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Hemmed In: Responses to Africa's Economic Decline
Thomas M. Callaghy and John Ravenhill, editors
New York
1993
12. Political Passions and Economic Interests: Economic Reform and Political Structure in Africa
T HOMAS M. C ALLAGHY
Introduction: Beyond Authoritarianism or Democracy?
This chapter is about the relationship between economic and political liberalization in Africa. Among many Western scholars and politicians the explicit or implicit assumption was long that major economic restructuring required authoritarian regimes. Now both Western scholars and politicians are arguing that such economic restructuring requires simultaneous democratic political liberalization. Neither position is fully correct; neither is fully wrong. A more nuanced view is required, and time frame, sequence, and political conditions are central to such a perspective.
The key argument is an institutionalist one about the conditions under which economic policy is formulated and implemented in regimes of all types. If certain institutional features are present, economic liberalization is greatly facilitated, but not assured. Such features can be present under authoritarian, semi-democratic, and democratic conditions, but they are more likely to last and be effective under the first two, at least in the medium run. Propitious structures and conditions can disappear under any type of regime, but, because of the political logics of democratic coalitional and electoral support and legitimacy, they are more likely to do so under fully democratic conditions. I argue that established Third World democratic regimes engage in economic stabilization as well as most authoritarian regimes and better that most new or transitional democratic regimes but do not do as well at structural adjustment. While cases of established democratic regimes will be used here, the focus will be on new or transitional democratic regimes, as that is the primary issue facing African countries in the 1990s. Our time frame will be the short and medium run.
The chapter will first look at the old debate on the relationship between regime type and economic change and examine recent Third World evidence on it. Then it will sketch Africa's current economic and political marginalization and dependence as well as the efforts at economic reform in the 1980s that flowed from them. It will present an argument about the requisites of successful economic restructuring under African and other Third World conditions-one that focuses heavily on the politics of delegation under a variety of regimes. Other factors that facilitate successful reform will then be discussed as will the reactions of external actors to the quite limited success of neoorthodox economic reform in Africa. From two originally separate paths, these reactions converged on the new phenomenon of political conditionality stressing "governance" and democratization. In order to assess the prospects for mutually reinforcing processes of economic and political liberalization in Africa the difficulties facing new or transitional democracies will be examined and then three country cases will be analyzed--Ghana, Nigeria, and Senegal. Finally, the conclusion will look at the prospects for economic and political liberalization in Africa, especially its version of the "cruel choice" and the tension between everyday politics and developmental visions.
Economic Change and Regime Type: The Old Debate and the Recent Record
As Laurence Whitehead has pointed out, in many Western "policy-making circles it is virtually an unexamined axiom that market economics and participatory politics are parallel processes that accompany each other. Capitalism and democracy are seen as two sides of the same coin, united by commitment to individual free choice in both economic and political matters." 1 This belief was greatly reinforced by events in Eastern Europe and is now assumed to hold for the Third World as well. There is, in fact, a long tradition of scholarship that readily admits "the historical and the logical connections between capitalism and democracy," 2 certainly for much of Europe and frequently for other places in the world over the long run. This link has been seen to hold particularly for historically stable countries with high levels of economic development. 3 But the rise of bureaucratic-authoritarian states in Latin America in the 1960s and 1970s generated a more pessimistic mood. Discussions of East Asian newly industrializing countries (NICs) led to similarly pessimistic conclusions. For Africa it is even less clear that there is an historical or logical connection between the two, for at least the foreseeable future.
One analyst points to "the inconclusiveness of the debate" about "the impact of democracy on economic development." 4 While he does admit that "most cases of very high growth rates have involved authoritarian regimes, and authoritarianism may be a nearly necessary, though not a sufficient, condition for rapid economic growth," he asserts that "the economies of many democratic Third World countries have grown at satisfactory rates." 5 Most of his "satisfactory" cases are established democracies, however, such as India and Venezuela. He is more pessimistic about the prospects for transitional or newly established democracies facing the tasks of economic restructuring and points to the difficult political logics they confront:
| The capacity of democratic regimes to extricate themselves from social ties so as to restructure the economy is minimal. Generally, only incremental shifts are possible. Moreover, leaders in democracies concern themselves with what appears to be politically "rational"--namely, how to generate and enhance political support. Thus economic policies often are chosen because of the political benefits they may bring to the leaders. Policy incrementalism and the use of economic resources for sustaining political support generally tend to retard economic growth in democracies. 6 |
A study comparing the performance of twenty-five Third World countries for 1978-86, a sample that included "continuous democracies, authoritarian regimes, and countries that have undergone a democratic transition," found that "established democracies have performed about as well as authoritarian regimes in implementing stable macroeconomic policies," but that "new democracies as a group did appear to have difficulties controlling fiscal and monetary policy during the period of transition." The study noted, however, that there were striking differences among the new democracies based on different structural and institutional characteristics. 7 Considerable variation also existed among authoritarian regimes, reemphasizing the point that authoritarian regimes do not guarantee good economic performance; Africa is replete with such examples. The key finding for Africa is that "democratic political transitions are associated with difficulties in managing macroeconomic policy." 8 The differences become even more striking, however, when looking at major structural adjustment efforts rather than stabilization measures.
In a study of East Asian and Latin American NICs, it is clear that "authoritarianism contributed to economic growth," that "crucial policy reforms in the NICs have historically been associated with authoritarian rule; any assessment of the NICs must weigh this high cost of 'success.' " 9 In discussing the bottom line, the author notes that:
| One way to circumvent this problem is to go beyond regime type to other institutional factors that have affected the NICs' performance. . . . I have attempted to show how other institutional features of the state, including the organization of interest groups, the centralization of decision-making authority, and the instruments available to government officials, also affected ability to formulate and implement coherent policy. Yet as the case studies have shown, many of these institutional characteristics were themselves a by-product of the consolidation of authoritarian political power. Thus while there are good reasons to disaggregate the state, disaggregation does not reduce the analytic utility of beginning with the authoritarian-democratic distinction. 10 |
He goes on, however, to express a common hope:
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Nevertheless, . . . there are no theoretical reasons to think that authoritarian regimes are uniquely capable of solving the collective-action problems associated with development. This absence [of theoretical reasons] provides hope that newly democratizing countries will develop institutions conducive to both political liberty and economic growth . . . Authoritarian rule may have facilitated reform in the past, but a variety of institutions may be functionally equivalent in their ability to induce restraint from competing social groups. 11 |
Thus we appear to have a high historical correlation in the contemporary era between authoritarian rule and the ability to engage in major economic restructuring in the Third World, but not a necessary theoretical one. The search then becomes one for what might be called "effective and sustainable democratic functional equivalents." I will return later to the issue of the nature of these equivalents and how commonly they are likely to be found. If they are not found, current disturbing trends in Africa are likely to accelerate. It is to these that we now turn.
African Economic and Political Marginalization and Dependence
Referring to the precolonial era, a leading historian of Africa has pointed to "the paradox of Africa's simultaneous involvement and marginalization in the world economy," that "Africa was becoming less significant to the world economy at the same time as it involved itself more closely in international commercial relationships." This paradox "operates in the opposite direction" as well: the world's "increasing involvement in the African economy . . . is also at odds with the decreasing economic importance of Africa" for the world economy. 12 In the early 1990s, this paradox is still valid; in fact, it is probably more applicable now than it was earlier.
The increased marginalization of Africa is twofold--economic and politico-strategic, and both aspects are tightly linked in their consequences. The first is primarily economic: that Africa is no longer very important to the major actors in the world economy and its changing international division of labor--to multinational corporations, international banks, the economies of the major Western countries, or those of NICs such as Korea, Taiwan, Brazil, and Mexico. Africa produces a declining share of world output. The main commodities it produces are becoming less and less important or are being more effectively produced by other Third World countries. Trade is declining; nobody wants to lend; and few want to invest except in narrowly defined mineral enclave sectors. 13
The second aspect of Africa's marginalization is politico-strategic, but with very negative economic consequences. Africa has become of much less interest to the major world powers with the dramatic changes in the international arena in the 1980s and early 1990s, especially the end of the Cold War with a disintegrating Soviet Union, a liberated Eastern Europe, the rise of Japan as a major world power with more influence in the IMF and the World Bank, the dynamism of East Asian NICs, and the preoccupations of the Latin American debt crisis, which, unlike the African one, posed a threat to international financial stability. As one senior African diplomat put it, "Eastern Europe is the most sexy beautiful girl, and we are an old tattered lady. People are tired of Africa. So many countries, so many wars." 14 Even the French are beginning to reassess their "special relationship" with Africa.
Debates about Africa used to pit "internationalists" concerned about big-power rivalry against "regionalists" concerned with African issues. 15 Ironically, the internationalists have now voluntarily ceded the field to the regionalists. The latter used to call for the major powers not to turn Africa into an international security battlefield of the Cold War, but rather to let Africans solve their own problems, to leave Africa alone. The regionalists still wanted Western powers to provide substantial development assistance, but, at the same time, to let these countries decide how to use it. Now that the internationalists have declared the game over, the regionalists are desperately searching for a rationale to keep external interest and resources focused on Africa, especially in areas of intense desperation such as the Horn. The dramatic changes of 1989, Africa's politico-strategic marginalization, and the search for a new foreign policy rationale by Western industrial democracies meant that economic conditionality was joined by forms of political conditionality, under the assumption that, as in Eastern Europe, economic and political liberalization must go hand-in-hand.
What to Do?: The Political Economy of Attempted Economic Reform
As in other areas of the Third World, a difficult external debt burden and the resulting desperate need for foreign exchange have made African countries very dependent on a variety of external actors, all of whom have used their leverage to "encourage" economic liberalization. 16 This process, which some have referred to as "the new neocolonialism," means intense dependence on the International Monetary Fund, the World Bank, and major Western countries for the design of economic reform packages and the resources needed to implement them. This leverage has been converted into economic policy conditionality: specific economic policy changes in return for borrowed resources. 17 The primary thrust of these economic reform efforts is to more fully integrate African economies into the world economy by resurrecting the primary-product export economies that existed at the time of independence and making them work right this time by creating a more "liberal" political economy.
By the early 1980s the key question was not whether Africa had a serious economic crisis, but rather what to do about it. Avoiding the problem and policy drift were common Afrcan reactions, despite external warnngs and pressure. Much of the African response was to rail against the prescriptions of external actors. For those governments which did decide, out of conviction ro desperation, to attack the problem, the dilemmas were enormous, the risks great, and the uncertainties pervasive. Throughout the 1980s economic reform did take place in Afric, in large and small ways. A fair number of countries went through the motions or at least appeared to do so, resulting in a series of "small reforms." Few cases of "large reform" appeared, however, that is, multisector and sustained over time. By 1992 Ghana was still the only clear-cut example, although Tanzania had also made important changes. Yet Ghana illustrates the enormous difficulties of such efforts. Dr. Kwesi Botchwey, Ghana's longtime finance minister, portrays them vividly:
| We were faced with two options, which we debated very fiercely before we finally chose this path. I know because I participated very actively in these debates. Two choices: We had to maneuver our way around the naiveties of leftism, which has a sort of disdain for any talk of financial discipline, which seeks refuge in some vague concept of structuralism in which everything doable is possible. . . . Moreover, [we had to find a way between] this naivete and the crudities and rigidities and dogma of monetarism, which behaves as if once you set the monetary incentives everybody will do the right thing and the market will be perfect. 18 |
As the regime of Jerry Rawlings in Ghana discovered, neither position is fully correct: everything is not possible and policy incentives do not ensure that markets will work well. In addition, a revenue imperative exists whatever path is chosen. Resources have to come from somewhere. As we shall see, a quite rare conjuncture of factors allowed the economic reform efforts in Ghana to be sustained, and Ghana's success at "large reform," itself still fragile, is rare on the continent.
Reform and the Political Economy of Delegation: An Institutionalist Argument
How, then, do we explain the varied ability of African governments, caught as they are between strong and often contradictory internal and external pressures, to engage in sustained economic reform? The degree to which an African government can adjust appears to be determined by its ability to insulate itself from the political logics, social pressures, and characteristics of the rent-seeking statist syndrome that has dominated Africa since independence while adopting externally- and market-oriented policies, largely through the delegation of economic policy-making and implementation to a core of powerful and protected technocrats. 19
The ability to insulate and delegate is affected primarily by the following variables: (1) how the economic crisis is perceived by African rulers-particularly whether it is caused by external or internal factors and is temporary or systemic; (2) the degree to which decision-making is influenced by technocratic and economic rather than political considerations such as patron-client politics and rent seeking; (3) the degree of autonomy of the government from powerful sociopolitical forces and groups, particularly relating to distributional demands; (4) the levels of stateness or administrative capabilities of the state apparatus and of cosmopolitanism, defined as the degree of sophisticated knowledge about how the international political economy actually works; and (5) the nature, dependence on, and extent of external influence, support, and resource flows, including the market forces of the world economy.
This argument maintains a balance between agency and structure, between voluntarist perspectives that stress "political will," so common to external actors, and pessimistic ones that stress structural constraints, so common to academic and African analyses. Proper policies and adequate levels of understanding, cosmopolitanism, commitment, and statecraft (plus luck-a variable we greatly underestimate) are necessary but not sufficient. Stateness, sociopolitical insulation, and adequate external resources are also necessary but not sufficient. Some combination of both sets of factors is required. Leaders need to rely on, insulate, and protect the technocratic staff while keeping it informed of the political and social effects of the reforms on both domestic and external actors. This places the technocratic team at the heart of complex two-level policy-making and implementation "games"--economic and political games played simultaneously at domestic and international levels for very high stakes. Given this argument, and the nature of African postcolonial political economies, it is not surprising that there have been few examples of sustained neoorthodox economic reform in Africa.
