriented reforms. 1992. potentially. First. the reforms indeed benefit supporters of conservative ideas more than supporters of leftist ideologies. Important as it is. but not all of them point in the same direction. because reform-oriented leaders may foresee the consequences of their actions and choose to move too cautiously or not move at all.. This compares to countries where the ideological alignment is not the predominant way of organizing political competition. the ideological makeup of the party system and its effects on the likelihood of reform initiation has to be analyzed on a case by case basis because ideological alignments of political parties are not a universal feature of democracies (they seem to be much less prevalent in portions of Sub-Saharan Africa and Asia). to avoid policies that may seem appropriate given the socio-economic circumstances (as. 1998). While these are germane to interpretations of specific reformist trajectories. 10 .g. the insidersoutsiders distinction made above may be more relevant. and various contributors to the volume edited by Dornbusch and Edwards. or some other similarly labeled axis). or polarization in systems with a high number of veto players may in fact lead to policy stalemate (Tsebelis. the degree of party institutionalization). if a pro-reform government feels bound by historical allegiances and/or conflictive intraparty dynamics. in South Africa under ANC rule or. ideologically polarized party systems (particularly where the competitors have a balanced chance of acceding to power) may result in perverse cycles of extreme policy changes (see Haggard and Kaufman. Third. e. when ideological alignments coincide with important social cleavages. it can be expected that there will be at least some pro-liberalization actors in the political arena that will have some chance of being elected to office. The existence of various significant episodes of this kind has attracted attention of analysts and motivated theoretical exercises aimed at their explanation (see Sturzenegger and Tommasi.

the leadership must be able to get the consent of various branches of government. For the reforms to be adopted. how accountable each center of power is to other centers within a state’s structure. However.e. or incumbents become convinced of the need to reform. that how concentrated is decision-making power. The Power to Reform Even if reformist leadership is appointed to key policy making positions. democracies may have a greater-than-expected capacity to initiate and persist in a reformist path in the face of significant social costs or even social unrest. for example. It would then be necessary to take a much closer look at political institutions in search for the factors that could account for their reformist performance.. or whether opposing players are allowed to exert some political power (i. 2002). The studies show. and 11 . may have as strong a bearing on policy innovation in dictatorial regimes as it does in democratic ones (see Remmer. 1989. The lack of a clear pattern of association between regime type and reformist performance has to be considered to undermine the analytics that had led to the misplaced expectations: the horizontal and vertical accountability mechanisms of democratic regimes need not be an insurmountable obstacle in the path to reform. this does not guarantee that reforms will be initiated and passed. two salient aspects of the institutional configuration of democracies appear most relevant: (i) the distribution of power among branches of government. Bates and Krueger. or the costs of some reforms may be lower than expected or the benefits may materialize faster.e. 1993).2. as mentioned above. or to overcome social opposition regardless of how vocal or well organized. to become veto players). and this takes us to the nuts and bolts of the political organization of societies. the studies of the early 1990s showed a much more complex picture of relations between regime type and reform performance. including many successful democratic reformers and generally similar frequencies of authoritarian non-reformers (Haggard and Kaufman. given the global wave of “dual transitions” in the 1980s and 1990s (i. it seems reasonable to focus attention on the institutional makeup of democracies and its role in the reform process. as the country’s political constitution and law may require. More generally. However. simultaneous democratization and economic stabilization and liberalization). 1992. let alone fully implemented. Though we will devote more space to the various modes of organization of democracies. Castiglioni. non-democratic distinction may be too broad to capture the relevant political economic dynamics that determine a system’s propensity to produce policy change in the face of failure of the status quo. the democratic vs.. organized interest groups in developing countries may be less powerful at imposing or blocking policy agendas than originally anticipated. it is worth mentioning that the literature on non-democratic regimes shows that certain determinants of a system’s propensity to revise and depart from the status quo may be common to both types of regimes. The authoritarian advantage hypothesis also referred to the apparent greater facility of non-democratic governments to ignore or modify possible institutional obstacles in the way of a reformist will. Given our interest in understanding what triggers policy change at a relatively macro level (since that is the level of the market oriented reforms of the 1980s and 1990s).

