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This book depicts the role of both formal and informal institutions in achieving long-term economic efficiency and development. It is organized into three sections: the first section deals with the historical and political roots that make institutions favorable to development; the second section offers theoretical perceptions of immaterial institutions; the last section explores how the various official institutions – such as international organizations – interrelate with the process of development. As both the recent global financial crisis and the subsequent sovereign debt crisis within the Eurozone have shown, sustainable development is a combination of human, social and institutional factors that interact with each other and go beyond the strictly economic conditions of each country. With contributions from several countries in Europe as well as Iran, this volume offers readers an international and multidisciplinary perspective of the institutionalist determinants of growth in the long run.



Editors’ Introduction

This volume includes selected chapters presented in the 5th International Conference “INSTITUTIONS & DEVELOPMENT” held in the new premises of the Department of Economics of the University of Thessaly in Volos, Greece, from May, 17th to 19th, 2017. The main objective of the Conference was to depict the role of both formal and informal institutions in achieving long-term economic efficiency and development. As both the recent global financial crisis and the subsequent sovereign debt crisis within the Eurozone have shown, sustainable development is a combination of human, social and institutional factors that interact with each other and go beyond the strictly economic conditions of each country. As put elsewhere, ‘Political Economy recognizes the fact that the performance of the economy depends only for a small part on nature factors, i.e. natural resources, and largely upon the institutional mechanisms that society chooses to use, as a matter of Policy, to motivate and to co-ordinate the participation of resources, in the social economy’ Vliamos (1992: 5). Economics is first and foremost a social science. Skidelsky (2016) reminds us of John Stuart Mill, the great nineteenth-century economist and philosopher, who ‘believed that nobody can be a good economist if he or she is just an economist. (…) What unites the great economists, and many other good ones, is a broad education and outlook. This gives them access to many different ways of understanding the economy.’
Spyros Vliamos, Michel S. Zouboulakis

Institutional Roots of Development


1688 and All That: Property Rights, the Glorious Revolution and the Rise of British Capitalism

In a seminal 1989 article, Douglass North and Barry Weingast argued that by making the monarch more answerable to Parliament, the Glorious Revolution of 1688 helped to secure property rights in England and stimulate the rise of capitalism. Similarly, Daron Acemoglu, Simon Johnson and James Robinson later wrote that in the English Middle Ages there was a ‘lack of property rights for landowners, merchants and protoindustrialists’ and that the ‘strengthening’ of property rights in the late seventeenth century ‘spurred a process of financial and commercial expansion.’ There are several problems with these arguments. Property rights in England were relatively secure from the thirteenth century. A major developmental problem was not the security of rights but their feudal nature, including widespread ‘entails’ and ‘strict settlements’. The year 1688 had no obvious direct effect on property rights. Given these criticisms, what changes promoted the rise of capitalism? A more plausible answer is found by addressing the post-1688 Financial and Administrative Revolutions, which were pressured by the enhanced needs of war and Britain’s expanding global role. Guided by a more powerful Parliament, this new financial system stimulated reforms to landed property rights and the growth of collateralizable property and saleable debt, and thus enabled the Industrial Revolution.
Geoffrey M. Hodgson

The Contemporary State and Interests: A Framework of Analysis

This chapter finds the indebted democratic state in a trapped position trying to satisfy conflicting interests of domestic and global actors, and tries to assess it from the institutionalist political economy perspective. The discussion on the possible ways of creating new alliances among the players would require much deeper elaboration and actually is a promising strand of new research to be embraced in the future.
Anna Ząbkowicz, Sławomir Czech

NGO in the Modern State

The aim of the following article is to show the role of the 3rd sector in the development of the modern state and present special relations between three main forces—state, market and civil participation via non-governmental organizations (NGO). The recent crisis as well as the ongoing social and economic movements along with changes generated by globalization has clearly shown that market and state are no longer the only main creators of reality. NGOs are the one that gain more and more power, not only on social field but also on political and economic ground. The author poses a research question on the role of NGOs in modern state. The article states the hypothesis that the role of civil participation is a vital factor for smart development of the modern societies and is essential for the economic and political sphere. Firstly, I analyse the role of NGO as a balancing factor between the state and the market letting society to express its opinion. Latter, the author discusses the changing role of NGO, more power that is taken by civil movements and its growing influence nowadays. The article sums up the role of NGOs emphasizing that their input is necessary for the proper functioning of the modern state in new globalized reality
Agnieszka Joanna Legutko

