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Donors are sensitive to political issues and therefore reluctant to bring politics into policy debate. Economists have dominated policy-making and political scientists have until recently been more concerned with macro issues as opposed to institutions. There has been relatively little research to date on the application of institutional theory to the politics of growth and development in developing countries. However, there are strong arguments and evidence that political factors determine state and institutional behaviour, and therefore development and pro-poor outcomes.

Application of a political science lens to institutional analysis shows that effective states cannot be made to order. More recent developmental states (Botswana, Japan, Malaysia, Mauritius, Singapore, South Korea, Taiwan, and Thailand) show that building the institutions that constitute an effective state is a political rather than a technical exercise. Key factors in the formation of pro-growth state institutions in these countries were:

• External threat (and to a lesser degree internal threat such as insurgency) providing powerful incentives for concerted policy, elite unity, and the encouragement of nationalist ideology
• Concentration of political, military, and ideological power in the state ensuring continuity of policy
• A single set of developmentally driven rules governing economy and polity in order to promote national survival or interest
• Low economic base, few powerful economic interests, and a weak subordinated civil society enabling state autonomy, and development of a powerful and competent economic bureaucracy
• Urgent development goals forcing elites to be developmentally minded and pushing rapid development of infrastructure and effective bureaucracy
• External western support in the context of the Cold War

Political processes shape both policy goals and the institutional means for gaining them. Recreating the historical conditions that helped the more successful developmental states establish institutions that drove generally equitable growth is not possible today. The external threats that galvanised elites and created one powerful incentive for ‘state-directed’ development are not common. Domestic demand for reform in developing countries therefore needs to be strong enough to establish the institutions which will promote pro-poor growth and to ensure compliance. Institutional analysis can accommodate both political and economic analysis of pro-poor growth. However more research is needed on the origins, forms, and effectiveness of domestic demand in analysing:

• Coalition building, especially with regard to the obstacles to African polities, the conditions under which middle-classes demand improved institutions, and the difficulties poor groups have in forming class-based associations
• The politics of economic decision-making and institutional design
• Formal and informal institutions and organisations and their interactions. How do they compare in their contribution to pro-poor growth and what policy implications flow from this?
• How national aims, ideology, development policy and objectives are shaped
• Political will (a crucial but analytically obscure factor in pro-poor institutional formation and development)