In many ways delegation is a statecraft strategy that attempts to create or reassert key Weberian bureaucratic attributes in a small but intense manner under conditions of stress, characteristics that have become greatly diluted by "politics as usual," and the rooted effects of older strategies and policies. Using insulated but informed delegation is an attempt to expand the arena of discretion and maneuver in order to diminish the constraints of the everyday "rules of the game"--legal, political, administrative, and social.
Given the effort to reassert these characteristics in a small but powerful "core" of officials and institutions, the strategy is, at least in the short run, an additive rather than a transformatory one in regard to overall state capabilities. As an additive statecraft variable, however, it exists and operates in a larger and much less variable and malleable historically defined political, administrative, social, and international context, which greatly affects the likelihood that such a strategy can become institutionalized and historically rooted. The larger contextual variables are not to be underestimated. By the early 1990s the IMF and the World Bank were increasingly, if grudgingly, giving them more analytic and policy weight.
The effective operation of a technocratic core is largely determined by its size, its level of technical and administrative capability, and the quality and availability of data. Also important are the technocratic staff's own depth, cohesiveness, continuity over time, and its degree of insulation and freedom to interact and bargain with external and internal actors. The technocratic staff's insulation and protection, political awareness, influence, and level of interaction with external and internal actors can vary over time given the statecraft of the leadership, political structure, and the economic and political impact of the attempted reforms. This is true of authoritarian as well as democratic regimes. The nature and use of an adjusting country's technocratic and bureaucratic capabilities are also directly affected by the behavior of external actors and the level of resources they provide.
Technocratic and bureaucratic capabilities vary considerably from country to country--as well as from region to region--reflecting different levels of overall development, political structure, and historical legacies. But, as we shall see, successful cases of delegation and economic reform cut across both regime type and level of economic and administrative development. In addition, they pose a significant challenge, at least in the medium run, to societalist views of social and economic change, which assert that successful economic reform requires the existence of sizeable supporting societal coalitions. Clearly, in some cases viable economic reform can come without major coalitional support in the short to medium run as part of a statecraft strategy that is heavily institutional in its thrust. How such a strategy can become institutionalized and relinked to society in the longer run is a larger and more complex question, one that now confronts Korea, Taiwan, Mexico, Chile, and Turkey in a very stark fashion.
A relatively common set of characteristics appears to make delegation possible. These characteristics are more commonly found in, but not restricted to authoritarian regimes (Korea, Chile under Augusto Pinochet, Ghana). 20 Under certain conditions, formally or partially democratic regimes can manifest functional variants which allow delegation to operate effectively, at least for awhile (Mexico, Turkey, Argentina). The bases for delegation can also exist in regimes of very different levels of socioeconomic development (Bolivia and Turkey, Ghana and Chile).
The most important of these characteristics is the ability to insulate the economic teams from pressure, opposition, and requests for particularistic exceptions from major social and political groups, from elements of the state bureaucracy, and from the top leadership itself. This insulation can be provided by the repressing or fragmenting opposition groups via direct coercion, states of emergency, internal or external exile of opponents (Chile, Ghana, Nigeria), corporatist control mechanisms in military or single-party regimes (Mexico), formal and informal political pacts (Bolivia), co-optation via selective and controlled patronage (Turkey, Bolivia), and the emasculation of legislative bodies (Jamaica, Bolivia). The formal structure of executive authority may also be important, such as the constitutional power to rule by decree or the strong executive power provided to a prime minister by a Westminster parliamentary system (Edward Seaga in Jamaica, Carlos Menem in Argentina).
Less tangible sources of executive authority may also be important-the personal popularity, at least initially, of a ruler (Rawlings in Ghana, Fernando Collor in Brazil, Menem), a positive international reputation for the ruler, increasing the probability of external support (Seaga, Raul Alfonsin in Argentina), an electoral mandate (Seaga, Turgut Ozal in Turkey, Collor), the chaos and decline left by previous governments (Ghana, Bolivia, Argentina), and even classic obfuscation efforts.
Just as executive authority and protection are key bases for delegation, they can also be its worst enemy. Often the major threat to the productive insulation of the technocratic team comes from the executive itself. Deviations from technocratic rationality can be productive or unproductive for the viability of economic reform. Political "buffering," via side payments, for example, that facilitates the continuation of a reform program without unduly undermining it, may well be very rational (Chile, Turkey); we will return to this point in the conclusion. Much executive meddling is driven by the clash of economic and political logics, related to the need to stay in power, especially in democracies (Ozal, Victor Paz in Bolivia). Such executive intervention can quite easily cross the fine line into the unproductive, however (Kenneth Kaunda in Zambia, José Sarney in Brazil). A good deal of meddling, however, is, often quite intentionally, of a much more predatory variety (Fernando Belande in Peru, Ferdinand Marcos in the Philippines, Mobutu Sese Seko in Zaire).
Unity of views and continuity of personnel--both indicators of coherence--are central to the effective performance of insulated economic teams in the short to medium run (Korea, Mexico, Ghana, Turkey). Several other factors are important, however, to the longer run coherence and eventual institutionalization of these processes and forms of statecraft. Two of the most important of these "nonbureaucratic elements of bureaucracy" are: (1) intrabureaucratic and extrabureaucratic informal networks of cohesion, and (2) the development of a bureaucratic political culture/esprit de corps/ideology. Both of these have been very important in the development of the Japanese state's role in the political economy, for example. The former has two parts. The first is the development of informal recruitment and performance networks that are based on competence and role definition. It is not a question of competence versus connection, as in the distinction between bureaucratic and patrimonial administration, but rather the fusion of connection and competence in the service of bureaucratic coherence and effectiveness. The second set of informal networks is extrabureaucratic, linking the bureaucracy with social groups, mostly business, in a way that facilitates economic transformation rather than retards it: what Peter Evans calls "embedded autonomy." 21
The difficult task is to institutionalize such a technocratic political culture while finding ways to relink it to society in a productive balance between insulation and social connectedness. These are challenges that remain of central importance to the ongoing development of Korea, for example. They can be affected both positively and negatively by political liberalization depending on how various forms of "democracy" are institutionalized. Both the development of informal networks and a bureaucratic political culture help to make possible the emergence of a distinctive outlook among state officials, one that focuses on the "general interest" rather than on particularistic interests. This is one of the key things that separates developmental from predatory states. Although the long-run institutionalization of delegation requires some form of "embedded autonomy," usually democratic or semi-democratic of one sort or another, it can be sustained most effectively after major economic change has taken place. But in the shorter run the line between productive relinking with society and succumbing to particularistic rent-seeking behavior by state and societal groups, especially business, is very fine indeed.
The search for this balance between economic and political logics generates delegation cycles, even in authoritarian regimes, as we shall see for Nigeria. Productive delegation is very difficult to sustain. It is a highly contingent statecraft variable, especially in democracies and plebiscitary authoritarian regimes. It is now clear that effective delegation is not necessarily restricted to more developed states, but it is more difficult to achieve and sustain in less developed states (Ghana, Nigeria, Zambia, Bolivia, Jamaica). As we shall see, Ghana demonstrates that countries with low levels of overall development and state capabilities can effectively use delegation as a statecraft strategy for economic reform, that small teams with enormous burdens can survive, learn, and win battles with powerful external actors.
African Economic Reform, an Implicit Bargain, and Learning
But is an intelligent delegation strategy sufficient? The answer is no. Africans and external actors alike have asked how serious attempts at economic reform can be prevented from collapsing, as one such program did in dramatic fashion in Zambia in 1987. 22 How can others that are limping along become more effective and sustainable? How can the enormous burdens of such efforts be softened, ameliorated? In a very real sense, these are classic issues of statecraft, at both the national and international levels.
Africans have long maintained that substantial resource flows and debt relief are required for sustained reform. One of the lessons of Ghana is that this is certainly a necessary but not sufficient condition. By the late 1980s external actors began to realize that increased resource flows and debt relief were going to be required. This realization began to sink in as the enormous obstacles to reform and the possibility of widespread failure became increasingly apparent. Whether adequate resource flows and debt relief will come is another matter. The special new lending facilities of the IMF and the World Bank are steps in that direction, but substantial support for them will be needed from all donor countries, probably much more. 23 Given the economic and political difficulties of major industrial democracies, it is not at all clear how likely this will be.
A larger problem exists, however, which is directly linked to Africa's increasing marginalization from the world economy. An "implicit bargain" has existed between the international financial institutions and the major Western countries on the one hand and the Africans on the other. It is that if African countries successfully reformed their economies in a neoorthodox direction with the help and direction of the IMF and the World Bank, then new international private bank lending and foreign direct foreign investment would be available to underpin and sustain the reform efforts.
This "implicit bargain" has not held for Africa. The failure is not the fault of the IMF and the World Bank alone, both of which have worked to increase voluntary lending and direct foreign investment, or of reforming African governments. It is a legacy of Africa's thirty-year history of dismal economic performance, a track record that banks and investors do not forget easily, and because of structural shifts in the world economy and state system that make other areas of the world more attractive. Proponents of neoorthodox reform in Africa have argued that the track record of poor performance can be overcome if Africa provides relatively predictable opportunities for profit. Even if the African end of the bargain were to be fulfilled (not likely in very many places, however), this would hold only if other areas of the world did not provide better opportunities. As some French scholars have noted, an "afro-pessimisme gagne du terrain et tend a réduire le continent à la portion congrue dans l'esprit des investisseurs et de nombreux dirigeants politiques." 24
But are delegation and sufficient resources enough? Once again the answer is no. By the middle of the 1980s some international officials began to realize that many efforts at economic reform in Africa would fail unless changes were made in how the programs were designed and implemented. This often quite palpable fear of failure became an impetus to international learning. This realization prompted some reassessment of the economic reform process, and by the end of the decade important learning was taking place, slowly and unevenly, by both external actors and some African officials. 25
Although some policy lessons are being learned, Africa's problems are larger still. The task of confronting this decline is enormous, much more so than for any other region of the world. External actors have learned that Africa is a special case; it has not responded as neoclassical theory predicted it should. In 1989 the World Bank noted that:
| The supply response to adjustment lending in low-income countries, especially in SSA [Sub-Saharan Africa] has been slow because of the legacy of deep-seated structural problems. Inadequate infrastructure, poorly developed markets, rudimentary industrial sectors, and severe institutional and managerial weaknesses in the public and the private sectors have proved unexpectedly serious as constraints to better performance-especially in the poorer countries of SSA. Greater recognition thus needs to be given to the time and attention needed for structural changes, especially institutional reforms and their effects. 26 |
Note the revealing use of "unexpectedly"; it indicates a changed perception-the lesson that Africa is a particularly difficult case.
It is not just a case of reordering policies, but rather one of constructing a whole new context, 27 what the World Bank is now calling an "enabling environment." At the end of the 1980s, a new tenet was added to neoorthodoxy-political liberalization.
Governance and Democracy: The New Political Conditionality
Ultimately, it is not just a question of finding the "precarious balance" between state and market or state and society, but rather searching for the precarious trialectic between state, market, and the international arena. Such a precarious trialectic can be very difficult to achieve, however, as domestic politics and the international arena have a habit of presenting new and unexpected challenges for African rulers. While the World Bank's 1989 long-term perspective study, From Crisis to Sustainable Growth, was initially well received by many Africans, it contained a quiet time bomb-"governance," which has brought considerable new tension and uncertainty to African-external actor relations. 28 The World Bank's emphasis on governance emerged out of its learning about the primary importance of creating a more facilitative sociopolitical context for structural adjustment in Africa.
In the long-term perspective study, the World Bank, and indirectly the IMF and the major donor countries, raised governance as a major issue for the first time:
| Efforts to create an enabling environment and to build capacities will be wasted if the political context is not favorable. . . . Ultimately, better governance requires political renewal. This means a concerted attack on corruption from the highest to lowest levels. This can be done by setting a good example, by strengthening accountability, by encouraging public debate, and by nurturing a free press. It also means . . . fostering grassroots and nongovernmental organizations (NGOs), such as farmers' associations, cooperatives, and women's groups. 29 |
Better governance, according to the Bank, also means less unpredictability and uncertainty in policy and administration, more rule of law, maintenance of judicial independence, and transparency and accountability to representative bodies.
Because of the dramatic changes in the world after 1989, especially in Eastern Europe, and the search for a new foreign policy thrust to replace anti-communism that resulted from these changes, governance was transformed quite explicitly by the major Western industrial democracies into political conditionality focusing on the promotion of democracy.
The convergence of these two external policy thrusts-one largely technocratic, the other distinctly political-merged in dramatic fashion with a third domestic thrust to pose a real dilemma for African leaders. Domestic opposition to authoritarian African governments erupted in a large number of countries in the early 1990s. Many of these tensions had been building for well over a decade, and while not all of them were directly related to the socioeconomic crisis many of them were. 30 The crisis brought great suffering in itself; this was further compounded by the hardship effects of attempted economic reform programs undertaken under the supervision of the IMF and the World Bank. In short, attempted economic reform was itself an important contributing cause of domestic unrest. Most of this opposition was put in "democratic" terms, much of it genuinely so, some of it not. When linked with the two strands of external pressure for political liberalization, domestic unrest dramatically increased the pressure on African rulers, on both those resisting economic reform and on those, such as Rawlings, attempting serious economic reform. These combined external and internal pressures for political liberalization can make economic reform more rather than less difficult.