We return briefly to the veto players and constraints frameworks below. 1990. in what could be seen as a variation of the authoritarian advantage argument discussed above. which could be thought to cover most of what is relevant from the perspective of understanding “reforms”. Mainwaring and Shugart. The faculties that have been isolated as most important are decree power. and collaborators (Shugart and Carey. e. 1997.particularly between executives and legislatures. Matthew Shugart. When the object of analysis are certain specific types of reforms. Shugart and Haggard. In terms of the critical relation between the executive and legislatures. The constitutional legislative powers of the president are the powers granted to the president or executive branch by the constitution.. approaching it from the angle of their effect on the propensity of systems to undertake policy reforms. 1992. There had been an earlier and broader debate. his “veto players” models by themselves do not explain what kind policies are produced but only the tendency of a political system to innovate. 2001). 1993). however. We realize that this choice short-changes a number of Eastern European transition countries that have parliamentary systems but it covers the broad majority of developing countries. on the relative advantages of parliamentary systems versus presidentialism to confront the challenges of simultaneous transitions (see. Shugart and Mainwaring. We now review some of the literature on these key political institutions. 1997). 2000). a conventional wisdom held for some time that economic reforms in developing countries required a dominant executive (or at least dominance by key policy making agencies). The same can be said of Witold Henisz’s more empirically-minded approach to identifying and measuring constraints on executive discretion (Henisz. with enough autonomy to initiate and implement significant policy innovation (O’Donnell. 1994. and theoretical as well as empirical work have shed light on the issues. Cox and McCubbins. However. and that allow that branch to initiate major policy change or to prevent it from happening. While the first allows presidents to introduce innovations even in the absence of supportive legislative majorities. which make up the majority of systems in existence in developing countries. and the exclusive power of legislative initiation (Shugart and Mainwaring.11 Starting with the executive-legislative relationships. and Mainwaring and Shugart. and the behavior of professional politicians. 2001. Linz. veto power. as he rightly points out. the introductory section of Tsebelis. we focus exclusively on presidential systems. 1997. 12 This was mostly a conventional wisdom about presidential regimes. and (ii) the way electoral rules (and informal institutions and political culture) affect the number and internal organization of political parties. 2000) has developed a theoretical framework aimed precisely at accounting for policy stability and change. 12 . to some extent originated with the transitions to democracy and economic reforms in Southern Europe. 1995. the other two are of a more reactive nature and normally only allow the executive to protect a 11 George Tsebelis (1995. Matthew McCubbins. and associated with the reform processes of the 1980s in Latin America. Scott Mainwaring. They have identified key aspects of the relationship that determine whether elected administrations are able to implement their policy agendas. it seems reasonable to give up something in terms of theoretical elegance and parsimony and look closer at the nuts and bolts of political institutions that may have a bearing on the kind of process to be explained.g.12 The relation between the relative powers of branches of government and a political system’s capacity to produce the right amount and kind of policy innovation has actually proven to be more complicated than that. 1995). Much of the light has come from work undertaken by Stephen Haggard. In this paper. two elements have been singled out as crucial: the constitutional legislative powers of the president and the partisan powers of the president.

Thus. reform-minded leaders in executive office will normally have to navigate through a larger number of veto points.e. and the responsiveness of his or her party’s legislators to presidential initiatives. they may see themselves in a “potentially dominant”. Tommasi (2002). one has to consider the factors that may determine their disagreements and the ability of presidents to obtain the rule making that they desire. More generally. However.certain status quo (although the status quo may be the situation created by a previous innovation. The number and significance of veto points would normally vary from one country to the next. Henisz (2000). However. 32-36) discuss the forms in which an independent judiciary and a federal organization of government may shape the policy making process. In particular. Even in presidential systems where specific prerogatives are recognized to two branches that are somewhat independently elected. the percentage of seats held by the president’s party). “proactive”. the second aspect of the relationship between executive and legislature –the partisan powers of the president—introduces us to the analysis of party systems and their determinants. the second is related to their internal organization. the more a government will lose in decisiveness (Cox and McCubbins.14 It would be impossible to survey the range of possible configurations of a veto points geography. analysts of the policy making process have highlighted the role of (a) an independent judiciary. and one has to go beyond the letter of the law to appreciate what veto players do have an effective veto power (more on this below). pp. and therefore reactive powers are also valuable to the passage of reforms). and (d) direct democracy mechanisms. the greater the number of veto points and the greater the likelihood of their disagreement on the preferred policies. While the first is related to the (effective) number of political parties with congressional representation. are crucial to complete the picture of the resources available to a president with an agenda. “reactive” or “potentially marginal” position vis-à-vis the legislature.13 Depending on what a particular constitution states regarding those specific “rights” of executive officeholders. Henisz (2000). (c) autonomous policy making agencies. but they 13 All three presidential faculties could relate directly to concepts of the veto players framework of Tsebelis. these two (the number and internal organization of parties) may be more volatile than the constitutional powers granted to the president vis-à-vis the legislature.. the formal separation of power is not all that counts. A useful way of synthesizing this idea is to say that the larger the number of effective veto players. Mainwaring and Shugart (1997) argue that the support enjoyed by the president in the legislature (i. Cox and McCubbins (2001. the lower the chances of reforms being adopted. 13 . in general. (b) sub-national governments. In general. in turn. 14 On the specific role of some of these in reformist trajectories see Geddes (1994). 2001). Remmer and Wibbels (2000). demonstrates the growing difficulty in passing policy initiatives when autonomous judiciary authorities and sub-national governments are added to the picture of potentially disagreeing executive and legislative branches.

