Economic
Growth

Introduction

Economic growth is usually a prerequisite for widespread improvements in living standards, particularly when it can help drive processes of structural transformation that can provide better jobs and generate higher value products and services.  

Most research on growth tends to focus on the influence of certain types of institution. This overlooks the difference between what drives growth take-offs, and what enables countries to sustain growth over time (rather than entering cycles of boom and bust).

We wanted to explore the political drivers of these two different forms of growth across different contexts. We also wanted to understand how the nature of growth, and the types of capitalists and firms involved in this, also shaped the governance context in developing countries.

Key findings

We found that growth trajectories in developing countries are shaped by the nature of deals between actors rather than rules set by institutions. Different stages of growth have different political drivers.

For example, initial growth spurts require deals between political elites and business leaders that are ‘ordered’ but not necessarily ‘open’.

Sustaining growth and achieving structural transformation requires the deals environment to be open as well as ordered.

Different types of firm place different types of pressure on public policy and governance institutions. The most positive effects tend to come from manufacturers and small-scale producers. The most negative effects are from monopolists and rentiers.