Warnings about governance and political liberalization have come from the highest levels of the international financial institutions and the most important Western industrial democracies. In April 1990, Barber Conable, then president of the World Bank, put the case in very blunt terms:
| The development of many Sub-Saharan African countries has been quite unnecessarily constrained by their political systems. Africans can and must tackle this issue. . . . Indisputably, three decades after independence too many African countries have failed to produce political and economic systems in which development can flourish. . . . People need freedom to realize individual and collective potential. . . . Open political participation has been restricted and even condemned, and those brave enough to speak their minds have too frequently taken grave political risks. I fear that many of Africa's leaders have been more concerned about retaining power than about the long-term development interests of their people. The cost to millions of Africans . . . has been unforgivably high. 31 |
Douglas Hurd, the British Foreign Secretary, asserted that the distribution of aid should favor countries tending toward pluralism, public accountability and human rights, and market principles. While saying that France did not intend to impose models, President Francois Mitterrand made a similar declaration and noted, that for him, democracy would include free elections, multiparty systems, press freedom, and an independent judiciary. U.S. officials also treaded a similar path, pushed with considerable vigor by Congress. In July 1990, for example, a senior U.S. official declared: "We believe that democratization is vital for Africa's long-term future, and that economic liberalization goes hand in hand with political liberalization." 32
Political conditionality promised to increase African dependence on external actors. African leaders feared its consequences, including some such as Rawlings who were committed to economic reform. A few leaders resisted energetically (Mobutu), others stalled or played charades with both internal and external critics (Paul Biya, Daniel arap Moi). But how viable is this vision of simultaneous democratization and economic reform?
Neoclassical Theory, Democratic Transitions, and African Reality
New or transitional democracies confront particularly serious difficulties in any attempt at economic stabilization and/or structural adjustment. They must deal with greatly increased political mobilization, which often feeds on long-repressed tensions, demands, and expectations. These usually relate to lingering conflicts over the character of political structure, control over the instruments of power, the distribution of resources, the legacy of the outgoing authoritarian regime, and the effects of socioeconomic crisis and any attempts to deal with it. For countries such as Ghana and Nigeria, whose authoritarian governments engaged vigorously in economic reform, many of the tensions released by political mobilization were themselves the direct result of the hardships of reform.
The advent of a new democratic regime usually generates very high expectations about positive change, especially strong distributional ones. New democratic leaders must worry about gaining and sustaining sufficient legitimacy and coalitional support to stay in power. Frequently, the short time horizon generated by such concerns is intensified by fears of the return of authoritarian domination. The predicament of the Hilla Limann government in Ghana in the late 1970s is a classic example. All of these pressures greatly constrain economic policy-making and implementation. Even when productive policies are announced, what actually transpires may be at great variance. As a result, "countries undergoing democratic transitions appear to pursue more expansionist policies than either established democracies or authoritarian governments," and the more difficult structural adjustment issues get delayed or set aside. 33
The number of political parties, especially two-party versus multiparty systems, and the degree of political factionalism and fragmentation are central variables to any attempt to produce and sustain productive economic policies, particularly as they affect the ability of political elites to bargain and cooperate. In the search for legitimacy and coalitional support, the temptation to adopt populist rhetoric and political action is strong, as powerful symbols that can be used to mobilize major support for painful adjustment measures are hard to find. For countries whose authoritarian governments engaged in systematic reform before the transition, the continuity of economic policy-making is often broken as experienced people are replaced by new ones and pressure mounts to restructure policy institutions, particularly to make them more open to outside influences. This is a special problem for countries, such as African ones, which have a very thin layer of technocratic talent.
As indicated above, factors that facilitate economic policy-making and implementation can begin to overcome some of these problems in new democracies, at least for awhile. Widespread success is not to be expected, however. Factors that foster the creation or continuation of a delegation strategy are the most important ones. A strong legacy of repression, corruption, and economic mismanagement can provide a "honeymoon" period for a new democratic government to initiate economic reforms and legitimate them. Where previous authoritarian regimes were already engaging in serious economic restructuring, however, the costs of such efforts are often the legacy that comes under attack unless the benefits of the reforms are so clear cut and widespread that the incoming democratic administration is at least willing to admit to some economic learning (Chile under Patricio Aylwin, for example).
Mechanisms that control the degree and intensity of popular sector mobilization are particularly important. Where the popular sector includes distinct particularistic as well as class components, as in Africa, this is an especially difficult task. Compared to the rest of the world, in Africa the processes of state formation are still quite incipient. A number of analysts have pointed to the hope for forms of democratic corporatism to overcome these collective action dilemmas, as has existed in some West European countries. 34 Unfortunately for Africa, such structures emerge only very slowly and incrementally and are thus not likely to play a major role in the short to medium run required for current economic restructuring efforts. Whatever the difficulties, however, mechanisms for elite consultation remain a primary need. Many Latin American countries have experimented with social pacts, with quite uneven results, however. 35
If these and other facilitating mechanisms remain weak, the need for strong and autonomous executive authority becomes even more important and calls for especially creative statecraft. All of these efforts are more difficult, but not impossible, at least for awhile, under conditions of low levels of overall development, highly personalized politics, pervasive corruption, permeable bureaucracies, and fragile democratic political cultures, as in Africa today.
Thus, a major contradiction between economic and political conditionality may indeed exist, one that the major Western governments and the international financial institutions either do not see or choose to ignore. The primary assumptions appear to be that economic structural adjustment and political liberalization are mutually reinforcing processes and that since authoritarian politics in large part caused the economic malaise, democratic politics can help change it. These may be incorrect assumptions, however. Evidence from the Third World over the last three decades, and now from the former Second World, does not support widespread optimism about the mutually reinforcing character of economic reform and political liberalization in a large number of cases.
The presumption of the mutually reinforcing character of political and economic reform in Africa and elsewhere relies on an extension of neoclassical economic logic, as follows: economic liberalization creates sustained growth, growth produces winners as well as losers, winners will organize to defend their new-found welfare and will create sociopolitical coalitions to support continued economic reform. This logic, however, does not appear to hold for Africa, even under authoritarian conditions, much less under democratic ones. As Herbst notes:
| African reality simply differs too radically from the assumptions of properly working governments or economies for the application of general precepts to be fruitful. Ironically, economic and public choice theories, which their proponents claim are completely opposed to the ideologically-driven rhetoric of socialists or free-marketeers, . . . cannot make a substantive contribution to the demarcation of the African state because these theories are . . . incapable of taking account of African realities. Only an eclectic mix of guidelines which are grounded in the realities of how the economy and the state actually work in Ghana and the rest of Africa will usefully suggest what the state should do for whom. 36 |
Under these conditions, the consequences of simultaneous economic and political liberalization, based on faulty assumptions about cause and effect, could be very serious.
The evidence from Africa in the 1980s indicates that successful economic reform requires a quite rare conjuncture of factors, such as those that existed in Ghana after 1983. Ghana under Rawlings demonstrates that successful and sustained economic reform is possible without the presence of an existing societal support coalition. There have been economic "winners" in Ghana, especially cocoa farmers and resident expatriate business people, but the former are difficult to organize specifically to support the economic reforms and the latter cannot form a viable element in a new support coalition under democratic conditions. Besides, private sector actors, domestic or foreign, are not uniformly supportive of full economic or political liberalization; they can be just as interventionist and particularistic as state actors. It depends on whether such intervention and particularistic discretion benefits them or not.
The winners of economic reform in Africa are few, appear only slowly over time, and are difficult to organize politically. The neoclassical political logic of reform is too mechanistic for the African context; there are real "transaction costs" to organizing winners, and not just infrastructural ones. Direct linkages between economic interest and political outcome are rare, thus making reliable theoretically based predictions about the emergence of coalitional support extremely difficult. Farmers, for example, have other interests, political loyalties, and histories of organization that make direct political organization in support of a given set of economic policies difficult. Other organizational bases of political solidarity exist-ethnic, regional, religious, linguistic, and patron-client, which make mobilization around policy-specific economic interests difficult in much of Africa. Speaking of Ghana, for example, Herbst points out that:
| rural dwellers are the obvious constituency for the PNDC regime because so much of the structural adjustment program is devoted to promoting agriculture. However . . . the high proportion of Ewes in the national leadership has made it particularly difficult for the PNDC to establish support in the Ashanti Region, despite the fact that cocoa farmers there have clearly benefited from the regime's policies. 37 |
Even where they might so organize, it would not likely be to support the full range of economic measures, thereby threatening the viability of reform.
Some have argued that Africa does not have a democratic tradition, but it does have one. It was just brief, vivid, and a failure, and the reasons for its demise have not disappeared. 38 The periodic reemergence of democratic regimes in Ghana and Nigeria over the last two decades indicates that old patterns of political organization reappear with quite amazing vigor under conditions of free political association. 39 As political transitions reached the final stage in both countries in 1992 this point was demonstrated yet again. For many countries, national unity, a factor analysts have asserted to be a basic prerequisite for viable democracy, is also still very tenuous. 40 Political liberalization is not likely to guarantee the appearance of new political alignments that favor sustained economic reform. Other issues may be more important, such as the definition of the state and nation or the shape of the political order. Besides, no strong evidence exists that African politics has shifted from distributional to productionist logics and forms of behavior.
Political openness without coalitions supporting a production-oriented rather than a distribution- or welfare-oriented political economy will simply make matters worse. It might end existing reform efforts and make new ones hard to initiate. Openness might simply empower old political and economic logics that have dominated African life since independence. More so than in any other region of the world, the political dilemma of structural adjustment in Africa is that no supporting societal coalition is even on the horizon. Neoorthodox economic reform in Africa is very unpopular because its political, social, and distributional effects are quite negative even in the medium run. Economic learning by political leaders and societal groups is possible, as Chile demonstrates, but it is usually a fragile creature, requiring special circumstances to survive, and can be easily upset. Renewed democratic politics on a diminished and still shrinking production base might be even more difficult to sustain than in the 1960s, making such learning very difficult indeed.
It is important to stress yet again that authoritarian regimes cannot guarantee economic reform or even produce it very often. Nor is this to say that economic reform under democratic conditions is impossible; it is just very difficult. There is evidence that economic reform can take place in existing democracies, such as Costa Rica and Jamaica, at least for awhile. In Costa Rica, however, there was much more economic stabilization than structural adjustment, and it is a long established democracy. In Jamaica under Edward Seaga very particular institutions and circumstances existed which reinforced executive autonomy and fragmented the opposition, but again progress was only temporary. 41 That military regimes already engaging in successful economic reform can become democratic is demonstrated by Turkey under Ozal and Chile under Aylwin, but again institutions and circumstances that reinforce executive autonomy, continuity in delegation, and controlled opposition appear essential. In Turkey, however, hard fought economic progress was once again being weakened in 1992 by democratic political logics. 42
Political Structure, Sequence, and Economic Reform: Three Cases
In order to more fully explore these points, we will examine three cases--Ghana under Rawlings, Nigeria under Ibrahim Babangida, and Senegal under Abdou Diouf. These three cases range across a continuum from an authoritarian regime that made real economic progress before initiating political liberalization (Ghana) to an authoritarian regime that attempted economic reform while simultaneously carrying out a protracted, highly structured, and multistaged political liberalization process (Nigeria) to a regime that attempted economic reform after important democratization had been achieved (Senegal).
Ghana
In late 1981, Flight Lieutenant Jerry Rawlings, a young populist military officer, staged his second successful coup d'état in Ghana and promised to make dramatic changes. 43 He did so in the context of a low level of socioeconomic development, serious economic decline over a 20-year period-approaching collapse, in fact-and cycles of ineffective change between democratic and authoritarian regimes. After trying radical populist mobilization techniques with only modest results, he and his advisors realized that something different had to be attempted. When asked for major help, the Soviet Union suggested the Ghanaians turn to the IMF and the World Bank. Given their desperate need for foreign exchange, the new Ghanaian leaders felt they had little choice but to do so.
As a result, the IMF and the World Bank jointly played the major formulation role for Ghana's economic reform effort, but did so in conjunction with a small but capable and stable economic team which received strong and consistent support from Rawlings. He provided this support for IMF and World Bank-style economic liberalization while having almost no knowledge of economics of his own. After its initial diffuse legitimacy dissipated, the new regime, the Provisional National Defense Council (PNDC), found that it had almost no coalitional base in society for such a strategy. Thus a delegation strategy was based almost solely on the insulation provided by the military, which was itself not fully united as demonstrated by several countercoup attempts. By the early 1990s, however, the result was a remarkably sustained and successful economic recovery program, in fact, the only major African success story.
Despite the PNDC's political commitment to a delegation strategy of economic liberalization and its success, the Ghanaian case illustrates other tensions inherent in such an approach, even under authoritarian conditions. One of the strengths of the reform effort was the quite striking stability, quality, and unity of the senior officials involved in it. The small economic team was loosely but effectively organized, without being very institutionalized. But the pervasive administrative weakness of the Ghanaian state clearly limited the program. It affected policy formulation and, above all, implementation. Long-term government planning was almost nonexistent. Even basic data gathering and analysis capabilities and accounting skills were rudimentary. The most effective reform policies were those that did not involve direct administrative action on a continuous basis.
Despite these enormous constraints, the Ghanaian economic team learned quickly, and over time it was able to bargain effectively with the Fund and the Bank and obtain concessions. The Ghanaians often agreed with the principle, but bargained vigorously over scale, speed, and sequence, especially after major unrest in 1986. On a number of issues they formed a coalition with the Bank against the Fund and were able to carry the day, on the nature and workings of the foreign exchange auction, for example.
To compensate for the low level of stateness, the economic recovery program generated a real and quite visible resurgence of expatriate influence in Ghana--the near constant presence of IMF and World Bank personnel, visiting missions, hired consultants, and seconded bureaucrats and managers. The World Bank, for example, sent more than 40 missions to Ghana in 1987. The whole recovery effort was a high-conditionality process, and the Fund, the Bank, and the donor countries believed that expatriate personnel and their skills were necessary to ensure that external funds were used wisely. Without much of this expatriate work, the adjustment effort would not have progressed nearly so far, but a real political problem was created in the process. The often bitter resentment of the role of expatriates clearly identified the program with external actors, further intensifying opposition among key groups in Ghana.
