Why and how does economic development happen?

[Cleaver, Ch. 10]

  1. What do we mean by Economic Development and how have we been doing?

  2. Lessons from History?

  3. A personal view.

1.    What is Development? The UN Development Programme defines and measures Human development in its Human Development Index, and produces an annual Human Development Report See, also, 25 years of HDR Infographics.
HDI
For detailed development indicators, see World Bank Development Indicators data set, and the annual World Development Reports.
See, also, UCTAD: Development and Globalisation Facts and Figures - for progress towards the Millenium Development Goals

 What does Development mean (what is growth)? Inequality versus Poverty Alleviation?  One of the Major current debates - does economic growth necessarily require growing inequality?

global income distribution

IFPRI's 'Speed' database (Statistics on Public Expenditure for Economic Development) does what it says in the title.

Special Report: The World Economy (Economist), 13.10.2012 "Growing inequality is one of the biggest social, economic and political challenges of our time. But it is not inevitable, says Zanny Minton Beddoes" introducing a special series of 12 articles in all:
As you were (history, and "the three levers used to narrow inequality—taxation, government spending and regulation")
Like a piece of string (measurement problems)
Like father, not like son ("what share of inequality can be explained by factors over which people have no control: race, gender, birthplace, parents’ education and occupation. The smaller that fraction, the greater a country’s equality of opportunity")
The rich and the rest ("The combination of tax loopholes, bank bail-outs and massive lobbying has led many observers to conclude that America’s growing inequality has political roots. The wealthy, in this logic, control the political system and rig it to their advantage.")
Makers and takers US tax and government spending implications for inequality
Crony tigers, divided dragons "By introducing a more efficient, and progressive, social safety net, Asia’s governments will go some way towards mitigating their growing income gaps. But there will be no big breakthroughs until the bigger problems of informality (in India), discrimination against migrants (China) and cronyism (everywhere) are dealt with.")
Lessons from Palanpur "But in a country (India) where for centuries the disadvantaged had no chance of improving their prospects, more social mobility, even amid wider inequality, is a big step forward."
Gini back in the bottle "Much like the United States, many Latin countries will have to decide whether to invest in poorer kids or continue to pay generous pensions to richer old people. In both places the social contract needs to be remade."
The new model: The Swedish Story: "All these case studies indicate that the geography of contemporary inequality has as much to do with government policy as with underlying economic forces. But it has not been a simple tale of tax and redistribution, nor is there a simple trade-off between efficiency and inequality"
Having your cake: "Less inequality does not need to mean less efficiency: First, in countries with the biggest income gaps, increasing inequality is partly a function of rigidities and rent-seeking—be it labour laws in India, the hukou system and state monopolies in China or too-big-to-fail finance in America. Such distortions reduce economies’ efficiency. Second, rising inequality has not, by and large, been accompanied by a smaller (and hence less distortive) state. In many rich countries government spending has risen since the 1970s. The composition has changed, with more money spent on the health care of older, richer folk, and relatively less invested in poorer kids. Modern transfers are both less progressive and less growth-promoting. Third, recent experience from China to America suggests that high and growing levels of income inequality can translate into growing inequality of opportunity for the next generation and hence declining social mobility. That link seems strongest in countries with low levels of public services and decentralised funding of education. Bigger gaps in opportunity, in turn, mean fewer people with skills and hence slower growth in the future."
A True Progressivism: "Three broad reforms stand out: One is to curb cronyism and enhance competition, particularly in emerging markets. ..and remove the rents that lie behind a lot of the surge in wealth at the top..A second priority is to attack inequality with more targeted and progressive social spending..from transfers to education, and from older and richer people to younger and poorer ones...The third priority is to reform taxes, to make them a lot more efficient and somewhat fairer."

