What policy implications emerged from the work of the Research Programme Consortium on Improving Institutions for Pro-Poor Growth between 2005 and 2010? This paper provides an overview, highlighting that while institutions matter for development, organisations matter for institutional formation and efficacy. The interaction of individuals, organisations and institutions is at the heart of the politics and political economy of development. Policymakers therefore need to think ‘beyond’ institutional design; they need to strengthen economic, social and political organisations that can advocate, negotiate, implement and monitor effective and locally legitimate institutional arrangements. This requires a long-term, experimental and thus flexible approach.
Institutions are the formal and informal ‘rules of the game’ that shape, but do not determine, human behaviour in economic, social and political life. As a set of rules, institutions achieve little on their own; they require legitimacy, consistency and compatibility with other institutions, maintenance, implementation and review. Institutions (whether economic, social or political) are social and political constructions shaped, implemented, undermined or reformed by actors and organisations through political processes. ‘Organisations’ are formally or informally co-ordinated vehicles for the promotion or protection of a mix of individual and shared interests and/or ideas.
Institutional effectiveness and hence development outcomes thus depend on how institutions interact with organisations and individuals. Understanding when, how and why institutions work involves understanding the politics of how individual players, organised interests and institutions interact. Formal and informal organisations and individuals may ‘play the game’ according to the rules (institutions), or may seek to evade or shape the rules. The research also finds that:
- Fostering and brokering the processes that promote interaction within and across both private and public organisations, as in improving state-business relations, can contribute to both growth and stabilisation.
- Generic institutional solutions seldom mesh with the unique and usually uneven balances of power, influence and access between organised interests (formal or informal) on the ground
- Compatibility rather than conflict between formal and informal institutions is generally a condition for developmental success
- Informal institutions can at times substitute for formal institutions or can have positive developmental outcomes through the workings of ‘developmental patrimonialism’.
Organisations aggregate and articulate interests, and are therefore the critical political links between citizens and the decision-making organs of the state. Individuals and organisations forge, maintain, implement and change institutions. For donors to encourage legitimate and effective institutions which sustain a stable and inclusive environment for growth and poverty reduction, they will need to:
- Embed the distinction and interaction between institutions and organisations in policy and operational thinking.
- Recognise that institutional and organisational issues are pervasive across all sectors and issue areas.
- Appreciate that deep knowledge and understanding are needed to recognise and negotiate the obstacles to institutional formation, change and reform (such as vested interests, cultural and moral objections or the sheer force of habit).
- Learn how to think and work politically, to help build up the economic, social and political organisations which both shape and make institutions work.
- Learn how to enhance the political capacity of organisations in areas such as negotiation and the generation of constructive policy options. Enhancing the organised political capacity of poor and marginalised ‘players’ increases the probability that poverty-reducing institutions will be forged.
- Commit to investing in processes, and develop the skills of facilitating and brokering interaction between organisations so they can negotiate and implement locally appropriate institutions in a variety of national and sub-national policy areas.
- Institutionalise a sustained, multi-disciplinary commitment to research and policy development, involving a deep understanding of comparative historical patterns, evidence and precedents.
