Efficient Polity:

The prevailing polity contributes significantly to shaping economic performance by defining and enforcing the economic rules formed. The thrust of development policy must therefore be the creation of polities that will establish and enforce the rules and laws framed. This requires certain characteristics to be instituted into the polity of an economy by developing the required institutional/organisational systems. Policy prescriptions should vitally be country-specific recognising the binding constraints to growth, and taking appropriate account of the institutional context of each country. Some of the other requirements identified may be stated as follows.

• Political institutions, for instance, will be stable only if they are supported by organisations with an interest in their perpetuation. Therefore, an essential part of political/economic reform is the creation of such organisations.
• It is essential to change both the institutions and the belief systems for successful reform since it is the mental models of the actors that will shape choices.
• Evolving norms of behaviour that will support and legitimise new rules is a lengthy process and in the absence of such reinforcing norms polities will tend to be unstable.
• While economic growth can occur in the short run even with autocratic regimes, long run economic growth entails the development of the rule of law and the protection of civil and political freedoms.
• Informal constraints (i.e. norms of behavior, conventions, and codes of conduct) are a necessary but not sufficient condition for good economic performance. Societies with norms favorable to economic growth can sometimes prosper even with unstable or adverse political rules. Very little is known about the evolution of belief systems and consequent informal constraints although religions have demonstrated to be a basic component of belief systems.
• Finally, the endowments of geography and the historical legacies of institutions also matter but not to-the exclusion of economic policies. Development-friendly institutions and governance tend to support good economic policies with the latter, in turn, strengthening good institutions. Improvements in institutions and economic governance matter a lot over long periods, especially in sustaining growth.