This blog post is part of the “Political Marketplace” program in collaboration with the research consortium, PeaceRep, based at the University of Edinburgh. The program is supported in part by the UK Foreign, Commonwealth & Development Office.
Can change in elite control of ‘rents’ explain the evolution of political settlements?
There is a vast (and contentious) literature on the relationship between rents, political settlements, and economic growth. In recent years, something of a broad consensus seems to have emerged. Broadly, scholars seem to agree that elite contestation for ‘rents’ shape political settlements. In turn, political settlements and the nature of institutions determine the quantum and nature of economic growth. The devil is, of course, still in the detail. Scholars continue to disagree on the precise mechanisms through which institutions and political settlements influence economic growth. My intention in this blog post is not to revisit those broader debates, but to draw on four empirical cases of countries in the Horn of Africa (HOA) to re-examine the first step in the chain – to briefly pose the question of whether a change in rent flows can explain the evolution of political settlements in Ethiopia, Sudan, South Sudan, and Somalia. These are important policy questions; the political settlements literature has been extremely influential in policy circles (especially within FCDO) and has shaped the research agendas of several multi-year research programs.
In this blog post, I will argue that the relationship between rents and political settlements is unclear, because the concept of political settlements itself remains muddled. Within the HOA, it is more appropriate to speak of political unsettlements, characterised by near-constant institutional flux. The concept of ‘political finance’ does a much better job of explaining the evolution of political (un)settlements in the region.
Definitions
The expression ‘rents’ is widely used in social science literature but rarely defined with precision. The expression usually refers to ‘incomes which are above normal’ – where ‘normal’ incomes are those which would have been earned by an individual or a firm in a competitive market.[i] Since the competitive market beloved of economic theory usually does not exist in practice, rents may also be understood as an income which is ‘higher than the minimum which an individual or firm would have accepted given alternative opportunities’ (p. 5). Rents may include monopoly profits, but also subsidies and transfers organized through political mechanisms, illegal transfers organized by private mafias, short-term super-profits made by innovators before competitors imitate their innovations and so on. Rents may be legal or illegal, but in general, create incentives for the recipients of rents to maintain access to these incomes. This is described as rent-seeking behaviour.
There are competing definitions of political settlements. The term can be understood to mean a ‘distribution of power across organizations’ underpinning a particular institutional configuration in a country/political system, which ‘reproduces itself over time’.[ii] In lay terms, this can be understood as a relatively stable or at least commonly accepted ‘balance of power’, or the ‘forging of a common understanding usually between elites that their best interests or beliefs are served through acquiescence to a framework for administering power’.[iii] Political settlements are dynamic, evolve over time, and involve both formal and informal institutions.[iv] The concept of political settlements has been criticized for being fuzzy – for instance, it is used in policy discussions to refer to both peace agreements and to the broader political system in a country. It is unclear whether the idea refers to ‘a mutually constitutive and relatively stable combination of power and institutions, or whether it is a configuration of power that underpins institutional stability’. It is also not clear whether ‘an agreement is necessary for a political settlement to exist, and if so, what sort of agreement’.[v]
Rents and political settlements
Khan[vi] has argued that the distribution of power across organizations affected by particular institutions was the most important determinant of institutional change and institutional effectiveness. In this definition, institutions and the distribution of power have a circular and interdependent relationship.
- Organizations are groups of individuals whose interactions were structured by the rules set by institutions.
- The configuration of power allowing an organization to prevail in societal conflict at the level of society (holding power) is supported by a range of formal and informal institutions that reproduce and sustain the relative balance of power between organizations by enabling a consistent set of economic benefits to be created and allocated. These economic benefits are understood as rents.
- In turn, relative power determines which institutions emerge, whether institutions are enforced, and what their effect is on economic performance. Institutions that threaten the rents of powerful organizations are contested and may be reversed, modified or distorted.
Khan’s concept of political settlements builds on the insight generated by North, Wallis, and Weingast who argued that the nature of the elite bargain structures the distribution of rents and personalized institutional arrangements between members of the dominant coalition, and by doing so, keeps the possibility of violence at bay.[vii]
Testing the relationship in the Horn of Africa
As noted above, there are marked challenges with the definition of political settlements and Khan’s own definition of rent doesn’t always remain consistent. But there are two significant conceptual and empirical challenges when this relationship is examined in the HOA.