to some extent. historical and cultural factors. individual constituencies. and whether or not votes from various party candidates are pooled to assign seats to the party as a whole. district magnitude (the number of seats elected from an electoral district). 2001). 17 Jones (2002). in turn. patronage and pork barrel spending in a greater scale (Cox and McCubbins. open party lists (as opposed to closed lists) and the absence of vote pooling produce stronger incentives for legislators to pursue a personal vote (as opposed to a partycentered vote). closed party lists). and therefore a low likelihood that the president can count on the support of a majority of seats in the legislature. 14 .18 The second important connection with policy innovation comes from the 15 The following generalizations on the relations between features of the electoral system and characteristics of the party system. There are two important connections between the typical legislator behavior and the likelihood of economic reforms. as discussed in section 1. the rules about the order of election (open vs. While certain electoral rules create incentives for legislators to pursue a “personal vote” and pay greater attention to the interests of their narrower. and personal vote systems tend to undersupply public goods in general and state capacity in particular (Cox and McCubbins. 18 State capacity is. a president’s ability to pass reformist legislation may hinge on party discipline as much as it does on the partisan distribution of seats in legislative bodies.16 As mentioned before. is not independent of features of the electoral system. are more likely to feature a larger number of parties.15 Regarding the number of parties. First. Again.nevertheless recognize constitutional and other “structural” determinants as we shall see shortly. and the existence of a second round (or runoff election) to elect the president. and of the behavior of politicians are informed by numerous empirical studies and are normally offered with the proviso that they must be applied in conjunction with a sensible analysis of other social. 2001). are those with nonconcurrent elections and/or with a two-round system to elect the president. citing Shugart and Carey (1992) and additional work by Mark Jones. a public good. Mainwaring and Shugart (1997) identify three key institutional factors that influence the extent of candidate-centered versus partycentered behavior: the rules about candidate nomination. others induce legislators to be generally more loyal to party directives or have a “party-centered” behavior. Their own analysis shows that the systems that have a very large effective number of parties. Mainwaring and Shugart (1997) highlight the role of the timing of presidential and congressional elections (whether they are concurrent or not). 16 Geddes (1994) also cites rules of party registration and minimum representation thresholds. political systems in which legislators have strong incentives to pursue a personal vote tend also to see clientelism. and may even see it beneficial not to invest in building state capacity as will be discussed in the next section. reviewing the theoretical precedents and some case studies. state or departmental governors are elected by direct vote. Party discipline or loyalty.17 Candidate nominations decided by the candidates themselves (as opposed as decided by the party leadership). These politicians are less likely to initiate or support economic reforms. and also that systems in which candidates need not belong to party lists and in which provincial. of the parties. also mentions district magnitude.

As pointed out by Cox and McCubbins (2001). and what margins of maneuver were left to successive administrations to cope with adverse shocks. 21 Depending on how power and purpose are aligned in a given country and time. as the relevant president’s “party” becomes harder to identify. for the nomination of candidates and election of legislators may have a significant effect on the workings of political parties. but that nominations are decided at the provincial rather than at the national level. 19 The analysis becomes more complicated when coalition governments are considered.21 While decisiveness could be desirable if the only objective were to see some reforms transformed into law. caeteris paribus. executives or presidents in party-centered systems tend to have more “reliable” or “obedient” legislative support –a second critical dimension of presidential partisan power. formal of informal. administrations willing to initiate reforms will have to give more or less to various political players (who may or may not represent well other. and party discipline may acquire new dimensions depending on whether legislators respond primarily to their political organization or to the coalition. This means that Argentinean legislators will tend to exhibit party-centered behavior but they would be provincially party-centered rather than nationally party-centered.g. with provincial political leaders thus acquiring a pivotal role in the legislative process and adding a twist to the party discipline dimension as discussed above. national state owned enterprises vs.. the party system is fragmented and the legislature features a strongly proportional distribution of seats.. this classification of parties must be considered simultaneously with the quantitative import of the president’s party presence in the legislature.g.observation that.19 Other rules. It is this adjusted number of veto players that correlates positively with a system’s indecisiveness. an executive that leads a unified and loyal majoritarian party in a unicameral system does not count as two but as only one veto player). As suggested above. for example.20 More generally. 20 Tommasi (2002) coincides with this analysis of the Argentinean party system. 15 . Similar complications may arise in analyzing parties constituted by “disciplined” fractions. as strongly disciplined and loyal parties may not be of much help if. thus indirectly determining what was and was not reformed (e. for example. presidents will have a tougher bargain to pass reformist legislation when their representatives in Congress confront powerful incentives to care more for their individual constituency’s interests than for party loyalty. Jones (2002). Tommasi (2002). See Jones (2002). indecisiveness equals a lower propensity to pass measures that enact economic reforms. argues that Argentina’s trajectory in the last two decades can be understood on the basis of how the institutions ruling the relationships between executive and Congress shaped the nature of the bargain among key political players. argues that Argentinean parties are strong vis-à-vis individual candidates in defining nominations. for example. Vice versa. the effective number of veto players results from counting the number of “nominal” veto players that indeed disagree on their objectives or preferences (e. these attributes of the party system refer to the possibility of a separation of purpose that would interact with the previously examined separation of power to determine a system’s key attribute of decisiveness. federal fiscal institutions). For the purposes of this paper. and Haggard and McCubbins (2001) in their introduction to the edited volume. extra-political social or economic interests) to obtain the legal measures required. we will see in the next section that some tradeoffs exist that make any simple-minded institutional engineering strategy aimed at that end quite risky.

