The previous sub-section provides a basic outline of LAO societies, in which political order is the outcome of elite bargaining and such bargaining restricts economic and political competition. This sub-section theorizes the political origins of economic change in LAO societies. As argued by North et al. (2013) and Khan (2010, 5) the principal agents in LAO societies are the ruling elites at the top of the coalition. For analytical purposes, the pursuit of political order through the distribution of privileges to coalition members can be considered analogous to the pursuit of political survival by ruling elites through the same clientelistic method (Booth and Therkildsen, 2010, 8; Gray, 2016). Indeed, long before the LAO and political-settlement frameworks, scholars saw neopatrimonialism in African countries as a means of attaining the political support needed for survival (Sandbrook, 1972; Lemarchand, 1972; Berman, 1974; Arriola, 2009; Clapham, 1996; Bratton and van de Walle, 1994; Beekers and Van Gool, 2012).
North and Khan stressed the importance of the concept of ‘political survival’ to understanding the rationality of ruling elites. Rational political actions are actions motivated by the desire to retain power, which in the broader sense includes the desire to keep the ruling coalition/pact intact. The conceptualization of rational political actions is a valuable analytical tool in the development of empirically testable propositions because rational political actions taken to ensure political elites’ survival may come into direct conflict with economic progress (see Geddes, 1994). In such cases, ruling elites may resist economic progress to secure their position. Acemoglu and Robinson theorized this scenario in terms of the “political replacement effect,” wherein ruling elites resist societal progress if it threatens to dislodge them (Acemoglu and Robinson, 2006, 115).4Likewise, rational political actions may lead to the pursuit of economic change and the alteration of the ruling coalition.
Following the logic of rational political actions, and within the context of a limited access order, economic transformation or economic diversification (which is by definition an alteration of the coalitional agreement to the extent that it involves political participation) is best understood as a political strategy for survival (Leftwich, 2008, 13). This is partly what some writers have in mind when they describe development as a political process (Doner et al., 2005: Eriksen, 2005; Khan, 2010; Hudson and Leftwich, 2014). That is, ruling elites allocate state resources (which are required for economic change) to maintain their political positions (Khan, 2011, 4; Bueno de Mesquita et al., 2004, 12). The question is thus as follows: when does economic change or diversification become a political-survival strategy within a LAO society?
As stated in the previous section, both the LAO framework (North et al., 2009 20) and the political-settlement framework (Khan, 2010,4) hold that the interaction between the two units – ruling elites and the coalition that keeps them in power or provides order – determines the context for institutions (mostly informal institutions) and government policies in terms of resource allocation. But more importantly, this interaction must provide the minimum level of economic viability on which the ruling coalition is based. In other words, there is a minimum level of economic performance that all LAOs and elite coalitions must achieve to generate sufficient rent to sustain themselves (Khan, 2010, 44; Sue, 2014, 4). This level of economic performance must be met to extract the revenue needed to support the neopatrimonial network and meet the general expectations of the public (North et al., 2009, 57; North et al., 2015, 9). Kunal Sen (2015, 47) argued that no elite coalition (political settlement or social order) that produces very poor economic outcomes or falls short of achieving minimum economic performance can survive except through oppressive means.
Therefore, the failure to meet the minimum level of economic performance is related to the collapse of elite coalitions. Much of the literature has posited that the failure to meet the minimum required level of economic performance roughly translates to political crisis, which is an immediate threat to ruling elites. North et al. (2015, 6), for example, argued that the collapse of the Marcos regime in the Philippines was due to a fall in commodity prices, which reduced the rent level and disintegrated the elite. Similarly, Whitfield argued that the breakdown of the Ghanaian political settlement in the 1970s and the early 1980s (with five changes of government between 1972 and 1981, of which four were military coups) was partly due to the failure to achieve the minimum level of economic performance following a crisis in the cocoa sector (Whitfield, 2011, 10). The loss of legitimacy and eventual dislodgement of Kwame Nkrumah in the 1960s have also been explained in these terms (Killick, 1978, 100). The implication is that ruling elites’ incentives for political survival, and more broadly political order, include a strategy to achieve the minimum required economic performance in times of crisis that affect the existing source of economic performance. Adrian Leftwich described this phenomenon as the economic settlement of a political settlement (2010, 22).
