Corruption

So the political-economy question is what kinds of political leaderships do you need to have to construct growth and transformation? And this is what I call governance for growth. And what we need to learn (and I will come back to Chile and the Latin American examples later on) that the problem in poor countries making the transition is, putting it very bluntly, how do you construct humane and dynamic versions of capitalism. And this is a very difficult task because capitalism by its nature is not just, is not fair, and it’s an ugly beast, right.

So when we’re talking about markets, you actually miss the elephant in the room, which is markets have existed in developing countries for thousands of years. We don’t need anyone to come and tell us about markets. India had markets when Europeans didn’t know what a bath was.

The point is that to construct capitalism is something completely new. It’s a different hierarchy in societies, different asset structure, it’s very difficult to construct. You need to have a lot of elite cohesion to achieve that transformation without civil war breaking out. The problem with a lot of African countries and large parts of India as well is that that elite cohesion is very difficult to construct. The elites when they have cohesion don’t have a long enough time horizon so that they do a lot of looting instead of construction of capitalism from which they will actually end up better off. This is the problem.