The Gospel of Good Governance#
In the late 20th century, the international development community shifted its focus from “getting the prices right” to “getting the institutions right”. This “Good Governance” agenda pressures developing nations to adopt democracy, independent judiciaries, and strong property rights immediately. Policymakers treat these institutions as prerequisites for any economic growth. They believe that without “global standard” institutions, a country simply cannot develop. This has led to “governance-related conditionalities” attached to financial aid and loans. However, Ha-Joon Chang argues that this approach puts the cart before the horse. It assumes that poor countries can afford the same complex systems as the richest nations on earth.
The Myth of Institutional Prerequisites#
Ha-Joon Chang’s analysis reveals that today’s rich countries established “good institutions” after they became wealthy, not before. During their main catching-up periods in the 19th century, most Now-Developed Countries (NDCs) lacked the institutions they now demand of others. They operated with corrupt bureaucracies, restricted voting rights, and nonexistent financial regulations. This suggests that “good institutions” are largely a product of development rather than a prerequisite for it. Imposing these standards on poor nations today can actually be harmful. It diverts scarce human and financial resources away from more urgent developmental needs.
The Rocky Road to NDC Democracy#
Universal suffrage was a novelty that only took hold in most NDCs in the 20th century. In 1820, no NDC had universal male suffrage, often restricting votes to a tiny minority of property-owning males. France only achieved universal suffrage in 1946, nearly a century after its industrial takeoff. The quality of democracy in early industrial nations was also notoriously poor. Vote buying, electoral fraud, and violence were common features of 19th-century American and British elections. Despite this, these nations were able to generate massive economic growth without the democratic standards they now deem essential.
Bureaucracy and the Burden of Modernity#
Modern professional bureaucracies took decades, or even centuries, to develop in the West. Until the late 19th century, the open sale of public offices was a common practice in many NDCs. The “spoils system” in the United States meant that offices were handed out to political loyalists rather than meritocratic experts. It wasn’t until the Pendleton Act of 1883 that the US even began a minimal competitive recruitment process. Expecting LDCs to install world-class bureaucracies in five to ten years is both unrealistic and historically unprecedented. Developing nations today often have higher institutional standards than NDCs did at equivalent income levels.
The Consequences of Institutional Transplantation#
Attempts to transplant “best practice” institutions from rich to poor nations often result in failure. Institutions are not merely matters of choice; they are deeply rooted in a country’s laws, culture, and history. Imposing a common institutional standard on countries with vastly different conditions is often ineffective. For instance, maintaining “global standard” property rights requires a massive army of expensive lawyers and accountants. This consumes resources that could otherwise be spent on training industrial engineers or schoolteachers. When institutions are imposed from outside without “local ownership,” they are often evaded or undermined.
Synthesizing a Historical Approach#
History demonstrates that institutions must be allowed the time to evolve and adapt to local requirements. We must stop viewing institutional development as a rapid, linear process that can be mandated by international decree. The “Good Governance” agenda frequently acts as another form of ladder-kicking by demanding the unaffordable. Developing countries should exploit the advantages of being latecomers to learn from Western mistakes, but they must not be forced into a rigid mold. A more patient, historically informed strategy is necessary for genuine institutional growth. True prosperity requires the “right” policies to be combined with institutions that a country can actually sustain.