First, the notion of rents is both too narrow and too broad to explain the dynamics of political change in the HOA. In Somalia, for instance, de Waal has shown that disruptive changes in the pastoral economy created poorly coordinated forms of violent resistance and intercommunal conflict — before any organized insurgency emerged. In other words, broader changes in the political economy of livestock led to the reshaping of identities and the emergence of the ‘clan’ around which violence was to be organized. These changes took place within the overall context of the commercialization of the livestock trade. To describe this much broader societal process only in terms of rent-seeking does violence to the analysis. Similarly, Thomas has shown that in Sudan, the reshaping of violence was driven by the adoption of austerity and privatization strategies by Sudanese Islamists. Privatization meant more than rent: as the state shifted its shape and social conflicts intensified, it started wars and then privatized military services, and militias aligned to governments, rebellions, and commercial interests reshaped war and economic life. Rents are part of the story, but not the whole story. Further, one type of rents is usually observed within the HOA countries – rents based on political transfers, that is, rents created through the operation of taxes and subsidies, as well as the creation of restrictions around the use of assets, conversion of public assets into private resources, etc.
Second, in the HOA, rent-seeking is usually only one of the strategies used by leaders, but understanding the dynamics of political change requires understanding how politics is transacted – whether in a classically autocratic system, or within a transactional political marker. Historically, rent-seeking sometimes underpinned the process by which leaders take power, but leaders may come to power through force of arms and only turn to rent seeking much later. Rents may be centralised in the state for developmental purposes as was the case in Ethiopia under the EPRDF as Kelsall[viii] and Dercon[ix] have shown, or it may be a crucial strategy for the retention of power, as remains the case in South Sudan. But even in South Sudan, rent-seeking looks markedly different from the process described by Khan. What is more important is the process of political bargaining within a system of transactional politics.
Political finance
I would argue that political finance – understood as discretionary cash available to a politician – does a better job of explaining political change in the HoA. It has been a key determinant of the nature of political settlements in both countries, at all times mediated by violence or coercion. Political leaders have sought to exert control over and centralise the sources of political finance – whether to simply stay in power, or to pursue developmental or ideological projects or a combination. Where politicians have been able to do so and are able to operate according to a relatively long-time horizon, sustained economic growth has been the result. These episodes of growth can persist through periods of domestic and global turbulence because political settlements create institutional configurations in states which are difficult to alter in the short term. However, short spurts of economic growth can also occur due to political economic changes unrelated to the changes in the political settlement – for instance, due to a boom in primary commodity exports. Finally, the causal relationship between political finance and settlements is not unidirectional. Political competition or political unsettlements can shape how and why political actors seek political finance, who they seek finance from, and what they need to do in return. Corruption, crony-capitalism, asset-stripping, emergency privatizations, clientelism, etc., form part of this broader interplay between political finance and political settlements.
[i] Mushtaq Khan, “Rents, Rent-Seeking and Economic Development: An Introduction,” in Rents, Rent-Seeking and Economic Development: Theory and Evidence in Asia, ed. Kwame Sundaram Jomo and Mushtaq Khan (Cambridge University Press, 2000).
[ii] Mushtaq Khan, “Political Settlements and the Analysis of Institutions,” African Affairs 117, no. 469 (2018): 636–55; Mushtaq H. Khan, “Power, Pacts and Political Settlements: A Reply to Tim Kelsall,” African Affairs 117, no. 469 (2018): 670–94.
[iii] Jonathan Di John and James Putzel, Political Settlements: Issues Paper, University of Birmingham, 2009.
[iv] Christine Bell and Jan Pospisil, “Navigating Inclusion in Transitions from Conflict: The Formalised Political Unsettlement,” Journal of International Development 29, no. 5 (2017): 576–93.
[v] Tim Kelsall et al., Political Settlements and Development: Theory, Evidence, Implications (Oxford University Press, 2022), https://library.oapen.org/handle/20.500.12657/58143.
[vi] Khan, “Power, Pacts and Political Settlements.”
[vii] Douglass C. North et al., Violence and Social Orders: A Conceptual Framework for Interpreting Recorded Human History (Cambridge University Press, 2009).
[viii] Tim Kelsall, Business, Politics and the State in Africa: Challenging the Orthodoxies on Growth and Transformation (Zed Books, 2013).
[ix] Stefan Dercon, Gambling on Development: Why Some Countries Win and Other Countries Lose (Hurst and Co., 2022).