These difficulties were also directly linked to Ghana's ability to absorb effectively newly increased amounts of external resources resulting from the sustained success of the reform program. The official side of the "implicit bargain" was fulfilled for Ghana, as bilateral and multilateral resource flows were relatively high. Given the needs in Eastern Europe, the former Soviet Union, and strategically more important parts of the Third World, it is not clear that such support can be provided to many African adjusters, however. On the other hand, the private half of the implicit bargain has been close to a complete failure, as direct foreign investment and voluntary international bank lending have been very weak in Ghana.
Given its rare conjuncture of factors, and despite the enormous difficulties linked to low levels of stateness and economic development, the Rawlings government managed to pursue successfully a delegation strategy of economic liberalization with an average annual growth rate of more than 5 percent after 1983. This is a remarkable achievement in the African context, especially given the extent of Ghana's decline. The predatory rent-seeking state of the first 25 years of independence was held at bay, at least for awhile. The military government successfully attacked many of the "easy" adjustment issues, but several particularly tough ones remain--effective privatization, parastatal reform, and a major restructuring of the financial and banking sector, for example--issues that restrict foreign investment and lending.
By the early 1990s, the primary dilemma was still that the impressive success had been achieved by the insulation provided by the military regime. The government continued to lack major coalitional support and the institutional bases to relink the delegation strategy to society in a way that might sustain the reform effort beyond the life of the military regime.
The continued fragility of this successful case was made apparent in 1990, one of the toughest years since the reform effort began in 1983. Growth dropped to about 3%, inflation increased from 25 to 37%, and the budget deficit ballooned due in part to a peacekeeping role in Liberia and the early fallout of the Gulf crisis. In addition, both cocoa production and revenue, the primary source of foreign exchange, were down. This was due in part to a 30% drop in cocoa consumption by the Soviet Union, which did not have the hard currency to pay for it. External support from donor countries and institutions continued at high levels, however.
At the same time, pressure for political liberalization grew substantially. As a result, after doggedly resisting such pressures for years, Rawlings announced political liberalization measures for 1992. A new constitution was approved overwhelmingly in April 1992, even though it protects the Rawlings regime from prosecution by future governments. The eleven-year-old ban on political parties was lifted the next month, and legislative and presidential elections were scheduled for late in the year. The opposition charged the government with stage managing the transition to protect the economic reforms and itself. In late September, Rawlings finally announced that he would run for president as the candidate of the National Democratic Congress. He won the early November presidential elections with about 60% of the vote over four challengers, although opposition parties contested the results. Much still rested, however, on the outcome of the early December parliamentary elections.
The primary fear was that even managed political liberalization would "hollow out" the hard-won economic changes, as it was far from clear that a social coalition supporting them existed yet. The uncertainty of the controlled political transition process bred some public caution by the new political parties in regard to the economic reforms. Nonetheless, resistance to the reforms still appeared to be strong, at least among urban groups. For example, Dr. Hilla Limann, the civilian president overthrown by Rawlings in 1981 and a presidential aspirant himself, attacked the reform program, especially devaluation, as a "terrible disaster" that the "dictatorship" of the IMF and the World Bank had imposed on Ghana in order to "stuff their own pockets." As one leading Ghanaian businessman noted in discussing the opposition parties, "Many of them seem unable to see the enormous changes that have taken place in the world. If they get it wrong again there will be no more chances for Ghana." 44 The makeup of the new parliament would be very important.
Rawlings and key members of his government remained hopeful, however. As Joseph Abbey, long a key member of the economic team, expressed it, "We are hoping that Ghanaians will have the political maturity to judge the programme not on their direct material benefits but on the solid foundations we have laid down for future economic take-off." 45 Rawlings himself believed that "the people have become a lot more defiant. You can't fool the people any more with sweet promises. Thank God for it. The politicians would be better talking about the reality of hardship ahead which faces us, instead of trying to con people." 46 But the new parties tended to reflect long-standing political attitudes and patterns in Ghana, many with roots in the 1960s, rather than new realities.
The opposition was stunned by Rawlings' victory in the November presidential elections. As a result, following intense debate, the anti-PNDC parties fatefully boycotted the December 29 parliamentary elections, allowing Rawlings's National Democratic Congress and two other small pro-government parties to control completely the new parliament.
After the elections, the opposition parties formed an Interparty Coordinating Committee and vowed to create an effective shadow cabinet. It will be difficult, however, for the opposition to contain the tensions between its conservative and Nkrumahist wings. Hence, the outcome of the presidential and parliamentary elections in Ghana was closer to a return to one-party rule than to multiparty democracy. The economic reform process was likely to continue, however. In this sense, Ghana may be following the Korea, Taiwan, and Chile 47 pattern of sequential vigorous economic reform followed by halting, incremental, but increasingly full political liberalization. 48 Such a propitious outcome appears far less likely in our next case, however.
Nigeria
The excesses of the Nigerian civilian democratic government of the Second Republic from 1979-83 had been spectacular, and the military government that replaced it made only minor progress on reform. In 1986 General Ibrahim Babangida's new military regime set in motion a neoorthodox delegation strategy for reforming the quite predatory and rent-seeking Nigerian political economy. 49 But because of intense domestic antipathy toward the IMF, the World Bank quietly played the central role in formulating the structural adjustment program. World Bank personnel worked directly with Nigerian officials in an interministerial committee established by the military regime. They also attempted to engage in extensive "policy dialogue" with influential members of the Nigerian elite. The resulting package was presented by General Babangida to his people as a "home-spun" indigenous solution. It was then quietly formalized as an IMF standby agreement, although Nigeria did not draw on the available funds. These were provided by the World Bank instead, again because of political sensitivities. Without its long-standing presence in Nigeria and the key background studies it had already conducted, the Bank would not have been able to play this extraordinary role.
Until the early 1990s this neoorthodox effort at economic reform was supported by a small, but capable and relatively stable economic team, increasingly centralized economic and repressive capabilities, strong political support and insulation by the military regime, and aggressive executive authority on the part of Babangida. Nigeria had greater levels of stateness and cosmopolitanism than the Rawlings military government in Ghana, but they were still weak by world standards.
The main dilemma of the Nigerian delegation strategy of economic adjustment was Babangida's promise to return Nigeria to two-party democracy, to a Third Republic, first by October 1992 then by January 1993. This difficulty arose precisely because, unlike Rawlings, he attempted from the beginning to carry a serious economic reform effort beyond his own regime by using political and institutional engineering during a simultaneous process of political liberalization. Well aware of the political logics that threaten efforts at economic reform, however, Babangida began to have second thoughts about how freely participatory these new democratic structures should be. He reneged, for example, on a promise to chose the two strongest political parties that emerged after the lifting of the ban on party activity as the two legal parties in the next regime. Instead he decided that the military government would create two parties which everybody would be "free" to join. His government chose the names and wrote the platforms of the two parties-the Social Democratic Party and the National Republican Convention. Nonetheless, Babangida found it increasingly difficult to control fully the political liberalization process.
Despite decent early progress made by a skilled and dedicated economic team, the Nigerian reform effort became increasingly driven by the need for debt rescheduling rather than a commitment by the military to economic transformation. Well-rooted political logics proved very resistant to change, including those within the military itself. A vicious circle of reform became the dominant and debilitating pattern. Fiscal difficulties would increase the need for debt rescheduling; this could not take place without an IMF agreement, even if Nigeria did not draw funds from it; the Fund would demand specific policy changes; these would eventually produce unrest; in response the government would ease off the policy reforms; these policy "wobbles" of the vicious circle would led to the suspension of the IMF approval; new macroeconomic imbalances would be generated, which required new debt rescheduling and hence a new IMF agreement. . . . These policy wobbles became stronger and more frequent over the course of the late 1980s and early 1990s.
Nonetheless, beginning in late 1990, with the early steps of the political transition already well underway, the military government made yet another round of concessions and policy changes, leading to a new set of IMF, Paris Club, and London Club agreements by March 1991. With these new agreements, the Nigerians felt that they had slain the debt dragon, ending the vicious circle of adjustment and setting up the political transition with a manageable projected debt service ratio of under 25%. It was not to be. As with all things in Nigeria, the proof was in effective implementation-or rather the lack of it. The old political and rent-seeking political logics were far from dead. They surged back with renewed vigor, and the overall reform effort began to disintegrate. It also had become clear that no political or social coalition had emerged that was likely to support continued structural adjustment under democratic conditions.
Two primary examples of the unraveling process will be presented here: (1) the greatly expanded banking sector as the new functional equivalent of the old corrupt import licensing system, and (2) the political logics of the Gulf War foreign exchange windfall. 50
Resurgent Logics I: the Banking Sector
Bank deregulation was one of the reform measures set in motion in 1986, but, as with changes in the exchange rate mechanism, the reform was only partial, allowing the powerful old political rent-seeking logics to surge back in the guise of positive change. The frantic search for foreign exchange simply moved from import licenses to bank licenses after the former were abolished. Bank licenses became as political and rent-seeking as import licenses had been. Bank deregulation and lax supervision (intentional and unintentional) allowed a wide variety of unproductive economic activities to flourish, including the subversion of the centerpiece of the reform effort-the foreign exchange auction as a market-based structure for determining the exchange rate and allocating foreign exchange.
In 1986 there were 41 licensed banks. By 1988 there were 66 banks; by 1990 107 banks existed. At the end of 1991 there were 120 banks "bidding" in the foreign exchange auction, and there were more than thirty pending applications when the licensing of new banks was finally suspended. The application and licensing processes were very political. Both the federal and state governments held substantial shares in many of these banks, and thus they had strong formal and informal ties to the government. Hence the structure and operation of these banks were also heavily politicized.
Under lax supervision, fraud, forgery, widespread corruption, political lending, and poor management, especially shoddy accounting, all flourished. The aim of the new banks was clearly quick profit, political deals, and access to foreign exchange. As one savvy external observer noted, "The banks continued to thrive against the background of rapid credit expansion and the wholly-artificial foreign exchange auction system in which all are winners." This multitiered mechanism, heavily managed and based on informal consultation, guaranteed access to foreign exchange for all banks. It allowed scores of them, large and small, to make major profits via arbitrage and "roundtripping" funds between the official auction and the more market-based rates of the parallel and, after September 1989, exchange bureau markets. The wider the gap between the rates the higher the profits, and the more managed the official rate, the higher the gap, usually further aggravated by poor fiscal and monetary policies. The World Bank estimated the effective rent for 1990 at about $500 million when the average spread was about 20%.
Under strong IMF pressure, the Nigerian government switched to the Dutch auction system in early 1991. But even this reform was perverted. After the middle of the year, because of informal discussion among the banks and with the government, all 120 "bidding" banks quoted the same buying rate. This assured that each bank met the "pod" price and thereby received foreign exchange based on a carefully negotiated distribution quota. By late 1991 the spread was more than 80%. Clearly the old political logics were resurgent in the face of reform.
Resurgent Logics II: Of Wobbles and Windfalls
In the first half of 1990, government spending was 33.7% above budget. Then came the Gulf crisis and an oil revenue windfall of about $5 billion from a 6% increase in production and an average 31% increase in price. An existing policy wobble was thus reinforced by a windfall. By early 1991 both spending and economic management were once again out of control. The normal vicious circle returned with an intensified vengeance: expansionary fiscal policy (both on and off budget), a surging budget deficit, substantial internal borrowing, an increase in the money supply, rising inflation, a growing exchange rate spread between the official and parallel/exchange bureau rates, and external concern and pressure. The government had projected a slight budget surplus for 1991. It was not to be.
In late June 1991, William Keeling, the resident Financial Times journalist in Lagos, reported that Western officials believed that about $3 billion of the windfall was unaccounted for and that much of it was being spent unwisely. The Nigerian government expelled him, charging "a deliberate attempt to mislead the public, including Nigeria's development partners." 51 The IMF, the World Bank, and Nigeria's other creditors were indeed worried. As a result, in November 1991, the World Bank produced a confidential internal report entitled "Nigeria: Public Expenditure Management." It reached very damaging conclusions about Nigerian economic management, which was described as lacking "transparency and accountability." It vividly indicated the degree to which old political logics were resurgent. The report asserted that:
|
Public expenditures are used more to distribute oil riches and generate lucrative business and employment opportunities for selected groups than to ensure efficient delivery of goods and services to the public at large. . . . [Pressures of the transition to civilian rule] led to a breakdown in fiscal and monetary discipline during 1990 . . . not only characterised by additional spending and monetary expansion, but also by a major surge in expenditures bypassing budgetary mechanisms of expenditure authorization and control . . . 52 |
The massive on- and off-budget expenditure surges had many causes, but they focused on debt service, massive corruption and unusual spending within the military, resurgent political logics among major societal groups, efforts to dampen opposition to the economic reforms, and the political business cycle of the democratic transition. The windfall greatly increased spending expectations of major social groups, and state and local government expenditures were difficult to control, especially with the creation of nine new states. By the time newly elected civilian governors took office in late 1991 as the multistage transition process unfolded, many of the state treasuries were nearly empty and heavily debt-ridden.
Defense and internal security spending were nearly double projected levels, partly because of the military peacekeeping operation in Liberia, but also because of the purchase of 150 new Vickers tanks from Britain, twelve Czech jet fighters, and 300 new Peugeot sedans for military officers ("toys for the boys" as one analyst put it). Spending linked to the looming political transition included funding for the two new parties, several sets of elections, a national census, placating payments to banned "old breed" politicians, and expenditures for the maintenance of old patron-client networks and the creation of new ones, both inside and outside the military. Other groups wanted to take what they could before the transition arrived.
As the return to democratic rule came closer, the economic reform effort continued to fray, especially macroeconomic policy. The IMF finally refused to certify that Nigeria was performing adequately under the terms of its January 1991 fifteen-month standby agreement. This put in jeopardy Nigeria's right to reschedule its Paris Club debt again in early 1992.
