Foreign Aid in the Age of Populism: Political Economy Analysis from Washington to Beijing 2018049122, 2018050739, 9780429032011, 9780367144357, 9780367144364

Table of contents :
Cover
Half Title
Series Page
Title Page
Copyright Page
Table of Contents
About the authors
Abbreviations
1. Introduction
Preamble
Political economy analysis at the crossroads of illiberalism and populism
The structure of the book
Note
References
2. Political Economy Analysis: A distorted view of reality
Introduction
Delineating Political Economy Analysis
Aid, economic growth and development
A paradigm shift
Applying a paradigm shift to PEA
From paradigm shift to international political economy: a rationale for a political economy analysis theoretical framework
Conclusion
References
3. Political Economy Analysis: Deficiencies and critiques
Introduction
A brief political background: foreign aid and Political Economy Analysis
Definitional deficiencies of PEA
Conceptual deficiencies of PEA
PEA: the critics and the proponents
Conclusion
References
4. Unpacking political economy analysis in a foreign aid context
Introduction
Evolution of development alongside politics
Evolution of politics in, or alongside, development
Conclusion
References
5. Populism: Challenging socio-economic orthodoxy
Introduction
Right-wing versus left-wing populism
Populism as a conceptual narrative
Constituents of populism: mercantilism and protectionism
Defining the demand side theories of populism
The rise of populism
Populism: the beginning of a new era
Populism and its impact on foreign aid
Populism and its impact on multilateral development banks
Conclusion
References
6. The challenge of illiberal democracy
Introduction
Democracy, liberalism and illiberalism
The failure of liberal democracy and the rise of illiberal democracy
Illiberal democracy and dominant development theory
Illiberal democracy and the Beijing Consensus
Illiberal democracy and foreign aid: towards a new conceptual framework
Impact of illiberal democracy on foreign aid
Conclusion
References
7. De-globalisation: Challenging the foreign aid agenda
Introduction
The locus of de-globalisation
From neoliberal globalisation to de-globalisation
A critique of neoliberal globalisation
The ghost of inequality
Globalisation and populism: two ‘unfinished’ projects
Trump administration as a globalisation discontent
A political economy analysis vantage point
Conclusion
References
8. The Beijing Consensus: Challenging the dominant Washington Consensus
Introduction
Positioning the Beijing Consensus: between the political and the value-laden parameters
The rise of the Beijing Consensus
Unpacking the Beijing Consensus
Contrasting the Washington and the Beijing Consensuses
Reconciling the Beijing and the Washington Consensuses
Beijing Consensus as developmentalism in an era of populism
Conclusion
References
9. The politicisation of Political Economy Analysis
Introduction
The politicisation of foreign aid
The political locus classicus of PEA
Problematising the politicisation of political economy analysis
Political challenges: re-politicisation of PEA
Power relations as the politicisation of PEA: the principal-agent theory
A Trumpist political politicisation of PEA
Conclusion
References
10. (Re)locating Political Economy Analysis: Theoretical constructs and practical undertakings
Introduction
Theoretical frameworks for Political Economy Analysis
Actor-oriented theoretical frameworks
Structuralism as a theoretical framework
Institutionalism
Conclusion
References
11. Foreign aid: Political Economy Analysis at the crossroads
Introduction
Political Economy Analysis: politics matter
Relocating Political Economy Analysis
From political theory to policy practice
The demise of the neoliberal political economy analysis or mainstreaming political economy analysis in a new key?
Conceptualising Political Economy Analysis in a ‘new key’
Conclusion
References
Index

Citation preview

“A provocative, innovative effort to re-politicize and re-think political economy analysis as a tool of development aid through an examination of the implications of larger currents of international political change, including the rise of populism and illiberalism and China's growing role in the developing world.” — Thomas Carothers, Carnegie Endowment for International Peace, USA “The book provides a timely, critical and thought-provoking analysis of the impact of contemporary challenges on decision making in orthodox development institutions. Political Economy Analysis is critically reviewed as an evaluation tool, leading to an insightful call for theoretical frameworks for PEA couched in an International Political Economy paradigm.” — Lisheng Dong, Professor, Graduate School of the Chinese Academy of Social Sciences, PR China and University of Tartu, Estonia “Jakupec and Kelly provide a compelling analysis of the contemporary development agenda. Their plea to apply a theoretically grounded political economy analysis to foreign aid is an important contribution to the debate. This book is a must read for everyone interested in the critical examination of the dominant neoliberal paradigm of development.” — Wil Hout, Professor, International Institute of Social Studies, Erasmus University Rotterdam, The Netherlands “Jakupec and Kelly provide cutting-edge insights into contemporary complexities of foreign aid marked by the rise of populism, de-globalisation, and illiberal democracy. This highly innovative, timely and important book deserves to be read widely and carefully by scholars and development practitioners interested in better understanding the geopolitics of foreign aid.” — Susanne Soederberg, Professor, Department of Global Development Studies, Queen’s University, Canada

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FOREIGN AID IN THE AGE OF POPULISM

Across the world the Western dominated international aid system is being challenged. The rise of right-wing populism, de-globalisation, the advance of illiberal democracy and the emergence of non-Western donors onto the international stage are cutting right to the heart of the entrenched neoliberal aid paradigm. Foreign Aid in the Age of Populism explores the impact of these challenges on development aid, arguing that there is a need to bring politics back into development aid; not just the politics of economics, but power relations internally in aid organisations, in recipient nations, and between donor and recipient. In particular, the book examines how aid agencies are using Political Economy Analysis (PEA) to inform their decision making and to push aid projects through, while failing to engage meaningfully with wider politics. The book provides an indepth critical analysis of the Washington Consensus model of political economy analysis, contrasting it with the emerging Beijing Consensus, and suggesting that PEA has to be recast in order to accommodate new and emerging paradigms. A range of alternative theoretical frameworks are suggested, demonstrating how PEA could be used to provide a deeper and richer understanding of development aid interventions, and their impact and effectiveness. This book is perfect for students and researchers of development, global politics and international relations, as well as also being useful for practitioners and policy makers within government, development aid organisations, and global institutions. Viktor Jakupec is a Professor at Deakin University, Australia and the University of Potsdam, Germany. Max Kelly is a senior academic in International and Community Development at Deakin University, Australia.

RETHINKING DEVELOPMENT Rethinking Development offers accessible and thought-provoking overviews of contemporary topics in international development and aid. Providing original empirical and analytical insights, the books in this series push thinking in new directions by challenging current conceptualizations and developing new ones. This is a dynamic and inspiring series for all those engaged with today’s debates surrounding development issues, whether they be students, scholars, policy makers and practitioners internationally. These interdisciplinary books provide an invaluable resource for discussion in advanced undergraduate and postgraduate courses in development studies as well as in anthropology, economics, politics, geography, media studies and sociology. Communicating Development with Communities Linje Manyozo Learning and Volunteering Abroad for Development Emerging Economies and Development Jan Nederveen Pieterse Disability and International Development A guide for students and practitioners David Cobley Numeracy as Social Practice Global and Local Perspectives Edited by Keiko Yasukawa, Alan Rogers, Kara Jackson and Brian V. Street Communication in International Development Doing Good or Looking Good? Edited by Florencia Enghel and Jessica Noske-Turner Epistemic Freedom in Africa Deprovincialization and Decolonization Sabelo J. Ndlovu-Gatsheni Foreign Aid in the Age of Populism Political Economy Analysis from Washington to Beijing Viktor Jakupec and Max Kelly

FOREIGN AID IN THE AGE OF POPULISM Political Economy Analysis from Washington to Beijing

Viktor Jakupec and Max Kelly

First published 2019 by Routledge 2 Park Square, Milton Park, Abingdon, Oxon OX14 4RN and by Routledge 52 Vanderbilt Avenue, New York, NY 10017 Routledge is an imprint of the Taylor & Francis Group, an informa business © 2019 Viktor Jakupec and Max Kelly The right of Viktor Jakupec and Max Kelly to be identified as authors of this work has been asserted by them in accordance with sections 77 and 78 of the Copyright, Designs and Patents Act 1988. All rights reserved. No part of this book may be reprinted or reproduced or utilised in any form or by any electronic, mechanical, or other means, now known or hereafter invented, including photocopying and recording, or in any information storage or retrieval system, without permission in writing from the publishers. Trademark notice: Product or corporate names may be trademarks or registered trademarks, and are used only for identification and explanation without intent to infringe. British Library Cataloguing in Publication Data A catalogue record for this book is available from the British Library Library of Congress Cataloging-in-Publication Data Names: Jakupec, Viktor, 1945- editor. | Kelly, Max, editor. Title: Foreign aid in the age of populism : political economy analysis from Washington to Beijing / edited by Viktor Jakupec and Max Kelly. Description: Abingdon, Oxon ; NewYork, NY : Routledge, 2019. | Series: Rethinking development | Includes bibliographical references and index. Identifiers: LCCN 2018049122 (print) | LCCN 2018050739 (ebook) | ISBN 9780429032011 (eBook) | ISBN 9780367144357 (hardback) | ISBN 9780367144364 (pbk.) Subjects: LCSH: Economic assistance--Political aspects. | International economic relations. | Populism. Classification: LCC HC60 (ebook) | LCC HC60 .F591545 2019 (print) | DDC 327.1/11--dc23 LC record available at https://lccn.loc.gov/2018049122 ISBN: 978-0-367-14435-7 (hbk) ISBN: 978-0-367-14436-4 (pbk) ISBN: 978-0-429-03201-1 (ebk) Typeset in Bembo by Taylor & Francis Books

CONTENTS

About the authors Abbreviations

viii x

1 Introduction

1

2 Political Economy Analysis: A distorted view of reality

9

3 Political Economy Analysis: Deficiencies and critiques

29

4 Unpacking political economy analysis in a foreign aid context

46

5 Populism: Challenging socio-economic orthodoxy

60

6 The challenge of illiberal democracy

78

7 De-globalisation: Challenging the foreign aid agenda

98

8 The Beijing Consensus: Challenging the dominant Washington Consensus

115

9 The politicisation of Political Economy Analysis

137

10 (Re)locating Political Economy Analysis: Theoretical constructs and practical undertakings

154

11 Foreign aid: Political Economy Analysis at the crossroads

175

Index

188

ABOUT THE AUTHORS

Viktor Jakupec is an academic at Deakin University, Australia, and the University of Potsdam, Germany. His research background is in development studies and politics of education. He holds a Dr. phil. from FU Hagen, Germany, and an MEd (1st Hons) from James Cook University, Australia. Professor Jakupec is Member of the Leibniz-Sozietät der Wissenschaften zu Berlin (Academy of Sciences) and member of the German Association of Political Science (Working Group for International Political Economy). He previously has held academic positions at the University of Technology, Sydney, and Deakin University, Melbourne. His latest research includes development studies, Political Economy Analysis, higher education policy, and aid architecture and impact. His recent publications include Development Aid: Populism and the End of the Neoliberal Agenda (Springer International Publishing), Assessing the Impact of Foreign Aid: Value for Money and Aid for Trade (Academic Publishers/Elsevier), Development Aid: Regulatory Impact Assessment and Conditionality, and Foreign Aid: Cultural Values and Norms. Professor Jakupec has worked as an international consultant for the World Bank, the International Finance Corporation, the Asian Development Bank, the Millennium Challenge Corporation, the EU, the European Training Foundation, and bilateral agencies funded development aid projects in Asia, the Middle East, North Africa, and the Balkans. Max Kelly is an academic in International and Community Development at Deakin University, Australia. She holds a PhD in International Development from Kingston University in the UK, a Masters in Rural and Regional Resource Planning from the University of Aberdeen, and a Bachelors in Agricultural Science from University College Dublin. Her previous academic positions include RMIT University, Melbourne. Dr Kelly’s recent research focuses on Political Economy

About the authors ix

Analysis, livestock development and animal welfare, impact assessment in development policy and practice, research methods in an African context, civil society in post-conflict settings, and agricultural extension theory and practice. Her most recent publications include: Women Researching in Africa (Palgrave Macmillan), Assessing the Impact of Foreign Aid: Value for Money and Aid for Trade (Academic Publishers/Elsevier), Development Aid: Regulatory Impact Assessment and Conditionality Food Sovereignty and Landscapes, Food and Change in Africa, and Animals in International Development, Ethics, Dilemmas and Possibilities. She has consulted and volunteered with a wide range of organisations, including international NGOs, multilateral organisations, and government departments. She has experience in Malawi, Uganda, Timor Leste, Bangladesh, Pakistan, Papua New Guinea, Solomon Islands, and Vanuatu.

ABBREVIATIONS

ADB AfD AfDB AfT AIIB AusAID BRICS CIDA DAC DDD DFID EBRD EIB EMC FDI GATT GDP GFC GNI HDI IBRD IMF IPE IR KORUS LDC MDB

Asian Development Bank Alternative für Deutschland African Development Bank Aid-for-Trade Asian Infrastructure Investment Bank Australian Agency for International Development Brazil, Russia, India, China, South Africa Canadian International Development Agency Development Assistance Committee Doing Development Differently Department for International Development European Bank for Reconstruction and Development European Investment Bank European Monetary Crisis Foreign Direct Investment General Agreement on Tariffs and Trade Gross Domestic Product Global Financial Crisis Gross National Income Human Development Index International Bank for Reconstruction and Development International Monetary Fund International Political Economy International Relations USA-Korea Free Trade Agreement Least Developed Countries Multilateral Development Banks

Abbreviations xi

NAFTA NDB NIEO OBOR ODA ODI OECD OECD DAC OPEC PDIA PE PEA PGPE SAP SIDA TnA TPP TWP UK UNCTAD UNDP UNESCO UNRWA USA USAID WTO

North American Free Trade Agreement New Development Bank New International Economic Order One Belt, One Road initiative Official Development Assistance Overseas Development Institute Organisation for Economic Co-operation and Development OECD Development Assistance Committee Organisation of Petroleum-Exporting Countries Problem-Driven Iterative Adaptation Political Economy Political Economy Analysis Problem-Driven Governance and Political Economy Analysis Structural Adjustment Programme Swedish International Development Cooperation Agency Trade-not-Aid Trans-Pacific Partnership Thinking and Working Politically United Kingdom United Nations Conference on Trade and Development United Nations Development Programme United Nations Educational, Scientific and Cultural Organization United Nations Relief and Works Agency United States of America US Agency for International Development World Trade Organisation

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1 INTRODUCTION

Preamble The rise of right-wing populism as a political movement in Western democracies, the emergence of illiberal democracies, the quest for de-globalisation and the advent of the Beijing Consensus are challenging the established economic orthodoxy of the neoliberal foreign aid paradigm. These challenges are driven by a pursuit of nativism, protectionism, and other socio-political factors. In short, there is a growth in re-politicisation drivers affecting Western foreign aid. Yet, despite these emerging measures, the application of Political Economy Analysis (PEA) as a catalyst for improving foreign aid effectiveness in a changing political environment remains at best an ambitious epistemic intention, and at worst a marginalised tool that is perceived by numerous foreign aid agencies as being too time-consuming, too cumbersome and too complex to implement (Duncan and Williams, 2012; Hudson and Marquette, 2015). Prior to progressing any further, and for the purpose of a better understanding, let us briefly define the concept called ‘Political Economy Analysis’ (PEA). It would be tempting here to discuss the various approaches taken by different aid agencies concerning PEA. However, since this discussion and analysis will be provided in detail in subsequent chapters, it suffices here to offer a widely quoted description of PEA. According to OECD DAC, [PEA] is concerned with the interaction of political and economic processes in a society: the distribution of power and wealth between different groups and individuals, and the processes that create, sustain and transform these relationships over time. (OECD DAC, cited in DFID, 2009, p. 1)

2 Introduction

USAID (2016, p. 2) defines PEA at application level as a field-research methodology used to explore not simply how things happen in an aid-recipient country, but why things happen. It results in recommendations for a Country Development Cooperation Strategy (CDCS), project or activity design, course correction during implementation, and is supported by a written report of the analysis. Given the above USAID misconception between a method and methodology, and the diversity of definitions, which we will address in subsequent chapters, an understanding of PEA as a component of economics and politics in a context of foreign aid is not uncomplicated, but it is no more complicated than trying to understand any other everyday political and economic discussion in the media and to draw informed conclusions. However, within the foreign aid community and institutions, there is a myth that politics and economics of development, and thus PEA, are best understood by economists and governance experts (Yanguas and Hulme, 2014) and are largely inaccessible to others. The myth concerning the supremacy of economics has, since the rise of neoliberalism in the 1970s, been perpetuated by neoliberal development economists themselves who dominate the organisational thinking within multilateral development banks1 (MDBs) and many other donor agencies. Ironically the very same economists were able to convince the development community, namely, aid donors, recipients and practitioners that their neoliberal economic theory reflects an unquestionable, universally valid reality and needs to be adhered to in preference to any other social science theory and actuality. In an implicit as well as explicit claim that there is no alternative to neoliberal economic ideology, by sleight of hand, this belief became ‘reality’. In addressing this economic orthodoxy, the ‘Western’ political frame within which economic decisions are made also becomes potentially implicitly accepted as the norm. However, contemporary global society is dealing with a range of fundamental changes, or challenges which impact both on the donor side, as drivers of global and local engagement with society generally, and on the recipient side in terms of both the impact of aid, and the higher-level ability of recipient nations to define their own development. In this vein, the book identifies three ‘internal’ challenges to a nation’s aid and development intentions and actions, namely, (1) illiberal democracy; (2) the rise of populism and de-globalisation; and (3) one external or global challenge – in the guise of the so-called ‘Beijing Consensus’. Although each of these is analysed in depth in later chapters, it is necessary to review the basic premise of each here, and their interrelationships, given there is so much confusion in the literature.

Political economy analysis at the crossroads of illiberalism and populism We identify illiberalism as a challenge in its own right. However, when one turns to the academic literature and other forms of public discourse, it becomes evident

Introduction 3

that there is a trend to conflate (1) liberalism and democracy (i.e. liberal democracy) and (2) populism and illiberalism. Concerning the former, Rosenblatt (2018) notes, ‘[o]ne common mistake is to conflate liberalism with democracy. The two concepts are not synonyms. For most of their history, they have not even been compatible’ (n.p.). As far as the latter is concerned, the academic literature usually refers to illiberal democracy, rather than to illiberalism. Zakaria (1997, 2016) made an important distinction between democracy and liberalism, constructs that are often conflated. He sees democracy as a process for electing leaders through popular participation. However, stating that a state is democratic does not say anything about how it is actually governed. Liberalism defines norms, values and practices that form political life. A liberal state perceives individual rights as paramount. It protects the individual not only against the abuses of autocracy or dictatorship but also against the maltreats of democratic majorities. In contrast, illiberalism imposes limitations on liberal freedoms, such as greater restrictions on freedom of assembly and speech, constraints on the press, performs reprisals against political opponents, and practises oppression of minorities. All of this may be perceived as immoral and evil, but they are not necessarily undemocratic. In short, illiberalism may be conceived and practised as illiberal democracy, or it may provide a political basis for the strengthening of the power of a democratically elected autocrat or dictator. Let us turn to populism. According to Mudde (2004, 2007, 2017) and Moffitt (2017), populism in political sciences is the idea that the society is divided into two groups, which disagree with each other. One is the group denoted as ‘the pure people’, and the other is ‘the corrupt elite’. In short, a populist leader, irrespective if elected through a democratic electoral process or otherwise, uses as the political platform the unification of the ‘will of people’ and defends the ‘pure people’ against their enemy, namely, the ‘the corrupt elite’. As we may see from the above, however short discussion, populism does not equate to illiberalism. Turning now back to the impact on neoliberalism and PEA, claims for the supremacy of neoliberal economics disguised as reality lead to a belief among many foreign aid practitioners that PEA is enigmatic and should be best left to the economists and governance ‘experts’. The organisational thinking within donor organisations concerning PEA does not appear to be much different. Because it is shrouded in a political-economic myth, the application or enactment of PEA is sporadic at best. Interestingly, PEA as an evaluation method is not part of the institutionalised project cycle and, when it is used, the findings are more often than not seen as inconsequential and, at worst, as a potential hindrance to the ‘cult of efficiency’ (Stein, 2001) which governs foreign aid interventions. To complicate matters further, there is an ambiguity about PEA as a concept. Different foreign aid agencies have taken different approaches to PEA, for example, by atomising PEA activities and foci into macro-, meso-, and micro-levels, or country, sector, or problem levels, but without a clear epistemic justification. In doing so, donor organisations are projecting a hope that this fragmentation will potentially harvest greater operationally relevant findings. There is little if any

4 Introduction

epistemic justification offered for this segmented approach, and, unsurprisingly, there is at surface level a lack of clear indication of ‘relevant findings’. Against this, deeper-level analysis of the PEA reports made available by the foreign aid agencies, a different picture emerges. PEA appears to be an evaluation tool that provides benefits to the donor agency to achieve their aims and to maintain advantageous power relationships vis-à-vis the recipients. Against this background, and for the purposes of a better understanding, this book will attempt to de-mystify the political economy analysis of foreign aid. In doing so we will focus on three intertwined themes within the PEA, namely, (1) the existing deficiencies of PEA; (2) the emerging global challenges to the existing economic dogma governing the current foreign aid agenda and thus PEA; and (3) the need for the re-politicisation of PEA. The discussions concerning the deficiencies of PEA will focus on the de-politicisation of PEA thus operationalised as a simple ‘tick-box’ technicist-mechanistic process. This discourse is further grounded in contemporary political and economic context. The book highlights what we consider to be the critical global challenges. With reference to global challenges, the discussion will concentrate on the impact of populism, illiberalism, de-globalisation and the emergence of the Beijing Consensus on established MDBs and foreign aid. In this context, we argue that major foreign aid institutions have thus far failed to address the reality of the above-mentioned emerging challenges in any significant way. If anything, the MDBs, it appears, have, by adopting the ‘business as usual’ approach, disguised the reality of the political and economic changes affecting the foreign aid world. While challenges identified as core in this book exclude perhaps the greatest challenge to humanity in the twenty-first century, namely, climate change, the aim of this book is to critically analyse the conceptualisation, and implementation of political and economic factors in the pursuit of sustainable human development, currently driven by the UN Sustainable Development Goals. Political and economic context drives decisions which impact not only society, but the global environment, and therefore the role of PEA in international development decision-making, and implementation is critical for all aspects of a sustainable future. Therefore, we argue that there is a lack of political foundation within the current PEA concept, and at the same time there is a failure of the neoliberal paradigm in foreign aid. One of the reasons for this phenomenon is that neoliberal economists are to a large extent the gate-keepers of foreign aid policies within orthodox MDBs and bilateral aid agencies. They exert immense influence not only so far the policy decision-making process within their organisations is concerned, but also on recipient governments. They have amassed significant power and influence concerning foreign aid allocation and conditionalities throughout the developing world. In short, the neoliberal economists fulfil a censorship role of the paradigm they subscribe to, and the majority of donor governments provide the relevant support for the sustainability of the existing neoliberal economic paradigm. They dismiss any critique of neoliberal economics, invoking the Thatcherite doctrine that ‘there is no alternative’ (Berlinski, 2008). However, in order to make PEA politically, economically and socially more responsive and relevant to donors and recipients, there is a

Introduction 5

need to recast PEA through a critical engagement with conceptual and theoretical underpinnings, going beyond uncritical acceptance of neoliberal economic orthodoxy. Thus, we have (re-)located PEA within a theoretical framework of international political economy.

The structure of the book In the Zeitgeist of populism as an anti-neoliberal political, economic and social movement, this book opens in Chapter 1 with a broad discussion concerning the foreign aid agenda, that is dominated by a globalised neoliberal economic growth paradigm. This chapter analyses in brief the shortcomings of this ‘Western’-led development orthodoxy in a political and economic context which is challenging these foundations. Based on these challenges the authors address the ‘why’ and ‘how’ PEA should be recast through a paradigm shift and introduce the rationale for International Political Economy (IPE) as a theoretical framework for PEA. This chapter sets the comprehensive argument for a critical revision to and recasting of PEA as a concept limited in most cases to analysing the economic policies, transforming it into a tool that provides a critical analysis of politics as central notion of human development. Chapter 2, Chapter 3 and Chapter 4 discuss PEA in more detail by exploring the emergence of PEA as a tool to address the growing recognition of the impact of political factors on development interventions and their impact (or lack thereof). These three chapters address understandings of and the use of PEA in diverse institutions, and present critiques of PEA at multiple levels within international development. Chapter 2 focuses on the need for a critical revision to PEA. It argues for recasting PEA from its current conceptualisation, limited in most cases to analysing the politics of economics, to a tool that provides a critical analysis of politics as the central foundation. Chapter 3 explores what has been identified as both definitional and conceptual deficiencies in PEA as it is currently practised. Chapter 3 unpacks the operationalisation of PEA by key donors and explores related concepts that take a more critical approach, including Doing Development Differently, and Thinking and Working Politically. The discussions conclude with an analysis of the shifting ground of PEA in theory and practice in response to critiques to date, highlighting the lack of engagement with contemporary political and economic challenges, namely, the rise of populism, and illiberal democracies, the emergence of a de-globalisation narrative and the challenge to ‘Western’-led development orthodoxy (the Washington Consensus), by the so-called Beijing Consensus. In Chapter 4 the authors ‘unpack’ PEA as it is practised by major MDBs including the World Bank, and the Asian Development Bank (ADB) and bilateral aid agencies such as the UK’s Department for International Development (DFID) and the Swedish International Development Cooperation Agency (SIDA). Commonalities and the development of ideas are tracked through the use of tools and methods employed by these agencies. Drawing on critiques of PEA in previous chapters, and the contemporary use of PEA,

6 Introduction

the chapter explores alternative approaches both conceptually and practically to explore contributions to political economy understandings in development. Chapter 5, Chapter 6 and Chapter 7 provide critical analyses of the challenges facing Western MDBs and bilateral aid agencies. Chapter 5 offers a critical analysis of populism as challenging political, economic and social orthodoxy in foreign aid; Chapter 6 discusses illiberal democracies arising in association with populism, and the challenges to existing democratisation embedded in the Washington Consensus. This concludes with an analysis of the challenges of illiberal democracy in the context of foreign aid and the impact of illiberal democracy on MDBs and recipients alike. Chapter 7 focuses on de-globalisation as a challenge to the foreign aid agenda, and Chapter 8 provides an analysis of the Beijing Consensus as a challenging paradigm to the Washington Consensus representing the economic and financial establishment. These fourchapters provide the basis for the analysis of the political agenda of PEA which is taken up in later chapters. Chapter 9 focuses on the need for the politicisation of PEA. The point of departure for this chapter is the proposition that, despite the claims to the contrary made by neoliberal economists and the Washington Consensus-based institutions, foreign aid was and still is political in nature. Thus, this chapter argues that PEA must be abandoned as a technical exercise and must be re-politicised. This repoliticisation will bring about a paradigm shift from an efficiency-focused agenda to more nuanced notions of ‘best fit’, which require much deeper engagement with political economy, and particularly with power relations between donor and recipient, and other vested interests. Chapter 10 then proposes a relocation of PEA within the construct of International Political Economy by articulating a range of theoretical frameworks, which may be used to underpin epistemologically the practice of PEA. In order to respond appropriately to the requirements of the donors as well as the recipients, this chapter explores actor-oriented theoretical frameworks, structuralism, and institutionalism, as potentially relevant vantage points from which to frame a political economy analysis in designing or evaluating an international development intervention. Chapter 11, the final chapter, draws together the main arguments and discussions. In doing so the authors bring to the fore the economy-politics dialectics from the vantage points of the donors and recipients alike. Subsequently, the discussion reverts to the questions of power relationships, the emerging notions of nativist interest vis-à-vis cosmopolitanism, covering, however speculatively: (1) the influence of populism on foreign aid; (2) the juxtaposition of the Beijing Consensus and the Washington Consensus; (3) the impact of de-globalisation and the rise of illiberal democracy on foreign aid; and (4) the interdependency of the theoretical frameworks and foreign aid strategic practices. In the latter context, the discussion turns to resolving the question whether theoretical frameworks follow from the strategic practices or the other way around. Although the chapters follow a multi-faceted ‘red thread’, the reader is not required to read the book in a specific sequence. The chapters are self-contained in content, arguments and conclusions. However, for a better understanding and

Introduction 7

connections between the chapters, the common ‘red thread’ encompasses the following topics:         

the failure of the neoliberal economic paradigm; political economy analysis: as a distorted view of reality; the problematisation of political economy analysis; populism as a challenge to the socio-economic orthodoxy; illiberal democracy as a challenge to the liberal democracy-based foreign aid; de-globalisation as a challenge to the neoliberal foreign aid agenda; the Beijing Consensus as a challenge to the Washington Consensus; the politicisation of PEA; new theoretical constructs and practical undertakings for PEA.

Note 1 The term multilateral development banks denotes global development banks, regional development banks and sub-regional development banks.

References Berlinski, C. (2008). There Is No Alternative: Why Margaret Thatcher Matters. New York: Basic Books. DFID (Department for International Development) (2009). Political Economy Analysis: How to Note. London: DFID. Duncan, A. and Williams, G. (2012). Making Development Assistance More Effective Through Using Political Economy Analysis: What Has Been Done and What Have We Learned? Development Policy Review, vol. 30 (2), pp. 133–148. Hudson, D. and Marquette, H. (2015). Mind the Gaps: What’s Missing in Political Economy Analysis and Why It Matters. In OECD (ed.), A Governance Practitioner’s Notebook: Alternative Ideas and Approaches. Paris: OECD. Moffitt, B. (2017). Liberal Illiberalism? The Reshaping of the Contemporary Populist Radical Right in Northern Europe. Politics and Governance, vol. 5 (4), pp. 112–122. Mudde, C. (2004). The Populist Zeitgeist. Government and Opposition, vol. 39, pp. 541–563. Mudde, C. (2007). Populist Radical Right Parties in Europe. New York: Cambridge University Press. Mudde, C. (2017). What Populism Is Not. Vice News. 9 May 2017. Available at: https:// news.vice.com/en_us/article/vbz874/what-populism-is-not (accessed 19 January 2018). Rosenblatt, H. (2018). Liberal Democracy Is in Crisis. But … Do We Know What It Is? The Guardian, Australian edn, 28 May 2018. Available at: www.theguardian.com/commentis free/2018/may/27/liberal-democracy-history-us-politics (accessed 3 August 2018). Stein, J. G. (2001) The Cult of Efficiency. Toronto: House of Anansi Press. USAID (United States Agency for International Development). (2016). Draft Working Document: USAID Applied Political Economy Analysis (PEA) Field Guide. Washington, DC: USAID. Yanguas, P. and Hulme, D. (2014). Can Aid Bureaucracies Think Politically? The Administrative Challenges of Political Economy Analysis (PEA) in DFID and the World Bank. ESID Working Paper No. 33. Manchester: University of Manchester. Retrieved from

8 Introduction

www.effective-states.org/wp-content/uploads/working_papers/final-pdfs/esid_wp_33_ya nguas_hulme.pdf (accessed 13 November 2018). Zakaria, F. (1997). The Rise of Illiberal Democracy. Foreign Affairs, vol. 76 (6), pp. 22–43. Zakaria, F. (2016). America’s Democracy Has Become Illiberal. The Washington Post, 29 December. Retrieved from www.washingtonpost.com/opinions/america-is-becoming-a -land-of-less-liberty/2016/12/29/2a91744c-ce09-11e6-a747-d03044780a02_story.html? noredirect=on&utm_term=.623a2ba06eb4 (accessed 19 June 2018).

2 POLITICAL ECONOMY ANALYSIS A distorted view of reality

Introduction Despite a long history of foreign aid, there is broad recognition of the fact that aid does not always (and indeed not often) produce results that are either desired or expected, or of a significant magnitude to achieve the grand goals and visions of the development industry. One of the many reasons for the lack of coherent evidence for the success of development interventions financed and implemented by the neoliberal multilateral development banks (MDBs), such as the World Bank, the Asian Development Bank (ADB), the European Bank for Reconstruction and Development (EBRD), the African Development Bank (AfDB) and a long list of bilateral aid agencies such as the United States Agency for International Development (USAID), the UK Department for International Development (DFID) and the now defunct Australian Agency for International Development (AusAID) [now ‘Australian Aid’, under the Department of Foreign Affairs and Trade], to name but a few, is the blind adherence to neoliberal ideology and economics, which is reflected in the Washington Consensus. Following the Global Financial Crisis (GFC) in 2008, discontent with the political and economic establishment emerged. The neoliberal political agenda is challenged by the rise of populism, the neoliberal economic agenda, in the form of globalisation and hyper-globalisation, is being the contested by ideas of de-globalisation, and the eclectic Beijing Consensus is confronting the neoliberal Washington Consensus. In short, the dominant economic agenda of foreign aid is being challenged by political movements, thus bringing politics into the economics of foreign aid interventions. Despite the dominance of neoliberal economics as the foreign aid credo of the dominant MDBs and bilateral aid agencies, there is a widespread contemporary acknowledgement that aid is an inherently political project, and that thinking politically, or indeed thinking and working politically, as the new jargon tends to

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argue we must do, are vital to achieving ‘good change’. However, behind these somewhat jingoistic statements and buzz-phases, there are significant issues to be addressed to work out ‘how’ to think and work politically in an aid system that is firmly embedded in a neoliberal hegemonic discourse. Thinking and working politically are what Carothers and de Gramont (2013) call the ‘almost revolution’. If this stands to reason, we need to stand back and take a distinct critical perspective on aid and development, employing a range of disciplinary areas, exploring and understanding the impact of complex human, social, cultural and political systems to achieve an effective and efficient change. By arguing in favour of a change, we suggest that the existing neoliberal economic dominance of foreign aid has shown insufficient evidence in acting socially and politically responsibly. Through the ideals of globalisation, the donor agencies, to a large extent, were seeking economic power essentially to protect the global economic establishment and to expand the business interests of the donor nations. Without wishing to be unkind to the MDBs and other donor agencies, they have projected little if any concern with the public needs of the recipient countries and have failed to a large extent to formulate a socially conscious political framework for foreign aid interventions. Given the above-stated emerging challenges, it is not surprising that the foreign aid world, as we know it, is at a crossroads. One road is the well-worn path of development through growth, based on globalised neoliberal ideologies, loosely termed the Washington Consensus ideology, the other road is characterised by right-wing populist milestones and their corresponding ideologies. However, when it comes to the evaluation of aid effectiveness, there is one specific tool which may provide a pointer for the direction of change. Here we are referring to the concept and activity called Political Economy Analysis (PEA). In this chapter, we will turn to the foreign aid agenda, focusing on the need for PEA, by articulating a brief outline of the dominant economic growth paradigm in aid and development, as a foundational critique. We will then turn to international political economy (IPE), and the rationale for IPE as a field of enquiry, given our core argument to relocate PEA within a theoretical framework. To preface work in later chapters which highlight significant challenges to the neoliberal orthodoxy, we then turn to the argument for a paradigm shift – from the uncritical dominance of a neoliberal model of development. As it stands, the neoliberal paradigm is being rendered increasingly incongruous with the existing politics and economics of foreign aid. We therefore address ‘why’ and ‘how’ PEA should be recast through a paradigm shift and the rationale for IPE as a theoretical framework for PEA. This provides the rationale for higher-level engagement with some core challenges, and opportunities, essential to move beyond what appears to be an impasse – the ‘almost revolution’ of Carothers and de Gramont (2013). In essence, we are going to look at the ‘poverty’ and practices of political economy and analysis, calling for a paradigm shift in foreign aid from the politics of economics as a driver of development, to a critical analysis of politics as central, not just to development interventions but to the entire notion of human development.

PEA: a distorted view of reality 11

Delineating Political Economy Analysis PEA is a relatively new concept within the foreign aid arena. It emerged in the 1980s under the term of ‘governance studies’ and was redefined in early 2000 as ‘Political Economy Analysis’ (Hudson and Leftwich, 2014). Over the last three decades, there have been some significant changes in thinking about the purpose of foreign aid, which in its broadest terms is seen as contributing to the introduction of PEA as a tool for analysing ‘economic and political behaviour, and the understanding of how political institutions, social and political power relations, and the political and economic environment influence each other …’ (van Breukelen, 2007, p. 46). Within the aid and development architecture, PEA emerged as a tool to address the growing recognition of the impact of political factors on development interventions and their impact (or lack thereof). Despite the fact that PEA is a widely used tool and concept in development discourse and practice, it attracts a level of distrust and criticism for a broad variety of reasons. PEA, as it currently exists, stays firmly within the remit of the dominant neoliberal orthodoxy. The many and diverse challenges provided by global political and economic shifts, including the rise of populism, the emergence of a de-globalisation agenda, and the emergence of an alternative development agenda under the ‘Beijing Consensus’ cannot adequately be addressed through existing PEA discourse. A business-as-usual approach is unlikely to provide the required level of understanding and direction to operate in this brave new world. The aim of this book therefore is to bring to the fore the inadequacies of PEA, as used by the major MDBs and bilateral institutions, and to recast PEA in a new light. To date, PEA has had an ‘outside in’ focus, analysing the political context of the recipient county, with no broader political context in focus. Particularly in light of the political changes across the globe, and their impact in the world of international development, as previously identified, i.e., populism, globalism (de-globalisation) and the Beijing Consensus, it is argued that PEA needs to take into account broader political considerations. These include, as well as the political context of the recipient country, the relations between donor and recipient, and the need to make explicit the underlying assumptions, values and theoretical frameworks of any development intervention. In short, we argue that PEA as it currently stands, is technicist (i.e., technocratic and mechanistic) and based on neoliberal values and norms, is too focused on recipient country politics, and not relations between donor and recipient, and is therefore uncritical.

Aid, economic growth and development Some fundamental questions must be asked of foreign aid, primarily why is it being given, to achieve what, and how? The linking of politics and economics is embedded in this basic discourse. The aim of foreign aid is development, framed as the economic and social development of the world poorest countries (Kingsbury, 2004). The traditional mechanism of development has been a rather uncritical focus on economic growth. If economic growth is a given, then foreign aid becomes a

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somewhat technical exercise to achieve economic growth for the purposes of economic and social development, a much broader concept. There is a disconnect between economic growth per se and development which is best characterised by the notion of inequality. As Kingsbury points out, resource allocation, which determines people’s livelihoods, is ‘perhaps the singularly most intense political subject’ (ibid., p. 164). Although a full analysis of the changing aid and development agenda globally is beyond the scope of this book, it is vital to understand critical developments that have brought PEA to the fore. The underpinning system of foreign aid is its ‘architecture’. The emergence and contemporary form of the aid architecture are central to understanding the modalities, approaches and ideologies embedded in the development industry. Aid architecture emerged from the post-war period with the establishment of the so-called Bretton Woods institutions – the World Bank, and the International Monetary Fund (IMF) – and with the first General Agreement on Trades and Tariffs (GATT) of 1948 (becoming the World Trade Organisation (WTO) in 1995) constituting the new global architecture for rebuilding a secure trade and economic environment. The setting-up of these structures was driven by British and US interests with John Maynard Keynes and Harry Dexter White respectively figuring largely in the design of the World Bank and the IMF. The Bretton Woods system is based on three premises: (1) the absorption of political and economic power by a number of states, such as the USA, the UK and a few others; (2) the existence of a collection of common fundamental interests by the aforesaid powerful states; and (3) the presence of a prevailing power, which is able and willing to accept a leadership role (Spero and Hart, 1997). Unsurprisingly, the USA holds the most significant power in terms of voting rights in the IMF, and World Bank Group members and has until quite recently exercised the global leadership role. As far as the Bretton Wood institutions go, the IMF’s function is inter alia the promotion of global economic growth, focusing on trade and financial stability. The World Bank’s role was the reconstruction of Europe, by facilitating the investment of capital for productive purposes. Between them, they have set the scene for the intervening 70 years in global aid and global trade. Foot et al. (2003) argue that the USA has an incredible influence on these institutions, both through formal functions and informal practices and conventions that have been embedded over time. They do, however, refute the call that the IMF and the World Bank are only instruments of US power and hegemony. Early economic and social policy prescriptions for growth and development led on from modernisation theory. In the 1970s and early 1980s, there were moves to address basic needs and incorporate social development, such as the World Bank’s focus on health and education. However, the dominant neoliberal orthodoxy of the World Bank, the IMF and other MDBs and bilateral aid agencies reflects the ‘western’ paradigmatic obsession with neoliberalism, which has dictated global economic policy since the 1980s (McKay, 2016).

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The Development Assistance Committee (DAC) of the OECD has been the primary forum through which aid has been disbursed over a long period. The history of development aid emerging from the post-Second World War development institutions is well documented elsewhere (cf. Williams, 2013), and the institutionalisation of aid through the creation of multilateral agencies (the World Bank, the IMF, and so on) led to the Washington Consensus (and the post-Washington Consensus). A primary concern of this book is the role of this ‘western’ development orthodoxy and the dramatically changing political and economic context in which foreign aid operates, both from within Bretton Woods development industry, and externally. It is therefore beneficial to explore, if briefly, aid flows, from the traditional (OECD-DAC donors) and increasingly, the so-called ‘non-traditional’ donors, among which the BRICS (Brazil, Russian Federation, India, China and South Africa) have gained considerable attention in the contemporary context. The biggest (in real terms) donor from the OECD countries has consistently been the USA, in 2017 with $34 billion of net official development assistance (ODA), providing around 24 per cent of Net ODA from OECD countries (OECD, 2018a). This is followed by Germany (at nearly $24 billion) and the UK (at $18.5 billion). Since the post-war period, aid from OECD DAC (headed in volume terms by the USA) has been the predominant form of ODA, or foreign aid internationally, driven initially by the Marshall Plan to rebuild Europe. However, aid flows from DAC donors are only one part of the picture. Remittances are frequently the biggest net contributor to external resource flows to lesser developed countries (to use OECD language). In 2015, for example, remittances comprised over 35 per cent of external resource flows to lesser developed countries, with foreign direct investment (FDI) comprising 21 per cent and ODA 16.5 per cent. Absolute figures on development finance outside of the DAC reporting are frequently less clear. However, non-DAC donors’ contributions to development financing are growing globally, and according to OECD (2018c), in 2016 comprised 13.1 per cent of development finance flows (therefore DAC donors provided 86.9 per cent). There has been a substantial shift in both awareness of, and interest in, the role of other ‘non-traditional’ ‘emerging’ or ‘non-DAC’ donors (Kitterman and Findlay, 2013). The Russian Federation is the only non-DAC donor from this ‘non-traditional’ donors’ group that reports to the DAC. From this, the Russian Federation in 2016 provided $1 billion. However, some of these donors are hardly new, as Kitterman and Findlay note, Kuwait has been funding aid since 1961 and Russia and China have provided development assistance of various kinds for over 40 years (ibid., p. 305). Russia at the height of the Cold War was an immensely significant donor (Walz and Ramachandran, 2011), yet postCold War became a recipient and has only recently re-emerged as a significant donor (and is among the ‘non-traditional donors’ reporting to DAC). Arab aid at its peak in the 1970s averaged 4.7 per cent of gross national income (GNI)

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relative to the 0.3 per cent GNI of the DAC countries at the time (Villanger, 2007), and which in 2017 still stood at an average of 0.3 per cent for DAC donors (OECD, 2018a). Although the volume of Arab aid has shown both volatility and a relative decline, a significant feature of relevance is that Arabrelated aid does not seek to impose policy conditions or similar on its grants and loans (OPEC Fund, 2006). Chinese aid originated with essential supplies to North Korea in the 1950s and expanded to include nearly all the African countries. Current data on Chinese aid is frequently contradictory, with AidData figures citing Chinese ODA (equivalent) in 2014 at $6.9 billion versus the US $28.4 billion. The total official commitments (including non-concessional, more commercially oriented projects) show Chinese official finance at $354.3 billion and the US at $394.6 billion (Dreher et al., 2017), justifying a considerable amount of attention on the role, approaches and intent of aid and investment from China. One of the key features of most non-traditional donors is that they are distinguished from DAC donor/recipient model, where the recipient is subject to terms and conditions that can and do include political, economic and ideological forms. Walz and Ramachandran (2011) identify a diverse set of core ideas about development, including mutually beneficial relationships, and horizontal cooperation, whereby power relations are less unbalanced, in essence, premised on a principle of non-interference, which contrasts sharply with more ‘western’ models. Moving forward from this brief exploration of foreign aid, we turn now to some of the terminologies we draw on. At the time of the collapse of Soviet Union, a ‘new ideology’, based on the notion of the ‘Washington Consensus’ became dominant within the foreign aid sphere (cf. Williamson, 1990; Naim, 1999). Acknowledging the many simplifications embedded in the term, we will use the terminology of the so-called ‘Washington Consensus’ throughout the book as the adherence, by many Western MDBs and bilateral aid agencies, to the neoliberal ideology advocated by economists such as Friedrich Hayek and monetarist ideology advocated by Nobel laureate Milton Friedman, respectively. The Washington Consensus is a rather catchall term, but in general refers to what Stiglitz (2008, p. 46) summarises as privatisation, liberalisation, and macro-stability (meaning mostly price stability) … a set of policies predicated upon a strong faith – stronger than warranted by either economic theory or historical experience – in unfettered markets and aimed at reducing, or even minimising, the role of government. A more recent but distinctly related term is that of the Beijing Consensus. Acknowledging again, the many simplifications potentially embedded in terminology, due to the fact of ‘China’s rapid economic progress, the Beijing Consensus is in the ascendancy’ as per Stephen Howes (2017). Despite some critique, there is overwhelming literature that positions the Beijing Consensus as an alternative to

PEA: a distorted view of reality 15

the Washington Consensus, and rather than using the Beijing Consensus as a rhetorical device, it is as a clearly substantiated concept in development literature. Williamson (2012) states the key points of a Beijing Consensus are: incremental reform, innovation, export-led growth, state capitalism and authoritarianism. Thus, we use the term Beijing Consensus as per Williamson’s definition to mean ‘the policies pursued by China’. This is unpacked in detail in Chapter 8. Returning to the notion, however, of the Washington Consensus, over time, it became evident that the neoliberal and monetarist ideology linked to the Washington Consensus has failed, not only in terms of its epistemic but also of its methodological tenets. This gave rise to discussions on the suitability of the neoliberal agenda for foreign aid and a limited dissent within and wide-reaching dissent from outside MDBs, such as the IMF, the World Bank, the Asian Development Bank (ADB) and the European Bank for Reconstruction and Development (EBRD) (cf. Peet, 2003; Önis and Senses, 2005; Saad-Filho, 2010). Critiques of the Washington Consensus were broad but were particularly damning of its relevance to developing country context, including a narrow focus on GDP as a measure of progress and a failure to consider or address inequality (Stiglitz, 2008). The underpinning market fundamentalism required a minimal role for the state, on the assumption that failures of development were in fact failures of the market and could be rectified through market-based mechanisms. There has been, in theory at least, some response to dissenting discussions and external criticisms of the Washington Consensus with the underpinning neoliberal ideology. Stiglitz (ibid.) explores the variations of adaptation of the Washington Consensus model, based on a fundamental fixation with markets, including layers of reform, first, focused on projects and policy and, then, when this failed to produce results, institutional reform, including public institutions and governance. However, these Washington Consensus-plus models still rely on the market and tackle perceived market failures, through privatisation, rather than a fundamental rethink of the role of the state. The focus on institutions also promoted analysis and critique of the role of international institutions, and predominantly MDBs (ibid.). Currently, there is some argument that there is a tentative ideological change from the Washington Consensus to a post-Washington Consensus (cf. Rodrik, 2006; Lopes, 2012). Whether this represents a fundamental shift in ideology is debatable. However, foreign aid in the form of ODA is still couched very much in the neoliberal ideology. In short, both the Washington Consensus and the post-Washington Consensus are purely economic constructs, deprived of the desired political dimension. It is therefore hardly surprising that within the interest sphere of foreign aid, the critique and discussion of the Washington Consensus as well as the postWashington Consensus dogma persist. For example, some eminent economists, most notably (Easterly, 2006; Stiglitz, 2008; Stiglitz and Charlton, 2012; Deaton, 2015) have questioned both the effectiveness and efficiency of the foreign aid ideology pursued by the major MDBs. A significant number of emerging economies have reduced their reliance on the ‘expertise’ of developed countries. Birdsall and Fukuyama (2011) note the decreasing reliance demonstrated by many countries

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on the foreign finance fetish, in response to the financial crisis of the late 1990s in East Asia and Latin America. This provided some level of resilience for emerging country economics to the Global Financial Crisis (GFC) of 2007/08 which bounced back far more effectively than their ‘developed’ peers (ibid.). The potential for reduced hegemony of US-driven neoliberalism can also be perceived in the changes in global financial institutions, demonstrated by the emergence of two new development banks, the Asian Infrastructure Investment Bank (AIIB) (Chin, 2016) and the New Development Bank (NDB, previously referred to as the BRICS Bank) (Biswas, 2015; Stuenkel, 2015), being the first major MDB without a membership from the OECD countries, and the Chinese One Belt, One Road (OBOR) initiative (Cai, 2017), which are in direct competition with the World Bank, the ADB and other development banks (Bolton, 2015; Wildau, 2015). To clarify, the OBOR initiative is a substantial global network of infrastructure projects to open trade routes across the globe, including multiple high-speed rail networks to penetrate Europe, massive ports across Asia and Africa and a series of free-trade zones. It is estimated that China will spend up to one trillion dollars on OBOR, which will potentially bind 60–70 per cent of the world population from some 65 countries to its economy (Lim et al., 2016; Cai, 2017). Furthermore, the global financial crises in 2008 and 2009 increased the argument against the doctrinaire character advocated by proponents of neoliberal and monetarist economic schools of thought. In the post-GFC world, ‘sub-par economic growth’ (Khadem, 2017, para 7) is the new normal. However, there is little evidence of any significant change from the adherence to this type of economic thinking, development banks persevere with a ‘one-size-fits-all’ strategy for foreign aid, proving less and less relevance in addressing the fundamental issues of deeply entrenched poverty and inequality. Despite significant criticism, there are few wellarticulated alternatives to the existing economic ideology. Given the dominance of the neoliberal and monetarist economic schools of thought at the expense of alternatives, our proposition is that PEA, since its beginnings, has been plagued by a lack of political theoretical and epistemological groundings and frameworks and thus was unable to support its application beyond the currently applied technicist-mechanistic ‘cookbook’ or ‘how-to’ approach. Notwithstanding that over time there have been some conceptual changes in the thinking of international development agencies, PEA is still firmly grounded in a technical-instrumental narrative (Unsworth, 2005; Fisher and Marquette, 2014). The absence of the theoretical and epistemological grounding beyond neoliberalism did not deflect from a general acknowledgement from foreign aid institutions that PEA plays an essential role in assessing foreign aid projects (Tidemand, 2010; McLoughlin and Batley, 2012; Copestake and Williams, 2014).

A paradigm shift To (re)locate PEA within a theoretical framework, there is a need to enact a paradigm shift, which may enable academics, policy-makers and practitioners working in the foreign aid arena to take into account the emerging political

PEA: a distorted view of reality 17

movement brought about by the rise of populism, anti-neoliberal and de-globalisation sentiments within donor countries and the rise of the Beijing Consensus. These emerging political movements, anti-neoliberal sentiments, and newly emerging development banks challenge the neoliberal foreign aid ‘establishment’ which in turn is beginning to lose its global dominance. As it stands, the neoliberal paradigm is unable to provide the donors, recipients, practitioners and decision-makers to bridge the gap between the realities of the political changes and public sentiments and their own entrenched ideology expressed through neoliberal theory. However, if the dominant theory or ideology is not sufficiently relevant or applicable, the development world will not stop turning, and a paradigm shift will occur from outside the ‘establishment’. According to (Kuhn, 1962), the term ‘paradigm shift’ refers to the, at times. complex experience in transiting from the ‘existing’ to ‘new ways’ of thinking and ‘paradigm’ is defined as a ‘disciplinary matrix’, namely, a set of values, norms, ideas and attitudes accepted by the members of a scientific or professional community. In this context, paradigm fulfils a number of essential purposes and may either advance or hinder the progress of a discipline. Thus, a paradigm may be defined as a framework used in thinking about and organising an understanding of natural or social phenomena. All societies and the individuals within them tend to have relatively fixed assumptions about how to understand and interpret the world, but there is great variation in these assumptions from place to place and from time to time … (Vyas-Doorgapersad, 2011, pp. 235–236) Here a cautionary note is in place, namely, we are not suggesting that PEA is a discipline. It is a cognitive activity which requires to be located within an academic discipline, which we will address subsequently. Returning to a rationale for a paradigm shift, as developed by Kuhn, it provides a basis for an analysis of development interventions in terms of its inclination to address the above-stated emerging changes and to include sustainable development as a basis for shifting its theoretical framework and participate in, and become methodically amalgamated with, a newly established paradigm. This is captured in Kuhn’s concept of ‘scientific revolution’ whereby ‘revolution’ refers to discontent. This, we can witness in the form of popular discontent with the existing social, political and economic structures and a hostility towards the ‘elites’ and the ‘establishment’. However, in the context of the development interventions, it does not necessarily mean that a new paradigm will replace the old paradigm in its totality. As we indicated above, elements of the old paradigm may be incorporated into the new one. This causes, for the foreign aid organisations and their supporters, intellectual difficulties.

