The deep determinants can be modified
The deep determinants may be deep but they are not destiny; they can be modi-
fied to promote long-run sustainable economic growth.
Chapter 11 noted that geographical constraints can be overcome.
Landlocked countries can reduce transport costs through improving port facil-
ities, giving duty-free access to imported inputs and capital goods, and ensur-
ing efficient customs administration. What looks like geographical isolation
can in truth be a product of poor policy. Policies that restrict competition in
cargo transport and give monopolies to official national carriers (often airlines)
have been adopted by many African governments and have increased freight
costs. There is a market failure in the construction of many transport links,
including railways and roads. For any landlocked country there are external
benefits to them from any country lying between them and the coast investing
in transport infrastructure. Why would any country help a landlocked country
become a more viable competitor in world export markets?
Chapter 12 noted that good institutions can potentially resolve the ethnic
conflicts that may result from diverse social structures – a cultural explanation.
Institutions that give protection to legal minorities, and guarantee freedom
from expropriation and from repudiation of contracts would constrain the
amount of damage that one ethnic group could do to another. The example in
this book was that of one tribe getting into power and plundering the resources
of another less powerful tribe, specifically the case of Ghana and the Ashanti
cocoa producers being plundered. Such institutions could make a given degree
of ethnic fractionalization less damaging for development. The big problem is
that the measure of institutions is negatively correlated with ethnic division so
there is an original dilemma of wondering where such diverse countries can
acquire those strong institutions.
An optimistic chapter 10 in Banerjee and Duflo (2013) argued that a ‘view
from below’ allows us to see it is not always necessary fundamentally to
change institutions to improve accountability and reduce corruption. As they
point out, limited democracy can even be introduced into an authoritarian
regime at the local level. Local elections were introduced in Vietnam in 1998,
Saudi Arabia 2005, and Yemen 2001. Since the early 1980s village-level elec-
tions have been gradually introduced into rural China and research shows an
increase in accountability and public expenditures being re-allocated to reflect
the needs of local inhabitants. In Indonesia engineers sampled material to
build roads in 600 villages and compared those samples with construction
norms. The threat of audit reduced the theft of wages and materials by one-
third compared with villages where audits were not conducted. The introduc-
tion of electronic voting in Brazil reduced the number of invalid votes by 11
per cent; these votes were especially likely to be among the poorer and less
well educated. Again in Brazil, since 2003, sixty municipalities have been
drawn at random every month in a televised lottery and their accounts are
audited. These audits are made public through the internet and the local media.
298 Patterns and Determinants of Economic Growth