PART II
Patterns of Long-term Economic
Growth and the Deeper Determinants
of Economic Growth
After discussing the proximate determinants of economic growth in Part I we
may be tempted to start listing desirable policy reforms. Perhaps the country of
our particular concern needs more investment, better education and more
hospitable domestic laws for FDI to make it easier to attract new technologies
from overseas. Of course we recognize the complexities of education. We can’t
simply will a better and more inclusive school and university system into
being. So after a lot of study we may decide the Finnish education system
based around highly qualified teachers, a flexible approach to learning and
small class sizes is the one to emulate. So far so good but that is not enough. We
need now to turn to Part II which analyzes the five deeper determinants of
growth:the underlying deep structures which influence the proximate determi-
nants and through them economic growth. These are colonialism, institutions,
geography, culture and openness. We noted in Chapter 6 that the education
system in India was very bad. We cannot then jump to the policy decision of
importing the Finnish model and hope for quick improvements. The Indian
education system, for example, is influenced by those deep determinants:
perhaps India’s colonial history is responsible for the elitist pattern of good
education for a tiny few and poor education for the mass of children; or India’s
culture sees education as unsuitable for the low caste of the population; or
perhaps India is simply not open enough to the ideas and debates from the rest
of the world to give education an appropriate richness.
Chapter 7 explores the data and debate about the centuries-old origins of
contemporary patterns of income inequality. Did the income gap between
today’s developed and today’s developing countries emerge in 1750, in 1500 or
ev en earlier? Chapter 8 shows how economic growth, whether over the recent
or historical past, impacts on the structure of the domestic economy. The first
deeper determinant discussed is colonialism in Chapter 9. It comes first
because, arguably, its influence works through the other four deep determi-
nants of growth: through institutions (importing them from the colonizer or
maintaining indigenous institutions); through geography (colonial rulers
drawing borders); through culture (whether ethnic divisions existing today are
a product of the colonial experience); and through openness (typically expos-
ing the colony to trade and openness with the colonizer at the cost of trade and
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