Show Summary Details

Page of

PRINTED FROM OXFORD HANDBOOKS ONLINE (www.oxfordhandbooks.com). © Oxford University Press, 2018. All Rights Reserved. Under the terms of the licence agreement, an individual user may print out a PDF of a single chapter of a title in Oxford Handbooks Online for personal use (for details see Privacy Policy and Legal Notice).

Subscriber: null; date: 06 July 2020

On Your Mark, Get Set, Develop!: Leadership and Economic Development

Abstract and Keywords

One of the lingering questions for development economists is that of economic transition and whether development can be promoted by a strong political leader. Earlier writings on leadership and economic development tend to fall into one of two camps: (1) leaders matter and can contribute positively to economic growth, or (2) leaders seldom have positive effects and, at best, can avoid doing a great deal of harm. This article establishes a third option—a middle-ground position—between these two views. Good leadership can, indeed, have a positive effect on economic growth but only during the initial moment when economic reform is up for grabs. Once the opportunity to implement sweeping reform has passed, interests become entrenched, and the opportunity for growth-enhancing reform passes. Bad leaders, on the other hand, can hamper economic growth in periods well beyond the ideal reform moment.

Keywords: economic development, economic growth, leadership, reform, transition

Introduction

Unless philosophers become kings in our cities, or unless those who now are kings and rulers become true philosophers, so that political power and philosophic intelligence converge, and unless those lesser natures who run after one without the other are excluded from governing, I believe there can be no end to troubles, my dear Glaucon, in our cities or for all mankind. Only then will our theory of the state spring to life and see the light of day, at least to the degree possible.

(Plato 1985, 165)

[T]he main point about which there can be little doubt is that [Adam] Smith’s chief concern was not so much with what man might occasionally achieve when he was at his best but that he should have as little opportunity as possible to do harm when he was at his worst. It would scarcely be too much to claim that the main merit of the individualism which he and his contemporaries advocated is that it is a system under which bad men can do least harm. It is a social system which does not depend for its functioning on our finding good men for running it, or on all men becoming better than they now are, but which makes use of men in all their given variety and complexity, sometimes good and sometimes bad, sometimes intelligent and more often stupid.

(Hayek 1948, 11–12)

Adam Smith’s ([1776] 1976) An Inquiry into the Nature and Causes of the Wealth of Nations is, first and foremost, an attempt to explain why some countries are rich and others are poor. According to Smith: “Little else is requisite to carry a state to the highest degree of opulence from the lowest barbarism but peace, easy taxes, and a (p. 714) tolerable administration of justice: all the rest being brought about by the natural course of things.”1

As evidenced by the title of a recent book by two leading development economists, Why Nations Fail (Acemoglu and Robinson 2012), economists are still trying to figure out why some nations embrace the growth-enhancing policies of peace, easy taxes, and a tolerable administration of justice, while others fail to do so.

One of the explanations for the vast differences in economic performance across nations involves national leaders and changes in leadership within a nation. The question of whether leaders can promote economic development has a long history in economics and political philosophy. At one extreme sits Marx and disciples of Marx, who view social change as a function of grand economic and historical forces, rather than coming through the work of individuals and leaders (Tucker 1978). At the other extreme are a number of historians and sociologists who posit “great man” theories of history (Kissinger 1968; Ionescu 1991) and emphasize the role that “charismatic leadership” can play in promoting social change (Weber 1947, 358–363). As we will see in the next section, economists have also explored the relationship between leaders and social change; their ideas, which have built on and sought to fill in the details of the grand social theorists, have helped to advance our understanding of how economic growth and stagnation relate to the polity and national leaders.

Of particular interest to economists working in the Smithian tradition is the extent to which leaders can influence the adoption of growth-enhancing institutions. According to economists, state-led development planning has, time and again, failed to promote growth (Boettke 1993; Boettke 1994; Easterly 2009). Institutions conducive to economic freedom—private property, the rule of law, and free trade—promote growth (Acemoglu, Johnson, and Robinson 2001; Acemoglu, Johnson, and Robinson 2002; Djankov et al. 2002; Frye and Shleifer 1997). To a large extent, the growth discussion has shifted to a question of how to make the transition from “here” (i.e., current economic environment) to “there” (i.e., more economically free environment). Some economists think we might have to wait hundreds of years for cultural and institutional change (Williamson 2000); others think institutional reforms can be implemented more rapidly through a dose of “shock therapy” or military intervention (Sachs 1994).

Once discussions of how to transition are entered, an understanding of leadership and the role that national leaders play in promoting growth is needed. If good leaders, whom we define as leaders who promote growth-conducive policies, can somehow help a nation embrace economic freedom, then maybe growth depends on nothing more than getting the right person at the top. If good leadership is a primary determinant of economic growth, then fostering sound leadership—leaders committed to economic freedom and sound economic policy—may be the most efficient and humane path toward economic growth. On the other hand, if leadership does not matter for economic (p. 715) growth, then development economists can refocus their scholarly efforts and policy prescriptions away from figuring out how to get the right people into power.

