There is general consensus among all economic commentators and stakeholders that the South African economy is in dire need of a major overhaul. South Africa remains locked in a low-growth, path-dependent economic trajectory that is currently deepening social inequality and highly concentrated ownership patterns. There can be no denying that the economy needs to be radically transformed, which requires us to think afresh on the roles of institutions in economic governance and resource allocation. By MCEBISI JONAS.
While I think most of us could agree that institutions are critical for economic prosperity, at the same time I think we should be sceptical of "grand theories" and general perspectives on this subject. Ruchir Sharma (2016) in his book Rise and Fall of Nations: Forces of Change in the Post-Crisis World makes the important point that institutions themselves reflect the economic structure of the country.
Where wealth is created primarily through innovation and productivity gains, societies tend to have strong and enduring institutions.
Where wealth is created primarily through rent-seeking, institutions will always be under threat.
This presents something of "a chicken and the egg" paradox - inclusive institutions are required to restructure an economy towards more shared and sustained prosperity, but...