Efforts to attain the minimum level of economic performance offer crucial insights into shifts in economic focus, diversification, changes in ruling elites’ configuration/coalitions and institutional changes. The idea that a threat to political survival may lead to economic diversification and transformation is at the core of recent investigations into the political origins of the developmental state. For example, proposing their theory of systemic vulnerability, Richard F. Doner, Bryan K. Ritchie and Dan Slater argued that states become developmental when ruling elites face existential threats. They compared the newly industrialized countries of South Korea, Taiwan and Singapore with Indonesia, Malaysia and the Philippines to show that the former states became developmental when ruling elites faced challenges to their rule. Doner et al. (2015) modeled three types of threat that induce political elites to pursue economic transformation: reduced living standards, a fall below minimum economic performance, and war or budget constraints.
Although I focus here on the political origins of diversification and economic change, it is crucial to note that changes provoked by a reduction in minimum economic performance in LAO communities naturally go beyond the economic, involving political changes (in the form of changes to coalitions) and institutional changes (in terms of the re-ordering of distributional logic – choosing new winners and losers) (see Whitfield and Buur, 2014; Mosley, 2014). In essence, economic changes cannot be attained without changes in institutional logic (North et al., 2009; Khan, 2010; Whitfield et al., 2015). For example, in an effort to understand changes in political coalitions, Bueno de Mesquita and his colleagues borrowed from the historical literature to argue that periods of crisis caused by a reduction of rent (or a reduction in minimum economic performance) represent critical junctures that create incentives for political reform (Mesquita et al., 2004, 42), this is similar to the argument made by Paul Mosley in his study of coalitional changes in LAO (2014). Mesquita et al warned that the post-1945 development industry may have obstructed the conditions required for coalitional (and subsequently institutional) and economic change in developing countries. Writing on the provision of financial aid by the World Bank and the International Monetary Fund during crises in developing countries, they argued that “by bailing out leaders during such crises, these organisations may unwittingly hinder political reforms” (Mesquita et al., 2004, 42).
In light of the above, in theory, there is a periodic political drive towards economic change, or crisis and the dislodgement of political elites, in LAO countries. Both Khan and North argued that LAO societies are constantly changing both politically and economically due to the constant readjustment of the minimum level of economic performance. In West African countries, where the main sources of rent extraction are cocoa and coffee exports, the dislodgement of ruling elites and eventual political crisis can only be prevented by economic change, for two reasons. First, an international price drop over a sustained period of time will reduce minimum economic performance and threaten not only political elites but political order itself. This is precisely what happened in Ghana, Nigeria and Guinea in 1960-1965, when the price of cocoa beans reached crisis point and the Nkrumah government was threatened with street riots and the disintegration of the elite coalition (for example, Ashanti chiefs renounced Nkrumah and the CPP had most local chiefs deposed as a result). Second, regardless of international prices, rent extraction is not sustainable for products like cocoa and coffee, which are susceptible to diminishing returns due to the relationship between forestland and cultivation. The exhaustion of forestland (a finite resource) thus leads to a reduction in rent and an eventual reduction in minimum economic performance (Odijie, 2015). This was to some extent the case in Ghana from the 1970s.
The limited economic transformation and relative political order of Côte d’Ivoire and Ghana therefore constitute a puzzle that requires thorough explanation. Foreign aid does not explain the puzzle because West African countries are mostly dependent on trade. I argue that ruling elites in West African countries have historically seen the EEC trade system as a means of guaranteeing their minimum economic performance in order to secure their position. Securing a static level of minimum economic performance (through mechanisms such as price support/stabilization) breaks the link between threatened minimum economic performance and the political origin of diversification and creates an economic/production function. Africa’s limited economic transformation (which has been a puzzle for several researchers in the LAO tradition, such as Lindsay Whitfield, Ole Therkildsen, Lars Buur and Anne Mette) can be explained with reference to the guarantee of minimum economic performance obtained by ruling elites from the EU in both the Yaoundé and the Lomé Convention. I defend this proposal using Jean-François Bayart’s theoretical language of extraversion.