Posted September 26, 2022 12:24 am by Comments

Note: The book has an interesting take on emerging-frontier market development:

  1. Economic development is dependent on the deal between elites of a country. In most poor countries, elites choose to extract resources from the economy because the policies that lead to development can endanger their political position.
  2. When elites decide to have pro-growth policies, they’re taking a risk that it will work out and benefit them personally. Most elites do not want to take this risk, and would rather enjoy the spoils of corruption instead.
  3. Some circumstances like the possibility of losing legitimacy (e.g. China after the Cultural Revolution) can force elites to focus on economic growth. But this doesn’t guarantee it. Elites also have to ration state capacity wisely and be open to correcting course for countries to escape extreme poverty.
  • In Egypt, Thailand and Pakistan, their militaries have coerced the government into giving them large amounts of power and economic resources. The ensuing elite bargain is that the country’s economic resources are used to further the interests of the military, while civilian leaders do not have much power. This doesn’t lead to much economic development because policy is usually skewed to help the military, large amounts of tax money is used on military spending and so, the economy’s resources are used primarily for the military’s ends. In some countries the political elites loot whatever resources exist in a competitive free-for-all between them.
  • It is really important to understand that an extractive elite is the default. READ MORE

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