What is good development policy, Elísio Macamo?
Text: Elísio Macamo
Would gaining free access to northern markets help the South economically? And how can developing countries secure functioning institutions? Two contributors discuss how the effectiveness of development aid could be improved.
Africans must develop their own continent. They need, first, to roll up their sleeves and make better use of their resources, and secondly, to solve their problems more peacefully. Above all, however, they need better institutions and governments – and perhaps better populations. This last point echoes a suggestion by the economist and Nobel laureate Douglass North. When asked for his advice on what Russians should do to develop their country, he responded drily that they should get themselves a different history.
What is meant by this is not the sort of history that would have spared Africa colonialism and the slave trade, but a history that would have given Africa better institutions. For many economists who work on development issues, it is all about the institutions. That is because, fundamentally, development is quite simple: All you need is the rule of law, free markets, and competition. According to the top economists working on development issues – Daron Acemoglu, James Robinson, and the rest of them – this simple argument explains why good institutions are necessary. Nations fail because they lack good institutions.
So why don’t developing countries do these simple things? Some put it down to the fact that governments are rewarded only for short-term gains, whereas setting up and strengthening good institutions are tasks for the long term. Others think that does not happen because it is unclear who would gain from it. As a result, politicians in these countries cannot see why they should make the effort.
Now a third explanation is circulating among experts. The argument holds that politicians in developing countries fail to make better decisions for their countries because they are caught in a violence trap. Anything that disrupts the balance could unleash a spiral of violence. Indeed, statistics confirm that the poorest countries in the world are also those with the highest levels of violence – in other words, countries where governments are more likely to be brought down by force. This latent violence is said to reflect a lack of internal cohesion. Douglass North, Gary W. Cox, and Barry Weingast first wrote about this violence trap some years ago, pointing to France, South Korea, and Taiwan as examples of countries that had freed themselves from it by strengthening their internal cohesion. In the case of France, the trigger for this was the threat posed by Germany in the 18th century, while in the other two cases it was the threats posed by North Korea and China. This is the sort of clever analysis that characterizes thinking about development.
The problem with many arguments about development policy is their circularity. Countries are developed because they have developed – or something along those lines. Thus we know that good institutions are important for development because countries that are developed today have good institutions and countries that are not have bad ones. This “institutionalized know-itall-ism”, as Philipp Lepenies calls it, leaves no room for the possibility that good institutions may be not the cause but the consequence of development.