Introduction
There is a strong correlation between the development of the level of governance, that is, the strength and solidity of institutional capital, on the one hand, and the development of the economy, on the other hand. But that does not mean that the economy must be reformed before governance, or vice versa.The issue is not that simple, but rather it’s complicated, especially in light of the current financial and economic system.
Using the “strengths” of countries is an approach to giving an impetus to economic growth and building markets. When markets develop, they will inevitably need strong institutions to manage them, and strong institutions, in turn, will preserve the markets and develop them to higher levels.
For example, attracting investments, even if the goal of some state officials is to extract commissions for their benefit (which is against the law), will motivate them to attract a lot of investments, and this will increase the volume of investments significantly.
This is “bad governance” according to the conventional understanding of governance, but the scramble of officials who will use their social networks to attract investments and develop cities will contribute to creating a huge market that constitutes the starting point. Then it will become easier to move from quantitative to qualitative investment.
This is why you must always “start with what you have, not what you want.”
While there is another point of view that may consider this situation as an obstacle, instead of indiscriminate investment, they may adopt an approach that seeks quality and diversification of the sources of the economy through investment in services, tourism, and advanced technology.
There are also other countries (the oil countries) that use petroleum wealth as a source of rentier economy and build an important market based on consumption, direct transfers, and concessions. An example of this is the Gulf countries. When this market reached an advanced level of accumulation, the Gulf countries began to develop governance institutions to upgrade and improve the effectiveness of government intervention. This development made them invest in diversifying the sources of the economy and developing markets at the level of tourism, services, technology, and currently cryptocurrencies.
It is expected that when these markets reach a certain stage, they will need more powerful institutions based on strict oversight, effective government intervention, competition, transparency at all levels, and a culture of rights for all, to keep pace with this development.
On the other hand, countries' reliance solely on fixed capital (investment) and technology, will not achieve the desired development and economic take-off to absorb unemployment, create wealth, and bring much of it into the club of emerging countries.
Fixed capital may achieve quantitative transformation in the market, but qualitative transformation comes from institutional capital and human capital development.Taken together, these factors may give the economies of countries additional points in terms of growth, and this is enough to make them take steady steps toward the first or emerging economies.
But the approach of using “bad governance” is risky. Although granting privileges to some investors to implement and develop infrastructure “due to its importance” may give a strong push to exceptional economic growth, at the same time it encourages the growth of brutal capitalism and cartels, as well as the growth of organized crime and “foolish tribalism,” which will inevitably lead to complete economic collapse, as is the case today in Lebanon.
Conclusion
The rush to invest creates a huge market but at the expense of unregulated use of resources, which raises questions related to sustainability, the destruction of the ecosystem, the greedy import of raw materials, and the high environmental bill, which are difficult for anyone to overcome.
Therefore, the model based on “opportunistic” use of available opportunities is “permissible” temporarily, but it does not succeed in the long term without monitoring the risks.
The markets must be developed through policies of rentier and privileges, but without leaving them vulnerable to corruption, otherwise, they will become difficult to overcome. Therefore, institutions must be developed in parallel with the “primitive” development of markets.
Once markets reach maturity, institutions will have gained experience that enables them to monitor society and the economy with a view to effective competition and transparency.
Therefore: Yes, the economy can be developed based on what we have, but our eyes must always be fixed on what we aspire to, on the desired qualitative transformation.
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