In March 1992, the IMF forced the Nigerian government to terminate its foreign exchange auction and to effectively float its currency, the naira. The exchange rate fell from 10 to nearly 20 naira to the dollar. Major riots broke out in May; they were linked to the renewed sting of the economic reform measures, but complicated by ethnic, religious, regional, and political tensions generated by the political liberalization process. The economic reforms were very unpopular, and, as in Ghana, the opposition charged that the military regime was manipulating the transition process in order to protect the reforms and itself.
At the same time, Babangida found the political liberalization process increasingly difficult to control. For example, presidential primary elections were invalidated in August and then postponed twice because of massive vote fraud and intimidation. By late September 1992 the government still did not have a new agreement with the IMF. Then in mid October Babangida nullified the results of the latest attempt to conduct presidential primaries, dissolved the leadership of the two parties, and ordered their reorganization. Babangida subsequently announced that the political transition would be delayed until August 27, 1993, the eighth anniversary of his coup d'état, and that the military was turning the day-to-day administration of the government over to a civilian Transitional Council as of January 1, 1993. Presidential elections would now be held in June 1993, and by late February there were more than 300 declared candidates ready to engage in a new, complex, and multistaged primary process. The Transitional Council was headed by a respected businessperson, Chief Ernest Shonekan, who surrounded himself with competent technocrats. Babangida made it clear that the primary aim of the Transitional Council was to relaunch the economic reform program, noting that it would be a rare feat to make a successful transition to democracy with a declining economy. Chief Shonekan faced strong opposition from both military and civilian groups, however, and was not likely to succeed. By early March 1993 Nigeria was still without a new agreememt with the IMF, and one would not come easily or quickly.
Despite these troubles, the Babangida government vowed to continue with the transition and return the country to civilian rule. Unlike Ghana, however, the economic reform effort in Nigeria was nearly dead before the actual transfer of power to a civilian democratic regime. Despite an auspicious beginning in 1986, the crippled economic reforms are likely to be "hollowed out" of real substance even more quickly in the Third Republic than under the Babangida military regime. Economic reform programs, whether imposed or voluntary, are rarely ever repudiated or terminated formally by governments because they are so dependent on external resources. Most programs die unobtrusively, eaten out quietly from within, and the IMF is eventually forced to suspend them. If the Babangida economic reforms continue to be "hollowed out" in the Third Republic, Nigeria will then have achieved political liberalization without economic liberalization, an outcome similar to that of our last case--Senegal.
Senegal
In the postcolonial period, Senegal became a patrimonial administrative state built around clientelist networks of single-party politicians from the Parti Socialiste (PS) and of marabouts from Islamic brotherhoods. 53 The material base of this political structure was a very fragile economy with a weak and inefficient manufacturing sector and a declining groundnut agricultural sector. In the late 1970s, President Léopold Senghor started a halting process of democratization as an economic crisis deepened under the weight of the old clientelist politics and the collapse of peanut and phosphate commodity booms. At the same time, Senghor's longtime prime minister, Abdou Diouf, began to assemble a group of fellow technocrats who would be able to attack the economic crisis.
When Senghor decided to retire from politics, Diouf became president in January 1981. As part of a political logic to ensure the survival of the regime, Diouf accelerated the process of democratization. The result was twelve political parties, only one of which posed a potential threat-the Parti Démocratique Sénégalais (PDS) of Abdoulaye Wade. The process of democratization also led to an explosion of associational life including the creation of new and autonomous unions and business and civic associations.
Diouf took power with the obvious intention of engaging in serious economic reform, something he made very clear through the use of slogans such as "moins d'Etat, mieux d'Etat." Over the course of the 1970s he had come to understand the serious nature of Senegal's economic problems. In conjunction with his deepening of the democratization process, this willingness to attack the economic problems increased Diouf's legitimacy, which was reinforced by his technocratic image. A "débat sur la technicité" further underscored the political credibility of the reform intention, at least for awhile.
President Diouf either benefited from or created many of the conditions discussed earlier in the chapter that can facilitate serious economic reform, even under democratic conditions. He assembled a very strong team of experienced technocrats and provided it with strong backing. The new economic team also had the confidence of the IMF, the World Bank, and the major donor countries. In order to further strengthen the technocrats, Diouf set out to weaken the old "barons" of the PS, a process he felt would be facilitated by democratization.
Diouf likewise moved to increase the powers of the presidency by eliminating the post of prime minister, restricting the powers of the National Assembly, and removing old barons from sensitive positions in the government and replacing them with people with more technocratic qualifications. The President launched administrative reforms aimed at enhancing data collection and analysis capabilities and policy coordination, including the creation of policy analysis cells in key ministries. With external help, several interministerial committees were created. Above all, the Comité de Suivi du Programme d'Ajustement Structurel (CPSA) was formed to provide overall coordination of the economic reform effort. It was to be insulated from countervailing pressures from the rest of the state administration and the party barons and was to work closely with the international financial institutions (IFIs).
In addition, Diouf's economic reform effort received substantial external support, with assistance growing at 18% a year over the 1980-87 period. This made Senegal the leading per capita recipient of aid in Africa. These external resource flows did increase the debt burden, but it was partially offset by repeated Paris Club reschedulings and some debt forgiveness.
Finally, Diouf benefited from an early political honeymoon, especially from urban groups, because of his acceleration of the democratization process. This was reinforced by a very strong mandate derived from the 1983 presidential elections. Thus, Diouf's effort seemed to start under very propitious conditions with a leader who understood the economic crisis and had both the legitimacy and the mandate to attack it, a fine and insulated team of technocrats, administrative reforms to enhance policy formulation and implementation, and external support and resources.
The reform effort had a rough start, however. The first plan for 1981-84 proved to be quite weak and was badly implemented. Above all the government was unable to control spending. Agreements with the IFIs were canceled and had to be renegotiated. The peak of the reform effort came in the 1985-87 period when it was led by Mamadou Toure who had worked for the IMF. It coincided with better rains and more favorable commodity prices and external demand. After 1987, however, the reform effort was quite systematically "hollowed out," such that by 1991 it could be characterized as having failed, leaving both the state and the economy weaker than they were in 1981.
The political weaknesses of the reform effort will be stressed here, but it is important to point out that it was also constrained by the inability to use devaluation because of Senegal's membership in the West African Franc Zone; 54 by policy design errors, especially in industrial policy and trade liberalization; by the country's extremely weak agricultural base; by the near collapse of the corrupt banking sector; and by a very weak overall supply response.
Agricultural policy was quite feeble and unevenly and incompletely implemented, particularly in response to pressure from the marabouts. Despite some new producer associations, farmers were never mobilized in support of the reform effort, underscoring the difficulty of organizing them. They usually found that their interests could be defended more effectively if they acquired particular policy exceptions and resources via their client ties to the marabouts. In short, dominant social and economic relations in the rural areas were essentially untouched.
The New Industrial Policy was also badly conceived and poorly implemented, especially a trade liberalization that was much too rapid. Compensating policies that were to mitigate the loss of protection were poorly formulated and only partially implemented, for reasons of politics and state capacity. A number of the old, mostly foreign, trading houses and light industrial firms simply went out of business; others survived only by obtaining protection and subsidies via old clientelist networks. The policy shift was compounded by the continuing overvaluation of the Communauté Financiére Africaine (CFA) franc, which is pegged to the French franc. Deindustrialization loomed and as many as 20,000 jobs may have been lost. These changes had a devastating effect on state revenue levels, largely because of the emergence of new trader groups who flooded the country with cheaper foreign goods but were not forced to pay import taxes or other related fees on them.
In the 1970s, with the groundnut economy clearly declining, the marabouts of the Islamic brotherhoods, particularly the Mourides, sought to find a new economic base in order to reproduce their social order outside the rural agricultural economy. Moving into commercial trade and distribution was the most logical answer. It extended their reach into the urban areas while providing jobs for increasingly distressed rural followers. In order for it to succeed, however, it required at least de facto trade liberalization; with the complicity of the state and its agents, this began to happen in the 1970s. The process was accelerated by the formal trade liberalization of the 1980s and its devastating impact on the long-protected trading houses and light industry. The switch into trade was controlled largely by Mouride marabouts, who had long been a political pillar of the regime, and was first accomplished by smuggling via Gambia. With later changes, the Mourides, playing by old political rules, moved systematically into the urban areas. For example, the Sandaga market in Dakar, commonly referred to as the "Mouride market," became a quasi-"free trade area" or "tax haven" with increasing amounts of import fraud and nonpayment of import duties. Over time, this trade was increasingly run through the port of Dakar rather than Gambia.
This transformation amounted to what Catherine Boone has called a vast "informalization" of the import/distribution trade which benefits groups of state agents but greatly weakens the fiscal health of the state by depriving it of badly needed resources. The regime allowed it because of its political dependence on the marabouts, and this dependence was intensified by the democratization process. Permitting this process also helped the regime buffer the social costs of austerity by providing cheaper goods and jobs to the urban population while helping to integrate marginalized groups into a supportive social order. Thus, drawing on social and political changes already under way, trade liberalization had consequences hardly imagined by the IFIs. It certainly did not depoliticize trade, strengthen the fiscal basis of the state, or integrate the informal economy into a revitalized and expanding formal one. It did, on the other hand, help to solve major political problems by shoring up both the Mouride social order and the Diouf regime. The result was not economic reform, however; the old patrimonial administrative state and its politicized economy was only partly reconfigured, not transformed in a more productive direction.
As the 1988 elections approached, generalized opposition to the economic reforms intensified and diversified as their costs continued to mount. From the beginning very few members of the dominant political class in the state and the PS believed that the reforms would succeed. They certainly did not see any ready alternative to the declining groundnut economy or believe that Senegal could compete with manufacturing exports in the world economy. They did believe, however, that Senegal could muddle through with periodic commodity booms and donor assistance. Above all, they feared the high political costs of IFI-style economic reform. These views were reinforced by a long-standing distrust of the market that was so much a part of the decolonization process and by the overselling, by both Diouf and the IFIs, of the reforms, which created greatly unrealistic expectations. Given Diouf's strong support for such reform in the early 1980s, however, many of these people simply bided their time while quietly diverting the reforms from the most dangerous political shoals. As the costs mounted, however, they began to shift into more overt opposition.
Much of this same skepticism existed among major social groups as well, and opposition to the reforms was facilitated by the explosion of associational life that resulted from the democratization process. Reform of the labor code, for example, which was central to the compensating measures of the New Industrial Policy, was blunted by opposition from newly autonomous unions as well as the state corporatist labor federation-the Confédération Nationale des Travailleurs Sénégalais (CNTS) as it responded to pressures from the new unions. Strikes and demonstrations became commonplace and resulted in a largely successful effort to get the National Assembly to resist labor code reform creating a freer labor market. Student opposition also intensified greatly beginning in 1987. In the face of this opposition, the government eventually made very costly concessions, greatly aggravating the already serious fiscal health of the state. In April 1987, government concern was galvanized by a police strike. Although triggered by a professional dispute, it was aggravated by the general conditions of austerity and declining working conditions resulting from the reforms.
As the elections approached, Wade's PDS and other parties campaigned vigorously against the economic reforms, bringing preemptive government concessions such as lowering the price of rice. On the whole, however, the government did not see the opposition parties as a major threat because it continued to receive the support of the marabouts, support purchased via particularistic concessions in agricultural policy, and generalized support for the move into import trade and distribution. Diouf and the PS won the elections with more than 70% of the vote. They were followed by protests alleging vote fraud and challenging the economic reforms, leading to the declaration of a state of emergency.
A major blow to the government's confidence that it could control the effects of democratization came with a serious outbreak of social violence in April 1989. It emerged out of a complicated land dispute with Mauritania, but tapped long-standing tensions over the role of Mauritanians in the informal trading sector. The violence scared the government because it was fueled by marginalized groups beyond any of the normal control structures of the party, the unions, or the marabouts: discontent it feared could be organized by opposition political parties, and the new vigor of associational life. Unemployment became a major concern again, undercutting plans to cut the civil service, push privatization, pursue trade liberalization, and regulate informal trade. Some taxes were cut, wages raised, and the government began to harden its position to external demands. These events accelerated a move by the government to back off from the economic reforms; political logics were beginning to take precedence over economic ones.
In August 1989, for example, the government reintroduced some protective tariffs and retreated from other industrial reforms. This angered new traders who went on strike. These mostly Mouride interests were now represented by a new organization-the Union Nationale des Commercants et Industriels du Sénégal (UNICOIS). The government attempted to engage in a delicate balancing act in the face of these contending forces. It pulled back from industrial reform and gave out particularistic concessions to individual businesses while it refused to control the new trading activities of the Mourides. Reconfiguration of older patterns, not economic transformation was the result, one that intensely frustrated the IFIs. As one World Bank official put it in 1991, "We are almost back to where we were in 1986." 55
Diouf's new concern about controlling the political costs of democratization led him to view the PS in a new light; it was his only major instrument of social control beyond the alliance with the marabouts. An attempt to revitalize the party by a renewed attack on the barons failed, in large part because of the now very clear political and social costs of the economic reforms. With this route blocked, Diouf reversed course and sought to come to terms with the barons.
In addition, Diouf sought reconciliation with the opposition. In April 1991, he created a coalition government of national unity or cohabitation&nsbp;with Wade's PDS and another opposition party. He also recreated the position of prime minister and appointed Habid Thaim to fill it. Thaim had been prime minister from 1980 to 1983 and was known for his anti-reform views.
