Political Settlements and the Governance of Growth-Enhancing Institutions - Khan (2010)

This paper analyses the ‘political settlement’ with the aim of providing an analytical framework that can evaluate institutions and governance in developing countries. In advanced countries, the distribution of power within a political settlement is normally based on formal institutions and rights. In contrast, the distribution of power in developing countries draws significantly on organisational abilities based in non-capitalist sectors. In these contexts, formal institutions alone cannot support distributions of benefits consistent with these distributions of power. Instead, informal institutions play a critical role in power distributions and rely on patron-client relationships. These factors explain why differences can occur in political settlements of developing and advanced countries. The analytical framework presented by the author in this paper is applied to a variety of case studies and outlines how each of their political settlements has evolved over time in terms of these characteristics. The evolution of their political settlements is shown to be closely related to changes in their formal growth-enhancing institutions and the performance of these institutions. From this analysis, the author attempts to identify governance changes that can be sufficiently enforced to make a developmental difference in particular countries as well as providing a framework for understanding changes in the political settlement.