How Context Influences Development: Political Settlements and Collective-Action Problems

Abstract

"This paper develops a broad framework for political economy theory of development. It addresses three propositions: 1) Achieving economic and political development requires resolving multiple underlying collective-action problems; 2) Institutions facilitate resolving complex collective-action problems; 3) Political settlements underlie configurations of institutional systems that arise from and shape developmental prospects. Political settlements are mutual understandings held among powerful parties that they will rely primarily on politics rather than violence to resolve disputes. This paper develops and applies a typology of political settlements that facilitates analyzing how broad categories of social context influence developmental prospects. More specifically, it categorizes political settlements along two dimensions (or spectra). First, the breadth of its social foundation: the extent to which socially relevant groups are party to the settlement. Second, its degree of functional unipolarity, namely the degree to which insider elites can achieve rough agreements concerning broad allocations of decision-making power and broad national purpose (e.g., state-market or state-religion relations).

Each type of settlement shapes the subsequent evolution of a society’s institutional system (or social order). Each possesses its own set of developmental collective-action problems whose resolution shapes prospects for development. The paper proceeds to illustrate key principles using a game-theoretic representation of rival coalitions, state capacity, and proclivities for cooptation, repression, staging a coup, or pursuing civil war. This typology should facilitate both developmental policy analysis and broad inquiry into the political economy of development."