Developmental patrimonialism?

The management of clientelist crises and business-politics relations

Tim Kelsall and David Booth

with Brian Cooksey

Africa Power and Politics Programme[(]

, ,

Summary

Mainstream analyses of post-war economic stagnation in Africa focused on the negative effects of political clientelism on the business environment. African governments have consequently been advised to take a hands-off approach to business, confining their role to providing an enabling environment by means of clear and secure property rights, an independent judiciary, democratic elections, and regular consultations with formal business associations. Drawing on Asian experience and a re-reading of the African record, our working hypothesis is that it is not clientelism per se that is bad for business, but rather the way in which clientelism is organised (or not organised) in specific contexts.

This paper describes an effort to operationalise this idea by means of a systematic investigation into the differential effects of different types of clientelism on business, in different country contexts in Africa. The research, being carried out within the framework of the five-year Africa Power and Politics Programme, was begun in September 2008. It combines a small-n comparative exercise on politics-business ‘regimes’ in post-Independence Africa with intensive within-country studies focused on key business sectors in selected African countries in the present period. We are interrogating the way in which different types of clientelism have contributed to, or at least have not severely constrained, the solution of critical collective action problems and the provision of essential public goods in various economic sectors.

1 Introduction

1.1 The background

Most African countries entered the post-colonial era with small, externally oriented, foreign-dominated business sectors. Most consequently took it upon themselves to try and expand their industrial and modern sectors, by means of a variety of state interventions in the market, ranging from creating state-owned-enterprises to enforcing or encouraging partnerships between expatriate and African businessmen. As well as achieving economic objectives, these policies tended to create patronage resources that allowed the state to placate various political demands for jobs, income, and resources. In most countries, the industrial sector grew fairly rapidly, but by the time of the 1970s oil crisis, inefficiencies had become apparent. Many firms could only survive by means of price-fixing and protection that was highly discriminatory against the agricultural sector, while other businesses were managed with regard only to predation.

The experience of the 1970s inspired a liberal political critique of the state, in which state intervention in the market was seen to create clientelistic economic rents, rents which fuelled cut-throat patron-client competition, increasing the pressure on politicians to extract more rents, leading to a downward spiral of economic decline, further loss of state legitimacy, and eventual state collapse (Diamond, 1987; 1988; Sandbrook, 1985; 2000). Meanwhile the donor response to this spiral, contained in the structural adjustment and good governance approaches, was to advise the state to withdraw from the market, and to concentrate instead on creating an enabling environment for private investors by means of a transparent and enforceable property rights regime, supported by an independent judiciary, free press, oversight organs (like audit-offices, anti-corruption commissions) and a democratic political system (WorldBank, 1981; 1989; 1997; 2000).

We now have reasons to believe that this advice was inadequate, and that the interpretation upon which it rested was at least in part misconceived. It is clear that the downward spiral of economic and political collapse identified by authors such as Sandbrook and Diamond did not affect all African countries. Although none were without problems, some, such as Kenya and Côte d’Ivoire were much better at managing their business sectors than others. Other countries, like Tanzania, while economically inefficient were remarkably stable politically. Chris Allen (1995) has explained this by reference to the fact that the more stable and successful countries were able to avert clientelist crises by introducing forms of centralised bureaucracy, which, while retaining clientelism, were by and large able to prevent competition for rents or spoils from assuming its most damaging form. In addition, some states, like Benin or Ghana, which at one time fitted the model of clientelist and spoils crisis, were able to regain some stability by introducing centralised bureaucratic politics. Yet others, like Malawi and Zambia, which lost their grip on centralised bureaucracy, descended into damaging competition for spoils.

The lesson suggested by this diverse experience is that the degree to which patrimonialism and clientelism are economically damaging is at least in part a function of the way in which they are politically organised. At its most simple, it is a difference between the politics of the share-out, and the politics of the free-for-all. In a free-for-all, development, if it occurs, can only be accidental. In a share-out, there is at least some scope for making collective decisions in a strategic way with a view to the long term.

1.2 Aspects of the problem

There are at least three reasons for thinking that the market-liberalisation-plus-good-governance agenda, as currently conceived, is unrealistic and inadequate. In addition to macro-economic stability, the conditions for achieving rapid, sustained, transformative economic growth in very poor countries include i) a minimum of political stability, ii) some degree of security over property for investors, and iii) solutions to various industry-specific collective action problems.

Political stability is not the least of the requirements, as the last half-century of African history has repeatedly reminded us. Moreover, it has become increasingly clear that it is unwise to separate the question of political stability and peace from the ways in which states intervene in the distribution of the rents generated by business activities. Developing country governments face powerful political pressures to provide patronage to potentially disruptive groups, business rents being one source of patronage resources.[1] Expecting African governments to cease altogether from using business as a patronage resource is not only to go against the grain of established practice. It may also endanger the most essential preconditions for economic progress, the maintenance of peace.

Security for investors is critical but, as Rodrik has shown, the institutional arrangements that have successfully fulfilled this function historically have been quite varied (Rodrik, 2007). Furthermore, as Mushtaq Khan has argued, it is extremely difficult for very poor countries to finance the generalised definition and protection of property rights. Also, historical experience in Europe and Asia suggests that it may not be necessary. In processes of development, governments have frequently protected some property rights, but not others (Khan and Gray, c2006; Khan, 2006).

Finally, economic growth and industrial expansion requires the solution of a variety of collective action problems that cannot be solved by markets alone, problems like infrastructure provision, human capital supply, infant industry protection, coordination with up- and downstream suppliers, ability to penetrate new markets, technology acquisition and learning, and natural resource acquisition, to name but a few. Good governance approaches tend either to ignore these collective action problems, or to encourage their solution by means of formal business associations, taking the developed West as its model. We do not doubt that formal business associations can help with the solution of industry-specific or nation-wide collective action problems. However, it is surely a mistake to rely exclusively on the history of the now developed West in thinking about this problem, particularly that of the last hundred years.