Development Prospects:
The World Bank's Commission on Growth and Development produced a report in 2008 on Strategies for Sustained Growth and Inclusive Development, which examined 13 economies which have sustained high growth in the post-war period, to identify any common patterns.
The Growth Commission Report identified “five striking points of resemblance” among all 13 highly successful countries in the world, that, for more than 25 years, had grown at rates exceeding 7 percent a year:
  1. openness to the global economy,
  2. macroeconomic stability,
  3. high saving and investment rates,
  4. reliance on a functioning market system,
  5. credible leadership and good governance
However, (WB, 2010: “World Bank (2010d) Research for Development: A World Bank Perspective on Future Directions for Research. Policy Research Working Paper No 5437.) there remain important questions:
According to The Day After Tomorrow: A Handbook on the Future of Economic Policy in the Developing World, (World Bank, 2010) almost half of global growth is currently coming from developing countries. As a group, it is projected that their economic size will surpass that of their developed peers in 2015. “Developing countries have come to the global economy’s rescue,” said Otaviano Canuto, World Bank Vice President for Poverty Reduction and Economic Management (PREM), and co-editor of the book. “They are the new locomotives of growth which will move global growth forward while high-income countries remain stagnant.”
Diverging growth prospects are seen as continuing in the medium term.
Five factors account for it:
“The economic horizon of the developing world is promising,” said Marcelo Giugale, World Bank’s Director for Poverty Reduction and Economic Management in the Latin America and Caribbean Region, and co-editor of the study. “The rebalancing of global growth toward a multiplicity of engines will give the developing countries new relevance. It will also change their policy agendas: on average, economic management will be stronger, governments will be better, and the beginning of the end of poverty will be within reach.”
The study notes that developing countries should take advantage of their relatively healthier fiscal positions to foster inclusive growth. This means better targeting of social programs, more emphasis on giving people the same opportunities, and business environments that facilitate the creation of formal jobs.
Other upcoming, developing-country trends identified in the book include the recovery of remittances, an increase in South-South trade, rising investment by sovereign wealth funds, more conservative debt management, and progress by many governments in gaining public trust."

For more detailed information and analysis - see the World Bank's World Development Reports. - e.g. 2013 - focusing on Jobs. For a snapshot on urbanisation and incomes, see here (Economist, October, 2012)
and also a 2013 report on global urbanisation (McKinsey) including an intersting/illuminating graphic of the shifting centre of (economic) gravity of the world (Economist Daily Chart, June 28, 2012):
Shifting Centre of Global Economic Gravity
Though shifting people and economic activity from farms to cities does not always generate growth and development (Economist, Oct 2, 2012)

For some additional reading on development processes and appropriate development policies, see The World Bank Research Observer, Symposium on "New Structural Economics",  Vol 26. no. 2,  August 2011, with contributions from Justin Lin, Anne Kreuger, Dani Rodrik and Jo Stiglitz.

2.    Lessons from History? 
How come Europe, and especially Britain led the Industrial Revolution of the 19thC. and not China?
Why did Europe, and especially the UK lead the Industrial Revolution?
"The industrial revolution is quite probably the most important economic development of the past 500 years. It produced not a once-only step-up in productivity but a century-and-a-half of industrial expansion and continuing innovation that transformed lives everywhere. What is more, it stemmed from the globalisation of the early-modern period and gave rise to more. With global crisis raging anew, readers could do worse than ponder that long-ago upheaval." [Economist, review of Allen, British Industrial Revolution.. (below), 21.05.2009]

The Traditional/Conventional View (?):  Max Weber (1864 - 1920), and founder of modern sociology, argued that it was the Protestant Work Ethic which was decisive. Frey (Economic History net), 2010, argues "More recent quantitative evidence supports the hypothesis that cultural values count in economic development. The cultural values examined in recent studies are not religious values, as such. Rather, such presumably secular values as the need to achieve, intolerance for corruption, respect for property rights, are all correlated with economic growth. However, in its own time Puritanism produced a social and economic ethic known for precisely these sorts of values."
See also, David Landes: The Wealth and Poverty of Nations (Abacus, 1998), which tends to side with the cultural explanation, while also recognising the importance of climate, geographical location etc.

