The political economy explanation for Nigeria’s elusive progress

Political economists are concerned with the interaction between politics and economics, or between the state and markets, in influencing change in any society. They reject any analysis that suggests that politics alone or economics alone determines policy choices in any nation. This approach of bringing together economic and political factors in analysing policy development distinguishes political economists from pure economists, if such a genre of social scientists still exists, who see policy choices solely through the lens of economic analysis and ignore the roles of law and politics. But, redolent of the tradition of the classical economists, such as Adam Smith and David Hume, political economists are interested in the interplay between economics, law and politics, and how this shapes development and progress in a country.

This analytical approach is based on a simple yet powerful conceptual tool, known as the political economy taxonomy or, more commonly, the “3-I framework”. The three components of this framework are: interests, ideas and institutions. Often, a fourth is added: circumstances or events, notably crisis. With these interpretive concepts, a hypothesis is developed, which says that policy change in any country is a function of interests, ideas, institutions and circumstances. Although this framework is often used in analysing economic or trade policy, as the renowned Columbia University economics professor Jagdish Bhagwati famously did in his seminal book, “Protectionism”, it can also be used to explain developments in other policy areas. And my aim here is to use this conceptual tool to discuss why progress continues to elude Nigeria. But, first, what do the concepts really mean?

Take vested interests. As the Harvard economist Dani Rodrik put it, they are “the cornerstone of political economy”. A common assumption about policy developments is that they are driven by the narrow interests of powerful groups. However, another school privileges the role of ideas. John Maynard Keynes famously said that, “It is ideas, not vested interests, which are dangerous for good or evil”. Ideas refer to knowledge or beliefs about what is and views about what ought to be. Typically, ideas flow from intellectuals, visionary leaders and the dominant values and cultures in a society. The main point of this political economy factor is that change only happens when ideas lead to a normative consensus and political momentum in favour of a particular cause of action.

This brings us to the role of institutions, usually defined as “the formal and informal rules, norms, precedents and organisations factors that structure political behaviour”. Put differently, institutions provide the framework within which actors can influence change, and therefore they can shape and constrain policy developments and choices. The distinction that Douglas North, the economics Nobel laureate, made between formal and informal Institutions is also important. Formal institutions are those we can see – the laws, the courts, parliaments etc. Informal institutions are the intangible norms, values, cultural attributes, convention or tradition in a society etc. North’s argument is that while formal institutions can influence human and political behaviour, informal ones, which are embedded in the subconscious, are even more powerful in incentivising behaviour. Of course, political scientists also tell us that institutions can lead to “path dependency”. Once created, they shape subsequent political dynamics, and reversal is difficult because of resistance from vested interests who benefit from the status quo.

This, then, is where the last political economy factor, circumstances or events, becomes relevant. A key assumption here is that existential events, such as a major crisis, can break down interest-group, ideological or institutional barriers to change. Indeed, as my friend, Razeen Sally, associate professor at the Lee Kuan Yew School of Public Policy at the National University of Singapore, pointed out, “all real-world examples of radical reforms seem to have occurred in the aftermath of crises”. The truth is that a significant economic or political crisis presents a country with a ‘window of opportunity’ for a radical change. When an existential crisis leads to a TINA (There Is No Alternative) situation, existing ideas, interest-based attitudes and institutions that are not working are easily discredited and swept away!

Of course, none of the above factors alone can influence policy developments and choices; often it is the interaction of the factors that explain policy change. That said, it is possible for one factor, such as ideas or interests, to be dominant in a particular situation even though it still interacts with other factors to shape policy action.

So what does all this mean in the Nigerian context? But, first, what is the context? Well, the context is that, by any measure of progress, by any metric of development, Nigeria is a laggard in the world. The international indexes or league tables are there for everyone to see: they show that Nigeria is in a deplorable state on corruption, human development, governance, government effectiveness – name it! A nation, like a human being, must always make progress, constantly improving itself; otherwise, it will atrophy. Yet, no radical transformation has taken place in this country for several decades. Why is this so? Why is change so difficult in Nigeria? Why has progress, real progress, continued to elude this country? Well, the answer, from a political economist’s perspective, lies in the relative influence of interests, ideas, institutions and circumstances in shaping policy developments and choices in the country.

Let’s start with ideas. Is Nigeria a country where ideas drive change? No. There is hardly any normative consensus about anything in this country. Since the pre-independence period, when there was a national consensus around the need for Nigeria to become independent from Britain – even then the North demurred on timing – there has been no prevailing idea driving change in Nigeria. There is no consensus, for instance, on the need to restructure the country, even though that’s badly needed. There is a dearth of intellectualism in Nigeria, and, of course, lack of political visionary. Cerebral and visionary leaders, like Obafemi Awolowo or Lee Kuan Yew, who can articulate and drive change are absent in Nigeria today.

But what about institutions? Well, while institutions drive policy change in many countries, in Nigeria, they lead to path dependency. The theory of regime creation and change says that when institutions become dysfunctional they must be changed. But not in Nigeria! The current failed or failing political, economic and bureaucratic structures in this country have bred powerful interests that are mobilising and resisting change. A prominent political leader, Bola Tinubu, said recently that “Nigeria can’t progress under the current political system”. Well said, but even his own party, All Progressive Congress (APC) won’t touch the issue of political restructuring with a badge pole, because powerful interests within the party are opposed to restructuring Nigeria.

Ah, what about crisis, then, you might ask? Well, hasn’t Nigeria gone through several existential crises – the civil war, economic devastation, deep political divisions and tensions etc? But this is not a country that typically responds to crisis by undertaking radical reforms. For instance, most countries that had a civil war ended with a negotiated political settlement, even if one side won. But in Nigeria, it’s business as usual. Yet the same cleavages and schisms that led to the war are still with us. Or take economic crisis. Most countries that have embarked on radical economic reform did so from the ashes of a crisis. But, again, not Nigeria! We pay lip service to economic reform!

This, of course, leaves us with one political economic explanation: vested interests! Truth be told, Nigeria is a deeply fractured country where powerful interests groups hold sway. And any attempt to change the country, reform the judiciary, the bureaucracy, the political structure etc, is bound to be thwarted by these powerful interests. It is impossible to achieve change when there are too many vested interests with sectional and narrow agendas. Yet, until ideas and institutions, if not crisis, can constrain these powerful interests, change will continue to elude Nigeria and so will progress!

Olu Fasan