How effective political institution matters for economic development, opinion 5 years ago

There are many factors contributed to the development and economic growth. However, there are the question whether the effective political institution matters for economic development or not. The assumption for this issue is effective political institution does matters for economic development of a country with several determinants no matters what kind of government there is.

This is what I tough 5 years ago :

• Electoral system : The electoral system in each countries are different. Ever though the electoral system is formal political institution but in order to determine the form of electoral system, state need to also considered the informal institution like culture or religion. According to Arend, Liphart (1999), the electoral system was divided into 3 main systems which include the Non-proportional Representation, Proportional Representation, and Semi Proportional Representation. The proportional Representative allows many small or medium size of political party to gain seats in the parliament3and that will contribute to the large wining coalition. The larger the wining coalition, the less the incumbents would offers to benefit particular members in the coalition, and they can spend more on the public goods rather then private gain. If the electoral system is effective for the country, it will help to promote economic development.
• Political regime : There is no clear evidence whether the regime type matter for economic development 6because we can see from the cases of China and India. India as the third world largest and the oldest democratic state in the world could not development their economic effectively because many people are still very poor. The political parties in India lacks of efficiency and they compete with each other in the patronage system. And the case of China show us that condition under the authoritarian regime might be suitable for growth and can provide political order.
• Strong constitution : In this case I will use the case of the Latin America. Even though the constitution was adopted by almost every countries after they gain independent in Latin America, most of those constitution was abolished within 5 years and only 3 of them survived more than 25 years. In the Latin America, the constitution were not strong enough and because of the discontinuity of the constitution which might contributed to the disorder in the country and hinder, the economic development was hindered. The strong constitution like the United Kingdom which use the unwritten constitution. It means that their constitution come from the customs that was adjusted to be suitable with their overall institution. The United Kingdom revised their constitution through the parliament which is the representative of their citizens so they can make the law that can utilise the limited resources to make the best use out of it to develop economically resulted with better living condition.
• The effective of the judiciary system : Because in order to judge any case, the judges have to refer to the law of a country. It is important to have effective judicial system and effective constitution. The example is the case of property rights. The property right is one of the determinant for any investors to invest in one country. The judicial independent can contribute to more economic freedom because when it come to the conflict between the public and private, the institution who decide the cases is the judge, and if the judge has the political influence, it would result in injustice.
• Culture : The patronage system as the culture of some countries can also hinder the economic development. The patronage system can be seen from the cases of Thailand. According to the article ‘Under our patronage politics, little work gets done’ by Suranand Vejjajiva, the patronage come with the money politics become involved. We can see from the patronage system that everything have a lot to do with the private gain and the distribution to public goods will be less.
• The independence of central Bank : The effective central bank should not be muddled by the governments. Central bank should works freely under the regulation of the effective constitution. The central bank in the United Kingdom is one of the example of the effective and independent central bank. The UK central bank is independent from the central government, they got full authority to implement the monetary policy according to the expectation of people without any intervention. However, in the case of Thailand, BOT does not have full authority and full independence from the central government under the Bank of Thailand Act. in the frame of the constitution18 . Despite of the article 28/1 of the Bank of Thailand Act., which say that the committee who choose the incumbents in the BOT must not have political interest, but deeply the BOT was still influenced by the government.
• The interest groups : The interest groups according to Mary Maicki (1992), she believes that the interest groups will attempt to influence the policy that benefits to all of them that involved in that particular issues. And if those interest groups demand for public goods, the more variety of interest groups, the more variable for economic development policies will be implemented.
• Taxes cuts and tax increase : The lower the tax rate, the more incentive people will have for working, spending, and investing. However, tax cut can only in short-term because in long-term, the size of economy will be reduced. We can see from the Congress Budget Office that the 2001 tax cut in the United States tends to have negative effect to the economy because tax but means cut in government expenditure 22 which is one of the indicators for GDP.

Reference

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Gale, William G., and Andrew A. Samwick. “Effects of Income Tax Changes on Economic Growth.” SSRN Electronic Journal SSRN Journal. Web. 17 July 2015.

Hunter, Kennith G. Interest Groups and State Economic Development Policies. Westport, Conn.: Praeger, 1999. Print.

Laporta, Rafael, Florencio Lopez-De-Silane, Cristian Pop-Eleches, and Andrei Shleifer. “Judicial Checks and Balances.” Web. 17 July 2015.

Mesquita, Bruce. Governing for Prosperity. New Haven, Conn.: Yale UP, 2000. Print.

Patchimnan, Attakrit. Theory of Ideas for Political Economy แนวคดิ ทฤษฎวีา่ ดว้ยเศรษฐศาสตร์ การเมอื ง. Bangkok, 2556. Print.

Przeworski, Adam, and Carolina Curvale. “Political Institutions and Economic Development in the Americas: The Long Run.” (2006). Department of Politics, New York University. Web. 18 July 2015. .

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“พระราชบญั ญตั ิ ิธนาคารแห งประเทศไทย.” พระราชบญั ญตั ิ ิธนาคาร แห งประเทศไทย. Web. 18 July 2015.