The Importance of Institutions and their Role in State Development

The previous articles in this module have briefly discussed the importance of institutions in state building and state formation. The key themes that were introduced were how well functioning and stable institutions contribute to state development and state formation.

When we talk about institutions, we mean the bureaucratic setup, the judiciary, the armed forces, the governance structures, and the overall umbrella of regulatory agencies and the executive. The west developed largely because it had developed strong institutions that were at the core of its state building efforts.

These institutions coupled with the practice of the rule of law and the social contract ensured that citizens had access to basic services, could rely upon the courts to enforce the law, and enjoy better standards of living because they were well taken care by the state.

Further, the fact that capitalism needs strong institutions to thrive and prosper was another reason why the West forged ahead of other countries in the race to development.

On the other hand, many developing and postcolonial countries could not match the speed of development of the west either because they could not develop the necessary institutions or because they inherited weak governance structures that were resistant to change and adaptation.

Contrast between the West and the East

On the other hand, India is an example of a country that inherited relatively strong institutions but was unable to continue with them due to historical and cultural factors. Without getting into detail, it would suffice to state here that these historical prejudices against colonialism and cultural dissimilarity between the institutional actors and the people meant that over a period, these institutions began to decay.

Many commentators believe that colonial countries have a window of a few decades wherein they can either develop the institutions left behind by their colonial masters or develop institutions of their own in this window of time. It is the tragedy for India that it did not do both in this window and hence, we are now witnessing a period of upheaval and chaos.

Why the West forged ahead and why it is in Danger now

As mentioned earlier, the west had strong institutions that guaranteed the social contract between the state and citizenry and which ensured that they developed and progressed. However, the recent global economic crisis has shown that the institutions in the west are failing and hence, nothing can be taken for granted in these turbulent and chaotic times marked by turmoil.

However, any day the institutions in the west are superior to those in the east and despite the Chinese and the Asian Tiger economies trying to emulate the west by adopting some of their practices, they are still behind in terms of having institutions that are strong and resilient.

Finally, it must be mentioned that institutions take time to develop and hence, any method of providing good governance must be given time to bear fruit.

Only when deep-seated reforms are undertaken can effective governance structures develop and the countries benefit.