Governance, Corruption, and Development
Why institutional quality matters more than natural resources for development, and why corruption is so hard to root out.
Why Institutions Matter
The question that has dominated development economics for decades is: why are some countries rich and others poor? The most influential answer, advanced by economists Daron Acemoglu and James Robinson, focuses on institutions. Countries with 'inclusive' institutions -- those that protect property rights, enforce contracts, limit rent-seeking, and provide public goods -- grow richer over time. Countries with 'extractive' institutions -- where a narrow elite captures the state to enrich itself -- stagnate.
The evidence is compelling. South Korea and North Korea started from similar economic conditions in 1950 but diverged radically under different institutional arrangements. Botswana, which built strong institutions after independence, became Africa's fastest-growing economy despite being landlocked and resource-dependent. The Democratic Republic of Congo, with vastly greater natural resources, remained impoverished under kleptocratic rule.