How we build national institutions plays a crucial role in ensuring prosperity for developing nations

Even with most institutional reform projects failing, it is understandable why trying to change a poor country’s institutions feels so urgent. In many poor countries, the government is often the only game in town and wields significant influence on the economy.

In addition, think about the well-functioning institutions in the United States, the United Kingdom, Japan, or the many other prosperous nations in the world. Prosperity and good institutions seem to go hand in hand. Consider, for instance, the legal systems in the US or the UK, where citizens can generally depend on the enforcement of contracts and the rule of law.

This, in turn, creates trust not only among citizens, but also between citizens and the State. Conversely, Angola, Ecuador, and Bangladesh might be seen, broadly speaking, to have institutions that prevent their economies from flourishing because their institutions have not been able to engender that trust. How likely, for instance, are you to trust the legal system in Angola?

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