Millions of young people around the world enter the workforce with high hopes for a successful career yet they cannot find jobs. Although for sure a lack of needed skills contributes to this problem, something else is responsible for persistently high unemployment in many countries. What is preventing all the economic potential of the “generation in waiting” from being tapped? Nobel Laureate Douglass North provides the answer: countries with sustainable economic growth trajectories are able to establish institutional structures that allow them to move from personal interactions to impersonal exchanges, or in other words to provide an enabling environment for conducting business.

In this Feature Service article CIPE’s Director for Policy Reform Aleksandr Shkolnikov explains the importance of building entrepreneurial economies. He says, “The link between entrepreneurship and institutions is not immediately obvious. When we think of successful entrepreneurs we think of innovators, risk-takers, or people with great ideas exhibiting determination, hard work, and dedication. But in entrepreneurial economies, individual skills are not the only thing in play – the rules within which interactions occur matter just as much, if not more.”

Article at a Glance

• Traditional approaches to promoting entrepreneurship focus too much on individual skills-building at the expense of institutional reforms needed to remove barriers to doing business.

• Through institutional reform it is possible to empower entrepreneurs to transition from micro-enterprises to small and medium-sized business that can create jobs, innovate, take advantage of economies of scale, and increase productivity.

• Private sector organizations can play a vital role in removing barriers to entrepreneurship through public policy advocacy and community engagement.

Read the full article.

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Preparations for the 2012 UEFA European Football Championship (Euro 2012) hosted jointly by Poland and Ukraine have been progressing in fits and starts, often suffering from delays. As the pressure to finish everything on time mounts, so do questionable ways of trying to speed up the work. Getting ready for Euro 2012 entails massive spending of public money on sports and transportation infrastructure and officials often complain that burdensome public procurement procedures slow down their ability to complete projects in a timely manner. A recipe for that should be streamlining and simplifying procurement rules, but that’s not what is happening in Ukraine. Ukrayinska Pravda, a popular Ukrainian internet newspaper (cited in Polish news), reports that instead the government removed the requirement for open tenders on Euro 2012 projects and centralized the decision-making on contract awards in the National Agency Euro 2012. Read the rest of this entry »

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Today the world celebrates the International Day of Democracy, highlighting the universality of democratic principles and human aspirations that those principles embody. The UN Secretary-General Ban Ki-moon put it well in his message for today, “Let us recognize that democratic governance is a yearning shared and voiced by people the world over. Democracy is a goal in its own right, and an indispensable means for achieving development for all humankind.”

But what exactly does democratic governance mean? What makes democracies endure and deliver to their people? In this Feature Service article, Larry Diamond, Senior Fellow at the Hoover Institution, Stanford University, answers those crucial questions. He notes that the growing incidence of democratic breakdowns around the world is related to problems with the quality of democratic institutions beyond elections. They include functioning legislative, checks and balance on the executive power, independent judiciary, rule of law and many other facets of democracy that citizens want to experience in their daily life. If the quality of those institutions is poor, democracies will not perform well, they will not engender trust and confidence of their citizens, and thus will be prone to breakdowns. Read the rest of this entry »

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China’s real estate market, especially in major cities, seems to be increasingly out of control. Soaring prices make home ownership unaffordable for many and show no signs of slowing down their upward climb, even in the midst of a global recession. In this Feature Service article, Catherine Tai, Asia Program Assistant at CIPE, examines the reasons behind this distorted real estate market and talks about its intricacies.

What makes the Chinese property market complicated and prone to speculation is the fact that individuals and firms cannot fully own land but merely lease it from the government. “Informal arrangements, promises, and assumptions are a poor substitute for the secure property rights that are the hallmark of a genuine market-based economy,” she concludes.

Article at a Glance

• China’s soaring housing prices appear largely disconnectedfrom economic rationality; housing prices in coastal cities are 20 times the average household’s annual income, effectively pricing the average Chinese citizen out of the housing market.

• Primary culpability for distortions in the real estatemarket lies with three interconnected players: wealthy investors, complicit local governments, and predatory state-owned enterprises.

• The root cause of China’s real estate problem lies in the country’s absence of genuine property rights, which the government substitutes with manipulation-prone land use rights.