Applying a paradigm shift to PEA To bring about a paradigm shift applicable to PEA with the aim of replacing the existing variations is analytically and politically demanding, and a protracted process. There are many reasons for this. One reason, PEA in its various versions is

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seen by aid agencies at best as something outside the foreign aid processes and procedures, and at worst as a hindrance to the organisational culture pursuing the efficient disbursement of aid funds. Thus, there are not many incentives within the foreign aid community to seriously engage with refining PEA so that it becomes an integral part of the evaluation process within the ‘project cycle’. The questions are: why and how should PEA be recast through a paradigm shift? In response to the ‘why’ question, we would like to re-emphasise that the emerging challenges, where the existing politics and economics of foreign aid are increasingly rendered incongruous, indicate the ability of PEA as an analytical instrument to assess and explain aid effectiveness is deteriorating. Furthermore, since no generally acceptable new PEA paradigm has emerged, the foreign aid community is confronted with an increased risk of fragmentation between the forces of neoliberal globalisation and populist de-globalisation, as well between the Washington Consensus and the Beijing Consensus, respectively. The fragmentation may well come about because of the ‘there is no alternative’ canon which enabled the neoliberal ideology to become an unquestionable doctrine within MDBs and bilateral aid agencies. It is a belief without true comprehension, insight, or critical discernment. Without being challenged, the neoliberal ideology has led to complacency and, as a result, PEA became an add-on, ad-hoc evaluation tool. Following the GFC, the perceived advantages of globalisation and the neoliberal ideology were challenged by the aforesaid rise of populist movements with the demand for de-globalisation. In parallel, the analytical failure of PEA became evident among foreign aid agencies. PEA being dominated by economics at the expense of politics militated against the development of a comprehensive understanding of the nexus between the needs of the recipient countries and aid agencies, especially in terms of inequality of power (Hudson and Marquette, 2015). Unsurprisingly, the impact of PEA remained poorly understood if not discarded altogether by donor agencies and recipient governments, alike. Instead, the donors emphasised the analytically sophisticated (but from the recipient country’s vantage point, often non-viable) microeconomic model as the basis for economic development. In effect, policy-makers at donor agencies often ignored the politico-economic and socio-economic consequences of rising discontent among the recipient countries with respect to the neoliberal version of globalisation. If the above observations stand to reason, it is not surprising that the interest for PEA among the Washington Consensus ideology-based donor organisations is fading. Indeed, most Western donor organisations have continually shown reluctance to strengthen PEA by going beyond examining the political economic power structures of the recipient country and to include within PEA an examination of the donor organisation. This has led to a weakening of PEA as an evaluation tool in the eyes of the host countries. We can now turn to the ‘how’ question, namely, how should PEA be recast through a paradigm shift? It was alluded above that there is a need to develop a new approach to theoretical frameworks which underpin PEA. A point of

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departure is to challenge the knowledge framework by turning away from the dominant theory towards investigating alternative multi-dimensional theories, according to the political economy beliefs, values and norms of both the donor and the recipient. However, this raises the question, can the multi-dimensionality be viewed as a paradigm shift? To answer this question, it could be said that the existence of competing theories may bring about a breakthrough in the form of a ‘new’ theory. If this stands to reason, then the ‘how’ may be answered by proposing to confront the neoliberal economic paradigm that dominates PEA with theoretical frameworks which combine well-understood concepts which have the capacity to deal with the problematics that currently affect PEA. Advancing a PEA paradigm shift will not be an easy task. As stated above, it will require broad analytical understanding of the political changes, especially the impact of populism on the donor countries and organisations, and it will take time. PEA will also need to become intellectually more inclusive and more multidisciplinary, incorporating political sciences, economics and social sciences. Moreover, PEA ‘feedback loops’ between the donors and recipients need to be developed in greater depth. To conclude, complacency concerning the political-economy evaluation of foreign aid programmes and projects and the existing technicist-mechanistic approach are arguably the reasons for PEA’s loss of importance as an evaluation tool. Let us explain. The afore-mentioned argument in favour of a paradigm shift, with the aim of bringing about a new theoretical framework may be justified through the emerging ‘megatrends’ hallmarked by the rise of right-wing populism in many Western donor countries. To re-emphasise: in the recent elections in the USA, Germany, France, Italy, Austria, and the Brexit referendum in the UK, the populist right has gained increased support. This, as a megatrend, may be perceived as an indicator for the demise of the neoliberal centrist political systems in Western democracies, which are the major developing aid contributors. The move towards the populist right brought with it a rejection of the existing cosmopolitanism in favour of a nativist political agenda with calls for de-globalisation and anti-globalisation, protectionism, and mercantile economics. This megatrend questions the existing neoliberal Washington Consensus-based foreign aid, thereby rejecting advocacies for hyperglobalisation. It also opens the doors for the Beijing Consensus as a geopolitical countermove to the existing neoliberal Washington Consensus-based foreign aid. The effect is that the foreign aid politics of the Western donor nations are headed for a potential crisis. In light of the above tendencies and dichotomies, it is becoming increasingly unclear what the Western foreign aid policies stand for. As a megatrend, the Washington Consensus-based foreign aid has been struggling because of its pursuit of neoliberal economic agenda, which has created a significant credibility problem among developing nations. The Washington Consensus-based MDBs and bilateral aid agencies had not just stood for, but also had vigorously promoted finance capitalism, hyper-globalisation, deregulation, privatisation, and minimal state involvement in economic and social aspects of a nation. As a consequence, the Western aid agencies may need to restore their credibility among developing nations by disassociating themselves from the toxic aspects of

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neoliberal economics. This requires a paradigm shift and a new diversified theoretical framework.

From paradigm shift to international political economy: a rationale for a political economy analysis theoretical framework The basic proposition here is that a paradigm shift is the foundation for identifying a PEA theoretical framework. According to Kuhn (1962, p. 10), paradigms ‘provide models from which spring particular coherent traditions of scientific research’. Thus, it follows that paradigms are not theories and they are deficient in progressing propositions that are scientifically testable as much as they fall short of articulating law-like scientific generalisations. If this stands to reason, then paradigms, as stated above, should be defined as the foundations of theory, for paradigms provide theory building in an academic discipline with its meaning and direction. Thus, the question arises, which academic discipline may provide a theoretical meaning and direction to PEA? The obvious answers to this question are economic theories, political science theories and social science theories.

Towards a new narrative: international political economy Having rejected the neoliberal technical-instrumental narrative as the dominant worldview and argued for bringing politics into the economics of the foreign aid, we note that there is a relatively limited discussion in the scholarly and institutional levels, concerning the application of PEA. From this vantage point, we are testing many of the commonplace assertions made by the MDBs and others towards PEA, especially when it comes to examining the impact of vested interests by the recipients. This opens up an interesting line of inquiry, namely, which new narrative may provide a politico-economic framework for PEA? Our thesis is that PEA needs to be couched in the interaction of economics, political sciences and social sciences narratives and theoretical and practical frameworks. In order to break down the barriers between the various disciplines which may adversely impact on PEA, we have turned to International Political Economy (IPE), for it is a precipitously developing interdisciplinary field of study, providing a basis for an understanding of international and global problems employing an eclectic range of theories as analytical tools (de Deugd and Hoen, 2010). It is difficult to conceive the foreign aid theory and practice without IPE, for the mutual interaction of international relations, international economics and social and cultural values. Let us now delineate IPE in more detail. IPE is a ‘field of enquiry’ or a branch of knowledge, it is not a scientific discipline, for it draws on a range of different academic disciplines and corresponding theories (Seabrooke and Young, 2017). In other words, IPE is not based on rigorous suppositions, neither does it have a generally recognised and accepted methodology or method. It may draw on positivism and empiricism (Katznelson and Milner, 2002), as much as on interpretivism

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and historicism (Blyth, 2009), and alternatively on critical social sciences (Farrands and Worth, 2005). Each of these inquiry modes has their own methodologies, methods and normative values. Given that IPE does not have comprehensive normative values it is characterised by a convergence of theories with their underpinning methodologies, methods and analytical inquiry frameworks. It would be tempting to contrast here the workings of the various IPE orientations, however, for the purpose of this discussion it should suffice to provide a classification of IPE within a broad context. The academic literature concerned with IPE, as a branch of knowledge, emerged in the 1970s and 1980s (Smith et al., 2014), originally focusing on research concerning international finance and trade, developed-developing countries relations (i.e., North-South relations) and globalisation and global governance (Murphy and Tooze, 1991) and international financial institutions such as the World Bank and the International Monetary Fund (Dillman, 2015). Such research was previously subsumed, from a political sciences standpoint, within the academic disciplines of International Relations (IR) and from the economic perspective in Political Economy (PE). The rationale of studying IPE as a field of enquiry, instead of having it embedded as a sub-discipline of IR or PE, is that IPE allows the epistemic focus to be widened beyond the typical constraints of studies in economics and politics, respectively (cf. Lawton et al., 2000; Halliday, 2009). However, the literature concerning theories of IPE is, with some notable exceptions, limited (see Gilpin, 1987; Ravenhill, 2008; O’Brien and Williams, 2010; Palan, 2013). Those working in the area of IR or PE may consider IPE, despite the large amount of literature being produced, as marginal to the political sciences, development studies and economics (Langley, 2000). If one turns to the orientations or competing theories and IPE’s schools of thought, historically three main paradigms are identifiable, namely, classical liberalism and neoliberalism (Overbeek, 1993; Razeen, 1998), mercantile realism (Gilpin, 1987; Bolsinger, 2004), and Marxism, neo-Marxism and historical materialism (Bieler and Morton, 2003; Engel, 2010; Hülsemeyer, 2010; Paul and Amawi, 2013). There are other ways to classify theoretical orientations of IPE, namely, orthodox and heterodox IPE theory, whereby the former is often seen as the dominant theory, with a strong connotation of neoliberalism and institutionalism, which in turn has the tendency to rely to a large extent on rational choice theory. The orthodox IPE theory may include mercantile realism and neo-realism. By default, heterodox IPE theories include everything else not included within the realm of orthodox IPE theories (cf. Peterson, 2003; Cohen, 2008; Cohn, 2012; Paul and Amawi, 2013; Smith et al., 2014). Others delineate PEA in terms of a pluralistic, management-cum-leadership and social class perspective (cf. Dobratz et al., 2016). Thus, it is important to note that in addition to the political and economic dimensions of IPE, there are also social considerations to be taken into account (cf. Campbell, 2009). By bringing the political, economic and social science perspectives into the theoretical field of the IPE, there is a need to articulate a new epistemic basis, which may be achieved through a paradigm shift.

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A rationale for international political economy as a political economy analysis theoretical framework In the preceding discussion, we have identified the IPE as a scholarly undertaking with a focus on, relationships between developed and developing countries (e.g. North-South relations), globalisation and global governance, and MDBs such as the World Bank and the International Monetary Fund and others. These research foci have direct relevance to foreign aid interventions and thus on PEA as an evaluation tool. More importantly, we have identified the three main challenges to the existing foreign aid agenda as the rise of populism, an emerging rejection of neoliberal globalisation and hyper-globalisation in Western donor countries and the emergence of the Beijing Consensus in competition with the Washington Consensus. These three challenges are interrelated and have their roots in the perceived or real failure of neoliberal globalisation. As a process, both IPE and PEA are focused on issues concerning global expansion of finance and production, based on globalisation forces driving interrelationships between developed and developing nations, and power relations between foreign aid donors and recipients, to name but a few. From a foreign aid agenda, however, neoliberal globalisation impacts significantly on the question of the power relationships between donors and recipients and thus the question of the foreign aid recipient state. From a neoliberal globalisation point of view, it has been argued that foreign aid recipient nation states are to a large extent progressively becoming powerless in dealing with the complexities of the neoliberal global economy and economic politics. In essence, developing countries have lost significant power when compared to other actors in the global economy. The rejection of the dominant neoliberal agenda, demonstrated by the above-stated phenomena of de-globalisation, populism and the Beijing Consensus, is compelling a rethinking among the foreign aid community to search for new PEA theoretical underpinnings in order to understand and put into practice complex and newly emerging global and bi-lateral interactions between donors and recipients. One example is IPE’s focus on the power of theories to affect how recipient states and donor institutions understand and act in response to foreign aid problems. Given the above-stated challenges facing the dominant neoliberal PEA ideology and theory, it is not surprising that there is a range of political, social and economic problems that require the attention of PEA scholars, policy decision-makers, and practitioners as these have serious effects on the quality of PEA. As it stands, the lack of a comprehensive theoretical frameworks underpinning PEA has helped to produce critical risks and crises, which the MDBs and other foreign aid international institutions have seemingly not been able to control. The challenge for IPE is to provide theories and concepts which help to make sense of what is indeed PEA as an evaluation tool within a new challenging environment.

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The problematic of linking international political economy to Political Economy Analysis We have argued that economic theory dominance militates to a large extent against a rich understanding of PEA in theory and practice, leading to technocratic and mechanistic approaches and currently building on neoliberal economic theories. The political sciences offer an alternative, but it raises the question of which theoretical framework to apply. There is not one definitive or straightforward answer, especially if one rejects the ‘one-size-fits-all’ and ‘best practice’ and accepts the ‘best fit’ paradigm. Of course, this does not mean that economic theoretical foundations should be rejected, but that it is necessary to bring politics into economics. In other words, to bring the economic, political and development theories together, one may use IPE as a theoretical foundation for PEA. This brings to the fore our understanding of IPE, namely, there is a lack of evidence that IPE is couched in either international relations as a sub-discipline of political sciences, or in any positivist or empirical versions of economic theories. Thus, we see IPE as a foundation for PEA theoretical frameworks for it is distinguishable from international relations theories, yet it is interdisciplinary enough to accommodate and bring together economics, politics and social sciences. Arguably from a PEA vantage point, IPE emerged as a new interdisciplinary field of academic research, study and scholarly discourse in response to the rapid advance of neoliberal globalisation. It integrates a range of social sciences, such as political sciences, economics, sociology, humanities, geography, anthropology, jurisprudence, feminism, all of which can be used interdependently in politicoeconomic analyses. Over the years some specifically focused analysis perspectives have emerged, for example, analysis of political regulations, legal institutional systems, socio-political power relations, civil societies and communication. To sum up, IPE is concerned with an analysis of global neoliberalism and the manifold discursive dialectics. More importantly, IPE elucidates extensively the boundaries of political studies, and it extends the established notions of who exerts power and how this power is exercised as to affect outcomes (Strange, 1995). This is, in line with the PEA definition which includes ‘the interaction of political and economic processes in a society: the distribution of power and wealth between different groups and individuals’ (OECD DAC, cited in DFID, 2009, p. 4). The challenge, as noted elsewhere in this book, is to bring politics into economics and thus into PEA and to link PEA to the disciplines underpinning IPE and its ideological values and norms. However, since the economic values and norms have become the dominant ideological paradigm among major MDBs, foreign aid is being subjected to critique as a ‘depoliticised project’ (cf. Tordello, 2003; Bryan, 2011). This is characterised by the marginalisation of social, cultural, historical, economic and political values of foreign aid recipient countries and the imposition of Western neoliberal solutions. It means that the political dimension can only be assimilated as long it can be controlled and directed to adhere to the dominant a-political economic paradigm (Mouffe, 2005). This leads to a

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predisposition for MDBs to embrace a limited understanding of politics within the narrowly focused neoliberal hegemony, lacking a broad perspective concerning the power relations that exist across and within institutions, vested interests and the society in the foreign aid recipient country.

Conclusion Western neoliberal foreign aid agenda is being challenged absolutely by contemporary global politics and seismic changes ,as demonstrated through the rise of populism, the de-globalisation agenda and the Beijing Consensus. PEA has emerged within international development institutions to address a deficiency in engagement with the political aspects of development. However, PEA as it stands, and as will be addressed in much more detail in Chapter 3, remains a heavily critiqued tool. We have argued that the dominant economic paradigm, that of a neoliberal globalised development paradigm, is under threat from many quarters, yet remains at the centre of development institutions primarily concerned with financing and implementing development projects, frequently on a large scale. In parallel, there is a range of challenges which are of direct and unequivocal relevance to foreign aid and international development. We will focus in this volume on three that are the most significant, namely, the rise of populism, the move to de-globalisation as a political and economic act, emerging in many ‘developed’ nations and impacting significantly on foreign aid agenda, and the rise of the Beijing Consensus. Although we acknowledge that there are other global and local challenges, these three provide a significant change to the existing world order, within which the assumptions, implicit values, and therefore decisionmaking by traditional development actors, such as the MDBs and bilateral aid agencies, are in danger of becoming further removed from reality. We see two options, the first is for the so-called Bretton Woods institutions to remain within the same economic paradigm and become at least partially obsolete. They would be overtaken economically and politically by the populist movements. A second scenario is that they will have to start readjusting and relocating their thinking, more broadly and flexibly. We argue that for the second scenario to become a reality, they will have to engage with their own position in the political economy, and in essence engage with theoretical underpinnings of development interventions, power relations, and global challenges to both donor and recipient, which will drive the impact of any development decisions in the future. To recast the whole interrelationship or challenge the orthodoxy, there is a need for a paradigm shift in how we view and use PEA. This translates into a paradigm shift as far as PEA is useful or used. We are not arguing that we should throw PEA out completely, but that we have to look at the various different options and extend them to come to grips with or accommodate PEA in a new light. This becomes a broader, more comprehensive, or more intellectual engagement with aid.

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3 POLITICAL ECONOMY ANALYSIS Deficiencies and critiques

Introduction In Chapter 2 we have shown that Political Economy Analysis (PEA) is neither widely adopted, nor unproblematic in conceptual foundations or operational impact. The aim of this chapter is to unpack these claims through an analysis of the emergence of PEA as a tool to address the growing recognition of the impact of political factors on development interventions and their impact (or lack thereof). The chapter will address understandings and use of PEA in diverse institutions, and critiques of PEA at multiple levels within international development. Notwithstanding the above, PEA has a reasonably lengthy history in the social sciences more broadly but is a more recent concept within the international development arena. In the 1980s, governance studies gained some traction and were refined and redefined in the early 2000s as Political Economy Analysis. As noted previously, there has been a significant change in aid and development thinking and practice, including in the perception of the role and position of politics. These changes led to the introduction of PEA as a tool for analysing ‘economic and political behaviour, and the understanding of how political institutions, social and political power relations, and the political and economic environment influence each other …’ (van Breukelen, 2007, p. 46). This underlying purpose of PEA is worthy of some reflection. There is a potential disconnect between two visions of PEA. One version of PEA is a tool intended to help do things ‘better’, through understanding the politics of a development intervention and how this is likely to contribute to its success or failure. A second possibility is the use of PEA to help do things ‘differently’ through engaging with power, and transferring power to the ‘have-nots’, in other words, transformative development. This is perhaps the first point of significant disconnect across agencies and actors. Contemporary PEA as a tool and a concept suffers from a range of shortcomings,

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ranging from a lack of a commonly acceptable definition, to an absence of comprehensive conceptualisation including theoretical and epistemic frameworks. Referring to PEA’s conceptual framework, DFID (2009, p. 4) notes ‘[t] here is no single conceptual framework for political economy analysis …’ and this impedes to a certain extent the ability to formulate a coherent definition of PEA. This chapter will unpack PEA from the perspective of definitional perspectives, and then conceptual deficiencies. The chapter will then explore the operationalisation of PEA and the associated but alternative conceptualisation that engages in change processes (namely, theories of change and most significant change), and concludes with a summary of critiques to date and how these have contributed to an evolution of the concept.

A brief political background: foreign aid and Political Economy Analysis The neoliberal ideology in most, if not all, aspects of foreign aid has remained unquestioned for over three decades. Some of the problematics include the existing neoliberal agenda that dominates foreign aid and the practice of PEA. The dominant neoliberal ideology has since the end of the Cold War emerged as the ‘only’ way forward. The claim was that there is no alternative to neoliberalism (Fukuyama, 1989, 1992). For decades after the end of the Cold War, neoliberal multilateral development banks (MDBs) could do no wrong. Developing countries that accepted the conditionalities of the Washington Consensus institutions were portrayed as role models of economic development. The first pronounced challenges to the neoliberal foreign aid agenda as advocated and practised by the World Bank and the other like-minded aid agencies which followed the Washington Consensus conditionalities appeared at the time of the Global Financial Crisis (GFC) in 2008. Given the limited economic success of the neoliberal foreign aid agenda developing countries began to question the wider economic consequences of the Washington Consensus-based foreign aid. With the formation of the China-led Asian Infrastructure and Investment Bank (AIIB), the New Development Bank (NDB), also known as the BRICS Bank, and the One Belt, One Road (OBOR) initiative, developing countries now have an alternative to the existing development banks. To clarify, NDB, launched in 2015, with its headquarters in Shanghai, was established by a group of emerging economies (i.e. the BRICS countries: Brazil, Russia, India, China and South Africa) to provide development aid to its member countries and beyond. The establishment of NDB by the BRICS countries may be viewed as the first most important achievement of the BRICS countries by joining forces in 2009 to pursue a more influential position in challenging the global postSecond World War foreign aid order created by the Western powers, and their respective Washington Consensus-based institutions. Given the ascent of alternative development banks and initiatives, the neoliberal foreign aid agenda and its advocates, together with the political elite that supports the neoliberal economic structures, are in descent. Congruently the rise of populism in

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developed Western economies is undermining the beliefs and the confidence of developing countries in the current development agenda, especially the claims concerning the benefits of the Washington Consensus conditionalities. PEA emerged in response to the failures of aid alongside the apparent demise of structural adjustment, and is an acknowledgement that governance and institutions were important in development, within the recipient country. Since then, a number of epistemological, organisational and operational issues associated with PEA have emerged. These are: (1) PEA is deprived of generally agreed epistemic grounding and thus lacks a theoretical framework; (2) beyond that, PEA is a process on which there is no generally agreed definition; and (3) PEA has been implemented by various development agencies as a ‘technique’ not dissimilar to a ‘cookbook’ approach. This militates against the problematisation of complex issues such as normative and cultural values, locating PEA within a framework of instrumental rationalities. To clarify, development agencies use PEA to increase their understanding of the factors that help, or hinder, development interventions, and frequently focus on policy reform. The rationale of PEA in this context is primarily to increase the effectiveness of development initiatives, through informing design, feasibility assessment and implementation (Copestake and Williams, 2014). The principal driver for the emergence of PEA in international development is the realisation that development is fundamentally influenced by political factors. Beyond this, there is a significant lack of widely agreed definitions of PEA. There is equally little general agreement on what a Political Economy Analysis may constitute. There is no single conceptual framework for political economy analysis. Donors’ and development agencies’ use of PEA culminates in an unproblematic list of ‘what and how to do’ activities. In short, it is a process. In this guise, PEA is not and cannot engender a transformative development approach. At best, it can promote some incremental changes or improvements to a process. A significant issue of concern highlighted by this chapter is the exclusion of donor-recipient relationships as a focus of analysis and therefore there exists aid architecture that talks the language of country ownership of aid and yet is currently unable to move beyond donordriven priorities, politically or economically.

Definitional deficiencies of PEA The starting point for any consideration of Political Economy Analysis is a review of how PEA is understood in different contexts. We will turn first to definitions of PEA. The OECD DAC definition is perhaps the one that is most widely used and generally follows its use in a DFID ‘How to’ Note (DFID 2009, p. 4) to define PEA thus: Political economy analysis is concerned with the interaction of political and economic processes in a society: the distribution of power and wealth between different groups and individuals, and the processes that create, sustain and transform these relationships over time.

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This is a description of what PEA has ‘to do with’ rather than a definition. PEA is described as a crossing point between two interrelated processes. Not dissimilar, Serrat (2017, p. 2007) states: ‘political economy analysis investigates the interaction of political and economic processes in a society; in the context of historical legacies …’. USAID (2016, p. 2) defines PEA as a ‘field research methodology’. However, even a cursory review of this document shows that it is a process consisting of 13 ‘applied PEA’ steps (ibid., p. 6) culminating in an unproblematic list of ‘what and how to do’ activities. In short, it is a process. A different approach is to delineate PEA according to its aims, for example, as McLoughlin (2014, p. 2) states: ‘Political economy analysis (PEA) aims to situate development interventions within an understanding of the prevailing political and economic processes in society – specifically, the incentives, relationships, distribution, and contestation of power between different groups and individuals.’ Unsworth and Williams (2011, p. 4) offer the following ‘definition’: Political economy analysis investigates how political and economic processes interact in a given society, and support or impede the ability to solve development problems that require collective action. It takes particular account of the interests and incentives driving the behaviour of different groups and individuals, the distribution of power and wealth between them, and how these relationships are created, sustained and transformed over time. Interestingly, DFID (2009, p. 1) identifies a more complex definition as an opening statement, hinging on the role of PEA in aid effectiveness: Political economy analysis is a powerful tool for improving the effectiveness of aid. Bridging the traditional concerns of politics and economics, it focuses on how power and resources are distributed and contested in different contexts, and the implications for development outcomes. It gets beneath the formal structures to reveal the underlying interests, incentives and institutions that enable or frustrate change. Such insights are essential if we are to advance challenging agendas around governance, economic growth and service delivery, which experience has shown do not lend themselves to technical solutions alone. The Swedish International Development Cooperation Agency (SIDA) (Pettit, 2013, p. 9) uses ‘power analysis’ as the framework for PEA and defines power analysis as ‘a learning process that supports staff, partners and other actors to understand the forms of power that reinforce poverty and marginalisation, and to identify the positive kinds of power that can be mobilised to fight poverty and inequality’. In the same publication, SIDA broadly defines PEA as [seeking] to understand political actions and strategies through the lenses of economic institutionalism, with a main focus on key actors, their interests, and

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what enables or hinders their cooperation. Structures, norms and ‘rules of the game’ are also considered, both formal and informal, but with emphasis on those that are visible or explicit. (ibid., p. 15) Bueuran et al. (2011), referring to the World Bank, note that [P]olitical economy studies refer to the study of the relations between political and economic processes which involve several factors such as incentives, relationships, and the distribution of power between various interest groups in society, all of whom have an impact on development outcomes. The World Bank (2011, p. 1) defines PE as: [T]he study of both politics and economics, and specifically the interactions between them. It focuses on power and resources, how they are distributed and contested in different country and sector contexts, and the resulting implications for development outcomes. PE analysis involves more than a review of institutional and governance arrangements: it also considers the underlying interests, incentives, rents/rent distribution, historical legacies, prior experiences with reforms, social trends, and how all of these factors effect or impede change. Why are we so concerned with definitions? The above-cited elucidations are not ‘definitions’ in the traditional sense, for many of these statements describe what PEA aims to do, what it is concerned with and what it does, but not what it is. These declarations lack the necessary proprieties of a definition, namely, a conciseness which establishes the limitations or confines of PEA, and which includes those elements that are inherent and excludes those which are not. PEA is therefore devoid of any exact meaning, or any kind of definitional conciseness, and indeed is rather confused in essence as to what it even is. Menocal (2014) refers to PEA as a useful tool of analysis, and an instrument, a framework and a set of tools and methods. In a scathing critique of PEA, Fisher and Marquette state that PEA has devolved from ‘a transformative approach to policy-making to a discrete instrument that is applied to specific “problems”’ (2014, p. 3). In part, the definitional issue of PEA is driven by the significant diversity in engagement with politics within a development context.

Importance of definitional deficiencies In the past decade, PEA within the foreign aid arena has attracted growing interest from aid agencies and to a lesser extent from the foreign aid research community. The focus of much of this attention is the institutional and political factors that affect the impact of foreign aid policies in relation to foreign aid. The common

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theme is an acknowledgement that development cannot be understood, assessed or implemented without an unambiguous acceptance of the functions of politics, organisations and interest groups as determining factors contributing to the success of foreign aid projects. However, this focus on PEA did not happen arbitrarily, it happened due to economic and geopolitical challenges and changes over a period of time. The changes may be ascribed to diverse factors, for example, the economic crises of the 1970s causing the breakdown of the Bretton Woods agreement (Jones, 2014), the Latin American debt crisis in the 1980s, the Global Financial Crisis in 2008 and the continuing European Sovereign Debt Crisis, from 2009. As far as the geopolitical constellation is concerned, arguably the collapse of the Soviet Union in 1989 and the rise of China to become the second largest economy are additional catalysts for changes to foreign aid by recasting geopolitical and geo-economic power relationships. Before we turn to the discussion of some of the major factors that have contributed to changes and challenges that led to the increased interest in PEA, it may be opportune to make an important observation, namely, to distinguish between International Political Economy (IPE) proposed as the theoretical foundations for a critical analysis of PEA in later chapters, and PEA itself. The former is increasingly being recognised as an academic discipline, whereas the latter is, as we have seen above, more of a technical-instrumental exercise, characterised by a ‘cookbook’ or ‘how-to do’ approach. The geo-economic and geopolitical changes and challenges affecting foreign aid over the last three decades have impacted to a large extent on how development studies researchers perceive their discipline. In essence, as far as epistemological and methodological approaches to foreign aid are concerned, the focus of academic interest emphasises the problematics of how political choices, the functions of institutions and vested interest groups, and stakeholders impact on the social, political and economic fabric of the aid recipient countries. This requires researchers in development studies to engage in a number of academic disciplines, such as sociology, political sciences, human geography, economics, anthropology and others. This is generally accepted as the emerging discipline called IPE. Thus, there is a correspondence between PEA as it is practised and the potential to employ IPE as the epistemic and methodological base. However, the nexus between IPE as the epistemic and methodological underpinning for PEA has so far not been realised to any significant extent by the foreign aid organisations. One of the reasons may well be that development banks see PEA as a tool for enhancing their own policies, rather than as a means to change the nature of how they operate for the economic, political, cultural and social benefit of the recipient counties. The absence of the epistemic and methodological underpinning for PEA is unlikely to foster improvements in foreign aid processes. At best, it may advance the acceptance and enactment of development banks’ own policies and conditionalities by recipient countries.

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Conceptual deficiencies of PEA As stated above, one of the characteristics of PEA in the contemporary Washington Consensus-based context is its lack of theoretical underpinnings which would form the basis for its conceptualisation. There is much confusion about political theory and politics. With reference to the latter, for example, Leftwitch (2006) refers to the DFID report, Drivers of Change (DFID, 2004, p. 2) and claims that [t]he challenge, which DoC [Drivers of Change] faces, however, is how to conceptualise and analyse politics, and especially the politics of development. What is needed therefore is a framework for the political analysis of the prospects and possibilities of development in very different societies. But the problem with this approach is that Leftwitch (2006) seeks the resolution of the challenges through [the] conceptualisation of the political system as the set of linked formal and informal political processes by which decisions are made concerning the use, production and distribution of resources in any society or part of one. This framework helps to identify the dynamic elements which drive politics. (ibid., p. 2) Here it appears that there is a sleight of hand, for there is a shift from political decision-making to economics, or, to put it differently economics is driving politics, which turns Leftwich against Leftwich. He suggests that there is a need to conceptualise and analyse politics but turns this to the proposition of economics, which as he claims drives politics. This once again puts the supremacy of economy over politics at the forefront of the conceptual discourse and is in line with the Washington Consensus conceptualisation of foreign aid (Hudson and Marquette, 2015). Thus, conceptually, PEA is a-political, focusing too much on economics (see Fine, 1999; Hudson and Marquette, 2015) and may be unashamedly conceptualised as the ‘economics of politics’ (Hudson and Leftwich, 2014). From this vantage point, PEA is limited in any pursuit of political actions, including its own intrinsic claims to analyse the power relations within the aid recipient country’s political and social structures. It does, however, focus on the economic side of power relations. However, even with reference to power relationships Hudson and Marquette observe that ‘there are serious conceptual gaps within PEA tools and studies. More specifically, most PEA tools seriously underplay the role of ideas and the complexity of power’ (2015, p. 67). Furthermore, in the context of ideas Williams and Copestake (2011, p. 19) claim that ‘somewhat ironically the political implications of PEA often remain inadequately conceptualised’. However, before the scene for discussion concerning PEA’s effectiveness can be set, it may be opportune to very briefly focus on its perceived strengths and weaknesses. Based on a perusal of the existing literature, according to Copestake and Williams

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(2014), PEA’s strengths and weaknesses, are as follows. With reference to strengths, first, they note that although the advocates of PEA failed to include an examination or scrutiny of institutions as part of development practices and procedures, the PEA proponents have fostered a broader and more authentic awareness of institutional functions. This has incorporated the significance of formal and informal beliefs, values and norms. Taking this approach, PEA was instrumental in acting against the naïve conjecture that development may be advanced through the devolution of best international practice and has produced a better understanding among stakeholders and decision-makers concerning circumstantial limitations. Second, the enactment of PEA in foreign aid has increasingly fostered candid discussions concerning power relationships within the donor agencies and the corresponding policy formulation and policy implementation procedures. Third, as an outcome of the two above-stated strengths, it has been argued that PEA has introduced a greater authenticity into foreign aid policies and practices and the rationale for institutional engagement by aid donors and recipients with the political content. Fourth, and finally, PEA proponents suggest that the development of PEA frameworks, methods, techniques and tools has brought to the fore more systematic analytical methods in search of methodological regularity. This final point, claimed as a strength by PEA proponents, does not stand up to scrutiny, and as such can be constructed as a weakness. In short, there is little if any methodological regularity to be found in PEA as it is described by USAID (2016), DFID (2004, 2005, 2009, 2011), the World Bank (2007, 2008, 2009), and the World Bank Institute and CommGap (2010). To explain, even the most cursory analysis of PEA practices and procedures, such as DFID’s (2004) Drivers of Change, or the World Bank’s (2008) The Political Economy of Policy Reform and the World Bank’s (2009) Problem-Driven Governance and Political-Economy Analysis are inherently mechanistic and devoid of methodological frameworks. A second weakness emerging from the relevant literature is the problem with the complexity of PEA and the ‘academic’ language required. That is, non-specialists, i.e. development experts, who do not have the required background in political and social sciences and economics, find PEA often intangible and revert to the above-stated approach to PEA, which is mechanistic and at times devoid of the necessary methodological foundations (see, for example, Eyben, 2010; Haider and Rao, 2010; Grindle, 2011b). Furthermore, PEA undertakings, which go beyond the simplistic venture of mechanistic approaches, are by their own definition highly political, which in certain situations may be a disadvantage. No doubt, political sensitivities may militate against realistic articulation and dissemination of the findings, not only internally within a foreign aid agency but also externally, namely, vis-à-vis the recipient government. Internally, the development agencies are in the business to lend money, and often the advancement of individual staff depends on their success in generating and disbursing loans or grants. Thus, negative or cautionary findings emerging from a PEA may be perceived as counterproductive to the donor organisation’s aims of lending. In order to maintain harmony between donors and recipients and to mitigate any potentially controversial issues, PEA findings are often ‘tailored’ to different audiences (see DFID, 2005; Landell-Mills et al., 2007; Haider and Rao, 2010). This, as Unsworth (2009)

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stipulates, enhances the risk of suppression of information, selectivity and biases of reported findings, and leads inadvertently to misunderstandings and misinformation. This militates against political power relation problem solutions. Notwithstanding these shortcomings and deficiencies, PEA has made a useful contribution to foreign aid but within the existing limitations of institutional values and norms (see Unsworth, 2009; Booth, 2011; World Bank, 2015). However, the issue is that in identifying the strengths and weaknesses of PEA, it is assumed that the political and economic paradigms and theoretical orientations of foreign aid are consistent and well defined. This assumption was correct and seemed reasonable until recently. The existing world order was politically and economically well defined, and foreign aid politics were subordinated to the economic theory of the dominant neoliberal agenda. However, this is changing with the rise of populism, for, in contrast to neoliberalism, populism is not an ideology, it does not have a coherent theoretical underpinning or framework, and it does not necessarily fit within a concept of liberal democracy. If this stands to reason, then the ‘established’ rules of PEA no longer retain their appropriateness or usefulness.

PEA: the critics and the proponents PEA is used by most MDBs and a large number of bilateral development agencies, albeit under different names, as a tool for investigating politico-economic power relations in a foreign aid recipient country. It has economic consequences but the potential problematics it identifies are political. The thesis presented here is that in today’s foreign aid arena, with the impact of a diverse range of forces, including but not limited to the rise of populism, de-globalisation, and the increasing importance of the Beijing Consensus, PEA’s aim should be to ascertain how such political forces and power relations may impact on the success, or otherwise, of a development programme or project at the relevant macro or country level, meso-level or sector level, and micro-level or project level of politico-economic issues (see Fritz et al., 2014). The outcome of a power-relationship exploration obtained through PEA can provide donors with a decision-making tool, including risk assessment of foreign aid projects or programmes and furnish a comprehensive understanding of recipient countries’ power structures, including those vested politically, socially, economically and culturally oriented interests (Carothers and de Gramont, 2013). Since the formal and wide-ranging acceptance of PEA in the 1990s as an investigative and decision-making tool, MDBs and other foreign aid agencies have created and operationalised an array of PEA methods, techniques and approaches (Nunberg et al., 2010; Fisher and Marquette, 2014). These will be explored in more detail in Chapter 4. Yet despite two decades of continued use of PEA as a decision-making tool, it appears that the MDBs and their bilateral counterparts have been less than successful in implementing politically informed foreign aid project programming (Yanguas and Hulme, 2014).

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Given the lack of apparent success of PEA, it may be appropriate to look initially at some reasons behind this phenomenon. A good starting point for this debate is the argument put forward by Hudson and Marquette (2015), that PEA suffers from a severe conceptual lack of appropriate tools and therefore underemphasises the intricacy of power relationships. This lack of conceptualisation, together with curtailed ideas concerning power relations, is further augmented by a lack of coherent epistemological and paradigmatic explanations. To unpack this further, the political economy methods employed by the Washington Consensus-based MDBs and their bilateral counterparts, reveal several shortcomings. Due to the aforesaid definitional deficiencies, there are difficulties concerning the development and application of PEA instruments. This leads to problems of interpreting the findings of PEA so as to provide recommendations for reforms, especially with reference to resolving or mitigating power relationships and competing vested interests, which may impede the success of the foreign aid actions. Second, there is an associated conceptual deficiency, namely, that PEA focuses mostly on the power relationships that exist within the political structures of the recipient country, without much consideration of the principal-agent theory that may influence the paradigmatic construct of PEA. Traditionally MDBs perceived PEA as an instrument to advance foreign aid outcomes, based on exposing and understanding political, economic and social power structures and identifying those potential vested interests within a recipient country which may resist the conditionalities attached to foreign aid funds and associated reforms (see Limpach and Michaelowa, 2010; Koch, 2015). This is, however, only one side of the coin, for MDBs have dismally failed to address the power relationship between the donors and the recipients (Müller and Sondermann, 2016). There is some acknowledgement of this issue, for example, the 2015 World Development Report (World Bank, 2015) looking at the inherent bias of professional development practitioners, as well bureaucratic incentives for particular decisions. Alongside this somewhat limited discourse, there has been considerable focus on country ownership of development. One of the fundamental changes to global aid architecture over the past 20 years has been the aid effectiveness agenda, comprising five priority areas, namely, (1) ownership by developing countries; (2) donor alignment; (3) harmonisation of aid; (4) mutual accountability; and (5) managing for results. Country ownership is complex but raises some very problematic questions linking the potential of aid to contribute to development, with the conditions under which that may occur. Booth, explicitly coming from a position whereby aid can make a positive contribution, notes It is also accepted that aid can, and often does, do harm, especially because of the way it affects incentives and institutions in recipient countries. Therefore, it matters a great deal what form aid takes and exactly how it is delivered. (2011, p. 1) A significant failing of PEA in practice is the lack of connection in conceptualisation between donor-driven PEA and ideas of country ownership of aid and development

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(Fisher and Marquette, 2016). This goes to the heart of the debate on the effectiveness and the impact of aid. The aid effectiveness debate has in essence been hijacked by donors’ concerns, for political accountability in the donor country, and focusing on issues of efficiency, in terms of costs and disbursement, and results. Within this, there is a further focus on results-based management and measurement. The Fourth High Level Forum on Aid Effectiveness in Busan in 2011 introduced the managing for results agenda, and managing for results is the major impetus for donors seeking visible results. However, as Sjöstedt (2013) has argued, there is an inherent tension between results-based management and country ownership. The need for a donor to show results requires tighter prioritisation by donors, which may not align so well with recipient country priorities. The country ownership agenda is finally, in Booth’s (2011) analysis, buried by a range of other concerns leading to an incoherent focus on things, such as aid alignment, donor harmonisation, management for results and mutual accountability, all of which are in effect answers to a different question. Booth argues that the assumption that country ownership exists is a fallacy and that the proposition that country ownership exists has led to an aid effectiveness agenda that seeks to answer ‘how can aid avoid weakening country ownership when it already exists?’ (ibid., p. 3). Booth’s core argument is that mutual accountability is the only aspect of the effectiveness agenda that pays any attention to the donor-recipient relationship, but which is fundamentally flawed by the notion that donors should be accountable to recipient governments suffers from the same weakness as alignment, that it assumes countries already have leadership that in practice give priority to achieving development outcomes. That, rather than the equally valid point that donors themselves may have mixed motives, is the number one difficulty. The plea for governments to be accountable to the citizenry in the ways they usually are in wealthy, advanced democracies suffers from a different sort of difficulty, that of being ideologically driven and unrealistic. (ibid., p. 6) This would require a radical rethinking of donor-recipient relationships, and much deeper engagement by donors with how development happens, rather than resource transfers that are directly (through bilateral donors) or indirectly (multilaterals) politically driven by a North Atlantic political bias. Thus, the evidence suggests that donors continue to pursue policies and practices that may not produce the best outcomes (projectisation and conditionalities in particular) but are much more politically defensible in the donor country. This, of course, leads to donordriven PEA using the same narrow lens for analysis, driven by donors’ concerns and an underpinning philosophy that the donor-recipient relationship is dealt with through mutual accountability in the narrowest sense. Aid effectiveness agenda, therefore, provides no engagement with the politics of development, and particularly no engagement between the politics of donors and

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their aid recipients. There is clear evidence that the aid effectiveness agenda has been taken up more readily by recipients than donors (Gulrajani, 2014). This points to the emergence of promising ‘politically smart’ approaches to aid delivery, such as Doing Development Differently (DDA) and Problem-Driven Iterative Adaptation (PDIA), which may contribute to addressing some of the failures of aid effectiveness related to a lack of engagement with local political realities. However, Blampied questions whether there is ‘a fundamental tension between the iterative, flexible and interventionist nature approaches such as DDD and PDIA, and the central tenets of predictability, ownership and transparency in traditional development effectiveness’ (2016, p. 3). Turning to the above-identified tensions and deficiencies, our thesis is that the fundamental problem which impacts on all other contemporary PEA shortcomings is its definitional and conceptual deficiency, including the lack of thorough theoretical and epistemic underpinnings, beyond the ‘taken-for-granted’ supremacy of the neoliberal economic agenda. This is reflected in the PEA documents produced by many Washington Consensus-following MDBs and bilateral aid agencies, which present PEA mostly as a mechanistic and unproblematic activity with instructions characterised by ‘how-to-do-cookbook’ approaches. This has been observed, for example, by Hudson and Marquette (2015, p. 72), who state that PEA has all too often become another ‘tick-box exercise’. Others, such as Duncan and Williams (2012, p. 136) have described PEA as ‘the dismal science of constraints’, and Fisher and Marquette (2016) labelled PEA an inward-looking activity, which is detrimental to its own efficacy without being able to enact essential and potentially transformational foreign aid adjustments and changes. Hudson and Leftwich (2014) claim that foreign aid organisations which use PEA fail fundamentally to explain the characteristics and complexities of political procedures, including power relations and incentives. In contrast, sympathetic critiques of PEA have emphasised its values in bringing about collaboration between donor agencies and various actors and vested interests on the recipient side, based on the proposition that impediments to foreign aid success are essentially political. From this vantage point, PEA appears to be merely an appealing exercise in political homogeneity without providing reliable political and economic alternatives (see DFID, 2009; Kassoff, 2015; USAID, 2016; Orre and Rønning, 2017). This raises the question of whether foreign aid is evidently a political process. Depending on how one locates foreign aid from a theoretical vantage point, the potential answer is in the affirmative, for foreign aid has been and is being used today by donor governments as a ‘soft power’ tool (see Nye, 2005). To be sure, foreign aid loans and grants are used to bring about political changes imposed by donors on recipient countries, such as an acceptance by recipient countries of Western-type democratisation and other political and policy requirements embedded in the Washington Consensus conditionalities. Notwithstanding the dominance of these conditionalities, new and different perspectives are transforming the international aid agenda (Carothers and de Gramont, 2013).

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Be this as it may, if one accepts that foreign aid is a political undertaking, albeit dominated by economic policies, then it follows that PEA is equally such a political construct. However, PEA, as it stands in operational terms, is divorced from politics. Yet, if one turns to foreign aid also in operational terms, there is sufficient evidence that MDBs and other development agencies interfere in the political, economic and social structures of a foreign aid-seeking sovereign country (Limpach and Michaelowa, 2010). This interference is inherently a political act. If this stands to reason, then it is understandable that those foreign aid institutions are compelled to discover how to think and operate politically. To explain, many donor governments, either directly through their bilateral agencies or indirectly through their voting rights on MDBs’ boards, are overtly, or otherwise, pursuing political aims through their foreign aid. This is taking place in parallel with their conventional socioeconomic objectives and enacted through the advancement of increasingly politically focused approaches. Carothers and de Gramont (2013) conclude that despite these changes, donors are often confronted by a range of esoteric and exoteric impediments, ranging from heightened political sensitivity to indifference on the part of aid recipient governments vis-à-vis the donor’s preconditions. This may include hostility towards not only foreign political, economic and social interventions but also towards the rigid conditionalities and aid delivery methods, and resentment of established technocratic predilections which govern many MDBs and bilateral aid agencies. Today these hostilities and resentments are heightened by the rise of populism with its rejection of globalisation and the increased acceptance of the Beijing Consensus. Having outlined the problematics, deficiencies or inadequacies of PEA in a contemporary context, we can now turn to the issues at hand in more detail, by addressing the characteristics and potential consequences emerging from the poverty of PEA in terms of conceptional deficiencies.

Conclusion PEA has evolved significantly over time, alongside all of the inherent critiques of PEA. In response, both to shortcomings of aid impact and a widespread acknowledgement of the shortcomings of programme aid focusing on technical knowledge and capacity, there is a range of initiatives to support innovative ways of reconceptualising aid and development. Foreign aid, as we know it, and as governed by the neoliberal ideology of MDBs such as the World Bank Group and other development agencies, which follow the Washington Consensus, is in a state of uncertainty. The very relevance of aid agencies that adhere to neoliberalism and the Washington Consensus is being questioned. Today MDBs are confronted by the rise of populism with all its side effects and constitutive components. For example, de-globalisation is gaining traction among aid donor and aid recipient nations, challenging the very foundation of the existing foreign aid world order and beyond. The taken-for-granted Washington Consensus based on the neoliberal doctrine of ‘there is no alternative’ is being challenged by the Beijing Consensus.

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From a most recent history vantage point, the USA under the Trump administration may well be used as an example. The USA is not only the single largest contributor to the Official Development Assistance programmes, it is also the major World Bank Group shareholder, has a significant influence on the Boards of regional development agencies and is a major financial contributor to the UN’s agencies, such as UNESCO. Since Trump’s ascent to the US presidency in 2017, the very relevance of the foreign aid institutions and indeed the existing policies and practices of foreign aid itself are being questioned. More precisely, at the core of the discontent with the foreign aid as it is composed and implemented today is undoubtingly the rise and acceptance of right-wing populism. This, however, is not only a US phenomenon, it has emerged as a political force in other Western democracies, such as in Austria, Germany, France, Italy, the Czech Republic, Hungary, Poland and Slovakia, to name but a few. Setting aside the former Warsaw Pact countries and Austria, for their contribution to foreign aid fades into insignificance compared to the USA, Germany and France, the populist movements in the EU countries have a strong potential to change the existing foreign aid world order. The Trump doctrine of ‘America first’ has thus far exhibited four major consequences. One is the reduction of US foreign aid funding by about 30 per cent. Second, there is a threat to cut foreign aid to countries, which in the eyes of the Trump administration ‘hate’ the USA. The third consequence is the Trump administration’s threat to cancel foreign aid to countries, which vote against the US foreign policy in international forums, such as the UN. The fourth consequence is to withdraw funding from UN organisations such as UNESCO, which do not accept the political dictates of the USA. As stated above, given the fact that the USA was, until now the single largest contributor to foreign aid globally, the withdrawal of funds creates a complex and untested situation as far as the global foreign aid agenda is concerned. Assuming that the Trump administration implements the above-stated foreign aid policies, and there is no compelling reason to think differently, the geopolitical and geo-economic consequences for the developed and developing economies are significant. As a scenario, there is every possibility that, as the USA reduces its foreign aid budget, China will take the opportunity to increase its provision of foreign aid. This would enable China to become the dominant geopolitical and geo-economic power. Subsequently, the second scenario may well be that the current dominant neoliberal Washington Consensus with its neoliberal conditionalities, which are imposed on developing countries in return for foreign aid loans or grants, may be replaced by the Beijing Consensus. Either way, due to the Trump administration’s policies concerning foreign aid funding and/or China’s increased global foreign aid role, there is a compelling argument to review the consequences of the two scenarios with reference to the theory and practice of PEA as a diagnostic tool for foreign aid assessment (Fritz et al., 2009).

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References Blampied, C. (2016). Where Next for Development Effectiveness? Building a Renewed Consensus. Paper presented at 2016 Cape Conference, Conference Note, Number 1, Overseas Development Institute. Retrieved from www.odi.org/sites/odi.org.uk/files/ events-documents/10936.pdf (accessed 19 December 2017). Booth, D. (2011). Aid Effectiveness: Bringing Country Ownership (and Politics) Back In. Working Paper No. 336, London: Overseas Development Institute. BueuranM., RaballandG. and KapoorK. (2011). Political Economy Studies: Are They Actionable? Some Lessons from Zambia. Washington, DC: World Bank. Carothers, T. and de Gramont, D. (2013). Development Aid Confronts Politics. Washington, DC: Carnegie Endowment. Copestake, J. and Williams, R. (2014). Political-Economy Analysis, Aid Effectiveness and the Art of Development Management. Development Policy Review, vol. 32 (1), pp. 133–154. DFID (Department for International Development). (2004). Drivers of Change: Public Information Note. London: Department for International Development. DFID (Department for International Development). (2005). Lessons Learned – Planning and Undertaking a Drivers of Change Study. London: Department for International Development. DFID (Department for International Development). (2009). Political Economy Analysis - How to Note. London: Department for International Development. Retrieved from www. gsdrc.org/docs/open/po58.pdfon (accessed 19 December 2017). DFID (Department for International Development). (2011). Bilateral Aid Review: Technical Report. London: Department for International Development. Duncan, A. and Williams, G. (2012). Making Development Assistance More Effective Through Using Political Economy Analysis: What Has Been Done and What Have We Learned? Development Policy Review, vol. 30 (2), pp. 133–148. Edelmann, D. (2009). Analysing and Managing the Political Dynamics of Sector Reforms: A Sourcebook on Sector-level Political Economy Approaches. Working Paper No. 309. London: ODI. Retrieved from www.odi.org.uk/resources/download/4323.pdf (accessed 19 December 2017). Eyben, R. (2010). Hiding Relations: The Irony of ‘Effective Aid’. European Journal of Development Research, vol. 22 (3), pp. 1–16. Fine, B. (1999). A Question of Economics: Is It Colonizing the Social Sciences? Economy and Society, vol. 28 (3), pp. 403–425. Fisher, J. and Marquette, H. (2014). Donors Doing Political Economy AnalysisTM: From Process to Product (and Back Again?). Birmingham: International Development Department, University of Birmingham. Fisher, J., and Marquette, H. (2016). ‘Empowered Patient’ Or ‘Doctor Knows Best’? Political Economy Analysis and Ownership. Development in Practice, vol. 26 (1), pp. 115–126. Fritz, V., Kaiser, K. and Levy, B. (2009). Problem Driven Governance and Political Economy Analysis – Good Practice Framework. Washington, DC: The International Bank for Reconstruction and Development and the World Bank. Fritz, V., Levy, B. and Ort, R. (2014). Problem-Driven Political Economy Analysis: The World Bank’s Experience. Directions in Development–Public Sector Governance. Washington, DC: World Bank. Fukuyama, F. (1989). The end of history? The National Interest, vol. 16, pp. 3–18. Fukuyama, F. (1992). The End of History and the Last Man. London: Penguin Group. Grindle, M. S. (2011a). Good Enough Governance Revisited. Development Policy Review, vol. 29 (suppl. 1), pp. 223–251. Grindle, M. (2011b). Governance Reform: The New Analytics of Next Steps. Governance, vol. 24 (3), pp. 415–418.