Even before the 1988 elections, Diouf had begun to diminish his support for the technocrats. The CSPA had made many enemies inside the state administration. Diouf allowed long-simmering bureaucratic tensions to undermine the technocrats and allowed disputes among them to go unresolved. In March 1988 Mamadou Toure and Chiek Hamidou Kane, the two key technocrats, left the government, and the next month the CSPA was moved into the presidency where it became far less insulated from countervailing meddling by the executive itself and by powerful political and social forces opposed to reform.
Thus, by the middle of 1991, as Ka and van de Walle put it, "economic reform had been dislodged from the top of President Diouf's agenda by the exigencies of Senegalese politics," the reforms had "succumbed to the changing political context." Diouf's "top priorities related to his own political needs rather than the needs of reform," and these needs were greatly magnified by the effects of democratization. 56 What had started out as a propitious attempt at economic reform under democratic conditions, one supported by committed leadership with a honeymoon period and an electoral mandate, capable and insulated technocrats, and external advice and resources, ended in failure, having been effectively "hollowed out" by the old political logics of the patrimonial administrative state. The process of democratization had been an early and quite temporary advantage for the economic reform effort. Ultimately, however, it became a major contributing factor to its failure. 57
This conclusion has major implications for economic and political reform efforts now underway in the rest of the continent. This is particularly so for the one launched in late 1991 by Frederick Chiluba in Zambia after the electoral defeat of the authoritarian single-party regime of Kenneth Kaunda. 58 Even under the most propitious political and institutional conditions, serious and sustained economic reform under democratic conditions in Africa is not likely to take place in very many countries. In most places, limited reform for a limited period of time is the more probable outcome, before it is swamped by the host of political, social, attitudinal, capacity, and ecological constraints that are inherent in the continent's current conjuncture.
In Senegal, all the normal problems confronting economic reform in Africa--low overall level of development, thin state capabilities, weak supply response, flawed program design, and, above all, the persistence of old rent-seeking political logics-were further aggravated by the democratized political context that focused political calculations on the survival of the regime. This led to premature compromises with state and non-state groups alike. These compromises not only "hollowed out" the reform effort; they also seriously undermined the state itself, making it an even weaker vehicle for possible transformation. Senegal's unusually fragile ecological and agricultural base, with no ready primary product alternative, constituted an additional constraint.
Furthermore, this agricultural base was still controlled by a well-entrenched social formation desperately seeking a new way to reproduce itself. It picked the route of least resistance, a sort of crony commercial capitalism, one with negative consequences for the Senegalese state and the economic reforms, if not for the political elite. 59 Unlike Senegal, both Ghana and Nigeria have more viable resources bases and rural social formations that are less politically dominant in ways that rule out reform. As in Ghana and Nigeria, however, the Senegalese technocrats had no real coalitional support base in society from which to fight, and it is not at all clear that they could have created one even if they had tried assiduously. But unlike the Ghanaian economic team, the Senegalese one lost its one real domestic pillar of support-the chief executive. As we have seen, the Nigerian case is more mixed in this regard.
It would thus not be correct to say that democratization was the dominant or overriding reason for the failure of the economic reform effort in Senegal, but, given its effect when combined with all the other constraints, democratization was certainly a very important contributing reason. By accelerating the "hollowing out" process, it certainly intensified the degree to which Senegal is "hemmed in." This is a constraint Jerry Rawlings did not confront in Ghana until almost ten years into a quite, by African standards, effective reform effort; in fact, the reform efforts of the two countries covered roughly the same period of time, but had very different outcomes. In Nigeria, which started the democratization process during a less systematic economic reform effort, the negative effects came sooner than in Ghana, but later than in Senegal. In Senegal democracy survived, but economic reform died. 60 Ironically, although Diouf wanted "less state, better state," he got "less state, worse state," one much less capable of ever transforming the Senegalese political economy. In effect, major economic reform is likely to be out of the question for some time, although the ritual dances of the reform game with external actors will most likely continue because of Senegal's dependence on external resources and debt rescheduling.
Conclusion: Prospects for the Future
In a passionate discussion of "reactionary rhetoric," Albert Hirschman points to what he calls "the thesis of the perverse effect": the situation where "unwilling to argue directly against reform, opponents of progressive impulses in society have attempted to show instead that reformist measures will invariably have effects that are contrary to the ones intended." 61 Is the version of the "thesis of the perverse effect" presented here-that political liberalization might have a negative impact on the chances for desperately needed economic reform-likely to hold across the board for Africa? No, not necessarily. It is important to assess the cases in particular countries. Kenya, for example, might be a case where political liberalization could allow formerly powerful political actors who had to retreat into the private economy in order to survive under the Moi government to return to political influence without impeding continued economic reform, but it would have to be done carefully and without allowing the returning political forces again to dominate political and economic life so totally. It is also possible that the elite learning that has taken place in Tanzania might survive electoral scrutiny. 62
It might be possible to facilitate economic reform under certain democratic conditions in two major ways: by careful and clever political "engineering" and "buffering." The first or "engineering" way is to shield key areas of policy from distributional and other political pressures by delegating them to autonomous institutions or processes, such as auctions for exchange rate fluctuations and central banks for certain types of macroeconomic policy. The second or "buffering" way is to attempt to link political and economic logics by selective, but balanced political amelioration of the costs of economic adjustment-what has been called "embedded liberalism" in the context of the Western industrial democracies.
In regard to the "engineering" method, Paul Collier identifies "agencies of restraint" as one type of democratic functional equivalent of insulation and delegation: "At the macroeconomic level the main function of agencies of restraint is to prevent public expenditure from out pacing public revenue . . . ; the typical business of such agencies is to say no to spending requests or to punish the politically well-connected for abuses of power." As he points out, "For such agencies to function effectively they must be protected from the pressures they are designed to hold in check. They must therefore be autonomous centers of power." 63 But there are attitudinal as well as institutional aspects to the creation and effective operation of agencies of restraint. For them to be most successful both aspects must be present.
The most common institutional example of an agency of restraint is the central bank. The most typical example is the German Bundesbank, although Chile was the first developing country to establish an effective one. As John Goodman observes:
| Creating an independent central bank can be seen as a way for governments to prevent themselves (and their successors) from pursuing overly expansionary policies. Central bank independence is thus considered a solution to what economists term the dynamic inconsistency of policy. Dynamic inconsistency refers to the inability of politicians to commit to and implement policies that may be best for the economy in the long run, but are politically harmful in the short run. 64 |
This is the tension between political and economic logics discussed at the beginning of this chapter.
As part of the conditionality inherent in externally supported economic reform, the IMF and the World Bank can insist on the creation or strengthening of central banks. Such has been the case in a number of Third World countries: Nigeria and Zambia, for example. 65 In Zambia, the stautory authority of the Central Bank was greatly strengthened in 1992 and early 1993, and, as part of an effort to revise the Kaunda-era constitution, the Chiluba government was working on a constitutional formula to prevent overspending. In fact, however, we know very little about how to create viable institutions in contexts where other facilitating factors are absent. Most central banks in the Third World are weak because they lack autonomy and attitudinal support for generalized restraint.
Collier takes his argument one step further, however, by asserting that "both for fiscal rectitude and adherence to the law, democratic institutions can serve as powerful agencies of restraint because they can produce "informed domestic constituencies of restraint" 66 at the level of organized social groups and the mass electorate. Most of the evidence from Africa, the rest of the Third World, and now the former Second World does not support such an optimistic conclusion. In large part, this is because powerful populist and distributive political logics are at play and because much of the debate about the need for economic reform and what to do about it has been externalized, making the foreign actors, especially the IMF and the World Bank, the lightening rods of opposition to serious economic reform.
In most places, no serious domestic debate about restraint has taken place, and there are few organized social constituencies for such restraint. Indeed, the very political language and set of symbols through which such a debate could take place do not usually exist. Some learning about economic reform and the necessity of macroeconomic restraint has taken place, but the question becomes who has learned technocrats, rulers, military officers, government officials, politicians, leaders of groups in "civil society," or the mass electorate? 67 So far the learning has mostly been at the technocratic level. Collier's "informed domestic constituencies of restraint" are not likely to emerge in very many places.
The second or "buffering" method of facilitating economic reform under democratic conditions is linked to the practice rather than the rhetoric of the Western industrial democracies. A striking thing about the Western vision of simultaneous economic and political liberalization is that it is not the accurate representation of Western economic and political realities that it is alleged to be. Western industrial democracies have been preaching the vision and doing something else all along, especially on the economic side. Contrary to popular assumption and official rhetoric, orthodox liberalism, especially its free-market core, has not been the dominant form of political economy in the industrial West since World War II. Instead, the dominant political economy has been a form of compromise called "embedded liberalism," which involves the use of quite extensive state power simultaneously in the interests of domestic political and social stability and well-being on the one hand and international economic adjustment on the other. 68
At the international level, market forces have been permitted to move, if haltingly, toward comparative advantage and adjustment. Within industrial countries, state power has been employed to varying degrees to restructure the economy while minimizing and buffering the disruptive domestic political and social consequences of liberal economics at the international level as trade, finance, production, and technology have evolved. As a result, modified international economic liberalism and domestic political stability and prosperity via state intervention coexist in a strained and uneasy balance, mediated by the pressures of democratic politics. This is not the autonomous interplay of free markets and minimalist states.
The compromises of the postwar political economy are sometimes viewed as liberalism with lots of cheating. But the "cheating" (protectionism, for example) as a form of political buffering and economic adjustment is, in fact, an inherent and defining characteristic of the system. In other words, international economic liberalism is real, but "compromised" by being "embedded" in the political and economic realities of domestic state-society relations. International economic efficiency is not sacrificed to domestic political stability, nor vice versa; a modus vivendi is established through embedded liberalism by uniting the entanglements of domestic and international politics and economics.
Embedded liberalism is an inherently unstable equilibrium, based on a delicately balanced tension between state and market and between economic and political logics, which can easily tip into unbalanced and unproductive statism, a form of malign mercantilism, on the one hand or the instabilities of unbridled market forces on the other. Maintaining this balanced tension, and getting economic and political logics to reinforce rather than contradict each other, requires special state capabilities, sophisticated statecraft, and considerable resources.
The compromise of embedded liberalism has not been extended by the major powers to the Third World since the onslaught of the debt crisis in 1982 or now, with the collapse of communism, to the former Second World. It is likely that the need to extend it may be learned most easily for Eastern Europe and the former Soviet Union because central, and threatening, interests are at stake. Until now developed countries have attempted to force Third and Second World countries to adjust to full orthodox liberalism without embedding it in the realities of their domestic state-society relations. Embedded liberalism is not likely to be extended to the Third World, especially Africa, because of its combined economic and strategic marginalization and the lack of sufficient Western resources. This lack of resources results from the fact that in the 1980s the embedded liberal compromise started to come under increasing strain in the West itself, largely for fiscal reasons.
Without the effective implementation of these "engineering" and "buffering" processes, simultaneous economic and political liberalization is not likely to be successful. As recent Western experience indicates, this is difficult to achieve because the two methods are partially contradictory and therefore hard to balance. Thus, a probabilistic rather than a deterministic perverse effect is likely to operate in Africa. As Hirschman himself finally admits, "there is no denying, to be sure, that the perverse effect does show up here and there. . . . I have merely intended to raise some doubts about whether it occurs with the frequency that is claimed." 69 If not handled properly, political liberalization might well impede rather than facilitate the productive relinking of Africa to the world economy that the continent so desperately needs.
Given the enormous constraints discussed here, what are the prospects that African countries will engage successfully in economic reform and establish more effective linkages to the world economy? The answer appears to be that simultaneous marginalization and dependence are likely to continue, and probably increase, for most countries. A few, with hard work, propitious facilitating circumstances, and luck, may begin to lessen their marginalization and dependence. Differentiation among African states, already long evident, may well increase. A few will stay in the Third World and do relatively better economically, while many will continue to descend into the Fourth and Fifth Worlds-fulfilling the Economic Commission for Africa's own "nightmare scenario." 70
In regard to the relationship between economic and political liberalization, one analyst concludes that: "any justification of non-democratic regimes that relies on their developmental capacities is, at best, weak." 71 Yes, effective authoritarian regimes are quite rare, but, in regard to the ability to carry out badly needed economic reform, especially in a region like Africa, the following holds even more so: any justification of democratic regimes that relies on their developmental capabilities is, at best, weak. This dilemma underscores just how "hemmed in" Africa really is. Assertions by external actors to the effect that economic liberalization requires political liberalization ring more than a little hollow.
As the evidence presented here suggests, it is possible in some cases that political and economic liberalization can positively coexist in transitional democracies, at least for awhile, but it requires a difficult, rare, and fragile conjuncture of factors. The probabilistic perverse effect holds--it is possible, but not probable in many cases or for very long. Are we thus to ignore the pessimism of the historical record of the last three decades in the Third World and put our faith in the theoretical vision of widespread democratic functional equivalents in a large number of cases? Ignore the historical pessimism and opt only for policy optimism? It all boils down to how much stock, or hope, we put in democratic functional equivalents of authoritarian delegation and where we place our normative bets. One could argue that African countries are so unlikely to become Koreas, Chiles, or Turkeys that why not ignore the analytic conclusions and go with our instincts? In fact, this seems to be what is happening. But if we place our bets on the side of democratization as a valued end in itself, we need to do so with our analytic eyes and pocketbooks wide open and our expectations well in check.
If Western actors are to go ahead and encourage political liberalization as an explicit policy, they should at least do it with some of the democratic functional equivalents of a delegation strategy firmly in mind, to specifically foster them. This would require a clear recognition of the constraints facing leaders of transitional democracies, a strong willingness to allow more gradual economic liberalization accompanied by increased policy experimentation drawing on the structural adjustment lessons of the 1980s, and an intention to commit substantially increased resources, including major debt relief.