computer specialists and accountants. the middle-income countries of Latin America or eastern Europe generally have higher levels of state capacity than the low-income states of Sub-Saharan Africa (World Bank. which themselves vary in their ability to collect revenues. Most generally. that affect their relevant discount rates). middle-income states typically have a larger pool from which to draw qualified staff into the civil service. and capacity to detect flaws in a given institutional architecture and fix them. 1996. and may make it harder to obtain support for reforms that may only start to produce widespread benefits in the medium run. will tend to produce short-sighted behavior on the part of key political actors. 1990). 1997). this ongoing effort is required because no policy making entity or entities can anticipate all the contingencies that will arise from complex and more or less volatile socio-economic system. they vary in their ability to control the complex administrative structures they oversee. 3. 1997). statisticians. regulate economic activity. Governments vary in their access to economic policy expertise. the ability of a reform-minded administration to pass laws and other rules needed to put in place economic reforms may be helped or hindered by other institutional factors that lengthen or shorten politicians’ planning horizons (i. design. 1997. for instance. Analyses of the reform trajectory in democratic countries may need to take these into account in their combination with other aspects of the institutional landscape of a society. Capacity can also be related to the professionalism of the civil service and the degree to which appointment to and promotion within the civil service is based on merit rather than ascriptive criteria or patronage dynamics. These 16 . state capacity is partly correlated with level of economic development. (Brautigam. In this sense. suggesting a more comprehensive administrative coverage in the richer countries. successful economic reform requires the capacity to tackle different types of socio-economic challenges. undertake and evaluate economic policies. but it has become increasingly evident that sustaining reforms requires the capacity to improve their initial. The Capacity to Sustain and Deepen Reforms Successful economic reform is much more than the passing of reformist laws or the removal of dysfunctional regulations. These state capacities vary widely across the countries that have been undertaking policy reform. These are. Therefore.e. no doubt. Turner and Hulme. so that.Last but not least. enforce property rights and deliver services. and to do so over the entire territory. State Capacity: Capacity refers broadly to the ability of state agents to conceive.g Rowat. to put in place the necessary complementary regulations. design. The size of the public bureaucracy is strongly and positively correlated with level of per capita income (e. in the form of economists. and are better able to afford the wages necessary to attract qualified professionals. World Bank. capacity to persevere in a certain direction of change despite possible setbacks. required. and to manage the newly created set of intermediate level institutions. Moreover. To some extent. often imperfect.. 1993. general political/regime instability or even high legislature’s turnover rates (probably associated with features of the electoral and party system). Jackman.

with state structures that go back to the early 19th century (Latin America) or even earlier (East Asia. and the middle East) compared to state administrations in low-income states that only emerged following the end of colonialism in the second half of the twentieth century (Sub Saharan Africa). Zambia was said to have only 76 college graduates while Mozambique had only 30 trained doctors for its population of 12 million at its independence in 1974 (van de Walle. that have undermined government and donor attempts to buttress it. big countries. Thus. such as India. 1988. Eastern Europe. at least within the core institutions of central government. politicization of the civil service. These assumptions ignored 17 . have undermined morale in the civil service and lowered performance. Herbst. The first generation of reform programs typically did not view implementation issues as paramount. Local governance practices often have had an equally negative effect on long term state capacity development. which moreover have been encouraged in many countries thanks to ill-conceived forms of government regulation. or where educational levels are quite high. the link between level of economic development and capacity is far from determinative. North Africa. it is hard to blame low state capacity on colonialism in countries that have been independent for several decades or longer. while state decay in other regimes has resulted in a worsening of capacity over time that has proven hard to reverse. despite sometimes large amounts of foreign technical assistance (van de Walle. Some states have specifically sought to buttress the capacity of their administrative apparatus to reach regime objectives that required capacity (e. Berg. for instance. At independence in the mid 1960s. in recently decolonized countries in the 1960s and 1970s. On the other hand. middle income states are more likely to draw upon a longer tradition of administrative practice. There. represent a partial exception to this generalization since they have demonstrated a relatively high level of capacity. a willingness to devote resources and political support on behalf of a more effective state apparatus accounts for the large variation that is observed in the capacity of states at a similar level of development.characteristics correlate with the level of economic development. p. and Wade. as is too often done. China or even Nigeria. 1998. 1993). 1990 on the East Asian cases). 2000). To a certain extent. albeit imperfectly. Among low-income states. (Migdal. The importance of state capacity to reform program success was long underestimated by the designers of policy reform programs. and it would thus be a mistake to treat state capacity as entirely exogenous to the political system. Poorly paid ill trained civil servants have been a vector for governance shortcomings such as rent seeking and other forms of corruption. Cheng et al. True. 129). Most experts agree that in the final analysis. 2001. the reasons for low state capacity are more complex. In any event. Patronage has typically resulted in a combination of sharply increased numbers of civil servants and declining real wages as governments struggle with the overall wage bill.g. low capacity was a legacy of the colonial government’s inattention to local human capital needs. 2001. the most important determinant of state capacity is executive leadership. with patronage concerns and non-merit based promotions.

