1. Institutions

2. Topics The invisible world of systems and cultures, which enable modern society; Good and bad governance; Banking and financial stability; and Justice and rule of law

3. The Invisible World of Systems and Cultures Invisible world of systems and cultures is actually institutions Composed of government, economic frameworks, religious groupings, armed forces, banking systems and rules of law Living under repressive governments Interested in how the elites in a government organize these institutions

4. Good and Bad Governance Good governance usually emanating from democratic principles Bad governance usually stemming from autocratic states, which can be subdivided into following types of regimes: –Authoritarian –Totalitarian

5. Good and Bad Governance (con’t) Statist regimes Have economics as a focal point Don’t speak of government as a collection of agencies but as embodiment of collective good Government makes decisions for individuals Coercion often necessary

6. Good and Bad Governance (con’t) Another institution is type of economic system a country decides to adopt Can be one of three: –Pure market –Planned –Mixed Pure markets allow laws of supply and demand to evolve unimpeded and take market where they will

7. Good and Bad Governance (con’t) Planned economies the reverse of pure markets Planned models have failed because were unable to sustain economic growth and avoided reliance on the normal laws of supply and demand to stabilize markets With collapse of communism as ideology in 1991, planned economies disappeared virtually overnight

8. Good and Bad Governance (con’t) No purely market economy in international system First World economies are mixed, as a combination of market and planned Third World ruling elites wasting a great deal of money on personal preference projects No such thing as transparency with them

9. Good and Bad Governance (con’t) Third institutional reference we see is extent religion plays role in peoples’ lives Religion’s responsibility to create constructive conflict culture to help end inter-communal and international violence Three institutional strengths and weaknesses of religious organizations that help with constructive conflict management

10. Good and Bad Governance (con’t) Armed forces is final institution to review Can be very useful if they train personnel in technical and administrative skills that they can later transfer into civilian fields But can be risks to civilian population when forces are mobilized Latin America from the 1950s-1970s saw use of armed forces for domestic political purposes instead of protecting state

11. Banking and Financial Stability Banking system in the Third World is weak and extractive Fundamental problems for foreign banking systems are lack of foreign exchange reserves and low capital stocks Countries borrowing abroad at high rates and getting into debt trouble quickly Global financial crisis of 2008 hit developing countries especially hard

12. Justice and the and Rule of Law Legal systems corrupt with untrained jurists and an uneven enforcement of laws Collapse of Soviet Union and its legal system At end of the day, states fail because their institutions fail Institutions that malfunction or are manipulated by elites end as failed state

13. Check Your Understanding

14. Summary The invisible world of systems and cultures, which enable modern society; Good and bad governance; Banking and financial stability; and Justice and rule of law