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Development, Institutions and Public Policy; Deciphering the Linkages

Much of the social science revolves around the idea of the development. Social scientists around the world have proposed and still proposing models and theories of development in order to improve societies. Still it is far from the potential level, except for a very few islands of development; having said that these islands too are not close to what scholars actually idealize. Today, the basic ingredients of development are known i.e. well-defined property rights, effective judicial system, rule of law, institutional frameworks, market-based economy and so on. If all the ingredients are known, then what’s missing? Why are not all the countries developed? Why most of the world is still trapped in the vicious cycles of poverty, low productivity, stagnant economic growth etc.?

The problem is that economics, political science, sociology, law and other social sciences are, though rich but static disciplines that explore very narrowly their own particular field. Now here, the liberty that can be taken under the emerging subject of ‘public policy’ is that it can take all of these together and can analyze how different fields interact with one another to shape the social order of different societies. Public policy takes into account all the interesting things that other fields just assumes, as ceteris paribus, in order to simplify their models. It can thus be concluded that evolution of social order and institutions is exceedingly context-specific. Every society evolves and moves towards transition in its own particular way and every development mantra works only under very specific circumstances providing conducive settings to catch up. To know these exclusive settings of societies, how each society work ought to be known.

Douglass C. North, an influential American economist, known for his work in economic history, pronounces that the manner in which societies work is the function of the way institutions work. For the purpose, societies devise institutional frameworks to govern their domains. To be specific, institutional framework comprises a set of rules of the game. These rules of the games may be informal or formal in nature. In order to understand the change or transition, one should go beyond broad generalizations to a specific understanding of the cultural heritage of the societies.

 

 

General perception across the world is that developing realms are sick and that they require the proper remedy i.e. policy reform. This standpoint misperceives the subject. The countries of the developing world are not sick, but they are somewhat successful in their own specific context as they are structured in such distinct ways and engineer such public policies that generate rents and privileges which principally solve the problem of violence in the society and provide for stability.

Endeavors to create rule of law, market reforms and democracy go unsuccessful because they fail to take into consideration the very logic of a natural state. Transplanting the institutions from developed countries into developing countries cannot yield political and economic development on its own. Undeniably, if these institutions are enforced involuntarily onto societies by international or domestic gravity but do not follow the prevailing beliefs about the political, cultural, social and economic systems within a particular society, then novel institutions will probably work worse than the ones they displace.

It is generally not comprehended that a society, especially in a developing country is based on the decades old or sometimes centuries old system of power, privileges and patronage network to control the violence or threat of violence. When that system is overthrown and institutions like free market economy and political competition is imbued; chaos and uncertainty is usually the outcome. The most recent examples in this regard can be of Iraq and Libya. The relatively stable existing systems of power and patronage were overthrown and democracy was introduced, which off course met brutal failure. The point to understand here is that every society has its own rules of the game to control violence. Any change in those rules of the games should be endogenous, not exogenous. There are three essential features that impede the progression of development in this regard. It includes violence, absence of impersonality and dearth of perpetuity. These hinder any reform process.

In a crux, developing countries need to provide the foundations for self-enforcing violence control mechanism, a perpetual state and factor of impersonality. Contemplation of these matters is indispensable before natural states can cultivate democracy, rule of law and competitive economic and political markets.

The author Saddam Hussein is a Research Fellow/Program Officer at Center for Research and Security Studies (CRSS), Islamabad. He is a Development Economist and also holds Master of Philosophy degree in Public Policy from Pakistan Institute of Development Economics (PIDE). He tweets @saddampide

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