The Political Economy of Development,
Post-colonial Analysis and “Bad Samaritans”
Fernando López

Both the “political economy of development” and the “political economy of colonization” theories share the notion that a universal model of institutions and economic policies exist that allows for institutional engineering (Przeworski, 2004) and for transferring Western models of institutional architecture to third countries (Evans, 2004; Portes, 2007). They dodge the issue of how informal institutions (norms, codes of conduct and cultural factors), a key part of traditional societies, influence the effectiveness of formal institutions (Eggertsson, 2005). They ascribe too much importance to economic institutions that aim to protect property rights and guarantee contract fulfillment, in detriment of the political institutions linked to “good government” (Rodrik, Subramanian & Trebbi, 2002). They do not refer to the distribution factor, despite its important role in the persistence of dysfunctional institutions and in the problems of collective action (Bardhan, 2002); nor do they mention human capital as a determinant of society's institutional and productive capacity (Glaeser et al, 2008).

The political economy of development delves deeper into the historical origins of the state and its evolution, on the basis of a rational model of individual behavior that extends to people from the past (Hodgson, 2001; Jenkins, 2009) and presents an incorrect image of pre-modern states because it projects onto them nineteenth- and twentieth-century conditions (Epstein, 2009). Even more anachronistic is their interpretation of the [developmental] route taken by states that achieved independence in the mid-twentieth century, with a repeated use of possible-world [semantics] for counterfactuals (Molteni, 2006).

Theories of institutional development based on colonial origins have been questioned for their excessive generalization of historic factors and for their limited empirical foundations. The economic history of Latin America and other former colonies are not mentioned in these works. The instrumental variables used can also be criticized as a measurement of institutional causality and for their role in growth (Dobado, 2009). Neither does the hypothesis of “investing the fortune” pass the test, given the inconsistency of the data used as “proxies” (urbanization, population density) of prosperity through 1500 (Maddison, 2002; Coatsworth, 2008; Przeworski and Curvale, 2007). The interpretations underpinning the imaginative econometric models are as debatable as the ideas of “good” institutions (Rubio, 2006).

Understanding the divergences in growth at every historical juncture would require a study of the dual aspects of colonialism: the socioeconomic context that the colonizers found, and the economic and political development of the metropole. It is only within the framework of social, economical and internal political evolution–defined by the colonizing countries’ level of development and by the social conditions that they found in their new territories –that the relationship between types of colonization, institutions and development can be viewed as a factor for economic lag or success. For Spain, colonization brought a hegemonic role; for England and the Netherlands, it drove forward capitalism. The flow of precious metals from America to Europe, with Spain as the intermediary, boosted the development of capitalism, but the institutional, political and economic lag was felt in the colonies (Albán Moreno, 2008: 241-242). Colonization created institutional imbalances, with new formal institutions overlapping pre-existing informal ones; in some cases this situation led to the persistence of traditional informal institutionalism, and in others it led to changes in society (Alonso and Garcimartín, 2009). In any case, a feudal society was established in which agrarian civilizations found that they could use menial labor through coercion (Zuleta, 2004).

The more radical criticism is aimed at the theory of modernization underlying the assumptions of the “political economy of conquest,” which ignores the “cultural worlds” that lend meaning to institutions and defend development as an inevitable sequence of phases, with the Western world as the reference point. This loses sight of “the asymmetrical relations of power, the criminal exploitation of the African continent, the English system of domination in India and the Middle East, Europe's relations with China and Japan, the European colonial and postcolonial system in America” (Correa, 2006: 279-281). If we accept that the evolution and consolidation of the modern nation state presided over the process of development, and that without this configuration of power capitalist society would not have grown (Epstein, 2009), there are two questions that must be answered: why did nation states form in some areas and not in others, and why was violence central to the modern Western state? To respond to these two questions, we must reflect on the nature of power (Quijano, 2000).