An alternative answer is provided by Jared Diamond - Guns, Germs and Steel. (see, also, PBS pages) - that geographical and biological advantage favoured the european land mass (temperate, well connected and polulated with domesticable plants (wheat, barley, flax, legumes) and animals (horse, cow, sheep, goats) -> cultivation, civilisation and growth (specialisation and trade), which provided both a base and a need for the development of military force for both defence and expansion (guns); and also for steel (machines and power); and also generated disease in dense populations and disease resistance (germs), which, when transmitted to more sparsely populated regions (the Americas) proved decisive. -an evolutionary accident generating positive feedback loops which proved self-reinforcing. A synopsis of his thesis:
A further answer is provided by Robert Allen, The British Industrial Revolution in Global Perspective (Cambridge, 2009), which relies more on economics: "In the late sixteenth and early seventeenth centuries a European-wide market emerged. England took a commanding position in this new order as her wool textile industry out competed the established producers in Italy and the Low Countries. England extended her lead in the late seventeenth and eighteenth centuries by creating an intercontinental trading network including the Americas and India. Intercontinental trade expansion depended on the acquisition of colonies, mercantilist trade promotion, and naval power." [Though the Dutch and others also managed similar expansion at this time].
In England, rapid urbanisation and growth -> increased demand for fuel (wood replaced by easily and cheaply available coal). ["Energy was more expensive on the European continent and particularly expensive in China (Figure 2)."]
Rapid growth also -> higher wages and incomes - rising cost of labour & increased demand for manufactured and imported goods
-> Commercialisation and revolution of agriculture (to feed the rich and growing urban population)
"Success in international trade created Britain’s high wage, cheap energy economy, and it was the spring board for the Industrial Revolution. High wages and cheap energy created a demand for technology that substituted capital and energy for labour.... The technologies that were used (in England vs, China) reflected the relative prices of capital, labour, and energy. Since it was costly to invent technology, invention also responded to the same incentives."  "These technologies (steam driven) eventually revolutionised the world, but at the outset they were barely profitable in Britain, and their commercial success depended on increasing the use of inputs that were relatively cheap in Britain. In other countries, where wages were lower and energy more expensive, it did not pay to use technology that reduced employment and increased the consumption of fuel. .. Since the technologies of the Industrial Revolution were only profitable to adopt in Britain, that was also the only country where it paid to invent them."  In addition, the demand for R&D, education and training to develop the industrial muscle and sophistication also generated a supply repsonse (private education, apprenticeships, and respect for science and research), and the development of venture capitalists (the early banks) willing to finance R&D.
Once started, however, the drive for progress in harness with the expansion of the British Empire, led rapidly to increasing efficiency of steam power: "The consumption of coal in steam engines, for instance, was cut from 45 pounds per horse power-hour in the early eighteenth to only 2 pounds in the mid-nineteenth. The genius of British engineering undermined the country’s technological lead by creating ‘appropriate technology’ for the world at large. By the middle of the nineteenth century, advanced technology could be profitably used in countries like France with expensive energy and India with cheap labour. Once that happened, the Industrial Revolution went world wide."
In short, expensive labour and cheap energy spawned the industrial revolution. And trade helps enormously. The Black Death raised the price of labour and boosted trade. English sheep grew longer fleeces as they grazed fields newly left fallow, and local cloth improved. As Britain traded more, extending its reach to the Americas and Asia, London, then other cities, expanded. Agriculture became more productive. Between 1500 and 1800 England shifted people out of farming faster than any other big European country. The coal that Britain was lucky enough to have was mined in growing quantities to fuel city dwellings. By 1800 Britain was producing “the vast preponderance” of the world’s coal, and it was cheap.
Thanks to trade, wages stayed high although the population grew. Education improved (though the Dutch still had a higher literacy rate in 1800). So did diet, permitting people to work longer and harder. And trade gave them a reason to, bringing in exotic products that well-paid workers could aspire to. This “industrious revolution” made possible the industrial revolution. Steam engines were originally designed to pump water out of the pits and railways to move coal around them. The watchmakers of southern Lancashire proved an unequalled source of high-quality, low-cost gears."

DRH Note - the major migrations to and colonisations of the 'new world' also provided valuable 'safety valves' for European (and especially British) industrialisation - by providing an escape route for the disaffected and displaced (Scots from the Highland clearances, Irish from the Potato famines); and also by providing both the means of and demands for transport (ships and railways) and the food and raw material supplies for the home population. Not only this, but the revolution was also based (at least partly) on the slave trade. Could the industrial revolution have happened without these safety-valves?  Would it have been different and had a different development path without them?

