What has CARE learned from political economy analysis?

Since the 1990s donors, multilateral lenders and research institutes have adopted two complementary streams of study which look at political economy, and particularly the importance of political and economic institutions.2

On one hand, with the peaceful end of the Cold War and the failure of the Washington Consensus, the conventional wisdom emerged that poor “institutions” were the problem. Much recent scholarship has argued that “inclusive institutions” and respect for the rule of law are preconditions for sustainable development with equity. Three hugely influential books were published over the last few years which consolidated this now conventional wisdom (North, Wallis, Webb and Weingast, 2011; Acemoglu and Robinson, 2012; Fukuyama, 2014). Acemoglu and Robinson (2012: 68), for example, argue that:

“Poor countries are poor because those that have the power make choices that create poverty. They get it wrong not by mistake or out of ignorance but on purpose. To understand this you have to go beyond economics and expert advice on the best thing to do and, instead, study how decisions actually get made, who makes them, and why these people decide to do what they do.”

In parallel, by the mid-2000s, political economy analysis (PEA),3 which was highly influenced by these thinkers, began to emerge in donors’ plans and country strategies, such as through “Drivers of Change” analysis. Over the past few years it has become standard practice for bilateral donors and multilateral agencies to profess their approval. The World Bank developed a how-to note for political economy assessments at sector and project levels (Poole, 2011), the UNDP developed a guide for institutional and context analysis (UNDP, 2012) and the ODI and World Bank, and CGD began to push “problem-driven” political economy analysis (see Andrews, Pritchett and Woolcock, 2012; Harris and Booth, 2013; Fritz, Levy, and Ort, (2014).4 Inspired by this tide, many INGOs such as CARE, Oxfam, and IRC have developed their own guidance notes.