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4- Institutional change
Economic growth and development require institutional change. New organizations such as banks, stock and bond exchanges, and insurance companies gain new importance. The role of the central government – what is often termed the state – must change so as to facilitate and not thwart private initiatives. The social infrastructure of roads, ports, communications, the provision of electricity, water, and other power must be improved, and the state plays a central role in these areas, particularly during early stages of structural transformation. Further, enforcing the rule of law and the definition and defence of property rights are fundamental tasks of the state, which itself typically must be greatly modified and streamlined, if economic growth and development are to be advanced effectively.
But institutional change runs deeper, to basic values and motivations; business increasingly must be operated with more attention to efficiency and profitability in a more competitive and open atmosphere. Old ways of thinking and doing are threatened by an often unsettling attention to profit maximization by the ‘new’ entrepreneurs in industry and agriculture. Even the family often is redefined, as the extended family of the past is replaced by the nuclear family of more modern society. Economic growth and development, however, definitely require a break with the past, and some of the most cherished institutions of many societies today, such as their close family structures and interpersonal relations, their religious traditions, and the pace of life will be altered over time, becoming more and more like those institutions in other societies on the path to development.
These are not the only structural changes that most less-developed nations must foment if they wish to make progress toward development. There are others, such as changes in macroeconomic policy to control inflation, for example, and the role of the state in a broader context that attend the process of becoming developed.
copied and edited by: Jasmine M. Fakhry
Media Team
YES Country Network Egypt
Sustainable Development Association
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