Exporting policy and Institutions

Development has been rife with trending schools of thought, asserting the superiority of their ideological convictions over others. Here, Jesus Rodriguez evaluates the effectiveness of exporting successful ideas, institutions, and policies from one place to another.

Like any academic discipline or social activity development is subject to trends. This is nothing to necessarily be afraid of, but something to be aware of insofar as these trends can represent what is at the forefront of our field. Within the field of development our main focus is to discover the secret of prosperity, how to lift people out of poverty, how to achieve a good quality of life. Development is a young discipline yet we have greatly progressed in recent years by viewing historical and economic trends through path dependency analysis. In this piece we will have a brief discussion of what institutions are, how they relate to path dependency analysis, how they impact development, and why they may not function in application. We will be arguing that path dependency analysis in economic history has possibly uncovered a key factor in achieving prosperity but more research is needed to verify our hypothesis.

Open Grid Scheduler / Creative Commons License

Open Grid Scheduler / Creative Commons License

Douglass North describes institutions as the rules by which the game is played; they are our social norms, the way our society functions, the way in which we interact with each other. In short path dependency analysis using critical junctures is when we compare very similar case studies and evaluate how they differ when confronted with the same stimulus. An example of this would be how Western Europe and Eastern Europe reacted to the Black Death, in Western Europe workers demanded greater wages for more work and in Eastern Europe the workers were forced to do more work for the same wage. Path dependency analysis relates to institutions in that through historical events we can see how different countries have succeeded based on their institutional makeup. Following this thought and using path dependency analysis we generally see that the countries with inclusive institutions tend to be more prosperous than the rest.

In theory if we could learn how to do this we should be able to engineer more prosperity for developing countries, as with the use of the right institutions these countries are more conducive to growth. At which point we arrive to the crux of the issue, we know that inclusive institutions are the most conducive to growth so how do we export them to other countries? The answer is we cannot, at least we do not know how at the moment. There have been attempts in the past to do such a thing but they have failed. An example of this is the exportation of consumer protection groups to Latin American countries. Consumer protection groups are largely a North American phenomenon; they were developed as part of North American history and culture. What we find when this policy set was exported to Latin America during its neo-liberal era is that they did not function in the way that they were supposed to. Consumer protection groups had no history in the continent and as such people were ultimately unfamiliar with the concept and failed to adequately implement them.

Giselle Varga / Creative Commons License

Giselle Varga / Creative Commons License

Owing to the fact that institutions are socio-historical constructs it is near impossible to adequately translate them unless the country in question has a very similar history and culture. Its as if you try to use an inside joke with a different group of friends, without the right context the exportation of policies and institutions will not work. Yet that is not to say it will never work. At the core of social interaction and individual decision-making there are behavioural patterns at play that we can theoretically analyse in order to understand how people interact. With this it is possible to breakdown a group of foreign institutions and policies into behavioural patterns and adjust them according to the behavioural patterns of the developing country. It would be like breaking down an inside joke into its respective parts and adapting it to fit the context of a different group of friends. With that, there is currently no research of the sort occurring to the knowledge of the author, likely owing to a myriad of reasons from complexity to cost of doing such extensive research.

We see from path dependency analysis that inclusive institutions are conducive to growth and prosperity, which if we could learn how to artificially create them we would be able to greatly enhance our ability to increase the quality of life of others. Yet it is possibly impossible to recreate culture and history, which is why we must attempt to reduce institutions to behavioural patterns and adjust them accordingly. We know why some societies prosper and others fail, and we have a few ideas into how we can help them succeed, but before we can be sure we need more research.

The views expressed in this article are those of the author and do not necessarily represent the views of Development in Action.


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