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Policy
Memo 2
In his essay, Root Causes, the
MIT economist Darren Acemoglu differentiates between “good” and “bad”
institutions (27). “Good” institutions
encourage investment and lead to economic prosperity, setting in motion of a
virtuous circle of equitable development and inclusive political
institutions. “Bad” institutions
concentrate wealth and political power in the hands of a small elite, setting
in motion of a vicious circle of chronic underdevelopment and widespread
poverty.
One of Acemoglu’s key
contributions is his insistence that these institutions are not natural or
inevitable – they have a history. And
that history is often the by-product of the colonial adventures of powerful
European states: where the Europeans left behind a “good” institutional
infrastructure – in the United States, Canada, Australia and New Zealand –
today we find prosperity and democracy.
By contrast, where the Europeans left behind a “bad institutional
infrastructure – in Sub-Saharan Africa, Latin America and Southeast Asia –
today we find poverty and authoritarianism.
The purpose of your second policy
memo assignment is to consider the economic and political path whereby a set of
“bad” institutions can be effectively converted into a set of “good” institutions. In Part I of your memo, please describe the
various laws, policies and institutions of “good” regimes. What are the characteristic features of these
regimes, and why are they conducive to growth, prosperity and democracy? In Part II, please describe why the absence
of these “good” institutions is so destructive of economic prosperity,
individual well-being and political stability.
Finally, in Part III, please describe how an extractive regime be
converted into an inclusive one: What are the main impediments, both internal
and external, for effective economic and political reform? What are the necessary preconditions, both
internal and external, for effective economic and political reform?
Please make extensive use of
assigned course material throughout your policy memo and be sure to provide
practical examples whenever possible.
You will also find a dossier of helpful supplementary resources posted
to the Assignments section of Blackboard.
Please pay close attention to the journal articles by Darren Acemoglu
(with various co-authors), which
discuss all of the key ideas and concepts of the course: the need to
historicize institutions, the lingering impact of European colonialism (good
and bad), the necessary ingredients for prosperity and democracy, and the path
to effective economic and political reform in developing contexts. Regarding the final theme – the path to
prosperity – please pay careful attention to Chapter 14 of Acemoglu and
Robinson’s Why Nations Fail, which describes the path to inclusive institutions
in Botswana, the United States and China, and to Joseph Stiglitz’s “Is there a
Post-Washington Consensus Consensus?,” which describes the international
economic strategies conducive to the sustainable, equitable development of the
world’s poorest countries.
Note:
My suggestion
is to focus on the material of Weeks 11
and 12 will be especially useful when it comes to the question of how
states can effectively develop.
You’re not
obligated to use the supplementary materials posted; those
are simply a bit more guidance.

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