How power and institutions affect development

What does the World Development Report 2015 have to say about power and institutions – two central determinants of development?

When we think of power, social institutions like the police and the military often come to mind – organizations with the ability to use brute force to compel people to follow rules and obey commands. But while the power structures we observe in the world around us are very real, (they are not simply “in the head”) part of their clout nevertheless lies in their “schematizing role.” Institutions, we argue, are more than just the “rules of the game” as is conventionally understood in the disciplines of economics and political science.

Institutions are also, as anthropologist Mary Douglas argued more than three decades ago, “ways of seeing the world.” They provide us with categories, and associations between categories, which we then use to apply meaning to our environment. In other words, institutions shape the mental models – the internal representations our cognitive systems create to interpret the environment – we have available to us as we make judgments and decisions in our day-to-day lives.[1]

Institutions, thus, can empower and disempower people in ways that we might not expect. The standard approach in economics and political science suggests that groups are excluded because they lack access to markets and resources or are under the thumb of exploitative structures. These factors explain part, but not all, of the story. They do not explain why some social groups continue to face exploitation and lack equal treatment in markets even after the formal barriers to access have been removed and many of the informal barriers outlawed.

An alternative, cognitive, approach to institutions sheds light on this puzzle. It suggests that because people both see and judge themselves and others through categories and belief systems inherited from previous generations, the effects of abolished formal institutions and now proscribed exclusive clubs can persist. Such an approach allows policymakers to identify when cognitive mechanisms of exclusion are at play and offers solutions to tackle them. Take, for example, the social and economic marginalization of many black people in the United States today. The “rational actor” approach argues that African Americans are disproportionately marginalized due to America’s historic legacy of discrimination: A legacy that has left the group poorer on average than most white Americans and with less access to social goods, such as quality schools and valuable professional networks, than other groups.

An enriched psychological and sociological approach shows that many African Americans are also marginalized because of enduring racial prejudice – or, as the WDR says, the persistence of dysfunctional mental models. History, as in the standard approach of economics and political science, matters, but in more ways than the rational actor model identifies. New research, for instance, shows that even fine differences in historical experience shape prejudice. Whites today who live in Southern counties that had high shares of slaves in 1860 are more likely to express racial resentment toward blacks and to oppose affirmative action than are whites who live in otherwise similar areas that had lower shares of slaves in 1860. The authors suggest that “following the Civil War, Southern whites faced political and economic incentives to reinforce racist norms and institutions. This produced racially conservative political attitudes, which in turn have been passed down locally across generations.”

Dysfunctional mental models that lead to encounters in which black people are categorized and essentialized are not limited to conservative districts in the US South, and do not affect merely support for affirmative action. They affect virtually all aspects of social life in the country. Take the labor market: When resumes of equal quality are sent to employers, those with names associated with African Americans are fifty percent less likely to get called back than those with names associated with whites. When people with similar resumes, interpersonal skills, and other demographic characteristics turn up to look for jobs, blacks again are half as likely as equally qualified whites to receive a callback or job offer. In fact, in one recent experiment, black applicants without criminal records were equally statistically likely (and perhaps, even less likely) to receive callbacks or job offers than white applicants with a criminal record!

But the labor market is just one of the many contexts in which dysfunctional mental models affect judgments. An expanding body of research in behavioral economics and psychology is showing that blacks face irrational and widespread prejudice in a variety of environments –health, education, politics, and justice system. It even appears to affect how Americans perceive the legitimacy of institutions. As WDR co-director Karla Hoff notes in a follow-up paper to the WDR:

“When Prohibition produced high incarceration rates for whites, many people viewed the law as harmful, and the United States repealed Prohibition (Kyvig 1979); but when current U.S. laws against drug use produce high incarceration rates for African Americans … the laws go little changed.”

How does the schematizing power of institutions matter for developing countries? Just as power’s effect on perceptions of the legitimacy of institutions has harmed black people in the US, the WDR documents examples of “perverted legitimacy” in villages in developing countries.  In Sierra Leone and India, for historical reasons, in some villages dominant groups have an unusually firm grip on power (either because of lack of political competition in Sierra Leone or due to patterns of land ownership in India). These elites have persistently underserved their constituents: Compared with villages that have more political competition or which are less dominated by the landlord caste, development outcomes are worse and pro-poor government programs are few or non-existent. Yet when asked by surveyors about authority, the villagers in the more exploited villagers in Sierra Leone are more likely to report that there ought be more support for authority as compared to villages with more political competition. Similarly, members of low-caste groups in the more oppressed villages are more likely than those in the less oppressed villages to say that they trust the landlord caste.

So legitimacy may follow power as was powerfully argued over three centuries ago by Hobbes. But in ways that are more perverse and for reasons that may have more to do with ways of seeing the world than previously recognized. This may sound bleak. But identifying the role that mental models play in social exclusion can help development practitioners tackle the problem.

This post first appeared on The World Bank Let’s Talk Development Blog. Publication does not imply endorsement of views by the World Economic Forum. 

Publication does not imply endorsement of views by the World Economic Forum.

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Author: James Walsh was a member of the research team for the World Development Report 2015: Mind, Society, and Behavior.

Image: Scales of Justice are seen in Brittany’s Parliament. REUTERS/Stephane Mahe