involving various international donors and NGOs. The policies that actually get carried out are often very different from the policies that central decision-makers intended. 1988. these same groups have been argued to assert their social power and influence public policies during the implementation phase. This essay ignores the very important issues surrounding how relationships between local governments and the donors have shaped the nature of the reform process. the complexity of policies being negatively correlated to the likelihood of complete implementation. Indeed. as states delay difficult economic policy reform decisions until the old economic policy regime has brought about a non-sustainable economic disequilibria (Grindle and Thomas. participatory pressures on policy makers are less likely to occur before implementation. The capacity available in most low-income states was simply inadequate to carry out these programs. in some cases. and had emphasized capacity constraints as a significant factor in the design of policy (Montgomery. Because of the combination of low administrative capacity and the absence or weakness of interest groups. capture. 1982). The first generation of policy reform programs in the late 1970s and early 1980s were typically very demanding of state capacity. in the face of this opposition. with multiple complex objectives. Grindle and others (1980) emphasized that in low-income states. those that they think they are implementing. forcing the actual policies to diverge from the intended policies. and thus should be emphasized whenever possible (Grindle. decision-makers should emphasize simple policy designs with a small number of clear and explicit objectives. 1974). We return to this theme below. unintended consequences and partial implementation. in negotiation with state elites. it is often only when the old policies have failed so miserably that politicians begin to see that keeping the status quo 22 Within a broader arena. Mosley et al (1991). Leonard. see Killick (1995). 1981). and van de Walle (2001. In the language of this literature.22 Societal groups which have an interest in policy outcomes are rarely able to have their preferences taken into account before policy decisions have been made. Similarly. Relatively weak administrative capacity prevents low-income governments from fully carrying out their initial reform agenda. at least within the domestic arena. a characteristic feature of economic policy reform in low-income economies is the difference between de jure or official policy and de facto or actual policy. decision-making has been more complex. As a result. These dynamics have been exacerbated by the impact of economic crisis on state capacity in low-income economies under distress. but more typically take place after policies have been decided upon and are being carried out. 1987. Bryant and White. well after policies are decided upon. policies that are easier to monitor are more likely to be implemented. or. chapter 5).a long tradition of development administration literature that focused on the implementation of specific policies in low-capacity environments. They weigh on policy during implementation. the decision-making process in low-income states tends to be closed and nonparticipatory. Public decision-making is exclusive to a small cadre of public elites. Caiden and Wildavsky. policy is characterized by extensive leakage. 18 . and intervention by state agents at different levels. As a result. 1980. It had advanced several useful recommendations: for instance. altering the initial intentions of decision-makers. Policy reform has typically occurred during periods of intense economic crisis. On this.

and the civil service has suffered substantial losses in real wages (Lindauer and Nunberg.may be politically more dangerous than plunging into the unknown world of policy reform. delays in reform implementation worsen these dynamics. Chabal and Daloz. 1997). State budgets also have underinvested in the maintenance of equipment and infrastructure. One study of cabinet effectiveness in Africa in the mid 1990s estimated that two thirds or more of all cabinet decisions in Zambia. governments have had to rely to a much greater extent on external expertise for the design and evaluation of the policy reform program itself.. which is no longer able to carry out the most basic policies. Policies have been more likely to originate in donor agencies. 1996. see Myers. 2001 on Haiti). p. 2001. Ghana and Guinea-Bissau were never carried out (see Bratton et al. 1997). Lienert and Modi. the net effect of this decline incapacity was that “governments in Latin America and Africa lost the ability to set and enforce broad rules of the game. to both the local private sector or abroad. First. In the 1990s. Some governments are often in the position of not being able to enforce the decisions they have made.” (Grindle. In lowincome states with low state capacity. Another study noted that the Cameroonian government sponsored the same legislature through the National Assembly on several occasions in the early 1990s. 1999) but is evident in countries in other regions of the world as well (For instance. by then. oblivious to the fact that it had already been passed. The literature has chronicled this process in some low-income states. experience has suggested that the degree of indigenous state capacity shapes the nature of the process of policy reform. 1995. the greater the likely decline in state capacity. This dynamic of state decline has been particularly evident in Sub Saharan Africa (Reno. according to Grindle. let alone carry out the ambitious agenda of policy reform envisioned by the architects of classic structural adjustment programs. 2000. Grindle (1996) has suggested that governments have invested in indigenous policy expertise in order to more effectively manage the process of policy reform. Yet. so that these dynamics have altered over time. where prolonged economic crisis over a number of years achieves a practical collapse of the state. As a result. Still. 1994. As a result. because of a breakdown in administrative capacity. Civil servants salaries have accumulated arrears. van de Walle. with an exit of trained professionals from the public sector. 19 . The more reform is deferred. and Fatton. state infrastructure deteriorates and brain drain accelerates. and local officials have been less likely to negotiate effectively with donor agencies over the nature of the reform process. the much greater role for external advice and conditionality remains a fairly distinctive characteristic in the reform experiences of most low-income states compared to middle-income states. the state apparatus has typically been diminished by the economic crisis. 32) Over time. reform experiences in these low-income states have been more likely to be undermined by problems of local ownership and poor implementation. What is the impact of state capacity on policy reform once implementation has begun? A number of issues appear germane.