This chapter establishes a middle ground between two prominent views of leadership: (1) leaders matter and can contribute positively to economic growth, or (2) leaders seldom have positive effects and, at best, can avoid doing a great deal of harm.

Good leadership can, indeed, have a positive effect on economic growth but only during the initial moment when economic reform is up for grabs. Once the opportunity to implement sweeping reform has passed, interests become entrenched, and the opportunity for growth-enhancing reform passes. Bad leaders, on the other hand, can hamper economic growth in periods well beyond the ideal reform moment. Thus, betting on institutions meant to potentiate strong leadership for development poses significant downside risk but very little upside benefit. Rather than seek to design institutions and lead the development process, economists should focus on how institutions can prevent bad leaders from doing great harm. As Milton Friedman ([1962] 2002, 50) wrote, “Any system which gives so much power and so much discretion to a few men that mistakes—excusable or not—can have such far-reaching effects is a bad system.” Thus, our argument is that leadership can have important positive effects at the reform moment, when the rules are established for subsequent periods, but that the opportunity for a leader to play a positive role in the reform moment is only through constraining future leaders.

In the next section, we review the literature on leadership in economic development. The section after that compares leadership-led development with more gradual and spontaneous development processes. Then we argue that leaders matters but in a slight and subtle way. And the final section offers conclusions.

Leaders in the Development Literature

In recent years, economists have turned their attention to the role that leaders play in promoting growth. Throughout history, especially in feudal times, leaders played a prominent role in recorded histories (Burns 2003). The idea that leaders play a crucial role in promoting social change remains alive and well in the fields of history, politics, and sociology. For example, Klineberg (1950, 212) writes that “the impact on recent world events of individuals like Churchill, Stalin, Gandhi, Hitler, and Roosevelt make it abundantly clear that the influence of the ‘great man,’ for good or evil, must not be underestimated.” Furthermore, Klineberg says, history’s great men are people researchers should try to understand. What characteristics do history’s great men share? What conditions lead them to becoming great leaders? These are the questions Klineberg thinks we should be asking.

Edinger (1964a; 1964b) argues that the political science profession failed to recognize the importance of leadership in political history and calls for more political biographies. (p. 716) While noting the difficulty of studying leaders currently in power, Klineberg (1950, 212) argues, “There is probably no more important problem in this whole field than understanding of the role played by the leader in helping to direct his nation toward peace or war.” More modernly, Thomas Friedman (2009) writes: “One-party autocracy certainly has its drawbacks. But when it is led by a reasonably enlightened group of people, as China is today, it can also have great advantages. That one party can just impose the politically difficult but critically important policies needed to move a society forward in the 21st century.”

Long before twentieth-century writers weighed in on the issue of leadership, Karl Marx offered up a theory of historical determinism that placed minimal weight on the role of leaders (Tucker 1978). For Marx, leaders had agency but were largely servants to broader economic forces. Searing (1969) interprets Hegel, Spencer, and Marx as all adhering to the philosophy that a leader can indeed act as a catalyst for change but that these changes would have eventually occurred even without the leader.

When we move away from historical arguments about leadership and narrow our focus to contemporary discussions in economics, we see that Acemoglu and Robinson (2006; 2008) have a dismal view of leaders. For Acemoglu, Johnson, and Robinson, institutions that protect property and restrict the political power of leaders are more important than leaders for transitioning from low economic growth to high economic growth. The colonial origins faced by different countries at the time of settlement also have a first-order effect on economic performance (Acemoglu, Johnson, and Robinson 2001; 2002). Williamson (2009), while not specifically addressing the leadership debate, finds that informal institutions, such as trust, respect, individual self-determinism, and obedience, matter more for economic growth than formal institutions, including a country’s leadership.

Turning to empirical work to resolve the leadership debate poses many difficulties. Since each country faces its own unique cultural characteristics, vested interests, historical factors, and geographical features, separating out the effect of a particular leader is a difficult econometric exercise, and endogeneity problems are a constant concern. For instance, Searing (1969, 10) asks, “Do leaders lead, or do they follow?” His question highlights the tricky empirical problem of determining causality when leaders could, quite possibly, be responsible for leading change or, alternatively, take credit for changes already underway that they had no direct involvement in bringing about.

