Syed Mansoob Murshed presentation ref Afghanistan seminar 2009

The salience of institutions: institutional determinism  It is argued that two types of political institutions, a formal ones plus b informal power, together shape economic institutions

HUMAN SECURITY FROM THE STANDPOINT OF AN ECONOMIST-Seminar on Afghanistan at the ISSSyed Mansoob Murshed

Institute of Social Studies (ISS) University of Birmingham Centre for the Study of Civil War, PRIO, Oslo, Norway.

Murshed-30th March 2009

Franklin D Roosevelt’s Four Freedoms

I wish to focus on the first two

CONCEPT (1): Freedom from Want

 This refers to the quality of life, and

economics is originally based on the

utilitarian (pleasure-pain) concept

consumption only As regards the

pleasure-pain (utility) principle, John

Stuart Mill said: “better to be a Socrates

dissatisfied than a fool satisfied”

Murshed-30th March 2009

CONCEPT (1): Freedom from Want

Also Sen’s capability approach which states that well being emerges from capability, examples

of which could be the twin freedoms from

want and fear

 The two concepts (utility and capability) are not mutually exclusive

Why is there so much want?

Poverty

and education

 In extremely poor countries redistribution

without expanding the economic pie through growth may only equalize misery

countries of the world

Murshed-30th March 2009

“Happy families are all alike;

every unhappy family is

unhappy in its own way”

Tolstoy, Anna Karenina.

What is to blame (long-run factors):

Central Asia, including Afghanistan

 2 Culture (lack of trust) Religion (Islam)

 Applies to Afghanistan: highly polarized society with many ethnicities.

 3 Bad political institutions and

mechanisms of governance

The salience of institutions: institutional determinism

 It is argued that two types of political

institutions, (a) formal ones plus (b) informal power, together shape economic institutions

of governance

(a) economic performance such as growth in per-capita income and (b) the future

distribution of income

 Poor economic institutions create an uncertain

climate for sustainable long-term growth

producing economic activities

Murshed-30th March 2009

What are the conditions for good economic institutions to emerge?

 When there are constraints upon the executive and a balance of power between different forces in

society -democracy with checks and balances.

 When the enforcement of property rights (necessary

to secure investment) are broad based and are not confined to a narrow elite group’s interests—less

inequality-strong middle class Otherwise predation will be common.

 When there are few “rents” that can be appropriated

by small groups -capturable resource rents.

The salience of institutions for growth in the long-run.

inseparable

Murshed-30th March 2009

CONCEPT (2): Freedom from Fear

 Violence is an alternative economic activity to peaceful production

 Theft is an alternative to a job.

 Causes of civil war are related to causes of

the lack of economic development

 Applies to Afghanistan

civil war, so notoriously fragile?

Greed and Grievance

Explanations for Civil War

 Greed (motivation) and the feasibility

(opportunities) of rebellion This works best in countries with capturable natural resources

like oil, diamonds (alluvial) and drugs

 Opium in Afghanistan.

 Grievances in polarized societies, relative

deprivation and horizontal inequality

 APPLIES TO AFGHANISTAN Ethnically very

diverse.

organising principle for collective action

Murshed-30th March 2009

Causes of Civil war as elucidated

by Aristotle more than 2300

years ago

Plato, along with his disciple Aristotle, attributed tendencies towards internal conflict in the

Athens of antiquity to three factors which still resonate with our modern reality more than two millennia later

 They consist of the inequalities within Athenian

society

 the incompetence of the Athenian leadership,

 the avariciousness in elements of Athenian society

 Thus, greed and grievance can, and do, exist

simultaneously, particularly after the dynamics of conflict are set in motion

Afghanistan: Opium

motivation for civil war

and doubled between 2002-2007

 Conflict causes opium production, rather than the presence of opium being a cause of large scale conflict Conflict results in

 Destruction of infrastructure

 Uncertain investment climate with regard to other long-term economic sectors

 Political instability and low central law

enforcement

Murshed-30th March 2009

Just as institutions facilitate economic growth,

institutions may be crucial to preventing large

scale conflict

 The origins of conflict (whether greed or

grievance) are immaterial if there are viable dispute settling and resource sharing

mechanisms preventing either cause from resulting in full scale war

 So institutions are important to both growth (poverty reduction) and conflict prevention

Social Contract

dimension

 The state of nature without a social contract

is characterised by opportunistic anarchy

omnes (Hobbes)

 Afghanistan post-1979?

 Observe that failing or fragile states all have weak institutions contributing to development failure (poverty), as well as an enhanced

conflict risk

Murshed-30th March 2009

Why are peace agreements so hard to sustain?

Commitment problems to peace

problem is high discount rates, or the short

time horizons of the parties involved

reputation, but with a high enough discount

rate it might pay to renege because the cost

comes in the future

Donor Engagement in institution building,

economic reconstruction and enforcing peace

 Civil war destroys institutions as well as

physical infrastructure, as conflict

entrepreneurs deliberately undermine

institutions

be concerned with re-building damaged

institutions

be broad based

functioning state must, at least, be able to

meet current government expenditures from domestic revenues and resources

Murshed-30th March 2009

Donor Engagement in institution building, economic reconstruction and enforcing peace (2)

engagement; others spot deleterious effects:

 Aid dependence does not always help to

re-establish the legitimate authority of the state, particularly given the presence of uncoordinated donor efforts and the diverse practices of both donor agencies and development NGOs, which can undermine the authority of the state

 Aid dependence discourages domestic resource mobilization

 Both may apply to Afghanistan?

William Easterly (2006): The White Man’s Burden!

 He is critical of the ‘white man’s burden’; need for the West to civilize the ‘rest’– harmful, including recent tendencies towards ‘neo-trusteeship’

 He demonstrates that self-reliant (hence less aid dependent) states have grown considerably faster;

 As have nations whose boundaries were not too rigidly defined colonially.

 He argues that although markets, democracy and good institutions are important to development, attempts at foisting them which are not at least partially sui generis are doomed to failure