The conundrum of resource-rich countries locked in poverty and war for generations is one that has been a perpetual source of frustration and intense debate for both academics and politicians. With the advent of the age of international institutions came a flood of new proposals and solutions for these countries, including heavy flows of foreign aid, military and humanitarian interventions, offers of assistance to failing governments, and grand plans for reform. Yet, conflict and poverty prevails in what is colloquially termed "the third world", and more precisely in what Collier has termed "the bottom billion"*. In answer to the question, "what institutions can enable the world's poor to realize their power and achieve prosperity", my answer is tri-fold: first, a system of law and minimal government, second, a market system, and third, a robust civil society. Each of these institutions will naturally be tailored to the demands of particular countries, and reaching across all three categories must be a governing set of principles that fosters individual freedom and economic growth.
I will begin a brief explication with the rule of law and the institution of government. Most poverty-stricken countries have failing or non-existent governments and accordingly, no reliable system of law. The rule of law and politics in these failing and failed states is bribery and personal gain, or brute force for the attainment of power. Under such conditions, there is no hope for the creation of wealth, the productive ordering of markets, or the creation of civil society. Thus, countries stuck at the bottom desperately require the political legitimacy and functioning legal institutions that have been elusive for decades.
How will the legal and political be actualized in these countries? How can theoretical principles be turned into order-producing institutions? This depends heavily on the creation of wealth within the country through the preservation of private property. While Collier and others suggest that resource wealth must be harnessed and cultivated by governments, enabling countries to capture ‘rents' and build up their infrastructures, I suggest that they are reasoning in reverse order. Since the establishment of legitimate and stable governance has been unreliable at best, genocidal at worst, it is the cultivation of the principle of ownership within loosely-organized societies that will most reliably guide the fortification of productive relationships and norms, leading to the creation of institutions which will provide the stability of protected rights and property.
While this has been a brief account and defense of three important institutions, it's clear in conclusion that it is not big plans and perfected schemes of foreign governance that will aid countries struggling through civil wars and poverty. Citizens of these countries must locate the basic principles of a stable order through a recreation of their civil societies, and build the requisite legal, political, and market institutions to protect and defend these principles.
* see Paul Collier's The Bottom Billion 2008
MSc The London School of Economics and Political Science