more complex reforms can require considerable time to be fully implemented and skill and discipline from local officials. 1999. Bresser Pereira and Spink. Grindle. the latter would be dominated by issues of state reform. Similarly. For Naim. It is considerably harder for governments to improve administrative capacity through out the state apparatus. Thus. 2003. 2003. For instance. A second manner in which the level of state capacity has had an impact on the course of policy reform is in the implementation of programs (Grindle and Thomas. On the other hand. particularly during a protracted economic crisis. or the strengthening of state capacities. Not all policy reforms require extensive implementation capacity: so-called “stroke of the pen” reforms such as devaluation can easily be implemented by even the weakest of states. 1997. unable to gauge the precise impact of policies on socio-economic conditions. it is easy to point out cases in which first generation reforms would have been more likely to succeed if they had been preceded by institutional reforms. Indeed.It is relatively easy for governments to acquire economic policy expertise with which to design reform programs and interact with donors. and it is pretty clear that the latter have been more likely to be shaped in important ways by capacity issues. Politicians in pursuit of personal vote strategies tend to profit from the weaknesses of the state and have no or little incentives to support economic reforms. the inability of the state to collect timely and accurate economic and social data has repeatedly undermined the progress of reform in low-income states. 1992). as relatively weak tax collection capabilities have forced governments to rely on expenditure reduction to restore fiscal balance perhaps more than was optimal for both political and economic reasons. Capacity issues have been particularly salient to outcomes in complex institutional reform. One issue has been the generally considerably lower level of administrative capacity available at local levels of government. It is tempting to distinguish between relatively “easy” short term stabilization exercises and the more capacitydemanding reforms of structural adjustment programs. Ross Schneider and Heredia. 1998) Nonetheless. capacity issues have been relevant even for the most short-term stabilization experiences. In countries in which the first stage of reform has been viewed as largely completed. even in countries with relatively high quality central public administration 20 . and so various obstacles to reform tend to exist simultaneously in some countries. the experience with decentralization reforms suggest two types of constraints from within the state apparatus. Naim (1994) was perhaps the first to distinguish between a relatively easy first stage of reform and more demanding second generation of reforms which would be necessary for developing countries to sustain more rapid economic development. to increase the effectiveness of public institutions. The difficulty is exacerbated by the correlation and mutual reinforcement between weak capacity and the prevalence of particularistic politics (see section 2 above). 1990). these countries have been engaged in “policy-making without facts” (Mosley. the need to improve state performance has come to be seen as an integral dimension of economic reform (Kuczynski. and Burki and Perry. and incapable of making informed judgments about necessary adjustments. the capacity of governments to generate revenues has shaped the design of stabilization programs. In the words of one observer.

Reform Reversal: First in some cases. In effect. ranging from inaction. low state capacity interacts with a relatively closed decisionmaking system to derail the process of economic reform. reform policy is implemented and then simply reversed. or the new private owners have been able to maintain all of the fiscal and monopoly advantages of the public company (Tornell. Joel Helman (1998) has pointed to a similar paradox in his study of economic reform in Eastern Europe when he argues that political elites there seem to use the partial implementation of reform programs to increase their access to economic rents. despite the stated intention to deregulate and allow market outcomes to dominate. but can be understood as a dimension of low capacity. In some cases. 21 . to misapplication and outright sabotage of proposed changes.services. In other cases. In particular. 1994). (Smoke. officials appear to be responding to internal pressures to reverse the reform decision. In theory. 1997) But in addition. A year or two later. Several distinct forms of this kind of partial implementation can be identified. Decentralization reforms have thus required a costly and time-consuming effort to build up local level capacity. Reform reversals are often achieved surreptitiously. 2000). the same or a very similar policy is reinstated. In a number of cases we see significant initial progress on a policy reform. economic liberalization is undertaken precisely to reduce the size of economic rents. decentralization episodes have often been characterized by central bureaucratic opposition. 2003. In yet other cases. the central administration has typically been ambivalent about the transfer of discretionary power and resources to the local level.g Mkandawire. so how can liberalization result in greater rents? A third example of such paradoxical dynamics is provided by the scholars who have argued that privatization programs have often failed to net efficiency gains because they have either actually strengthened state control over the economy (e. they use an unforeseen event to justify a reversal they desire for various reasons. they get cold feet as a result of some unforeseen event. the dynamics of participation just described help to explain the phenomena of “partial reform” that has been identified by a number of observers. Thus. Hibou (1993) argues that trade liberalization efforts in West Africa have in some cases actually increased the level of effective protection for domestic firms because of selective application of the new policies and the concurrent granting of compensatory policies. or are carried out in ways that have unexpected effects. in which reform measures are not fully carried out. one regulatory regime was replaced by another. the further from the capital. Partial Reform: The inattention to the impact of low capacity on policy implementation during periods of economic reform in low-income countries has had predictable consequences. In each of these cases. As a result. The inability of the government to get compliance from its own officials is of course a complex phenomenon. Richard Snyder’s (2001) study of economic reform in Mexico suggests that statist regulation of markets in some cases actually increases following what he calls “neoliberal reform”. Tendler. Typically. Similarly. the more uncertain the reach of the state.