See, also, Angus Maddison: Contours of the World Economy 1-2030 AD : Essays in Macro-Economic History, Oxford, 2007 (e-book). "Written by a pioneer in the quantitative and macroeconomic analysis of economic history, this book combines qualitative histories with quantitative data. It also seeks a new understanding of the forces of economic growth and development by taking the ultimate long view - the whole of the last millennium - and looking to the future. This book seeks to identify the forces which explain how and why some parts of the world have grown rich and others have lagged behind. Encompassing 2000 years of history, part 1 begins with the Roman Empire and explores the key factors that have influenced economic development in Africa, Asia, the Americas and Europe. Part 2 covers the development of macroeconomic tools of analysis from the 17th century to the present. Part 3 looks to the future and considers what the shape of the world economy might be in 2030. Combining both the close quantitative analysis for which Professor Maddison is famous with a more qualitative approach that takes into account the complexity of the forces at work, this book provides students and all interested readers with a totally fascinatingoverview of world economic history. Professor Maddison has the unique ability to synthesise vast amounts of information into a clear narrative flow that entertains as well as informs, making this text an invaluable resource for all students and scholars, and anyone interested in trying to understand why some parts of the World are so much richer than others" [Angus Maddison passed away on 24 April 2010]
Maddison's original website contains a number of 'seminal' papers on economic growth and development - see, especially, "New Estimates of Chinese Growth Performance and Potential 1952-2030", which shows how difficult it is to measure economic growth; and "Economic Epochs and their Interpretation", and "European Capitalism: an historic and comparative perspective" - though now considerably out of date, an  account of the last 200 years of economic development in the West.

For more on the genesis of the industrial revolution, see: The story began in Bedlington, Northumberland: "The coming of the iron industry with the opening of the Bedlington Ironworks Company in 1736 changed the town from an isolated rural village to an industrial town."

Why didn't it happen in China?

Interesting question (aka The Needham Puzzle). By 1100AD China was apparently poised to embark on a major industrial revolution, having already invented/discovered gunpowder, paper, printing et. and already had a large fleet of ocean going ships, as well as a substantial internal transport infrastructure, relying on vavigable water routes.   
Diamond's (Guns) argument is that Western success was a coincidence driven by accidental good fortune - being in the right place at the right time - a view which is quintessentially postmodern.  Ian Morris: "Latitudes not Attitudes: How Geography Explains History", History Today, 20. Oct, 2010, argues a similar thesis.  Diamond's more recent book -  ''Collapse'' posits that the Western way of life is flirting with the sudden ruin that caused past societies like the Anasazi and the Mayans to vanish. .“...“ The big problem with this view (Guns)  is explaining why China -- which around the year 1000 was significantly ahead of Europe in development, and possessed similar advantages in animals and plants -- fell behind. This happened, Diamond says, because China adopted a single-ruler society that banned change, at least after the Ming dynasty (1368 -1664) - [as does Menger (op cit)]. True, but how did environment or animal husbandry dictate this? China's embrace of a change-resistant society was a political/cultural phenomenon. During the same period China was adopting centrally regimented life, Europe was rapidly developing the idea of individualism. Individualism proved a potent force, a source of power, invention and motivation. Yet Diamond considers ideas to be nearly irrelevant, compared with microbes and prevailing winds. Supply the right environmental conditions, and inevitably there will be a factory manufacturing jet engines." (Gregg Easterbrook, NYTimes) - Socio-economic development is a political/cultural phenomenon, then, as argued by Landes (above).

See, also: Daniel Venn, Warwick University, "Why Did The Industrial Revolution Take Place In Europe And Not Asia?" (2005), who surveys the arguments, without coming to a major conclusion - other than that the industrial revolution might well have happened in China.  Stenger (op.cit, intro) suggests that China turned inwards rather than outwards at the time when industrialisation was possible and made sense, and (by implication) only reversed this position in the last 30 years, and is now experiencing its own industrial revolution - the implication being that China's failure to 'capitalise' on her early technological and knowledge base was largely political. 
Or, Justin Yifu Lin, "The Needham Puzzle: Why the Industrial Revolution Did Not Originate in China", Economic Development and Cultural Change, Vol. 43, No. 2 (Jan., 1995), pp. 269-292, who suggests that China, while demonstrating major technical advance based on experience (and practitioner trial & error), did not manage to make the transition to the science/experimental methods developed in Europe in the 17th C., and develops an argument based on the conditions necessary for significant advance by experiential trial and error versus by scientific expermentation. He concludes that the cultural legacy of well organised bureaucracy (and associated service to the 'state') in China, in contrast to the more individually hierarchical social 'systems' in Europe, is at least a part of the explanation.  Dr. Patrick Leung, Economic History of China: "Why industrial revolution did not occur in China?" argues along similar lines.
Or, for a sociological perspective,  Mark Elvin, "Why China failed to create an endogenous industrial capitalism",  Theory and Society, Volume 13, Number 3, 379-391, DOI: 10.1007/BF00213231 for a critique of the Weberian explanation, and arguing that an economic and ecological explanation is simpler, more internally consistent, and more capable of empirical examination than Weber's cultural and ideological explanation (though possibly less entertaining and intuitively appealing?)
And Naill Ferguson:  "The 6 killer apps of prosperity" (neither geography nor national character/culture can explain the differences in prosperity) - as presented in his recent book and TV series: Civilisation.