Freedom and Friendship: Some Thoughts on the Renewal of Our Democracy

This chapter analyses the relevance of the Ancient Greek experience to the troubles and challenges which our democracies face in our present times. It is argued that, historically speaking, it was the rule of the people that brought forth and nourished the idea of the free individual, rather than vice versa. Laying aside the everyday struggle of political interests and ideologies, a bond of friendship and fraternity between the democrats is essential for the survival of democracy. The rule of the people is not tantamount to an absolutistic rule of the majority in which the winner takes it all. Whilst the populist demagogue appeals to the lowest instincts of the masses, the ethos of the democratic politician wants him to appeal to the virtues of the people. The elites must not pretend that whatever politics benefits them is also good for the people. The elites should recognise their intrinsic interest in the rule of the law and the democratic form of government, which again requires a high degree of social cohesion. The new “social media” and the digital capitalism which is their driving force are a serious threat to the foundations of democracy. The European Union will not solve its problems unless it self-critically faces up to its ethical and democratic deficits.
Guy Féaux de la Croix

The Institutional Impact on Economic Development in Iran

The impact of institutional environment on economic development was well demonstrated in the closing decades of the twentieth century, and this trend has continued apace into the twenty-first century. The significance of this finding has been made especially clear after the 2007–2012 financial crisis. The status of institutional factors including rule of law, quality of law, political stability, democratic institutions, trust and confidence in the business environment has been seen to alter the economic development of several countries. Institutional improvements have reduced economic uncertainties, lowered transaction costs, increased market competition and more. The effects on development of having good institutions have been determined by motivating economic incentives, enhancing productivity, and eventually increasing per capital income and social welfare. This chapter tests the impact of institutions on economic development in Iran during the 1996–2016 period. The findings of the research detailed herein highlight the urgent need for institutional improvements in Iran so as to enhance sustainable growth and development.
Yadollah Dadgar, Rouhollah Nazari

Theoretical Insights of Institutions


Critical Realism in the Analysis of National Innovation Systems

National Innovation Systems (NIS) are networks of institutions operating at the national level, which jointly contribute to the development and diffusion of innovations. The analysis of these systems, especially the linkages among institutions and related organisations, can provide insights regarding the performance of a country’s economy with respect to innovation. Usually, the analysis of NIS concentrates on the flow of tangible and intangible assets among institutions and organisations, as well as on the inter-institutional and inter-organisational learning processes which depend on the relationships and interactions of the actors participating in them. In this chapter, we focus on a particular such relationship: the relationship between universities/research centres and industry. Our objective is to investigate deeper the social context-specific social structures and mechanisms that are responsible for the observed successes and failures of these relationships and of their resulting economic consequences. We adopt a critical realist perspective, and use Bourdieu’s theory of the social structures of the economy as the basis of an event-generating mechanism, to explain agents’ behaviour in these relationships as accumulators of different forms of capital. We substantiate our analytical approach to the explanation of the weak university-industry relationships in the Greek NIS.
Emmanuel D. Adamides

From Commons Dilemmas to Social Solutions: A Common Pool Resource Experiment in Greece

Common pool resources frequently give rise to social dilemmas in which individuals have to choose whether they would overexploit the common good to maximise their short-term personal returns or whether they would refrain from doing so for the sake of the long-term social benefit and the sustainability of the resource. This chapter used a laboratory experiment to explore this in Greece, and to assess whether subjects, by communicating with each other, manage to cooperate and to form institutions that overcome the commons’ tragedy. For this purpose, three experiment sessions were undertaken with 77 final-year undergraduates in economics. The game was played in eight rounds, where every two the rules were slightly different. The study recorded the decisions (and earnings) of the subjects in each round, examining whether, under different communication conditions, they would refrain from personal maximisation towards the sustainable use of the resource. It was found that individuals in commons dilemmas are not always confined to their narrow self-interest, but that small-group, face-to-face communication enables them to articulate cooperation-facilitating institutions and achieve outcomes that are almost socially efficient.
Paschalis Arvanitidis, Fotini Nasioka

Public Goods, Club Goods and Specialization in Evolving Collaborative Entities

Since the days of Adam Smith the concept of specialization and the invisible hand has seen applications throughout the macroeconomy such as global trade patterns and competitive forces, but also at the microeconomic level through the specialization of firms and cooperative entities. This chapter examines the welfare economics implementation in EU and ESA within the above context, focusing on specialization in alliances and the provision of public goods with relevant compensating mechanisms, drawing analogues between the macroeconomy and the space institutional sector. The analysis shows how, in the absence of pure pubic goods within a collaborative entity, the transformation of a collaborative entity into an industrial mechanism of support for commercial benefit maximization results in inefficient allocative outcomes.
Vasilis Zervos