Above all, external actors should avoid the "faults of analytic and policy hurry" and not create undue expectations about what can be achieved in Africa over the medium run. Given the enormous obstacles confronting African countries, overly optimistic expectations can be very dangerous. Slow, steady, consistent progress is far preferable; there are no shortcuts after all. Change is incremental, uneven, often contradictory, and dependent on the outcome of unpredictable socioeconomic and political struggles. Policy-makers, both international and African, can try to bring about important changes, but they need to retain a sense of the historical complexity involved. Today's policy fads can easily become tomorrow's failed initiatives. External actors need to work closely with Africans to find ways to implement effectively the lessons learned from the experience with structural adjustment in the 1980s, lessons apparent in the World Bank's long-term perspective study. If not, "adjustment with a human face," "capacity building," "governance," and "democratization" will just become the latest in international passing fancies. To rely solely on the hope that democratic functional equivalents might just magically appear is a quite sizeable leap of faith. Indeed, both Africans and external actors face difficult and cruel choices.
If simultaneous economic and political liberalization is not likely, is democracy possible in many countries in Africa without major reform and a solid economic base? Evidence from the rest of the world is not encouraging. Africans may well use democratic structures to choose not to engage in economic restructuring, but they will then have to live with the consequences of that choice until accelerated decline and sufficient learning turns policy around. By then, however, it might well be too late to recover economically, leaving the continent marginalized or hemmed in beyond salvation. A cruel choice indeed.
More than thirty years of independence have shown that there are no panaceas, authoritarian or democratic, conservative or revolutionary, but at the same time, that it does matter what rulers and their subjects do and how they do it. The experience of nineteenth-century Latin America indicates that the nature of patrimonial administrative states changes only very slowly and incrementally. Structural and contextual constraints to action are real and set serious limits to political action, but they do not unilaterally determine it. Expectations of swift and dramatic change are likely to be dashed; new cycles of authoritarian rule are likely. There is little prospect for what Richard Sklar has called "developmental democracy." The harsh realities of African politics over thirty years make his vision of "a democracy without tears" appear strikingly utopian. 72 What "Africa needs" may well not be what it is likely to get. Modest expectations about democracy are required. Like Tocqueville, it is important to bring to democracy neither the enthusiasm of those who expect from it a transfiguration of the human lot nor the hostility of those who see in it no less than the very decomposition of human society. Democracy is risky after all and often lacks brilliance and grandeur . . . 73 The day-to-day politics of African patrimonial administrative states makes the effective translation of political vision into reality very difficult, but not necessarily impossible.
Note 1: Laurence Whitehead, "Economic Liberalization and the Consolidation of Democracy in Latin America: Mutually Reinforcing or Potentially Conflicting Processes?" paper prepared for the Inter-American Dialogue workshop on Political and Economic Liberalization, June 1990, p. 1. Back.
Note 2: Atul Kohli, "Democracy and Development" in John P. Lewis and Valeriana Kallab, eds., Development Strategies Reconsidered (New Brunswick, N.J.: Transaction Books, 1986), p. 164; as examples he cites Charles E. Lindblom, Samuel Huntington, Barrington Moore, Jr., Seymour Martin Lipset, and T. H. Marshall; also see Robert Dahl, Polyarchy (New Haven: Yale University Press, 1971). Back.
Note 3: See Kenneth A. Bollen and Robert W. Jackman, "Economic and Non-Economic Determinants of Political Democracy in the 1960s," Research in Political Sociology , vol 1 (Greenwich, CT: JAI Press, 1985); Dietrich Rueschemeyer, Evelyne Huber Stephens, and John D. Stephens, Capitalist Development and Democracy (Chicago: University of Chicago Press, 1992), pp. 12-39. Back.
Note 4: Kohli, "Democracy and Development," p. 156. Back.
Note 5: 5. Ibid., pp. 159, 156. Back.
Note 6: Ibid., pp. 159-160. Back.
Note 7: Stephan Haggard and Robert R. Kaufman, "Economic Adjustment in New Democracies" in Joan M. Nelson et al., Fragile Coalitions : The Politics of Economic Adjustment (New Brunswick, N.J.: Transaction Books, 1989), p. 58. Back.
Note 8: Ibid., pp. 62, 64. Back.
Note 9: Stephan Haggard, Pathways from the Periphery (Ithaca: Cornell University Press, 1990), pp. 265, 256. Back.
Note 10: Ibid., p. 264, emphasis added. Back.
Note 11: Ibid., pp. 256, 267, emphases added. Back.
Note 12: Ralph Austen, African Economic History (London: James Currey, 1987), pp. 102, 109. Back.
Note 13: For data on marginalization, see Thomas M. Callaghy, "Africa and the World Economy: Caught Between a Rock and a Hard Place" in John W. Harbeson and Donald Rothchild, eds. Africa in World Politics (Boulder: Lynne Rienner, 1991), pp. 39-68; and the Ravenhill and Green articles (chapters 1 and 2) in this volume. Back.
Note 14: B. A. Kiplagat quoted in "Africa Fears Its Needs Will Become Secondary," New York Times , December 26, 1989. Back.
Note 15: See Gerald Bender, James S. Coleman, and Richard Sklar, eds., African Crisis Areas and U.S. Foreign Policy (Berkeley: University of California Press, 1985). Back.
Note 16: On Africa's debt problems, see Tony Killick and Matthew Martin, "African Debt: The Search for Solutions," United Nations Africa Recovery Programme Briefing Paper No. 1, New York, June 1989; Charles Humphreys and John Underwood, "The External Debt Difficulties of Low-Income Africa," in Ishrat Husain and Ishac Diwan, eds., Dealing with the Debt Crisis (Washington, D.C.: World Bank, 1989); Thomas M. Callaghy, "Debt and Structural Adjustment in Africa: Realities and Possibilities," Issue, 16, 2 (1988): 11-18; and Trevor W. Parfitt and Stephen P. Riley, eds., The African Debt Crisis (London: Routledge, 1989). Back.
Note 17: On conditionality, see the Gordon article (chapter 3) in this volume. Back.
Note 18: Quoted in "Ghana: High Stakes Gamble," Africa News , 31, 2 (January 23, 1989): 10. Back.
Note 19: On the African postcolonial syndrome, see Thomas M. Callaghy, "Lost Between State and Market: The Politics of Economic Adjustment in Ghana, Zambia, and Nigeria" in Joan M. Nelson, ed., Economic Crisis and Policy Choice (Princeton: Princeton University Press, 1990), pp. 257-262. Back.
Note 20: Much of the comparative evidence comes from the results of a multiyear, six-person research project in which I participated. It was entitled "The Politics of Economic Stabilization and Structural Change in Developing Nations" and was funded jointly by the Ford and Rockefeller Foundations. The project produced three books: Nelson, Economic Crisis and Policy Choice ; Nelson, Fragile Coalitions ; and Stephan Haggard and Robert Kaufman, eds., The Politics of Economic Adjustment (Princeton: Princeton University Press, 1992). Also see Thomas M. Callaghy, "Vision and Politics in the Transformation of the Global Political Economy: Lessons from the Second and Third Worlds" in Robert O. Slater, Barry M. Schutz, and Steven R. Dorr, eds., Global Transformation and the Third World (Boulder: Lynne Rienner, 1993). On Bolivia, see James M. Malloy, "Democracy, Economic Crisis and the Problem of Governance: The Case of Bolivia," typed manuscript, August 1989, pp. 29-30, and Catherine M. Conaghan, James M. Malloy, and Luis A. Abugatta, "Business and the 'Boys': The Politics of Neoliberalism in the Central Andes," Latin American Research Review 25, 2 (1990): 3-30. Back.
Note 21: Peter B. Evans, "The State as Problem and Solution: Predation, Embedded Autonomy, and Structural Change" in Haggard and Kaufman, Politics of Economic Adjustment, pp. 139-181. Back.
Note 22: On Zambia, see Callaghy, "Lost Between State and Market," pp. 268-69, 286-303. Back.
Note 23: See the Gordon and Martin articles (chapters 3 and 4) in this volume. Back.
Note 24: Letter of invitation dated July 10, 1990 from the staff of Politique Africaine to an October 1990 conference in Bordeaux. Back.
Note 25: See the Green article (chapter 2) in this volume. Back.
Note 26: World Bank, Adjustment Lending: An Evaluation of Ten Years of Experience (Washington, D.C.: World Bank, 1988), p. 3, emphasis added. Back.
Note 27: See Thomas M. Callaghy, "The State and the Development of Capitalism in Africa" in Donald Rothchild and Naomi Chazan, eds., Precarious Balance: State and Society in Africa&nsbp; (Boulder: Westview Press, 1988), pp. 67-99. Back.
Note 28: . World Bank, Sub-Saharan Africa: From Crisis to Sustainable Growth&nsbp;&nsbp; (Washington, D.C.: World Bank, 1989); also see Deborah Brautigam, "Governance and Economy: A Review," Working Paper, Policy and Review Department, World Bank, Washington, D.C., December 1991. Back.
Note 29: World Bank, From Crisis to Sustainable Growth&nsbp;, pp. 192, 6. Back.
Note 30: See the Chazan and Rothchild article (chapter 5) in this volume. Also see Goran Hyden and Michael Bratton, Governance and Politics in Africa&nsbp; (Boulder: Lynne Rienner, 1992); Larry Diamond, Juan J. Linz, and Seymour Martin Lipset, eds., Democracy in Developing Countries: Africa&nsbp; (Boulder: Lynne Rienner, 1988); Michael Bratton and Nicolas van de Walle, "Popular Protest and Political Reform in Africa," Comparative Politics&nsbp; 24, 4 (July 1992): 419-22, and "Regime Type and Political Transition in Africa," paper for the Annual Meeting of the American Political Science Assoication, Chicago, September 3-6, 1992; Peter M. Lewis, "Political Transition and the Dilemma of Civil Society in Africa," Journal of International Affairs 46, 1 (Summer 1992): 31-54; John Healey and Mark Robinson, Democracy, Governance, and Economic Policy: Sub-Saharan Africa in Comparative Perspective&nsbp; (London: Overseas Development Institute, 1992). Back.
Note 31: Barber B. Conable, "Address As Prepared for Delivery to the Bretton Woods Conference on Africa's Finance and Development Crisis," Washington, D.C., April 25, 1990, World Bank, typed manuscript, pp. 2-3. Back.
Note 32: Director of the U.S. Agency for International Development, "Realizing Africa's Dream," speech to a conference in the Netherlands, July 4, 1990, typescript, p. 2. Back.
Note 33: Haggard and Kaufman, "Economic Adjustment," p. 61. Back.
Note 34: Haggard, Pathways&nsbp;, p. 267; Joan M. Nelson, "The Politics of Adjustment in Small Democracies: Costa Rica, the Dominican Republic, and Jamaica" in Nelson, Economic Crisis and Policy Choice , pp. 211-213; see Peter J. Katzenstein, Small States in World Markets: Industrial Policy in Europe&nsbp; (Ithaca: Cornell University Press, 1985). Back.
Note 35: See, for example, Terry Lynn Karl, "Dilemmas of Democratization in Latin America," Comparative Politics&nsbp; 23, 1 (October 1990): 1-21. Back.
Note 36: Jeffrey Herbst, "The Economic Frontiers of the State in Africa," typed manuscript, 1990, p. 26. Back.
Note 37: Herbst, "Labor in Ghana," pp. 24-25. Back.
Note 38: For the classic assessment of this period, see Aristide R. Zolberg, "The Structure of Political Conflict in the New States of Tropical Africa," American Political Science Review&nsbp; 62, 1 (March 1968): 70-87. Back.
Note 39: See, for example, Naomi Chazan, An Anatomy of Ghanaian Politics&nsbp; (Boulder: Westview Press, 1983); Richard Joseph, "The Overthrow of Nigeria's Second Republic," Current History (March 1984); Larry Diamond, "Nigeria in Search of Democracy," Foreign Affairs 62, 4 (Spring 1984). Back.
Note 40: See Robert H. Jackson and Carl G. Rosberg, Jr., "Why Africa's Weak States Persist: The Empirical and the Juridical in Statehood," Comparative Politics&nsbp; 35, 1 (October 1982): 1-24; Robert H. Jackson, Quasi-States: Sovereignty, International Relations, and the Third World&nsbp; (New York: Cambridge University Press, 1990). Back.
Note 41: See Nelson, "The Politics of Adjustment in Small Democracies." Back.
Note 42: On Turkey and Chile, see Callaghy, "Vision and Politics." On Chile, also see Barbara Stallings, "Politics and Economic Crisis: A Comparative Study of Chile, Peru, and Colombia" in Nelson, ed., Economic Crisis and Political Choice , pp. 113-67, and "The Political Economy of Democratic Transition: Chile in the 1980s" in Barbara Stallings and Robert Kaufman, eds., Debt and Democracy in Latin America (Boulder: Westview Press, 1989), pp. 181-99; Pamela Constable and Arturo Valenzuela, A Nation of Enemies: Chile Under Pinochet (New York: Norton, 1991); Carol Graham, "Democracy, Economic Reform, and Civil Society in Chile: The Merging of Democratic and Authoritarian Traditions," paper for the conference on "Economy, Society, and Democracy," Washington, D.C., May 1992. On Turkey, also see George Kopits, Structural Reform, Stabilization, and Growth in Turkey (Washington, D.C.: IMF, 1987); Ziya Onis, "Redemocratization and Economic Liberalization in Turkey: The Limits of State Autonomy," typed manuscript, n.d.; Ziya Onis and Steven B. Webb, "The Political Economy of Policy Reform in Turkey in the 1980s," paper for the conference on "The Political Economy of Structural Adjustment in New Democracies," Washington, D.C., May 1992; John Waterbury, "The Export-Led Growth and the Center-Right Coalition in Turkey," Comparative Politics&nsbp; 24, 2 (January 1992): 127-145; Ergun Ozbudan, "Turkey: Crises, Interruptions, and Reequilibrations" in Larry Diamond, Juan J. Linz, and Seymour Martin Lipset, eds., Democracy in Developing Countries (Boulder: Lynne Rienner, 1989), pp. 187-230. Back.
