Final Flashcards
Inclusive Institutions
- Promote economic prosperity
- Secure private property rights for the majority of people
- Ensure rule of law
- Physical security
- Enforcement of contracts
- Provide public goods and services including investment in infrastructure
- – Only entity capable of providing all of these goods is the state
- – Free markets cannot function effectively in an institutional vacuum (meaning w/o institutions)
Extractive Institutions
- Lead ultimately to economic failure
- Concrete political power in the hands of a small elite and place few constraints on the use of its power
- Economic institutions are then structured by this elite to extract resources from the rest of society
- There is a strong feedback loop between extractive economics and political institutions:
- – economic power is used to secure political power and visa versa
- –Nations fail when extractive institutions continue over long periods of time b/c extraction is better for elites than losing power, even though results are bad for nations overall
——If elites can allocate resources to high efficiency/productive activities that they themselves control then this will lead to short term economic growth: but not long run
Douglas North
Theorized that economic growth is determined largely by the kind and quality of institutions that support markets
Ex: Property rights, transactions costs (contracts, credit, etc.)
Impact of the Civil War and the Glorious Revolution in England
a. Causes of English Civil War
i. Struggle between Parliament and the King
1. King James I believed in the “diving right of kings” which basically states that the king is only held accountable to God and gets his power from God.
2. Parliament didn’t agree with James and though they should govern England together in harmony
3. The power struggle led to a weaker central government and conflicting supporters
ii. Religion
1. Puritans were members of the church of England but attempted to make church more protestant
2. King James’ strong defense of the Church of England unsettled and upset the puritans
3. The religion issue increased when James’ son Charles I imposed more rituals in the church making it resemble Catholicism even more
iii. Petition of Right
1. Petition of right prohibited taxation without Parliament’s consent
2. Charles I broke this petition b/c Parliament would not grant him permission to tax on behalf of his war effort
b. Reasons for the Glorious Revolution
i. Religion
1. King Charles dies, catholic brother James II starts replacing protestant officials with Catholic ones
2. James also created new laws that were more tolerant to Catholics as opposed to the already existing ones
ii. James’ Army
1. James had his own army which were viewed as an aggressive act by Parliament and planted the seed in Parliament’s brain that James may try to gain absolute power for himself
iii. James’ Son
1. Parliament was not concerned until James had a son, fearing he’d grow up to be catholic like his father and mother
Rentier States
- Oil impedes democracy and state development
- A rentier state relies extensively on revenue that is external, flows exclusively controlled by the state, and requires few people to produce
- They do not need to extract taxes from the domestic population in order to function and thus the population doesn’t expect much from them and they do not expand their institutional capacity
- Because they have ample resources, they tend to buy political loyalty and armies to suppress dissent as a consequence, they are usually ineffective autocracies
The Black Death as a Political Juncture
- How it affected England vs. East Europe
In the UK
- High death tolls leads to:
- higher wages
- labor organization
- breakdown of feudal system
- Workers could leave and find new jobs with better perks
- Lords were unable to organize and combat this trend
In East Europe
- taxes went up
- Wages stayed down
- Feudal labor system gets stricter
Why?
- Because labor was spread out which made it difficult for workers to organize
Hernando de Soto
Main arguments and findings
Research in Peru:
- asked the question, how much does it cost to set up a legal business in Peru in 1983?
Findings:
- It took 289 days and $1231, which was 32 times the minimum salary of the nation
Concluded:
- legal barriers and regulations were strangling the Peruvian Economy and individual property rights were the key to growth (that is, informal sector business grow at a slower rate)
Governance Indicators - World Bank
- Political stability and absence of violence: Perceptions of the likelihood that the government will be destabilized or overthrown by unconstitutional means, including domestic violence and terrorism
Ex: threats of terrorism, frequency political unrest, ethnic/religious tensions - Government effectiveness: perceptions of the quality of public services, the quality of civil service, and the degree of its independent from political pressures, the quality of policy formulation and implementation, and the credibility of the governments commitment to such policies
- Regulatory Quality: perceptions on the ability of the government to formulate and implement sound policies and regulations that permit and promote private sector development
Ex: Ease of starting a business, price controls/tariffs/taxes
Efficiency of tax collection, labor regulations - Rule of law: perceptions of the extent to which agents have confidence in and abide by the rules of society, and in particular the quality of contract enforcement, property rights, the police, and the courts as well as the likelihood of crime and violence
Ex: confidence in police, prevalence of tax evasion, speediness and fairness of the judicial process - Control of Corruption: perception of the extent to which public power is exercised for private gain, as well as the “capture” of the state by elites and private interests
Ex: is corruption in government widespread?