The experience of the formerly very poor countries of East Asia is more obviously relevant. Informal networks, including relationships of a clearly clientelist kind, played essential roles in creating the industry-specific conditions for investment and growth in key periods in several such countries. The literature from Asia suggests that clientelism has been used to achieve economic and political goals in a variety of different ways; that it has always been important, and that nowhere has it been eliminated (Khan and Sundaram, 2000). There are, moreover, grounds for arguing that informal relationships and networks perform important functions in market economies generally, and certainly more so than is implied by some of the strands of new institutional economics. So the almost exclusive focus of the good governance agenda on getting the ‘right’ formal institutions in place in low-income Africa seems to be far from justified (Moore, 1994; 1997).

To summarise, recent research and debate points strongly to the need for a re-examination of the evidence on the role of clientelism in politics and business relations in Africa. The literature on the subject is no doubt not definitive. But it indicates clearly enough that there is a gap in current policy thinking where the varieties of patrimonial and ‘neopatrimonial’ politics are concerned. Although clientelism always has social costs, which constitute a public bad, these can, in certain circumstances, be outweighed by the public goods it helps to provide in terms of political stability, guaranteeing key conditions for investment and solving development-constraining collective action problems. There are therefore grounds for a working hypothesis that it is not clientelism per se that is bad for business, but rather the way in which clientelism is organised (or not organised) in specific contexts.

1.3 Our research and this paper

The Africa Power and Politics Programme is sponsoring research focused on the issues described above as one of its six Research Streams. A first proposal was approved in September 2008, and empirical work is scheduled to continue until at least 2011, meaning that the research is still in its early stages. This paper is therefore a report on work-in-progress. For the authors, it is an opportunity to share some initial thinking with like-minded researchers and practitioners, particularly any who share our concerns about the limitations of the prevailing policy paradigms or who are already engaged in similar avenues of enquiry. We hope for feedback that will help us avoid mistakes that others have made or have succeeded in avoiding. For our readers, there may be some interest in the approach we are proposing to adopt in constructing and refining a body of policy-relevant theory regarding the management of clientelist crises and business-politics relations in sub-Saharan Africa. The paper has three further sections, devoted to the main steps we have taken so far in the direction of a final research design.

As it stands, our working hypothesis is too non-specific to be really interesting. It says too little about what it is about the organisation/non organisation of clientelism that makes a difference to relevant outcomes. It does not say, in particular, whether we are dealing with one factor or several, and if the latter, how they interact. Our task during the last nine months has therefore been to move in the direction of a more formally stated hypothesis, one that we expect to remain plausible after fuller exposure to the relevant literature and to warrant further testing and elaboration through intensive research

We have completed three steps so far. A fourth step is now beginning, with detailed research under way in one study country, Tanzania, and beginning in two others, Malawi and Rwanda. The steps are:

·  a speedy (and therefore incomplete) review of the literature on post-colonial Asian experience, including conceptual refinements based principally on Asian cases;

·  an equivalent and also, at this point, incomplete review of African literature on politics, business and development;

·  a brainstorming of the results of this work with a view to identifying the elements of a ‘typological’ theory applicable to post-Independence sub-Saharan Africa; and

·  intensive research in case-study mode on a subset of countries whose politics-business regimes, past and present, are reasonably representative of the range of variation in the variables identified by the theory.

2 Issues from the Asian literature

2.1 Concepts

Our scan of the literatures has been primarily country focused. However, we have picked up relevant conceptual refinements along the way, at least some of which reflect concerns close to our own and seem likely to help us in our theory building. The contributions by Moore and Schmitz (2008), Khan and Gray (c2006: 18), and Williams et al. (2009) have proven particularly suggestive.

Among the helpful concepts advanced by Moore and Schmitz are distinctions between the investment climate and the business climate; between hand-in-hand government-business relations and crony-capitalism; and between different forms of predation, including looting, rent-scraping, and dividend collection (Moore and Schmitz, 2008).

Khan and Gray usefully distinguish between four types of corruption that centre on different types of state activity. The first is what they call market restricting corruption. This involves things like needless red-tape which places unnecessary obstacles in the way of market operations. Although there may be a political logic to this type of corruption, it is economically damaging and attempts should be made to remove it.

The second is state-constraining corruption. This refers to corruption that surrounds potentially beneficial state interventions such as those required for infant industry protection, infrastructure development, technology acquisition, and so forth. Because this type of intervention generates rents, a certain amount of rent-seeking and corruption is to be expected. However, the object of policy should be to ensure that the amount of rent-seeking and corruption is not so large as to destroy the potential benefits of the intervention.

The third is political corruption and primitive accumulation. This is particularly prevalent in developing countries, where the absence of well-developed fiscal capacities and strong service-providing bureaucracies encourages regimes to seek legitimacy through the dispensation of patronage, the source for which is political corruption, and where the absence of capital funds outside the state encourages the dominant class to use the state for primitive accumulation (non-market transfers of assets) (Khan and Gray, c2006: 18). All this is to be expected, but whether or not it is damaging to development depends on whether political corruption is sustained at a level that enhances or erodes state legitimacy, and whether primitive accumulation is channelled into productive or unproductive activity.

The final type of corruption is predation or theft. Predation, extortion or theft are most common where the capacity of the state to enforce its will is weak – perhaps because of extreme factionalism and institutional fragmentation. This type of corruption tends to erode production capacities and threatens the state with descent into warlordism and economic collapse (Khan and Gray, c2006: 25-27).