quality state institutions and socio-economic development

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Modern economists have resolved that better institutional quality and political stability are the key determinants for assessing the macroeconomic performance of the economies concerned.

Better quality state institutions ensure economic growth by providing a level playing field for all agents with a fair opportunity to exploit available resources; ensure contract enforcement and property rights through a speedy court system; achieve sustainable implementation of social and public sector policies through apolitical state officials and promote the private sector with complete control of crime and violence through state agencies dedicated to the law enforcement (Acemoglu and Robinson 2008; Easterly, Ritzen and Woolcock 2006).

High-quality state institutions reduce uncertainty and encourage economic transactions that further stimulate economic growth, as in the case of high-income countries. High-income countries have achieved high economic growth rates through high total factor productivity through improving the efficiency of the basic input factors, namely labor and capital in given economic models , which was possible only in the presence of high-quality state institutions.

The non-existence of high quality state institutions breeds extractive economic activity which further reinforces socio-economic disparities in addition to ethnic, regional and geographic conflicts which ultimately distort economic growth and lead to overall economic instability (Acemoglu and Robinson 2008 ; Collier 2007 ; Gradstein and Justman 2000).

However, political stability is the prerequisite for the establishment of high quality state institutions. The quality of apex-level state institutions can be achieved through an improved level of governance.

Independent scholars and others associated with the World Bank and other international organizations have defined governance as a set of traditions, laws, and regulations that empower relevant institutions to exercise their authority in the interests of service delivery. public in the country concerned. The World Bank publishes Worldwide Governance Indicators (WGI), which are estimated taking into account six dimensions, including voice and accountability; political stability and absence of violence/terrorism; Government effectiveness; Regulatory quality; Rule of Law and Corruption Control by leading researchers Daniel Kaufmann and Aart Kraay since 1999 is based on over thirty types of data sources. The above-mentioned indicators indicate the rank of the country concerned among the countries of the world in percentile rank values ​​varying from (0) to (100) demonstrating the lowest to the highest rank. The six dimensions of governance mentioned above were defined by the WGI by considering multiple features specific to the country concerned. Voice and accountability explain citizens’ ability to choose government alongside freedom of expression and association and free media. Political stability and the absence of violence/terrorism explain political instability and politically motivated violence and terrorism. Government effectiveness measures the quality of public and civil service with a degree of independence from political interference. It also considers quality policy formulation as well as its realization alongside the level of government obligation for such policies.

The quality of regulation determines the government’s ability to design and implement policies to stimulate private sector development. The rule of law explains the level of confidence of socio-economic agents in society; the execution of contracts; property rights as well as the quality of the police and courts taking into account the prospects of crime and violence. Corruption control explains the degree of embezzlement in the public sector for personal gain.

These six Governed World Indicators (WGI) have been examined for the period 2011-20 with respect to high income OECD countries, lower middle income countries, particularly in the case of Pakistan. It was found that the percentile rank values ​​of these six indicators are stable in the 4th highest quartile in the case of high-income OECD countries. The percentile rank for five indicators is higher, ranging from 85 to 88 percentiles, with the exception of political instability and politically motivated violence and terrorism which are around 74 percentiles. In the case of lower-middle-income countries, all these six indicators fall within the upper limit of the 2nd quartile with a value close to the median fluctuating from 32 to 42 percentile.

Whereas, in the case of Pakistan, all these indicators are almost in the lowest 1st quartile and in the bottom of the 2nd quartile, which does not extrapolate a better picture even compared to lower middle income countries. The average percentile rank over the period 2011-2020 for voice and accountability is 26%; government effectiveness is 27 pertile; regulatory quality is 27 percentiles; the rule of law is at the 24th percentile and the control of corruption at the 20th percentile. Consequently, political instability was measured at 1.655 percentile on average over the period 2011-20, which is a matter of grave concern. In particular, during the years 2011-13 and 2015-16, the percentile rank of the political stability indicator is estimated at zero with the highest value of 5.19 percentiles for the year 2020.

The above-mentioned indicators suggest that political stability has led high-income countries to build high-quality state institutions through better levels of accountability; the efficiency of the public sector and the quality of regulation as well as substantial control of violence and corruption. The presence of high quality state institutions further facilitated the actualization of long-term socio-economic policies on a sustainable basis. This has not only enabled them to achieve high economic growth rates but also to realize the dream of a quality social fabric with a strong sense of social responsibility and civic-mindedness unlike low-income countries, especially Pakistan. We can conclude that in Pakistan, political instability has not made it possible to set up quality inclusive state institutions and that the process of socio-economic development has always known turbulent phases. Political and regional conflict has always distorted the accountability process. The greater propensity for the collapse of democratic governments has never allowed state institutions to function optimally.

Therefore, the political fabric of Pakistan is bound to establish a consensus that can enable the continuity of democratic governments concerned with healthy criticism of public policies by the opposition and an impartial process of accountability by the government. In order that democratic and political stability may enable the improvement of the quality of state institutions through sustained political reforms and accountability, and that Pakistan’s seventy-five year old dream of socio-economic development may to come true.

The author is a director (PD&R) of the highway police and holds a master’s degree in international trade and economic cooperation from the Graduate School of Pan-Pacific and International Studies in South Korea.


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