In part because of the empirical difficulties inherent in measuring the impact of leaders, most studies involve sui generis case studies, anthropologies, and biographies that often do not lend themselves to statistical analysis (Edinger 1964a, 431). Further biases exist because our knowledge of leaders is limited to the records they leave us. These limitations make historical accounts of social change more state-centric and thus more leader-centric than may be justified by actual circumstances (Hayek 1988, 44; Scott 2009). This leadership-centric bias, by ascribing too much power to leadership in history, can carry over into the policy prescriptions prepared by development economists for developing nations.

(p. 717) Despite the many econometric challenges that confront leadership research, some scholars have found creative ways to attempt to measure the importance of leadership. Jones and Olken (2005) examine the role that the death of a national leader played in economic development for a cross-section of countries after World War II. Their results suggest that leaders play a crucial role in economic development, especially in autocratic regimes where leaders have few limitations. Similarly, Besley, Montalvo, and Reynal-Querol (2011) use the deaths of national leaders to find that leadership played a significant role in economic performance across countries from 1875 to 2004.

One of the primary ways leadership can foster or hamper economic growth is through the selection of institutions. Glaeser et al. (2004) argue against the view that democracy and constraints on government are good for growth, instead arguing that “good-for-growth dictators” have been the source of many successful East Asian reforms, including China’s boom. Glaeser et al. (2004, 298) conclude, “Countries that emerge from poverty accumulate human and physical capital under dictatorships, and then, once they become richer, are increasingly likely to improve their institutions.”

The notion that dictators might need to be the driving force of development surely strikes some as dangerous. Any leader with the power to promote growth also has the power to do a great deal of harm. The prevalence of underperforming nations, to a large extent, may have little to do with the constraints placed on a leader and more to do with leaders intentionally maintaining institutions detrimental to economic growth to maintain the current balance of power (Acemoglu and Robinson 2006; 2008). Easterly (2011) criticizes the view of the “benevolent autocrat.” He finds little empirical evidence to support the benevolent autocrat hypothesis, arguing that the proponents of this view cherry-pick examples and that when taken as a whole, autocratic regimes have experienced a higher variance of economic growth but not a higher growth rate.

Easterly (2011) also thinks that many economists are asking the wrong questions. Rather than focus on the number of autocratic countries among the fastest growers in the world, he suggests that economists instead focus on the entire universe of autocratic regimes. Once we do so, we should then ask ourselves how many autocratic regimes are enjoying rapid growth. Easterly identifies several biases that result when development economists draw the mistaken, and potentially harmful, conclusion that benevolent autocrats can promote development.

The variance in growth performance is not the only thing to worry about for those who embrace benevolent autocrats. Strong, autocratic leaders have been responsible for killing hundreds of millions of their own people through democides outside of warfare. The potential human costs of strong leadership illustrate the risks involved in a full embrace of “good-for-growth” dictators. Rummel (1997) provides a comprehensive overview of the many democides committed by autocrats, and he concludes that while strong leadership may sometimes promote economic growth, there is a far greater tendency for strong leadership to be abused.

Easterly, Rummel, and other skeptics of autocratic-led development are echoing an insight made by Hayek ([1944] 2007, chap. 10) about autocratic regimes. For Hayek, the costs of autocracy are large. In addition to these costs, though, the autocratic structure (p. 718) consistently encourages the worst and most ruthless to rise to the top as national leaders. Democratic institutions, by contrast, check excessive discretion on the part of their leaders and promote secure property rights because they encourage government forbearance (Merrill and Smith 2010; Olson 2000).

Institutional Imposition versus Evolution?

The debate about the role of leadership in economic development, highlighted above, centers on the following question: do institutions conducive to economic growth need to be grafted onto struggling nations through imposition, or do growth-enhancing institutions need to emerge indigenously through a spontaneous evolution? If the institutions of economic freedom can be imposed, then strong leadership could be a key ingredient in the reform process. On the other hand, if successful institutions need to emerge organically, rather than be imposed, then leadership has a much more modest role to play.

At the core of this debate is the degree to which institutions are path-dependent. North (1990) made one of the first attempts at applying the concepts of path-dependency to institutions and institutional change. Path-dependency, in the context of technology, describes a situation where a technology is established as a result of historical adoption. Even if a given technology turns out to be inferior to another technology, the inferior technology may continue to be employed because of the historical embeddedness of the inferior technology. In the context of institutions and institutional change, path-dependency, North argues, is when institutions, even inferior institutions, are locked in because of historical embeddedness. While recognizing the role of culture and embedded informal institutions in economic development, path-dependency implies a larger role for leadership in reshaping indigenous institutions. As North (2005, 164) writes:

In a country without a heritage of formal and informal consensual political institutions, the road to an effective political system requires either an authoritarian ruler with an understanding, desire, and ability to put in place the necessary economic rules and enforce them, or the much more lengthy process of piece meal development through non-governmental organizations (NGOs) and effective foreign aid in which educational, health, judicial, or other assistance is effectively designed and delivered with the objective of transferring the essential knowledge and skills to the resident population.