What should we learn? Is collapse inevitable?

Diamond (Collapse, above) suggests that collapse is inevitable until and unless we take much better care of our environments.  Those subscribing to the cultural explanation necessarily require that our cultures have to change if we are to be sustainable, which seems to suggest that collapse is inevitable short of a second coming.  Joseph Tainter (author of the 'classic' - The Collapse of Complex Societies (Cambridge University Press, 1988) argues that complexity of problem solving is the major difficulty, requiring ever increasing effort and resource which ultimately undermines the capacity of the society to survive.  See Tainter: Complexity, Problem Solving and Sustainable Societies, for a synopsis - though this argument does not indicate any clear directions to avoid collapse. Others might reasonably complain that our politics are too cumbersome, incomplete, divisive, corrupt, etc. etc. to offer much prospect for future sustainable development. On the other hand, surely our command of technology can be harnessed ensure a more sustainable future?  Not, might come the response, unless our economics is very substantially revised.  So, do we need a new, revised, different IDEOLOGY?

The short answer to the issue of what we might learn from history is that it all depends on the 'story' about why what has happened has happened - and thus what we might expect to happen in the future (or at least to identify either the major and fundamental problems, and/or outline the major alternative options).  However, there is NO SINGLE, COHERENT AND CONSISTENT THEORY about the development of people and nations, other than some form of Socio-Economic, and therefore political and cultural Evolution, which necesarily happens in interaction with our natural and physical environments, and is not necessarly continually progressive.  A major problem with this evolutionary foundation is that it is fundamentally a-scientific - there are no (or very few) testable (refutable) propositions from the theory of evolution, which raises (even generates) some interesting philosophical issues.

Since understanding Globalisation Patterns and Processes necessarily involves consideration of what the nature of patterns and processes might be - we need to consider the philosophy of what we think we know - the philosoph(ies) of social science.  What (Metaphysical) stories do social scientists subscribe to?  What sort of ideological alternatives are available - ideology: "a system of ideas and ideals, especially one which forms the basis of economic or political theory and policy", or "the set of beliefs characteristic of a social group or individual". In short -  What do we need from Social Science? [See here, and here, for your lecturer's attempts to answer this question}
This might seem a large jump - from ideology to the philosophy of social science - but what else could possibly underlie any "scientific study of human society and social relationships"  i.e social science, other than a system of ideas and ideals forming the basis of economic, political or social theory?  Is the apparent fact that modern (economist) use of the term 'globalisation' arose following the collapse of the Berlin Wall, the dissolution of the USSR and the effective demise of Communism (with a capital C) as a credible alternative to liberal, democratic capitalism a clear signal that ideology is a fundamental part of the phenomenon?  Is the apparent dominance of the liberal, democratic capitalist system (and assocated ideology) the 'climax' state of socio-economic and political evolution - as approximately argued by Fukuyama - really the "The End of History" (1992)?  More importantly, will we only know when it is too late? 

Essential preconditions for growth? Role of Agriculture in Development?
Major Relevant Reference and Source Sites:
UK DfID  (Department for International Development) - with its own list of relevant links - see their Development Forum. 
World Bank - especially their annual World Development Reports
International Food Policy Research Institute (IFPRI)
UNCTAD (United Nations Conference on Trade and Development)

3.    A PERSONAL VIEW

A    The Essential Logic

Human systems are living systems - they follow a Darwinian logic - making the best possible use of available resources according to the socio-economic and political pressures ruling at the time (which determine the best fit of allocation of scarce resources to best uses), and making use of such technolgies and techniques as are available, tried, tested and trusted.  The best-fitted systems and organisms (firms, organisations etc.) grow better and replicate faster than those which do not fit.

In such systems, specialisation of function and trade between entities (people, communities, localities, regions, sectors and states) are necessary characteristics.

In this sense, Economics is very largely simply a respecification of the principles of darwinian evolution and the survival of the fittest - not, notice, the winner taking all, nor, by and large, domination by single species (except in the most malign, sparse and poor environments).  Economic development, then, should lead to richer environments and greater diversity.  How does this happen in evolutionary systems?