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Many recognize the iconic 1980 image of Lech Wałęsa signing – with a giant pen – the so-called August Agreements that symbolized the rise of the Solidarity movement in Poland and ultimately paved the way to the collapse of communism in Eastern Europe. However, few remember what these agreements, which represented major concessions of the then-communist government of Poland to its citizens, actually contained.
Read the rest of this entry »

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The latest Peace Brief published by the U.S. Institute of Peace (USIP) highlights the challenges – and opportunities – facing Afghan women in the upcoming Wolesi Jirga parliamentary elections on September 18. Although women account for half of the country’s population and on paper possess equal electoral rights, in reality they are up against a number of factors that hamper their political participation. Physical insecurity remains one key obstacle that threatens the rights of all Afghans. Yet, women in particular have to deal with social and cultural constraints that limit their participation.

For instance, many Afghan women feel that they need explicit permission from their husbands to vote or to run for office. They often have a hard time registering to vote because in culturally conservative communities women are not allowed to interact with unrelated men – including voter registration officials. A practice of proxy voting, where when a man fills out voting ballots on behalf of the female members of his family, is also a common social norm. Read the rest of this entry »

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Economic growth is a key requirement to ensure stability of post-conflict countries and advance reconstruction. Yet, the economy is one of the most evident casualties of conflict. When not just physical infrastructure but also legal frameworks for doing business become severely disrupted by civil strife, the first impulse of reconstruction is to act fast. Frequently, however, this urgency is not accompanied by legitimacy necessary to ensure local ownership of the newly created institutions.

In this Feature Service article, Wade Channell, senior legal reform advisor for the U.S. Agency for International Development, discusses the pitfalls of urgent lawmaking and recommends practical solutions. “The number one impediment to effective business legislation in post-conflict countries is the failure of drafters to include business in a meaningful way,” he says. To have a voice in policymaking, businesses need to establish associations, set the reform agenda, monitor the results, educate the community, and work with other advocates.

Article at a Glance

• Rebuilding the commercial sector is of utmost importance in post-conflict economies.

• Urgent lawmaking, while sometimes necessary, can undermine the long-term processes needed to ensure legitimacy.

• Meaningful business legislation in post-conflict countries requires private sector input. Business is a vital link in drafting laws that lead to effective economic policy development and reform.

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The Economist points out that elections in Africa, although a crucial element of democracy, are not enough to ensure that democratic governance takes root. The number of successful coups on the continent has declined from over 20 in 1960-69 to fewer than 10 in 2000-09 and many African countries now regularly hold elections. This year, for instance, Burundi, Guinea, and Ethiopia already had theirs and Rwanda, Tanzania, Chad, and several others are getting ready to vote. But does the ballot box translate into a functioning democracy? This map shows some big discrepancies:

Too many of the elections remain rigged or deeply flawed. Too many incumbents voted out of office refuse to step down. And, most importantly, too little effort goes into building institutions of democratic governance that would ensure transparency and accountability between elections.

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In the aftermath of the global financial crisis, businesses around the world must be the engines of economic growth and job creation. To achieve that goal, businesses need a legal and regulatory environment that fosters entrepreneurship and, importantly, they need to be able to transparently provide input on proposed laws and regulations that affect them. When this public-private dialogue does not happen, the consequences for the quality of economic and trade policies can be very damaging.

In this Feature Service article, John Murphy, VP of International Affairs at the U.S. Chamber of Commerce, asks crucial questions: How can regulators best engage with the industries they regulate? How can they produce “smart regulations”? He says, “Citizens entrust legislators to provide broad parameters for regulators. Yet regulators can only truly succeed in their mission of protecting citizens’ interests by engaging in an open dialogue with business and other stakeholders on trade and other vital economic issues.”

Article at a Glance

• Countries around the world need “smart regulations” that protect health and safety without slowing economic development and job creation.

• To improve the quality of the economy, regulators should better engage with the industries they regulate.

• Transparency, stakeholder engagement, cost-benefit analysis, and the ability to appeal poor regulatory outcomes are the hallmarks of good regulation.

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Last week the United Nations Global Compact (UNGC) Leaders Summit convened in New York, gathering more than 1,200 corporate executives, government officials and civil society leaders. The UNGC is an initiative that gathers businesses committed to the ten universally accepted principles in the areas of human rights, labor, environment, and anti-corruption. Launched ten years ago, it grew from just a handful of participants to about 8,000 today, with an ambitious goal to reach 20,000 participants by 2020.

