Government and Economies in the Postwar World: Economic Policies and Comparative Performance, 1945-85

By Andrew Graham; Anthony Seldon | Go to book overview

Chapter seventeen

Political institutions and economic performance

David Marquand

Since Adam Smith, if not before, writers on economic matters have known that economic performance depends partly on political and institutional factors. Even those who believe that the competitive free market is bound, by definition, to allocate resources more efficiently than any other mechanism, and that public intervention in the market is therefore bound to do the economy more harm than good, accept that governments can affect economic performance for good or ill-for good, by removing barriers to free competition, and for ill by erecting or maintaining them. Other schools of thought believe that state intervention can, at least in principle, improve it. On either view, it is reasonable to suppose that the structure, values, and policies of the state must have something to do with its economic impact.

Unfortunately, attempts to discover how and under what conditions these political or institutional factors impinge on economic performance have not been conspicuously successful. Discussion of this topic rarely gets beyond anecdote, and often falls into the trap of circularity. Seeing a successful economy, and noticing that the political institutions in the society concerned have tried to promote economic success, we are apt to conclude that the success is the product of the institutions. By the same token, if a country's political institutions intervene in the economy, and the economy performs badly, we tend to blame the institutions or their policies. But these are not valid inferences. The successful economy might have been even more successful-and the unsuccessful one even more unsuccessful-if the institutions or policies had been different.

So it is not enough simple-mindedly to compare the political institutions and economic performances of the societies described in this book, in the hope that worthwhile institutional or political generalizations will emerge of their own accord. It might be better to proceed in the opposite way: to begin by looking at possible 'models' of the relationship between institutions and policies on the one hand, and economic performance on the other, and then to see what light they throw on the story told here. Three such 'models' suggest themselves: first, Paul Kennedy's (1988) model of imperial over-stretch; second, Mancur Olson's (1983) model of group-induced economic

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Government and Economies in the Postwar World: Economic Policies and Comparative Performance, 1945-85
Table of contents

Table of contents

  • Title Page iii
  • Contents v
  • Acknowledgements ix
  • Figures x
  • Tables xi
  • Chapter One - Introduction 1
  • Part I 7
  • Chapter Two - The International Environment 9
  • Chapter Three - The United Kingdom 30
  • Chapter Four - France 54
  • Chapter Five - West Germany 79
  • Chapter Six - Italy 104
  • Chapter Seven - Spain 125
  • Guide to Further Reading 153
  • Chapter Eight - Scandinavia 154
  • Chapter Nine - Eastern Europe 179
  • Chapter Ten - The Soviet Union 205
  • Chapter Eleven - The United States 225
  • Guide to Further Reading 252
  • Chapter Twelve - Japan 253
  • Part II 271
  • Chapter Thirteen - Comparative Economic Performance of the Oecd Countries, 1950-87: a Summary of the Evidence 273
  • References 283
  • Chapter Fourteen - Benefits of Backwardness and Costs of Continuity 284
  • References 293
  • Chapter Fifteen - Economic Policies and Traditions 294
  • References 302
  • Chapter Sixteen - The Meaning of Hard Work 303
  • References 313
  • Chapter Seventeen - Political Institutions and Economic Performance 315
  • References 322
  • Index 323
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