Rethinking Global Economic Incentives: How Mismanagement Keeps World Leaders in Office
Oct 29, 1999
Hilton L. Root

Why do so many leaders ignore the good policy advice about economic development that is so abundantly available?

The answer is, the policies most likely to lead to prosperity often differ from those most likely to keep leaders in power. To put it bluntly, leaders are able to stay in power by ruling badly.

More insidious, the institutions that dispense economic aid and policy advice suffer from similar perverse incentives. Accurate and timely indicators of economic mismanagement are vital, but tracking and publicizing these indicators threaten easy working relations between borrowing nations and lending institutions. By the same token, asking nations to take politically unpalatable advice from an international organization in which membership is voluntary is asking a lot.

The only durable resolution of this tension is to build domestic political institutions that reward rulers for policy performance.