ESSAY QUESTION(s):

1. What form or combination of political institutions is required to enhance economic

It goes without saying that all of us are familiar with the fact that political institutions affect
favorable economic growth. They have different political structures like the nature of
government, elections, rule of law, private property protection, and regulatory institutions which
act as the basis of the economic policies and government structures of the state. Having
powerful and honest politics will be conceived as a guarantee for the national economy going
ahead. This can potentially halt these dynamic processes if the presence of incompetent and
corrupt ones is neglected.

A socio-economic system needs to be relatively stable and predictable for long-term investors,
which is an important element that brings in economic sustainability. They instruct the public to
invest, eliminate their worries, and disseminate both domestic and foreign kinds of investment.
By the same token, free bureaucracies are instrumental in ensuring the compliance with the
agreements, the respect of ownership matters and the introduction of fair competition, thus,
individuals are able to venture into innovation and entrepreneurship.

Governments distinguished by regular elections, political pluralism and the rule of law become
subject to the accountability of members and also of course citizens. Through collaboration
citizens are enabled to be involved in the decision-making processes, and leaders can be held
accountable for their actions. The process of forming a government that is both inclusive and
transparent in its operations will largely contribute to the growth of the economy through
embracing stability, eradication of corruption and strengthening the rule of law. The
implementation of legal and property rights is one of the notable aspects of economic
development. Powerful legal institutions make possible the contract enforcement, property rights
protection, and peacefully resolved conflict situation by the means of laws. The
above-mentioned will be motivated through investment, entrepreneurship, and innovation assert
with this.

Institutions from the field of finance develop and carry out the creation and continuance of the
economy with the help of rules and registration of business operations. Well-crafted regulatory
frameworks endeavor to ensure that consumers and consumers, and on the other hand, the
enterprise sector are being protected through the provision of sound public health and green
environment, and at the same time their business environment is business conducting.
Unconfused, and easily understandable and friendly regulations add on to this competitive
environment in general through its impact on the investment climate as well as economic
stimulation. The judges, like the judiciary, are the column provided by the rule of law system
because the role of the independent judiciary as it stands to protect the rule of law, individual
rights and also as the solution to conflict and disputes is to be fair and impartial. Providing
judiciary operations with the independent mode operations, deters political influence, corruption
and partiality; these measures give more confidence to investors and ensure the equality of the
laws. They support different types of political institutions that are built according to the most
positive factors relevant to the development of the country within bureaucratic and social
aspects. Institutional arrangements and political entities with different areas of responsibility e.g
judiciary, corruption, and discrimination among others, provide for economic growth.
Market-based policies that provide a notice of trade and the investment barriers withdrawal are
to be conventional first, whereas the later development effort will cover a competitive market to
foster innovation and productivity growth. An entrepreneur should set his objectives and invest
on human capital and infrastructure that are the fundamental activities of the cities and gradually
do economic transformation. For example, in order to create trust among investors, which is
basic for overcoming the conflicts that arise from the corruption elimination or infringements, the
receiving of new profits should be reduced. In proportion, the competitive field among people
becomes even. Lastly, one can note that strategies are means by which the economic situation
of a country changes through the affected political institutions.

There should be adequate overlap between democratic ways of governance, good institutions,
rule of law, regulatory reforms, investment on human capital and infrastructure, anti-corruption
attitudes and inclusive policies so that the intended economic growth would be realized.
Through the establishment of institutional political systems and the supporting framework, the
growth of a sustainable economy and growth will then be encouraged. Hence, the policy makers
and the stakeholders need to put in all their efforts in order to strengthen all the institutions
which will create a better conducive environment for improving the growth of the economy.

2. Do political institutions affect economic performance regardless of any preconditions

This linkage between politics and economy has become an object of investigation and research
by a lot of people several times. There is the common perception that democracy growth is the
result of stronger economies whereas those last studies are against this idea and they claim
that the role of economics regarding the rise of democracy is complex. The assumption during
historically past that the economic growth represented the main source of transformation of
social structures, which inverted led to the development of a middle class supporting
democracy, to the dissemination of new political values, to the societies’ increase in education
level, to the wealth rise and to the improvement of international relations, etc., is not
experimentally supported.

According to Przeworski and Limongi, a higher GDP does not directly lead to a democracy, but
rather is an indicator that democracy exists within society. Even though wealth is an eloquently
played factor which helps the democracy prevail yet it is not the most significant factor that
determines the democracy itself. Fewer democratic states at the brink of collapse follow the idea
of non-linearity when it comes to the democracy–wealth relationship. To add to this, wealth
starts to affect democratic longevity as from the selected threshold of income rates, and
therefore, poor countries do not get protection from democracies. For the first point, political
systems are one of the major factors in order to explain the dynamics of the economy and it is
that which concerns the analysis as a whole. Earlier on, autocracies were perceived as
performing better than democracies as far as economic development was concerned, because
people used to be misled that lack of effectiveness was their inherent strength, due to internal
struggle brought about by unstable property rights and patronage-seeking behavior. Autocracies
are configured as a form of government in which property protection is the highest value along
with powerful and opaque processes for rule-making and rent-seeking attitude. Further, the
challenges of rule of law as a political foundation can be amply more complicated because
democracies can also antagonize, especially create conflict in it.

Nevertheless, the situation becomes further complex when one expects that freedom of
economic activity has two more sides to look at. Countless numbers of opuses have ascertained
that the power of economy tends to play the most pivotal role in the perceptions about
governance and corruption. It is both accompanied by the rise of wealth as well as political
liberty. Democratic countries may therefore have some constitutional economic development
advantage which is mainly observed in the situation where the country is a clear democracy with
a well institutionalized economy. However, the level of that advantage may not be true for the
country that has a poorer economy or is a new democracy. Thus, the authorities ought to
combine the features of economic development and democracy building with the justice system.
The most significant responsibility – even for the country which has already entered
democratization – is the institution providing macroeconomic stability, justice and free trade.

The process of democratization is a source of the troubles in its reforming of the institutions but
still had to be reckoned with in the political context. Another point is that some countries may
still be in the process of democratization and thus those countries deserve more attention than
the countries that have already institutionalized democratically. The economic authorities
prevailing an influence over those democratic ones may best bring out the true effects and form
of long run and also sustainable growth.