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Gulrajani, N. (2014). Organising for Donor Effectiveness: An Analytical Framework for Improving Aid Effectiveness. Development Policy Review, vol. 32, pp. 89–112. Haider, H. and Rao, S. (2010). An Overview of Five Approaches, Political and Social Analysis for Development Policy and Practice. Birmingham: Governance and Social Research Centre, University of Birmingham. Hudson, D. and Leftwich, A. (2014). From Political Economy to Political Analysis. Research Paper No. 25. Birmingham: DPL College of Social Sciences, University of Birmingham. Hudson, D., and Marquette, H. (2015). Mind the Gaps: What’s Missing in Political Economy Analysis and Why It Matters. In Whaites, A., Gonzalez, E., Fyson, S. and Teskey, G. (eds), A Governance Practitioner’s Notebook: Alternative Ideas and Approaches. Paris: OECD, pp. 67–82. Jakupec, V. (2017). Foreign Aid: Cultural Values and Norms. In Fleischer, L-G. and MeierB. (eds), Sitzungsberichte, 131. Berlin: Leibniz Sozietät der Wissenschaften, pp. 209–222. Jones, D. S. (2014). Masters of the Universe: Hayek, Friedman, and the Birth of Neoliberal Politics. Princeton, NJ:Princeton University Press. Kassoff, S. (2015). Busting 5 Myths on Political-Economy Analysis. Retrieved from www. weforum.org/agenda/2015/03/busting-5-myths-on-political-economy-analysis/ (accessed 5 February 2018). Khadem, N. (2017) Ten Years since the Global Financial Crisis, World Still Suffers ‘Debt Overhang’. The Sydney Morning Herald, 17 June 2017. Retrieved from www.smh.com.au/ business/the-economy/10-years-since-the-gfc-20170526-gwe5f2.html (accessed 20 June 2017). Koch, S. (2015). A Typology of Political Conditionality Beyond Aid: Conceptual Horizons Based on Lessons from the European Union. World Development, vol. 75, pp. 97–108. Landell-Mills, P., Williams, G. and Duncan, A. (2007). Tackling the Political Barriers to Development: The New Political Economy Perspective. Policy Practice Brief, No. 1. Brighton: The Policy Practice Ltd. Leftwitch, A. (2006). From Drivers of Change to the Politics of Development: Refining the Analytical Framework to Understand the Politics of the Places Where We Work – Part 3: Final Report. Retrieved from www.gsdrc.org/docs/open/doc104.pdf (accessed 7 February 2018). Limpach, S. and Michaelowa, K. (2010). The Impact of World Bank and IMF Programs on Democratization in Developing Countries. Zürich: University of Zürich, Centre for Comparative and International Studies. McLoughlin, C. (2014). Political Economy Analysis: Topic Guide (2nd edn). Birmingham: GSDRC, University of Birmingham. Menocal, A. R. (2014). Getting Real About Politics: From Thinking Politically to Working Differently. London: Overseas Development Institute. Mises, L. (1951). Socialism: An Economic and Sociological Analysis (trans. J. Kahane). New Haven, CT: Yale University Press. Müller, F. and Sondermann, E. (2016). Myths of the Near Future: Paris, Busan and Tales of Aid Effectiveness. In de Guevara, B. (ed.), Myth and Narrative in International Politics: Interpretive Approaches to the Study in IR. London: Palgrave Macmillan, pp. 249–266. Nunberg, B., Barma, N., Abdollahian, M., Green, A. and Perlman, D. (2010). At the Frontier of Practical Political Economy: Operationalizing an Agent-Based Stakeholder Model in the World Bank’s East Asia and Pacific Region. Policy Research Working Paper No. WPS 5176. Washington, DC: World Bank. Nye, J. S. (2005) Soft Power: The Means to Success in World Politics. New York: Public Affairs.

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Orre, A. and Rønning, H. (2017). Mozambique: A Political Economy Analysis. Oslo: Norwegian Institute of International Affairs. Pettit, J. (2013). Power Analysis: A Practical Guide. SIDA. Retrieved from www.sida.se/con tentassets/83f0232c5404440082c9762ba3107d55/power-analysis-a-practical-guide_3704.pdf (accessed 10 May 2018). Serrat, O. (2017). Political Economy Analysis for Development Effectiveness in Knowledge Solutions. Singapore: Springer. Sjöstedt, M. (2013). Aid Effectiveness and the Paris Declaration: A Mismatch Between Ownership and Results‐Based Management? Public Administration and Development, vol. 33, pp. 143–155. Unsworth, S. (2009). What’s Politics Got to Do with It?: Why Donors Find It So Hard to Come to Terms with Politics, and Why This Matters. Journal of International Development, vol. 21 (6), pp. 883–894. Unsworth, S. and Williams, G. (2011). Using Political Economy Analysis to Improve EU Development Effectiveness. A DEVCO Concept Paper (Final Draft). Retrieved from www.delog.org/cms/upload/pdf-pea/Using_political%20Economy_Analysis.pdf (accessed 5 February 2018). USAID (2016). Draft Working Document: USAID Applied Political Economy Analysis (PEA) Field Guide. Washington, DC: USAID. Van Breukelen, A. M. (2007). Drivers of Change: Understanding the Forces for Poverty Reduction in a Rich Menu for the Poor: Food for Thought for Effective Aid Policies. Amsterdam: Dutch Ministry of Foreign Affairs. Williams, R., and Copestake, J. (2011). Political Economy Analysis and the Art of Development Management. Conference Paper, Rethinking Development in an Age of Scarcity and Uncertainty: New Values, Voices and Alliances for Increased Resilience, York, University of York,19–22 September 2011. World Bank (2007). Tools for Institutional, Political and Social Analysis of Policy Reform: A Sourcebook for Development Practitioners. Washington, DC: World Bank. World Bank (2008). The Political Economy of Policy Reform: Issues and Implications for Policy Dialogue and Development Operations. Washington, DC: World Bank, Social Development Department. World Bank (2009). Problem-Driven Governance and Political Economy Analysis, Good Practice Framework. Washington, DC: World Bank. World Bank (2011). Social Accountability E-guide. Retrieved from https://saeguide. worldbank.org/sites/worldbank.org.saeguide/files/documents/2_Political%20Economy% 20Analysis%20(SL-PL).pdf (accessed 11 June 2018). World Bank (2015). Human Development Report, 2015: Mind, Society, and Behaviour. Washington, DC: World Bank. World Bank Institute and CommGap (2010). The Political Economy of Reform: Moving from Analysis to Action, a Global Learning Event. Washington, DC: World Bank and CommGap. Yanguas, P. and Hulme, D. (2014). Can Aid Bureaucracies Think Politically? The Administrative Challenges of Political Economy Analysis (PEA) in DFID and the World Bank. Working Paper No. 33. Manchester: University of Manchester.

4 UNPACKING POLITICAL ECONOMY ANALYSIS IN A FOREIGN AID CONTEXT

Introduction As previously discussed Political Economy Analysis (PEA) in its current form has a range of definitional and conceptual shortcomings. To broaden this discussion about the potential and actual role of PEA it is necessary to explore how and where PEA fits within development discourse, and what are the factors that contribute to, or provide barriers to the widespread adoption of PEA, in such a manner as to ensure better outcomes, both for donors and recipients. The operationalisation of PEA shows some unresolved tensions among multilateral development banks (MDBs), other donors, recipients and the foreign aid community at large concerning the nexus between governance and development (see Grindle, 2011). The operationalisation of PEA, when viewed from a policy design and implementation perspective, is a challenging and fragmented undertaking with no predetermined outcomes. As the World Bank (2008) notes, the political economy perspective extends operational deliberations beyond technical or mechanistic responses with the aim of incorporating a focus on processes, stakeholders and institutions through which negotiations of policy reforms are enacted. The above debate concentrates most significantly on PEA as widely used since its inception, with the UK Department for International Development (DFID) and the World Bank as perhaps the most significant proponents. Hudson and Leftwich (2014) identify three generations of PEA which will be unpacked. There are other conceptual approaches and recent initiatives that are of direct relevance to political economy analysis, including Doing Development Differently, Thinking and Working Politically, and a raft of critical development discourse centred around the role of development more generally. Central to the emergence of PEA is the widespread acceptance of the role of politics in development. There are multiple ways of conceptualising change and the role of politics in change. The aim of this chapter is to explore the evolution of

Unpacking PEA in a foreign aid context 47

PEA by major donors, in terms of its relationship more broadly with development discourse. Commonalities and the evolution of thinking is tracked through discussing the use of tools and methods employed. Drawing on the critiques of PEA presented in Chapter 3, and the contemporary use of PEA, this chapter then explores alternative approaches to explore contributions to political economy understandings in development. The current focus on Doing Development Differently, Thinking and Working Politically and diverse but related tools and methods which bring a political economy focus to bear are analysed to explore whether critiques of PEA are being addressed in alternative forms.

Evolution of development alongside politics There was a specific point, in the early 1980s, where the Washington Consensus as an accord between the World Bank, the International Monetary Fund (IMF) and the US Department of the Treasury established their ideological supremacy within the development aid world. However, it may be noteworthy that at a later stage, namely, post the 1997–1998 Asian Economic Crisis, the IMF and the World Bank took a cautious approach to financial interventions. Thus, arguably, the IMF-supported programmes were initially less successful than hoped in restoring confidence in Asian countries (IMF, 2000). However, the philosophy of the unfettered freedom of the market surged and was intended to provide the answer to economic growth and poverty, and in fact was heralded as the solution to pretty much all aspects of human underdevelopment. One of the bases of neoliberal economics is of course that privatisation, free markets and the right prices can solve all problems (Peet and Hartwick, 2009). A fundamental error with this approach, as Peer and Hartwick identify, is that it excludes any consideration of the social processes or the real-world institutions which make up society. In other words, the role of the state is greatly diminished. Market reform became, in essence, the requirement for state reform, which in turn became the basis of the pursuit of ‘good governance’. Bernstein argues that this ‘rapidly escalated into an extraordinarily ambitious, or grandiose, project of social engineering that amounts to establishing bourgeois civilisation on a global scale’ (2015, p. 116). The emergence of the governance agenda is frequently touted as the origin of PEA in foreign aid discourse. In the late 1980s, Africa’s development problems were reframed as a crisis of governance with the publication of the World Bank report on Sub-Saharan Africa in 1989 (World Bank, 1989). As Kyamusugulwa (2013) argues, since then, donors have been (and still are) focused on governance, but specifically on the particular principles of transparency and accountability. Accountability in this framework is rather neatly aligned with ideas of participation, given the two-way requirements for both the powerful (or the leaders) and the powerless (locals, beneficiaries, and so on) to both hold and be held accountable regarding decision-making and actions. Kyamusugulwa identifies other principles of governance to include ‘citizen engagement, equality and social inclusion (gender, ethnicity, age, religion, etc), ethical and honest behaviour, equity (fair procedures and due process), partnership,

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sustainability, and the rule of law’ (ibid., p. 27). However, Mkandawire (2007) argues that good governance is just another new label on which to hang aid conditionality Turning briefly to participatory development, as espoused by Chambers among others (see, for example, Chambers, 1983, 1993, 1997), it gained a massive following in the late 1980s and into the 1990s and provides an interesting point of reflection on how difficult it can be to change the direction of development in any form. Rahnema’s (1997) critiques of participatory development foreshadowed an avalanche of criticism. Participation as initially conceptualised was based on the principles of transformative development and the empowerment of the most marginalised sections of society. Critiques of participation in international development frequently refer to the failure of participatory development to provide the promised radical transformation, and, indeed, in the eyes of some to actively de-politicise development (see, for example, Cooke and Kothari, 2001). However, from early in the explosion of interest in participatory development, it has faced many of the same tensions that are inherent in PEA discourse. First, the potential of participatory development is to be transformative, yet the core critique, set out eloquently, and in depth in Cooke and Kothari (ibid.) is the failure of participatory development to engage with issues of power and politics, and its becoming, as a result, a technical approach to development. Participatory approaches spread through existing development agencies, without providing any fundamental change in how they conceptualised or operated development projects, despite some great examples of participation (Hickey and Mohan, 2005). Although much of the discourse on critical development and the development industry is beyond the scope of this book, it is necessary to backtrack a little to engage with the challenges to a dominant western paradigm, which date back to the emergence of the development landscape in the post-war era (we deliberately commence debate at the often touted origins of modern development industry, as prior initiatives are also beyond the scope of this book). This feeds clearly into the more recent counter-hegemonic discourse that underpins critical development studies, and its relevance to current discourse. The politicisation of development is taken up in more detail in Chapter 8. However, the critiques of development have contributed to the current status of PEA, and it is in this vein that we now turn to some of this discourse. Alternatives to the dominant western-led development paradigm driven by the Bretton Woods institutions are not necessarily new, and the role of foreign aid, the donors and the initiatives that emerged from outside the Organisation for Economic Co-operation and Development (OECD) do provide some brief context for understanding the politics of aid and development (and its relevance to Political Economy Analysis) which is unpacked further in Chapter 9.Chapter 2 briefly reviewed the role of non-traditional donors, their input into aid and development discourse, with particular relevance to Cold War foreign aid from the Eastern Bloc and the Organisation of Petroleum-Exporting Countries (OPEC) aid of the 1970s in particular, which contributed significant funds in the name of economic growth, and political leverage. Making the point that a defining feature of non-traditional donors, then and now, was a policy of non-interference, which provides a

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significant point of contrast with the grants and concessional lending given by OECD Development Assistance Committee (OECD DAC) donors, which has a history of conditionality relating to policy and governance with significant implications for recipient countries. The new aid landscape, including the rise of aid flows and investment, particularly from China, provides an alternative for aid recipient countries. The notion of alternative forms of development that are influenced by non-OECD countries is also not a new phenomenon. The emergence of a collective ‘voice’ for non-OECD countries was given some momentum through the 1955 Bandung Conference of Asian and African States (many newly independent states). There was both a specific push for economic cooperation and growth, as well as an agreement for the provision of technical assistance from the conference and this provided the platform for the Non-Aligned Movement (Walz and Ramachandran, 2011). This, as Walz and Ramachandran (ibid., p. 3) note, forms the basis for the South-South cooperation of today. The Non-Aligned Movement was formed in 1961, to oppose the power blocs of the Cold War superpowers of the day (the USA and the USSR). However, despite a strong focus on sovereignty, independence, and a focus on self-reliance and equitable development of the ‘South’, it has struggled to remain relevant in the postwar era, focusing on South-South technical cooperation (Centre for South-South Technical Cooperation, 2014). The more recent group of 77 at the United Nations (the G77) (from 1964), a coalition of primarily developing nations, promotes members’ collective interests primarily in terms of voice and economic interests. China is not a member but a participant, and the G77 plus China is a frequent reference. Although, frequently perceived as implying a disruptive voice (Martinetti, 2007), the impact of the G77 is debatable. Although it provides a platform for a move to somewhat of an ‘alternative’ world to that currently plagued by colonial legacies, and power structures, there are large questions as to its overall impact (Siphamandia, 2015). Of course, the New International Economic Order (NIEO) proposed at the United Nations Conference on Trade and Development (UNCTAD) in 1974 provided another potential space for an alternative paradigm whereby developing nations benefited from the transformation of the governance of the global economy. The challenge has always been to address the dominance and embedded power inherent in the western-led nations and of course their impact on multilateral institutions that determine so much of the ‘development’ conditions under which aid and trade are negotiated and implemented. Outside of this brief foray into what may be summarised as intentional efforts to challenge the dominant western-led development and aid (and economic development) paradigm, there are further foundational critiques of development. The very existence of development has been challenged in numerous ways over an extended period of time. Although Sachs (1992) declared an obituary for development which, in his view, stood ‘like a ruin in the intellectual landscape’, it is clear that this pronouncement was premature. Development as an industry, as an ideal, and as a driver for interventions in the name of human development is alive, if not well. This is in part due to the evolution of the neoliberal project of

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economic globalisation and its reach into the furthest corners of the world, both developed or ‘underdeveloped’ (Sachs, 2009). There are, however, arguments that perhaps the most useful contributions of this post-development discourse were the introduction of a considered critique around very diverse types of power relations, and the contribution to a non-Eurocentric (or ‘western’) and more power-sensitive theory of change (Ziai, 2017). The relevance of the post-development discourse, as espoused by Sachs (1992) and his colleagues, also highlighted one of the fundamental critiques frequently waged against the interventions executed under the banner of (or at least funded by) foreign aid, namely, the de-politicisation of development, the promotion of technical solutions to social change, and the reliance on the provision of knowledge, technology and capital (by the development industry) to provide development (that benefits the poor, without hurting the rich) (ibid.). This, as may be obvious ,echoes again the critiques waged against PEA, The premising of ‘western’ scientific knowledge and the role of ‘western’ institutions form the base of much of the critique of development. The very basis of knowledge generation is based on a ‘paradigmatic hegemony of knowledge norms, which has its origins in Western societies and their scientific institutions’ (Weiler, 2009, p. x). Equally, given the overtly critical nature of power and politics within any development intervention, there have been attempts within the development discourse to engage more critically with the role of the development institutions. The World Bank serves as a useful case in point here, as, despite its claim to remaining apolitical, its role in the international system is one of immense power, and clearly ranges much more broadly than exercising influence on solely economic activity and policy (ibid.). These norms have not gone unchallenged. There have been many attempts to provide a radical shift in thinking in development. Some of these have come from within. Some are external to development. The explosion of ‘participatory’ practices and discourse can be seen as an attempt to represent a radical paradigm shift. However, it was equally perceived (as noted above) as providing a way of actively de-politicising international development (Hickey and Mohan, 2004). Similar charges are laid at the foot of ‘rights-based approaches’ to development, which have been advocated as a radical and necessary change. At the same time, the implementation of rights-based approaches has been critiqued for legitimising the existing approaches to development and related power structures (see, for example, Grégoire et al. (2017)). Similarly, Akram-Lodhi (2011) critiques sustainable livelihoods as an approach that again stresses method over theory. Participatory development, communitydriven development, rights-based approaches, alternative development and other buzz-phrases are all based on a more people-centred version of development and operate clearly within the parameters of orthodox development institutions and agencies. In many ways, the mainstreaming of what at face value appears to be good ideas, renders them subservient to the development machine, as they become more politically and economically attractive, and much less of a threat (Peet and Hartwick, 2009). However, Valters (2014) locates a theory of change within the remit of those development ideas that seem so full of promise, but which are

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quickly discarded if they become a threat to power or lose favour in the buzzword-driven corridors of the MDBs. A question of relevance is whether this is driven by practicalities of rendering them ‘doable’ (back to the Monday morning dilemma, see below), or whether it really is driven by the intractability of donors and the entrenched ideologies of the MDBs. Discourse external to development practice has run through a range of critiques from the Marxist and dependency critiques of the earlier years, through post-development, and more recently in visions of more critical development through post-colonial, postmodern and feminist development studies (Kothari, 2005). There are plenty of calls to abandon the development imperative. As Peet and Hartwick comment, ‘all critical approaches find development, as presently understood, to be a mistake of (natural and social) global proportions’ (2009, p. 279). Yet at the same time, they argue for rethinking the development project rather than discard it entirely. The ideological basis of this book is that, despite fundamental challenges, the act of supporting the aspirations of those for whom the neoliberal project has failed to deliver space to pursue safe, secure livelihoods, is of value, in line with Peet and Hartwick’s vision.

Evolution of politics in, or alongside, development The evolution of development from the post-war Marshall Plan in 1948 has had a predominantly economic focus. From economic growth models, through structural adjustment process (and failures), and to more recent debate over the Washington Consensus (and the post-Washington Consensus), foreign aid has maintained the fallacy of apolitical development. Blind faith that investment of aid dollars and the technical knowledge required to achieve development through economic growth has persisted through decades of development intervention. Carothers and de Gramont (2013) note the role of politics here as the assumption that economic growth would lead to (western-style democratic) political development.

Existing forms of PEA PEA has a long history. However, the focus of this chapter (and this book) is PEA as specifically tailored and practised within international development. This translates in most cases to applied tools used by the development agencies in the name of understanding politics in development. As noted in Chapter 3, the focus of PEA is primarily as a tool for the donor to understand politics and power within the recipient country, rather than a broader analysis of power relations inherent in any development intervention between donor and recipient (and other stakeholders). PEA in this form emerged more than 20 years ago amid a growing consensus that political and economic processes, and their interactions, contribute significantly to the impact of foreign aid interventions. This resulted from a mounting awareness that a focus on technical or capacity-based ‘fixes’ was not providing the positive outcomes in regard to human development. Although the use of the term

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Political Economy Analysis suggests a common understanding, as previously shown, there is very little clarity on what PEA is, and therefore what it does. Hudson and Leftwich (2014) note that political economy work is a rather generic term, and perhaps somewhat of a misnomer, that covers a range of attempts to identify and manipulate links between politics and development, seeking solutions to development problems, often under the guise of governance. It is, in essence, a diagnostic tool for addressing development failure. In this sense, it is far more of a risk management approach than anything deeper. Green (2014) refers to a broadly ‘political economy’ approach. The rationale behind the ubiquitous use of Political Economy Analysis as the dominant form of political economy is, in McCulloch’s (2018) view, due to the fact that political economy is too political and therefore appears to be meddling in the politics of a country, which is unpalatable to both the donor and recipient. PEA, on the other hand, works well as a tool, which can help most donors ‘emphasise the benign, technical and apolitical nature of their work’(ibid., n.p.). It is difficult to argue against this, given that World Bank publications on PEA very specifically state the fact that the World Bank’s mandate ‘explicitly precludes it from engaging in politics’ while acknowledging that ‘it has become widely accepted that the institution needs to understand the political economy context of reforms from a diagnostic perspective in order to be able to assist countries effectively in designing and implementing development strategies and policies’ (Fritz et al., 2009: p. viii, n 1). From generalisations, it is necessary now to look at how PEA has evolved. Hudson and Leftwich (2014) identify three ‘generations’ of political economy work. They contend that the significant growth of work in and around governance, particularly in the 1990s, constitutes the first generation. Governance, in the public sector, when stripped to a basic idea by Grindle ‘encompasses notions of how political and administrative decisions get made, how governmental systems work, and why both formal and informal institutions matter in how things get done and how states relate to societies’ (2017, p, 17). In the early stages of the elevation of a governance agenda in development, governance referred primarily to a government’s requirement to be transparent, accountable, effective and to promote the rule of law. Kwon and Kim (2014), among others, have found that good governance does not equate to poverty reduction in lower-income countries and argue that policies to directly address poverty and structural inequality are essential. However, as Grindle (2017) also argues, the governance agenda in international development extended dramatically beyond this initial conceptualisation and inflated the idea of governance to one of an idealised endpoint, normatively reframed as ‘good governance’. The list of the recommended qualities of this good governance agenda now incorporates a far more extensive set of conditions: equity, participation, inclusiveness, democracy, widespread service delivery, sound regulation, decentralization, an open trade regime, respect for human rights, gender and racial equality, a good investment climate, sustainable energy use, citizen security, job creation, and a variety of other ends. (ibid., p. 18)

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The result of this conceptual inflation has been a blurring of the lines between cause and effect for development and good governance, with a resulting loss of focus on how change happens in structures and processes. In essence, we come back to a very apolitical view of governance, both in the initial conceptualisation of governance and its expanded and still current existence (Hudson and Leftwich, 2014). The original ‘tools’ with which the politics of development, through governance lens, were analysed were rather generalist in nature, with a focus on building capacity The second generation engaged far more deeply with issues of politics in development, moving from a narrow, rather managerial and technocentric governance focus, to a focus on ‘historical legacies, structural conditions, broad power relationships, stakeholder analysis of “agents” and institutional arrangements that frame the politics of development’ (ibid., p. 9). This is widely referred to as Political Economy Analysis and was in essence typified by the DFID’s report Drivers of Change, SIDA’s Power Analysis (Pettit, 2013), as well as the Strategic Governance and Corruption Analysis from the Netherlands (see, for example, DFID, 2005a, 2005b; OECD DAC, 2005; Unsworth, 2008; Pettit, 2013). It is worth noting that Hudson and Leftwich argue that this is actually not PEA as it is socially and historically generalist (2014, p. 19), rather than being grounded in mainstream economics. The theoretical foundations of PEA within International Political Economy (IPE) are addressed in the following chapters. The commonalities between these approaches are the focus on politics and power, in theory, at least. However, in practice, they proved to be generally somewhat too broad and failed to really be able to engage with the frequently messy, complex, and context-specific realities of on the ground politics. One of the core issues raised with PEA in this guise is a relatively pragmatic one, ‘What do we do on Monday morning?’, i.e. what does a development practiioner do on the ground? (Hudson and Leftwich, 2014; Green, 2016). A significant point of conflict has been the applicability of PEA on the ground. To polarise the debate somewhat, there is a significant tension between a transformative version of a political economy of development which can engage with the deep and context-specific complexities of power, structures and institutions, and a broad engagement with PEA. As Fisher and Marquette (2014) point out, if PEA tools are too complex for anybody other than specialists to engage with, then they fall short of being ‘fit for purpose’. A weakness emerging from the relevant literature is, therefore, a problem with the complexity of PEA and the ‘academic’ language required. That is, nonspecialists, i.e. development experts who do not have the required background in political and social sciences and economics, find PEA often intangible and revert to the above-stated approach to PEA, which is mechanistic and at times devoid of the necessary methodological foundations (see, for example, Eyben, 2010; Haider and Rao, 2010; Grindle, 2017). From this vantage point, Bernstein (2005, p. 120) is particularly damning of practitioners. He groups them into: (1) neoclassical economists, mathematically well endowed but challenged in other ways; (2) public administration personnel who deal with good governance (state reform, civil service reform and public institution reengineering); and

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(3) those who work in the ‘soft’ areas of welfare and community-level engagement. His ire is raised not so much by the practitioners themselves but in the practical manifestation of the neoliberal hegemony through the demand of aid agencies for expert advice across this spectrum. There is an identified disconnect between donor needs, and desires to ‘think politically’ and the skills and incentives within agencies to do so (Fisher and Marquette, 2014, p. 5). The result, in particular of second-generation PEA, is a tendency to be driven by donor requirements for results, thus requiring a variety of PEA tools, methods and frameworks that are both practical and instrumental. Arguably PEA falls into the trap that so many development big ideas have fallen into. In needing to be understood by field staff, and fit into donor and development agency requirements for results, the transformative potential has been subsumed. There is relatively widespread agreement on some of the limitations of secondgeneration PEA, as summarised by Hudson and Leftwich (2014) as a lack of operational relevance and a methodological looseness. Thus, Hudson and Leftwich identify a third generation of PEA which they classify as the politics of economics, or the tools that they consider political economy proper (ibid., p. 19). This third generation is typified by a problem-driven approach, with a focus on interests and incentives (hence the economics of politics, rather than political economy). PEA in this frame is concerned primarily with self-interest, institutions, and incentives (ibid., p. 32). In Hudson and Leftwich’s conceptualisation, this third generation focuses strongly on ‘what do we need to do on Monday morning?’, at the expense of a resulting partial analysis of politics (see Harris 2013). This third generation is problem-driven. A prominent example of this is the problem driven iterative adaptation (PDIA), and the World Bank’s problem driven governance and political economy analysis (PGPE) (see, for example, Grindle, 2017) identifies the problem-driven reformers as those who seek to improve governance (through institutional reform) by find[ing] a problem and fix it, or more impressively, they follow a problem-driven iterative process of change. Thus, the particular context of a problem—its micro-level political economy of winners and losers, power, reform champions, and coalitions—is a jumping-off point to generate interventions that might—or might not, as experience is observed—ameliorate a particular situation. Time, experimentation, and learning from doing are central to this approach. Next steps, contextspecific interventions, good enough, best fit, relieving bottlenecks, iteration—these are terms often used to describe what problem-driven reformers are up to in efforts to improve public sector performance. (ibid., p. 20) However, this third generation in adopting mainstream economic thinking and focusing on ‘active’ factors of institutions and stakeholders, has excised some core factors, most importantly the issue of power, as well as structures, and ideas (Hudson and Leftwich, 2014). The narrow focus on new institutional economics,

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in the analysis of incentives, embedded in these versions of PEA, has fundamentally shifted the ground of foreign aid from needing foreign aid to fill the gap, to needing foreign aid to provide the missing institutions. The embedded and clear theoretical assumption is based on an economic approach of the individual egoistic, rational, utility-maximising political agent (ibid., p. 47). Reform is the intent of PDIA in action. In considering how this may work, in terms of thinking and working politically, let us now turn to the recent engagement of development with alternatives, namely, Doing Development Differently. The kind of aid agency reform agenda that results from a problem-driven iterative adaptive approach is embedded in two distinct but interrelated networks, namely, Thinking and Working Politically (TWP) and Doing Development Differently (DDD). Thinking and Working Politically is, in essence, an explicit recognition of the fact that understanding, and working with, domestic politics are essential ingredients in any development attempt. Interestingly the TWP and DDD manifesto acknowledges the emergence of new donors, the decreasing role of conditionality in an era where recipient governments are exercising more power, and being more assertive (Akmeemana et al., n.d.). The slogan of TWP is that not only that politics do matter but that institutions and politics also matter (Rocha Menocal, 2014). The Doing Development Differently manifesto is partially an aid reform agenda. It emerged from a meeting convened in 2013 at Harvard University. The joint agendas of TWP and DDD are: ‘(1) strong political analysis, insight and understanding; (2) detailed appreciation of, and response to, the local context; and (3) flexibility and adaptability in program design and implementation’ (Akmeenama et al., n.d.). Both of these approaches are relatively recent, and even in conceptualisation are noted as not being silver bullets, and likely to be limited to initiatives in policy, institutional or governance reform (ibid.). Despite some challenges to traditional aid modality, TWP and DDD still do not appear to offer an alternative, more theoretically informed, approach to PEA. If, as many both inside and external to development institutions and academia argue, there needs to be a rethink of development theory and practice, then there must be a space for questioning and understanding many of the assumptions and beliefs that underlie mainstream models of development. PEA, as widely conceived, consists of some versions of the above generations. There are recent initiatives that combine some more critical aspects of international development theory and practice with political economy. However, it appears that PEA and the political economy of development are driven by a range of incredibly dedicated individuals within organisations, rather than by any organisational commitment to fundamentally reconsider the political economy of aid. This is not to marginalise the efforts made, particularly by DFID and other early uptake donors. However, despite various iterations, and despite some excellent champions of the need to engage politically, the use of PEA, in various guises, is at best a partial attempt to engage deeply in the messy, complex and diverse power relations, structures and agency that fundamentally impact any attempt at change. An inward focus

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on own institutions, or an external focus on recipients in isolation from contemporary challenges and fundamental ideological assumptions is not likely to produce any significant impact on the efficacy of foreign aid investment.

Conclusion There is clearly growing dissatisfaction with the neoliberal project globally. Alternatives are framed in multiple ways, as discussed in brief above. However, if there is a move towards a more critical engagement with the very notion of development, what change may be required to achieve that elusive goal of an inclusive, equitable, participatory and sustainable pathway? This chapter explored the evolution of politics in development under the guise of Political Economy Analysis. Although arguably there has been a significant change in the way that politics is conceived as part of development, and in how political economy is analysed, in essence, there is little to demonstrate significant progress definitionally, or conceptually in PEA. It still exists primarily to understand the domestic politics of recipients, and in some cases the institutional barriers to change within donors. However, it remains in the realm of tools and methods to increase the impact of aid. Even if the aid itself is reconceptualised from technological gap filling to institutional reform, the whole process is primarily one of reform, or incremental change within donors, and recipients. In an era where the very base of the neoliberal project is being challenged, through populism, through the rise of illiberal democracies, the rise of the Beijing Consensus and, of course, de-globalisation, we argue that a mainstream PEA based on existing hegemonic assumptions will not deliver significantly different aid and development outcomes. The following chapters will move into a much more nuanced analysis of these challenges, as the basis for a reanalysis of the politicisation of aid and development, and the relocation of PEA within the theoretical framework of international political economy.

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Hout, W. (2012). The Anti-Politics of Development: Donor Agencies and the Political Economy of Governance. Third World Quarterly: Journal of Emerging Areas, vol. 33 (3), pp. 405–422. Hout, W. and Schakel, L. (2014). SGACA: The Rise and Paradoxical Demise of a Political-Economy Instrument. Development Policy Review, vol. 32 (5), pp. 611–630. Hudson, D. and Leftwich, A. (2014). From Political Economy to Political Analysis. Research Paper No. 25. Birmingham: DPL College of Social Sciences, University of Birmingham. IMF (International Monetary Fund) (2000). Recovery from the Asian Crisis and the Role of the IMF. Washington, DC: IMF. Kothari, U. (2005). From Colonial Administration to Development Studies: A Post-Colonial Critique of the History of Development Studies. In Kothari, U. (ed.), A Radical History of Development Studies: Individuals, Institutions and Ideologies. London: Zed Books. Kwon, H. and Kim, E. (2014). Poverty Reduction and Good Governance: Examining the Rationale of the Millennium Development Goals. Development and Change, vol. 45, pp. 353–375. Kyamusugulwa, P. M. (2013). Participatory Development and Reconstruction: A Literature Review. Third World Quarterly, vol. 34 (7), pp. 1265–1278. Marquette, H. and Fisher, J. (2014). Donors Understanding Governance and Corruption Through Political Economy Analysis: From Process to Product (and Back Again?). DLP Research Paper No. 28. Retrieved from www.dlprog.org/ftp/view/Public%20Folder/ Donors%20Doing%20Political%20Economy%20Analysis%20-%20From%20Process%20to %20Product%20(and%20Back%20Again).pdf (accessed 23 April 2018). Martinetti, I. (2007) UN Management Reform: The Role and Perspective of the G77. Centre for UN Reform. Available at: www.centerforunreform.org/?q=node/271 (accessed 20 September, 2018). McCulloch, N. (2018). Can a Political Economy Approach Explain Aid Donors’ Reluctance to Think and Work Politically? Guest post, From Poverty to Power Blog. Retrieved from https:// oxfamblogs.org/fp2p/can-a-political-economy-approach-explain-aid-donors-reluctance-to-thi nk-and-work-politically-guest-post-from-neil-mcculloch/ (accessed 29 June 2018). Mkandawire, T. (2007) ‘Good Governance’: The Itinerary of an Idea. Development in Practice, vol. 17 (5), pp. 679–681. Nelson, N. and Wright, S. (eds) (1995). Power and Participatory Development: Theory and Practice. London: Intermediate Technology Publications. OECD DAC. (2005). Lessons Learned on the Use of Power and Drivers of Change Analyses. In DAC Network on Governance (GovNet), Development Cooperation. Paris: OECD. Retrieved from www.gsdrc.org/docs/open/doc82.pdf (accessed 12 May 2018). Peet, R. and Hartwick, E. (2009). Theories of Development, Contentions: Arguments, Alternatives (2nd edn). London: Guildford Press. Pettit, J. (2013). Power Analysis: A Practical Guide. SIDA. Retrieved from www.sida.se/con tentassets/83f0232c5404440082c9762ba3107d55/power-analysis-a-practical-guide_3704.pdf (accessed 2 February 2018). Rahnema, M. (1997). Participation. In Sachs, W. (ed.), The Development Dictionary: A Guide to Knowledge as Power. Hyderabad: Orient Longman. Rocha Menocal, A., Cassidy, M., Swift, S., Jacobstein, D., RothblumC. and Tservil, I. (2014). Thinking and Working Politically Through Applied Political Economy Analysis: A Guide for Practitioners. Washington, DC: USAID, DCHA Bureau, Centre of Excellence on Democracy. Rotberg, R. I. (2014). Good Governance Measures. Governance, vol. 27, pp. 511–518. Sachs, W. (ed.) (1992). The Development Dictionary: A Guide to Knowledge as Power. London: Zed Books.

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Sachs, W. (ed.) (2009) The Development Dictionary. A Guide to Knowledge as Power (2nd edn). London: Zed Books. Sakuntala, A., Booth, D., Brown, D., et al. (n.d.). The Case for Thinking and Working Politically: The Implications of ‘Doing Development Differently’. Retrieved from http://publications.dlprog.org/TWP.pdf (accessed 29 June 2018). Siphamandia, Z. (2015). The G77@50 and the Struggle for a Decolonial Future: Editorial. Latin American Report, vol. 31 (1), pp. 1–6. Unsworth, S. (2008). Framework for Strategic Governance and Corruption Analysis (SGACA) Designing Strategic Responses Towards Good Governance. Paper prepared by the Clingendael Institute for the Netherlands Ministry of Foreign Affairs Conflict Research Unit (CRU). Retrieved from https://europa.eu/capacity4dev/governance/ document/framework-strategic-governance-and-corruption-analysis-sgaca-designing-stra tegic-responses (accessed 17 March 2017). Valters, C. (2014). Theories of Change in International Development: Communication, Learning, or Accountability? Justice and Security Research Programme Paper No. 17. London: London School of Economics. Walz, J. and Ramachandran, V. (2011). Brave New World: A Literature Review of Emerging Donors and the Changing Nature of Foreign Assistance. Working Paper No. 273. Washington, DC: Center for Global Development. Weiler, H. D. (2009) Whose Knowledge Matters? Development and the Politics of Knowledge. In Hanf, T., Weiler, H. N. and Dickow, H. (eds) Entwicklung als Beruf. Baden-Baden: Nomos, pp. 485–496. World Bank (1989). Sub-Saharan Africa: From Crisis to Sustainable Growth: A Long-Term Perspective Study. Washington, DC: World Bank. World Bank (2008). The Political Economy of Policy Reform: Issues and Implications for Policy Dialogue and Development Operations. Washington, DC: World Bank. Ziai, A. (2017). Post-Development 25 Years after The Development Dictionary. Third World Quarterly, vol. 38 (12), pp. 2547–2558.

5 POPULISM Challenging socio-economic orthodoxy

Introduction Until quite recently, the discourse concerning governance usually focused on dichotomies between the state and free markets. Proponents of the former argue in favour of state-oriented governance, whereas the latter argue for market-oriented governance. To put it differently, the argument is individualism versus collectivism. However, there is a newly emerging governance, namely, populism. It seems that both the proponents of state-oriented governance and market-oriented governance, respectively, generally have labelled ‘populism’ in negative terms, blaming it for endangering Western democracy. However, even a cursory review of the relevant literature shows that despite the often heated political, social and economic debates concerning its values, norms and ideologies, and despite any claims to the contrary, populism is inherently neither ‘good’ nor ‘bad’ (Urbinati, 2013). Any such value judgement about ‘goodness’ or ‘malevolence’ depends on one’s political, economic and social beliefs, which may be classified as either left-wing or right-wing populism, which we will discuss in detail further on. In general terms, populism is entrenched in two basic principles. One is the rejection of institutional restrictions, for example, from financial elites as far as left-wing populism is concerned. The other is a rejection of the impact of minorities and foreigners on the national well-being, from the right-wing populist movement. Of course, both these standpoints may have positive as well as negative consequences. However, the discussion concerning consequences should be subject to another debate. Here it should suffice to say that: (1) many free trade proponents in politics and economics underestimated the adverse effects of neoliberal globalisation; (2) populists on the left and on the right are most likely wrong to pursue mercantilism, protectionism and de-globalisation, with the view that this will consequentially lead to economically happier days of the past; and (3) there is much evidence that the political

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establishment in Western democracies has failed to put policies in place to compensate the losers of neoliberal globalisation. This has brought about changes in power relations and politics. However, the situation is not as simple as it may appear, for populism is not only a political but also an economic construct. From the economic perspective of the fundamental inherent assumptions by both the right and the left of the political spectrum, as well as proponents of populism and neoliberal globalisation alike, a permanent and stable potential of economic growth is achievable. Today, this idea is at best challenging and at worst illusionary. For both neoliberalists and populists are facing the same challenge, namely, how to square the circle of the impact of post-industrialism or the move from industrialism to post-industrialism. When the working and middle classes in developed countries move from assembly lines to the service industries, the whole socio-economic fabric of a nation changes. Thus, the vital question arises: is populism a reaction to economic uncertainty in post-industrial Western democracies, or a political attack on neoliberal values? On balance, it is both. This brings us back to the issue of economic and political values, which do not exist discretely and independently from each other. From the above discussion, and setting aside the consequences of value judgements, two political readings of populism emerge. From the left perspective, populism is a political movement that facilitates wealth redistribution from the rich to the lower and middle classes of the population. From the right of the political spectrum, populism is a threat to the interests of the economic elite and the world order. Whether one agrees with the ‘realpolitik’ of populism or not, its proponents pose legitimate questions about the condition of Western democracies in a globalised world. Many sections of the population feel politically and economically marginalised and alienated by mainstream elites and establishments. It is important for policy-makers, academics and political analysts to try to understand populism, beyond portraying it as a dangerous and destructive political force and opposing it simply as an ‘evil’ political movement. From the above introductory thoughts, it is evident that the concept called populism is exceedingly contestable. Thus, to achieve a better understanding, populism as a concept needs to be unpacked using a variety of vantage points. This may be perceived as the most apposite or the most inapposite approach, depending on the views of the reader.

Right-wing versus left-wing populism For a better understanding, it may be advantageous to offer a however brief and perhaps oversimplified juxtaposition of right-wing and left-wing populism. As we have pointed out already, there is an extensive discussion concerning the definition of populism, and thus populism is deprived of an authoritative and generally acceptable definition. The closest we may come to understand what is meant by populism is by pointing out that populism is characterised by two overarching assertions (see Taggart, 2000, 2004; Mudde, 2004, 2007). First, populists on the left and the right claim that the government should act according to the general will of

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the ‘pure’ and ‘uncorrupted’ people. However, by classifying people as ‘pure and uncorrupted’, there are ‘other’ people who do not fall into this category. In other words, the pure and uncorrupted people form the unified nativist population (Taggart, 2000). Second, and following on from the first point, populists assert that the existing political elite and the social establishment neglect to act on behalf of the ‘pure’ people. Instead, this elite has debased and distorted politics with the aim of denying the people the power in order to retain power for their own benefit. Thus, the responsibility of the populist leadership is to give political power and government back to the ‘pure’ people. Let us turn, however briefly to the populism position on the left and right spectrum. According to March (2007, 2011), left-wing populism is typified by accentuating socio-economic subject matters. Conversely, right-wing populism, which is at times, perhaps unjustly labelled ‘extreme’ or ‘radical’, is characterised by aspects of nativism and authoritarianism, which denotes the idea that only ‘pure’ members of the nation should reside in the state territory, whereas members of the non-native population should be kept out because they pose a threat to the social, cultural and political fabric of the nation (Mudde, 2007). When it comes to the socio-economic issues, the right-wing populist movements are not united and represent differing positions. Some right-wing populist movements, according to De Lange (2007) subscribe to a neoliberal economic agenda, while the so-called ‘new radical right’ endorses a more centrist position on socio‐economic matters. From this vantage point, left-wing populism denotes primarily the political position focusing on socio-economic matters, whereas the right-wing populism is generally focusing on migration and autocracy. Yet most students of populism concur that populism is characterised by readily changing attributes and may be amalgamated with different political movements and as such may be used by politicians representing a wide range of political beliefs (see Taggart, 2000). Setting aside the difference between left-wing and right-wing populism, we can also identify the commonalities. First, both forms of populism have the aim of restoring political power to the ‘pure’ people as opposed to power held by the elites. Second, both right- and left-wing populists require that the unmitigated voice of the ‘pure’ people be heeded. This means that generally such power must not be transferred domestically to non‐majoritarian or globally to supranational organisations. Translating this to foreign aid, this may well mean that the funds for foreign aid should be controlled by the ‘pure’ population of the donor nation directly, rather than transferring this power to international finance organisations and their bureaucracies.

Populism as a conceptual narrative As we have indicated above, even the most extensive research shows that there is no clear, generally acceptable and conclusive definition of populism, for it means different things to different people. As Illing (2017a, p. 1) points out ‘[t]he term “populism” is often used but rarely understood’.

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Others such as Pappas (2016, p. 8) come to a similar conclusion, namely: As most seem to agree, for over half a century now, we have been engaged in a lively but hitherto futile search for a common understanding in the study of populism. As the battle of definitions has become in recent years even more intense, most scholars admit a conceptual morass. To clarify further, Pappas provides an array of definitional vantage points and conceptualisations of populism, such as a movement, an ideology, a discourse, to name a few. In this discussion, the focus will be on populism as a movement and an ideology. Arguably, one of the most widely cited delineations of populism has been offered by Mudde (2004). He argues that populism is a ‘thin ideology’ which does not go beyond presenting a framework contrasting the ‘pure’ people with the ‘corrupt’ elite. Mudde juxtaposes populism and pluralism, claiming that this ‘thin ideology’ may be attached to many ‘thick’ ideologies such as nationalism, socialism, racism, nativism, and others. As such, populism attempts to explain the political, economic, social and cultural worlds and to rationalise its specific political platform. Mudde suggests that although there is a strong tendency among academics and mainstream politicians to criticise and condemn populism, it has the advantage that it can force elites and the establishment to discuss and pay attention to political, economic, social and cultural matters which they prefer to ignore. The issue is that, according to populism, politics should be a manifestation of the ‘volonté générale’, or general will, of the people (ibid.; see also Mudde, 2017, n.p.). From this vantage point: populism is fundamentally pro-democracy, in the sense that it supports popular sovereignty and majority rule. However, populism goes further: It wants the will of the people to go unchallenged, which puts it at odds with liberal democracy, the political system of most contemporary Western states. Liberal democracy puts certain limits on majority rule, such as constitutionally protected minority rights and the rule of law. Ultimately, populism is a form of illiberal democracy that accepts no limits on majority rule. (ibid., n.p.) To be sure, as a ‘thin’ ideology, populism, as stated above, mostly attaches itself to one or another form of ‘thick’ ideologies on either the left or the right. In the latter case, populism has the tendency to merge with, say, nativism or neoliberalism, whereas in the former case, populism attaches itself to some forms of socialism. Irrespective of the political spectrum, populists on the right and the left argue that the people are always correct. Potentially, this means that the basic principles of liberal democracy, such as the rule of law and the rights of minorities are neglected. Pippa Norris (cited in Illing, 2017b) offers the following description of populism as a movement. First, populism is an ‘appeal to popular sovereignty over and above liberal democracy’. Second, populism is ‘anti-establishment’, and it rejects the political and economic elites as well as other apparently powerful groups such as,

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for example, the intellectual or academic elites, exercising some form of power in the society. Third, populists see that power to be vested in an individual leader, who epitomises the ‘voice’ of the ordinary populace. Norris (2005) elucidates by pointing out that the existence of all three characteristics does not say much about how to define populism. Given that there is a lack of a generally acceptable definition of populism and that there are many understandings and explanations of this notion, some basic clarifications are in place. Mudde (2007) sheds some light on how to understand populism: (1) Populism may be perceived as a philosophy that accentuates a belief in the judiciousness and righteousness of ‘ordinary’ people as opposed to the corrupt establishment. This opposition is marked by a deepseated scepticism, resentment and cynicism towards the existing establishment represented by multinational institutions, organisations and corporations, politicians, government officials, academics, experts, elites of any kind and the advantaged wealthy. (2) The populist narrative characteristically accentuates notions and virtues of nativism by retreating into xenophobic nationalism. This presupposes that people are homogeneous and that national governments should reject people from other cultures and nations. This leads to a desire for policies which advance national self-interests at the expense of international collaboration and foreign aid. (3) Setting aside the populist characteristic of leaning towards authoritarianism, populists seek direct modes of majoritarian democracy through ‘direct’ communication with the political leadership, as opposed to representative democracy with its institutional checks and balances (Zaslove, 2008). From the above but rather brief discussion concerning populism, it is evident that although we may know what populism stands for, we do not know exactly what it is. However, populism as Inglehart and Norris (2016) point out, may be understood from two demand-side theories, namely, (1) the cultural backlash theory; and (2) the economic inequality theory.

Constituents of populism: mercantilism and protectionism Mercantilism and protectionism are both constituents of economic populism. Both notions are and have been intertwined, but they have seldom been used in a discourse concerning foreign aid. However, as constituents, they give a deeper understanding of the concept called populism and of populist economics and politics. As such, they deserve our attention. At the most simplistic level, the mercantilist school of thought maintains that the ultimate economic aim of a sovereign country is to increase the balance of payments surplus (Meier, 2008). In other words, the aim is that exports should exceed imports. Equally simplistically put, protectionism, or more precisely trade protectionism, is a political construct or a kind of policy or a politically driven safeguard that restricts inequitable competition from foreign commerce.

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Mercantilism and protectionism are two sides of the same coin. The former is an economic theory, and the latter may be classified as a political construct. Both are an integral part of contemporary right-wing populism. In recent years, but especially since the rise of populism in the second decade of the twenty-first century, both mercantilism as an economic theory and protectionism as a political construct have gained increased attention in political, economic and social debates. Since the rise of populism in Western democracies, mercantilism as an economic theory and protectionism as a political construct, are subject to intense debates fraught with claims and counterclaims as to their usefulness, application and validity. For example, mercantilism in neoliberalist literature is accused of not providing a suitable economic ‘model’ for foreign aid. The opponents of protectionism argue that free trade restricting actions have negative impacts on a country’s economic growth. This, so the argument goes, applies equally to developed and to developing countries. Yet despite these arguments against mercantilism and protectionism, the USA as the largest global economy and as the most significant contributor to MDBs is, under the Trump administration, pursuing a mercantilist and protectionist agenda. Given this Trumponomics agenda, it is not surprising that the current discourse concerning mercantilism and protectionism, when set against a background of populism, provides a fertile ground for critique and is often labelled by its neoliberal opponents as misguided. Be this as it may, Trump’s protectionism and mercantilism are a vehicle for shifting the economic gains from the globalisationbased institutions and organisations to the USA. Consequently, Trump is, on the one hand, refusing to sign new multilateral trade agreements, but, on the other, is prepared to negotiate bilateral trade agreements. This should be not construed as a movement against economic integration, but as a move against the transfer and delegation of sovereign power to IFCs and other supra-national organisations. This leads potentially to establishing a political and economic mixture of sovereign power and hyper-globalisation. Notwithstanding the commonly prevailing views that we are living in a neoliberal world, some, such as Trump and other populists in the West, are challenging this assertion. The counter-argument to the dominant neoliberal global economic structures is that the existing system does not reflect a ‘positive-sum’ game whereby everyone benefits and the needs of all concerned are met, but a ‘zero sum’ game where there are winners and losers (see Klein, 1991; Hsu et al., 2008). More to the point, there is a case to be made that inequalities in wealth and power have been exacerbated by the policies and practices of the Washington Consensus institutions.

De-mystifying mercantilism Mercantilism was the prevalent trade and economic doctrine from the fifteenth to the eighteenth centuries in Europe and in the twentieth and twenty-first centuries in some Asian countries, with a tendency towards the above-stated ‘zero sum’ game theory. In the contemporary context, mercantilism denotes the conventional and newly important approach to foreign policies and foreign aid. As stated above,

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it re-emerged with the rise of populism in the second decade of the twenty-first century as a challenge to neoliberalism. Landreth and Colander offer the following definition of mercantilism: The goal of economic activity, according to most mercantilists, was production - not consumption, as classical economics would later have it. For the mercantilists, the wealth of the nation was not defined in terms of the sum of individual wealth. They advocated increasing the nation’s wealth by simultaneously encouraging production, increasing exports, and holding down domestic consumption. (2002, p. 45) However, if one were to follow this definition to its logical conclusion, one potential downside is that the national wealth of one country is built on creating or maintaining the poverty of another. That is, despite the mercantilist’s strong advocacy for domestic production, an ample supply of domestic goods is seen as disadvantageous. High production in parallel with low domestic consumption would allow for greater exports, which in turn would increase the national wealth and geopolitical and geo-economic power. In order to achieve the export-oriented advantages, the mercantilist agenda needs to maintain low salaries, which make their export goods competitive in international trade. This approach, however, has a further economic flow-on, namely, to keep the production up and at the same time the domestic consumption down due to low wages. Thus, individuals’ poverty benefits the nation. If this stands to reason, then it could be further argued that export-oriented industries are gaining economic advantages vis-à-vis the labour force. This defeats to a large extent the populist claims, such as those expressed by Trump in support of the lower working and middle classes, who were left behind by neoliberal globalisation. As far as foreign aid is concerned, the issue of productivity in developing countries is not overtly separated from economic growth. The question whether economic growth within the confines of mercantilism is advantageous or otherwise for developing countries depends to which extent the benefits of additional output surpass the costs of production. Thus, for developing countries, production and export are a catalyst to economic growth, whereas production for domestic consumption is the pathway to poverty. The usual response is to revert to Aid-for-Trade (AfT) principles.