Note 43: Since the Ghanaian case is also discussed in the chapter by Matthew Martin, the treatment here will be relatively brief. Also see Callaghy, "Lost Between State and Market"; Donald Rothchild, ed., Ghana: The Political Economy of Recovery (Boulder: Lynne Rienner, 1991); Jeffrey Herbst, The Politics of Economic Reform in Ghana (Berkeley: University of California Press, 1993); and Matthew Martin, The Crumbling Facade of African Debt Negotiations: No Winners (London: Macmillan, 1991). Back.
Note 44: Both quotations are from Julian Ozanne, "Ghana's Tough Economic Reforms Face the Ballot Box Test," Financial Times, August 14, 1992. Back.
Note 46: Quoted in Julian Ozanne, "The Riddle of the Chairman," Financial Times, August 17, 1992. Back.
Note 47: See Callaghy, "Vision and Politics." Back.
Note 48: As Michael Lofchie notes in his chapter, the impressive economic changes in Tanzania have yet to be tested electorally. Back.
Note 49: On the Nigerian reform efforts, see Callaghy, "Lost Between State and Market," and "Democracy and the Political Economy of Restraint and Reform in Nigeria," paper for the conference on "Economy, Society and Democracy," Washington, D.C., May 1992; Adebayo Olukoshi, ed., Crisis and Adjustment in the Nigerian Economy (Lagos: JAB Publishers, 1991); and Jeffrey Herbst and Adebayo Olukoshi, "Nigeria," draft manuscript for the Project on the Political Economy of Structural Adjustment in New Democracies, 1992. On Nigeria's older political logics, see Richard A. Joseph, Demcracy and Prebendalism in Nigeria (New York: Cambridge University Press, 1987); Larry Diamond, Class, Ethnicity and Demcracy in Nigeria (Syracuse: Syracuse University Press, 1988); Thomas J. Biersteker, Multinationals, the State, and Control of the Nigerian Economy (Princeton: Princeton University Press, 1987); Sayre Schatz, Nigerian Capitalism (Berkeley: University of California Press, 1977), and "Pirate Capitalism and the Inert Economy of Nigeria," Journal of Modern African Studies , 22, 1 (March 1984): 45-58; Douglas Rimmer, "The Overvalued Exchange Currency and Over-Administered Economy of Nigeria," African Affairs , 84, 336 (July 1985): 435-446. Back.
Note 50: The next two sections are based on confidential interviews in Washington, D.C., August 1990, March 1992, and in Lagos, January 1991; discussions with a former student who became the head of a state bank; and press reports from Financial Times, West Africa, African Business, Newswatch, and Africa Report covering August 1990 to March 1992. Back.
Note 51: Financial Times, July 1, 1991. Back.
Note 52: These quotations from the report come from Financial Times, March 16, 1992, pp. 1, 18; and Financial Times Survey , "Nigeria," March 16, 1992, pp. i, xiv; the discussion here is based on these and Financial Times, June 27, 1991; July 1,4 and 10, 1991; August 14, 1991. William Keeling clearly based his reporting in June and July 1991 on work that went into this very damaging report, and his findings are confirmed by confidential interviews I conducted in Lagos in January 1991while the data for the report was being collected. Back.
Note 53: This section draws on two particularly fine papers: Samba Ka and Nicolas van de Walle, "The Political Economy of Adjustment in Senegal, 1980-91," paper for the World Bank Project on the Political Economy of Structural Adjustment in New Democracies, directed by Stephan Haggard and Steven B. Webb, Washington, D.C., May 1992, and Catherine Boone, "Trade, Taxes, and Tribute: Market Liberalization and the New Importers in West Africa," a paper presented at the Annual Meeting of the American Political Science Association, Chicago, September 3-6, 1992. Also see: Catherine Boone, "State Power and Economic Crisis in Senegal," Comparative Politics&nsbp; 22, 3 (April 1990): 341-357; Victoria Ebin, "Mouride Traders vs. the State: Strategies for the Development of International Trade in a Time of Crisis," and Momar Coumba Diop and Mamadou Diouf, "Notes sur le réconversion des marabouts mourides dans l'économie urbaine," papers presented at the Colloque "Etat et Société au Sénégal: Crises et Dynamiques Sociales," Centre d'Etude d'Afrique Noire and Institut Fondamental d'Afrique Noire, Bordeaux, October 22-25, 1991; Gilles Duruflé, L'Ajustement Structurel en Afrique: Sénégal, Côte d'Ivoire, Madagascar (Paris: Karthala, 1988); Christopher L. Delgado and Sidi Jammeh, eds., The Political Economy of Senegalunder Structural Adjustment (New York: Praeger, 1991); Catherine Boone, "Politics under the Specter of Deindustrialization: "Structural Adjustment" in Practice" in Delgado and Jammeh, eds., Political Economy of Senegal, pp. 127-149; John Waterbury and Mark Gersovitz, eds., The Political Economy of Risk and Choice in Senegal (London: Frank Cass, 1987); S. Commander, O. Ndoge, I. Ouedrago, "Senegal 1979-88" in Simon Commander, Structural Adjustment and Agriculture (Portsmouth, N.H.: Heineman, 1989), pp. 145-174; Crawford Young and Babacar Kante, "Governance, Democracy and the 1988 Senegalese Elections" in Hyden and Bratton,Governance and Politics in Africa&nsbp;, pp. 57-74; Christian Coulon, "Senegal: The Development and Fragility of Semidemocracy," in Larry Diamond, Juan J. Linz, and Seymour Martin Lipset, eds., Politics in Developing Countries: Comparing Experiences with Democracy (Boulder: Lynne Rienner, 1990), pp. 411-448; Robert Fatton, The Making of a Liberal Democracy: Senegal's Passive Revolution, 1975-85 (Boulder: Lynne Rienner, 1987). Back.
Note 54: See Nicolas van de Walle, "The Decline of the Franc Zone: Monetary Politics in Francophone Africa," African Affairs 90 (July 1991): 383-405. Back.
Note 55: Cited in Boone, "Trade, Taxes and Tribute," p. 14, from an interview she conducted in Dakar, December 1990. Back.
Note 56: Ka and van de Walle, "The Political Economy of Adjustment," pp. 66, 65. Back.
Note 57: In "The Political Economy of Adjustment," Ka and van de Walle attempt to take a less pessimistic view of the impact of democratization on economic reform than the one presented here, but I do not believe that their own evidence supports a less pessimistic assessment. They do note that "social pressures were indeed in part to blame for the failure of reform" by pushing "the state to return to pre-adjustment policies of subsidies, regulation and trade protection" and that "regular and reasonably honest elections obviously did put some pressure on the government to lessen the bite of economic austerity" [p. 64]. They go on to conclude, however, that the "common wisdom on Senegal" which suggests that "its economic stagnation is linked to the fact that it has been one of the most democratic regimes in Africa" is flawed. For them, the fact that Diouf won the 1988 elections by nearly the same percentage as the 1983 ones points to "the limits of this kind of analysis" [p. 64]. They contend that "interest group pressures must be put into a larger context to properly understand the failure of reform" [p. 64], a context dominated by constraints such as the inability to use devaluation, weak supply response, personal rivalries within the economic team, little faith in the reforms etc. which become reasons for failure. Yes, such constraints have long weakened economic reform efforts by authoritarian regimes as well in Africa, but I would argue that these weaknesses were further aggravated by democratization in Senegal, making a successful outcome of the reforms even less likely. Lastly, speaking about Diouf, they argue that "democratization held relatively few risks for him, particularly as long as he maintained the support of the marabouts" [p. 65, italics added]. This caveat is the key; the point is precisely that maintaining such support was one of the chief reasons for the failure of the reforms, as their evidence and that provided by Boone and others demonstrates quite clearly. By placating the marabouts and other groups, the Diouf government won the 1988 elections by a comfortable margin but killed the economic reforms. This more pessimistic assessment is likely to hold for other African countries undergoing democratization as well, and shows just how "hemmed in" Africa is. Back.
Note 58: In chapter 4 in this volume, Matthew Martin indicates that, at minimum, Chiluba will need all of these propitious factors, plus much more sensitive program design and negotiating procedures. Back.
Note 59: For a discussion of a strikingly similar situation in another patrimonial administrative state, see Paul D. Hutchcroft, "The Political Foundations of Booty Capitalism in the Philippines," paper delivered at the Annual Meeting of the American Political Science Association, Chicago, September 3-6, 1992. Back.
Note 60: For Latin America, Karen Remmer argues, contrary to much of the literature on the region, that economic crisis does not necessarily lead to the end of democracy. I would argue for both Latin America and Africa, certainly for Senegal, that although, or rather because, democracy survives, at least in the short run, major economic reform is made more difficult and thus will not be very common. This clearly runs counter to the Western vision of the need for simultaneous economic and political liberalization; see Callaghy, "Vision and Politics." For Karen Remmer's argument, see "Democracy and Economic Crisis: The Latin American Experience," World Politics (April 1990), pp. 315-335, and "The Political Impact of Economic Crisis in Latin America in the 1980s," American Political Science Review&nsbp; 85, 3 (September 1991): 777-800; also see Stephan Haggard and Robert Kaufman, "Economic Adjustment and the Prospects for Democracy" in Haggard and Kaufaman, The Politics of Economic Adjustment , pp. 319-350. Back.
Note 61: Albert O. Hirschman, "Reactionary Rhetoric," Atlantic Monthly 263, 5 (May 1989): 63. Back.
Note 62: On the Tanzanian case, see Lofchie's article (chapter 11) in this volume. Back.
Note 63: Paul Collier, "Africa's External Economic Relations: 1960-90," African Affairs 90 (1991): 340, 339. Back.
Note 64: John B. Goodman, Monetary Sovereignty: The Politics of Central Banking in Western Europe (Ithaca: Cornell University Press, 1992), p. 6, note 12; also see Stanley Fischer, "Dynamic Inconsistency, Cooperation, and the Benevolent Dissembling Government," Journal of Economic Dynamics and Control 2 (1980): 93-107; William Nordhaus, "The Political Business Cycle," Review of Economic Studies, 42 (April 1975): 169-190. Back.
Note 65: See Callaghy, "Democracy and the Political Economy of Restraint and Reform in Nigeria." Back.
Note 66: Collier, "Africa's External Economic Relations," p. 134, and his talk of the same title, Center for International Affairs, Harvard University, March 6, 1992. Back.
Note 67: The notion of "civil society" has generated considerable discussion, and hope, by academics and political actors alike, in the context of efforts at political liberalization in Africa. At the same time it remains a contested concept. For a discussion of the concept and its applicability to Africa, see Naomi Chazan, John W. Harbeson, and Donald Rothchild, eds., Civil Society and the State in Africa (Boulder: Lynne Rienner, forthcoming 1993); for my skeptical views, see Thomas M. Callaghy, "Civil Society, Democracy, and Economic Change in Africa: A Dissenting Opinion" in Civil Society and the State in Africa. Also see Lewis, "Political Transition and the Dilemma of Civil Society in Africa." Back.
Note 68: The concept of "embedded liberalism" is John Gerard Ruggie's; see his "International Regimes, Transactions and Change: Embedded Liberalism in the Postwar Economic Order," International Organization 36, 2 (Spring 1982), especially pp. 398-399, 405, 413, and "Political Structure and Change in the International Economic Order: The North-South Dimension" in Ruggie, ed., Antinomies of Interdependence (New York: Columbia University Press, 1983), pp. 423-487. Robert Gilpin and Barry Buzan both prefer the term "benign mercantilism;" see Robert Gilpin, The Political Economy of International Relations (Princeton: Princeton University Press, 1987), pp. 404-5. I prefer "embedded liberalism" because it more accurately reflects the direction of policy change and the balancing point between state and market. On the Japanese version of it, see Kent E. Calder, Crisis and Compensation: Public Policy and Political Stability in Japan (Princeton: Princeton University Press, 1991). Back.
Note 69: Hirschman, "Reactionary Rhetoric," p. 70. Back.
Note 70: On the "nightmare scenario," see Economic Commission for Africa, "ECA and Africa's Development: 1983-2008," Addis Ababa, April 1983, and "Beyond Recovery: ECA-Revised Perspective of Africa's Development, 1988-2008," Addis Ababa, March 1988. Back.
Note 71: Kohli, "Democracy and Development," p. 178. Back.
Note 72: Sklar's discussion of "developmental democracy" in his "Democracy in Africa" in Patrick Chabal, ed., Political Domination in Africa (Cambridge: Cambridge University Press, 1986), pp. 1-29. Back.
Note 73: See Raymon Aron's discussion of Tocqueville's views on democracy in Raymond Aron, Main Currents in Sociological Thought, vol. 1 (New York: Anchor Books, 1968). Adam Przeworski recently echoed Tocqueville's point in the context of Eastern Europe, as well as one of its inherent dangers: "The everyday life of democratic politics is not a spectacle that inspires awe: an endless squabble among petty ambitions, rhetoric designed to hide and mislead, shady connections between power and money, laws that make no pretense of justice, policies that reinforce privilege. This experience is particularly painful for people who had to idealize democracy in the struggle against authoritarian oppression, people for whom democracy was the paradise forbidden. When paradise turns into everyday life, disenchantment sets in. Hence the temptation to make everything transparent in one swoop, to stop the bickering, to replace politics with administration, anarchy with discipline, to do the rational-the authoritarian temptation" [Democracy and the Market: Political and Economic Reforms in Eastern Europe and Latin America (New York: Cambridge University Press, 1991), pp. 93-94]. This point and its inherent warning are particularly pertinent to Africa. Back.
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