In the 1990s, economists came to settle on the idea that sound economic policies—policies that ensured a fair playing field, predictable taxes, and free trade—were the key to economic growth, a consensus that became known as the (p. 719) Washington Consensus (Williamson 1990). With the list of reforms in hand, many development economists started advocating “shock therapy,” which seeks to implement rapid economic reforms on economies in transition (Sachs 1994).

Some Austrian economists, such as Peter J. Boettke and Murray Rothbard, became persuaded by the logic of shock therapy reforms and the concomitant strong national leadership needed to ignite these reforms. Boettke (1993, 85–86) argues that exogenous shocks, such as ideological revolutions and economic collapses, introduce a reform opportunity. At that moment, a strong leader—what Boettke terms an “intellectual entrepreneur” (86)—must sweep in and override the dominant interest groups intent on blocking reform and preserving the status quo. Like Boettke, Rothbard (1992, 76) argued for rapid reform—a reform program that, in fact, could be fully completed in “one day.” His reforms, of course, rested on the idea of a strong leader, someone with the power to overcome special interests and the ideology to “push the button of liberty” and desocialize an economy in one fell swoop. While Rothbard and Boettke were arguing for shock therapy in the context of post-Soviet transition, Beaulier (2003) concluded that the same combination of strong leadership and market-based reforms were needed to put African countries on the path to prosperity.

Despite the theoretical logic of shock therapy, many think it has failed in practice. Murrell (1993) examined the shock therapy experiments in Poland and Russia and concluded that an evolutionary approach would have performed better. North (1999, 4–5) raised Hayekian concerns about shock therapy when he wrote: “But, essentially, it is an endless story of our having very poor understanding of an enormously complex process in which the uncertainty, again, is in all three dimensions. We do not know enough; we are dealing with a world of continuous change; and we do not have any dynamic theory to guide us when we attempt to get from one point to the next.”

For North, there is an arrogance involved when policy makers and Western advisers attempt to impose their economic and governmental systems on diverse and complex cultures. Similarly, Easterly (2006, 66) critiques shock therapy, arguing, “The attempted changes at the top are out of touch with the complexity at the bottom.” Rodrik (2006) criticizes the Washington Consensus model but says it must be tweaked rather than abandoned. After comparing shock therapy to gradual reform experiments, Easterly (2009) argues that the case for transformational approaches, such as shock therapy, has been grossly exaggerated. Despite these severe shortcomings, shock therapy has reinvented itself in the postcommunist period in the form of military interventions and reconstruction efforts that entail broad institutional changes. Examining the record of US military interventions aimed at exporting democracy, Coyne (2008) finds that the majority of these interventions failed to meet the goals of the planners. Despite the US military’s tremendous resource capabilities and long history of experience, the reconstruction efforts of the US military were more likely to result in failure than success.

The evidence piling up against shock therapy has led development economists to reconsider their reform options. Many are shifting away from attempts to understand the right mixture of formal and informal institutions; instead, they seek to understand how path-dependencies manifest themselves in historical institutions and vested (p. 720) interest groups (Easterly 2009; Olson 2000, chap. 9; Popov 2007). Williamson (2009) measures the relative impact of formal and informal institutions across forty-five countries and finds that the success of formal institutions depends largely on how well they mesh with the informal. Williamson encourages development economists to study the conditions under which quality informal institutions emerge and rejects the view that formal institutions should be transplanted.

Boettke’s later work (Boettke et al. 2005; Boettke, Coyne, and Leeson 2008) focuses less on the role of leadership and emphasizes the role that indigenous institutions play in a nation finding its way to prosperity. For Boettke, Coyne, and Leeson (2008), successful reforms of formal institutions must necessarily be built off of informal institutions and culture. In the absence of change at the informal level, formal institutions will not be effective. In fact, Coyne and Boettke (2006) call for dialing back the hubris of development economists and encourage more professional humility. A more humble development economics means accepting that reform is complex and should be informed by the indigenous institutions and culture of the transitioning economy. Rather than having the economist play the role of savior, they call for the economist to become a student of the economy.

The approach being taken by the new comparative political economists (e.g., Boettke, Coyne, Leeson, and Williamson) recognizes the need to use liberal means to obtain liberal ends (Coyne 2008, chap. 8). Since economists have not been successful at imposing institutions, they need to focus instead on how good institutions emerge. Free trade and nonintervention, Coyne (2008) argues, play an essential role in the emergence of good institutions. Trade disrupts the traditional balance of power and allows entrepreneurs and other beneficiaries of trade to pressure political elites into a more equitable distribution of political power (Acemoglu and Robinson 2006; 2008).