De-mystifying protectionism In the context of this discussion and as stated above, protectionism is an economic policy restricting trade between countries, using mechanisms such as the imposition of tariffs on imports, restrictive import quotas, affording government subsidies to domestic industry and other government measures intended to inhibit imports and block foreign take-over of domestic commercial and industrial enterprises (Reinert and Reinert, 2011). This is closely associated with either de-globalisation or anti-globalisation. Proponents of protectionism claim that it counteracts inequitable

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competition from foreign industries (Kim, 2007). These notions can be put into the context of developing countries receiving economic foreign aid for the purpose of developing new industries, tariffs, quotas, subsidies and other measures to protect these new industries and allowing time to develop and grow, eventually providing protection and competitive advantage (Meier, 2008). These protectionary policies and practices have a further advantage, namely, the creation of employment opportunities for the domestic labour force. These benefits end once the developing country opens its economy to the forces of neoliberal globalisation as is required under the conditionalities of the Washington Consensus following foreign aid agencies. Not surprisingly, protectionism has met with much hostility from the proponents of neoliberal globalisation, including economists, politicians, academe, foreign aid agencies and industry. The neoliberal globalisation rhetoric is one of strengthening the contribution of trade to the economies of the developed world. However, with Trump’s political rhetoric in favour of protectionism (Lim, 2017) and the UK leaving the world’s largest trading bloc, the question about the viability of neoliberal globalisation is put in question. The question is, what impact will the rise of populism with its two constituents, mercantilism and protectionism, have on developing economies and emerging markets, where the Washington Consensus conditionalities have tightened the growth prospect through opening their economy to global competition? The potential answer is that developing countries would become victims of the ‘zerosum’ game, as much as from the ‘positive-sum’ game. However, as a scenario and a consequence of the rise of populism, Western governments will turn at least in part to protectionist policies because they have to provide economic protection to their marginalised and disenfranchised population, which have a significant influence on the electoral outcomes based on their demands.

Defining the demand side theories of populism Inglehart and Norris (2016) suggest that the difference between the cultural backlash theory and the economic inequality theory may be perceived to be somehow blurred, for there are common processes which link these two theories. For example, they refer to variations in employment-based structures, which have in globalised economies a tendency, not only to affect the labour force, but also the social fabric in the globalised economies and bring about economic uncertainty. This, in turn, fuels a negative repercussion on the cultural aspects within the society. The cultural backlash theory stipulates that the rise in the number of voters supporting populist movements and parties can be rationalised to a large extent as a negative response to the progressive cultural changes brought about by phenomena such as globalisation and neoliberalism. Thus, this surge in votes supporting populism cannot simply be explained away by economic factors. If this stands to reason, then the cultural backlash theory is in part aligned with the ‘silent revolution’ theory of value change (Inglehart, 1971). To explain, the ‘silent revolution’ theory maintains that an unusually ‘high level of existential security experienced by the people of developed

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Western societies during the postwar decades brought an intergenerational shift toward post-materialist values, such as cosmopolitanism and multiculturalism, generating rising support for left-libertarian parties’ (Inglehart and Norris, 2016, p. 3). However, as history has shown, the cultural shift, having been heralded as a catalyst to guide the emerging post-industrial societies towards an increasingly progressive course, sparked an anti-progressive backlash, particularly from white males, the less educated of the population and the older generation, who detect a deterioration of their societal, political and economic values. Not exclusively, but to a large extent, members of this socio-economic strata reject the mounting surge of progressive values and begrudge the dislocation of their habitual values and norms, thus shifting their political allegiance to populist movements and parties. Turning to the economic inequality theory and the relevant literature (cf. Fosu, 2010; Guidetti and Rehbein, 2014), there is significant evidence showing an increasing wealth and income inequality in Western democracies. One of the reasons for this phenomenon is the growth of the knowledge economy, technology, technological automation and the decline of manufacturing industry, reduced need for manual labour, global trade with its free movement of human resources, goods and capital, diminished role of unions, the reduction of welfare benefits and lessening of the social welfare safety nets. There are also the neoliberal austerity measures that have, for example, been implemented in the post-GFC era in Greece and Spain. From a social perspective, it can be argued that increasing economic uncertainty, social deprivation and socio-economic marginalisation of the disenfranchised population, cause them to exhibit their anger, directing it at political elites and the establishment. This condition may be construed as making the less well-off socio-economic strata of the society, such as long-term unemployed, low-income workers, unskilled and semi-skilled workers in the manufacturing industry, welfare-dependent households, single parent families and others, receptive to the nativist, anti-establishment and xenophobic political platforms. The disenfranchised poor place the blame for the lack of employment opportunities, financial resources and access to social welfare and services, on these political elites and the establishment.

The rise of populism As discussed above, unquestionably, the reason for the rise of populism is that after a few decades a significant number of voters in many Western democracies are decisively responding to the intensification of economic inequality and stagnation. Social stratification and social class divisions are emerging as core issues of politics reflected, for example, in defending and reinstating nationalism, against cosmopolitanism. From an economic vantage point, there is a societal push for de-globalisation and anti-globalisation, against neoliberal globalisation. The economic and political gap, between the vast majority of the population and the economic elite and the political establishment in Western democracies, has been growing steadily ever since the 1970s and 1980s, with the rise of neoliberalism and

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neoliberal globalisation, based on the Thatcherite and Reaganite notion of ‘there is no alternative’ to neoliberalism. This doctrine was supported by Fukuyama’s ‘end of history’ theorem and through the works of Friedrich Hayek and Milton Friedman, who had much influence on Thatcher’s government and the Reagan administration policies. Subsequently, the ‘left’ under Blair in the UK, Schröder in Germany and in some other Western democracies, adopted a ‘New Left’ political and economic paradigm, which supported the neoliberal agenda. In effect, there was and still is very little difference between the political-economic agenda of the left and the right in Western democracies. There were some attempts to change the neoliberal paradigm, such as in Greece by the SYRIZA Party, but the demands and dictates from neoliberal institutions such as the IMF and the major EU economies such as Germany, with its austerity measure policies imposed by the then Finance Minister Wolfgang Schäuble, ensured that the neoliberal agenda was adhered to by the Greek government. This served as a lesson to any other EU country government that contemplated any change to the neoliberal agenda. It is worth considering that the dominance of the neoliberal globalisation agenda has been advancing at least since the 1980s and that the wealth disparity between the economic elites and the majority of the lower and middle classes has increasingly widened over the same period of time. However, curiously, the consequences of this wealth disparity only recently started to dominate the political and economic agenda in Western democracies, such as the USA, the UK, France, Austria, Italy and the Netherlands, to name but a few, through the unprecedented upsurge of right-wing populism. In order to understand the rise of populism, it may be helpful to explain why it took so long for the disenfranchised population in Western democracies to reject the neoliberal policies of the economic elite and the political establishment. Only subsequently one may turn to the question why the populist movement was able to gain traction and record such remarkable political gains in a very short period of time. Now the economic elites and the political establishment, on the centralist left and right of the political spectrum, have been forced by surprising electoral losses to populist movements, to reconsider their political and economic platforms. Thus, it helps to recognise that populism, be it political or economic, or a combination of both, has not emerged by chance, nor from nowhere and without reasons, despite the fact that it is an unwelcome phenomenon, as far as the economic elite and the political establishment are concerned. It is simply a snowballing reaction against the ever-increasing inequalities brought about by neoliberalism over the last three decades. To take a step back, it should be noted that the existing globalisation ideology has its foundations in the post-Cold War neoliberal Washington Consensus doctrine. This ideology predicted a world that was inextricably progressing towards the global acceptance of a unified and uniform set of explicit regulations, principles and standards, governing political, international and economic relations. In this vision, the power of sovereign governments would be reduced to a bare minimum with the role of intervening in case of market failures. For all practical purposes, national identity and national borders would vanish, for

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there would be no political or economic justification for them in a hyper-globalised world. National cultural and social values would be reduced to universal global values, and free market capitalism would reign globally. From a political vantage point this meant that all countries would be governed in similar ways.

Populism: the beginning of a new era It is beyond the scope of this discussion to analyse the rise of populism in a number of Western democracies, for there are subtle differences. Instead, Trump’s administration policies will be used as exempli gratia. The reason is that the USA is the largest global economy and has arguably the greatest influence on and control over the Washington Consensus organisations, such as the International Monetary Fund (IMF), the World Bank and the World Trade Organisation (WTO), to name a few. Until 2016, the USA exercised a global leadership role in advancing neoliberal globalisation. However, this changed drastically. With Trump’s electoral victory, the neoliberal globalisation era is coming to an end, and the populist de-globalisation or anti-globalisation agenda (depends on one’s point of view) is emerging. In essence, the Western democracies are experiencing a reversal of Fukuyama’s ‘end of history’ – history is back, bringing with it populism, de-globalisation, nativism and illiberal democracy. We turn back to the question why it took the disenfranchised population in Western democracies almost three generations to reject the neoliberal policies of the economic elite and the political establishment. There are a number of potential reasons. The political establishments on the left and the right successfully stifled the discussion, claiming that indeed there is no alternative. The economic elites argued either that economic globalisation would bring about a win-win situation for everyone, or from a more moderate view that the benefits from economic globalisation were sufficient, if not more than adequate, to offset the losses experienced by the working and middle classes through appropriate strategies such as job training and re-training, which would provide them with new employable and employment skills. In reality, with few notable exemptions, in EU countries, the training and retraining programmes have failed to provide the desired employment effects. However, despite the fallacy of the arguments presented by the elites and the establishment in favour of and espousing the benefits of neoliberal globalisation, neither the centrist left nor the centrist right parties in Western democracies were willing to reconsider the necessary economic adjustment process to ensure that the benefit gap between the working and middle classes, on the one hand, and the economic elite, on the other, was reduced through, for example, protection of domestic jobs. There was a further failure, namely, that neither the political establishment nor the economic elite invested adequately in social programmes, which could have lessened the ever-increasing number of unemployed and the, by then, unemployable members of the lower socio-economic strata. In short, until recently, the disenfranchised and economically marginalised sections of the population in Western democracies had nowhere to turn. Only with the emergence of

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populist leaders such as Trump, Wilders and Le Pen, along with movements and parties such as those in Germany, the Netherlands, Austria and other Western democracies, was there the possibility for the working classes who were left behind in the neoliberal globalisation game, to show their anger at the centrist political parties and the economic elite. Electorates are now sufficiently disenchanted with conventional policies and the wrangling style of politics that they will vote for what is perceived to be different. Hence, a new vision can be realistic if it is linked to programmes for implementation, which make sense and are articulated by persuasive leaders. However, there is little evidence that the establishment and the elites have genuinely addressed the inequalities that affect the working classes. They have failed to reconsider some of the long-standing discontents of those who are the losers of neoliberal globalisation, such as job protection at a national level and the perceived or real consequences of immigration, foreign investment and international trade. From this vantage point, one of the intellectual challenges is to determine to what extent it is possible to retreat from neoliberal globalisation without falling into the trap of anti-neoliberal globalisation. The potential response may be to usher in a new era of de-globalisation (for a detailed discussion, see Chapter 7), which could include some of the populist concerns without totally dismantling the economic globalisation, as well as supporting the national economy, which would produce a more advantageous environment for domestic industries and thus a better domestic and national income equality.

Populism and its impact on foreign aid In recent political debates, populism has been a key theme of domestic and international politics and international relations and, as such, should by extension also be an essential topic for foreign aid. However, with some notable exceptions, the academic literature, political rhetoric, the MDBs, many bilateral aid agencies and donor governments remain curiously silent and uncritical. Yet, despite the popularity of populism in the public and academic arena, the foreign aid community is to a large extent stepping back from the discourse. One of the many reasons may be that populism, as far as its impact on foreign aid is concerned, is difficult to define and to understand. Thus, it could be argued that populism is difficult to explore in the context of foreign aid, as well as its features and consequences from both the aid donors and the recipients. As noted above, there is both a left-wing populism and a right-wing populism. However, in the Western democracies such as the USA, the UK and many European countries, such as Austria, the Czech Republic, Hungary, Poland and Slovakia, to name but a few, there is a predominance of right-wing populism. Setting aside the USA and the UK, it could be argued that the European populist government countries are too small and too insignificant as far as their foreign aid contributions are concerned. This may be the case, but these countries have a strong voice in determining the EU policies and budget allocation for foreign aid.

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Thus, the discussion will focus on right-wing populism, characterised by nativism and anti-establishment tendencies. These two characteristics of right-wing populism have the potential to bring to the fore deep divisions in foreign policy, international relations, and thus foreign aid policies, impacting on policy-making at various levels of government and foreign aid agencies. Given that there is a poverty of discourse concerning the impact of right-wing populism on foreign aid, it seems necessary to define its parameters. This will help to avoid potential confusion, especially since the definition of populism, as it was noted above, is still wanting. To clarify, right-wing populism focuses on a division between the people, on the one side, and the establishment and the elite, on the other. For right-wing populism, this division is along the lines of nativism and authoritarianism. The latter refers to the preservation of stringent social and moral order as determined by the people, whereas the former denotes the perceived threat from non-natives and minority groups against the nation. There is another constituent of right-wing populism, namely, the aforesaid hostility towards the establishment. This antiestablishment movement points to the desire to upend existing political institutions nationally, internationally and globally, which by definition includes national bilateral aid agencies and the national contribution to and membership of international aid agencies. For a better understanding of the right-wing populism on foreign aid, it may be advantageous to discuss, however briefly, the impact of nativism and anti-establishment constituents, respectively (Kane and McCulloch, 2017).

Nativist constituents of populism and the potential impacts on foreign aid Populists such as Trump in the USA, Le Pen in France, Orban in Hungary, Wilders in the Netherlands and Kunz in Austria, to name a few, have advocated nativist populist policies, such as increased border securities, limitations on legal immigration, and deportation of illegal immigrants, with the aim of preserving national identity and retaining a ‘pure’ ethnicity. As far as Trump is concerned, he is part of a group of populist politicians who promote ethnic and racial antipathy and xenophobia, by differentiating between the native ‘pure good’ people and ‘bad’ foreigners (Canovan, 1981). Arguably, one of the significant outcomes of this political division between the native population and foreigners is the toughened attitude among the native populace on matters concerning foreign aid. In effect, Trump has significantly reduced the funding for foreign affairs and foreign aid. In terms of foreign aid, this amounts to promotion of nativism at the expense of cosmopolitanism. This not only shows strong scepticism towards the intents and consequences of foreign aid institutions and the way foreign aid is distributed, but also a distrust of the aid recipient countries. The exempli gratia is Trump’s withdrawal of UN Relief and Works Agency (UNRWA) funds for Palestine, and the withdrawal of US membership, and thus funding, of the United Nations Educational, Scientific and Cultural Organization (UNESCO).

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The anti-establishment constituent of populism and the potential impacts on foreign aid The anti-establishment feature of contemporary populism accuses the established political leadership and traditional centrist political parties of having failed the ‘ordinary’ people. They now demand new political alternatives outside the established party-political environment, with new leadership and new policies. Considering that in the USA, the UK and many European countries, there are traditionally two major centrist parties or groups of centrist parties which were in government, the dissatisfaction was and is directed against them, which gave rise to the third party or movement, namely, populism. These anti-establishment sentiments have led in the USA and some other European countries such as Austria, for example, to an infusion of new populist governments, or as in Germany where the right-wing populist party, Alternative für Deutschland (AfD) emerged in 2017 as the largest opposition party in the Bundestag. However, the anti-establishment sentiment goes further. It includes the anti-system attitude. By ruling out the legitimacy of the establishment, its political and economic systems and institutions, populism depicts itself as the antithesis of traditional domestic and foreign policies, which in turn will have an impact on foreign aid. This anti-establishment and anti-system attitude constitutes an assault on big foreign aid donor institutions and MDBs. This leads to redrawing lines on the allocation, purpose and limitations of foreign aid, in the image of populism. However, it may be argued that the rise of populism may be indicative of weak governance and a harmful establishment, which lacks the ability and the political will to respond to the needs and demands of the ordinary people’s inclusion and participation in the benefits of economic development. To sum up, populism, as it exists in the USA and Central European countries, is a backlash expressing itself, as far as foreign policy, and by extension, foreign aid is concerned, as anti-establishment and as pro-nativism It targets international institutions, including MDBs and bilateral aid agencies, at the domestic level. Populist movements perceive foreign aid agencies as instruments of the global elites, which dominate policy-making for the benefit of the establishment, at the expense of the domestic interest of the people. Despite the rise of populism with its anti-establishment and pro-nativist tendencies, MDBs and other aid agencies have thus far not demonstrated much desire to react to populism. Yet one of the consequences of the rise of populism is the push by populist governments, such as the USA, to restructure international institutions. However, more importantly, there is also the push by the populists to restructure power relations and reject the orthodox methods of the establishments and the elites. If this is translated into foreign aid, this would mean the restructuring of power relationships between governments and foreign aid agencies. Consequently, there would be much less stability within the foreign aid institutions and between these institutions and the foreign aid-seeking countries.

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Populism and its impact on multilateral development banks From the vantage point of the Washington Consensus-based MDBs and bilateral aid agencies, both political and economic forms of populism are dangerous. The reason is that both kinds of populism militate against the very foundations of the global elite-driven foreign aid institutions. The current surge of populism relates to other issues concerning trade and foreign policy. The latter, as noted, includes foreign aid. Populist leaders, such as Trump, Le Pen, Wilders, Orban, Kunz, and many others are, through their domestic and foreign policies, overtly condemning foreign aid, which in their terms does not benefit their own country’s population. MDBs that adhere to the Washington Consensus are, due to the rise of populism in Western democracies which are governing them, in a paradoxical situation. Their activities, as far as foreign aid administration is concerned, remain decidedly technical. However, the consequences of their measures are predictably highly political. MDBs and bilateral aid agencies exert an immense power not only in developing countries but also in Western donor countries. Yet they are administered by unelected officials, who represent the political elite of the rich member countries. Taking a step back, it could be argued that the Washington Consensusbased MDBs and bilateral aid agencies perceive themselves as being independent from politics. According to their own charter, they should not interfere in the domestic politics of the economic foreign aid recipient country. Of course, this is a myth. One only has to think back to the aftermath of the GFC, when the German Chancellor Angela Merkel insisted that the elected governments in Greece and in Italy be replaced by an unelected government of technocrats, in order to receive economic aid in the form of bail-outs. As far as populists are concerned, shielding international agencies like the IMF, the World Bank, the WTO and bilateral and regional aid agencies, from the demands of the ‘good’ people and leaving it to the ‘evil’ elites, has disadvantages for the national economy and politics. Foreign aid agencies and political parties and politicians under the neoliberal mantra, share a mutual desire, namely, to keep politics out of the foreign aid arena and let free-market forces reign supreme. This, since the rise of populism in donor countries, is impossible, if ever it was possible. Recent history has shown foreign aid policies becoming increasingly political, as shown by the political decision of the Trump administration to drastically cut funding for foreign aid in all its forms. Hitherto, attempts by MDBs to shield themselves from political interference are becoming increasingly difficult, if not impossible. Recent events in the USA point strongly to a situation where foreign aid is becoming increasingly politicised, beyond any existing politicisation. Any efforts to separate foreign aid from politicisation may, under the conditions of populism, have an opposite effect as the recent history of the USA’s cuts to UNESCO and other agencies have shown. This is the current paradox of foreign aid integrity. While the dominant neoliberal approach is to keep politics out and focus on neoliberal economics, the populist movement, by its own definition, is demanding to put politics onto the foreign aid agenda.

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Thus, any attempts by the MDBs to keep foreign aid de-politicised and within the realm of neoliberal economics will most likely antagonise the populist donor governments, forcing them to adopt much more radical stances and thereby threaten the existence of the MDBs. This is not to be construed as an argument against the technical expertise that MDBs and bilateral aid agencies have to offer, but as a need for them to respect and cultivate a more restrained and engaged form of policies. To be engaged with foreign aid donor and recipient countries and the respective demands of the population has the potential to bring to the fore a new, broader and more flexible approach to PEA.

Conclusion With the rise and acceptance of populism, many foreign aid donor countries have become more inward-looking, accepting a certain level of nativism at the expense of cosmopolitanism. They have rejected the neoliberal globalisation agenda, accepting some degree of de-globalisation and retreated from unbridled economic neoliberalism to mercantilism and protectionism. As noted above, these changes, generally ascribed to populism, are neither inherently good nor evil. If the argument of increased instability brought about by the rise and characteristics of populism stands to reason, the MDBs and bilateral aid agencies may have to do the following: (1) be prepared for precipitous changes in the political power relationships, the economic circumstances of individual foreign aid-seeking countries and the rules and guidelines by which they operate and impose on developing countries; (2) accept a wide variety of potential theoretical frameworks to develop appropriate conditions and strategies; (3) recognise political, economic, social and cultural idiosyncrasies of foreign aid. Finally, populist governments will become increasingly willing to intervene directly in the operations of their own bilateral aid agencies as well as the operations and aid budget distribution administered by the MDBs and bilateral aid agencies. They will put strategies and guidelines into place, with the aim of controlling foreign aid policies and allocations, to purposefully achieve their own national interests. In practical terms, namely, applying PEA within an environment of populism in developing countries, seeking foreign aid, there is a need to focus on the power structure, which is inherently anti-globalisation, potentially illiberal, and the populist policies’ positions. This means that PEA practitioners and researchers need to engage with the questions on how populist interest groups in foreign aid-seeking countries operate politically, rather than economically, which requires a specific communication narrative (see Albertazzi and McDonnell, 2008; Rooduijn and Pauwels, 2011). From both the right-wing and the left-wing populist perspectives, the rhetoric will be couched in anti-elitism and the claims by the power-brokers in aid-seeking countries that they represent the ‘pure people’, and not the economic national interests of the industrial elite, as may be common in neoliberal economies, or as a Washington Consensus-based conditionality. This may mean that the populists’ substantive position vis-à-vis the existing neoliberal foreign aid agencies

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will be to look at different methods to determine the needs for economic development, resulting in opposing interpretations about how to overcome the potential barriers to implementing a foreign aid intervention successfully. Although it may be argued that there is another additional dimension, namely, a left-wing versus a right-wing populist position, conceptualised as being on opposite sides of the political spectrum, the reality, as we have shown, is that right-wing and left-wing populism are pursuing similar aims, a hostility towards cosmopolitanism, globalisation, elites and the establishment. This, of course, requires a new approach to PEA using diverse theoretical frameworks.

References Albertazzi, D. and McDonnell, D. (2008). Introduction: The Sceptre and the Spectre. In Albertazzi, D. and McDonnell, D. (eds) Twenty‐First Century Populism: The Spectre and the Sceptre. London: Palgrave, pp. 1–14. Canovan, M. (1981). Populism. Party Politics, vol. 15 (1), pp. 29–48. De Lange, S. (2007). A New Winning Formula: The Programmatic Appeal of the Radical Right. Party Politics, vol. 13 (4), pp. 411–435. Fosu, A. K. (2010). Growth, Inequality and Poverty Reduction in Developing Countries: Recent Global Evidence. OECD Background Paper for the Global Development Outlook. Paris: Organisation for Economic Co-operation and Development. Guidetti, G. and Rehbein, B. (2014). Theoretical Approaches to Inequality in Economics and Sociology. Transcience, vol. 5 (1), pp. 1–15. Hsu, L-C., Yang, C. C. and Yang, C-L. (2008). Positive- Versus Zero-Sum Majoritarian Ultimatum Games: An Experimental Study. Journal of Economic Behavior & Organization, vol. 68 (4), pp. 498–510. Inglehart, R. (1971). The Silent Revolution in Europe: Intergenerational Change in Post-Industrial Societies. The American Political Science Review, vol. 65 (4), pp. 991–1017. Inglehart, R. F. and Norris, P. (2016). Trump, Brexit, and the Rise of Populism: Economic HaveNots and Cultural Backlash. HKS Faculty Research Working Paper Series. Cambridge, MA: Harvard University. Illing, S. (2017a). Populism, Defined in 170 Words. VOX, 30 May 2017. Retrieved from www.vox.com/policy-and-politics/2017/3/30/15078176/donald-trump-bernie-sanderseurope-populism (accessed 19 January 2018). Illing, S. (2017b). Why Trump’s Populist Appeal Is About Culture, Not the Economy. VOX, 27 March 2017. Retrieved from www.vox.com/conversations/2017/3/27/ 15037232/trump-populist-appeal-culture-economy (accessed 19 January 2018). Kane, C. and McCulloch, C. (2017). Populism and Foreign Policy: Deepening Divisions and Decreasing Efficiency. Global Politics Review, vol. 3 (2), pp. 39–52. Kim, J. (2007). Fears of Foreign Ownership: The Old Face of Economic Nationalism. SAIS Review, vol. 27 (2), pp. 167–177. Klein, B. H. (1991). The Role of Positive-Sum Games in Economic Growth. Journal of Evolutionary Economics, vol. 1 (3), pp. 173–188. Landreth, H. and Colander, D. C. (2002). History of Economic Thought. Boston: Houghton Mifflin. Lim, L. (2017). Politics Trumps Economics in US Trade Policy. Straits Times, 21 October 2017. Retrieved from www.straitstimes.com/opinion/politics-trumps-economics-in-us-trade-policy (accessed 25 January 2018).

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March, L. (2007). From Vanguard of the Proletariat to Vox Populi: Left‐Populism as a ‘Shadow’ of Contemporary Socialism. SAIS Review, vol. 27 (1), pp. 63–77. March, L. (2011). Radical Left Parties in Europe. London: Routledge. Meier, P. (2008). A Wave of Protectionism? An Analysis of Economic and Political Considerations. Working Paper No. 2008–2002. Ottawa: Bank of Canada. Mudde, C. (2004). The Populist Zeitgeist. Government and Opposition, vol. 39, pp. 541–563. Mudde, C. (2007). Populist Radical Right Parties in Europe. New York: Cambridge University Press. Mudde, C. (2017). What Populism Is Not. Vice News, May 9, 2017. Retrieved from https:// news.vice.com/en_us/article/vbz874/what-populism-is-not (accessed 19 January 2018). Norris, P. (2005). Radical Right: Voters and Parties in the Electoral Market. New York: Cambridge University Press. Pappas, T. S. (2016). Modern Populism: Research Advances, Conceptual and Methodological Pitfalls, and the Minimal Definition. In Research Encyclopaedia of Politics. Oxford: Oxford University Press, pp. 1–20. Reinert, E. S. and Reinert, S. A. (2011). Mercantilism and Economic Development: Schumpeterian Dynamics, Institution Building, and International Benchmarking. OIKOS, vol. 10 (1), pp. 8–37. Rooduijn, M. and Pauwels, T. (2011). Measuring Populism: Comparing Two Methods of Content Analysis. West European Politics, vol. 34 (6), pp. 1272–1283. Taggart, P. (2000). Populism. Buckingham: Open University Press. Taggart, P. (2004). Populism and Representative Politics in Contemporary Europe. Journal of Political Ideologies, vol. 9 (3), pp. 269–288. Urbinati, N. (2013). The Populist Phenomenon. Raisons Politiques, vol. 51 (3), pp. 137–154. World Bank (2007). Tools for Institutional, Political, and Social Analysis of Policy Reform: A Sourcebook for Development Practitioners. Washington, DC: World Bank. Zaslove, A. (2008). Here to Stay? Populism as a New Party Type. European Review, vol. 16, pp. 319–336.

6 THE CHALLENGE OF ILLIBERAL DEMOCRACY

Introduction The ideals of Western liberal democracy are under siege from various quarters. Nations with a long history of providing foreign aid either directly through their national aid agencies or indirectly through contributions to multilateral development banks (MDBs), such as the USA, Germany, the UK and Japan, being the largest development aid contributors (see SEEK Development, 2018) are repudiating the fundamental foreign aid principles of the Washington Consensus (Jakupec, 2018). Given the rise of illiberalism, these countries are adopting political ideas which essentially weaken the existing neoliberal foreign aid agenda, pioneered by the MDBs, such as the World Bank, the Asian Development Bank (ADB), the European Investment Bank (EIB), the African Development Bank (AfDB) and others. The issue is that with the rise of populism in Europe, the USA and other regions, the orthodox liberal democracy is being replaced by the illiberal democracy, which is displaying populist tenets such as anti-globalisation, nativism, a distrust of the elites and the establishment and anti-neoliberalism. The term ‘illiberal democracy’ was coined by Zakaria (1997), denoting a governing system in which, although elections are held at specific intervals, the population is removed from knowing about the actions of those who exert real political power due to a lack of civil liberties. It is a problematic notion and concept, which we will ‘unpack’ through subsequent discussion. Notwithstanding the problematics concerning the definition of illiberal democracy, let us turn to the scholarly literature and note that the ideas of illiberal democracies not only challenge the established understanding of foreign aid, but we also acknowledge that our own understanding of illiberal democracy in a context of foreign aid and Political Economy Analysis (PEA) is limited (Santiso 2001; Krauland, 2011; Hagmann and Reyntjens, 2016). In order to gain a better understanding of powerful political movements, such as illiberalism and illiberal democracy on foreign

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aid and PEA, we should turn to the basic notions of democracy, liberalism and illiberalism and at the same time interpret illiberal democracy as a counter-movement to the modernisation development theory which dominates much of the Western neoliberal MDBs’ development aid agenda. Our point of departure is that with the rise of populism, liberal democracy is experiencing a credibility crisis. Thus, it is not surprising that some of the prevailing contemporary debates among the foreign policy and international relations community are focusing on the impact of illiberal democracy on the rules-based liberal democracy, albeit from different vantage points (Zakaria, 2016; Gaughan, 2017; Hegedüs, 2018; Levitsky and Ziblatt, 2018; Wilkin, 2018), expressing concerns about the future of liberal international rules-based world order embedded in the values and norms of liberal democracy. Yet despite the fact that the world has experienced over seven decades of Western liberal democracy, participation in and contribution to the debates from the international finance institutions (IFIs) and multilateral and bilateral institutions are curiously absent. In more recent history, namely, since the emergence of the Washington Consensus (see Williamson, 1990), donor nations and IFIs have been promoting the advantages of the democratic political systems, mainly in the form of liberal democracy along with the neoliberal economic agenda. The ideological alliance between liberal democracy and neoliberalism, or to put it differently, a link between the political ideology and the economic theory, has transcended the foreign aid policy areas and promoted economic development as aid conditionality. The aim of linking the neoliberal economic and politics impacted on the social, political and cultural norms and values, and thus is present in the political discourse and is embedded in Washington Consensus institutions (World Bank, 2009), and other development aid organisations. Taking a step back, it may be noted that since the Bretton Woods conference, Western governments have, for much of the past 70 years, adhered to the principles of democracy and constitutional liberalism. Thus, it is difficult for the IFIs and other Washington Consensus-based countries to imagine these two concepts being ideologically, politically and economically separated or disconnected. The point is that, since the Bretton Woods conference, constitutional liberalism has led to democracy, but democracy did not necessarily bring about constitutional liberalism in developing countries. One of the reasons is that there is a tension between democracy and constitutional liberalism concerning the extent of governmental authority. To explain, constitutional liberalism is concerned with the limitation of government power, whereas democracy is focusing on the accrual and exercise of government power. This interrelation, as we will show, has a parallel in illiberal democracy, which affects the question of the Washington Consensusbased conditionalities and thus Political Economy Analysis (PEA).

Democracy, liberalism and illiberalism We are confronted by a number of basic concepts, namely, liberalism, democracy and illiberalism. Within the context of this discussion, we will focus on liberal or constitutional democracy as counteracting illiberal democracy. For a better

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understanding, there is a need to unpack, however briefly, all these concepts. There is, however, a clarification in place, as noted in Chapter 1, that it is essential to understand. In much of the international relations and political sciences literature, liberalism and democracy are presented as an interconnected concept (Bobbio, 1990; Knowles, 1995; Samet and Schmeidler, 2003). However, essentially, liberalism and democracy are two different concepts. Despite the danger of oversimplification, it could be said that, in contemporary terms, liberalism is an ideology, supporting values such as the rule of law, free market philosophy, and individual liberty. In this sense, liberalism is an aim or an end in itself. Although it may be tempting to define liberalism in more detail, for the purpose of this discussion it should suffice to focus on liberal democracies, which may be defined as a type of governance that accentuates and safeguards individual freedom and rights. The latter is seen as immutable, namely, as being inherent to the individual and cannot be rescinded or transferred to others. In liberal democracies, the rights and the freedom of individuals are usually guaranteed by the constitution or statutory declarations, and any interference is inadmissible. The advantage of the liberal democracy is that no majority holding political or other forms of power may suppress the rights and freedom of minorities, without breaching these protections. Liberal democracy may be traced back to the Age of Enlightenment and the writings of philosophers such as Thomas Hobbes, John Locke, and Jean-Jacques Rousseau (Dunleavy and O’Leary, 1987; Laskar, 2013). As a generalisation, democracy may be perceived as a process, or a means to an end, which may lead to diverse varieties of policies, outcomes or forms of government, including markedly illiberal forms of government. Let us explain. Before any conceptualisation, and prior to discussing illiberal and liberal democracy and the former’s impact on foreign aid and PEA, it may be appropriate to clarify democracy. It should be acknowledged that democracies come in various forms, including non-liberal and non-illiberal forms of democracy, and as guided democracy, managed democracy, delegative democracy and more (see Brown, 2001; Krastev and Holmes, 2012). Although the classifications depend on the methodology of categorisation, as a matter of convenience our point of departure for the classification of democracies is based on the concepts of pluralisation and contextualisation (Hendriks, 2010; Kurki, 2010). This means that democracies may be categorised as being contestable, namely, that the sense of critical contestability generally denotes that a concept may be presented from a variety of different vantage points, each with its own epistemic framework at any given epoch (Kurki, 2010). If this stands to reason, then no two forms of democracies are identical and thus existing attempts to pigeonhole democracy into either the liberal or illiberal democracy may be perceived as an expedient generalisation, which does not necessarily cover the entirety of the political, social and cultural system of a country, for there are diverse variables to be taken into consideration.

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A note on liberal democracy Arguably liberal democracy rests on two pillars, one is the will of the people expressed as popular preferences concerning policies, however these are voiced, and the other one is the rule of law, including the law of a constitutional system (Offe, 2017). Today we are witnessing a situation where there is a strong will of the people in democracies, but a weakness in the rule of law and rule of a constitution. These two pillars may be understood as that they secure the rights of the political opposition and minorities (ibid.). Returning to the popular policy preferences, we have to further understand that policies do not have truth values, and as such they are contestable. To put it in the context of foreign aid, a recipient country by the virtue that it is the weaker partner in the principal-agent power relationship (discussed in detail in Chapter 9) does not have the right to contest the policies of the MDBs and bilateral aid agencies. Thus, even the neoliberal democracy rule that ‘there is no alternative’ is contestable and if MDBs were built on norms of liberal democracies, there would be foreign aid policy alternatives, taking, for example, into consideration the will of the people in the foreign aid recipient countries. In such a situation, PEA as an instrument of power relation evaluation must include liberal democracy norms. According to Offe (ibid.), the second constituent of the rights of opposition is the governance capacity, which includes ‘Selbsteinwirkung’ (see Heller, 1983), namely, the capacity of the society to act upon itself through public policy. If we accept Heller’s proposition, agreeing that the society in a foreign aid recipient country has the right to act upon itself through public policy, established through democratic means based on ‘the rule of the people’. this means that no one else – neither donor government or MDBs – should assume a dominant role in power relations between principals (donor) and agents (recipient). It may be noteworthy that currently PEA as practised by MDBs and other Washington Consensus-based donor agencies focuses on vested interests within the recipient country, which may hinder the foreign aid intervention, without any regard to the power of the people. Accepting that the power relation focus of the current version of PEA refers to the elites and the establishment, it is understandable that discontent and distrust towards donor agencies may emerge among the disadvantaged socio-economic groups, which gives support to populism and illiberal democracies, an interesting cause and effect scenario, currently ignored by PEA.

Nexus between democracy and constitutional liberalism For a better understanding of the nexus between the above-stated liberal or constitutional democracy, and illiberal democracy, we will in the first instance very briefly address the relationship between democracy and constitutional liberalism. Constitutional liberalism represents government goals and must not be confused with electoral processes in aid to select a government. It seeks, on the one hand, to protect the liberty of individuals and, on the other, it is constitutional because it is firmly couched in the rule of law.

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With reference to the nexus between democracy and constitutional liberalism, we are focusing on the discord between democracy and constitutional liberalism, especially on the limitation of government power as a constituent of constitutional liberalism, and the accrual and application of government power, which may impact on the power relation between foreign aid donors and recipients. Due to this dichotomy, there is often a tendency by democratic governments to assert that they have absolute power expressed as sovereignty, leading to a centralisation of power by extraconstitutional measures. The democratically elected governments in a range of Western countries, including the USA, Poland, Hungary, Italy, the Czech Republic and others, have turned to illiberal democracy. These governments assert that they represent the ‘true people’. In doing so, they increasingly violate the powers and rights of other political, constitutional, judiciary and social constituents of the country at the horizontal as well as vertical levels. Here we are referring to the horizontal level as a usurpation concerning other branches of government (legislature, judiciary and administration) and at vertical levels, we denote usurpation of local authorities, private enterprises and non-government groups.

Delineating illiberalism and illiberal democracy Illiberalism is an elusive term. It means different things to different people and political movements. It may be found in democratic and non-democratic nations and societies (Sonnenfeld and Taylor, 2018), in monarchies, dictatorships, autocracies, and theocracies (Levitsky and Way, 2010; Scrafton, 2018; Sonnenfeld and Taylor, 2018). It may be described as an ideological viewpoint, which rejects the need for independent institutions such as independent judiciary and regulatory agencies which may exercise checks on the government. Illiberal ideology, in practice, tends to reject the idea of legitimate and lawful dissent in the public sphere (Schenkkan, 2018) and to discard international conventions (Desch, 2008). Some academics such as Rupnik (2016) align illiberalism with populism and nativism. To bring some clarity into the understanding of illiberalism and illiberal democracy, it may be important to note that illiberalism is not necessarily linked to any specific political ideology or a form of government. It may be defined as being anti-democratic which may lead to authoritarianism and being rooted in principles opposed to individual freedoms, which is one of the foundations of liberalism. Illiberalism advocates a restoration of institutionalism, as opposed to individualism. In much of the academic literature, illiberalism is defined in negative terms (see Desch, 2008; Holmes, 2016; Hinsey, 2017; and for an opposite view, see Simpson, 2017). Others, such as Hazony (2018), suggest that illiberalism is a meaningless notion. Be this as it may, a number of Western democracies have adopted illiberal principles. Let us turn to illiberal democracy which refers to ‘democratically elected regimes, often ones that have been re-elected or reaffirmed through referenda are routinely ignoring constitutional limits on their power and depriving their citizens of basic rights and freedoms (Zakaria, 1997, p. 22).

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We have seen that both illiberalism and illiberal democracies are elusive terms and concepts, which leads us to the necessity to unpack the latter in more detail. Let us restate that illiberal democracy existed prior to the recent rise of populism (Levitsky and Way, 2010). Thus, the alignment of illiberal democracy and populism is not a foregone conclusion. We should remember that illiberal democracy is an ideology, while populism is a movement, which is subject to continuing change. Without wishing to go into further discussion concerning the history of illiberal democracy, it should suffice to note that some Western European countries became liberal democracies with the beginning of the twentieth century, that is after the end the First World War, especially in former monarchies such as Germany and the countries of the Austro-Hungarian Empire. However, today the illiberal democracy is experiencing a renaissance and is linked to the rise of populism (Rupnik, 2016). In contrast to the above-stated liberal democracies, illiberal democracies do not protect the freedom and rights of an individual. All rights are seen as granted at the pleasure of the government of the day and are subject to annulment. Thus, as opposed to liberal democracy, any minority may be subjected to repression by the will of the majority and the government (Zakaria, 1997). In Zakaria’s words, governments that tend to ignore constitutional boundaries concerning their power and denying their citizens basic freedoms and rights can be classified as illiberal, but are they democratic? The answer is a qualified yes, as long as one defines democracy as the expression of the will of people through free and democratic elections (Schedler, 2002). Since the election of Donald Trump, the Brexit referendum, the rise of right-wing populist movements in Hungary, Poland, Austria, the Czech Republic, and Italy, among others, the idea of illiberal democracy, as delineated by Zakaria (1997) has been successfully promoted as an antithesis to liberal democracy. Although Zakaria viewed illiberal democracy in negative terms, claiming that it is lacking robust constitutional democracy and liberal beliefs, some political leaders such as Viktor Orbán (Hungarian politician and Prime Minister from 2010–) argue that illiberal democracy is a positive concept (Buzogány, 2017). As a positive notion, illiberal democracy is identified as a reaction of the ‘periphery’ (the disenchanted and disenfranchised population) against the ‘centre’ (the political and economic establishment and the elites), whereby liberal democracy is perceived by the former population as promoting the interests of the strata of the latter population. From this vantage point, illiberal democracy is defined as a re-politicised and bottom-up majority-ruled democratic substitute for liberal democracy. In an illiberal democracy, working and other lower socio-economic classes, so the argument goes, regain political power and economic advantages from the elites and the establishment. Thus far, however, there is insufficient evidence to show that in reality, this may be the case. From a theoretical perspective, we could analyse illiberal democracy from various vantage points, for example, we could turn to Gramsci’s theory of hegemony (see Cox, 1983; Davidson, 2005), Max Weber’s concept of Führerdemokratie (leader democracy) (see Röhrich, 2013; Llanque and Schulz, 2015); or Laclau and Mouffe’s (1985) exposition of radical democratic politics; (see also Laclau, 2014). Despite these different views, the proponents of illiberal democracy argue within the realm of

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populism that the voice of the disenfranchised nativist population takes precedence over the voices of the cosmopolitan elite and political establishments. Given the aforementioned disenchantment with liberal democracy (and cosmopolitanism), we have, over the last few years, not only witnessed the rise of illiberal democracies in Western democracies, since the US presidential election in 2016, we have been able to observe the illiberal policy tendencies being pursued by the Trump administration’s approach to foreign affairs, including foreign aid. At the same time, China is increasingly overtly showing its ambition to expand its geopolitical interests. With reference to the former, there are signs that the Trump administration is increasingly embracing illiberal democracy values, seeing neoliberal democracies as a threat to its own political ambitions. This is demonstrated by a suspicion of and the hostility of Trump’s USA towards multinational and supra-lateral agencies such as UNESCO and NATO, and the withdrawal from the Trans Pacific Partnership Agreement and the Paris Accord on Climate Change. As far as China is concerned, its foreign aid policy sees the promotion of Western democracy models as a threat to its geo-strategic (economic and political) interest. This is counteracted by China’s Beijing Consensus, which politically is being used as a form of illiberal ‘soft power’ in international relations (Death, 2011; Polyak, 2018).

The failure of liberal democracy and the rise of illiberal democracy The failure of liberal democracy as a governance ‘model’ for developing countries is caused to a large extent by the far-reaching chasm between the ideals, values and norms of liberal democracy, and the way it is promoted, implemented and allowed to be practised in developing countries. Thus, with the rise of populism in recent times, the aforesaid chasm has been extended, opening the door for illiberal democracies to flourish as a form of polarised and partisan politics. Let us explain, liberal democracy is fundamentally a precarious form of governance, because any reconciliation between its values, norms and epistemic constituents rarely produces an inherent political equilibrium, or level playing field, as far as power relations are concerned. In short, power is vested in the elites and the establishment at the domestic level or, as far as foreign aid is concerned, it is vested in the donor agency. Since the elites, the establishment and the donors have adequate power, they have little interest in considering the preferences of the lower working and middle classes, or the population of the aid-seeking country. However, when large numbers of the population mobilise and seek power, for example, through the election of Trump in the USA, the rise of illiberal populist movements in Western countries and Brexit, the compromise offered by the elites, the establishment and the liberal democracy governments very seldom produces sustainable safety measures to guard the rights and liberties of those not being represented at the negotiating table. After all, the political establishment, the elites, and the donor organisations favour liberal autocracy which allows them to impose their rules on others to protect their own rights and benefits exclusively. In other words, liberal democracies provide an impetus for a society that is divided by two, not mutually

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exclusive cleavages, one politico-economic and the other socio-cultural. The former is characterised by the wealth gap that sets the elites, the establishment and the rich in competition with the rest of the society, and the other is the identity division splitting the ethnic, religious, and ideological majority from the non-nativist minority. If this stands to reason, liberal democracy over time has the predisposition to fade into either an illiberal democracy or liberal autocracy, as we have witnessed in the various afore-mentioned European countries, such as Hungary, Italy, Austria, the Czech Republic and Poland, among others. The current political developments in Europe and the USA imply the vexing probability that liberal democracy may be a passing political phenomenon. As some lament its failures, they should remember that illiberal democracy is not the only form of governance to replace liberal democracy. Be this as it may, when it comes to the rise of illiberal democracy, we may well turn to Zakaria’s prophecy, namely, that [I]lliberal democracies have become more the norm than the exception. By Freedom House’s count more than 60% of the world’s countries are electoral democracies – regimes in which political parties compete and come to power in regularly scheduled elections – up from around 40% in the late 1980s. However, the majority of these democracies fail to provide equal protection under the law. (Rodrik and Mukand, 2016, n.p.) If this trend continues, liberal democracy will be declining, especially if the Beijing Consensus becomes an even stronger competitor to the Washington Consensus than it is today. The emerging impact of domestic and international political agendas, such as a move towards nativism and economic emphasis on protectionism in the USA, will impact on foreign aid and especially the legitimacy of the dominant modernisation theory. That is, as the USA is retreating from its role of providing leadership as the vanguard of liberal democracy on a global scale, the illiberal democracy movement will gain traction.

Illiberal democracy and dominant development theory Notwithstanding the range of development theories (So, 1990) discussed in the scholarly literature, such as dependency theory (Dos Santos, 1970; Frank, 1971; Prebisch, 1971; Ferraro, 1996; Herath, 2008), world systems theory (Wallerstein, 1979, 2000a, 2000b, 2004; Nölke, 2014), structural adjustment development theory (Landes, 2002; Wade, 2004; Nhema and Zinyama, 2016) and others, the Washington Consensus-based MDBs and other like-minded bilateral agencies arguably are pursuing modernisation theory as the predominant idea governing the foreign aid agenda (Green, 2008). Modernisation theory emphasises economic development, political stability and social and cultural change. Its main critique comes from the proponents of the dependency theory claiming that Western

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nations impose their rules, values, norms and politics on developing countries. Modernisation theory provides a substantive basis for advancing neoliberal political and economic values (Bull and Bøás, 2012; Rufaro Mawire, 2013; Nhema and Zinyama, 2016), which is opposed by the illiberal democracy ideology. Let us turn to unpack, however briefly, the basics of modernisation theory. According to Eisenstadt: [M]odernisation is the process of change towards those types of social, economic, and political systems that have developed in Western Europe and North America from the seventeenth century to the nineteenth and have then spread to other European countries and in the nineteenth and twentieth centuries to the South American, Asian, and African continents. (1966, p. 1) As Basset (2017, n.p.) explains: Despite its failings Modernisation theory has been one of most influential theories in terms of impact on global affairs. The spirit of Modernisation theory resulted in the establishment of the United Nations, The World Bank and the IMF, global financial institutions through which developed countries continue to channel aid money to less developed countries to this day, although there is of course debate over whether aid is an effective means to development. There are a number of issues that need to be noted. First, in a contemporary context, modernisation theory assumes that the Western neoliberal economic values and norms such as globalisation, Western-type democratisation, privatisation and market economy are technically and economically superior to any other development aid theory. Second, modernisation theory is based on two main aspects: (1) modernisation theory attempts to provide an explanation why developing countries are under-industrialised; and (2) it proposes how to overcome the lack of economic development (Przeworski and Limongi, 1997). Thus, it is not surprising that much of the scholarly literature concerning development studies engages critically as well as sympathetically with modernisation theory, however, with an emphasis on internal factors of developing countries, such as agriculture and other food production, literacy and human development, and economic and political aspects. It takes into consideration the lack of infrastructure and communication. According to modernisation theory, all these and other factors are responsible for ‘economic under-development’. Being focused on economic issues as a catalyst for development through modernisation, the differences in historical social and cultural values and norms are seen as being of little importance. Modernisation theory is based on the premise of a unilinear development principle. That is, developing countries are perceived by Washington Consensus-based MDBs and other donors to be in the initial phases of industrial and economic development and through the provision of foreign aid interventions, the

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developing countries will improve and submit themselves to the same type of economic, political and societal transformations as the developed countries have undergone (Linklater, 2008; O’Brien and Williams, 2010). In other words, modernisation theorists assume that development is a universal process, which will lead to the same economic prosperity outcomes across all developing nations globally. The unresolved problem is that the unilinear development principle assumes a linear process as advocated by Fukuyama (1989), proclaiming the victory of liberal democracies and capitalism, which has been embraced by Washington Consensusbased MDBs, is, as ‘history’ has shown, fundamentally flawed. In accepting Fukuyama’s worldview, MDBs and other foreign aid agencies have positioned development firmly in a Western-centric epistemic framework. Concurrent with the belief in the universal processes, modernisation theorists assume a priori that a complete transformation within a developing country needs to take place in order to become ‘modern’ or industrially and economically developed in the image of the developed nation, and furthermore that economic growth relates to liberal democratisation. Thus, given the blind faith in the neoliberal ideology in Western democracies, it is not surprising that over the last three decades modernisation theorists have argued in favour of neoliberal globalisation. In parallel, there is an accord among Washington Consensus-based MDBs and other like-minded donor agencies that the ‘only’ suitable foreign aid approach is to invoke liberal democratisation in developing countries, based on Western neoliberal economic development (Huntington, 1971; Huntington, 2009). This, however, does not stand necessarily to reason. The exempli gratia is China, which domestically has succeeded in modernising its economy, without pursuing the Western liberal democratisation, and through its Beijing Consensus is supporting economic growth in developing countries, without the viewpoint of liberal democratisation. In short, China acknowledges that while ‘modernisation’ is desirable, countries should be able to follow different ways. Let us turn now to illiberal democracy in the context of modernisation theory. As a preliminary observation we note that the past few years, since the Global Financial Crises (GFC) have proved that if guardians of democratic liberalism neglect to deliver on their promises of peaceful economic growth in developing countries, the political settings will be ripe for the rise of disagreeable alternatives. Today these alternatives are the rise of illiberalism, in all its various forms. To be sure, illiberal democracy is often portrayed as a particular form of democratisation which does not entirely fit into orthodox forms of modernisation theory (Brown and Jones, 1995). It is important to understand that the roles of vested interests, the elites, the establishment and socio-economic classes appear to be different in the Western modernisation theory in comparison to the values and norms of illiberal democracies. Thus, the rise of illiberal democracies disputes the orthodox wisdom of liberalism and modernisation theory. The understanding of illiberal democracies among Western MDBs is inadequate to address the political consequences of the illiberal democracy movements as these may relate to PEA. Given this situation, there is a case to be made for Washington Consensus-based MDBs

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and other like-minded bilateral foreign aid agencies to analyse the dialectics between modernisation theory and illiberal democracies in more depth through PEA (Engberg and Ersson, 2001). However, the current rise of the illiberal democracy movement is continuing to benefit from the inherent failings of liberal democracy, especially in the context of the manner in which the elites and the establishment have arguably excessively benefitted from the mechanisms of neoliberal economics, such as globalisation. As it stands, the assumptions and beliefs governing the dominant modernisation theory go against the populist movement and strengthen the attractiveness of illiberal democracy, especially at the recipient countries’ levels. The attractiveness of illiberal democracy for recipient countries is often focused on differentiating between economic experiences based on the Beijing Consensus and political examples, which are adopted from other liberal or illiberal democracies.

Illiberal democracy and the Beijing Consensus There is a compelling argument to be made that the People’s Republic of China’s (PRC) political stability and the associated rapid economic growth could not have been realised if the PRC government had followed the Western liberal or even social democratic course. With the strong economic development at the domestic level, the political leadership in Beijing is mindful of the potential consequences in allowing a more pluralistic political environment. Thus, the outcome is adherence to a soft version of illiberal democratic ethos (cf. Levitsky and Way, 2002). However, when it comes to foreign aid, China is, in comparison to the Washington Consensus-based MDBs, much more flexible as far as political ‘conditionalities’ are concerned. In short, under the Beijing Consensus, the aid recipient countries have no obligation to pursue any form of governance. The Beijing Consensus is based, among other things, on the premise of political, economic, social and cultural non-interference. However, this does not mean that the countries receiving Chinese aid development do not wish to pursue the economic and political models based on China’s experience and pathways, although in modified forms, with the view to achieving rapid economic growth. For a better understanding of the appeal of the Beijing Consensus to developing countries, let us, however briefly, outline two interdependent phenomena: the social disenchantment with liberal democracy and the political vantage point of the model of illiberal democracy. As stated previously, in the first decade of the twenty-first century, and especially following the Global Financial Crisis (GFC) in 2008, the developed and the developing world have seen an increased disquiet among the working and middle classes with liberal democracy. Developing countries, not benefitting from the world economic growth, are increasingly disenchanted with the Washington Consensus. They have been adversely affected by the IMF’s and the World Bank’s structural adjustments and by depredations of financial contagion, which are seen as

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consequences of being subjected to global financial markets dominated by the neoliberal free-market ideology (Halper 2012). From a political vantage point, in many cases, elections in developing countries have contributed little, if anything at all, to release them from autocratic or semiautocratic governing rule. Instead, in many cases, the elections have produced pretend democracies, which are governed by personality-dominated regimes, with a lack of respect for the rule of law, creating a liberal democracy void, which is being filled by the Beijing Consensus and its model of illiberal democracy. The Beijing Consensus-based democratic illiberalism presents the authentic, long-term, geopolitical response to the Washington Consensus. The former is politically effortlessly transferable and is attractive to the disaffected and disenfranchised developing countries seeking foreign aid. The Beijing Consensus-based illiberal democracy model is exceptionally formidable because it includes both internal and external constituents, namely, it provides guidelines for domestic governance and for conducting international relations. With reference to the former, China’s government has over the last 25– 30 years developed a strategy for implementing illiberal capitalism at home, which has fostered and achieved unprecedented economic growth, combined with poverty reduction. This has been achieved without triggering any significant cracks in the authoritarian political manipulation usually found in one-party systems. Following on from the domestic political-economic success, the Chinese government has affirmed a foreign policy viewpoint which rebuffs the neoliberal proposition that the global and international institutions such as the Bretton Woods institutions and Washington Consensus-based IFIs should be able to influence the social, political and economic structure of developing nations. This strategy represents a self-strengthening progression of illiberal democracy. To conclude, China with its Beijing Consensus is defined as an illiberal democracy model because economic advancement is increasingly becoming a distributor of both political and economic ideas to developing countries, disillusioned with the democratic liberalism. If this stands to reason, China is restructuring the existing ‘new global order’ replacing it by an international order rooted in illiberal democracy. To illustrate the point, in early 2018, China proclaimed its plan to form an international development cooperation agency (Zhang, 2018). This new agency will primarily concentrate on foreign aid planning, monitoring and evaluation. These components of the project cycle are at present underdeveloped within the existing structures (ibid.).

