Endogenous Ideology Formation and Economic Policy in Former Colonies

Abstract

Social science is full of studies that purport to recommend optimal economic policies for states to pursue. However, this wealth of analysis is not matched by works that attempt to explain the policy choices that states actually make and the reasons for those choices. Positive, deductive analysis of economic policy formation is still a relatively new research area. Theories that attempt to predict variations in economic strategies among countries are rare, and those that apply to both developing and developed countries are rarer still. Given the obvious centrality of the issue, the lack of systematic, general explanations for such variations creates a rather gaping hole in the literature on political economy. This shortage of explanations is quite obvious for perhaps the most prominent variable in economic policy choice, the level of state intervention in the economy. Intervention can be measured along two major dimensions: the first is the extent to which tariffs, quotas, licenses, subsidies, and other forms of economic control distort overall prices of goods from their free-market value; the second is the size of government spending with respect to the total size of the economy. 1 The level of state economic intervention has long been considered the most salient variable in public perceptions of economic policy, 2 and is the most widely examined policy variable in the comparative analysis of economic performance. 3 Furthermore, state economic intervention is the central policy variable in the great ideological debate of this century, that between capitalism and socialism. This article examines a number of different existing explanations for variations in levels of state economic intervention and argues that they ignore the crucial role that ideology plays in economic policy formation. It then provides a theory of endogenous ‘‘oppositional’’ ideology formation among groups engaged in conflict against the state, applying it to explain systematic biases among state elites in former