A humbler political economy is consistent with and, to a large extent, informed by Mises and Hayek. Hayek (1945; 1948, chaps. 7–9) stressed the knowledge problems inherent in economic planning and said that they would seriously cripple any attempts by leaders to manage the economy. Whether the planning’s end goal is liberal or nonliberal, the complexity and informational problems facing the planner make for an insurmountable problem. Hayek (1948, 11) stressed the importance of Smith’s inquiry that sought to design institutions robust do deviations away from idealized conditions.

Indeed, indigenous institutions, which emerge from the bottom up, rather than top-down institutions, encourage the development of culture, responsibility, and civil society (Tocqueville [1835] 2010; Ostrom 1997; Otteson 2015, 100). As Tocqueville ([1835] 2010, 148–149) put it: “one of the greatest misfortunes of despotism is that it creates in the soul of the men submitted to it a kind of depraved taste for tranquility and obedience, a sort of self-contempt, that ends by making them indifferent to their interests and enemies of their own rights.” In fact, Tocqueville (149), goes on to criticize the notion that a strong leader can be used to transition a country to liberal institutions:

Nearly all the passionate and ambitious men who talk about centralization lack a real desire to destroy it. What happened to the praetorians happens to them; they (p. 721) willingly suffer the tyranny of the emperor in the hopes of gaining the empire. So decentralization, like liberty, is something that the leaders of the people promise, but that they never deliver. In order to gain and keep it, nations can count only on their own efforts; and if they themselves do not have a taste for it, the evil is without remedy.

Tocqueville and Hayek had the answers about leadership and development long before us. What the new comparative political economy is, in part, aiming to do is to bring us full circle back to a focus on the organic and informal over the designed and formal.

Leaders Matter … at the Margin

Rather than thinking about leadership as an expedient to economic development, historical experience, economic logic, and data suggest that we should instead be quite skeptical of the role that leaders play in development. For most of history, leaders have sought to erect formidable barriers to economic development and control their people. The idea of a “good for growth” leader is fleeting at best and perhaps a myth. To the extent that leaders can be a force for good in economic development, their role is largely symbolic and concentrated in the very early days of reform.

That seems to be the main idea to take away when we look closely at the “good for growth” autocrats. The autocrats had a moment—in some cases, only a moment—to spark reforms. Once interest groups had a chance to form or realign, the reform moment was over. During that reform moment, their success was not the result of splendid planning or tremendous autonomy but, rather, resulted from their decision to be liberty leaders. As liberty leaders, they chose to get out of the way and sought to embrace free exchange, the informal sector, and the rule of law. Thus, leaders can have a positive effect on growth if, at the right moment, they set up institutions that curtail future leaders. While the alignment of conditions necessary to spark reforms during a reform moment is rare, there are examples of leaders achieving this.

One would be hard-pressed to find a better example of leadership mattering than the case of Botswana (Beaulier 2003). Botswana’s first postcolonial president, Seretse Khama, came to power in 1965 and sought to reform Botswana in ways that were largely proliberty. He did not go about designing institutions from scratch but, rather, embraced the informal, traditional institutions. Even the system in which knowledge was gathered throughout the country—the kgotla system—was preserved. Khama has been praised for being a charismatic leader who helped to launch Botswana’s growth miracle, but he did little in the way of actively advancing policy and focused mainly on serving as the face of Botswana externally, while emphasizing free exchange and tolerance internally. Khama did what any good business leader would do: he delegated and embraced an antiplanning plan. To the extent that he was wise enough to plan for a market, we can say that his leadership mattered.

(p. 722) Liberty leaders such as Khama have the potential to ignite reforms. But their potential is far more limited than what the shock therapy writers in development economics imply. They have the potential to set the tone for their country, control the narrative, and block bad ideas. But there is no such thing as a blank slate in the reform moment, and the good ones have an ability to recognize this. In other words, developing nations need to adopt the philosophy that Tocqueville ([1835] 2010, 302) witnessed in America: “The inhabitant of the United States learns from birth that he must depend on himself in the struggle against the ills and difficulties of life; he looks upon social authority only with a defiant and uneasy eye, and calls upon its power only when he cannot do without it.”

Other examples of leadership taking advantage of a window of opportunity to successfully institute reform is in post–World War II Germany. While the main task was largely building back infrastructure; rather than designing new social institutions, leadership put in place in both countries made important decisions that allowed the war-stricken nations to recover. In West Germany, Ludwig Erhard, who was elected the director of economics of the Office of Economic Opportunity in 1948, eliminated a wide array of price controls that had been imposed during the war (Coyne 2008, 132). When planners implement antiplanning measures at opportune times, they can drastically change the trajectory of growth for their nation. This is especially true when they respect local culture and institutions. For example, in West Germany, great care was also taken to preserve existing institutions through the placement of native Germans in positions of leadership in order to preserve informal institutions necessary for a successful recovery (Boettke, Coyne, and Leeson 2008, 346–348).