Illiberal democracy and foreign aid: towards a new conceptual framework In order to understand the conceptual framework of illiberal democracy, it may be useful to make a critical review of the assumptions underpinning the idea called liberal democracy. As Bell and Jayasuriya (1995) point out, one of the fundamental fallacies advanced by the proponents of liberal democracy is the belief that the

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liberal democracy has universal values and norms, as framed by Western philosophical, cultural, societal and political tradition. They offer no justification for the claims of universality of liberal democracy, except the unsubstantiated argument that the rest of the world is aspiring to be politically emancipated by the values and ideals of liberal democracy, especially, however, of neoliberal democracy. This blind belief in the universality of liberal democracy has to a large extent its roots in Fukuyama’s discredited claim that it is the ‘end of history’ in Hegelian terms. Thus, an ideological politico-economic global contest has come to an end. Neoliberalism is, according to Fukuyama, the undisputed winner. More to the point, this belief, devoid of authentic comprehension, critical analysis or epistemic insight, has been embraced by Washington Consensus-based IFIs and bilateral aid agencies to advance liberal democracy globally to developing countries, without much evidence to address local political, economic, societal and cultural needs through PEA. In order to succeed with the acceptance of the liberal democracy values by developing countries the Washington Consensus-based MDBs and like-minded bilateral aid agencies have in part adopted a mixture of ‘two distinct and opposing theories of economic development – neoliberalism and modernisation theory’ (see Reyes, 2016, p. 42). However, the attempts to impose economic encouragement to follow the path of liberal democracy as a form of governance has often clashed with the existing political economic, societal and cultural values of aid-seeking developing countries. Notwithstanding the above fallacies, proponents of liberal democracy, as it is understood in the Western philosophical context, are facing strong opposition from the populist and illiberal democracy movements. The attempts to export liberal and neoliberal democracy to developing countries in an era of populism, illiberal democracy and the rise of the Beijing Consensus appear to be much more complex than its proponents and proponent institutions can imagine. The complexity of exporting liberal democracy as a conditionality for development aid loans or grants may be illustrated by the fallacy of the above-stated neoliberal modernisation theory (Reyes, 2001). According to the modernisation theorists, the problem is the linkage between neoliberalism and modernisation theory. That is, modernisation theorists point to the fallacy of the nexus between neoliberalism and modernisation theory. They argue, the expectation of the donors pursuing a Washington Consensus-based neoliberal ideology that enduring and lawful democratic structures could be efficaciously established and sustained in societies, which have no experience with liberal democracy but nevertheless will embrace a politically pluralistic socio-political model of governance, is misleading. They turn the argument on its head, claiming that only ‘economic development produces … the social forces that seek the democratic transformation of the political system’ (Bell and Jayasuriya, 1995, p. 1). It would be interesting to unpack these arguments, but this is beyond the scope of this chapter. It should suffice to say that over the last 20–30 years, the most remarkable economic growth has been recorded in illiberal democracies of the Asia-Pacific region, such as Singapore, Indonesia, Thailand, Malaysia, and, above

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all, China. If we were to follow the neoliberal theory, we should expect that with economic growth, a liberal democracy would emerge. This is, despite the fact that some of these countries have been ‘democratising’, history has shown this is not the case. By ‘democratising’, we mean simply the development of political measures of enabling parliamentary elections to take place at recurrent intervals, accepting the votes of the majority. If we follow the modernisation theory argument to its logical conclusion, in the absence of the rise of liberal democracy, these countries should not have experienced an economic boom. Proponents of illiberal democracy do not have any political expectations as far as development aid outcomes are concerned, which may suit some developing countries and may prove a less cumbersome development aid environment than a quest for liberal or neoliberal democracy.

Impact of illiberal democracy on foreign aid The impact of illiberal democracy on development aid is an understudied project and is barely ever examined in much depth in theory or practice. Since illiberal democracy has anew gained credibility in Western nations such as Austria, the Czech Republic, Hungary, Italy, Poland, the UK, the USA, and other countries, one can only speculatively seek answers on how illiberal democracy may impact on foreign aid. In order to do so, let us restate some of the factors that may give us an insight as to a potential megatrend. As we noted previously, illiberal democracy within the confines of populism, and by its own definition is deeply nativist, and thus rejects the notion of cosmopolitanism. By this definition, it also rejects globalisation in favour of de-globalisation. At a political level and as a populist notion, illiberal democracy claims to represent the voice of the ‘good’ people against the establishment and the elite. Taking these aspects together, illiberal democracy points to a megatrend characterised by a hostility towards, or even rejection of, international organisations, in favour of bilateral cooperation. To illustrate the case, we refer to the USA under the Trump administration, namely, abandoning its global leadership role based on liberal values and ideals, which have governed the post-Bretton Woods agreement institutions giving way to illiberal forces to fill the vacuum. Thus, the potential scenario arising from the above megatrend is that illiberal democracy will discredit liberal democracy casting a shadow on Washington Consensus-based development aid (Zakaria, 1997). In our discussion, we highlighted the alliance between liberal democracy and the Washington Consensus-based aid agencies: their quest for the enactment of ‘good governance’ as a criterion for development aid success. This alliance, or nexus, represents formidable challenges to both the ‘democratising’ countries and MDBs and other Washington Consensus-based aid agencies endeavouring to help the latter to achieve neoliberal democracy. Equally, if not more difficult is a response to the erosion of liberal democracy through the rise and increased acceptance of illiberal democracy in donor countries. The current situation appears to suggest that illiberal democracy movements in relation to foreign aid may merely epitomise, although

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in an exceptionally polarised manner, a transient change affecting foreign aid. This may well be a consequence of the benevolent optimism that portrayed the Washington Consensus-based foreign aid in the 1990s, following the demise of the Soviet Union. The point is that over the last few decades, the Washington Consensus-based foreign aid has gradually been supplanted by increased scepticism and frustration with the impact of foreign aid in donor and recipient countries, leading, at least in part to the rise of illiberal democracies, on the basis of nativism, and a hostility towards neoliberal democracies.

Conclusion Our thesis is that foreign aid organisations based on the Washington Consensus such as the World Bank, the IMF, the EBRD, the ADB, to name but a few, as well as those based on the Beijing Consensus, such as the New Development Bank (NDB), the Asian Infrastructure Investment Bank (AIIB) and the One Belt, One Road (OBOR) initiative, will accept illiberal democracy in developing countries as a political reality, even it means bridging autocracy embellished by symbols of liberal democracy. To explain, foreign aid distribution to illiberal governments under the disguise of liberal or neoliberal globalisation points to a reality which is at the same time liberal and illiberal. However, instead of perceiving international foreign aid as being opposed to illiberal democracy by upholding the values and norms of good governance, human rights, and free market philosophy, illiberal aid recipient governments and their political elites effectively combine illiberal polity, politics and policy with the neoliberal economic discourse of efficiency, performance and effectiveness. From this vantage point it could be argued that introducing PEA into the assessment process would bring to the fore the political agenda and would unwrap the illiberal as well as the neoliberal foundations from a political point of view, which in turn would provide a deep insight into the possible political barriers affecting the success of foreign aid interventions. Given these global trends, the governments in the West, as well as civic groups throughout the world, should re-examine if they really want to advocate democracy or liberalism. Perhaps the liberal autocracy being pioneered in some countries is the real alternative to Western-style democracy because there is no guarantee that democracy will be liberal or illiberal. In this way, an open PEA can be maintained, taking into consideration the various national policies of the foreign aid recipient country that are effective and beneficial to their people. With a focus on development aid interventions, PEA may well emerge in an era of illiberal democracies as an exogenous factor in a project formulation and implementation process. Although, the existing theory and practice of PEA are very much couched in the technicist-mechanistic paradigm to provide information concerning the political economy in the narrow sense of neoliberal economics, vested interests and power relations, it must be acknowledged that these factors are catalysts to critically distort reality as to the desired impact of development aid intervention. As we have suggested in the previous chapters, development

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economists and planners are not necessarily the ‘best experts’ to conduct PEA, especially in times of illiberal democracy, populism and de-globalisation, for these phenomena are characterised by political unpredictability and at times, from the point of view of rational choice theory, irrational, underpinned by collectively coordinated strategies adopted by the vested interests in recipient countries, which are contrary to the interests of the donors. Thus, it could be argued that the existing technicist-mechanistic process of the existing PEA theory and practice may be a contributory factor which disrupts the ‘orderly’ process of perhaps well-designed development aid intervention. In other words, PEA based on technicist-mechanistic process may itself contribute to a counterproductive reaction from the donor interest groups by disregarding the illiberal democracy forces and affiliated political consequences of the narrowly neoliberal economic development aid interventions. If this stands to reason, PEA, as a diagnostic tool, needs to be better understood and needs not only take into consideration but also extended horizontally and vertically so as to address the ramifications of the illiberal democracy within the realm of economic development aid interventions. The epoch when the MDBs such as the World Bank, the IMF, the EBRD, the ADB, USAID and other bilateral and regional aid agencies could enact PEA as a diagnostic tool focusing solely on technicist-mechanistic processes, namely, technical financial and economic issues, has passed. The rise of illiberal democracy in developed and developing countries with a nativist resurgence commands a broader, a more political form of donor-recipient engagements including through PEA.

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Wilkin, P. (2018). The Rise of ‘Illiberal’ Democracy: The Orbánization of Hungarian Political Culture. Journal of World-Systems Research, vol. 24 (1), pp. 5–42. Williamson, J. (ed). (1990). Latin American Adjustment: How Much Has Happened? Washington, DC: Institute for International Economics. World Bank (2009). Problem-Driven Governance and Political Economy Analysis: Good Practice Framework. Washington, DC: World Bank. Youngs, R. (2015). The Puzzle of Non-Western Democracy. Washington, DC: Carnegie Endowment for International Peace. Zakaria, F. (1997). The Rise of Illiberal Democracy. Foreign Affairs, vol. 76 (6), pp. 22–43. Zakaria, F. (2016). America’s Democracy Has Become Illiberal. The Washington Post, 29 December. Retrieved from www.washingtonpost.com/opinions/america-is-becoming-a -land-of-less-liberty/2016/12/29/2a91744c-ce09-11e6-a747-d03044780a02_story.html? noredirect=on&utm_term=.623a2ba06eb4 (accessed 19 June 2018). Zhang, D. (2018). Diplomacy Will Have More Weight in China’s Foreign Aid Program. DevPolicy. Retrieved from www.devpolicy.org/diplomacy-more-weight-chinas-foreign-a id-program-20180502/ (accessed 8 July 2018).

7 DE-GLOBALISATION Challenging the foreign aid agenda

Introduction In order to understand the concept called ‘de-globalisation’, it is necessary to appreciate its underpinning concept, namely, globalisation. Discussions of globalisation, which dominated the social, political economic and cultural spheres of the developed and developing nations, have more recently focused on the failure of neoliberalism and its effects on foreign aid as well as its effect on the everyday life of the sections of the populations who have not benefitted from globalisation. In order to understand the discontent that is haunting neoliberal globalisation, there is a need to deconstruct it and to reconstruct it in a different key. Here it may be tempting to provide upfront a definition of both concepts and their interconnectivity. However, globalisation as well as de-globalisation are problematic notions and in order to gain a realistic theoretical and practical understanding of both concepts, a discursive delineation is necessary. Furthermore, there are various forms of globalisation, such as economic, political, social and military globalisation. To complicate the matter further, it is noteworthy to state that the above-stated types of globalisation are not neatly cloistered from each other but have nodes of intersection between them. To clarify at the simplistic level: (1) economic globalisation denotes the interrelation between sovereign nations and their economic and trade-based instrumentalities, financial transactions and movements of people, goods and services; (2) political globalisation refers to the extent of political co-operation that exists between different sovereign countries, as well as between sovereign countries and global organisations; and (3) social globalisation refers to the sharing of social ideas, values and norms between different societies and diverse cultures. For the purpose of this discussion, the focus will be on economic, political and social aspects of globalisation. It is also important to note that the above-stated types of globalisation have their own theoretical underpinnings. These range from liberalism, neoliberalism and ordoliberalism

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(Young, 2013), to political realism and critical realism (Pühretmayer, 2013), Marxism, constructivism, structuralism and post-structuralism (Wullweber, 2013), post-modernism, Keynesianism (Herr, 2013), feminism (Caglar, 2013), and mercantilism (Jakupec, 2018), transformationalism (see Chang, 2001; Giddens, 2003) and eclecticism, as well as others. There is also the contextual framework of globalisation which emerges from the academic discipline called international political economy and international relations, each with their own theoretical underpinnings and philosophical overlaps. Given the conceptual complexities of globalisation and its various classifications and definitions, it may be advisable to step back and describe globalisation from a theoretical point of view and from the time when globalisation gained traction in the contemporary post-Second World War era and subsequently, the post-Cold War political arena. To clarify, from a theoretical perspective, the discourse concerning globalisation: has become exceptionally difficult, not to say confused, because there are at least two quite distinct but overlapping positions which are often run together; indeed, in many cases they are not even seen to be different. The positions share what might be called a general and abstract theoretical definition of ‘globalisation’ understood as referring both to the compression of the world and the intensification of consciousness of the world as a whole … (Bromley, 1999, p. 280) Others such as Giddens (1990, p. 64) suggest that globalisation may be understood as ‘the intensification of worldwide social relations, which link distinct localities in such a way that local happenings are shaped by events occurring many miles away and vice versa’. And according to Robertson (1992, p. 8), globalisation is ‘both … the compression of the world and the intensification of consciousness of the world as a whole’. Following from the above conceptual problematics in defining or delineating globalisation in theoretical terms brings to the fore the questions of the epistemic foundation of globalisation, including its rationale. With reference to the latter, one may understand globalisation from the vantage point of asking: (1) who are the political and social actors and institutions that act as protectors and guardians of globalisation?; (2) what type of mechanism do these actors and institutions use to maintain social, economic and political practices?; and (3) how can one understand globalisation as a tangible and precise phenomenon or a series of interconnected phenomena?. If this approach stands to reason, then the question what is globalisation broadly speaking, is at a delineated pragmatic level. However, in addition to the political, economic and social theories and practices of globalisation, there are the cultural and civilisational aspects of globalisation (Hopper, 2007, Marchetti, 2009). At the risk of oversimplification and using a Western cultural vantage point, globalisation is perceived as an economic construct, namely, as an enduring ‘project’ of neoliberal modes of socio-economic and politico-economic global construction, whereby the cultural and civilisational aspects are subordinate to the politico-economic globalisation aspect.

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In contrast, the process of de-globalisation fosters the cultural and civilisational aspects of nation states. However, this does not negate the concepts of multiculturalism allowing for the development of new forms of internationalism. These take into consideration a variety of global economic paradigms through participatory interaction, acknowledging and respecting cultural diversity and difference among the actors. Thus, at a theoretical level, nations may be part of the globalisation movement, without being wholly globalised. In other words, national sovereignty may be preserved under the concept of de-globalisation. This would mean that globalisation would be re-constructed so as to include universal values and norms, but without the currently existing hegemonic connotations, requiring a process of de-globalisation and construction of a new globalisation paradigm. This would avoid the rise and global acceptance of anti-globalisation movements and may bridge the gap between populist nationalism and neoliberal cosmopolitanism (Habermas, 2003; Yegˆ enogˆ lu, 2005; Beck 2006).

The locus of de-globalisation In this discussion, there is a deliberate distinction being made between de-globalisation and anti-globalisation respectively. Although the focus is on the former, it may be helpful to clarify the differences to avoid any confusion. To put it simply, de-globalisation aims to restructure the neoliberal globalisation-based economic and political structures so as to support the national and local economic infrastructure. In short, de-globalisation does not endorse economic isolation or autocracy but a different style of global amalgamation, which is not dominated by global financialisation and neoliberalism. This is in stark contrast to anti-globalisation principles of withdrawing completely from the global economy by imposing isolationism (Bello, 2013). From a historical vantage point, it should be noted that de-globalisation is not a new phenomenon. It can be traced back some 14 centuries (Therborn, 2000) including the more recent history of de-globalisation from 1913 to 1950. Although it would be tempting to analyse the history of de-globalisation from its early beginnings, namely, following the ‘first wave’ of globalisation from 300 to 600 AD (see Therborn, 2000), the discussion concerning the historic complexity of de-globalisation going back to the end of the Roman Empire and the demise of the Hun Dynasty in China is beyond the scope of this discussion. Thus, we will limit our deliberation to the concept of de-globalisation as it is emerging within a contemporary context. To clarify, during the aforesaid 1913–1950 era, the Western economy was characterised by restricted economic growth and imbalanced trade results combined with political tensions and a massive burden of war debt. This brought about an upsurge of nationalist, protectionist and populist political movements (Swarup, 2016) and is not dissimilar to the contemporary conditions of national debt and budget deficits, slowing economic growth and trade imbalances at least since the Global Financial Crisis (GFC) in 2008. De-globalisation, as we know it today, re-emerged in the scholarly literature at the beginning of the twenty-first century (Bello, 2002; James, 2017a) and is experiencing a renaissance as attested by, for example, the above-mentioned election of Donald

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Trump (see Moyo, 2017; Bond, 2017) and the Brexit vote (see Sharma, 2016; Giles, 2017; James 2017b) in 2016. The concept was popularised by Bello (2002) denoting a strategy to restructure the globalisation-based economic and political system with the aim of bolstering, rather than weakening, national economies. Bello defines de-globalisation as a comprehensive concept to supplant neoliberal globalisation. In other words, de-globalisation becomes the leading paradigm to replace neoliberal globalisation, as an alternative to the existing global economic governance structure. The main arguments in support of de-globalisation are that the prevailing world system is unsustainable. In this context, Bello argues that multilateralism is in a state of mayhem, the neoliberal world order is in crisis, with the economic establishment being challenged. Furthermore, Bello suggests that the world is witnessing an erosion of liberal democracy, the possibility of a deflation globally, and the upsurge of anti-globalisation movements. Taking into consideration that these claims were made in 2002, one cannot but attribute to Bello a certain ‘visionary’ credibility. We have experienced the Global Financial Crisis (GFC), the continuing European Monetary Crisis (EMC) and the rise of right-wing populism in Western democracies. To conclude, it needs to be restated that there are a number of significant delineations of globalisation, which characteristically impact on the sovereignty of the nation state and consequently on its political, economic and cultural structures.

From neoliberal globalisation to de-globalisation Neoliberal globalisation is historically a relatively new concept on the global economic and political stage. Initially, and in recent history, neoliberalism emerged most prominently as an economic doctrine in Thatcher’s Great Britain and Reagan’s USA. and rose to the fore with Thatcherism and Reaganism in the 1970s and 1980s. It gained further global acceptance with the fall of the Soviet Union and was celebrated as what Fukuyama (1989), borrowing from Hegel, proclaimed to be the end of all major ideological battles. Simply put, so the proponents of neoliberalism claimed, there was no longer an ideological alternative to the Western model of globalisation. However, the neoliberal globalisation experiment was short-lived. Following the GFC in 2008, it became evident that neoliberal globalisation, not globalisation per se, was in decline. It took another ten years until the process of dismantling neoliberal globalisation began in earnest driven by unexpected forces, such as the election of Trump and the yes vote for Brexit. The irresistible lure, which neoliberal globalisation exerted on the economic elite, political establishment, economists, the Washington Consensus institutions and other like-minded multilateral development banks (MDBs) and bilateral aid agencies, emanated from its arguable claim of ‘perfection’, namely, the success of ‘perfect’ free market and free competition theory. The opposition to neoliberal globalisation and the emerging populist movements in the USA and many European countries now is pointing to the limitations and the disadvantages of neoliberal globalisation – disadvantages for people in both

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developed and developing countries. There are, however, those who cling to neoliberal globalisation, and there are others who argue for the imposition of antiglobalisation policies and strategies. In between these two opposing views is the group which argues for de-globalisation based on principles of social economic and political equality. Taking into consideration the varied and at times opposing viewpoints concerning globalisation, it is difficult to provide an authoritative definition. Thus, we have to be satisfied with a broad working definition, which is subject to challenges. As Spajic´-Vrkaš, et al. (2001, pp. 178–179) suggest, globalisation is: a complex and controversial process of building of the world as a whole by the creation of global institutional structures … and global cultural forms, i.e. the forms that have been produced or transformed by globally available objects. It is declared as a) free market-economic unification of the world with uniform patterns of production and consumption; b) democratic integration of the world based on common interests of mankind such as equity, human rights protection, rule of law, pluralism, peace and security; c) moral integration of the world concerning some central humanistic values, important for sustainable development of humanity. This working definition combines the positive and negative characteristics. However, setting aside the controversial views concerning globalisation, when we turn to the contemporary dominant view we need to understand globalisation as a postSecond World War and a post-Cold War phenomenon. The former epoch is based on the General Agreement on Tariffs and Trade (GATT), which existed between 1948 and 1994, which was replaced by the World Trade Organisation (WTO) in 1994. Setting aside the economic theoretical underpinnings of GATT and WTO respectively and looking at globalisation from a developing country’s perspective, the GATT period was significantly more open and free than what emerged under the WTO auspices. To explain, under GATT, developing countries enjoyed many exceptions. They could obtain exemptions and concessions from GATT articles and were able to follow their own nationalist protection policies for their industrialisation and modernisation. In contrast, to GATT, under the WTO, globalisation became increasingly neoliberal globalisation, and the developing countries had to perform under the same rules, regulations and guidelines as the developed countries. Not surprisingly, in developing countries, the government support for their industries became, under WTO regulations, increasingly difficult. China and India both avoided the WTO restrictions for a long time and still enjoyed the benefits of globalisation. The reason for this is that China and India were pursuing the advantages of globalisation and at the same time they implemented protectionist policies supporting national industrialisation, which was outside the WTO structure (Kimura, 2016). Returning to the current situation, the rejection of neoliberal globalisation based on market forces and restricted government support is based, among others, on the

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perception that it undermines nation state sovereignty and brings about the disintegration of unifying cultural goods such as ethnicity, linguistic and national homogeneity. From a foreign aid perspective, neoliberal globalisation is a catalyst for subordinating national economies to the dictates of the neoliberal global economic order as enforced by the international, regional and bilateral foreign aid agencies, which subscribe to the ideals of the Washington Consensus as discussed, elsewhere in this book. From a normative vantage point, it is advantageous to note that there are two entrenched camps. One camp, as one may suspect, consists of stringent proponents and defenders of globalisation; the other camp is distinctly critical of globalisation. There is nothing in between. The former group argues that globalisation contributes to economic progress, wealth creation and global harmony. The latter group argues that globalisation has brought about economic failures, dispossession, as well as cultural and societal calamity. Thus, understanding of the concept called globalisation as it is practised today, is confusing. From a political vantage point, we have the Washington Consensus, which is based on and promotes neoliberal globalisation as a model for developing countries. It imposes economic policies which prescribe standard economic, political and social reform strategies for developing countries in return for foreign aid loans or grants but is facing a crisis due to the rise of populism. The populist attack is focused on the MDBs such as the World Bank, the International Monetary Fund (IMF), the WTO, the European Bank for Reconstruction and Development (EBRD), regional aid agencies such as the Asian Development Bank (ADB), as well as bilateral aid agencies such as United States Agency for International Development (USAID) and the Japan International Cooperation Agency (JICA), to name but a few. At the domestic level in Western countries, the effect of neoliberalism is characterised by the disassembling of some important social protections. In developing countries these institutions imposed the neoliberal globalisation structural adjustment programmes with corresponding policies and strategies (ADB, 2012; Albo 2005). This had the effect of methodically extracting resources in order to provide the global economy and especially the developed countries with the required natural resources (Altvater, 2009). Following the GFC, the Washington Consensus institutions and the MDBs and bilateral aid agencies, with their neoliberal globalisation agenda, put into place reform policies defined as ‘austerity’ measures. In developing countries these imposed measures weakened the existing social protection and safety nets, mainly affecting the poor. Considering the emerging force of populism with its anti-globalisation tendencies and the existing dominance of the neoliberal globalisation institutions, the concept of de-globalisation seems to be a valid alternative. The question is about the transition from globalisation to de-globalisation. This may be achieved by changing, but not totally abandoning, the existing political economy structure through strengthening and giving preference to the domestic economy and national needs. This, for example, is an approach taken recently by China by refocusing its export-led economy to a domestic consumption economy. There are, of course, other strategies, which are the subject of another discussion.

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Returning to the point of departure concerning the transition from neoliberal globalisation to de-globalisation, it needs to be acknowledged that this may, and most likely will be, subject to an ideological battle. On one side of the political and economic spectrum is the pro-neoliberal globalisation elite, which perceives the need to strengthen the free market forces and reduce the ability of governments further in developed (aid donor) and developing (aid recipient) countries, to regulate economic enterprise and capital. On the other side of the spectrum are the proponents of anti-neoliberal globalisation. These argue that the existing inequalities, the marginalisation and disenchantment among the lower working and middle classes are due to the forces of neoliberal globalisation, which is the dominant economic paradigm. The anti-globalisation proponents are seeking opposing strategies, processes and practices to those which are propagated by the elite, which are based on a business-as-usual attitude focusing increasingly on the free marketdriven approach to economic growth and the reduction of the role of government in the national social and economic infrastructure. To conclude, with a note on foreign aid, which is a component of neoliberal globalisation. As Stiglitz (2017a) points out, despite its shortcomings, it provided benefits to millions in developing countries. This may give a justification for moving from the neoliberal globalisation agenda to a de-globalisation, but not antiglobalisation, form of foreign aid.

A critique of neoliberal globalisation Both neoliberalism and, by association, neoliberal globalisation have since the 1970s and henceforth been subject to severe critique from the left and more recently from the right. In the former instance, neoliberal globalisation has been propagated by Thatcher and Reagan and subsequently by Bush, Blair and Schröder, and more recently by Obama and Cameron. The chorus of left-leaning critiques has now been joined by the right-wing and far right populist movements in Austria, Belgium, France, the Netherlands, the UK’s Independence Party and most prominently Trump’s USA, to name a few. The critiques from the left and the right are not the same and even within the right-wing populist movements, there are significant differences. Nevertheless, the right-wing populist movements have some overarching similarities, which form the basis of their critique of neoliberal globalisation. The pivotal point of the populist movement critique of neoliberal globalisation is nationalism, through the fierce rejection of immigration or free movement of people and cultural integration. There are equally fierce policies in favour of national economic protectionism, social cohesion and maintenance of national cultural values and norms. On domestic territory, the populist claim, perhaps correctly so, is that since the GFC there have been income disparities between the working and middle classes, on one side, and the elites, on the other, within countries, as much as between the developing and developed countries. In the former case and despite the provisions of foreign aid with Washington Consensus conditionalities, general living standards

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have not improved significantly since the advent of the GFC. In developed countries, a large segment of the semi-skilled and skilled working-class population have experienced unemployment or underemployment and now face a fear of dislocation due to neoliberal globalisation. This is exemplified by free trade competition and the failure or reluctance of national governments to exercise their sovereign right to protect national interests and compensate those who have been disadvantaged or marginalised. The counter-neoliberal globalisation argument as far as foreign aid is concerned may be summarised as follows: The expansion of global trade has rescued millions from abject poverty. Foreign direct investment has often been a way to transfer technology and knowhow to developing economies. Privatization of state-owned enterprises has in many instances led to the more efficient provision of services and lowered the fiscal burden on governments. (Ostry et al., 2016, p. 38) Despite these claims, Ostry et al. (ibid.) state that the projected gains were not achieved, from at least two policy vantage points. These are policies concerned with: ‘removing restrictions on the movement of capital across a country’s borders (so-called capital account liberalization); and fiscal consolidation, sometimes called “austerity”’ (ibid., p. 38). They conclude: The benefits in terms of increased growth seem fairly difficult to establish when looking at a broad group of countries; The costs in terms of increased inequality are prominent. Such costs epitomise the trade-off between the growth and equity effects of some aspects of the neoliberal agenda; increased inequality in turn hurts the level and sustainability of growth. Even if growth is the sole or main purpose of the neoliberal agenda, advocates of that agenda still need to pay attention to the distributional effects. (ibid., pp. 38–39) From the foreign aid viewpoint, it is the imposition of inequality that has come under much attack and criticism. Within individual developing countries, inequalities between the working class and the political and economic elite have been intensified through privatisation policies whereby the social provisions have been excised. From a critical point of view, it could be said that these emerging inequalities are not accidental phenomena, but rather the outcome of the neoliberal globalisation foreign aid conditionalities (Piketty, 2013). Overturning the inequality cycle necessitates bringing back state intervention, a notion that is contrary to neoliberal philosophy. Failure to do so will increasingly endanger the democratic political order and give populism further justification for its critique of neoliberal globalisation.

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The ghost of inequality Since the 1970s, with the rise of a neoliberal politico-economic agenda in the West, the most unfortunate characteristic of neoliberalism, as stated, has been the considerable growth in inequality, not only between the developed and developing countries, but also domestically within developed countries. Arguably, until the advent of the GFC, this was essentially ignored by the MDBs and bilateral aid agencies and most foreign aid donor countries. However, in 2016, the discontent with the inequalities in Western democracies emerged as a key politico-economic phenomenon. With unexpected swiftness, populist movements emerged, as one of the most successful political counter-movements to neoliberal globalisation in Europe and the USA. Let us take a step back. Given the absence of a counter-movement as it existed during the Cold War period, neoliberalism had a free hand and gravitated towards policies and economic ideologies which inadvertently increased inequality domestically between the working and middle classes, as well as globally between foreign aid donors and recipients. In short, the neoliberal globalisation is being challenged from two vantage points. First, on the basis of its record, showing that it was never especially strong in promoting or bringing about economic growth, neither in developed nor in developing countries. Post-GFC, it was indeed desolate. Since the GFC, Europe has recorded a weak economic growth and is battling its monetary crises. The USA’s economy has done marginally better, but economic growth has remained weak. Second, at the domestic level, those who have been disenfranchised and marginalised due to neoliberal globalisation policies are becoming, as recent elections in Europe and the USA have shown, increasingly disinclined to continue to accept the political establishment that propagated the neoliberal agenda and economic structures. They are turning to alternative movements, which are turning against neoliberal globalisation. At the international level, developing countries which received foreign aid loans that have the Washington Consensus conditionalities attached have generally, at least since the GFC, not recorded significant economic growth. This is in stark contrast to the economic growth experienced in developing countries, who have pursued their own political and economic models, such as the East Asian economies (World Bank, 2017) and the Sub-Saharan countries (Zahonogo, 2017). There is also a substantive critique of neoliberal globalisation being advanced from academics and economists. Arguably, one of the most widely cited critiques of globalisation came from Joseph Stiglitz (2002, 2017a, 2017b). Stiglitz is the former Chief Economist of the World Bank and a Nobel Peace Prize laureate. His main theme of discontent with globalisation is the inequality factor. Stiglitz (2017b, p. xvi) notes that at the beginning of this century, ‘85 per cent of the world population …’ had only ‘39 per cent of the world income’. The discontent, according to Stiglitz was highest in the developing countries located in SubSaharan Africa. This region has abundant natural and human resources, which have

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been appropriated by developed countries, resulting in a ‘per capita income 2.5 per cent of that of the United States’ (Stiglitz 2017a, p. xvi). This created a strong feeling of discontent with the neoliberal globalisation project that promised better economic well-being for all. As the 2016 US presidential election results and other political electoral events in European countries have shown, the discontent about inequality has spread beyond the developing countries, giving rise to right-wing populism and its anti-globalisation tendencies. In the USA, and a number of other Western democracies, the inequality discontent comes from the lower working and the middle classes of the social spectrum. The populist movements have benefitted from this phenomenon, addressing the discontent of those who are not part of the so-called establishment and the elite. Although, according to Stiglit (ibid.), blaming neoliberal globalisation for the economic plight of the lower and middle classes in the USA and other Western democracies seems startlingly remarkable, for these countries designed and implemented the neoliberal globalisation guidelines and policies. They support the MDBs and bilateral aid agencies which are responsible for sustaining the neoliberal globalisation agenda, and which gives them an advantage over developing countries. Yet populists like Trump, Wilders, Le Pen and others see it differently. They claim that the neoliberal globalisation has disadvantaged their own country and people, giving rise to anti-globalisation. Others, more moderate voices, argue for de-globalisation. Taking a step back again, since the 1970s, politicians on the left and the right of the political spectrum, the MDBs and most bilateral aid agencies referring to the economics of Adam Smith, David Ricardo, Friedrich Hayek, Milton Friedman and others, promised that neoliberal globalisation would benefit everyone equally in both developed and developing countries, in enjoying economic benefits. There is little evidence, if any, that significant parts of the population in developed countries have achieved economic gains, at least not since the GFC. There are some notable exceptions, such as the Nordic countries. However, as Stiglitz (ibid., p. 18) notes: in most countries around the world there is growing inequality – those that followed the American economic model have typically done worse than countries following other models, though their outcomes have not been as bad as that in the United States. Stiglitz elucidates, by saying that the neoliberal economic model, which has been promoted as the best possible way or ‘there is no alternative’ to the neoliberal globalisation free market economic model, has not brought benefits to a significant number of people at the lower end of the socio-economic strata in developed countries and for the general population in developing countries.

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Globalisation and populism: two ‘unfinished’ projects The future of globalisation, as it is known today, which emerged as a neoliberal construct in the 1970s, is becoming increasingly subject to newly emerging challenges and is facing more uncertainties than ever before. To explain, in 2016 and subsequently, in 2017, the West has experienced a significant rise of right-wing populism, which brought to the fore a strong movement against globalisation and cosmopolitanism. To be sure, neoliberal globalisation is confronted by persistent national populism by a way of a call for de-globalisation in some of the Western democracies, especially by the Trump administration. Donald Trump’s electoral success and the subsequent sharp turnaround in the historical US role as the leader of globalisation are a case in question. Some of the US role reversals as a global leader in matters of globalisation include, as stated previously, the proposed re-negotiation concerning the future of the North American Free Trade Agreement (NAFTA), the USA-Korea Free Trade Agreement (KORUS) and the Trans-Pacific Partnership (TPP). All these events have the potential to upset the globalisation agenda. There were other events which contributed to the advent of de-globalisation. These include the already mentioned strong electoral support for the nationalist populist parties in Austria, Germany, the Netherlands, Poland, the Czech Republic, Slovakia and France. However, there is a political rationale for the US role reversal and rejection of neoliberal globalisation, which has also gained traction in other Western countries. Certain sections of the US population and in other countries blame, rightly or wrongly, neoliberal globalisation for much of their calamities. Notwithstanding the successes achieved through globalisation in the 1980s and 1990s, the twenty-first century may be seen as heralding, through technology, automation and financial and monetary crises, a strong rise in unemployment. Perhaps equally important is the fact that since China had joined the WTO, nobody anticipated that China would quickly rise to be the foremost global trading force. In response, Trump’s USA has adopted mercantilist and protectionist trade and foreign aid policies, moving against the existing neoliberal globalisation. This mercantilist zero-sum view defies neoliberal globalisation principles. From a foreign aid vantage point, the requirements of reciprocal free, fair and reasonable trade and meeting the Washington Consensus conditionalities for foreign aid cannot simply be subject to bilateral trade deficits. Globalisation in the foreign aid arena is designed to open market access for developing and developed countries alike. Foreign aid under the neoliberal globalisation condition of the Washington Consensus does not guarantee outcomes in terms of trade deficits or surpluses.

Trump administration as a globalisation discontent Neoliberal globalisation, as discussed previously in this book, is under siege not only from its critics but also from some of its supporters. The former is led by a chorus of populist politicians such as Trump. The critique, as far as foreign aid is concerned, is that neoliberal globalisation is unfair to the donor nations, for they

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get very few, if any, benefits in return. The latter acknowledge that neoliberal globalisation has not achieved its ambitious aims to enhance economic growth among many developing countries with different economic, political, social and social structures, values and norms. As Stiglitz (2017b, p. 1) observes: Globalization, which was supposed to benefit developed and developing countries alike, is now reviled almost everywhere, as the political backlash in Europe and the US in recent years has shown. The challenge is to minimize the risk that the backlash will intensify, and that starts by understanding – and avoiding – past mistakes. Unquestionably, institutionalised neoliberal globalisation has since the end of the Cold War era never been confronted, nor have the major foreign aid institutions such as the World Bank, the IMF and other the MDBs experienced so much uncertainty as now. One of the reasons for this situation is that under the Trump administration, the USA as a long-time globalisation leader is turning towards protectionism, putting the whole neoliberal globalisation agenda in question. Since Trump’s electoral victory, the USA has been retreating from its long-established role as the leader of global institutions like the WTO, the IMF and the World Bank. In doing so, the USA is creating a leadership void and an uncertainty about the future role of the MDBs and bilateral aid agencies that adhere to neoliberal ideologies. Trump’s basic argument against neoliberal globalisation is not an ideological one, but a politico-economic one based on the premise that the WTO and the MDBs’ rules compromise the USA’s sovereignty, deceiving its economy and its workforce. As far as foreign aid is concerned, the Trump administration is questioning the role of Washington Consensus-based MDBs and asking why the USA should provide aid funding to countries that ‘hate’ the USA. If the short history of Trump’s administration so far is any indicator of times ahead, the MDBs must surely feel uncertain about their future. The Trump administration may, as the single largest contributor, reduce funding to the MDBs, change the rules of operations as the single largest shareholder, or withdraw from some the MDBs altogether. Some changes are already being enacted. For example, in 2018, the Trump administration withdrew, suspended and reallocated aid funding to two countries, namely, Pakistan and Palestine. As far as Pakistan is concerned, the USA suspended some US$900 million for non-civilian aid due to its discontent with Pakistan’s alleged unwillingness to take appropriate and forceful action against terrorist groups. Depending on Pakistan’s reaction and countermeasures, it is not conceivable that the USA would retaliate with suspension or withdrawal of foreign aid. For example, Pakistan, may as a counter-measure deny the USA access to its roads, which are used to transport military equipment and supplies to its own and its allied troops. Pakistan may also close its airspace to the USA. Furthermore, in 2017, the USA announced that it

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will withhold US$65 million from the instalment allocated to United Nations Relief and Works Agency (UNRWA) for Palestine. In 2017, the Trump administration announced changes to its United Nations Development Programme (UNDP) funding policies for Iraq, by demanding that more financial resources be allocated to minority groups, especially Christian communities. It also rejected the UNDP’s contention that this could encourage the country’s sectarian divisions and single out already at-risk communities. These examples point to the Trump administration’s discontent with and abandonment of the neoliberal globalisation policies of the preceding administrations and arguably, a turn to de-globalisation across the various types of foreign aid. As far as economic foreign aid is concerned, Trump’s populist response to neoliberal globalisation-based foreign aid in general term, is to retreat and to turn to mercantilist economic principles. The basic assumption, as far as foreign aid is concerned, is that the turn to mercantilism will enhance domestic economic growth at the expense of developing countries. To explain, as far as foreign aid is concerned, the Trump administration, by pursuing mercantilist policies, will rely on Aid-for-Trade (AfT) principles or return to a new form of Trade-not-Aid (TnA) foreign aid policies (Jakupec, 2018). However, the vexed question is, will this strategy work? With reference to AfT, which through foreign aid provides opportunities for developing countries, and especially the least developed countries (LDC), to build their trade capabilities and infrastructure in a way to benefit from globalised trade. This, however, has the potential to adhere to neoliberal globalisation conditions, and the status quo is retained. On the other hand, TnA is an approach, based on the notion that provided developing countries are in the position to trade more extensively with developed countries, they would generate more sustainable income and would have a reduced need for foreign aid loans and grants. This would, so the argument goes, raise living standards in developing and LDCs. The problem with this approach is that most developed countries maintain higher tariffs on imports from developing countries. Again, to overcome the problem, a neoliberal globalisation strategy may need to be maintained. The alternative is to move from globalisation to de-globalisation strategies, namely, from an export-oriented economy to a domestic-oriented consumer economy, a move not dissimilar to the approach currently being implemented by China. In essence, every developing country needs to find its own balance between an export and domestic consumer-oriented economy. This could potentially avoid the pitfalls of neoliberal globalisation, silence the calls for anti-globalisation policies and strategies and establish a de-globalised international economy.

A political economy analysis vantage point From a PEA vantage point, there are at least three questions arising, which have been posed by Stiglitz in a different context but are nevertheless pertinent to put PEA into focus. These are:

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To what extent are these [inequality] results the consequence of globalisation? To what extent are they inevitable? And if due to globalisation, to what extent do they occur because of the rules of the game for globalisation are poorly designed, and to what extent do they come about because individual countries have done a poor job at managing the effects of globalisation, given the rules? (Stiglitz, 2017a, p. xviii) Drawing on Stiglitz’s (2002) work, and looking from a PEA perspective, the tentative answers may well be that inequality resulting in a form of the gap between the developed and developing countries, is to a large extent due to the neoliberal globalisation agenda of the Washington Consensus-based MDBs. Of course, there are other factors to consider such as technological development and changes to economic structures. The adverse outcomes and impacts of neoliberal globalisation are not necessarily unavoidable. They are effects of economic ideology by negating the social and political fabric of developing countries. Finally. it could be claimed that the neoliberal globalisation agenda has been mismanaged by the Multilateral Development Banks, at least politically, through financialisation in the form of destabilising capital flow, giving further impetus to disadvantaging developing countries (Jakupec and Kelly, 2015). If this stands to reason, then a case for de-globalisation can be made. The alternative would be anti-globalisation and a retreat to an isolationist economic world order. However, in order to counteract anti-globalisation forces, it is necessary to understand the social, economic, political and cultural conditions of developing countries in particular, since inequality is a significant and hugely important part that foreign aid needs to remedy. But, it is not just the constant occurrences of massive inequalities between developed and developing countries and the rising domestic societal inequalities in developed countries, but also the frustration with the political system which has become largely unresponsive to certain sections of the population who are marginalised and disenfranchised by the forces of neoliberal globalisation.

Conclusion To be sure, the rise of right-wing populism with the move against neoliberal globalisation, is strongly linked to the GFC of 2008 and the ostensible failure of its underpinning market fundamentalism. Proponents of populism presuppose that the GFC was the beginning of the end of neoliberal globalisation as a ‘class project’, whereby the working and middle classes direct their anger against neoliberal globalisation. The basic argument is that neoliberal globalisation is taking away employment opportunities at a national level, by shifting investment to developing countries. Thus, in the context of foreign aid, the main populist criticism levelled at neoliberal globalisation is trade liberalisation, which has facilitated the migration of capital and by extension, manufacturing and services to those developing countries

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where labour was cheaper and other standards were weakest. This caused a significant loss of jobs in developed countries, experiencing an exodus of capital. The problems with the relocation of capital were further exuberated by the advancement of the World Bank’s ‘one-size-fits-all’ export-focused conditionalities and the IMF’s structural adjustment programmes (SAPs). Often, these conditionalities and programmes created untenable levels of foreign debt for aid recipients. However justifiable the critique of neoliberal globalisation may be, it needs to be restated that de-globalisation does not object to international or global trade. Neither does it reject any international flow of capital, or the exchange of products or services. However, it is also important to note that neither Bello’s (2002) analysis nor his projections concerning de-globalisation, are without their shortcomings. For example, Bello does not advance an all-inclusive or wide-ranging theory of de-globalisation, or a greater extrapolative framework. Instead, de-globalisation advances diverse and exceedingly pertinent re-conceptualisations of the neoliberal globalisation agenda as a reaction to the current populist critique and an emerging crisis engulfing neoliberal globalisation in the foreign aid arena. It provides, however, an exemplar for a sociopolitical based economy of foreign aid. From a PEA perspective, de-globalisation has the potential to extend the epistemic and practical horizons beyond the existing neoliberal globalisation paradigm. De-globalisation, thus, becomes a socio-political and socio-economic construct, which provides PEA practitioners with a tool that not only investigates and analyses power relationships at the macro, meso and micro-levels, but provides for an understanding of the impact of foreign aid on the cultural, social, political and economic value system of the donor and the recipient alike. However, to achieve this, it is important and urgent for neoliberal governments, international organisations and the MDBs and bilateral aid agencies to accept reforms and change directions. Without such structural and ideological changes, the MDBs and bilateral aid agencies will potentially either face continuing crises in the foreign aid arena, or lose their dominant status as other development institutions from outside the Washington Consensus-based framework take a more prominent role within a framework of more conducive power relationships and PEAs in a new politico-economic key.

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8 THE BEIJING CONSENSUS Challenging the dominant Washington Consensus

Introduction The Beijing Consensus is the outcome of at least two interrelated dynamics. One is China’s unprecedented economic growth; the other is China’s foreign policies. As far as the former is concerned, China, as the second largest global economy, experienced an epochal economic transformation over the last three decades. Following the 19th Party Congress in 2017, it is evident that China is ready to progress its exceptional economic and political transformation further, which in turn will have considerable geopolitical and geo-economic impacts. It is evident that China sees itself today as worthy of restoring its historical place at the centre of the global economy, which it held between the twelfth to the nineteenth centuries when it was replaced by imperial Britain and other Western imperial powers. Given China’s economic successes, it is not inconceivable that China will overtake the USA and become the largest world economy within the next decade. Since the 19th Party Congress, foreign policies have been focusing on Xi Jinping China’s vision as a political superpower, with strong nationalist inclinations. From these economic and the political positions, China will have an increased and substantial global impact, potentially leading the ‘New World Order’. This will have a flow-on effect on foreign aid. For a better understanding of China’s emerging geopolitical and geo-economic ambitions and its potential effects on foreign aid, it is important to note that the Beijing Consensus is difficult to define in concise terms, for as Ramo (2004) notes, it has deep-seated and complex roots in Chinese philosophical traditions and culture. Thus, for the purpose of this discussion, a descriptive exposition rather than a definition of the Beijing Consensus will be used to allow for a clearer epistemic understanding. Ramo (2004, p. 4) describes the Beijing Consensus as:

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China’s new development approach is driven by a desire to have equitable, peaceful high-quality growth, critically speaking, it turns traditional ideas like privatisation and free trade on their heads. It is flexible enough that it is barely classifiable as a doctrine. It does not believe in uniform solutions for every situation. It is defined by a ruthless willingness to innovate and experiment, by a lively defence of national borders and interests, and by the increasingly thoughtful accumulation of tools of asymmetric power projection. It is pragmatic and ideological at the same time, a reflection of an ancient Chinese philosophical outlook that makes little distinction between theory and practice. Although the above description delineates the Beijing Consensus as a non-doctrinal political-philosophical construct, it is a more complex construct which needs to be ‘unpacked’. This, ‘unpacking’ will provide a basis for understand the Beijing Consensus not only as a construct in its own right, but also by contrasting it with the Washington Consensus.

Positioning the Beijing Consensus: between the political and the value-laden parameters For a better understanding of the Beijing Consensus, it may be advantageous to articulate the political and the value-laden parameters. One of the reasons is that the very term ‘Beijing Consensus’ at times is misunderstood and attacked in contemporary Western literature. The attacks come from an economic perspective, masquerading as political discourse, as well as from a Western values perspectives. Let us address the economic perspective first. For example, the economic attack is based on the argument that the Beijing Consensus ‘has never been codified in the form of a serious of propositions similar to those that [Williamson] originally termed the Washington consensus’ (Williamson 2012, p. 3). There is no compelling reason to judge the Beijing Consensus by economic Western neoliberal standards, rather than by other standards, often described as a form of economic liberalisation. However, the Beijing Consensus is much more complex than that, for it has a domestic economic as well as a foreign aid dimension. With reference to the former, and apart from the economic perspective, in its early stages it adopted in a modified form state-centred Asian models of development, for example, the Singapore model (cf. Tan 2016), and at the same time it incorporated and domestically further strengthened political, uniquely Chinese, measures aimed at safeguarding the political values of the Communist Party as the central point for economic and political decision-making. Arguably, the Beijing Consensus has some notions which also may be found in the state-centred Asian models, such as the aforementioned Singapore economic development model. However, to argue that the Beijing Consensus is a variation of the Singapore model, as some economists wish us to believe, has thus far had limited acceptance outside the neoliberal economic discourse. To conflate the Beijing Consensus into the ‘Singapore model’ does not do justice to China’s approach. In essence, the Beijing Consensus is a pragmatic and flexible development model which

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turns many of the ideas of the Washington Consensus and the Singapore model, such as privatisation, free market capitalism and decentralisation, on their head (Ramo, 2004). As far as foreign aid is concerned, the political values are bracketed. This, however, does not mean that developing countries do not juxtapose the Beijing Consensus with the Washington Consensus. In doing so, the Beijing Consensus is a contrast to Washington Consensus couched in a political paradigm, which differs from the latter with its roots in the neoliberal economics of the 1980s. This accounts for the dichotomy between the political and the economic. Another economist school of neoliberalism argues that the term Beijing Consensus is a misnomer and argue that it is essentially the ‘Singapore model’ (Tan 2016). With this in mind, we can turn to the political dimension of the Beijing Consensus in the context of foreign aid, which is originally based on the eight principles of China’s foreign development assistance, which were formulated by the Chinese Premier Zhou Enlai in January 1964. These are: (1) equality and mutual benefit of donor and recipient country have to be ensured; (2) non-interference in internal affairs and respect for the state sovereignty of the recipient country by not attaching any conditions to aid; (3) interest-free or low-interest loans are dispensed; (4) the aid’s main purpose is to foster self-reliance of the recipient country; (5) aid shall be ensured by supporting projects that yield quick results in order to increase revenues and accumulate capital of the recipient country; (6) development projects shall be carried out with Chinese quality equipment; (7) technological assistance and professional training of local workers are provided; (8) Chinese aid workers implementing the project locally are required to submit to the local standard of living in the recipient country (Lengauer, 2011, pp. 37–38). These have been extended and reformulated (cf. Li et al. 2009) as we have articulated elsewhere in this volume. Furthermore, it may be important to note that the ‘political background’ of the Beijing Consensus is rooted in Confucian ideology and values. The overarching Confucian values within the realm of foreign aid is that the ultimate aim of the government is to attain through good governance a universal world of harmony and concord (Hsu 1991). Turning to the values underpinning the Beijing Consensus, it is noteworthy that this consensus is based on Confucian values of equality, trust and cooperation, mutual benefit, and harmony of relationships (Jiang, 2006). To be sure, harmony is perceived within a context of mutual benefit and interests as a type of social capital. This new form of capitalism with its consensual basis in Confucian values is markedly different from the values of the Western hegemonic structures. It should be noted that the Confucian discourse of harmony-based social capitalism emerged at the same time as China started to establish global foreign policies and subsequently started to reshape and reinforce the global institutional governance structures. From a political perspective guided by Confucian values, it may be argued that the Beijing Consensus will remain an important paradigm for the advance of impending development aid initiatives globally. It is a political alternative to the

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economic philosophy of the Washington Consensus as well as the changing global political and economic environments such as the rise of right- and left-wing populism. By focusing on the political aspects, it could be argued that Beijing Consensus as an idea will support China as a world power in the development and foreign aid environment.