Legally.De jure implementation: These are situations in which the government has officially promulgated a law or decree. or simply through the interpretation of the reforms in a way that provides no incentive or ability for the private sector to really enter into the market in a competitive manner. implementing a policy change. a reform is implemented. the new institution may have a very limited mandate. but another regulatory institution is created. but feel compelled to undertake partial implementation. Governments claim credit for implementing parts of a program. but all or most of its regulatory functions are transferred to a new institution. but in time. there is reform. Regulatory “shifting”: in this category of non-implementation. Initially. When governments oppose the reform. Joel Helman (1999) has described one kind of partial reform. Some observers have argued that this kind of partial reform is often found in agricultural marketing reform. The government is not capable of enforcing policies through its own agents. Such forms of non-implementation are surprisingly common. In some cases. there are many circumstances in which the different components of reform are not divisible. policy reform programs should be understood as involving multiple individual policies that are interrelated in complex ways. in which governments select key elements of reform which generate new rents. the government hopes to satisfy some donor conditionality by undertaking some reform. Though our analysis breaks down implementation to each of its component policies. they may be willing to implement one component of the overall program in order not to implement another one. indeed. Implementation of one reform will not have a positive economic impact. the appearance of deregulation disguises the continuation of 22 . rent-seeking interests then freeze the implementation of reform which is not allowed to proceed to completion. it expands its scope. in practice the status quo is maintained. and or the one that has the least impact on the status quo. It is most likely when strong external pressure for reform coincide with strong domestic patronage and rent-seeking interests on the part of top state elites. In other cases. The intent of deregulation is defeated through the adoption of new regulations. which however does not appear to have real effect on the ground. and do not undertake the other components of the reform program which would promote effective liberalization. the most easily reversible component of the reform. In fact. they are likely to choose to undertake the least onerous. de jure implementation may reflect low state capacity. In one common pattern. because another element of reform has been neglected. eliminating one regulatory institution. In a second pattern. but keeps enough elements of the controls (either de facto maintenance of regulatory barriers or simply getting state officials not to implement the policy changes) that defeat the intent of the reforms. 1999). Recipient governments and critics of structural adjustment often argue that full implementation of some policies should garner a private sector response even when other important components of the reform program have not been implemented. notably in Sub Saharan Africa (Jayne. This is one of the most common forms of incomplete implementation. and eventually undertakes all of the same regulatory tasks as the old agency. Partial implementation: Part of the reform was implemented but not all of it. a specific public institution is dismantled. In effect. effectively undertaking the same form of regulation.

and therefore policies are more likely to be distributive or designed to cater to various special interests. they may be a way of redistributing the otherwise highly concentrated rents created by some economic reforms. where a larger number of various social segments have an effective voice in the policy process (i. This has sometimes been done by “co-opting” certain private companies into the control system. it is difficult to disentangle the reasons for which implementation was not fully sustained. In each of these cases. Whatever the case. giving the impression of liberalization. These are not necessarily fully dysfunctional or welfare-impairing. as rightly pointed out by the authors (pp. the combinations of separation of power and separation of purpose that allow a country to adopt rapidly and decisively a comprehensive package of economic reforms. a larger effective number of veto players means a larger set of actors that need to receive something in exchange for their consent. as well as to its ability to respond to the evolving concerns of general or particular interests. it has been pointed out that some of the institutional dimensions that account for a system’s ability to respond to new socio-economic challenges decisively are also related to its ability to guarantee stability and credibility of the reforms once enacted.e. This may be quite relevant to the problem of sustaining and perfecting economic reforms. it can be hypothesized that they are more likely to occur when external conditionality has played a significant role in bringing about policy reform. Secondly. 50-55)..g.versus private-regardedness (Cox and McCubbins. 2001).23 In fact.key elements of state control through private organizations. When policies require the consent of a relatively large number of veto players to be enacted. Conversely. Under what circumstances will such failures in implementation take place? Can they be linked to certain formal institutional arrangements? Several hypotheses can be made about these cases of partial reform: first. Those same systems. although each author emphasizes their implications differently. 23 . a veto power). Cox and McCubbins (2001) as well as Shugart and Haggard (2001) highlight two key tradeoffs that would complicate the mechanical drawing of “institutional engineering” lessons for economic reformists. the more governments will not be able to prevent these kinds of slippage in implementation. it can be expected that it also increases a system’s resoluteness. In fact. may be slower to change but also be better equipped to detect malfunctionings or “unfair” outcomes (e. An ambiguous combination of low capacity. The more important a role the donors have played and the lower the degree of local ownership. A third hypothesis involves the extremes of public. This illustrates that state control can still be maintained even with the entry of private sector firms into the market. there is bound to be negotiations among them and some side payments to “oil” the machinery.. excessively skewed 23 Tsebelis (2000) and Henisz (2000) are also aware of the tradeoffs. or its ability to maintain a given set of policies. low government commitment and clientelistic dynamics conspire to undermine the full implementation of the reform process. also make it more likely that those reforms will be abandoned (maybe equally rapidly and comprehensively) when a different will gets a handle on the existing power resources. while a larger number of veto players diminishes system decisiveness and would thus obstruct the passage of reformist measures.