Similarly, post–World War II Japan offers an example of leadership successfully ensuring that indigenous culture and institutions were not greatly disrupted. General Douglas MacArthur, who served as the supreme commander of the Allied Powers for the Occupation and Control of Japan, had realized early on that any reforms would be in vain if they tried to impose foreign institutions (Manchester 1989, 390). Rather, MacArthur insisted on largely keeping Japanese institutions intact, especially through the retention of Japanese leadership, and accepting the majority of the constitutional elements that were proposed by Japanese advisers (Boettke, Coyne, and Leeson 2008, 346; Coyne 2008, 124).

A few other examples of liberty advancing leadership are noted by Easterly (2006, chap. 10). According to Easterly, the cases of successful reform in Turkey, Hong Kong, India, and Chile all had a lot more to do with leaders just getting out of the way, rather than carefully planning development. The leaders mattered in that they signaled the introduction of a “new boss” into the reform process, but once the signal of a new regime was sent, they largely stepped to the side and let the process of development work. To be successful, leaders must be able to commit to stepping aside credibly (Boettke 2009; Coyne and Boettke 2009; Rodrik 1989). Rotberg (2012) provides several case studies highlighting countries that were positively affected by what he refers to as transformative political leaders, including Nelson Mandela in South (p. 723) Africa, Lee Kuan Yew of Singapore, Kemal Ataturk of Turkey, and Seretse Khama of Botswana.2

Conclusion

While Smith boiled down the causes of economic growth to peace, easy taxes, and a tolerable administration of justice, the process of getting institutions to support peace, easy taxes, and a tolerable administration of justice is quite complicated and messy in the real world. While strong leadership has seen some successes, promoting autocracy as the path to economic development is premature and has the potential to be extremely harmful. While strong leaders can and have orchestrated success, this misses out on the long history of cacophonic disasters brought about by dictatorial regimes.

However, our concerns about leader-led development do not push us all the way to the other extreme of thinking that national leaders can never matter. The examples of a few successful leaders in the real world suggest that there is still a possibility that the appropriate reformer can come onto the scene and transform a nation through his or her embrace of the informal. Botswana’s first president, Seretse Khama, is one of a few examples of a leader who ignited development and left the rest of the process alone.

Rather than promoting institutions that will enable the best men to do the greatest amount of good, formal institutions should be sharply circumscribed to protect against the wide variance of behavioral tendencies typical in political institutions. In other words, institutions should be designed so that the worst, who can and do achieve positions of power, can do the least harm. In a reform moment, a good leader can credibly set up such institutions that curtail future leaders. Future research should explore what types of institutional regimes best credibly curtail bad leaders from doing harm and what conditions allow for their emergence and implementation. Rather than focusing on giving the right leader a prefabricated development plan, future research and policy prescriptions should focus more on understanding the ideological and social conditions necessary to restrain harmful leaders.

References

Acemoglu, Daron, Simon Johnson, and James A. Robinson. 2001. “The Colonial Origins of Comparative Development: An Empirical Investigation.” American Economic Review 91, no. 5: 1369–1401.Find this resource:

    Acemoglu, Daron, Simon Johnson, and James A. Robinson. 2002. “Reversal of Fortune: Geography and Institutions in the Making of the Modern World Income Distribution.” Quarterly Journal of Economics 117, no. 4: 1231–1294.Find this resource:

      (p. 724) Acemoglu, Daron, and James A. Robinson. 2006. “De Facto Political Power and Institutional Persistence.” American Economic Review 96, no. 2: 325–330.Find this resource:

        Acemoglu, Daron, and James A. Robinson. 2008. “Persistence of Power, Elites, and Institutions.” American Economic Review 98, no. 1: 267–293.Find this resource:

          Acemoglu, Daron, and James A. Robinson. 2012. Why Nations Fail: The Origins of Power, Prosperity, and Poverty. New York: Crown Business.Find this resource:

            Beaulier, Scott. 2003. “Explaining Botswana’s Success: The Critical Role of Post-Colonial Policy.” Cato Journal 23, no. 2: 227–240.Find this resource:

              Besley, Timothy J., Jose G. Montalvo, and Marta Reynal-Querol. 2011. “Do Educated Leaders Matter?” Economic Journal 121, no. 554: F205–F227.Find this resource:

                Boettke, Peter J. 1993. Why Perestroika Failed. London: Routledge.Find this resource:

                  Boettke, Peter J., ed. 1994. The Collapse of Development Planning. New York: New York University Press.Find this resource:

                    Boettke, Peter J. 2009. “Institutional Transition and the Problem of Credible Commitment.” Annual Proceedings of the Wealth and Well-Being of Nations 1: 41–52.Find this resource:

                      Boettke, Peter J., Christopher J. Coyne, and Peter T. Leeson. 2008. “Institutional Stickiness and the New Development Economics.” American Journal of Economics and Sociology 67, no. 2: 331–358.Find this resource:

                        Boettke, Peter J., Christopher J. Coyne, Peter T. Leeson, and Frederic Sautet. 2005. “The New Comparative Political Economy.” Review of Austrian Economics 18, nos. 3–4: 281–304.Find this resource:

                          Burns, James MacGregor. 2003. Transforming Leadership. New York: Grove Press.Find this resource:

                            Coyne, Christopher J. 2008. After War: The Political Economy of Exporting Democracy. Stanford, CA: Stanford University Press.Find this resource:

                              Coyne, Christopher J., and Peter J. Boettke. 2006. “The Role of the Economist in Economic Development.” The Quarterly Journal of Austrian Economics 9, no. 2: 47–68.Find this resource:

                                Coyne, Christopher J., and Peter J. Boettke. 2009. “The Problem of Credible Commitment in Reconstruction.” Journal of Institutional Economics 5, no. 1: 1–23.Find this resource:

                                  Djankov, Simeon, Rafael La Porta, Florencio Lopez-De-Silanes, and Andrei Shleifer. 2002. “The Regulation of Entry.” Quarterly Journal of Economics 117, no. 1: 1–37.Find this resource:

                                    Easterly, William. 2006. The White Man’s Burden. New York: Penguin.Find this resource:

                                      Easterly, William. 2009. “Can the West Save Africa?” Journal of Economic Literature 47, no. 2: 373–447.Find this resource:

                                        Easterly, William. 2011. Benevolent Autocrats. Working paper. http://williameasterly.files.wordpress.com/2011/05/benevolent-autocrats-easterly-2nd-draft.pdf.

                                        Edinger, Lewis J. 1964a. “Political Science and Political Biography: Reflections on the Study of Leadership (I).” Journal of Politics 26, no. 2: 423–439.Find this resource:

                                          Edinger, Lewis J. 1964b. “Political Science and Political Biography: Reflections on the Study of Leadership (II).” Journal of Politics 26, no. 3: 648–676.Find this resource:

                                            Friedman, Milton. (1962) 2002. Capitalism and Freedom. Chicago: University of Chicago Press.Find this resource:

                                              Friedman, Thomas. 2009. “Our One-Party Democracy.” New York Times, September 8. http://www.nytimes.com/2009/09/09/opinion/09friedman.html.

                                              Frye, Timothy, and Andrei Shleifer. 1997. “The Invisible Hand and the Grabbing Hand.” American Economic Review 87, no. 2: 354–358.Find this resource:

                                                Glaeser, Edward L., Rafael La Porta, Florencio Lopez de Silanes, and Andrei Shleifer. 2004. “Do Institutions Cause Economic Growth?” Journal of Economic Growth 9, no. 3: 271–303.Find this resource:

                                                  Hayek, F. A. (1944) 2007. The Road to Serfdom. Chicago: University of Chicago Press.Find this resource:

                                                    (p. 725) Hayek, F. A. 1945. “The Use of Knowledge in Society.” American Economic Review 35, no. 4: 519–530.Find this resource:

                                                      Hayek, F. A. 1948. Individualism and Economic Order. Chicago: University of Chicago Press.Find this resource:

                                                        Hayek, F. A. 1988. The Fatal Conceit: The Errors of Socialism. Chicago: University of Chicago Press.Find this resource:

                                                          Ionescu, Ghita. 1991. Leadership in an Interdependent World: The Statesmanship of Adenauer, De Gaulle, Thatcher, Reagan and Gorbachev. Boulder, CO: Westview.Find this resource:

                                                            Jones, Benjamin F., and Benjamin A. Olken. 2005. “Do Leaders Matter? National Leadership and Growth since World War II.” Quarterly Journal of Economics 120, no. 3: 835–864.Find this resource:

                                                              Kissinger, Henry. 1968. “The White Revolutionary: Reflections on Bismarck.” Daedalus 97, no. 3: 888–924.Find this resource:

                                                                Klineberg, Otto. 1950. Tensions Affecting International Understanding: A Survey of Research. New York: Social Science Research Council.Find this resource:

                                                                  Manchester, William. 1989. American Caesar: Douglas MacArthur 1880–1964, Pleasantville, NY: Reader’s Digest.Find this resource:

                                                                    McBride, Michael. 2012. “Review of Robert I. Rotberg: Transformative Political Leadership: Making a Difference in the Developing World.” Public Choice 153, nos. 3–4: 503–505.Find this resource:

