New Institutional Economics ( Nie ) Perspective : Institutions Matter !

First, I will explain the role of empowered institutions and countries in limiting the economic activities of developing countries, impeding on their ability to survive. Afterwards I will explain the obligation people in privileged positions have to improve the lives of those in compromised positions, at a certain degree of self-sacrifices. Finally, I will critically analyze and disprove the counter argument, which attempts to relieve us of the aforementioned duties, by discrediting the roles of institutions and developed countries in the prolongation of impoverishment.

AIPA 2: UNDERSTANDING ACTORS, INTERESTS & POWER Institutions  Basic level – states exist to provide (1) defence and (2) social order  this requires the presence of a functioning economy.  State not only produces, consumes and redistributes; it’s also the main source and enforcer of “rules of games”.  “Rules of games” are institutions  institutional quality is related to economic performance.  Evidence: No country has gotten rich with bad institutions. Politics  Politics is the process of creating new institutions. Existing institutions create a constraint on this process.  Political processes can be analysed in terms of Actors involved in the processes, their interests and their relative power (AIP).  Actors: Political,

Within the last 60 years, Third World development has been a global priority, at the top of virtually every Western agenda. And with the rise of the global population and poverty levels continuing to rise along with it, it is very easy to see why human development is becoming such a topic of focus and discussion among members of the academia. But one question that everyone wants the answer too is, how does Third World development fit into Globalization? Despite apparent compatibility, when closely examined it is clear to see that Globalization actually contradicts Third World development due to the conflict of agendas. Both Globalization and Development hold views concerning market reform, social structure and regulation, which are

It seems counter-intuitive that institutions were set in place to stabilize financial markets around the world, but some of the policies set in place by them have long lasting negative effects on the local economy. These institutions could provide assistance in an objective and responsible manner, but it seems that they need to provide assistance to each project and country differently as well as it being a matter of ethics. Some policies set in place that may work for one developing country may not work for another. Also, it seems that these institutions can take advantage of the underdeveloped countries by putting regulations in place that profit countries that have more power within the structure of the institutions. I think this can be ensured by enlisting ethical individuals understand the local economy and culture of the country before setting policies in place that may benefit the other parties involved more than the developing

Weak Institutions A. Russia’s position/reaction: Russia believes even small changes in the institutional environment could be important as a start for a economic growth. i. The high levels of the lack in rule and law, corruption, and deficiency in market competitors, limit the prospective of the Russian economy. ii.

Established Stanford University professor, economist, and political scientist Barry Weingast portrays the global impact of institutions in his work through a term he coins the “fundamental political dilemma.” The dilemma illustrates that any government that has the power to protect property rights, enforce contracts, and maintain basic stability also has the power to take away the wealth of its citizens. A major question to consider, then, is what actually determines why some nations choose one route instead of the other? Weingast believes that the answer to this question lies in institutions; he states that institutions allow countries to choose the “rules of the game” and organize society. Simply put, the carefully-crafted institutions of

The BRICS as developing countries have more recently industrialized than developed ones, however they are considered to be emerging economically at a very fast rate along with having a growing impact and weight on the international scale. Nevertheless, those countries are highly vulnerable and affected by poverty and inequalities, jeopardizing their capacity to have some sort of control in global institutions (Miles Kahler, 2013, page 721). Some of the most important issues developing countries encounter, slowing down their growths are related to poverty along with inequality. This is the reason why certain worldwide institutions such as the World Bank set objectives, in an attempt to lift people out of poverty and decrease inequalities among

Neoliberal globalization is an economic system that promotes free market policies of liberalization, deregulation, privatization, and the cutting of social support systems. The International Monetary Fund and the World Bank help promote these policies by making structural adjustment programs conditions for any aid or support. Unfortunately, once structural adjustment programs are put into place they tend to disrupt developing countries’ economies and end up making them even worse off than before. Before the 1980s, developing countries had a per capita growth rate of more than 3%, once these policies were put into place growth rates dropped to 1.7% (Hickel 2012: 7). This provides evidence that these programs are pushed at developing countries

Economic stability is determined by the confidence of the majority population in the institutions established by the government. The economic and legal framework put in place should ensures strong property rights and provide credibility for people to invest in long term projects. Institutions are relevant only if they impose constraints to the behavior of actors. “They should diminish: i) the discretion of the government in the administration and implementation of policy objectives; and/or ii) the ability of the government to undertake unilateral changes in policies.” These conditions are similar to those stated by Levy and Spiller (1994) as the mechanisms that provide credibility and effectiveness to a generic regulatory framework. Those who have the utmost confidence in public institutions prefer flexibility as they believe they will pursue economic policies that are beneficial for the majority population at any given time. However, the politician who actually makes these policies prioritises their self preservation and maximises their own welfare function.

First it is of vital importance to define what we precisely mean by institutional change. In his acclaimed book, Douglass North mentions that institutional change will only be driven when relative prices and preferences of organizations change. Institutions are overwhelmingly incremental and will adapt and change its organization through continuous marginal adjustment. Institutions conforming nation-states are thus, non-static and will continuously adapt to different circumstances. North also mentions that change in preferences and prices can be exogenous, namely a plague, an economical crisis, or a colonizing power. However, North stresses the importance that the process of institutional change also includes “maximizing efforts of endogenous

Even though institutional infrastructures are able to encourage development, the book also offers an opposing answer. The authors believe that even though it could promot development this may only happen in the short term. In the long run poverty could be a result. Another point that the authors make is known as “vicious circle”. A vicious circle is one that is usually seen at work in numerous underdeveloped countries. There has been one in existence for over the last four centuries. The vicious circle has a history where extractive institutions have been created and entrenched. They have been created by a higher colonial power. This colonial power became the rulers, but because this happened there was a result in a civil war where large groups

In the Acemeglu, Johnson and Robinson article, “Institutions as a Fundamental Cause of Long Term Growth”, the authors emphasize how institutions are the main determinant of economic development because stronger institutions allow for more growth in education, security, and health. To observe whether strong institutions determine economic growth it is important to mention the characteristics of a strong institution that allows for fast growth. Strong institutions are able to enforce property rights, a fair judiciary, efficient bureaucracies, intellectual property rights, corporation government bankruptcy laws, and democracy (e.g. “(Lecture 13)”). Going in depth

The three major international economic institutions are the International Monetary Fund (IMF), the World Bank and the World Trade Organization; this book mainly focuses on the IMF and the World Bank, due to the author’s first-hand experience with both institutions. The IMF, a public institution built as a guiding hand for economic stability around the world, has brought false

The history of international development aid can be tracked down to antiquity, however, the modern era saw international development aid begin to evolve in the 19th and early 20th century (Kapur, 2003) but the true expansion of international development aid was in the aftermath of the Second World War. The most significant events in accordance with the establishment of international development aid were the creation of The United Nations, The Marshall Plan, and The Bretton Woods conference that established the World Bank and the IMF. The modern manifestation of international development aid is extremely widespread. There are countless international organizations and governments present which all contribute to international development aid as it is a moral responsibility, however, what is the effectiveness of the aid they provide? This paper argues

Assessment Title: “Africa needs to be rich - rather than green” claims Matt Ridley. Would this statement also apply to developing economies? Using clear Example, discuss the role and influence of The World Bank and the International Monetary Fund in the developing countries of Europe.