Importance of Institutions in Long-Term Economic Success
Institutions are rules and norms governing social interactions, including laws that protect property rights and ensure the rule of law.
Strong institutions encourage individuals to work, save, & invest, leading to economic growth
Countries with effective institutions tend to prosper, while those with weak or extractive institutions often face poverty and inequality.
The economic growth of China and India post-liberalization showcases the positive impact of improved institutional quality.
Impact of Colonialism on Institutions and Need for Reforms
Colonialism often established extractive institutions that concentrated power and limited political freedoms, hindering post-colonial economic growth.
To overcome the effects of colonialism, countries must implement structural reforms that enhance the quality of their institutions.
Global institutions are currently at risk from populist movements that can undermine democratic principles and lead to policies favoring elites over the broader population.
A democratic system that promotes inclusivity and protects the interests of the majority is crucial for sustainable economic development.
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