                                                                      Merrill, Thomas W., and Henry E. Smith. 2010. The Oxford Introductions to U.S. Law: Property. New York: Oxford University Press.Find this resource:

                                                                        Murrell, Peter. 1993. “What is Shock Therapy? What Did It Do in Poland and Russia?” Post-Soviet Affairs 9, no. 2: 111–140.Find this resource:

                                                                          North, Douglass C. 1990. Institutions, Institutional Change, and Economic Performance. New York: Cambridge University Press.Find this resource:

                                                                            North, Douglass C. 1999. “Dealing with a Non-Ergodic World: Institutional Economics, Property Rights, and the Global Environment.” Duke Environmental Law and Policy Forum 10, no. 1: 1–12.Find this resource:

                                                                              North, Douglass C. 2005. Understanding the Process of Economic Change. Princeton, NJ: Princeton University Press.Find this resource:

                                                                                Olson, Mancur. 2000. Power and Prosperity: Outgrowing Communist and Capitalist Dictatorships. New York: Basic Books.Find this resource:

                                                                                  Ostrom, Vincent. 1997. The Meaning of Democracy and the Vulnerability of Democracies: A Response to Tocqueville’s Challenge. Ann Arbor: University of Michigan Press.Find this resource:

                                                                                    Otteson, James R. 2014. The End of Socialism. New York: Cambridge University Press.Find this resource:

                                                                                      Plato. 1985. The Republic, translated by Richard W. Sterling and William C. Scott. New York: W. W. Norton.Find this resource:

                                                                                        Popov, Vladimir. 2007. “Shock Therapy versus Gradualism Reconsidered: Lessons from Transition Economies after 15 Years of Reforms.” Comparative Economic Studies 49, no. 1: 1–31.Find this resource:

                                                                                          Rodrik, Dani. 1989. “Promises, Promises: Credible Policy Reform via Signaling.” Economic Journal 99, no. 397: 756–772.Find this resource:

                                                                                            Rodrik, Dani. 2006. “Goodbye Washington Consensus, Hello Washington Confusion? A Review of the World Bank’s Economic Growth in the 1990s: Learning from a Decade of Reform.” Journal of Economic Literature 44, no. 4: 973–987.Find this resource:

                                                                                              Rotberg, Robert I. 2012. Transformative Political Leadership: Making a Difference in the Developing World. Chicago and London: University of Chicago Press.Find this resource:

                                                                                                Rothbard, Murray. 1992. “How and How Not to Desocialize.” Review of Austrian Economics 6, no. 1: 65–77.Find this resource:

                                                                                                  (p. 726) Rummel, P. J. 1994. Death by Government. New Brunswick, NJ: Transaction.Find this resource:

                                                                                                    Sachs, Jeffrey. 1994. Understanding Shock Therapy. London: Social Market Foundation.Find this resource:

                                                                                                      Scott, J. 2009. The Art of Not Being Governed: An Anarchist History of Upland Southeast Asia. New Haven, CT: Yale University Press.Find this resource:

                                                                                                        Searing, Donald D. 1969. “Models and Images of Man in Society and Leadership Theory.” Journal of Politics 31, no. 1: 3–31.Find this resource:

                                                                                                          Smith, Adam (1776) 1976. An Inquiry into the Nature and Causes of the Wealth of Nations. Indianapolis: Liberty Fund.Find this resource:

                                                                                                            Stewart, Dugald. (1793) 1829. The Works of Dugald Stewart, Vol. 7. Cambridge, UK: Hilliard and Brown.Find this resource:

                                                                                                              Tocqueville, Alexis de. (1835) 2010. Democracy in America. Indianapolis: Liberty Fund.Find this resource:

                                                                                                                Tucker, Robert C., ed. 1978. The Marx-Engels Reader, 2nd ed. New York: W. W. Norton.Find this resource:

                                                                                                                  Weber, Max. 1947. The Theory of Social and Economic Organization, translated by A. M. Henderson and Talcott Parsons. New York: Free Press.Find this resource:

                                                                                                                    Williamson, Claudia. 2009. “Informal Institutions Rule: Institutional Arrangements and Economic Performance.” Public Choice 139, no. 3: 371–387.Find this resource:

                                                                                                                      Williamson, John. 1990. Latin American Adjustment: How Much Has Happened? Washington, DC: Institute for International Economics.Find this resource:

                                                                                                                        Williamson, Oliver. 2000. “The New Institutional Economics: Taking Stock, Looking Ahead.” Journal of Economic Literature 38, no. 3: 596–613.Find this resource:

                                                                                                                          Notes:

                                                                                                                          (1) This quote is attributed to Smith by Dugald Stewart ([1793] 1829, 64).

                                                                                                                          (2) Also see a review of Rotberg by McBride (2012).