as a map of the pathways of influence from features of the institutional landscape to “reform success” –understood as economic reforms that are sustained and perfected. 24 . It seems true in general that the economic reforms of the 1980s and 1990s were of a kind that can be introduced and implemented more rapidly than changes in the political institutional landscape characterized in this essay. institutions of a higher level. and the frequent coincidence of social and ideological cleavages. towards more open and towards more authoritarian types). More generally. the same crises that motivated the economic reforms also brought about regime changes (both. recognize that political institutions are to a great extent a “given” when an administration considers initiating a program of economic reforms. The figure is drawn at a relatively high level of abstraction and highlights selectively what appear to be the key causal chains. there is no theoretical reason to expect that is harder to reform a political constitution than it is to significantly liberalize a highly regulated or statist economy. or some variation of it. 24 Given the significant distributional implications of market-oriented reforms. 1993). Figure 1 provides a graphic synthesis of the previous discussion. In other cases. Institutionalized ideological parties (particularly if about balanced in electoral backing and with a history of cooperation) may provide enough opposition of interests to detect quickly the dysfunctional elements of a package and allow it to generate real alternatives to existing policies. or even designing political regimes almost from scratch.distribution of costs). and influenced by. Many reforming countries were simultaneously undergoing tricky political transitions. and the discussion before it. which are relatively fixed while the reform effort is taking place. from the “more exogenous” variables to the occurrence of those reforms. partial achievements or complete implementation. The figure. However. to organize their arguments about the circumstances that account for failure. and therefore better able to identify and introduce adjustments that increase the reforms’ resilience. may be of use to analysts of specific national experiences. or reform-minded leaders realized the political obstacles that were facing and launched a political reform agenda that would make it easier to undertake significant changes in economic policies. This extends the logic of Lindblom’s argument about the intelligence of democracy resting in mutual adjustment and ongoing elaboration of imperfect solutions. the ideological profile of party systems may have some bearing on its ability to detect and correct flaws or dysfunctional effects. It is expected that this synthesis. This is just another way of expressing the multiplicity of time scales in which institutional change unfolds: changes at one level are effected by actors operating in an environment characterized.24 Concluding Comments This essay has reviewed a number of issues that relate political institutions to the process and outcomes of policy reform. both theoretically and practically the relevant choice situations for reformists are more complex than that. rather than on shared understanding of the optimal solutions (see Lindblom and Woodhouse.

Yet. 25 .. As George Tsebelis has put it. rather than by the medium level rules that may appear necessary to produce in particular economic circumstances. and consequently they ought to be stable even if in some historical juncture they seem to function suboptimally (Tsebelis. etc.. or for reforms that promote a greater balance between legitimate representation of special interests and the adequate provision of genuine public goods. for segregating some areas of decision making from constant partisan influence that introduces undesirable volatility. There may be scope in any political system for institutional changes that facilitate innovation in areas of economic policy that require rapid responses to changes in the environment. the ever present “needs” for policy stability and the ability to change cannot be accommodated by the same institutional structure. such as making innovation more or less likely and far reaching. but in general no direct mapping of specific institutions to properties will be possible because of the context-dependence of institutions. 469). better suited to the socio-economic system’s “needs”). Given what we know. or generally more efficient and growth-friendly economic regimes. and one key aspect of the feasible solution is for people who design political institutions to recognize that they are selected in the long run.25 Those configurations will have emergent properties. p. The previous is not a plea for political immobilism.e. political institution building should be guided by the model of democracy a country wants to achieve in the long run. see Rodrik (2000). One of the difficulties stems from the realization that the same that seems to hold true for strictly economic institutions appears to extend to political institutions: what matters is not each individual institution per se but the joint operation of many institutions that form the broader institutional configuration of a country. we feel more comfortable with the findings of this review being used as an aid to reconstruct concrete reformist experiences than with their use as blueprints to change political institutions that might look dysfunctional. neither the historical record nor the analytical lessons that can be drawn from it suggest that such instrumental view of political institutions would be appropriate. 2000.Considering those situations. it would be tempting to look at political institutions as “instruments” to be used to facilitate the movement towards more liberal. and vice versa. 25 On a similar approach to economic institutions. The second reason to be skeptical of “institutional engineering” as a route towards desirable economic policies is that there appear to be tradeoffs among the features of alternative institutional configurations. However. making ongoing upgrading of policies more effective (i. and those configurations that seem to present advantages at some stage of the economic reform process may prove to be handicapped at later stages.

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Figure 1: A road map to effects of political institutions on reform success modes of representation will Likelihood of initiation opportunities for political outsiders features of the party system insiders’ willingness to reform partisan powers of the president Reform success reforms initiated. laws) other veto points. perfected power constitutional powers of the president formal political rules (constitutions. sustained. of horizontal accountability Quality of followup state capacity level of development 31 . mechs.