The rise of the Beijing Consensus The existing international economic order, based on neoliberalism and the Western economic powers, led until recently by the USA and its followers, is buttressed by the multilateral development banks (MDBs) such as the International Monetary Fund (IMF) and the World Bank Group. These, and other similar regional development banks, pursue the policies of supporting their developing member countries in achieving economic growth and reducing poverty. These economic policies emerged in the 1980s as the Washington Consensus (see Williamson, 1989). To clarify, in order to understand the rise of the Beijing Consensus, we need to understand that following the collapse of the Soviet political and economic ideology as a form of Fukuyama’s end of ideological dialectics, the Washington Consensus emerged as the only lasting ideological way to achieve economic growth in the developing world. In this context, it should be noted that the arguably apparent absence of ideological alternatives produced the set of policies enshrined in the Washington Consensus. However, the problem herein, is that these policies were developed and enacted by the Bretton Woods system, the MDBs and other like-minded aid-funding agencies, without much sensitivity concerning the aid recipient country’s cultural, political, economic and societal base. These characteristics may necessitate different approaches than those that were successful in Western democracies. To be sure, the IMF provides among others, capacity development assistance to member countries with the aim of developing, advancing and sustaining healthy economies. There are, however, differences between the mandates of the IMF and the World Bank, respectively. As far as foreign aid is concerned, the IMF provides loans to countries to address balance of payment problems, in cases where adequate financing on reasonable terms is unavailable to service international debt payments. To clarify, the IMF provides advice and loans subject to the Washington Consensus conditions (International Monetary Fund, 2017). With regard now to the World Bank, its mandate is to assist developing countries, through technical and financial support, to restructure and improve various sectors such as education, health, agriculture, public sector management, finance, infrastructure, energy, environment protection and others, with the aim of reducing poverty and promoting sustainable economic growth (ibid.). Not dissimilar to the IMF, the World Bank’s technical and financial support is dependent on acceptance of the conditionalities embedded in the Washington Consensus. At this point of the discussion, it may be necessary to take a step back and to point out that the Beijing Consensus did not emerge from nowhere. One catalyst for its rise is the effect of the post Cold War ‘New World Order’ and the policies for development of the MDBs and bilateral aid agencies, focusing on structural

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adjustments, poverty reduction and economic growth. Another related catalyst is that the MDBs and bilateral aid agencies took too long to realise the importance of structural adjustment programmes acceptable to the recipient countries that impacted on their domestic economies. In other words, the MDBs and bilateral aid agencies failed to recognise that each developing country requires national, cultural and societal development policies and strategies, which reflect their own needs, rather than one which follows the ‘one-size-fits-all’ approach advocated by the Western-led MDBs. This approach may or may not have been successful in other developing countries. At this juncture, it is important to note that China itself has never been exposed to structural adjustment programmes (SAP). Over some 20 years China has achieved the most substantial poverty reduction in modern world history. The strategies for this achievement were, among others, a gradual government-controlled facilitation of economic reform processes. This in turn, provided a platform for many economic development experiments and ensured a stimulus for reviews of its own domestic politico-economic directions. China’s economic growth has inspired discussions not only in developing countries, but also in and among foreign aid donor countries and within the MDBs and bilateral aid agencies. These discussions centred to a significant extent on questions concerning developing countries seeking their own strategies for economic development, rather than following the domineering Washington Consensus. There is a focus within these discussions on the effects of neoliberal Washington Consensus doctrine and a lack of success of structural adjustment and poverty reduction strategies embedded in the Washington Consensus institutional ideologies. From this perspective, the Beijing Consensus brings a new point of departure for foreign aid discourse. To be sure, and as stated previously, two factors need to be kept in mind. First, the rise of the Beijing Consensus should not be construed as indicating that developing countries should attempt to emulate China’s economic or political policies, nor should it be construed to mean that, even if it were to be attempted, it would be successful. Second, there is no such thing as the ‘Chinese model’ for economic progress in developing countries. Nevertheless, if it were to be the case, it would mean that one consensus would be replaced by another. If there are any lessons to be learned from the Chinese economic growth and the Beijing Consensus, then it should be that there is no ‘one-size-fits-all’ approach as advocated by the proponents of the Washington Consensus, but that each developing country should find and pursue its own approach. This should take into consideration the unique cultural, social, political and economic paradigms, values and norms of each country.

Unpacking the Beijing Consensus To be sure, the Beijing Consensus is in fact not a ‘consensus’ in the same sense as the Washington Consensus is understood. The latter is perceived by its proponents as an ‘ideal’ formula to achieve economic development. Perhaps a more appropriate way

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to describe the Beijing Consensus is to classify it as a new epistemological concept pertaining to global order. It rejects and is intended to be in opposition to, the dominant and dogmatic ideology of the Washington Consensus and its current practices. In essence, the Beijing Consensus is a-ideological and may be perceived as ‘a notion, rather than a concept or an idea, because it does not have any of the coherence that we associate with either of those terms’ (Dirlik, 2006, p. 1). Another way to look at the Beijing Consensus is to define it as a Chinese ‘model’ for economic growth in developing countries and a political doctrine of non-interference of the donor country into the internal political, economic, social and cultural affairs and self-determination of the recipient country. If anything, from a philosophical or ideological point of view, the Beijing Consensus signifies a drive towards a radically pragmatic position concerning foreign aid policy debate. This is dissimilar to foreign aid models, which stipulate a subset of policy directions or guidelines for the policy decision-makers or for the basic observance of a specific economic school of thought. That is, the Beijing Consensus fundamentally accepts the proposition that each foreign aid programme or project has an impending backdrop of variables and thus, requires distinctive and at times experimental responses to the existing political, economic, social and cultural conditions of the aid recipient country. This radically pragmatic position requires from the policy decision-makers an engagement, which is characterised by broader policy formulation and policy implementation experimentation, as well as having considerable risk-taking flexibility. This philosophical view is most pertinently expounded by scrutinising the collection of China’s foreign aid practices and the lessons learned from the contemporary Chinese policy proficiencies. Paradoxically, this brings to the fore a probable misperception with reference to an analytical discrepancy between the Beijing Consensus and China’s development model. From an academic perspective, there are contradictory understandings of the Beijing Consensus. This is mainly due to the absence of an agreed epistemic framework, which may be used as an analysis of the Beijing Consensus. To explain, during the Cold War era, academe had specific reference points for analysing centrally planned or transitional economies. Following the end of the Cold War era, the body of knowledge concerning centrally planned or transitional economies dwindled. Today, countries are studied and classified as developed, developing or transitional. However, there are problems, for China is often classified as a developing economy and on other occasions as a transition economy and in other instances as a developed economy. China does not fit neatly into any of the above moulds. Based on its nexus between its international trade, its social welfare system and its fiscal and financial systems, the Beijing Consensus cannot be analysed by the conventional developed-developing methods. It stands to reason that with the absence of any appropriate analytical frameworks to study the Beijing Consensus, the various prognoses concerning its future will vary significantly. Nevertheless, it is important to recognise that the question is not if the analysis will render the Beijing Consensus in positive or negative terms but, in the first instance, to develop an

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analytical framework that provides for a better understanding of China and its Beijing Consensus. Returning to the ‘radically pragmatic’ position exhibited as a main characteristic of the Beijing Consensus, Ramo (2004, pp. 11–12) argues that the Beijing Consensus is based on the following overarching principles: (1) innovation; (2) pursuit of dynamic goals and the rejection of per capita GDP; and (3) self-determination.

Principle 1: Innovation In the context of innovation, Ramo (ibid., p. 12) refers to the need to overcome friction losses of reform, meaning that a government is required to actively pursue innovation with the aim of responding to changing social and economic circumstances. This is not dissimilar to Leonard’s (2006) concept of repeated tampering and continual changing strategies, in order to address issues in different settings. According to Ramo (2004) and Turin (2010), this epitome emerged from the Chinese government’s focus on innovation that it has developed for its own country since the end of the 1970s. That is, China has been successful in sustaining the development of innovative and effective policies in order to resolve problems, which are seen as important by the Chinese population. This of course required an understanding of the needs, wants and desires of the people. As Ogden (2002) states, the Chinese government carries out frequent public opinion surveys to ascertain people’s opinion about itself.

Principle 2: Pursuit of dynamic goals and the rejection of per capita GDP This second epitome is a rejection of the Western neoliberal concept that the only viable measure of foreign aid successes is the per capita Gross Domestic Product (GDP) (see Kosak, 2003; Leonard, 2006; Minoiu and Reddy, 2010). This partially rebuts those Western policies which focus strongly on foreign aid with an increase in the GDP. In contrast, the Beijing Consensus emphasises quality of life and individual equity processes (Ramo, 2004). As far as the quality-of-life notion is concerned, China is concurrently focusing on multiple development goals and strategies. It is pursuing a multi-dimensional development agenda, which, building on the above-stated principle 1, is putting the population first and is advancing economic, political and social innovation and reform in accordance with the ‘five balances’. These according to (Yusuf and Nabeshima, 2006, p. 5), are: ‘balancing urban and rural development, balancing development among regions, balancing economic and social development, balancing development between man and nature, and balancing domestic development with opening wider to the outside world’. This is in stark contrast to the one-dimensional approach using simple GDP as the measure for development success. Within the Washington Consensus there is to a large extent, an absence of a balanced development. In other words,

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proponents of the Beijing Consensus acknowledge that by increasing GDP deprived of other important balance strategies and goals, one-dimensional development, measured as GDP, will not resolve the relevant everyday issues and challenges encountered by the population. In order to achieve a multi-dimensional perspective for the quality-of-life measure, one may invoke the United Nations Development Programme’s (UNDP) Human Development Index (HDI). In other words, the option adopted by China is to measure development using both the GDP and HDI. According to (Ogden, 2002, p. 367), these two standards ‘provide an alternative to the view of development equated exclusively with economic growth and help us understand that poverty is really the deprivation of basic capabilities rather than merely … lowness of incomes’. This combination of GDP and HDI as indices of poverty emphasises an insight into the fundamental outcomes and impacts of foreign aid beyond the quantifiable monetary measures.

Principle 3: Self-determination As stated previously, developing countries’ self-determination is the cornerstone of the Beijing Consensus. To clarify, the Beijing Consensus accentuates the need for developing countries to effectively pursue autonomy from external policies, economic and societal pressures, which are usually imposed by Washington Consensus-oriented MDBs and regional and bilateral aid agencies, acting as hegemonic authorities. The self-determination principle of the Beijing Consensus may be explained by the Chinese model of development, which rejects foreign interference in its internal affairs. Throughout the last few decades China has, after all, successfully pursued its own development priorities and strategies. From this vantage point, China is providing a model for developing countries, encouraging them to plan and implement their own independent economic development without having to accede to inauspicious terms and conditionalities embedded in the Washington Consensus (Hasmath, 2014). In tandem with the principle of self-determination is the notion of non-interference. However, this must not be construed as meaning that China’s Beijing Consensus rejects political, economic and societal influence by itself, but it highlights China’s cautious approach to supporting developing countries in their move to sensible governance and sustainable economic development. These three principles bring into focus the dichotomy between the Beijing and the Washington Consensus, respectively. In opposition to the Washington Consensus ideology, the Beijing Consensus may be classified as an alternative to the former and it may be unsurprisingly attractive to developing countries that have not benefitted from the prevailing international power structures, which are the centrepieces of the conventional PEA undertakings. As mentioned above, China’s application of ‘soft power’ is overtly in opposition to the ‘hard power’ approaches used by the USA and other Western countries. Thus, it could be argued that quite commonly, the Beijing Consensus is being established by China as its tool for ‘soft power’ diplomacy not only in Asia, but also globally, such as in the Middle East, Africa and the Pacific region (Turin, 2010).

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Beijing Consensus as a ‘soft power’ instrument Based on the above discussion concerning the Beijing Consensus, it is obvious that China is pursuing a ‘soft power’ strategy for foreign aid. This was also, until recently, the case for other economic powers such as the USA. However, with Trump’s election as the USA’s 45th president, the situation has changed. The Trump administration is moving away from ‘soft power’ diplomacy towards a ‘hard power’ diplomacy, foreign policies and, by extension, foreign aid and foreign aid. Nye and Jisi (2009) explain: (1) power is the capacity to influence others to realise the results one wishes them to achieve; (2) there are a number of ways to exercise power, namely (a) by threatening coercion, and (b) by causing others to want what one wants. The former may be classified as ‘strong power’, whereas the latter is categorised as ‘soft power’. To be sure, ‘soft power’ embraces societal, cultural and political values, foreign relations and economic structures, which may be designated as a country’s national asset and have the capability to induce other countries to freely embrace the same aims (Nye, 2005). Taking into consideration the three above-cited principles and China’s economic success, it is not surprising that ‘soft power’ diplomacy is embedded in the Beijing Consensus. The potency of China’s relations with developing countries and the basis for much of its ‘soft power’ emerge from more than its recent economic growth and its investment in trade. It is based on trade, investment and technical support for human resource development, health and education without any political or economic conditionalities. To restate, the Beijing Consensus contests the Western views of economic and political reforms, as essential for long-term sustainable development and offers a different cultural perspective.

Contrasting the Washington and the Beijing Consensuses There are a number of different approaches to contrast the Washington and the Beijing Consensuses. The most common one is the political-economic contrast. A less pronounced form of contrasting these two consensuses, is from a civilisational discord and its socio-political imperatives. To be sure, the former is couched in the notions of economic efficiencies and political underpinnings that support the economic paradigm, whereas the latter focuses on contrasting the civilisational aspects that encompass the socio-political aspects.

The political-economic contrast To begin with, there is much literature concerning the contrast between the Washington Consensus and the Beijing Consensus, respectively. In short, the proponents of the Washington Consensus portray it as the most efficient and effective paradigm enabling developing nations to achieve economic growth, by promoting a free market ideology with the imposition of foreign aid conditionalities.

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However, to explain briefly the two consensuses: the Washington Consensus was a response to the mid-1970s crises, which the then dominant Keynesianism was arguably not able to address. Keynes’ economic theory was thus replaced by neoliberal economic theories (see Hayek, 2001; Friedman, 2002; Jones, 2012), which were advocated by the Reagan and Thatcher administrations, respectively. Neoliberalism became the new politico-economic canon. The cornerstones of the Washington Consensus according to Williamson (1990; 2002) are: 1. The imposition of fiscal discipline. 2. The redirection of public expenditure priorities towards other fields. 3. The introduction of tax reforms that would lower marginal rates and broaden the tax base. 4. The liberalisation of interest rates. 5. A competitive exchange rate. 6. The liberalisation of trade. 7. The liberalisation of inflows of foreign direct investment. 8. The privatisation of state-owned economic enterprises. 9. The deregulation of economic activities. 10. The creation of a secure environment for property rights. In contrast, according to Li et al. (2009 pp. 8–20), there are ten principles of the Beijing Consensus. These are: 1. 2. 3. 4. 5. 6. 7. 8. 9. 10.

Localisation of best borrowed practices. Combination of market and plan economies. Flexible means to a common end. National policy rights. Stable political environment. National self-reliance. Continuous upgrading of national industry. Indigenous innovation. Cautious financial liberalisation. Economic growth for social harmony.

Based on the above ten principles, it is evident that the Beijing Consensus is devoid of its own political economic system ideology and gains its strength by being, in its totality, outside the Washington Consensus. Thus, it is not surprising that much of the scholarly literature ‘defines’ the Beijing Consensus as what it is not (i.e. by negation) rather than what it is, or tries to define it as a politico-economic ‘model’ (see, for example, Halper, 2010; Hasmath, 2014; Rickards, 2014). Some of the literature portrays these two consensuses as being in competition. This, however, is open to discussion. In its broadest terms, the Beijing Consensus approach to foreign aid works differently from that of the USA-backed Washington Consensus. The latter is mainly focused on operational objectives. That is, the

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institutions that follow the Washington Consensus proceed from the vantage point of how to achieve economic growth based on principles such as free trade policies, privatisation and deregulation. Furthermore, the Washington Consensus works backwards from the objectives, ensuring that all necessary economic and political changes are implemented by the loan- or grant-receiving country. To be sure, the contrasts between the Beijing Consensus and the Washington Consensus are manifold. In the context of this discussion, the main differences are the methods of formulating and implementing policy reforms as foreign aid loan conditions. The Washington Consensus has the universal ‘one-size-fits-all’ approach to and as a guideline for, economic, political and social reforms. This approach is based on the above-stated Washington Consensus attributes as conditions, which in turn arguably provide the impetus for economic development and growth in developing countries. Furthermore, these conditionalities have to be adhered to, irrespective of a development loan recipient country’s specific political, economic, social or cultural structures. In contrast, the Beijing Consensus accentuates an experimental economic method. It allows the foreign aid recipient countries to use ‘trial-and-error’ methods. To put this simplistically, a foreign aid recipient country may experiment with and adopt those policies which suit its own political, economic, social and cultural structures. It can dismiss those policies and structures that are bound to be ineffective or unproductive. In essence, the Beijing Consensus does not adhere to any specific or general economic reform theory. From this vantage point, the Beijing Consensus economic reforms may be perceived to be accumulative, self-supporting and adaptive processes. In this viewpoint, the proponents of the Washington Consensus may well be correct by arguing that the Beijing Consensus lacks the application and potential benefits of Western economics and has not experimented extensively with free-market economic theories. Until recently, the existing global foreign aid order was unquestionably led by the USA, which dominated the main MDBs, such as the World Bank and the IMF. These two Washington-based institutions have, since the demise of the Keynesian economic theory, imposed neoliberal ideologies and conditionalities on developing countries, hence known as the Washington Consensus. However, in recent times, two phenomena have emerged causing the USA’s dominance to fade. One is the rise of populism couched in mercantilist economic theory pursued by the Trump administration and other like-minded countries. The other is the establishment of China-led development banks and initiatives such as the Asian Infrastructure Investment Bank (AIIB) and the New Development Bank (NDB), also known as the BRICS Bank, which brings together a development aid collaboration between Brazil, Russia, India, China and South Africa, and the establishment of the Chinese One Belt, One Road (OBOR) initiative. The underpinning political principles of the aforesaid AIIB, NDB and the OBOR initiative, as noted above, are firmly couched in the principles of the Beijing Consensus and are in stark contrast to the ideologies of the Washington Consensus.

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Notwithstanding the dominance of the Washington Consensus, over the last two decades China’s geo-economic and geopolitical ambitions have not only grown significantly, but China has also, as part of its foreign aid policies, formulated and slowly implemented the Beijing Consensus. The Beijing Consensus not only differs in many aspects from the USA-led Washington Consensus, but also as a competing foreign aid paradigm. However, the Washington Consensus and the Beijing Consensus have one common factor. Both try to foster relationships between the developed and developing economies. However, the Washington Consensus-based donor countries have the tendency to pursue specific monetary or other economic returns through, for example, the notions of ‘aid for trade’ (Jakupec, 2016), whereas the Beijing Consensus fosters to a large extent long-term ‘soft power’ diplomacy benefits (Turin, 2010). Nevertheless, with reference to poverty reduction, both consensuses bring to the fore the potentially regressive effects of unregulated forms of foreign aid, foreign direct investment and trade, the Washington Consensus through neoliberal conditionalities and the Beijing Consensus through the principles of non-interference into the economy of the aid recipient country. There are at least two other ways to contrast the two consensuses. One is political and the other economic. The comparison of the political perspective may be based on the differences between multiparty democracy with single party governance and their respective impact on foreign aid. The economic perspective difference may be synthesised as market-driven economic reforms, compared to government-supported and government-directed economic reforms. The discourse concerning which of these two political and economic approaches would produce a better result in foreign aid, is beyond the scope of this discussion. There is also a politico-economic difference between the Washington Consensus and the Beijing Consensus. The former is firmly couched in neoliberal globalisation ideology, whereas the latter sees globalisation as a potential way forward, rather than seeing neoliberal globalisation as the ‘only’ path to economic development. In other words, under the Beijing Consensus, globalisation generally and neoliberal globalisation specifically are not seen as something inevitable, rather they are seen as only one of the conceivable pathways. Furthermore, the Beijing Consensus, in addition to its cultural and philosophical roots, may also be perceived to be very pragmatic by focusing on geo-economics and geopolitics.

Civilisations and socio-political contrast The above discussion delineates the Beijing Consensus as a non-doctrinal politicalphilosophical construct set in a post-Cold War political era. From this vantage point, it may be appropriate to proceed with our discussion from the post-Cold War epoch at the time when Fukuyama (1989) proclaimed the ‘end of history’ and Huntington (1993) predicted the ‘clash of civilisations’. To recall, Fukuyama used the Hegelian philosophical definition of history as a linear sequence of epochs.

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From this perspective, Fukuyama’s thesis is that, following the collapse of the Soviet Union and the Marxist ideology, human ideological development has been achieved and Western liberal democracy is the only and concluding kind of human government. There is nothing more to come. To be kind to Fukuyama, he may have been at least thus far partially correct, as far as Western liberal democracy in the former Soviet Republics and its ‘satellite’ countries (especially the Warsaw Pact countries) are concerned. Fukuyama’s argument stood the test of time, but only for a while. However, following the Global Financial Crises (GFC), Fukuyama’s arguments began to crumble for there was little consideration given to the socio-political as well as the economic-political rise of China. There are at least two scenarios emerging. One is that, due to globalisation, the consumer-based economy and its leading global role, China will emerge as a progressive neoliberal democracy. This would prove Fukuyama’s theorem to be correct. The other, following Huntington’s (1993) argument is that instead of achieving a global neoliberal world order, cultural divisions would emerge as a defining characteristic of the post-Cold War world. He was referring inter alia, to a divide between the USA-led and the Chinese Confucian civilisations, respectively. Huntington (2013, p. 20) argued that: ‘The very notion that there could be a “universal civilisation” is a Western idea, directly at odds with the particularism of most Asian societies and their emphasis on what distinguishes one people from another.’ Huntington (1993) focuses on the clash of civilisations within a context of culture, rather than on economics or politics. He states that, ‘The great division among humankind and the dominating source of conflict will be cultural’ (ibid., p. 22). He continues: During the Cold War the world was divided into the First, Second and Third Worlds. These divisions are no longer relevant. It is far more meaningful now to group countries not in terms of their political or economic systems or in terms of their level of economic development but rather in terms of their culture and civilisation. (ibid., p. 23) He argues that, in the future, the identity or belonging to a civilisation will become progressively significant and the world will be affected by eight major civilisations, namely, the Western, Latin American, Sub-Saharan African, Confucian, Japanese, Islamic, Hindu and Slavic-Orthodox. Thus far, as much as the foreign aid arena is concerned, the world is witnessing the clash of Western and Chinese Confucian civilisations and their corresponding norms and values. To clarify, Huntington anticipated the emerging chasm between the USA-led Western and the Chinese-led Southeast Asian civilisations, respectively. The cornerstone of this chasm, according to Huntington, is the fallacy of believing that a global universal civilisation mirroring the Western cultural image, is globally possible. This is in direct conflict with Fukuyama’s end of history theorem and the

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cultural ideology of many Southeast Asian countries, especially China and Vietnam. Both countries adhere to the particularism of their respective society, which differentiates them from others. However, Huntington does not translate these ‘civilisations’ into geopolitical and geo-economic power structures. He leaves this open to interpretation. With the rise of populism, Huntington’s theorem has gained increased relevance. In the foreseeable future, cultural divisions will most likely surge, due to the tensions between Western and Chinese cultural values, traditions, social norms and philosophies. In the foreign aid arena, these tensions will exacerbate the fundamental tensions between developed Western aid donors and the developing aid recipient countries in Asia, Africa and beyond. The problem, as far as foreign aid is concerned, is the social and cultural incompatibility between these two civilisations. This incompatibility is evident by the significant differences between Western and Chinese understandings of the role of the government, the notion of the state, economic imperatives, the roles of individuals, social structures and international relations. From a Western, Washington Consensus foreign aid perspective, the government is perceived as a necessary ‘evil’, which should fulfil a minimal economic, societal and cultural role where market forces have the potential to fail. From a Chinese Confucian perspective, the government is a necessary ‘good’. It is a basic fundamental institution that ensures social, political and economic order, as well as cultural cohesion. It may be opportune to note that the political events in the post-GFC era have supported Huntington’s hypothesis. Today’s political environment, with the rise of right-wing populism in association with nativism and anti-globalisation, is a fertile ground for the clash of civilisations. Furthermore, the clash of civilisations, as may be relevant to the foreign aid agenda, arises at two levels; namely, at the macro, as well as micro levels. In the context of the micro level, the clash of civilisations appears on the basis of sovereignty, whereas at the macro level the clash of civilisations is mostly based on geopolitical and geo-economic influences. As far as the future is concerned, it appears that the coming decades will only strengthen Huntington’s hypothesis further. Huntington perceived the USA as being the leader of Western civilisation. However, with the election of Trump, the subsequent partial withdrawal of the USA from the Western leadership role and the rise of China, the tension between the new ‘America First’ values and China’s Confucian philosophies, values, social norms and traditions will change the existing world order. The question is, if and when and under which circumstances, will China with its Beijing Consensus supersede the USA-backed Washington Consensus? In response to this question, it may be said that the Washington Consensus institutions and others who followed have devoted nearly four decades augmenting their position as the most powerful foreign aid donor institutions. Throughout this period, these institutions exerted considerable influence on aid recipient nations. As a consequence, the political and economic establishment and the elites in aid recipient developing countries, had to absorb and implement Western cultural values and norms and approaches to political economy. Yet to a large extent, these

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institutions believe that they have the privilege of neglecting the cultural and societal views and values of the aid recipient countries. After all, could it not be said that the developing countries will inevitably embrace the Washington Consensus, irrespective of their social, cultural, political and other backgrounds? The Beijing Consensus is potentially providing an alternative, namely, that each country, as was argued above, has to develop its own economic, social and governance policies, not blindly adopting the policies used in China, however successful these may be.

Reconciling the Beijing and the Washington Consensuses Although the above discussion sheds light on the critique of the Beijing Consensus, it may be useful to note that in academic literature, there is much critique concerning the Washington Consensus from a range of viewpoints (see, for example, Stiglitz, 1989; Meier, 2005; Mavroudeas and Papadatos, 2007; Lal, 2012; Lopes, 2012; Cedrini, 2014) and there is equally much literature in support of the Washington Consensus (see, for example, Williamson, 1990; Symoniak, 2010; Greive and Koch, 2017). Since this discussion focuses on reconciling the Beijing and the Washington Consensuses, it should suffice to proceed from specifically relevant issues. From the perspective of China’s success and rapidly increasing economic wealth since the 1980s and its Beijing Consensus approach, the question about the relevance of the Washington Consensus has come to the fore in academic literature and in foreign aid policy formulation institutions (see, for example, Stiglitz, 1998; Head, 2008; Moyo, 2009; Birdsall et al., 2010; Huang, 2010; Asongu and Aminkeng, 2013). Much of the discussion concerning Washington Consensus-based foreign aid centres around issues concerning the benefits and detriments of trade liberalisation, foreign direct investment, privatisation, deregulation and property rights. The argument here is that following the above discussion concerning the contrast between the Beijing and the Washington Consensuses respectively, it seems equally important to analyse the potential for their reconciliation. One of the reasons is that these two consensuses are prevailing accords as far as foreign aid is concerned. In essence, as was argued above, the philosophical differences between these two consensuses are incongruent. However, there is the potential to reconcile at least some aspects. However, reconciling these two consensuses remains critical challenges in much of the academic literature. Yet the challenge is more taxing when the emerging development paradigms like the populist movement are considered. If we were to couch the populist paradigm in a mercantilist economic theory, then we would have to recognise the following notions (1) state and market failures as perceived through the Liberal Institutional Pluralist school of thought (see, for example, North, 1990; Rodrik, 2008; Brett, 2009; Asongu, 2014; Fofack, 2014); and (2) how the MDBs and bilateral aid agencies may have a bearing on foreign aid processes and implementation based on New Structural Economics school of thought (see, for example, Chang, 2002; Lin, 2011; Lin and Monga, 2011; Stiglitz et al., 2013a, 2013b; Fine and Milonakis, 2013). Given the two different and competing schools of thought, there is a lack

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of a unifying foreign aid economic theory and, thus, the discussion concerning reconciliation needs to consider structural and institutional authenticities of foreign aid seeking nations. Drawing on the work of Asongu (2014), one approach to reconciliation is to look at the situation from the vantage point of the relationship in which the two consensuses emphasise each other’s effectiveness. At risk of over-simplification, the Beijing Consensus asserts the role of the state in developing countries, which is perceived as one of the most significant conditions for development. This distinct characteristic may be perceived as an initial endeavour to understand at least some of the intramural subtleties concerning the power relationships, which PEA seeks to analyse on the basis of ideational debates of any competing or concurring vested interests. To do so, it is necessary to show how both the Washington Consensus and the Beijing Consensus shape the policy outcomes based on the aforesaid power plays. This requires the use of economic and political filters to unravel the power relationships at both the domestic (aid recipient country) and the international (donor institution) levels of PEA. At the level of the domestic political interests, groups, policy-makers, and other actors compete for different societal, economic and political interests, values and norms, using potentially international viewpoints. This possibly provides an opportunity to diffuse foreign aid’s economic and political ideas and the role of foreign aid institutions. The outcome may well be not just a simple implementation of either the Washington or the Beijing Consensus, but a hybrid and translations of both consensuses that emerge from both the domestic political power relations, as well as the power relations between the foreign aid donors and recipients. In other words, the reconciliation between the two consensuses may be based on an ever-extending policy space, shaped by the growing influence of the Beijing Consensus and the global economic influence of the Washington Consensus institutions.

Beijing Consensus as developmentalism in an era of populism Having articulated, however briefly, some reconciliation aspects between the Beijing and the Washington Consensuses, we can turn to the aspects of the former in light of its developmentalist agenda (Turin, 2010). It may be useful here to state that China has, since the beginning of the 1990s, shown an increasing interest in foreign aid participation. China’s emerging and sustained contributions have attracted growing interest from the international foreign aid community, especially since China is not a member of the group of traditional OECD foreign aid donor countries. Being independent of multilateral organisations, China had the opportunity to develop its own foreign aid policies. Not surprisingly the emerging Beijing Consensus was viewed with suspicion and speculation about the impact of China’s foreign aid policies on the existing neoliberal foreign aid agenda, especially with reference to the interactions with the recipient countries. Furthermore, there was the uncertainty among the Washington Consensus-led MDBs and bilateral aid agencies and donor governments as to how to understand

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and formulate a comprehensible China foreign aid policy, which is not only effective but also congruent with China’s rising influence in the international community and its subsequent political and economic power. This influence enables China to change in its international relations. If this stands to reason, then it could be argued that an assessment of developmentalism and its impact on China’s own developmental model, defined as the Beijing Consensus, elucidates its foreign aid policies, including the impact on foreign aid recipient countries and its consequences for the Washington Consensus-led MDBs and bilateral aid agencies. The question is how to understand China’s developmentalist model, which postulates the means for a most advantageous strategy that a recipient country may achieve in its economic, political and social aims through foreign aid. In response to this question, it may be said that the Beijing Consensus is not formulated to fulfil unreserved economic development, but it allows recipient countries to follow their own economic development path, under their own conditions and using their own strategies. Having outlined, however briefly, some major points concerning Beijing Consensus as developmentalism, there is a need to put these considerations within the context of populism. With the rise of populism, especially the electoral victory of Donald Trump as the US President, the Trump administration has reduced its full support for the Washington Consensus at least as far as the economic globalisation is concerned. This reduction of commitment to the Washington Consensus has created a gap, which is being filled by China and its Beijing Consensus. Given the instability and uncertainty of US foreign aid policies, China has recently arisen as a credible and reliable ally of developing counties, by assisting them to achieve long-term sustainable productivity. The above-cited developmentalist cooperation model is for many developing countries arguably more effective in comparison to the Washington Consensus. Thus, it is not surprising that an increasing number of developing countries are turning to Beijing instead to Washington for foreign aid. In short, the Washington Consensus has to a large extent lost its credibility, for an increasing number of Western donor countries are, due to the rise of populism, becoming powerless to maintain the social and political values and norms within their own societies, and thus are incapable of transferring these to developing countries. Populist movements are pushing back against the forces of globalisation and neoliberal economic world order and are supporting nativism and national sovereignty. In doing so, the Western donor countries, which succumb to the forces of populism, are retreating to an extent from the globalised world. In parallel, developing countries are also turning away from the Washington Consensusbased globalised realm, and thereby are able to abandon the requirements of core neoliberal principles, such as free trade and interference in their domestic policies, for example, by supra-national donor institutions. These states may seek foreign aid support from the China-led AIIB or NDB, as the neoliberal economics and some development models, based on the Washington Consensus, have to a certain extent failed to meet the expectations of the social and economic needs of the diverse range of developing countries.

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To clarify, following the GFC in 2008, much of the developing world lost confidence in the Washington Consensus. This brought about an epistemic paradigm shift concerning the dominant neoliberal economic theory. To be sure, there have been innate tensions between donors and recipients of foreign aid as far as the economic models are concerned. However, during the Cold War era these were mostly glossed over, for there was little alternative. With the end of the Cold War, the subsequent GFC, and the rise of populism leading to the US hegemony, these tensions re-emerged, and the Beijing Consensus is being offered as a viable alternative to the Washington Consensus-based foreign aid model (Ferchen, 2012). China, with its AIIB and the NDB, has arisen as a reliable economic partner and is arguably adding much in terms of developmentalism in an era of populism through the introduction of new initiatives, ideas and opportunities for developing countries to follow their own economic, political and social agenda.

Conclusion Based on the above discussion, it may be reasonable to argue that China, with the Beijing Consensus, will continue to expand its role and influence in the developing countries and regions, by creating future development programmes globally. The function of the Beijing Consensus is being acknowledged in the foreign aid community not only as an alternative philosophy, but also as an instrument to measure the varying international foreign aid’s political, economic, social and cultural environments. Following the GFC and the rise of populism, as demonstrated by the election of Trump as the 45th president of the USA, the Brexit vote in the UK and a shift to the populist right in various European countries, there is a move towards a destabilisation of the existing world order. There is a move in a number of developed countries towards de-globalisation, anti-neoliberalism, a popular distrust of the political elite and the establishment. Despite these emerging political and economic phenomena, there is little evidence that the Washington Consensusbased MDBs and bilateral aid agencies are showing signs of addressing the underlying issues of the rise of these populist movements. This inaction brings to the fore that significant differences between developed and developing countries are becoming increasingly greater, not only economically but also politically and socially. With many developing countries feeling themselves to be losers and disenfranchised with the Washington Consensus-based MDBs and bilateral aid agencies, they are turning to the China-led Asian Infrastructure Investment Bank, the New Development Bank (previously known as the BRICS Bank) and the One Belt, One Road (OBOR) initiative. China, with its Beijing Consensus, is reacting to the existing neoliberal Washington Consensus-based diminishing influence by fast-tracking its endeavours to develop small economic networks with developing countries, by going around the Washington Consensus-based MDBs and bilateral aid agencies and their Western-led political and economic power structures. This is evident by the

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establishment of the aforesaid AIIB, the quest to establish the infrastructure that will further link China with Central and Western Asia, Europe and Africa, through the above-said OBOR initiative and the increase in bilateral payments agreements. The combination of the effects of AIIB, the OBOR initiative and the rise in China’s bilateral payments agreements, is fuelling trade tensions and is potentially bringing about the risk of foreign aid fragmentation between China-led Beijing Consensus-based institutions and the USA-dominated Washington Consensus-based institutions. Should this financial and economic dichotomy persist, as appears to be the case, the world of foreign aid will increasingly become more volatile, due to the intensified geopolitical and geo-economic competition between the Washington Consensus-based MDBs donor countries and the Beijing Consensus-based state actors. In contrast to the Washington Consensus, which is often perceived and portrayed by its proponents as an ‘ideal’ mode for economic growth in developing countries, the Beijing Consensus is characterised by a new mode of thinking about the post-Cold War neoliberal world order in a new key (Dirlik, 2011). It acknowledges the cultural and social values of each country in preference to the currently dominant ideology of the Washington Consensus. If this stands to reason, it is possible that the Beijing Consensus will not only remain but also grow as an important global foreign aid catalyst. It will continue to be realised as a yardstick for changing foreign aid perceptions and strategies for developing nations and foreign aid institutions, as well as an alternative foreign aid philosophy, an alternative to the Washington Consensus. It is potentially a further indicator of China’s growing significance as a global economic power and ‘soft power’ diplomacy. Finally, and notwithstanding the above, there is the potential to reconcile Washington and the Beijing Consensuses. However, more research is required to combine the notions of non-interference of the Beijing Consensus with the orthodoxy of the Washington Consensus, allowing for more national autonomy of developing countries in addressing political economic and societal self-determination, within a context of market liberalism. From this vantage point and considering the political and value-laden parameters of the Beijing Consensus, one may reasonably conclude that China’s Beijing Consensus has over the last decade or more, demonstrated an impressive buoyancy and thus it appears that it will continue as a development aid mode.

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Stiglitz, J., Lin, J., Monga, C. and Patel, E. (2013b). Industrial Policy in the African Context. Policy Research Working Paper No. 6633. Washington, DC: World Bank. Tan, C. H. (2016). The Beijing Consensus and Possible Lessons from the ‘Singapore Model’? NUS Working Paper No. 2016/001. Singapore: National University of Singapore. Turin, D. R. (2010). The Beijing Consensus: China’s Alternative Development Model. Inquiries, vol. 2 (1). Retrieved from www.inquiriesjournal.com/articles/134/2/the-bei jing-consensus-chinas-alternative-development-model (accessed 28 November 2017). Yusuf, S. and Nabeshima, K. (2006). China’s Development Priorities. Washington, DC:World Bank. Williamson, J. (1989). What Washington Consensus Means by Policy Reforms. In Williamson, J. (ed.), Latin American Readjustment: How Much Has Happened? Washington, DC: Institute for International Economics, pp. 421–427. Williamson, J. (1990). Democracy and the ‘Washington Consensus’. World Development, vol. 21 (8), pp. 1329–1336. Williamson, J. (2002). Did the Washington Consensus Fail? In PIIE. Retrieved from https://piie. com/commentary/speeches-papers/did-washington-consensus-fail (accessed 6 January 2018). Williamson, J. (2012). Is the ‘Beijing Consensus’ Now Dominant? Asia Policy, vol. 13, pp. 1–13.

9 THE POLITICISATION OF POLITICAL ECONOMY ANALYSIS

Introduction Foreign aid is often presented by multi- and bilateral aid agencies as being apolitical. However, since the advent of the Truman Doctrine and the formulation and implementation of the Marshall Plan at the end of the Second World War, it is clear that, in reality, foreign aid has always been political in nature. The dichotomy between the claims of political neutrality and the realpolitik of foreign aid has created a number of problems for donors, recipients, academics and practitioners. One of the major problems is that by trying to be apolitical, development agencies institutionalised a technocratic, top-down approach to design, delivery and evaluation of aid interventions. This led to technocratic, ‘cookbook’ like evaluation approaches, often constructed as technicist-mechanistic processes. Over a period of time, foreign aid agencies have introduced a wide range of evaluation tools, to ascertain the success, or otherwise, of their interventions. These include, for example, ex-ante and ex-post impact assessment, performance testing (outcome rating), monitoring and evaluation processes and procedures, result-based evaluation, and the Logical Framework Approach, to name but a few (World Bank, 2004; ADB, 2014). More recent innovations in management tools, including theory of change, are more focused on political considerations, but to a large extent, these are most often tools devoid of political considerations. Political Economy Analysis (PEA), as it is practised, falls somewhat outside the other evaluation processes, procedures and methods, for although it is still couched to a large extent in mechanistic technicist paradigms, it has the potential to be a political evaluation instrument. In this chapter we intend to show how PEA may be politicised, to take into consideration the political dimension of foreign aid interventions.

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Given that PEA focuses on the importance of formal and informal institutions and vested interests, it has the potential to mediate political and economic interactions. PEA may be politicised from a range of vantage points, for example, through aid agencies’ policies, power relationships and political doctrines. In this chapter, we will initially explore the argument around the politicisation of foreign aid, followed by an exploration of the ‘locus classicus’ of PEA and issues concerning the politicisation and re-politicisation of PEA from the aid agencies’ political perspective. In further discussion we will draw on the principal-agent theory and review the impact of the donor-recipient power relations as a catalyst for the politicisation of PEA. Finally, an analysis of Trump’s ‘doctrine’ as a populist politicisation and its relevance to the PEA paradigm are advanced.

The politicisation of foreign aid By its very nature, foreign aid brings political sensitivity into play. Endeavours by a donor agency to transform key domains of social, economic, political and cultural life in an aid recipient country through the provision of financial, material and technical resources are essentially intrusive. The contemporary aid undertaking, which emerged following the Second World War, endeavoured to respect recipient countries’ sovereignty by adopting policies of pursuing only socio-economic aims limited to supporting economic growth and other public goods like basic infrastructure, education and healthcare. Taking an historic step back, it is important to note that the Bretton Woods institutions, such as the World Bank, were established as technocratic organisations, with the aim of advancing the reconstruction of post-Second World War Europe. The World Bank was based on two basic political premises. First, it must remain apolitical, devoid of any particular ideological agenda and, second, that it is officially barred from involving itself in the politics of an aid recipient member country (Mason and Asher, 1973). The basic parameters were to adhere to socio-economic aims. To explain, the World Bank’s Articles of Agreement IV, Section 10 state: The Bank and its officers shall not interfere in the political affairs of any member; nor shall they be influenced in their decisions by the political character of the member or members concerned. Only economic considerations shall be relevant to their decisions, and these considerations shall be weighed impartially in order to achieve the purposes stated in Article I. (IBRD, 1989 n. p.) Nevertheless, referring to the World Bank, Limpach and Michaelowa claim that, despite the restrictions imposed on the Bretton Woods institutions: their lending modalities do have political consequences for recipient nations (independently of whether this effect is intended by the international financial institutions or not). The design of loan conditionality is intrinsically highly

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political because it involves policies and processes which affect the welfare of most people. (2010, p. 2) Notwithstanding that, at least in practice, foreign aid was a political construct, the formal politicisation of foreign aid commenced with the introduction of the ‘governance’ agenda some 20 years ago, which was originally defined by the World Bank (1992, p. 1) as ‘the exercise of political power to manage a nation’s affairs’. It should be noted that this definition was later dispensed with. However, in the late 1980s and early 1990s, two independent phenomena occurred that led to the formal politicisation of foreign aid. First, there was a general realisation among donors that foreign aid interventions did not produce the desired impacts. Indeed, many programmes and projects performed poorly. To explain, in the 1980s, academics and policy-makers in multilateral and bilateral aid agencies questioned why the post-war conventional technocratic top-down foreign aid was not working (Nelson and Wright, 1995, p. 4). One conclusion the donor community came to on the basis of poor performance and failure to achieve socio-economic foreign aid objectives was governance failure. To overcome this problem, donors deduced that sustainable economic growth through education and training, healthcare, and other social services as well as labour market modernisation and agricultural productivity, requires more than technical knowledge and financial and physical resources. It requires, so the argument went, well-performing government institutions and instrumentalities. Concentrating on ‘good governance’, irrespective of how much aid agencies attempted to depict the governance issue as apolitical and purely technicist, inescapably led to the politicisation of foreign aid. This signified the donors’ preparedness to combat corruption, nepotism, fraud and other politically sensitive issues (Carothers and de Gramont, 2013b). In parallel, in the 1980s there was a histrionic move to democratisation in the developing and post-Soviet countries. This led to the introduction of ‘democratisation’ as a new conditionality. The basic idea, among the multilateral development banks (MDBs) and bilateral aid agencies, was that democratisation would enhance socio-economic development. MDBs and bilateral aid agencies developed and implemented a totally new series of aid programmes, such as electoral support and civic education, to promote the transition to democracy. With a focus on democratisation, foreign aid agencies notably deviated from an almost exclusive emphasis on socio-economics to embrace political aims and objectives. With a dual focus on democratisation and good governance, the politicisation of foreign aid was complete, and it extended to incorporate transparency, stakeholder participation and human rights. On the political economy side, it included decentralisation and privatisation, a free market economy and opening the domestic market to international competition, to name a few elements. However, even when the ‘good governance’ agenda was overtly embraced and implemented as a goal, for the most part, the political facets of aid had to be moderated (see; Sen,

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1999; Carothers and de Gramont, 2013a). Thus, it is not surprising that economic goals took precedence over political goals, and that the latter goals were being explicitly downplayed. The extension from purely economic considerations to political ‘interference’ into aid recipient countries by the MDBs, such as the World Bank, is subject to criticism from two quarters. First, there are those who criticise the MDBs for the methods they used to expand their sphere of influence from economics to politics. The contested point is that the MDBs and bilateral aid agencies’ mission extension provides a basis for politicising their institutional focus, which is potentially undermining attempts at economic efficiency. Second, there are critics, who concentrate on the content of the MDBs’ and bilateral aid agencies’ operations, rather than on issues concerning the expansion. The focus of this critique concerns the MDBs’ and bilateral aid agencies’ responsibilities to recognise various international laws and treaties including human rights and environmental protection as an obligation to aid recipient countries. However, the crux of this argument is that the MDBs and bilateral aid agencies should accept their political interference limitations and accede in these matters to those international organisations which have the mandate to ensure adherence to the binding agreements (Bradlow, 2010). Despite these critiques, it could be argued that there is a need for a strong political understanding of national context explicitly focusing on the realisation of a foreign aid programme. Nevertheless, there is much scepticism among foreign aid agencies as far as politicisation is concerned. Conversely, the counter-argument in favour of politicisation and against the pursuit of the purely technicist-economic foreign aid with its apolitical basis is the support needed for developing countries where the government and its instrumentalities are too weak to implement foreign aid goals. The main point here is that many commentators, academics and practitioners acknowledge that politics has been progressively included in the foreign aid agenda, but at the same time corresponding changes in PEA have not been systemically recognised. That is, in recent times, a significant number of foreign aid academics and practitioners have argued that aid should be more, not less, politically oriented. If this stands to reason and by the fact that through the governance notion, foreign aid has become increasingly politicised, it follows that for PEA as an evaluation tool to retain its credibility, it needs to change from its technocratic roots to be a politically oriented instrument. In order to understand the need for change, it is advantageous to unpack the political ‘locus classicus’ of PEA within foreign aid. This will provide a basis to locate PEA politically in the politics of development.

The political locus classicus of PEA As shown above, foreign aid has always been a political endeavour. Development studies scholars, practitioners, aid agencies, donors and recipients have understood the importance of politics in the aid environment since the formulation and implementation of modern post-war foreign aid ideas. However, PEA was the first

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endeavour to bring to the forefront traditional understandings and to try to explicate PEA as a concrete operational activity (Routley and Hulme, 2013). Despite the political focus, a review of the PEA literature clearly defines PEA from the donor perspective as being deeply rooted in the economic paradigm (Schräder et al., 1998; Fine, 1999; Faye and Niehaus, 2010; Werker, 2012; Acosta and Pettit, 2013; Hudson and Leftwich, 2014; Hudson and Marquette, 2015). Given the dialectics of economic and political foundations of PEA, it is useful to try to establish a locus classicus of PEA in a context of foreign aid. Here we face a vital problem which needs to be acknowledged up-front. Since PEA, as Fisher and Marquette (2014) point out, is donor-centric, any discussion concerning PEA’s locus classicus must proceed from the ideas articulated, imposed and practised by donor agencies. This raises the question about the prevailing focus of aid agencies as far as PEA is concerned but from a donor organisational perspective. In order to respond to this question, we will focus on the currently widespread third generation of PEA. As it stands, the third-generation PEA is firmly placed within the economic domain. It is seen as the economics of politics, rather than political economy, or as Hudson and Leftwich claim, political economy analysis, in the context of development, has steadily become the application of economic assumptions and tools to the analysis of political behaviour and institutions. In doing so, it has increasingly become the economic analysis of politics rather than the political analysis of development. (2014, p. 32) Similarly, Hudson, and Marquette suggest that ‘PEA involves plenty of economics, but not much in the way of politics’ (2015, p. 68). This is, however, not a new phenomenon and Fine (1999) noted that PEA included much of economics but little of politics. As in many other social sciences, economics has successfully attempted to take over development studies. The development economists claim that economic methods and approaches are applicable universally to all social noneconomic disciplines. Others, like Green (2014), claim that the third-generation PEA’s analytical concepts ‘are seldom well-defined, carefully differentiated or usefully disaggregated’ (n.p.). He refers in addition to a broad range of parameters, such as foreign aid organisations and ideas, specifically to power relations, which reflect a cumbersome one-dimensional analytical framework. He claims that this one-dimensionality militates against the ability of analysts and policy-makers to ascertain detailed and rich data, information and knowledge relating to power relations in supporting or hindering the success of a foreign aid undertaking. A further elucidation comes from Hudson and Leftwich (2014), who claim that third-generation PEA is to a large extent focusing on how vested political interests and institutions influence and expound not only the ‘agent’s’ actions but also how political processes and activities impact on the foreign aid outcomes. They conclude that the end effect of the third-generation PEA is the transformation of analyses of

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politics into analyses of the economics of politics. By essentially substituting economics for politics, PEA is deprived of what is idiosyncratically political about politics. However, trying to locate PEA politically in the politics of foreign aid organisations is a complex undertaking. There is a need to acknowledge that policy-makers in donor countries have their own understanding about how foreign aid operates. Their worldview forms their perception of the consequences of actions taken in political as well as economic terms. If we reject the validity of a purely economic locus classicus and relocate PEA within a political narrative, this will enable PEA to retain its purpose and still remain intact, and to explicate power relationships but with a focus on politicaleconomic instead of purely economic dynamics. Thus, PEA would provide a formulation and implementation of foreign aid initiatives. However, in terms of locating PEA, it is necessary to acknowledge that some donors, irrespective of their rhetorical assurance to the contrary, generally retreat in practice from shifting PEA theory and practice from economic to political economy methods. Arguably, as stated previously, one of the reasons may well be that donor agencies find it problematic to change their own organisational culture entrenched in their own dominant incentives structure and to engage with internal political imperatives and their development strategies. Thus, plausibly donors will elevate PEA to a rhetorical level (Hout, 2015). Furthermore, the organisational lack of will to enact cultural change is not in line with the perceptions of practitioners and academics. There is a general view among these groups that thinking politically is vital to effectively develop and enact interventions through PEA. Notwithstanding that many donor agencies have used PEA in one or other form as an evaluation instrument, the impact has been to a large extent ineffective (Fisher and Marquette, 2014). There are a number of reasons one may cite for the perceived ineffectiveness. However, one overarching reason is the ‘taken-for-granted’ approach that is missing if problematising PEA from a politicisation perspective.

Problematising the politicisation of political economy analysis Since the beginning of the twenty-first century, a range of PEAs have been introduced by various multilateral and bilateral aid agencies, aiming to provide an analytical framework for assessing aid effectiveness (OECD, 2009). Despite these attempts and its advantages, PEA is, at operational levels, only occasionally applied by aid agencies and conceptually it remains a contested concept, lacking to a large extent theoretical underpinnings and political grounding. Thus, there is a stark contrast between what PEA is supposed to be able to achieve, or the rhetoric, and what it can realistically accomplish, or the practice. In the context of the former, PEA ‘aims to situate development interventions within an understanding of the prevailing political and economic processes in society – specifically, the incentives, relationships, distribution, and contestation of power between different groups and individuals’ (McLoughlin, 2014, p. 2).

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However, in practice and among practitioners, there is arguably a fundamental lack of understanding of how political economy is to be captured. For example, Leftwich (2006) comments on DFID’s Drivers of Change (see DFID, 2004) and notes that there is a deficiency of thoroughness in conducting PEA. Some ten years later not much has changed. Yanguas and Hulme (2015 p. 209) claim, ‘Politics has become a central concern in development discourse, and yet the use of political analysis as a means for greater aid effectiveness remains limited and contested within development agencies.’ Drawing on Yanguas and Hulme’s analysis of the World Bank as the ‘typical’ MDBs and DFID as an example for bilateral aid agencies, a number of issues arise in the context of PEA. Perhaps the most significant point in question is the extent to which the bureaucracies within aid agencies are politically willing to embed the principles and practices of PEA into their organisational culture. At risk of over-simplification. the potential problem is the place of PEA within the dominant measures of aid success within the aid agencies gauged by the disbursement of loans. Taking a step back, it is important to note that at the same time as the organisational culture in a context of operationalisation of foreign aid, disbursement is firmly entrenched as the measure of success, the rhetoric among many OECD donor agencies has moved on to political deposition of good governance. Yet there is little evidence that the rhetoric has changed the practice of PEA. If anything, PEA is seen at an operational level as something outside the foreign aid processes and procedures (Carothers and de Gramont, 2013a). To put it differently, PEA is often internally de-politicised by the aid agency, for it is not a binding activity conducted randomly in parallel with established project or programme cycles. Furthermore, the PEA data and information-gathering systems in the context of political vested interests appear often only at the discretion of the executing agencies in the host country. If that stands to reason, then the data and information are in danger of being idiosyncratic. Given the fact that PEA has to a large extent been used only in an ad-hoc manner, it is potentially perceived as a barrier to maintaining the overarching organisational culture which promotes purely economic achievements, such as the disbursement of aid loans as swiftly and efficiently as possible. The challenge thus far has been to ensure that foreign aid agencies think politically. This would require an imposition of deep-rooted organisational change, which at best would be a contentious process which is counteracted by the commanding organisational inertia. Hence the changes to the politicisation of foreign aid through PEA as a part of the project cycle with equal status as other evaluation measures is unlikely. The most promising scenario for overcoming organisational inertia and installation of PEA as a mandatory evaluation ‘tool’ is the pressure from outside the aid agencies themselves. Turning to the second decade of the twenty-first century a number of political challenges have emerged which should force the traditional MDBs and bilateral aid agencies not only to start thinking politically but also to act politically (Menocal, 2014), bringing PEA into the mainstream of foreign aid, to function as an analytical component in determining the potential success of foreign

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aid interventions. The main challenges to the existing ‘world order’ of foreign aid confronting the traditional Washington Consensus-based MDBs and bilateral aid agencies are political as well as economic (Jakupec, 2018), such as the surge in rightwing populism, an increasing espousal of de-globalisation sentiment in Western democracies and the rise of the Beijing Consensus (ibid.). Drawing together the above arguments around the problematics of the politicisation, and the previous analysis of the locus classicus of PEA, it becomes evident that foreign aid agencies, aid recipient countries, policy-makers, academics and practitioners may be well advised against an overly enthusiastic assessment of PEA’s locus classicus. It is evident that the existing PEA approach has thus far been unable to gainfully integrate donor agencies and recipient governments and their respective bureaucracies into a coherent PEA methodology. This brings to the fore negative corollaries for ownership and sustainable development effectiveness. Thus, it would be no use to try to further refine the existing PEA. The existing PEA should be abandoned altogether and a new PEA model should be constructed based on new conceptual and structural frameworks. This ‘re-politicisation’ of PEA must commence with a shift in focus from an efficiency-focused agenda, to more nuanced notions of ‘best fit’, which require a much deeper engagement with political economy. There are some fundamental changes required here.

