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« The death of the globalization consensus | Main | What do you do when the markets are down? »

July 14, 2008

Comments

Rob (Formerly) In Toronto

Rather interesting formulation of property rights that is. Some would call it a protection racket.

Maybe my sarcasm detector just isnt working at 5:30 am ... I will try more coffee and read the story again.

aje

compared to what?

bill

Dr Rodrik,
Always wanted to this question, but this is probably going to be the most pertinent thread: Have you read Hernando De Soto's "Mystery of Capital"? Do you share most of HDS's premises&conclusions? This seems like a topic you've probably done some serious thought, so I always believed your opinion would be very interesting to hear..

Thanks,
Bill

Aqdas Afzal -- Pakistan

All:

This story from the Times highlights a key dilemma from the developing world: state failure.

This story might also provide more evidence that, in the developing countries, it's the state that needs to become more muscular and not let the market dictate the outcomes as there can be a market capture from certain forces -- the mafia, for instance.

A stronger state -- both with capacity and autonomy -- would not only be able to enforce property rights through an impartial legal system but could also prevent certain forces from partaking in market activities. For instance, if the state were strong enough, it could prevent the Taliban from taking part in profit making ventures.

So, ideally, the state should be strong -- not weak, in the shape of an honest broker -- in the developing countries. The process of development in the mentioned countries is a zero sum game. There are winners and there are losers in this process. Only a strong state has the competence to impart losses on losing sections of the society.

Therefore, we need to change the entire extant paradigm related to development. Markets are an efficient way of bringing sellers and buyers together and the reputations of individual sellers and buyers provides the sustainable dimension to this institution. Need I say that the markets in developing countries are inefficient.

We need to assist developing states -- democratic ones, of course -- in developing capacity and autonomy. In other words, we need to "bring the state back in."

Tord Steiro

I have not read "The Mystery of Capital", but I have read "The Other Path". That is a very interesting book, and takes economics a little further than usual, since it focuses specifically on the emergence of extra-legal systems to enforce property rights. However, these extra-legal systems is also organizations that coordinate cooruption, since corruption is necessary for them to have any power.Hence, I belive that these two phenomena goes pretty much hand-in-hand. That is, a failed enforcement of property rights from the state opens up the space for extra-legal systems, which again needs corrupt officials in order to be efficient, thus creating huge incentives for corruption.

This is for property rights, but what if the state fails to enforce social justice? Will we then see extra-legal systems emerge, corrupting state officials, and enforcing social justice as they feel fit? This is in general the same question as above, just in a broader sense. And yes, we will see extra-legal systems for social justice. We may call them mafia, but a range of organizations can be regarded as filling the very same gap in society, such as the Sendero Luminoso, Al-Qaida, ETA, Hamas, UCK, IRA, LTTE, Baader Meinhof, or the Haganah and so one must understand the emergence of these kind of organizations in this sense.

When states fail to fulfill crucial tasks in society, someone else will fulfill them, and usually for the worse of everybody else. In extreme cases such extra-legal systems may overtake the state itself. Hence, the ability of states to carry out these tasks in a way that is percepted as socially just is crucial.

Per Kurowski

No reasons to cheer at all.

It just helps to evidence that the growth rate in the illicit markets currently surpasses the growth rate in the licit ones and so by pure market force, sooner or later we will all be taken over by the mafia and their groupies, where even a Dani Rodrik might be forced to go underground to lecture.

Start preparing you avatar Professor, times will be rough!


CAP

"taken over by the mafia and their groupies"
Were we not there already?

"where even a Dani Rodrik might be forced to go underground to lecture"
Who paid De Soto's study? "The other path"

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Really interesting read and insite into how other countries although far away, arnt too differernt to ours :).

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