International Organizations and Development


The International Financial System and the Role of Central Banks in the Great 2007–9 Recession and the ‘Monetary Peace’

This chapter examines the evolution of central banks as powerful institutions in the international economic system, and reviews the political and economic context of international policy cooperation since the ‘first globalization’ in 1876–1914. The chapter claims that central banks’ cooperation has led to a new paradigm of ‘monetary peace’ in the aftermath of the ‘Great Recession’ in 2007–9. Assuming that the ‘Great Depression’ of the 1930s has taught hard lessons to the world, this chapter examines the institutional arrangements that shaped monetary policy and led to the successful implementation of ‘monetary peace’ by the leading central banks (mainly Fed and ECB) following the Great Recession.
Spyros Vliamos, Konstantinos Gravas

Institutions and International Political Economy: Realist Readings of International Regimes

The chapter addresses the role of institutions in respect to international political economy and particularly to the evolution of international cooperation, at both the economic and political sectors. The respective literature, within the field of international relations (IR), is indeed sizeable and multi-faceted. In this regard, the concept of international regimes has long drawn notable attention, also allowing for theoretical debates over the potential and dynamics of cooperation. In fact, the concept has proved useful even for realism, that is, an IR perspective, often criticized for being associated with conservative, static and conflict-prone analysis. Evidently, the engagement of realism with the concept has enabled the former to account for cooperative dynamics and mechanisms in the international system. Thus, the chapter at first offers brief typologies for both the creation and the maintenance of international regimes, and it subsequently offers a critical appraisal of the multiple understanding of institutions and particularly regimes within the realist perspective, pinpointing the strengths and weaknesses as well as the challenges of realist readings on institutions and the relevance of the latter within international political economy and politics.
Ilias Kouskouvelis, Kyriakos Mikelis

EU–Russia Antagonism in South-Eastern Europe: The Energy Factor

EU–Russia energy geopolitical antagonism has been raging in South-Eastern Europe (Greece and Turkey) at least since Putin’s rise to power at the beginning of the current millennium and Moscow’s endeavours to re-establish itself in the new global order as a great power. To that end, Moscow has adhered to a strategy of both weakening regional players’ economic and defence ties with the West, that is, NATO and EU, and promoting some vital geo-economic and geopolitical aspirations. The fact that both countries are heavily dependent on Russia as energy provider but at the same time are also potential energy hubs and producers ascribes supreme importance to them in the EU–Russian antagonistic complex. The chapter, based on secondary and primary sources (interviews), is trying to shed light on the background of this multilayered and convoluted constellation of power.
Andreas Stergiou

Declining Activity of the European Commission in Legislative Initiatives: Is the Commission Losing Its Influence?

In a fairly general opinion, the political developments of past years have weakened the position of the European Commission as an institutional actor. It manifests itself, among others, by a decreasing volume of the Commission’s legislative actions, which means (for the supporters of the above thesis) that the Commission losses its powers. In this chapter I want to show that such decline in legislative activity actually takes place, but this trend follows the Commission’s new approach to ensure its effectiveness in a changing environment, and is not a result of losing influence. Basing mainly on primary sources, the chapter focuses on confronting official statements of leaders of the Juncker Commission on their vision of the European Commission’s position among the EU institutions with the actual activity of the Commission, including the Commission Work Programmes.
Jerzy Ząbkowicz

Amendments to Legal Regulations in the Field of the Enterprises Restructuring Procedures in Poland

The EU has been focused on the institutional and economic problems, especially after the recent global economic crisis and while the EU single market seems to become less and less popular. The Small Business Act for Europe (SBA; as the main programme of simplifying the business environment conditions) has also been reconsidered in the context of delivering the positive effects of economic integration. One of the SBA’s principles is the second chance policy. Current research frequently concerns the insolvency and restructuring procedures. The aim of this chapter is to assess the amendments to legal regulations in the field of the enterprises restructuring procedures in Poland. This study will attempt to answer the following questions: Are the Polish restructuring procedures of companies in financial difficulties aligned with the entrepreneurs’ requirements? And were there any strategic amendments to legal regulations in the field of enterprises restructuring procedures in Poland? In order to solve the research problems, we suggest an analysis of the legal acts and the EU strategic documents and then a statistical analysis of the data collected in selected Polish courts concerning the implementation of the enterprises restructuring procedures in 2016.
Sylwia Morawska, Joanna Kuczewska


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