As the UNGC grows, however, it is crucial that new participants go beyond just signing their name on a dotted line, that they move from ideas and statements to action. Practical examples of successful implementation of the UNGC principles are of key importance here. CIPE, in cooperation with the UNGC and the Social Accountability International (SAI), set out to highlight such examples in a joint publication From Principles to Practice: The Role of SA8000 in Implementing the UN Global Compact. Read the rest of this entry »

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The World Cup frenzy is fully on. As South Africa kicks off the first ever World Cup on the continent, the country that in 1994 captivated the world with its peaceful transition from apartheid to democracy is once more at the center of attention. What is South Africa like 16 years later? For sure, serious problems persist, including high rates of HIV/AIDS, income inequality, pervasive poverty, and violent crime. But there are also things to celebrate, and not just for soccer fans. Read the rest of this entry »

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Moscow-based INDEM (Information Science for Democracy) Foundation is one of the first Russian NGOs founded in 1990. As a part of its anti-corruption work, INDEM set out to analyze the state of the judicial system in Russia given the country’s checkered experience with judicial reform.

In this Feature Service article, Georgi Satarov, president of the INDEM Foundation, presents the findings of this analysis. Although derived from the Russian experience, the findings represent broader lessons learned from the systemic transition that can be applied to any institutional reforms.

He concludes, “All of these lessons point in one direction. In trying to jump-start reforms in Russia from the 1990s to today, reformers have failed to make a proper distinction between the bottom-up evolution of institutions, which happens in effective democracies, and often ineffectual top-down design of institutions, which fails to account for the extra-institutional country environment.”

Article at a Glance

• How institutions evolve and their relationship to the environment in which they function is poorly understood.

• Institutions are influenced by both their design and extra-institutional factors such as a country’s operating environment.

• Rule of law rather than quality of regulation is the most important aspect of countries’ institutional development.

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As the world celebrates the annual Earth Day for the 40th time today, there are many achievements to point to with greater environmental awareness among citizens and businesses alike, and new technologies that make economic growth much more environmentally friendly. When we look closer at how this progress has happened, though, it takes more than good will and technological advances to ensure responsible environmental stewardship. In the long run, respecting the environment requires proper institutions. Read the rest of this entry »

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The global financial crisis in West Africa, despite being less severe or immediate than in the U.S. or Europe, has affected local economies, governments, and citizens alike. In this Feature Service article, Dr. Charles Mensa, founder and chairman of The Institute of Economic Affairs (IEA) in Ghana, talks about that impact and how to recover from the crisis. West African governments and the private sector must work together. The essence of such public-private partnerships is to figure out solutions to common problems through building strong organizational relationships, not just personal contacts. By cooperating in that way, businesses and governments can become partners in building a brighter economic and democratic future.

Article at a Glance

• Although the global financial crisis has not been as severe in West Africa as in the United States or Europe, it does have an effect on remittances, manufacturing, and financing for business.

• The crisis has not undermined the basic confidence of West Africans in democracy and market economy but it has highlighted the need for stronger governments.

• Stronger government does not equal strongman rule or too much control over the economy; it means strong institutions that can make democracy deliver regardless of who is in power.

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On Saturday, the news of a plane crash in Smolensk, Russia that killed Polish President Lech Kaczyński, his wife, and over 90 key figures in the country has shaken the world. The tragedy happened as they were headed to commemorate the 70th anniversary of the WWII Soviet massacre of Polish officers in Katyń. The international outpouring of grief and sympathy that followed ensures that neither the tragedy from 70 years ago nor the one from 2 days ago will be forgotten, helping Poland and Russia heal the wounds of history. But while many analyses have focused on that, there is another equally hopeful aspect of this tragedy that deserves attention.

The aftermath of the crash clearly testifies to the maturity and resilience of Poland’s still relatively young democracy. It is not hard to imagine a country where the sudden death of the president, several parliamentarians, governor of the central bank, top army chiefs, and many other key officials would cause political and economic chaos or even violent struggle for power. The fact that that’s not even remotely a consideration in Poland today is telling. Read the rest of this entry »

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