New Institutional theory, institutional reform and poverty reduction

New Institutional theory, institutional reform and poverty reduction

Higher taxes + control of arms sales = better society

Argues that the political underdevelopment that is characteristic of much of the ‘South’ largely results from the ways in which states have been created and political authority shaped through interactions with the wealthier ‘core’ countries in the context of global economic and political systems.

Politically underdeveloped states are too independent of their own citizens. Three main types of circumstances generate this independence:

  • strong external financial and/or military support for state elites, even when they are in conflict with many of their own citizens
  • the heavy dependence of states on ‘unearned income’
  • the capacity of states elites and challengers to use control of valuable commodity exports to purchase overwhelming armed force

The author recommends:

  • poor countries need to tax themselves more. There is no convincing evidence that, on a country by country basis, increases in aid levels actually reduce the effective tax effort. However, it is clear that in aggregate governments of poor countries reap an unusually low proportion of GNP in the form of taxes. Doing something about that would also provide the (reliable) resources they need to tackle poverty and deprivation
  • there is a need for more effective restrictions on international arms sales and on international purchases of commodities from ‘tainted’ sources.
  • There should be less noise made about trying to manipulate state institutions of poor countries in the name of ‘good governance’, and put more effort into creating the environmental conditions that will encourage the emergence of more productive state-society relations

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