Political challenges: re-politicisation of PEA It has been widely acknowledged by the foreign aid community that a more politically informed attitude to foreign aid is required (ODI, 2011). This would require a paradigm shift from a politics of efficiency and ‘best practices’ defined as ‘ideal’ standards, to a politics of ‘best fit’ which promotes divergent and multi-faceted pathways to the very structure of PEA within a context of the recipient government’s institutional power structures and performance and the donor’s internal organisational politics and the ‘political environment in which an agency operates’ (Yanguas and Hulme, 2014, p. 1). To clarify, as Yanguas and Hulme (ibid., p. 5) point out ‘[t]he institutional environment of aid organisations, which is generally risk-averse and eager for results, only reinforces the dominant cognitive model of development as a technical task.’ Let us turn to the political challenges. In the first instance, there is the challenge concerning the need to fundamentally change the internal organisational political culture, operational policies and guidelines, and associated administrative processes within foreign aid agencies (Carothers and de Gramont, 2013a; Routley and Hulme, 2013; Brett, 2016). Second, the political challenges, as we see it, would need to be located within an epistemic and cognitive framework, which in turn would facilitate a PEA policy viability and relevance. To clarify, a change to the existing epistemic structure of PEA, as espoused by the major MDBs and bilateral aid agencies, requires a noteworthy consensus among the scholarly community and practitioners on the criticality and importance of politics within the foreign aid process generally. In the same context, there is a need to acknowledge the limitations of PEA’s donor-centrality.

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Furthermore, PEA needs to attain political validity. This means that there is a need for a shift from the current politics of efficiencies, such as the principles of ‘value for money’ and ‘aid for trade’, towards the politics of effectiveness. The cult of efficiency is essentially negating the principles of PEA in its basic inferences. To clarify, notwithstanding that re-politicisation of PEA is becoming increasingly central to foreign aid, its use as a catalyst for increased aid effectiveness is lacking an epistemic political agenda. There is a lack of institutionalisation of PEA within the MDBs and bilateral aid agencies, including organisational planning and programming. There is a reluctance among PEA advocates to articulate a single, unambiguous ‘best fit’, as opposed to a ‘best practice’ ‘one-size-fit-all’ model for conducting PEA work as part of evaluative work. If this argument for politicisation of PEA stands to reason, it follows that as far as the political challenge of PEA is concerned, the evaluative processes need to be based on contextual political realities of the donors and the recipients, respectively. However, as we have seen in the preceding chapters, converting the existing PEA into a political tool with the aim of accommodating changes brought about by the rise of populism, the potential impacts of the Beijing Consensus and the advance of the de-globalisation agenda, have thus far not been very successful among donors. In extending the argument for the politicisation of PEA, there is a compelling argument to be made for an analysis of power relations between donors and recipients, for it is arguably a critical component of moving PEA towards becoming a political tool of relevance to development structures, institutions and to becoming of political and economic relevance.

Power relations as the politicisation of PEA: the principal-agent theory Any PEA model in which the organised interests of, and power relationship between, the principal donor and the agent recipient do not feature prominently on the foreign aid agenda is liable to remain obtuse and deficient. However, this should not be interpreted that principal-agent power relationships are the only and definitive determinants of PEA. A power relationship from a principal-agent theory vantage point may be considered an extension of politicisation of PEA. To neglect the power relationship between the donor and the recipient of the aid would limit the validity and reliability of PEA. In other words, PEA as an instrument for the examination of potential political constraints impacting on the success of the aid programme or project, cannot be successfully undertaken without an analysis of the power relationship within the governance structures and between the vested and competing interest groups of the recipient state. This brings to the fore the principal-agent problem, for example, when the agent (the aid recipient government and its agencies) does not act in the best interests of the principal (the aid donor) and in accordance with the objectives of the aid programme or project as it is envisaged by the donor (World Bank, 2016).

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However, given the interplay of diverse vested interests within the agency domain, and the agency’s discretion to execute the aid programme interpreted through information asymmetry, this becomes a political process and, in response, PEA becomes a political instrument which provides a rich explication of power relationship through the application of the principal-agent theory. In essence, the principal-agent theory explains how within a multifaceted system and with an imperfect information structure, the principal, such as an aid donor, does not always accurately recognise the understanding and intentions of the agent, such as the recipient government and its executing agencies. This innate information asymmetry enables recipient governments (as agents) to politicise aid and to maximise their own benefits and the benefits of vested interest groups. Principal-agent theory and practice in foreign aid are an understudied, yet often used procedure in donor-recipient engagement. Principal-agent theory impacts on financial and technical assistance, economic, and other forms of aid afforded by donor countries or the MDBs and bilateral aid agencies to developing countries. However, the structure, strategies and procedures of principal-agent enactment often require dealing with the intricacies of different vantage points, vested interests, questions of governance and sovereignty, power asymmetry, conditionalities and other pertinent issues (Spector and Wagner, 2010). An understanding of the principal-agent theory provides foreign aid organisations, practitioners and academics with insights into the above-stated complexities, the associated information asymmetries and incentives in political relationships with the aid recipient governments. It provides a vehicle to deliberate formally on power as the adaptation of incentives to encourage actions in the interest of the principal (i.e. the donor) (Milner, 2006). The principal-agent theory emerged originally from economics but has been taken up in political and social sciences and made applicable to specific political institutions such as development agencies. The theory is an advantageous instrument for explaining and interpreting any instances where one actor (donor) allocates the execution of a task (foreign aid programme or project) to another actor (recipient government). This theory is traditionally based on two basic assumptions. First, there is the assumption that there is a potential goal conflict between the principal and the agent. It is assumed that the goal conflict arises from the former acting in public interests whereas the latter is assumed to act in self-interest. Second, the agent has access to more information concerning the political, economic, social and cultural infrastructure of the aid recipient country. This leads to information asymmetry between principal and agent. In addition, there is the potential in power asymmetry. With reference to the afore-mentioned self-interests, it is reasonable to assume that there will be divergent vested interests and PEA may be used to analyse these and find common grounds and potential incentives. Furthermore, foreign aid has impacted, and will continue to impact, on power relationship between donors and recipients and it will also contain political options and values. Since donors are in control of foreign aid resources, they will retain power over recipients, for the former determine how and under which conditions the foreign

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aid resources will be deployed. This is a purely political power-related decision-making and amounts potentially to political interference. Thus, the problem concerning the impact of uneven balance of power between the donor and the recipient which is highly undemocratic arises. The irony of this is that, on the one hand, MDBs and bilateral aid agencies require the recipient countries to pursue a policy of democratisation, yet the donors are taking a non-democratic policy position. Given this uneven power situation, it is important to recognise different forms of power relationships and focus on how and under which circumstances interests arise. The other issue is that from a historical perspective, donor governments through their bilateral aid agencies have often been driven by other than welfare assistance motives, thus creating an uneven playing field. Returning to the application of principal-agent theory within the aid development arena, there is a need to consider loan conditionalities and the exploration of the outcomes of direct negotiations between donor agencies and recipient governments. There is little evidence that PEA, as it is practised today, examines and analyses the incentive structure differences and the power relations within recipient or donor organisations, which should be embedded in PEA. In this way, the question of conditionality could be studied as a particular instance within a general power relation paradigm, namely, in the case when the recipient and the donor act as heterogeneous identities. Given the potential heterogeneity of interests, governance and incentives of the donor agency and the recipient government, respectively, within an asymmetric information structure several layers exist which may be uncovered through the application of principal-agent theory within PEA. For example, the recipient government may, due to the influence of politically motivated vested interests, not act according to, say, pro-poor and poverty reduction alleviation objectives. Equally, principal-agent relationships exist within the donor organisation between the boards of directors representing the interests of their respective governments, the management and the staff. This may lead to misalignments of aid objectives and incentives and thus less than optimal foreign aid outcomes. These principal-agent problems may be identified and reconciled through a politically oriented PEA. Although a direct relation between the principal-agent problem and PEA as it currently exists is not clearly established in the relevant literature, these two areas of foreign aid study and analyses, respectively, connect well together. Applying PEA to seek a solution to principal-agent problems has the potential to provide a clearer understanding of the politics of power relationships within and between the agencies and the principal organisations. It may be opportune here to draw together the core argument of this chapter, namely, the requirement to re-politicise PEA. To clarify, in light of a disconnect between PEA’s tendency to focus on the economics of politics, and associated challenges and the required change to the existing epistemic structure of PEA (as espoused by the major MDBs and bilateral aid agencies), it may be opportune to revisit the core challenges identified earlier. These include the rise of populism, in the specific context of the Trump administration of the

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USA, a major bilateral donor, a significant contributor to the philosophical base of existing aid doctrine, and an unapologetic proponent of aid as a political tool.

A Trumpist political politicisation of PEA Perhaps the most pertinent politicisation or re-politicisation of foreign aid and thus PEA emerges from the development and foreign aid politics of the Trump administration. Trump’s foreign aid political agenda is based on his ‘America First’ doctrine. To be sure, this doctrine is at worst a vision devoid of ideology, and at best a dogma pragmatic enough to be classified as realpolitik (Baker, 2017; Jakupec, 2018). Trump seems to focus on foreign aid from a friend vs. enemy perspective. That means that ‘enemies’ must not receive US foreign aid and that the USA will withdraw donations to institutions and governments which do not support the geopolitical interests of the USA (Trump, 2015). Thus, the USA’s development policies will become unilateralist. But this is only one facet, the other one is that there is a complex relationship emerging between the politics of cosmopolitan foreign aid and the domestic nativist culture generally and the respective ideologies. With the electoral victory of Donald Trump, geopolitics has entered a new political and economic era. Trump’s presidency foreshadows mainly political and only to some extent economic changes to foreign aid. In short, the Trump administration is embarking on a re-politicisation of foreign aid in a populist form. Yet despite this new populist era, ideas concerning political challenges confronting foreign aid, and thus PEA, are, beyond a general critique from the proponents of the neoliberalism, curiously absent. The Trump era, as far as foreign aid policies are concerned, is not unique to the USA, it is emerging in other donor countries as well. Trump’s election and the aforesaid results of recent elections in, for example, Austria, France, Germany, Italy and the Netherlands signal at best a realignment of politics with the interest of the ‘pure’ people against the ‘evil’ establishment and the elite, at worst, a crisis of contemporary geopolitics and public administration. To understand how this impacts on foreign aid and thus PEA as a foreign aid evaluation instrument, it is necessary to take a step back and analyse the failure of the current foreign aid paradigm. There are of course many reasons for the rise of populism, the advance of the Beijing Consensus and the de-globalisation movement, which have been identified in previous chapters. To put it differently, there are many reasons why the existing elites and the establishment have lost credibility with the ‘people’. One is the blind implementation of neoliberal economics. Turning to foreign aid environment, neoliberal economics and the rhetoric of de-politicisation have not produced the desired effects, for neoliberalism is politically weak, and lacks a clear rationale for why it is advantageous for developing countries to follow. Foreign aid agencies embraced strategies which simply did not resonate with many aid recipient countries, especially in response to the Washington Consensus conditionality.

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The Washington Consensus-based donors, although using PEA in its various forms, do not have a reasonable and coherent explanation of PEA, beyond benefits to the donors. Thus, it is not surprising that few foreign aid recipient countries, foreign aid agencies, academics and practitioners, with few notable exceptions, showed much passion for PEA. The Washington Consensus-based aid agencies, with their neoliberal political economic agenda, are increasingly unable to resist the re-politicisation of foreign aid and its evaluation instruments. The Trump administration is rejecting the existing US foreign aid policies and strategies, by introducing populist politics and economics. Thus, Trumpism is in many ways a break from the locus classicus and something politically new. Conceivably, new global foreign aid politics will emerge, but the USA in the Trump era does not have the same status to force changes as it had in the post-war or even the post-Cold War era. So how does Trumpism connect to PEA? First, for PEA to remain and become more relevant, within a ‘Trumpist’ or a populist political environment, there is a need to acknowledge its political, rather than purely economic-technical relevance. This will require a capacity among foreign aid agencies and practitioners to demonstrate political thinking drawing on a range of international political economy theories. Second, the foreign aid donor administration should recognise PEA as an evaluation instrument that includes the exploration of both the aid donors and the aid recipients with their diverse vested interests.

Conclusion Couched in economics or economics of politics, PEA ignores, due to its donorcentricity, the authentic political activities such as negotiations and power relationships. In the above discussion, great emphasis is put on the need for change through politicisation. Habitually, however, the MDBs and many bilateral aid agencies take a somewhat simplistic view of change, namely, starting from the position of ‘best practice’ which leads to the ‘ideal’ project or programme goals. Subsequently, this is supported by international experts and aid funding, which may or may not include PEA. Shifting the emphases from the ‘best practice’ to what ‘best fits’ the recipient country, brings to the fore a different ‘theory of change’. This alternative theory supports the notion that an aid project has a greater success if the PEA is based on what is working locally, rather than on introducing technical solutions based on ‘international best practice’. This means that local authors must guide change and international technical expertise has the function of supporting the national endeavour (USAID, n.d.). Turning to Hudson and Leftwich, it may be useful to focus here, however briefly on the ‘political theory of change’ rather than on a general one, as covered in Chapter 2. They claim A political theory of change revolves around the interaction of agents and th,e institutional or structural context they act within, whether society, region,

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sector or issue. Institutions are shaped, maintained or undermined by human agents; agents are empowered and constrained by institutions, structures, power, and ideas. Politics occurs in the interstices of this interaction. (2014, p. 72) This means that their version of the political theory of change may be defined as ‘the dynamic and contingent relationship between power, structure, and agency’ (ibid., p. 105). The question is, how can the ‘theory of change’ be applied to PEA? From a PEA vantage point, one of the main and important actions is to identify where in the process the theory of change is embedded according to the fundamental findings. This suggests that the theory of change should be delineated within a context of related structures and the scenarios based on the circumstances under which different actors and vested interest groups may be able to influence success, or otherwise, of the aid activities (Harris, 2013). There were high hopes that PEA as an evaluation tool would enable donors to focus on outcomes by understanding the political economy in terms of power relationships that might impede on the success of the aid programme. This, so the argument goes, would lead to increased aid effectiveness. Furthermore, the donors envisaged that though PEA, delivery risk might shift to the recipient country. This was to be achieved through identifying political barriers within the recipient country. However, there is insufficient evidence that this has been achieved through PEA. One of the reasons is that PEA is neither conceptually sound has nor is it theoretically complete. Currently, PEA has a tendency to simplify high-level complex political issues by bringing them down to indicators, which do not capture in a politically reliable, coherent and meaningful manner the power balances internal to the recipient country. In addition, PEA, as constructed and practised today neglects the importance of the donor-recipient political relationship, such as it is possible to undertake within a framework of principal-agent theory. As far as the ‘ideological’ focus of PEA is concerned, in this discussion it has been shown that there are critical political, conceptual mismatches within PEA in theory and practice. More explicitly, much of what is termed PEA, with some notable exemptions, under-emphasises the function of political ideas and the intricacies of power relationships as a PEA politicisation constituent. In order to address these challenges by putting politics back into economics and to overtly, transparently and legitimately re-politicise PEA requires in the first instance administrative reforms within the aid organisation. This, in turn, requires a change to the organisational culture. At the centre of any such challenge is the recognition that the political power relations imbalances between the donor and the recipient countries need to be included as an integral component PEA. However, to change the administrative structures within an aid organisation, to the detriment of a more rigorous politically oriented PEA for foreign aid looking at both the host country actors and the foreign aid internal policies and power

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differences is insufficient. In other words, PEA needs to provide robust information regarding power relationships, vested interests and power partnerships which drive and inform donors and recipients how an aid policy agenda may be developed. While a politicisation of PEA may show enhanced effectiveness, as it relates to qualitative measures of potential aid outcomes and impacts, it may also provide rich data and information on policy performance of aid at the macro-, meso- or microlevels, it may also overcome the technocratic-managerial neoliberalised problems and shortcomings of the existing PEA.

References Acosta, A. M. and Pettit, J. (2013). Practice Guide: A Combined Approach to Political Economy and Power Analysis. Discussion Note Prepared for the Swiss Development Cooperation. Brighton: Institute of Development Studies. ADB (Asian Development Bank). (2014). 10 Years Independent Evaluation and the Asian Development Bank: Evaluation for Better Results. Manila: ADB. Baker, P. (2017). The Emerging of Trump Doctrine: Don’t Follow the Doctrine. Washington Post, 8 April 2017. Retrieved from www.nytimes.com/2017/04/08/us/politics/trump -doctrine-foreign-policy.html?mtrref=nationalinterest.org&gwh=56AB17034AC2F492 BA168125FE66552F&gwt=pay (accessed 20 July 2017). Bradlow, D. D. (2010). International Law and the Operations of the International Financial Institutions. In Bradlow, D. D. and Hunter, D. B. (eds), International Financial Institutions and International Law. Dordrecht: Kluwer Law International, pp. 1–30. Brett, E. A. (2016). Explaining Aid (In)Effectiveness: The Political Economy of Aid Relationships. London: Department of International Development, London School of Economics and Political Science. Carothers, T. and de Gramont, D. (2013a). Development Aid Confronts Politics: The Almost Revolution. Washington, DC: Carnegie Endowment for International Peace. Carothers, T. and de Gramont, D. (2013b). The Prickly Politics of Aid. Foreign Policy. Retrieved from http://foreignpolicy.com/2013/05/21/the-prickly-politics-of-aid/ (accessed 25 March 2017). DFID (Department for International Development). (2004). Drivers of Change: Public Information Note. September 2004. London: DFID. Faye, M. and Niehaus, P. (2010). Political Aid Cycles. Mimeo: UCSD. Fine, B. (1999). A Question of Economics: Is It Colonizing the Social Sciences? Economy and Society, vol. 28 (3), pp. 403–425. Fisher, J. and Marquette, H. (2014). Donors Doing Political Economy Analysis: From Process to Product (and Back Again?). Birmingham: University of Birmingham, International Development Department. Green, D. (2014). Why ‘Political Economy Analysis’ Has Lost the Plot, and We Need to Get Back to Power and Politics. Retrieved from https://oxfamblogs.org/fp2p/why-poli tical-economy-analysis-has-lost-the-plot-and-we-need-to-get-back-to-power-and-poli tics/ (accessed 18 March 2018). Harris, D. (2013). Applied Political Economy Analysis: A Problem-Driven Framework. London: ODI. Hout, W. (2015). Putting Political Economy to Use in Aid Policies. In OECD (ed.), A Governance Practitioner’s Notebook: Alternative Ideas and Approaches. Paris: OECD, pp. 83–97. Hudson, D. and Leftwich, A. (2014). From Political Economy to Political Analysis. Birmingham: University of Birmingham, International Development Department.

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Hudson, D. and Marquette, H. (2015). Mind the Gaps: What’s Missing in Political Economy Analysis and Why It Matters.In OECD (ed.), A Governance Practitioner’s Notebook: Alternative Ideas and Approaches. Paris: OECD, pp. 67–82. IBRD (International Bank for Reconstruction and Development) (1989). IBRD Articles of Agreement. Retrieved from http://siteresources.worldbank.org/EXTABOUTUS/ Resources/ibrd-articlesofagreement.pdf, (accessed 15 March 2018). Jakupec, V. (2018). Development Aid: Populism and the End of the Neoliberal Agenda. Cham: Springer. Leftwich, A. (2006). From Drivers of Change to the Politics of Development: Refining the Analytical Framework to Understand the Politics of the Places Where We Work. (Final Report). York: University of York, Department of Politics. Limpach, S. and Michaelowa, K. (2010). The Impact of World Bank and IMF Programs on Democratization in Developing Countries. Zürich: University of Zurich, Center for Comparative and International Studies. Retrieved from www.ethz.ch/content/dam/ethz/specia l-interest/gess/cis/cis-dam/Research/Working_Papers/WP_2010/2010_WP62_Limpach_ Michaelowa.pdf (accessed 15 March 2018). Mason, E. S. and Asher, R. E. (1973). The World Bank: Since Bretton Woods. Washington, DC: The Brookings Institution. McLoughlin, C. (2014). Political Economy Analysis: Topic Guide (2nd edn). Birmingham: GSDRC, University of Birmingham. Menocal, R. A. (2014). Getting Real About Politics: From Thinking Politically to Working Differently. London: Overseas Development Institute. Milner, H. V. (2006). Why Multilateralism? Foreign Aid and Domestic Principal-Agent Problems. In Hawkins, D. G., Lake, D. A., Nielson, D. L. and Tierney, M. J. (eds), Delegation and Agency in International Organizations. Cambridge: Cambridge University Press, pp. 107–139. Nelson, N. and Wright, S. (1995). Participation and Power. In Nelson, N. and Wright, S. (eds) Power and Participatory Development: Theory and Practice. London: Intermediate Technology Publications, pp. 1–18. ODI (Overseas Development Institute) (2011). Putting Politics into Practice? Political Economy Analysis and the Practice of Development. Retrieved from www.odi.org/ events/2756-putting-politics-practice-political-economy-analysis-and-practice-developm ent (accessed 18 March 2018). OECD (Organisation for Economic Cooperation and Development) (2009). Donor Approaches to Governance Assessments: 2009 Sourcebook. Paris: OECD. Routley, L. and Hulme, D. (2013). Donors, Development Agencies and the Use of Political Economic Analysis: Getting to Grips with the Politics of Development? ESID Working Paper No. 19. Manchester: Effective States and Inclusive Development Research Centre. Schräder, P., Hook, S. and Taylor, B. (1998). Clarifying the Foreign Aid Puzzle: A Comparison of American, Japanese, French, and Swedish Aid Flows. World Politics, vol. 50 (2), pp. 294–323. Sen, A. (1999). Development as Freedom. New York: Alfred A. Knopf. Spector, B. I. and Wagner, L. M. (2010). Negotiating International Development. International Negotiation: A Journal of Theory and Practice, vol. 15 (3), pp. 327–340. Trump, D. (2015). Crippled America: How to Make America Great Again. New York: Threshold Editions. USAID (n.d.). Political Economy Assessment: Field Guidance. Retrieved from http://pdf. usaid.gov/pdf_docs/PBAAA891.pdf (accessed 18 March 2018). Werker, E. (2012). The Political Economy of Bilateral Foreign Aid. Working Paper No. 13-026. Cambridge, MA: Harvard Business School.

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World Bank (1992). Governance and Development. Washington, DC: World Bank. World Bank (2004). Monitoring and Evaluation: Some Tools, Methods and Approaches. Washington, DC: World Bank. World Bank (2016). The Role of Political Economy Analysis in Development Policy Operations. Washington, DC: World Bank. Yanguas, P. and Hulme, D. (2014). Can Aid Bureaucracies Think Politically? The Administrative Challenges of Political Economy Analysis (PEA) in DFID and the World Bank. ESID Working Paper No. 33. Retrieved from www.effective-states.org/wp-content/uploads/ working_papers/final-pdfs/esid_wp_33_yanguas_hulme.pdf (accessed 18 March 2018). Yanguas, P. and Hulme, D. (2015). Barriers to Political Analysis in Aid Bureaucracies: From Principle to Practice in DFID and the World Bank. World Development, vol. 74, pp. 209–219.

10 (RE)LOCATING POLITICAL ECONOMY ANALYSIS Theoretical constructs and practical undertakings

Introduction Foreign aid organisations such as the World Bank, the Asian Development Bank (ADB), the European Bank for Reconstruction and Development (EBRD), and donor governments, are facing unprecedented political and economic challenges. The dominant neoliberal ideology of the major development institutions is being challenged by right-wing populist movements, the ideals of neoliberal globalisation are being contested by forces of de-globalisation, and the orthodoxy of the Washington Consensus is being ideologically replaced by the ideals and pragmatics of the Beijing Consensus. These challenges reflect competing ideologies and theoretical underpinnings governing foreign aid. From this vantage point, it may be argued that the Political Economy Analysis (PEA), as a theoretical construct and a practical undertaking should be (re)located in a way that it can respond appropriately to the requirements of the donors as well as the recipients by using a range of theories which support the diversity of political and economic challenges. In other words, we are arguing that the existing neoliberal theoretical framework, upon which PEA is based, is inadequate. There is a need to overcome the limitations of PEA’s existing theoretical one-dimensionality. In order to achieve this, it is necessary for PEA to be (re-)located in ways such that it can respond to and accommodate the diverse, and at times competing, theoretical and practical requirements of donors and recipients alike. In proposing this approach, there are a number of considerations we have considered. As argued in Chapter 2, there is a need to bring about a paradigm shift in order to articulate the theoretical frameworks for PEA, within the existing theoretical frameworks of International Political Economy (IPE), also referred to as global political economy. We have not rejected the theoretical frameworks that underpin the neoliberal PEA, we have simply brought it into a fold with other theoretical frameworks.

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From a practical vantage point, the success or failure of any PEA depends on the methodology and method used, which in turn depend on a number of interrelated factors. These we have identified as: (1) the choice of politico-economic theories and frameworks from the donor perspective; (2) the political, economic, social and cultural values of the recipient country; (3) the political and economic power relationships within and between institutions and vested interest groups through which the aid donor and the recipient governments intend to intervene in the economic and political structures of the recipient country; and (4) the type of recipient country’s bureaucracy and vested interests, and the donor-recipient socio-political, socio-economic and politico-economic relationships. All these and other factors need to be cast within a context of the type and aim of interventions envisaged, through the provision of foreign aid (Best and Paterson, 2010; Copestake and Williams, 2012; OECD, 2012). The interdependence of the above factors at the theoretical level remains a largely understudied phenomenon. The reason may be that the interaction of the political, economic, social and cultural dimensions is a difficult concept to grasp for individuals concerned with PEA and the political decision-making process at the foreign aid donor and recipient levels. In the context of this discussion, the wicked question, which leads to sharper strategic thinking about PEA, concerns the relevance of paradigms leading to a theoretical framework to which we will turn.

Theoretical frameworks for Political Economy Analysis Briefly and acknowledging the risk of over-simplification, a theoretical framework offers a specific vantage point from which to examine the subject matter. Theoretical frameworks for PEA emerge from various disciplines, including economics, political sciences, social sciences, cultural studies, and human geography and may be applied by PEA researchers and practitioners to bring to the fore new and at times competing understandings of PEA. It is important to note that there is no right or wrong theoretical framework when researching or undertaking PEA. However, the perspective taken will depend on the ‘variables’ and ‘values’ chosen, and the results one seeks to unravel. In short, a theoretical framework is the foundation of every PEA undertaking, be it at the theoretical or practical level. It defines how PEA researchers or practitioners frame a project’s problematics and how to examine the problem (i.e. methodology and method) and what connotation is ascribed to the data and information obtained. It needs to be acknowledged that there are numerous IPE theories, which may be used to construct theoretical frameworks for PEA, such as (1) the actor-oriented IPE theories including ordoliberalism, neoliberalism, laissez-faire liberalism, Keynesianism, public choice and rational choice theories; (2) structuralism, including World System theory, systems theory, and regulation theory; (3) institutionalism, including rational choice institutionalism and sociological institutionalism (Talani, 2014); and (4) post-positivism, including neo-Gramscian, feminist, critical realism, and post-structuralism IPE theories. Be this as it may, a more focused approach is

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to turn to the aforesaid PEA interrelated factors and try to align these with the IPE theories. To recap, we have identified the former as: (1) the preferences of politico-economic theories and frameworks from a donor perspective; (2) the political, economic, social and cultural values and norms from a recipient country’s vantage point; (3) the political and economic power relationships between donor and a recipient country and the latter’s institutions and vested interest groups through which the aid donor and the recipient government intend to intervene in the economic and political structures of the recipient country; and (4) the nature of the recipient country’s bureaucracy and vested interests, and the donor-recipient socio-political, socio-economic and politico-economic relationships. As it is beyond the scope of this discourse to articulate the various IPE theories in full, the discussion here will focus on some central theoretical orientations only, namely, on relevant actor-oriented IPE, structure-oriented IPE, and institutionalism as a transition between the other two afore-said orientations. It should be noted that each of the three above-mentioned IPE theories focuses in a way on the relationships between actors, including polity, i.e. the state as a political entity, bureaucracies, public or private institutions, political organisations, or individuals, to name but a few. Thus, clear-cut dissimilarity between these theories is at times arbitrary. However, it is also important to note that each of these theories accentuates discrete values, norms, actors, situations, and policy problematics and, in doing so, each of the theories ignores or sets aside some crucial aspects embedded in the other theories and theoretical orientations.

Actor-oriented theoretical frameworks Notwithstanding the above-mentioned actor-oriented theories, our discussion will be limited to the public choice, rational choice theories and game theory, as stated previously, because the neoliberal agenda is subjugated to or based on actororiented theories such as these. It is noteworthy that the boundaries between these two theories are somewhat blurred. As Green and Shapiro (1994) pointed out, public choice theory merely reiterates the prevailing knowledge of the rational choice theory and as such does not contribute much to an understanding of politics (for a contrary view, see Mueller (2003)). However, it could be said that both theories pursue an economic approach to politics as well as the social sciences, and thus to PEA and foreign aid. Another commonality is the focus on incentives structures within the political and bureaucratic realms (Eriksson, 2011). Let us turn now to the three previously identified IPE theories.

Public choice theory Over the last half a century, the scholarly community has been divided on the benefits of public choice theory, both from a political as well as an economic vantage point. There are those who argue in favour of public choice theory on the basis that it allows for an analysis of government public policy as well as the market

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forces consistently within a structural framework (cf. Mises, 1944, 1945, 1949; Hayek 1945, 1948, 1960). We can translate this in economic terms to PEA, for if we accept that the multilateral development banks (MDBs) and bilateral aid agencies work through the imposition of afore-mentioned concepts such as ‘good governance’ or ‘financialisation’ or ‘economic and market-oriented conditionality’ as matters of public policy, then it follows that the political and economic agenda of the donors merge. However, those critical of public choice theory, mainly coming from a political sciences background, argue that the economic emphasis militates against a political understanding of PEA. The usual response from the neoliberal economists is that those subscribing to public choice theory do not emphasise the economic agenda sufficiently (cf. Alesina et al., 2006; Blankart and Koester, 2006). In the end, the argument from a socio-political as opposed to a neoliberal perspective is that it is not public choice theory, but political economy that has more to offer to PEA. There are at least two divergent points here, which nevertheless can be traced back to MDBs as de-facto government institutions or, if one wishes, supra-governmental institutions. MDBs, such as the International Monetary Fund (IMF), the World Bank, the EBRD, the ADB and others, act as states, whereas bilateral aid organisations such as the US Agency for International Development (USAID), the Department for International Development (DfID), the Australian Agency for International Development (AusAID), the Canadian International Development Agency (CIDA) and others act on behalf of their respective governments. MDBs and bilateral aid organisations act as a ‘person’ making a rational choice. At best, these organisations may under certain circumstances act within the parameters of public choice. The reason for rejecting the former is that the MDBs and bilateral aid organisations cannot act as persons due to the fact that: (1) they do not represent an aggregation of individual preferences into a collective action; and (2) the recipient state cannot be viewed as a market in which various stakeholders, government agencies, interest groups and individuals interact through exchange of power and incentives. If we were to accept the proposition that the public or rational choice is based on a consensus between the MDBs and bilateral aid organisations on the donor side, and the aid recipient state on the other, both rational choice and public choice theories might be useful. However, the reality is that the balance of power relations between the donor organisations and the recipient is not based on equality. Thus, there is a question about the potential of the recipient states to fit neatly into a framework of public choice theory (cf. Arrow 1951; Coase, 1960; Buchanan and Tullock, 1962; Olson, 1965; Mueller, 2003) In reality, the recipient state seldom fits neatly into the rational choice or even public choice theorem. Recipient countries’ governments, polity, interest groups and institutions generally diverge from this ideal, whereas the MDBs and bilateral aid agencies, generally follow neoliberalism and the rational choice and public choice ideal. Thus, economists working within or for MDBs and bilateral aid agencies may not be in a position to offer alternative economic solutions for a different approach to PEA.

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Before we turn to discuss rational choice theory, let us elucidate its commonalities with public choice theory. The main point of convergence between these two theories is the argument concerning the behaviour and motivation of actors. The difference, if any, is that public choice theory refers mainly to public sector bureaucracies, whereas rational choice theory also includes other non-public sector actors. To elucidate, although by its own definition public sector bureaucrats are assumed to act in the public interest, administrating government policies effectively and efficiently, proponents of public choice theory see public sector bureaucrats as self-interested utility maximisers. Their motivation, according to public choice theory, is financial returns in the form of salaries and other monetary benefits, beneficiary conditions of the office, public status, patronage, political power, and the straightforwardness of managing the administrative unit (Niskanen, 1973). Thus, at the centre of public choice theory is an official at any level and any environment, be it public or private sector, institution or agency, motivated by and acting to some extent in promoting and securing self-interested benefits. This notion of self-interest is also a central point of rational choice theory.

Rational choice theory Rational choice theory is also referred to as ‘new political economy’. At the risk of repeating ourselves, let us restate Green and Shapiro’s (1994) claim that public choice theory simply echoes the prevalent knowledge of rational choice theory. This is mainly due to an unswerving belief in rational and self-interested actors beyond economics, namely, as equally applicable to politics. Furthermore, established PEA as perceived and practised by major MDBs and bilateral aid organisations is based on rational choice theory and epitomises an expansion of the invariably limited premises, which have informed and dominated economic paradigms of foreign aid policy for decades. The aforesaid minimalist state approach as advocated since the 1980s by MDBs appropriated this ideology quite faithfully as the basis for reasoning that there was a limited need for government. Furthermore, rational choice theory is mainly based on micro economic theories, such as marginal utility theory (see Stigler, 1950; Kauder, 2015), and game theory (Stone, 2001; Turocy and von Stengel, 2001) underpinning the familiar notion that all actors behave in a purposefully rational manner aimed at obtaining the best value for themselves. From a rational choice point of view, an economy (the recipient state) is seen as a collective of individuals and individual interest groups, which on the basis of self-interested preferences, and under the condition that they are fully informed, will reach the optimal self-beneficial solution (i.e. they act as homo economicus). This leads to the conclusion that there is no difference between economics and society (Mises, 1951). Following this emphasis on economics as society, rational choice and game theory have detached politics from economics and applied the concept of homo economicus to the PEA of foreign aid and the actors such as MDBs, bilateral aid agencies, aid recipient governments and other stakeholders. This search for

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quantitative, universally acceptable explanations of foreign aid actors has rendered rational choice theory a mere methodology, leading to observable and predictable PEA patterns, which can be used in any situation across the developing world, consisting of self-interested actors. To transfer this into a foreign aid context means that MDBs, bilateral development agencies, the recipient states, including their polity, vested interest groups and institutions, all behave as homines economici. The attractiveness of rational choice theory and game theory among MDBs and bilateral aid agencies may be explained by the belief that empirically testable postulations can be generated. However, rational choice theory is based on assumptions that actors behave as homines economici, and the notion of empirical testability is also based on an assumption that rational choice theory has been turned on itself. In response to this form of empirical methodology rational choice theory, emanating mainly from the USA, a new approach is emerging. A number of Continental researchers have adopted a mixed method incorporating critical and historical approaches. They claim that the orthodoxy of the homo economicus approach has epistemological and ontological limitations for studying and understanding international economic affairs. From the above discussion a number of shortcomings are apparent. First, by advocating ‘economics as society’, the rational choice IPE theory brackets the historical contextuality of the recipient state, its polity and society, and the socio-political embeddedness of the economic exchange relations (Polanyi, 1957; Granovetter, 1985). It could be argued that the nexus between ‘economics as society’ and its logic in rational choice theorising is often characterised by a tacit attempt to describe PEA as the rational choice of individuals or of the state and institutional actors. This ‘orthodoxy’ can be seen as a radical form of methodological individualism, which has the tendency to reject the validity of the contextual relationship between economics, politics and society as a whole (Youngs, 1999; Oatley, 2016). Furthermore, it is questionable how, if at all, rational choice theory can explain the contextualisation of the constraints governing the political and other institutions, which are embedded as actors in the recipient country. The point is that if such a contextualisation does not exist within its own epistemological framework, a significant challenge can be mounted in terms of the validity of rational choice theory to achieve its own claims.

Game theory Similar to the orthodox rational choice theory, game theory emphasises the behaviour of the rational actor and the associated intensification of material interests. These views ignore other potential normative interests and the actors’ other interests. It is possible that forms of socio-political and socio-economic actions echo strongly adhered to values and norms and may not be readily relegated to the primary goal of economic profit maximisation (Archer and Fritsch, 2010; Anderson, 2014). Furthermore, game theory’s weakness is the unsubstantiated assumption that the actors, for example, the recipient governments, its institutions and interest groups, all have

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perfect information, knowledge and understanding of the others’ preferences and the economic alternatives that may exist. Furthermore, public choice theory and the aforesaid focus on methodology as a foundation of rational choice theory within the context of socio-economic study, militates against studies concerning the authentic behaviour of recipient governments, their polity, institutions and interest groups. The issue is that the rational actor approach is applied to these identities as a collective, which behave akin to economic value-maximising individuals. This denotes IPE to a negotiated regulatory micro-economic methodology. In the context of IPE based on public choice theory, rational choice theory and game theory, the common problem is the lack of general recognition of the social and political constitutionality of politico-economic institutions and their interactions or market embeddedness (Polanyi, 1957; Lang, 2008). However, in light of the above and other criticisms against the assumed non-political character of donor-recipient actors, and the separation of economics and politics, a number of proponents of actororiented theories have focused on the inclusion of socio-political motives into public choice and rational choice IPE. This is portrayed as the politicisation of the recipient governments’ decision-making paradigm. This politicisation is to provide alternative outlets for explicating the social, political and economic characteristics and dominant themes of the aid recipient country’s civil society. The apolitical notion of the orthodox public choice, rational choice and game theories is thus shifting towards a collective, political, social and economic action in foreign aid recipient countries (Jørgensen, 2010; Broom, 2014). Given the above-identified weaknesses of the actor-oriented theory, its value as a theoretical framework for PEA is limited. The benefits of rational choice theory for a socio-political and socio-economic approach to PEA are debatable. It could be argued that the role and function of actor-oriented theories are missing a vital point by not differentiating between the notion that recipient governments and their polity are seeking to maximise their economic payoffs and maximising their social and political values. Notwithstanding that the former notion of maximisation is, in Popperian terms, falsifiable, this notion of falsifiability is not readily ascertainable in the actor-oriented schools of thought. Against this, it is noteworthy that the latter version of maximisation is not falsifiable, first, because it is not observable, and, second, it is an internalised esoteric value held by the actors. As such, it may be adjusted to fit any form of behaviour, including non-economic irrational behaviour, which is, by its own definition, unpredictable. This means that the inconsistencies in such behaviours are difficult, if not impossible, to determine without stipulations. Thus, the argument that values maximisation within the realm of public choice and rational choice theory can be seen in the same way as the maximisation of economic payoffs through rational behaviour is unsustainable. Nevertheless, rational choice theory assumes the mantra of universal rationalisation and claims that PEA can fit any foreign aid situation and condition. This, as a theoretical framework for PEA, is epistemologically difficult to substantiate and is one of the major weaknesses of rational and public choice theories. As long as PEA

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is confined to a theoretical framework based on IPE rational and public choice theories, the former will be epistemologically restricted when addressing the social, political and economic cohesions required in and for foreign aid interventions.

Structuralism as a theoretical framework Within the context of IPE, structuralism includes a wide range of theories (cf. Veneziani, 2008), which reject action-oriented rational choice and public theories (Frank, 1967, 1998; Prebisch, 1970; Elster, 1985, 1990; Przeworski, 1985; Habermas, 1987; Martinussen, 1997; Wallerstein, 2004). However tempting it may be to analyse the various structuralism theories, we will, for the purpose of this discussion, focus on world system theory, systems theory and regulatory theory. While, as we have seen, the actor-oriented theories focus on actors, structuralism focuses on societal structure, for example, social sub-systems (system theory), or on respective socio-economic development processes (regulatory theory) or global structures (World System theory). The common proposition embedded in structuralism is that social structures have their own logic, which cannot be (totally) deduced from the ‘rationality’ of individual members of a society. This means that, for example, proponents of structuralism within the context of IPE focus mainly on questions concerning how different social classes are affected by the dominant economic structure. As far as IPE is concerned, proponents of IPE structural theory accentuate that ‘markets’ in the neoliberal sense do not, and never did, exist in a social vacuum. There is always a nexus between the social, the economic and political forces. The theoretical concepts of structuralist theories are based on certain structural categories, such as the regime of accumulation and the method of regulation as portrayed in regulation IPE theory, or through the (unequal) trade in foreign aid that is formed by the interplay between donors, recipient governments and beneficiaries articulated through World System theory. Simply stated, all structure-oriented theories within the realm of IPE, are macro social-political-economic epistemic concepts. That is, economy is conceptualised as a structured aggregate of sub-systems. Nevertheless, each of the above-stated structure-oriented theories has a different emphasis.

Systems theory The systems theoretical IPE occupies a special position among structural theories, for actors are in the traditional sense not taken into consideration. Instead the main focus is on the communication processes which construct the social order and its differentiations. That is, politics and economy are perceived as two functional systems, which in turn form part of a world society as a greater function system (Bertalanffy, 1969). Essentially, systems theory is autopoietic, based on the proposition that systems reproduce themselves through a continuous production of their own components (communications) and are present only in the enactment of their particular workings (Luhmann, 1998; Brandhoff, 2009).

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The relation between systems theory and PEA within a framework of IPE is problematic. For one thing, systems theory is firmly grounded in social theories rather than economics. Thus, the application of systems theory has a different epistemological connotation than actor-oriented IPE theories. The main characteristic of systems theory is the focus on conditions, distortions and instability of the social structure formation. This is in contrast to the traditional delineation of IPE as being concerned with the connection between governments, vested institutional interests and markets (Gilpin, 1987, 2001; Strange, 1995). However, this is not a shift in complexity for systems theory focuses on other problematics more so than many of the traditional heterodox IPE theories. This often leads to the dismissal of systems theory as being outside acceptable IPE paradigms (Baecker et al., 2007). From this vantage point, system theory brings economics into sociology by appropriating economics as its own object. Thus, economics plays an important role within a contemporary understanding of society. From this point of view, there is little that may militate against system theory as a theoretical framework for IPE; it includes the social, the political and the economic epistemology. However, system theory is in direct contrast to actor-oriented theories. It is firmly couched in social theory with a focus on the constituents of social order, but without the pronounced economic contexts. The emphases are on consensus, communication, lifeworlds and social systems (Habermas, 1987; Luhmann, 1998, 2000). Although, system theory is not well established within the context of PEA, it may be noteworthy that it can make a substantive contribution as a potential theoretical framework. This is especially the case in the post-GFC foreign aid era, with a shift towards a post-Washington Consensus with its social dimension of politico-economic analyses. The analysis of the social dimension presupposes an intersubjective epistemology. Thus, as a point of departure for a societal-based theoretical framework for PEA, system theory provides an important epistemological impulse. However, as a theoretical framework for PEA, system theory may need to be couched in the epistemology of the political processes that may govern the socio-economic agenda. The emphases on the political processes in a global context (e.g. globalisation) may not be limited to recipient governments and states. The political dimension is brought into social relationships and politics locates itself within the processes of the structuring of the social world or as a process of economisation for the area of the economy. From this vantage point the ‘society of the society’ (Luhmann, 1998; Baecker et al., 2007) as a basis for IPE is more stimulating for the PEA than the ‘economics of the society’ or ‘politics of the society’ (Luhmann, 1998, 2000). System theory permits a discourse between the communicants (e.g. the state, social institutions, donors, recipients, benefactors and beneficiaries) while bracketing the inherent and dominant notion of economics in existing PEA. However, this raises the question, how may the economic conditions be included as a constituent of IPE? Or how may it be possible to define the boundaries of economic circumstances within a social context? We argue that the delineation of the economic circumstances, say, in a context of IPE with

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a focus on PEA have specific connotations. Here we are venturing into a pragmatic realm. System theory allows us to proceed from a social perspective and incorporate the political and the economic dimension as components of IPE. If this stands to reason, we can focus on the politics of expertise. This allows the economists to provide input into the economic context and political scientists to provide input into the political context of IPE system theory, but each from a societal point of view. In other words, the conditions of the discourse are determined by the discipline-specific expertise. Here, it could be argued lies the potential weakness of system theory. That is, the nexus between politics, economics and society requires, according to the proponents of system theory, as noted above, a communicative format of PEA and thus a stabilisation of power relations between the donors and the recipients, the benefactors and the beneficiaries and the donor and recipient institutions’ bureaucracies, and the organisation of the autopoiesis. To summarise, system theory is a societal theory and, as such, it could be argued it is not an IPE theory in the traditional sense. This has its advantages and limitations as far as its potential for a PEA theoretical framework is concerned. The advantage is that it may bring to the fore new approaches to constructing theoretical frameworks for PEA. It may open up new vantage points from which to construct theoretical frameworks for PEA, which may incorporate the problematics of PEA from a purely social perspective. In order to do so, proponents of system theory may need to bypass traditional political terms of other IPE theories. On the other hand, the nexus between the societal, political and economic constructs of system theory provides an increasing steadiness for social relations, especially within the context of power and wealth-sharing inclusiveness and exclusiveness. The limitations of system theory as a potential theoretical framework for PEA are the attempt to integrate politics and economics as sub-systems of social structures with the aim of reaching explicit PEA targets. That is, system theory from the Hegelian perspective is built on the proposition that it can solve specific social problems. In doing so, system theory may be reduced to an instrumental practice. Thus, system theory, as constructed by Luhmann, requires careful consideration when used as a theoretical framework for PEA.

Regulation theory Underpinning regulation theory is the question, in what way is a market-based profit-oriented system such as capitalism, despite the assumption that it is subject to crises, able to remain relatively stable in different epochs? From a historical perspective, regulation theory was prominent in IPE academic discourse during the period of Fordism (mid-1945 to mid-1970). It remained a strong critical framework in the analysis of an increasingly prominent financialisation of foreign aid. Due to the various economic crises in Asia, South America and other regions, the economic stability of the Fordist era vanished. This was one reason why traditional regulation theory shifted its attention to post-Fordism with a focus on changed

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accumulation and regulation structure (Jessop, 1992, 1997; Tickell and Peck, 1995; Bevir, 2009). Today, in the context of PEA, we can discern at least two broad regulation theories orientations, namely, the public interest theories of regulation and the private interest theories of regulation, respectively (Hantke-Domas, 2003; Ogus, 2004; van Hertog, 2010). The former is based on the proposition that regulators are sufficiently well informed and have the political, administrative and regulatory power to effectively further the public interests. The parallel assumption is that such regulators are altruistic and act for the benefit of the public. The latter is based on the proposition that regulators do not have adequate information concerning, for example, potential financial parameters, costbenefits, quality issues and other social, cultural, economic dimensions. Thus, they cannot accurately, if at all, advance public interests, when engaging in the analyses and implementation of foreign aid for the advancement of society. This division between the public interest theories of regulation (Hantke-Domas, 2003) and the private interest theories of regulation (Ogus, 2004; van Hertog, 2010) may be open to a hypothetical discussion whereby the former represents the donors such as the MDBs and the latter represents the recipient government. In addition, it may be also assumed as far as the private interest theories of regulation are concerned, that all economic agents such as donors and recipients including the relevant interest groups and stakeholders pursue their own interests, which may or may not be in accordance with ‘authentic’ public interests. Thus, under such circumstances, enacted regulations may advance private interests, however these may be defined. Pursuing this line of argument further, it may be suggested that the differences between public and private economic and political interests may lead some MDBs to pursue their own agenda at a disadvantage to the public interests of the recipient. Against this background let us turn to the theoretical discourse concerning system theories. As Jessop (1997) explains, regulation theory has, since the 1970s, been a prominent paradigm in the resurgence of the ‘new political economy’ with a focus on evolutionary and institutional economics. Its initial theoretical and political agendas, as it is known today, have their roots in the Parisian École de la régulation. Although regulation theories are often incorrectly entirely associated with the Parisian School, it is important to note that in addition there are other regulation theory schools of thought. However, all these have one thing in common, namely, they espouse a heterodox interpretation of capital accumulation which is socially embedded pursuing socially regularised endeavours (Aglietta, 1979; Boyer, 1990; Lipietz, 1993). A further (contested) distinction may be made along the techniques and development lines. We will focus our discussion on two schools of thought centring on policy and to a lesser extent on economic issues. These are positive theories of regulation and normative theories of regulation, respectively. The proponents of the former research the reasons for the existence of regulations, including market power theories, theories of interest groups’ attention to regulation and government opportunism theories that elucidate why restrictions on governments’ discretion may be necessary for a specific economic sector to deliver effective and efficient

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social and other services to the intended beneficiaries. In broad terms, positive theories are based on the proposition that regulations occur because recipient governments are interested in permeating information asymmetries in relation with the donor and aligning the MDBs’ interests with the recipient government’s interests. This may include the recipient government coveting protection of free market forces, especially when free market competition is inappropriate for social and political reasons, or from the donor’s point of view it may be the desire to protect its interests on, say, the basis of ‘aid-for-trade’ principles or the donors’ need to protect themselves from recipient governments’ opportunism. The latter may lead to either the donor or recipient parties taking advantage of opportunities, or seeking immediate strategic advantage with limited concern for the ultimate repercussions for the potentially affected parties. In broad terms, normative regulation theories advocate that regulators should support competition if possible, minimise financial and other expenditures emerging from information asymmetry by acquiring information and providing foreign aid recipient governments with inducements to improve their performance, including economic efficiencies. It follows then that there is a parallel need to establish regulatory processes, which support regulations according to the appropriate legislation and law, ensuring independence, transparency and the legitimacy of the regulation system. To conclude the discussion regarding regulation theory from a critical point of view, one could presume that regulation theory is simply one among many IPE theories that provide an understanding of Fordism and post-Fordism in the context of PEA as it relates to foreign aid. If this is the case, then the weakness of regulation theory is questionable, why use it as a theoretical framework in an epistemological and ontological sense? In response, one could argue that regulation theory is focused on realist epistemology and ontology and thereby assumes the method of articulation in constructing a theoretical framework. In doing so, it employs a general Marxist tradition of historical materialism within the realm of political economy. Regulation theories relate to the varying methods and procedures embedded in institutions, networks and norms, through and in which the expanded reproduction of, for example, foreign aid, as a social relation may be secured through PEA.