India vs. China vs. Brazil on government indicators
Which state is stronger on the six World Bank indicators
- Voice and accountability: India, Brazil, China
- Political stability: Brazil, China, India
- Government effectiveness: China, Brazil, India
- Regulatory quality: Brazil, China, India
- Rule of Law: India, Brazil, China
- Control of Corruption: Brazil, China, India
- Advantage: Brazil best in 3 categories, India best in 2 categories, China best in 1
Of Brazil, India, or China, which country has the largest agricultural population?
a.India has the most (52%), then China (35%), then Brazil (16%)
Of Brazil, India, or China, which country has the highest savings rate
China has the most (49%), then India (31%), then Brazil (15%)
Of Brazil, India, or China, which country is the most unequal (GINI Index)
Brazil is the most unequal (54.7 GINI), then China (42.1 GINI), then India (33.9 GINI)
Of Brazil, India, or China, which country has the highest rate of completion of primary education
China has the most (94%), then Brazil (50%), then India (19%)
Weber’s definition of the state
- “That organization that has a monopoly on the legitimate use of physical force within a given territory”
- the set of institutions that claim the right to make binding decisions for people within a specific country
- the permanent administrative apparatus with jurisdiction over a definite territory.
Impact of being landlocked
- Landlocked countries have no territorial access to the seas, limited border crossings and transit dependence.
- Due to their remoteness, landlocked countries are dependent on neighboring transit countries for their external trade and suffer from high trade transaction costs.
Symptoms of a failed (or failing) state
Failed State Index
Symptoms of a fail state:
- a failed state cannot enforce rules within its own territory of some portion of it.
- No longer has a monopoly over the legitimate use of force.
- Is no longer able to use its permanent institutional apparatuses to provide public services, including basic security to its citizens.
- They are “breeding grounds for instability, mass migration, and murder”.
- Known as exporters of drugs, human trafficking, arms trafficking, and mercenaries.
- Leader and associates concentrate power, usually in a single dictator and connect group.
- In part as a result, the distribution of economic and political power is likely to appear both unfair and not subject to change under the rules of the game.
Failed State Index (FSI): An attempt by the journal “Foreign Policy” to quantify the characteristics of failed states. Consists of 2 criteria, each with several sub-criteria, of social, economic, and political symptoms of state failure. Scores of up to 10 in each category are added together to produce a total FSI score: the more symptoms of state failure, the higher score countries with scores of 80 or higher are ranked critical (max is 120), 70-80 are “in danger” and 50-70 are “borderline”.
Examples of top failing states
- Ivory Coast
- Democratic Republic of the Congo
- Sudan
- Iraq
- Somalia
- Sierra Leone
- Chad
- Yemen
- Liberia
- Haiti
Causes of state failure
- Leader and associates concentrate power, usually in a single dictator and connected group
- In part as a result, the distribution of economic and political power is likely to appear both unfair and not subject to change under the rules of the game.
- Group in power siphons off state wealth to feed its power base: Visible and excessive corruption, legitimacy begins to decline
- It becomes increasingly unable to deliver public services and divert state resources to its narrow elite.
- In the face of falling legitimacy, elites turn to oppression to stay in power.
- Violence can trigger violent counter-reaction and rebellion.
Principle of bad neighbors
the instability, unrest, and civil war that increase the risk for state collapse are not limited to the failed/collapsed state; states neighboring—or located within close distance of—a failed state are also likely to experience subsequently higher levels of political instability, unrest, civil war, and interstate conflict
Conflict Material
- The four most commonly minded conflict minerals (known as 3TDs, from their initials, are:
- cassiterite (tin)
- wolframite (tungsten)
- coltan (tantalum)
- gold ore.
Which are extracted from the eastern Congo, and passed through a variety of intermediaries before being purchased.
- They are natural resources extracted in a conflict zone and sold to perpetuate the fighting.
- There is statistical and anecdotal evidence that belligerent accessibility to precious commodities can prolong conflicts
Indian National Congress party: origins, characteristics, leadership
- Formed in 1885
- Began to openly advocate for Indian Independence in 1907
- Ghandi becomes president in 1915 & begins campaign of civil disobedience expanded across India from 1920-40:
i. Established state-level branches
ii. Ends caste-based discrimination practices
iii. Introduces electoral processes for its leadership
iv. 1947-52 introduces a constitution establishing democracy & sweeps first elections
Muslim League: origins, characteristics, leadership
- AKA the all-Indian Muslim league.
- Founded in 1906. Generally lacked a mass base of support.
- Represented the interests of landed and commercial Muslin elites.
- 1930s: push for the formulation of a majority Muslim state in NW India.
- 1947: renames itself the Pakistan Muslim League. Two major party leaders die shortly after Indian independence (Iqbal and Jinnah).
- 1953: Splinters into several parties
