Lant Pritchett, a Visiting Professor in Practice at the LSE School of Public Policy London writing in a Working Paper for the Asian Development Bank Institute (Tokyo) tackles a subject I wrangled tangentially with over COVID looking into the origins of modern democratic systems and the development of the most successful of these, the United States; but that’s another story..
Preamble. Much of the analysis of what’s made the West economically successful represents backward induction based on a here and now. Arguments run like this: ‘Look where we are, look at our institutions, there has to be a connection’. Therefore, a ‘free’ press must be an agent of economic prosperity. Ditto an independent-of-government legal apparatus, a politically neutral military, a system of robust accountability of leaders (sometimes called ‘democracy’) and so on.
Framing economic progress in these terms has had a mixed record as a prescription for success for emerging economies. Moreover, it’s led to Cassandra-like prediction of failure for some of the world’s most dynamic economies with China being the most obvious example.
What the paper highlighted today explores is could nations that have done well with their “low quality” institutions and weak “state capability” begin to imagine that sustained progress is capable without reform? Could they too backward-induct to a conclusion that what’s got them where they are can now support progress to higher and higher levels of prosperity?
In looking at the likes of Bangladesh, Afghanistan, Mongolia and Myanmar it’s clear progress can go backwards as well as forwards and with refreshing candor the researcher has this to say about China; “The questions on the PRC are too large and complex for anyone to wade into, and I am not a specialist.”
There’s no conclusion just these three observations: first, you can get great results (as China has) by harnessing even poor institutions before you need to build great ones. Second, ‘good deals’ for business people can take the place of good laws and honest dealing is more important than a robust legal system to get things started (anyone who’s used Airbnb or Taobao knows how effective a peer-review system is). Finally, a system of “closed, ordered, deals”, early Korea is a good example, can work as long as there’s a lot of pork to go around. In Korea’s case though the transition to full democracy has been possible in spite of this early arrangement.
The work’s merit lies in it’s absence of firm conclusion and honest admission that there are just too many moving parts in these equations to be dogmatic about the issues. The author though seems to lean into the notion that better institutions are a good thing.
I’d add my own two-pennyworth here and remind the West’s ‘best practice’ has emerged iteratively over hundreds of years (start with the Magna Carta in 1215 if you like). China, in its current administrative form has yet to celebrate its 80th birthday (that’d be the same as the U.S. in 1856, on the cusp of its Civil War) and seems to be keenly aware that its institutions need work.
You can read the paper in full via this link The Risks to Sustained Economic Growth?
Happy Sunday.