How Political Institutions Influence Development Outcomes

Abstract

What is the cause of global inequality? Why are some countries poor and why are others rich? Is it because of poor mismanagement, bad economic policies or the lack of capital? In recent years two scholars Daron Acemugolu and James Robinson have come up with new theory to explain the determinants of wealth and poverty that exists between states. In their thesis, they argue that the inequality that exists between states is the result of how institutions are created. Many western countries they explain are rich not due to the luck of chance or abundance of resources. Quite the contrary, wealth they argue is necessitated by inclusive and democratic political institutions which are fundamental to initiating economic growth and development. However, the rise of China, Vietnam, Russia and some of the East Asian states in this century has prompted some reconsideration of the democratic development theory. The rise of China and other authoritarian developmentalist states in the twenty first century raises an important question in development discourse- Can states without inclusive political institutions create free and inclusive economic institutions? In other words, is inclusive political institutions a precondition for economic development? This paper will argue that states with non-inclusive political institution can develop and prosper as evidenced by China and some of the East Asian countries. Moreover, the paper will highlight some of the theoretical short comings in the democratic development theory presented in the book “Why Nations Fail”. More importantly, the paper will look at the China Model as an alternative to the democratic development model and examine if the Chinese development model can be transferred into the African context.