The development process happens as a result of experiments and innovations - new tools, and at least as important, new ways of doing things, both technical (tools) and institutional (the human rules and habits governing how we do things and for what purpose).  Natural development is the result of historical accidents - most of which fail, and only a few succeed - and are then able to replicate, breed, multiply and succeed.  Arguably, most human (socio-economic) development has also happened by accident - most favourable innovations surviving and replicating while less favourable developments tend not to be able to compete - in the ecological sense.

As with natural ecologies, development status is necessarily context and circumstance specific (where you are and where you come from matter).  The richer the habitats (the more resources) the more extensive and diverse will be the ecologies (economies), but these will differ from one another if they are isolated - the Galapagos and Australasia for example, though available niches will tend to be filled with similar organisms in the sense of filling the same place and role in the food chains and cycles.  Isolated ecologies, though, tend to be vulnerable to invasion and invasive species, which are better fitted to the environment than the natives.

Furthermore, naturally developing ecologies tend to develop their own resource base - making soil from rock etc. - via re-cycling their food stuffs - the socio-economic counterparts being the circular flow of income and the flows of information and knowledge, habits and rules.  In this sense, living systems accumulate resources and capacities.

But human systems are different from natural systems - human systems self-select, whereas natural systems are naturally selected.  Humans think they can make the rules about who lives and who dies, who prospers and who does not. It is the self-selection systems which are critical in human development processes - what signals, incentives and penalities are attached to certain forms of behaviour and activity?

The market system provides one set of incentives and penalties - through explicit or implicit prices on goods, services and factors of production, and thus on the returns and incomes to be made from various activities and the choices made about what to consume and how much to save.  This system - the competitive market place - operates largely according to natural principles - surivival, prosperity and replication of the fittest - leading to obvious inequality, but limited accumulation of power over the natural selection process - the large are necessarily most vulnerable to disruption of their food chains, and are frequently indicator species - a signal of the richness and diversity of the whole surrouinding ecology.  Market power (the ability of producers to dictate what and for whom) is regarded as a market failure, which needs social governance (typically formal government) to offset and overcome.

Our governance systems - from local habits and customs to formal government rules and regulations - provide the other major set of incentives and penalties - which does admit of power, and the fundamental exercise of self-selection rather than natural selection.  Power, then, is the ability to choose and the associated ability to persuade or require others to make particular choices.

The implication is that development is a reflection of the interaction of all these constituent parts and mechanisms - no one part is inherently more or less important than ay other - it is fit which counts, what will fit with what in any particular context and circumstance?  If we change the context and circumstance, we will get a different (not necessarily better or worse) development pattern.  If we change one part (such as substituting democratic control for autocratic control) this will have different consequences depending on what other systems we have in place and what resource base we have.

Trade and specialisation (market systems) naturally evolve in human systems through and from barter as the most efficient and effective ways of making the best use of available resources.  All other forms of human interaction associated with doing things will tend to involve higher transactions costs (be less efficient or effective) except in special circumstances, such as small and highly cohesive communities and families (the human organisation equivalent of single organism)  - when different organisations or communities (different species) compete for use of the same resources, then the market system - natural selection - tends to take over as the most efficient form of transaction/transformation.  Ecologies do this through the transmission and transformation of food and energy (the various biological and bio-physical cycles), while economies do it through economic cycles, like the circular flow of income and the interactions between markets.

However, markets and natural selection require that the final arbiter of who lives and dies is external, as a given outside determinant (g.o.d.) - in the natural selection case, as the laws of bio-physics governing the nature of the transactions and transformations of food and energy, and the possibilities for improvement or adjustment/adpatation of practice within these laws.  In the human case, governance takes over from the bio-physical laws as the final arbiter.  Markets exist and are allowed to thrive only insofar as their societies will let them and encourage them.  Hence, it is these governance systems (our habits and rules of social organisation - called institutions byDouglas North) which are the key elements of the development process.

Prudent and sensible macroeconomic management (requiring stable and legitimate (legitimised) government) is generally a necessary precursor, as are the major elements of a functioing market system.  However, neither of these is sufficient to ensure sensible development, and both could, perhaps, be overcome by socio-political governance of the 'right' type - i.e. the type which best fits existing contexts and circumstances.

B   Some Implications


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