World System theory World System theory has, among the IPE structural theories, arguably the most pronounced macro perspective. The proponents of this theory analyse and focus entirely on the global economy (i.e. the world politico-economic system). Thus, the social and political complexities are by necessity reduced to a limited number of variables. To explain: ontologically the World System theory portrays, among other structure-oriented theories, most clearly a characteristic of a functional system. With this, the World System theory explicates a global ‘world system’ with its own logic. That is, the actors’ behaviour is determined by the system and they

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act according to the functional system requirements. The strength of the World System theory lies in its elucidation and analysis of historical developments and these developments’ interrelation within a context of the limitations arising from ontological complexities and system-dependent variables. To be sure, World System theory is neither a political sciences theory, nor an economic theory in the narrow sense, but a macro-sociological-historical theory, which, according to Wallerstein (2007), includes theoretical components emerging from cultural and social sciences theories. The point of departure or basic propositions for World System theory proponents may be categorised as follows. First, World System within the international systems structure has global constituents. Within this proposition there is a dominant theme of a hierarchical nexus between the developed and developing nations, or between foreign aid donor nations and the foreign aid recipient nations, respectively. Second, this nexus needs to be perceived as being based on long-term tendencies of recurrent cyclical historical events and structures (Nölke, 2014). The contemporary foundation of these basic World System theory propositions emerged from the World System theorists’ rejection of modernisation as well as orthodox Marxism (Amin, 1975; Wallerstein, 1979; Worsley, 1979; Frank, 1998; Boris, 2005; Arrighi, 2008). In the contemporary foreign aid context, a number of issues from a World System theory’s perspective arise in line with dependency theory (Amin, 1975; Frank, 1998). Borrowing from Wallerstein (1979, 2000a, 2000b, 2004), and putting it into the context of foreign aid, one of the key issues is the structural dependency relations between developed industrial economies being ‘the Centre’ and developing economies, being ‘the Periphery’ and if one wishes, the emerging economies being the ‘semi-Periphery’. From this Wallersteinian perspective, the capitalist economic foreign aid world system is divided not only by regions but also by economic-hierarchical organisational structures. Setting aside the regional context such as the North-South and South-South divide, we focus on the latter as a theoretical, rather than a structural, framework. The economic-hierarchical organisational frameworks can be described as follows. First, the dominant and economically powerful ‘Centre’ consists of the developed countries and their MDBs and bilateral aid agencies, such as the IMF, the World Bank, the EBRD, ADB, AfDB and others. Second, there is the ‘Periphery’, consisting of developing economies which depend on and require their social and economic foreign aid from the ‘Centre’. Third, there is the ‘Semi-periphery’ consisting of emerging economies. In order for the ‘Periphery’ economies to receive foreign aid, they need to subordinate themselves to the Centre through loan or grant agreements and the superimposed conditionalities. This leaves us with the Semi-periphery economics. These are, on the one side, economies that were in the Periphery such as, say, China, India, Brazil and South Africa and are moving towards the ‘Centre’, either by the virtue of taking on in part the roles of the Centre through forming their own Centre such as the New Development Bank, also known as BRICS Bank or the Asian Infrastructure Investment Bank (Jakupec and Kelly, 2015). Thus, the

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World System theoretical framework is, in contrast to other theories, a tri-modal, rather than bi-modal concept (Love, 1980), i.e. the World System theory has in addition to the developed-developing economies nexus, also the emerging economies link. This trimodal theoretical construct (core or Centre, Semi-periphery and Periphery) may be found in earlier international political economy theories, including dependency theory (Love, 1980). The Semi-periphery occupies a transitional place between the Centre and the Periphery. Thus, for the purpose of PEA, World System theory provides an understanding of internal division between developing countries which are both donors and recipients. These three constituents of the World System theory each play a distinctive function within the world system. The problem, however, is the unequal distribution of political power between the ‘Centre’ and the ‘semi-Periphery’ and the ‘Centre’ and the ‘Periphery’. To conclude, there are two principal contributions that Wallerstein and his colleagues’ World-System theory have made to IPE. The strengthening of sociology and the expansion of a theoretical and structural system that explains IPE within the foreign aid environment from three, at times, competing perspectives. It accounts for an IPE applicable to developed and developing economies and the stage in-between the two economic structures. Setting aside the structural frameworks and remaining within the theoretical framework, it is noteworthy that the proponents of the World System theory engage in the discourse of globalisation (Wallerstein, 2000b). More to the point, the core of this discourse emerges from secular trends, namely, the World System theory leans towards commodification of the social imperatives. There are also critiques one may level at the World System theory. One weakness is the lack of a coherent epistemic dimension and the nexus between the conceptual structure and the method by which it theorises social construct within the IPE. In other words, the World System theory has been critiqued for being a theory of the world system without a system theory. On the other hand, World System theory is too preoccupied with economic processes, understating the more political social and cultural aspects. In addition, a critique by the proponents of the public choice, rational choice and game theory is that World System theory limits the actors’ ability to contribute to the structural framework and thereby shifts IPE too quickly from the economic to the political, social and cultural factors. This critique may be justifiable as far as Frank’s (1967, 1998) work is concerned but may not apply to others such as Wallerstein (2000a, 2000b) who acknowledges the need for actors’ choices and to Arrighi (2008), where there is a clear nexus between actor, agency and structure.

Institutionalism As a theoretical framework, institutionalism may be perceived as characterising a transition between actor-oriented theory and structuralism. There are different theoretical approaches to institutionalism, However, we will focus on rational choice or new institutionalism and sociological institutionalism (Hall and Taylor, 1996).

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From an economics point of view, institutionalism’s basic proposition is that an economy can function only within an adequate institutional framework, as long as the essential settings for a functioning economy are situated within a distinctly delineated general institutional system, which in turn operates within the underlying forces of civil society. In other words, institutions are important, and institutionalism leads them towards the actions of a general social resourcefulness and dynamism. However, there are differences between the diverse types of institutionalism (Leander, 2000). These differences may emerge due to diverse conceptualisations of this institutional parameter (e.g. polity, culture, law, state, society, etc.) and their origin (e.g. individualism or collectivism). From this vantage point, an institutionalist IPE is thus unable to detach the analysis of economic markets from manifestations of their political and societal backgrounds.

Rational choice institutionalism Rational choice or new institutionalism, in the contemporary literature, focuses on the development of political institutions’ international partnership behaviour and the democratic transitions based on game theoretical notions. Proponents of rational choice institutionalism argue that actors have predetermined instrumental predilections aimed at maximising the achievement of such preferences using strategic actions. Politics is seen as a sequence of collective exploit predicaments, i.e. a concept denoting that an institution will seize relevant processes and exploit them in order to secure their benefits at the expense of a competing institution and thereby creating a predicament for the latter. Furthermore, proponents of rational choice institutionalism emphasise the function of the strategic interface in achieving political outcomes. This includes the assumption that the actors will behave by strategically positioning themselves according to their instrumental expectations, and that others will do the same. This is based on the proposition that political institutions are rule-based systems within which individuals endeavour to maximise their benefits (Kim, 2016). Not dissimilar to other institutionalist schools of thought, rational choice institutionalism is characterised by internal discourse and some epistemic disparities. Notwithstanding these differences, we will address some noteworthy attributes of the rational choice institutionalism. As we noted above, rational choice institutionalism uses a specific type of behavioural postulate. First, there is an assumption that relevant actors have a set of stable predilections, which are following specific preconditions. Thus individuals, groups, institutions and government agencies behave in such a way as to maximise the realisation of these predilections. In doing so, a highly strategic and calculating system emerges. Second, rational choice institutionalism propagates the typical representation of politics as a struggle for power, which in PEA may be manifested as a principal-agent power relationship. In this instance, politics may be seen as a succession of collective actions. However, if one brings into the play the fact whereby individuals act to maximise their own benefit, collective action may become sub-optimal. Third, the

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significant contribution that rational choice institutionalism may provide as a theoretical framework for PEA is its emphases on the strategic interaction function in aid of defining political outcomes. The proposition is that an actor’s behaviour is likely to be influenced not only by forces which are historically impersonal, but also by strategic calculations about the potential benefits within the parameters of the impact of others’ behaviour and motives. At practical levels, rational choice institutionalism defines MDBs and bilateral foreign aid agencies as formal legal identities, with formal and informal rules that define the scope of PEA, based on the action of the rational choice actors. In other words, MDBs and bilateral foreign aid agencies are rational actors with their own power relation structures. As a self-interested actor, the donor agencies act within their own institutional framework according to the principle of maximising their own benefits, whereby the benefits are determined exogenously and clearly. From a PEA point of view, this means that institutions as rational players are trying to maximise their returns by considering their institutional framework and the actions of other players. Thus, no actor can unilaterally achieve a better return, since the result achieved is the best possible. The basic proposition of rational choice institutionalism is that all institutions have a common interest, namely, to avoid collective problems. It follows then from the above discussion that institutions and actors have a mutual interest to cooperate to circumvent foreign aid results which are socially sub-optimal. Using this proposition means that, through PEA, institutions are able to reduce monitoring and enforcement costs and transaction costs incurred due to incomplete information, which is often the case with the currently practised technicist-mechanistic PEA approach.

Sociological institutionalism Unrelated to the above-mentioned rational choice institutionalism, yet at about the same time, a new form of institutionalism emerged, namely, sociological institutionalism. Not dissimilar to other schools of thought in institutionalism, it is characterised by extensive internal discourse. Nevertheless, proponents of sociological institutionalism have advanced a set of theories, which are becoming of increasing interest to political sciences and government policy-makers and are becoming increasingly central to the argument for globalisation being the end of the nation state. Scholars in sociological institutionalism acknowledge globalisation as a catalyst for changing political practices. By focusing on globalisation as the end of the nation state and thus the catalyst for changing political practices, sociological institutionalism emphasises the socio-cultural aspects and opposes the notions of constitutional forms and processes employed by modern organisations, such as the MDBs and bilateral aid agencies, which rely on ‘rationality’. Thus, the proponents of social institutionalism not only advocate for the inclusion of formal rules, standards and processes, but also sociocultural symbols (i.e. hypothesised knowledge structures that outline how everyday

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events unfold and how these mental structures organise knowledge and inform our understanding of the world) which guide the frames of meaning (St. Clair, 2008) and guide human action (Hall and Taylor, 1996). Furthermore, institutions are seen as expressions through which social life becomes meaningful. Thus, MDBs and other aid agencies are responsible for the strategies and preferences of themselves and all other relevant actors. This means that through PEA, MDBs and bilateral agencies should take into consideration their own as well as the recipient’s strategies, values and norms. Of course, all actors may act rationally, as long as rational acts are also reasonably founded and are defined and expressed in a socially responsive and suitable way. As far as PEA is concerned, institutions, from a sociological institutionalism perspective, should not pursue increased economic efficiencies, as is mostly the case in the contemporary neoliberal foreign aid environment, but increase the social legitimacy of the foreign aid intervention. Applying this to PEA, sociological institutionalism may be used by PEA practitioners as an evaluation framework to understand the social embeddedness of PEA. This means that neoliberal globalisation may be seen not simply as a system which governs economic activities more or less efficiently, but as a system made up of a set of interrelating practices which are based on a particular kind of self-understanding, which in turn disseminate different kinds of benefits among social actors, thus empowering some over others, such as, for example, the foreign aid recipients over donors. In practical terms, this means that the central power relationship between donors and recipients may be viewed and enacted from at least two different perspectives. First, social institutionalism may provide a basis for Washington Consensus evaluation methods to be employed in PEA and, second, it may be enacted as a tool for investigating the interest of relevant actors. In short, sociological institutionalism brings to the fore the existence or emergence of governance practices entailing a mixture of donor and recipient actors.

Conclusion Given the variety of the theories we have discussed above, the (re)location of PEA extensively advances our knowledge and understanding of the nexuses between political and economic foreign aid world. Conversely, these worldview nexuses, which present the politico-economic world, although they may have some common characteristics, may not be considered as being identical. Each theoretical framework discussed above has its strengths and weaknesses, depending on the focus and worldview of the donors and recipients. As far as PEA is concerned, these theoretical frameworks, need to be considered first with respect to the foreign aid intervention, locating PEA within the specific relationship between the donors and recipients, as actors, political and economic structures or as institutions. To conclude, PEA today is confronted with not one phenomenon but four: populism, de-globalisation, illiberal democracy and the Beijing Consensus. Each of

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these feeds into each other, and at the same time each is following its own paradigm. It would be counterproductive to apply PEA based on only one specific IPE school of thought. Each given situation may require its own theoretical framework, so as to obtain rich and comprehensive data, information and knowledge which are useful for donors and recipients alike.

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11 FOREIGN AID Political Economy Analysis at the crossroads

Introduction In the preceding chapters we have attempted to provide insights into the challenges confronting multilateral development banks (MDBs) and other Western bilateral donor agencies in the wake of the rise of populism and illiberal democracies, the Beijing Consensus and the push for de-globalisation within the context of bringing politics into Political Economy Analysis (PEA). In order to bring politics into PEA we argued that there is a need to provide International Political Economy-based theoretical frameworks for PEA, which is a complex undertaking. We acknowledged and discussed how there are many diverse frameworks which may be applied to PEA and argued that the diversity and multitude of theoretical frameworks go beyond the simplicity of a ‘one-size-fits-all’ PEA model. We have argued that PEA, as it is perceived and applied today by various donor organisations, is mainly characterised by its technicist-mechanistic process approach with a strong emphasis on issues concerning neoliberal economics. PEA in its various forms, such as Drivers of Change (DFID, 2004) and Political Economy Analysis: How to Note (DFID, 2009), Problem-Driven Governance and Political Economy Analysis: Good Practice Framework (Fritz et al., 2009); Conducting a Democracy and Governance Assessment: A Framework for Strategy Development (USAID, 2000), Applied Political Economy Analysis Field Guide (USAID, 2016), Power Analysis (SIDA, 2005), Conflict Analysis for Planning and Management: A Practical Guideline (GTZ, 2001) and Governance Questionnaire: An Instrument for Analysing Political Environments(GTZ, 2004), Guidance Note: Use of Political Economy Analysis for ADB Operations (ADB, 2013), DANIDA’s Political Economy and Governance Analysis of Decentralisation (Tidemand, 2010) to name but a few, displays a lack of political underpinnings. Setting aside the strong economic and to a large extent technicist-mechanistic process at the expense of political

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dimensions, the main political problem is the apparent lack of conventional donor agencies to respond with their PEA strategies to the challenges of the emerging illiberal democracy as a political phenomenon in Western donor countries and beyond. The Western neoliberal foreign aid model pursued by Washington Consensus-based MDBs and bilateral aid agencies, such as the World Bank, the Asian Development Bank (ADB), the European Bank for Reconstruction and Development (EBRD) and many others are at the crossroads. There are at least four interdependent political forces impacting on the existing dominant neoliberal foreign aid agenda. These we have identified as the rise of right-wing populism and the rise of illiberal democracies in Western nations, de-globalisation,, and the advent of the Beijing Consensus. Each of these bring with them a challenge to the hegemony of the neoliberal foreign aid policies, by questioning, if not opposing, the purely neoliberal economic focus advanced by the MDBs. There is a compelling argument to be made that in order to maintain a foreign aid agenda which is equitable and based on appropriate principal-agent constructs, that go beyond a zero-sum game approach, a rethinking of foreign aid strategies is necessary. Today we find that developing countries have choices, which they have not had since the demise of the Soviet Union, when the US-dominated MDBs were competing for the geopolitical and geo-economic dominance by using, inter alia, foreign aid as a ‘soft-power’ tool. Today, there is the emerging challenge to the Western MDBs from the Beijing Consensusbased development banks and initiatives, namely, the Asian Infrastructure and Investment Bank (AIIB), the New Development Bank (NDB) and the One Belt, One Road (OBOR) initiative, and there is the political challenge due to the rise of populism in Western democracies, such as the USA, the UK and other donor countries. In parallel to the aforementioned rise of right-wing populism with the quest for deglobalisation, we are witnessing at the political level that donor governments like the USA are significantly reducing foreign aid funding and are challenging the functions of the MDBs and bilateral aid agencies generally. In the USA, the EU and in other parts of the developed world, governments are questioning the effectiveness of aid. In response to the political question of effectiveness, the Washington Consensus-based institutions respond in economic terms but show little evidence that their economic narrative and their dominant paradigm are as successful as they aspire to be. Conversely, at the economic level, donor governments are seeking to increase the trade advantages through the provision of foreign aid, on the basis of aid-for-trade and value-for-money ideologies. In response to this, the Washington Consensus-based institutions respond in political terms, such as the need to impose political conditionalities on aid recipient countries, or the condition of implementing policies leading to democratisation and political decentralisation. Yet there is little evidence that developing countries are showing an appetite for change in the domestic political environment. By focusing separately on the political responses to the challenges through economic responses and to the economic challenges through political responses, the

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Washington Consensus-based institutions cannot explain the lack of substantive evidence showing that foreign aid is effective. The problems these institutions face in addressing the challenges from the populist camp and responding adequately to the dissatisfaction of conditionalities imposed on foreign aid recipient countries have not been caused by the tests themselves, but by the Washington Consensus-based institutions’ diminished aptitude to recognise and to respond to them. In other words, the Washington Consensus-based institutions remain firmly entrenched in the Thatcherite and Reaganite neoliberal economic agenda, arguing that ‘there is no alternative’. This has been shown to be a false assumption, for the alternatives are here now, namely, populism and the Beijing Consensus. Let us now turn briefly to the challenges emerging from the Beijing Consensus. To recap, the term Beijing Consensus was coined by Ramo (2004), denoting China’s economic development achievements. It is based on three pillars: continuous innovation, a sustainable economy, and political and economic self-determination. In contrast, the Washington Consensus is an orthodox neoliberal development model introduced by Williamson (1989, 2002), with its own three pillars, namely, rationalisation of resources, reduction of government bureaucracy, and liberalisation of economies. However, there is evidence that the Washington Consensus has failed in a number of developing countries (cf. Williamson, 2002), because it has failed to identify ex-ante the potential barriers to the hoped-for goals, and thus was incorrectly executed. This is one reason why the Beijing Consensus is becoming progressively more attractive and is gradually becoming a competitive foreign aid model for the developing countries. However, some caveats are in place. First, the Beijing Consensus-based foreign aid interventions have not been around sufficiently long to provide unreserved judgement for their success, or otherwise. Second, in contrast to the Washington Consensus, the Beijing Consensus is not based on an ideology but a strategy which allows an economically and politically eclectic approach to focus on a ‘best fit’.

Political Economy Analysis: politics matter To recall, PEA has usually been perceived by Western MDBs as an instrument to identify obstacles, barriers or constraints to the effectiveness of foreign aid interventions at regional or country (macro), sector (meso) or project (micro) levels, respectively. However, more recently, PEA in its various forms is being expected to identify opportunities to bring about policy changes and support political reforms in the recipient countries. The argument is that by attaining a better understanding of the political dimensions, both the donor institutions and the recipient governments should be able to co-operate more effectively in the implementation of foreign aid intervention. This may include the identification of mutually acceptable reforms and interventions, which may not be the ‘ideal type’ based on ‘best practice’ but ‘best fit’ given the situation at hand. From this vantage point, the usual ‘trickle-down’ approach used by the Western MDBs is being

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mitigated by a ‘bottom-up’ approach based on the real or perceived need of the recipient governments. The argument presented throughout the discussion was that, no matter what the official aims and justifications for foreign aid are, PEA should be perceived and applied as an ex ante integral part of the project cycle and as a diagnostic tool largely formed and governed by politics. This requires that both the donors and the recipients and ‘partners’ have access to and understand the ‘politics of reforms’ based on PEA. In other words, we have argued that foreign aid is an intrinsically political process. Thus, PEA needs to habitually investigate complex and at times conflicting interests and relationships where the interests of both donors and recipients interests are overtly or covertly at variance. The inclusion of politics into the theories, design and practice of foreign aid interventions has not been such an effortless undertaking, as the declarations of MDBs and bilateral aid agencies might suggest. The endorsing and the implementation of PEA by donors have been prevalent for a long time. However, PEA has failed to gain support at the operational levels. There are a number of reasons why. First, the operationalisation of PEA, as shown in the preceding chapters, is for many foreign aid organisations a technical-mechanistic activity. As such, it cannot provide sufficiently sophisticated data, information and knowledge for the decisionmakers to formulate a reliable determination about the potential success of the proposed foreign aid intervention. Second, the predominance of economics at the expense of politics is rendering PEA problematic, especially in the context of organisational incentives, power relationships between and within donors’ and recipients’ vested interest groups. This brings to the fore the sensitive nature of PEA and the supposed anti-politics or a-politicisation persistence among donor agencies, which adhere to the technical-mechanistic paradigm and the neoliberal economic paradigm. To explain, PEA, as it is conceptualised and practised today by Washington Consensus-based institutions, has one major underpinning framework, namely, neoliberalism. However, the very concept called neoliberalism is an equivocal idiom. It may denote economic paradigms, a political movement, economic policies or a theoretical approach (Stilwell, 2013). In our discussion, we used it as an economic paradigm, but acknowledging its theoretical framework thus allows us to use it as a point of departure to locate PEA within theoretical frameworks of International Political Economy (IPE) (Wullweber et al., 2013). We identified a number of potential theoretical frameworks in Chapter 10. These are: (1) the actor-oriented theoretical framework, including public choice theory, rational choice theory and game theory; (2) structuralism, including system theory, regulation theory and World System theory; and (3) institutionalism, including rational choice institutionalism and sociological institutionalism. From this vantage point, PEA as an evaluation tool with a strong theoretical underpinning, which goes beyond the technical-mechanistic activity based on the neoliberal economic paradigm is not undemanding. No economic, political, social and cultural topic relevant to the identification and evaluation of barriers militating

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against the potential success of the foreign aid intervention may be perceived in isolation, for they all potentially represent different goals, motivations, interests and power relationships. Thus, PEA cannot be reduced simply to an expression of a technical-mechanistic version of economic expedience. Instead, PEA needs to be governed by the interface of different theoretical frameworks which provide the ‘best fit’ as opposed to the ‘one-size-fits-all’ principle. In essence it could be argued that MDBs are to a large extent caught between dated paradigms that have not yet come to terms with the current geopolitical moment, such as populism.

Relocating Political Economy Analysis Throughout the preceding discussion we have addressed the political as well as the economic dimensions of PEA, with a focus on neoliberalism, globalisation and deglobalisation, right-wing populism, the Washington Consensus and the Beijing Consensus, and on the impact of illiberal democracy. Although these notions and concept may appear as separate constructs, they have conceptual resemblances and thus provide a basis for relocating PEA. Relocating PEA within a range of different, and at times competing, realities of the foreign aid interventions, may seem a puzzling undertaking, because no single theoretical IPE framework has thus far been accepted and implemented by MDBs and bilateral aid agencies and practitioners – neither as a theoretical nor a practical, neither as an economic nor as a political construct. No single theoretical framework has been successful in explaining the observed political, economic, social and cultural PEA arrangements between donors and recipients, at least not at an equitable power relation level between donors and recipients. There are a number of potential explanations, which may point to a better understanding of PEA within multi-dimensional theoretical frameworks. To put this into practical context, the theoretical framework may be used to articulate the breadth and depth and the strengths and weaknesses of the political, economic and social aims of a foreign aid intervention, together with the views associated with the aid policies of the donor and the recipients, including the latter’s constituent groups and their differences. The various political, economic and social factors can be integrated into a single IPE theoretical framework to facilitate the ‘best fit’ for a given foreign aid intervention. This transition from theory to practice may be based on three constituents. First, there is a need to critically analyse the preferences of donors and recipients, for the outcome of a foreign aid intervention is impacted on by various structural constraints. This may invoke structuralism as the underpinning theoretical framework. Second, there is the need to identify and analyse policy choices available to both the donors and the recipients. In this context, the donors’ and the recipients’ ideas as actors on how to implement the policy choices are of importance. That means thinking and acting about specific policy matters and their central purpose in ensuring political, economic and social relevance This may be resolved through a deductive approach based on an actor-oriented theoretical framework. Third, PEA as a practical undertaking cannot be naïvely deduced from

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the socio-economic or political characteristics of institutional policy-makers at the donor or recipient level, Individually, these characteristics are not reducible to underlying variables and differences between the donor’s and the recipients’ organisational culture. Thus, PEA needs to identify and ‘measure’ policy choices, which requires an understanding of the institutional cultures of both the donor and the recipient. Here the institutionalist theoretical framework may be of significant use to undertake this part of PEA. In other words, institutionalism as a theoretical framework brings together the actor-oriented and the structuralist theoretical frameworks, respectively. The theory to practice transition of PEA suggested above is essentially an artificial construct, it can be found in IPE and PEA literature alike. However, if one allows for the wide range of donor and recipient potential diversity of preferences, aims and goals, it is difficult, if not impossible, to make a specific prediction about the potential success or otherwise of a proposed foreign aid intervention, without the absence of underpinning theoretical frameworks. At the practical level, it is not possible to obtain through the application of PEA data, information and knowledge to simply predict the donors’ and recipients’ aims, for these are seldom material, undemanding or clear-cut. However, equipped with the theoretical frameworks, PEA as an analytical evaluative ‘tool’ may be used to identify clearly and succinctly the potential choices of the donors and recipients by focusing on the additional factors identifiable through the application of IPE frameworks. In foreign aid and the existing applications of PEA specifically, we have argued that the deductive approach leading to practice informed by theory, is more than we have been able to achieve with PEA until now.

From political theory to policy practice At the political level, the Washington Consensus, as a theory and practice, plays a powerful role in foreign aid. The same may be said about the Beijing Consensus, which is less ideological and more pragmatic. Yet both initiate opportunities for the recipient countries, and at the same time they may frustrate the foreign aid policies and initiatives of each other. One of the reasons is that, as academics, researchers and practitioners have pointed out, the impact of foreign aid practices is reform-dependent, especially on reforms concerning informal and formal institutional and organisational arrangements, on historical legacies of the given consensus and structural drivers. In the preceding discussions, the characteristics of both the Washington as well as the Beijing Consensus, respectively, have been canvassed. The analysis indicates a potential retreat of the Washington Consensus and the rise of the Beijing Consensus, defining the entering of an age which some have called the ‘post-American’ epoch (Zakaria, 2008). Whichever way one analyses the dichotomies of and the converging attributes between the two consensuses, one cannot escape the fact of reversed standpoints that impact on the theory and practice of PEA. Both have been turned on themselves. To explain, with the rise of the Beijing Consensus

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building on China’s economic power, the USA-led Washington Consensus institutions are globally no longer the most powerful lenders. That mantle belongs increasingly to China with its leadership of the New Development Bank (NDB), the Asian Infrastructure Investment Bank (AIIB) and the One Belt, One Road (OBOR) initiative. However, the paradox is that China with its Beijing Consensus talks about being the defender of neoliberal globalisation and international trade which impacts on foreign aid as a ‘soft power’. The irony that is emerging is that the USA, as the champion of neoliberal globalisation with its support for the Washington Consensus, is retreating to protectionism under Trump’s ‘America First’ doctrine, leading to the rise of ‘hard power’ foreign aid policies (Nye, 2011). As a result, Washington Consensus-based foreign aid agencies need to take PEA seriously. The challenge they face is to ensure that PEA adequately provides a theoretical framework that guides and supports the donor and recipient actors. However, this requires radical changes and a political will to overcome the donorcentred PEA focused on an atomised and one-sided structure of PEA, which may be contrary to the perceptions of the recipient governments, and which may impact on the motivation of the actors at the recipient government level, altering the terms of interaction with the donors. To conclude, the main points of the discussion are that: (1) PEA needs to be politically, rather than purely economically driven and informed by a comprehensive analysis using a variety of theoretical frameworks; (2) PEA, by building on the theoretical frameworks, must bring to the fore an understanding among all the actors of the practical significance of motives that drive stakeholders to support or oppose the reforms required to implement the prospective foreign aid interventions processes; and (3) PEA explores throughout the analytical process stakeholders’ political positions on different aspects of the proposed foreign aid interventions and the associated reforms with the aim of recommending operational strategies for proposed interventions. As it stands, one of the major problems with the existing theoretical and practical aspects governing PEA is that ultimately the MDBs and other Western foreign aid agencies have failed to provide significant guidance on how to obtain and subsequently translate analytical insights obtained through PEA into practical recommendation underpinned by theoretical foundations, which are politically relevant for the foreign aid interventions decision-makers.

The demise of the neoliberal political economy analysis or mainstreaming political economy analysis in a new key? Given the above-stated challenges to the neoliberal economic foreign aid agenda as it exists today and is practised by a majority of Western foreign aid organisations, it would be too easy to predict the demise of the neoliberal aid agenda. However, as history has shown, neoliberalism has an uncanny ability to reinvent itself, as we have seen in the post -GFC era.

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Be this as it may, the challenges outlined in the preceding chapters point to a need to rethink how PEA is to be conducted, if at all. To explain, for decades, the MDBs and bilateral aid agencies have been grappling with issues of how to integrate the political agenda into PEA. Notwithstanding that the political dimension, based on the challenges, needs to become not only increasingly visible, but it also needs to overtly emphasise the political agenda of donors and recipients alike. However, thus far, most donor agencies have implemented PEA as an apolitical technocratic approach. One of the problems is that it is not uncomplicated to fully integrate the political dimension because it requires fundamental change in how the relationship between donor and the recipient may affect the outcome of foreign aid interventions. From this vantage point, PEA may confront donors with their own reality, acting like a mirror projecting the problems arising from donors’ policy inconsistencies and incoherencies, one-sided interests and problematic incentives. To be sure, most MDBs and bilateral aid agencies have some kind of PEA, but this should not be construed to mean that these agencies have internalised the function of PEA within a project cycle. PEA is largely a ‘sidelined’ activity, and at best PEA has been led across donor agencies bureaucracies by a small number of governance experts, academics and consultants providing new models and frameworks. Setting aside the practicalities of PEA implementation, foreign aid as an industry is facing arguably one of the most ambitious political times and challenges to their organisational culture. On the one side, MDBs and bilateral aid agencies are confronted by populist forces, on the other, by the neoliberal internal establishment with the technocratic tendencies. The former has been and still is the most active force which has the tendency to bring about change and the demise of the neoliberal ideology within MDBs and like-minded bilateral aid agencies. Proponents of populism are the most active actors bringing about changes. Populism together with de-globalisation and the rise of illiberal democracy may be defined in the context of PEA as a form of ‘input legitimacy’ or as popular legitimacy, whereas the neoliberal internal establishment is aligned with ‘output legitimacy’ or a legitimacy based on the implementation of efficient policies, such as a ‘tick-box’ technicist-mechanistic PEA activity.

Conceptualising Political Economy Analysis in a ‘new key’ Given that the dominant ‘orthodox’ neoliberal worldview of foreign aid advocated by the Washington Consensus-based MDBs and bilateral foreign aid agencies is under attack from proponents of de-globalisation, illiberalism, populism and the Beijing Consensus, it follows that PEA needs to be recast in a new key. Failing to do so might eventuate in a weakening of the impact of Western MDBs and bilateral foreign aid agencies. The question is to what extent can PEA be strengthened in order to provide a more comprehensive and politically oriented evaluation by identifying the various interests and power relationships, especially between the

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donors and the recipients? As the World Bank (2007) has pointed out, even the most expert technical PEA designs can fail in an unproductive political environment and so powerful interest groups acting from self-interest can hinder the progress of foreign aid interventions. Thus, the politically and economically disenfranchised populations need to be empowered through action in order to become effective participants and beneficiaries of the foreign aid interventions on both sides of the foreign aid spectrum, i.e. the donors and the recipients. This means that the donors may need to initiate their lending policies and conditionalities. This would require the PEA to be multi-dimensional as far as the political background evaluations are concerned. However, using multi-dimensional political vantage points, as we have identified within the theoretical frameworks in Chapter 10, involves confronting harshly competitive vested interests within the recipient countries and between the donor and the recipient, which may force PEA to highlight acrimonious power struggles and deeply conflicting political, social and economic values. Furthermore, this application of multi-dimensional political theoretical frameworks as a basis for PEA may be perceived as having a negative impact on the aid interventions from the recipient’s perspective, creating a conflict situation between the donor and recipient. Hence, PEA needs to build complex cooperative relationships between the diverse and competing interest groups in recipient countries as well as between these groups and the donor organisation (SIDA, 2006). These complex cooperative relationships expound the deeply contested foreign aid debate and the often conflicting judgements in the academic and policy literature, which seldom focuses on the nature and the dynamic processes that may define PEA as an instrument to analyse the potential success of aid interventions. Any significant attempt to politically reform PEA as a tool for foreign aid interventions, which at conceptual level go beyond a technicist-mechanistic process, must, due to the emerging challenges to the neoliberal aid agenda, use the multidimensionality of appropriate theoretical frameworks. Yet many MDBs have been and still are habitually avoiding PEA aspects which may promote reforms, due to the afore-mentioned institutional risk adversity. However, denying the need to engage with PEA which goes beyond the simplistic technicist-mechanistic processes emphasises the risk of aid intervention ineffectiveness. Having dispelled the myth of conflating liberalism and democracy, on the one hand, and populism and illiberalism, on the other, we now turn to the question of how to navigate PEA in a new key through the challenges of illiberalism. Foreign aid and PEA are politically at the crossroads between illiberalism and liberalism and economically at the crossroads of illiberalism and neoliberalism. If this stands to reason, the MDBs and other foreign aid agencies will have difficulty justifying their continuing refusal to accept not only the challenges to liberalism and neoliberalism as it exists under the Washington Consensus, but also the role of socio-political class influence at donor and recipient levels due to the rise of illiberalism. There is a questionable perception among the Washington Consensus-based foreign aid agencies that the poorest, economically disadvantaged countries do not support

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illiberalism. If in a context of PEA, this view prevails, then the perception of PEA may well be that there are no systemic structural problems to be addressed beyond those embedded in the neoliberal foreign aid agenda. Thus, the existing focus of PEA may remain. Without including the possibility of illiberal power existing in developing countries and without identifying and questioning to what extent illiberal vested interests in recipient countries may be a barrier to the donor’s aid intervention, the PEA results may provide a limited understanding of the balance of power between in-country groups as well as between the donor and the recipient. In conclusion, we argue that PEA may need to be radically restructured so as to include social class analysis.

Conclusion We have argued that foreign aid is inherently a political construct and process, which is plagued by and which often generates opposing theoretical and practical vantage points between the donors and recipients, where the recipients of the former and the latter diverge. We have also provided a discussion on the need for donors to incorporate political economy variables into their foreign aid interventions using PEA, which in turn could be used to further strengthen the ability of donors to improve foreign aid interventions by addressing the challenges through an increased political lens, using a range of orientations using International Political Economy theories. Let us restate. In the past few years we have seen increased global policy attention to foreign aid due to the rise of populism, illiberal democracy, a surge for de-globalisation and the emergence of Beijing Consensus-based MDBs. In light of the above-stated challenges, the Washington Consensus-based MDBs have taken steps to strengthen their neoliberal governance agenda for foreign aid and at the same time to mobilise financial resources for action. However, there is a greater agreement within the Washington Consensus-based MDBs on the technical economic, rather than political, issues, including the role of economic interventions in addressing the problems of developing countries – albeit without much overt consideration of different political, social and cultural environments. It may be appropriate at this juncture to acknowledge that the economic argument to invest in developing countries is well established and supported by aid-for-trade and value-for-money strategies and research findings. Furthermore, despite the normative argument (see Jakupec, 2017) to defend and advance the neoliberal Washington Consensus-based MDBs, considerable challenges remain in conducting and implementing the existing foreign aid agenda and translating PEA into tangible results in an era of populism, de-globalisation, illiberal democracies and the Beijing Consensus. Let us draw our main discussion point to a conclusion. First, the last decade has brought to the fore an increasing worldwide global focus on foreign aid and PEA. Many MDBs have taken action to strengthen their Washington Consensus-based governance architecture for foreign aid interventions and in parallel they have

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marshalled resources to enact their worldview. The outcomes were the priorities given to concepts such as aid-for-trade and value-for-money. Both concepts focused increasingly on technicist-mechanistic processes underpinning economic parameters, which included the corresponding delineation of the role of PEA. It has to be acknowledged that the economic neoliberal argument to provide foreign aid interventions was well developed, whereby foreign aid focused on outcomes of cost-benefit analysis and research, which quantifies the measures to implement and if possible up-scale foreign aid intervention. From a recent history vantage point, the implementation of foreign aid policies among Washington Consensus-based donors has been confronted by the abovecited political movements. This is not remarkable, because the Washington Consensus-based MDBs have to a large extent thus far failed to design new policies or revise their existing policies, which may be navigated using PEA, which in turn could help mitigate political impediments and foster foreign aid intervention goals. We have also shown that there is a growing argument emerging from MDBs and bilateral aid agencies, as well as in the academic literature, that foreign aid cannot be conceptualised, comprehended, analysed and enacted without a clear understanding of the role of the polity, politics, policies, as well as societal, stakeholder, institutional and economic parameters in forming a foreign aid intervention. From this vantage point, in a practical sense, the application of PEA expands the operative perspective, it enables PEA practitioners to look beyond the existing technicist-mechanistic processes, informing them of the impact of power relationships, incentives, institutions, and the beliefs, values and norms that characterise policy processes and thus PEA. From a practical vantage point and based on the discussion concerning the Politicisation of Political Economy Analysis in Chapter 9 and Theoretical Constructs and Practical Undertakings in Chapter 10, it has been shown that PEA may embrace a range of tools and approaches which provide policy decision-makers with information enabling them to identify political strategies to overcome the potential barriers impacting negatively on proposed foreign aid interventions. PEA in this sense also has the potential to identify political reform strategies within the donor organisation itself (Williams et al., 2007; McLoughlin, 2011; Menocal, 2014). The afore-mentioned theoretical constructs and politicisation of PEA can enable MDBs and PEA practitioners to apply PEA at various levels, including policy reforms and different foreign aid intervention scopes and purposes (DFID, 2009; McLoughlin, 2011; Poole, 2011). It also enables MDBs, bilateral aid agencies and practitioners to broaden PEA to include comprehensive theory-based scholarly analyses undertaken by experts, to develop a rich background to understand the political economy catalysts that link recipient-donor specific environments or if required to produce rapid evaluation studies, namely, micro-level, diagnostic problem-based studies. Given the aforementioned challenges, the Washington Consensus-based foreign aid agenda urgently needs to reconceptualise PEA as a flexible, rather than a dogmatic analytical, tool, which draws on a range of theoretical concepts to meet the specific

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circumstances of the recipient countries. This means bringing PEA into the realm of those who formulate, analyse and implement foreign aid policies. We suggest that mainstreaming of PEA based on the wide IPE theoretical foundations has the potential to increase foreign aid effectiveness and enhance the likelihood of politically desired and realistic reforms which fit the national context of the aid recipient country.

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Williams, G., Dunkan, A. and Mills, P. (2007). Making the New Political Economy Perspective More Operationally Relevant for Development Agencies. Policy Practice Brief No. 2. London: The Policy Practice. Williamson, J. (1989). What Washington Consensus Means by Policy Reforms. In Williamson, J. (ed.), Latin American Readjustment: How Much Has Happened? Washington, DC: Institute for International Economics, pp. 421–427. Williamson, J. (2002). Did the Washington Consensus Fail? In PIIE. Retrieved from https://piie.com/commentary/speeches-papers/did-washington-consensus-fail (accessed 6 January 2018). World Bank (2007). An Evaluation of Political-Economic Analysis in Support of the World Bank’s Governance and Anticorruption Strategy. IEG Working Paper No. 2011/4. Washington, DC: World Bank. Wullweber, J., Graf, A. and Behrens, M. (eds) (2013). Theorien der Internationalen Politischen Ökonomie. Wiesbaden: Springer Fachmedien. Zakaria, F. (2008). The Post-American World. New York: W.W. Norton and Co.

INDEX

actor oriented theoretical framework 6, 156, 178–79 African Development Bank 9, 78 aid; architecture 12, 31, 38; conditionality 48, 79; effectiveness 1, 10, 18, 32, 38–40, 142–3, 145, 159, 186, (see also conditionality) Aid for Trade (AfT) 66, 110, 126,145, 165, 175–6, 184–5 Asian Development Bank (ADB) 5, 9, 15, 78, 103, 154, 157, 166, 176–7 Asian Economic Crisis 47 Asian Infrastructure Investment Bank (AIIB) 16, 92, 125, 131–3, 166, 176, 181 Bandung Conference 49 Basset, S. 86 Beijing Consensus 14–5, 84, 88–9, 115–133, 176–7, 180–1; and Confucian ideology 117, 127–8; as developmentalism 130–2; as soft power 40, 84, 122–3, 178, 181; challenging the Washington Consensus 117–9, 123–9, 144, 162, 177, 181, 183; political and value laden parameters of 116–8, 133; principles of 117, 121–3, 124, 126; rise of 118–9, 180; unpacking the 116, 119–23; (see also contrasting Washington and Beijing Consensuses) Bello, W. 100–2 Bernstein, H. 47, 53 Booth, D. 37–9 Brett, E. 129, 144

Bretton Woods 13; agreement 34, 91; conference 79; institutions 12, 24, 48, 89, 138; system 12, 118 BRICS 13; bank 16, 30, 125, 132, 166; countries 30 Bromley, S. 99 Carothers, T. and de Gramont, D. 10–1, 37, 39, 41, 51, 139–40, 143–4 China; and economic growth 15, 115, 119; and foreign policy 115; and foreign aid policies 84; and foreign development assistance 117; and geopolitical and geo-economic interest 84, 126; and G77 49; and globalisation 102; and investment 49; and new global order 89, 115 Cold War 13, 30, 48; era 109, 120, 132 conditionality 30–1, 41–2, 67, 79, 88, 104–6, 108, 112, 118, 122, 125, 139, 146–7, 166, 176–7, 183; history of 49; market–oriented 157; role of 55; Washington Consensus–based 30–1, 40, 67, 75, 104, 106, 108, 118, 148; liberal democracy based 90; as loan based 138; (see also aid) contrasting Washington and Beijing Consensuses 116, 123–30; political-economic contrast 123–6; civilisations and socio-political contrast 126–9 Copestake, J. and Williams, R. 16, 31, 36, 155 cosmopolitanism 6, 19, 68, 75–6, 91; neoliberal 100

Index 189

country ownership 38–9; agenda, 39; of aid 31, of development 38 cultural backlash theory 64, 67 DAC (Development Assistance Committee), 13–4, 53 de-globalisation 7, 19, 41, 60, 66, 70–1, 91, 98–112, 144, 154, 182, 184; locus of 100–1; populist de-globalisation 18, 70; transition from neoliberal globalisation (see neoliberal globalisation) democracy 52, 63; and constitutional liberalism 79, 81, 83; and liberalism 3, 79–80; and illiberalism (see illiberalism and democracy); failure of liberal 84; forms of 80; liberal 37, 63, 78–81, 83–4, 90–1; majoritarian 64; multiparty democracy 126; neoliberal 90; representative 64; rules–based liberal 79 Department for International Development (DFID) 5, 9, 30–2, 35–6, 40, 46, 53, 143, 157, 175, 185 dependency theory 85, 166–7 Dirlik, A. 120, 133 Doing Development Differently (DDD) 40, 55 donor- recipient relationships 31, 39 Drivers of Change (DoC) 35–6, 53, 143, 175 EBRD (European Bank for Reconstruction and Development) 9, 15, 92–3, 154, 157, 166, 176 economic; growth paradigm 5, 10; inequality theory 64, 67–8 economics; neoliberal 3–4, 9, 47, 74–5, 88, 92, 117, 131, 148, 175; (see also ordoliberalism) Eisenstadt, S. N. 86 EMC (European Monetary Crisis) 101 evolution of development alongside politics 47 Fisher, J. and Marquette, H. 16, 33, 37, 39–40, 53–4, 141–2 foreign aid; politicisation of 138–9, 143; re–politicisation of 148–9 Frank, A.G. 85, 161, 166–7 Friedman, M. 14, 69, 107, 124 Fritz, V., et al. 37, 42, 52, 175 Fukuyama, F. 15, 30, 69–70, 87, 90, 101, 118, 126–7; and end of history 69–70, 90, 126–7 game theory 65, 156, 158–60, 167, 178 GATT (General Agreement on Trades and Tariffs) 12, 102

GFC (Global Financial Crisis) 9, 16, 18, 30, 74, 87–8, 100–1, 103, 104–7, 111, 127, 132, post-GFC 68, 106, 128, 162, 181 Gilpin, R. 21, 162 globalisation 10, 18, 22, 50, 60–1, 67, 69, 70–1, 91, 98,100–2, 104–10, 126, 131, 167, 170, 181; cultural and civilisational aspects of 99–100, 123; and populism 60, 66–8, 70–1, 108; economic globalisation 50, 70–1, 98, 131; political globalisation 98; social globalisation 98; neoliberal globalisation 98, 100–3; critique of neoliberal globalisation 20–3, 61, 67–9, 71, 87, 92, 101–2, 104–12, 170, 181; transition to de-globalisation 103–4; (see also de-globalisation) governance 15, 31–3, 47, 49, 52, 54–5, 60, 84, 185; agenda 47, 52, 139; domestic 89; failure of 139; global 21–2; good governance 47–8, 52–3, 91, 117, 139, 143, 157; market oriented 60; neoliberal 184; principles of 47; problem driven 36; state oriented 60; studies 11, 29; structure 145 Gramscian hegemony 83, 156 Green, D. 52–3, 141 Green, D. P and Shapiro, T, 156, 158 Grindle, M. 36, 46, 52–4 Halper, S. 89, 124 hard power 122–3, 181 Harris, D. 54, 115, 150 Hayek, F. A. 14, 69, 107, 124, 157 Hickey, S. and Mohan, S. 48, 50 Hudson, D. and Leftwich, A. 40, 46, 52–4, 141, 149 Hudson, D. and Marquette, H. 1, 18, 35, 38, 40, 141 Huntington, S. P. 87, 126–8 Illiberalism 3, 78–9, 82–3, 87, 182–3; and democracy 7, 63, 78–98, 182, 184; and liberal democracy 3, 7, 63, 78–90, 81, 83–5, 88–90, 92, 101, 127; and populism 2–3, 184; as new conceptual framework 89–91; and the Beijing Consensus 88–90, 92 (see also Beijing Consensus); and dominant development theory 79, 86–8; and foreign aid 89–92; as a new conceptual framework 89–91; challenge of 78, 91; delineating 82–4; impact on foreign aid 91–2; power 184; rise of 6, 84–5, 93; 182 Illing, S. 62–3

190 Index

IMF (International Monetary Fund) 12–3, 15, 47, 69–70, 74, 86, 88, 92–3, 109, 112, 118, 125, 157, 166 inequality 12, 15–6, 105–7, 111; cycle 105; of power 18; structural 52, (see also economic inequality theory) Inglehart, R. F. 64, 67 Inglehart, R. and Norris, P. 64, 67–8 institutionalism 21, 32, 82, 155, 167; as theoretical framework 180; rational choice 168–9; sociological 169–170 international political economy (IPE) 23, 34, 56, 99, 149, 155, 167, 175, 184; interdisciplinary 20, 23; rationale of 20, 22 international relations 71–2, 79–80, 89, 99, 128, 131; as soft power 84

nativism 1, 62–4, 70, 72, 75, 78, 82, 128 nativist constituents of populism 72 nationalism 63–4, 68, 100, 104 NDB (New Development Bank) 16, 30–1, 92, 125, 131–2, 176, 181 neoliberalism 2–3, 12, 15–6, 21, 23, 30, 41, 66, 68–9, 79, 90, 98, 100–1, 104, 106, 117, 124, 148, 155, 157, 178–9, 181, 183; agenda 15, 22, 30, 37, 69, 105–6, 156; demise of 19, 18–2; and foreign aid 7, 17, 24, 30, 75, 78, 130, 170, 176, 184; and globalisation (see globalisation); critique of 104–6; ideology 2, 14,–5, 17–8, 22, 30, 42, 80, 87, 89, 90, 126, 154, 158, 182 Nölke, A. 85, 166 non-traditional donors 13–4, 48 Norris, P. 63–4, 67–8 Nye, J. S. 40, 123, 181

Jakupec, V. 78, 99, 110–11, 126, 144, 148, 166, 184 Jakupec, V. and Kelly, M. 111, 166 Jessop, B. 162, 164

OBOR (One Belt One Road) initiative, 16, 30, 91, 125, 132–3, 176, 181 OECD (Organisation for Economic Cooperation and Development) 13–4, 16, 48, 130, 143, 155 OECD DAC (OECD Development Assistance Committee) 1; 13, 23, 31, 49, 53 ordoliberalism 98, 155 Ostry, J. 105

Kelly, M. 111, 166 Keynes, J. M. 12 Keynesian economic theory 125 Keynesianism 99, 124, 156 Kingsbury, D. 11–2 Kuhn, T. S. 17, 20 Landreth, H. and Colander, D. C. 66 Leftwich, A. 35, 143 Levitsky, S. and Way, L.A. 82–3, 88 liberal democracy 37, 63, 78–85, 89–91, 101, 127; failure of 84; orthodox 78 liberalism 3, 79–80, 183; and democracy 3, 80; constitutional liberalism 79, 81–2 Limpach, S. and Michaelowa, K. 38, 41, 138 Luhmann, N. 161–3 McLoughlin, C. 32, 142, 185 MDB (multilateral development banks) 2, 75, 97; and liberal democratisation in developing countries 87; and foreign aid 4, 23, 129; and neoliberal ideology of 41, 51; and PEA 38; criticism of 140; failure of 38; Washington Consensus–based 38, 40, 74, 85–7 mercantilism 60, 64–7, 75, 110 Mises, L. 157–8 modernisation theory 12, 85–8, 90–1 Mudde, C. 3, 61–4 Mueller, D. C. 153, 157

Pappas, T. S. 63 paradigm shift 5–6, 10, 16–20, 24, 50; 132, 144, 154; and international political economy 10, 20–1, 24, 154; as a rationale for a political economy analysis 5, 16–18, 20; applied to political economy analysis 16–18, 144, 154 participatory development 48–9 PDIA (Problem–Driven Iterative Adaptation) 40 Pettit, J. 32, 53 PGPE (problem driven governance and political economy analysis) 36, 55, 175 Polanyi, K. 159–60 Political Economy Analysis (PEA); and politics matter 177–9; and policy practice 180–1; at crossroads 2, 175, 183; conceptual deficiencies of 30, 35–8, 40, 46; definitional deficiencies of 5, 31–4, 38; between illiberalism and populism 2–5, 183; challenging socio-economic orthodoxy 7, 60–1; conceptualising 10–1, 29–30, 35–37, 182–4; critiques of 37–41; delineating

Index 191

11; de-politicisation of 4, 31, 148; existing forms of 51–56; linking to international political economy 11, 23–3; mainstreaming 181–2, 186; politicisation of 7, 55, 142–6, 148–50, 185; political locus classicus of 138, 140–2, 144, 149; power relations as politicisation of 145–9; problematising politicisation of 142–4; second generation of 53–4; re–locating 179–80; re–politicisation of 4, 6, 138, 144–5, 148–9; third generation of 54–5, 141; strengths and weaknesses of 35–7; theoretical frameworks for 5–6, 10–1, 16, 18–24, 76, 154–170; (see also (re)locating PEA); Trumpist politicisation of 148–9 populism 1, 3, 37 60; and globalisation 41, 108; (see also globalisation) and illiberalism (see illiberalism); and impact on foreign aid 19, 71–2; and impact on multilateral development banks 41, 74–5; and liberal democracy 79; and mercantilism 125, anti–establishment constituent of 73; as beginning of a new era 70–1; as economic construct 61; as ‘thin' ideology’ 63; as a political movement 61; definition of 62–4; conceptual narrative of 62–4; constituents of 64–7; demand side theories of 67–8; left–wing populism 62; nativist constituents of 72; right–wing populism 19, 42, 62, 101, 107; right–wing versus left–wing populism 60–1; rise of 30–1, 37, 41, 68–71, 79, 83, 103, 132, 147–8 post development discourse 50 post industrialism 61 post-Washington Consensus 13, 15, 51, 162 post-Cold War 133, 149; political era 126; political arena 99; and new World Order 118 power 123; analysis 32, 53, 175; distribution of 32–3; economic 10, 12, 18 131, 155–6, 181; geo-economic 42, 66; political 139, 156, 158, 159, 167; relations 4, 6, 11, 14, 22–5, 30, 34–8, 40, 50, 55, 61, 65, 81–2, 84, 112, 130, 138, 142, 145–8, 150, 157; regulatory 164; structures 49–51, 53, 122, 128 133, 145, 150 principal-agent; constructs 176; theory 38, 138, 145–8; power relationship 168

protectionism, 1, 19, 60, 64–7, 75, 87; national economic 104 public choice theory 156–8, 160 Ramo, J. C. 115, 117, 121, 177 rational choice 157; institutionalism 155, 168–9; theory 21, 93, 155, 157–60 reconciling the Beijing and the Washington Consensuses 129–30 regulation theory 155, 163–5 results based management 39 rights based approaches to development 50 Routley, L. and Hulme, D. 141, 144 SAP (structural adjustment programmes) 112, 119 SIDA (Swedish International Development Cooperation Agency) 5, 32, 53, 175, 183 sociological institutionalism 156–7, 169–70 soft power 40, 122–3, 126, 133, 176, 181 South-South; cooperation 49; divide 166 Stiglitz, J. 14–5, 104, 106–7, 109–11, 129 Strange, S. 23, 162 structuralism 6, 99, 155, 178, 180; as a theoretical framework 161, within the context of IPE 161 systems theory 155, 161–3 Taggart, P. 61–2 ToC (Theory of Change) 50, 137, 149–50 Transformative approach; to development 3, 48; to policy making 33 Trump 42, 65, 72; administration 42, 65, 70, 74, 84, 91, 108, 126, 149; agenda 65; and globalisation; global discontent 109–11; doctrine 42, 138; political politicisation of PEA 148–9 TWP (Thinking and Working Politically) 9–10, 46–7, 50, 55 Unsworth, S. 16, 36–7, 53 Wallerstein, I. 85, 161, 166–7 Washington Consensus 6, 10, 13–4, 19, 47; and foreign aid 19, 30, 129; and conditionality (see conditionality); and structural adjustment 88; critique of 15, 121, 131; description of 14–5, 123–5, 128; institutions 39, 70; (see also contrasting Washington and Beijing Consensuses; see also reconciling the Beijing and the Washington Consensuses)

192 Index

Williamson, J. 14–5, 79, 116, 118, 124, 129, 177 World Bank, role of 12, 33, 50, 52, 70, 118, 138; and PE perspective 46; and structural adjustment 88; critique of 140 World System theory 155, 161, 166–7, 178

WTO (World Trade Organisation) 12, 70, 74, 102 Yanguas, P. and Hulme, D. 2, 37, 143–4 Young, B. 99, 159 Zakaria, F. 3, 78–9, 82–3, 85, 91, 181