Historical Perspective
Institutions are integral, as they shape the way humans interact with each other while being defined as a constraint made by humans. It is imperative that apt knowledge of institutions is inculcated in us, which is undoubtedly a stepping stone in understanding the historical changes that occur through them. In institutions, human exchanges are powered through incentives, which are two types – personalized and impersonal exchanges. The personalized exchanges are the ones that occur on smaller levels of production, which has very few repercussions for third party enforcement because there are cultural homogeneity and respect for norms and values. On the other hand, impersonal exchanges require third party enforcement since the local norms and values are not strong enough to outweigh the benefits that can be expanded through cheating. However, this does not imply that norms and cultural values are not respected, whereas the incentive of cheating and pursuing one’s own interest is high.
Every country in today’s dynamically changing and a volatile environment is governed through a set of rules and regulations, formally followed by everyone in the society. In the meanwhile, the political and economic spectrum instill formal rules that in turn enable the economy to transfer.
In the retrospection, it can be said that institutions provide a set of varying opportunities for individuals to make apt economic choices to gain certain pay offs. Moreover, it can be precisely said that institutions improve the performance of the economy as it persuades as to conduct our exchanges in a safe, efficient and conducive environment.
In the historical realm, colonial development had a detrimental effect on the institutionalization of the specific colonies with certain characteristics i.e. potential settler mortality.
Europeans adopted very different colonization policies in different colonies, with different associated institutions. In places where Europeans faced high mortality rates, they could not settle and were more likely to set up extractive institutions.
Countries with better “institutions,” more secure property rights, and less distortionary policies will invest more in the physical and human capital and will use these factors more efficiently to achieve a greater level of income. It is quite likely that rich economies choose or can afford better institutions.
To estimate the impact of institutions on economic performance, we need a source of exogenous variation in institutions.
I. There were different types of colonization policies which created different sets of institutions. At one extreme, European powers setup “extractives states”. The main purpose of the extractive state was to transfer as much of the resources of the colony to the colonizer. On the other hand, Europeans migrated and settled in several colonies, creating “Neo-Europe” (Australia, New Zealand, Canada, and the US). The settlers tried to replicate European institutions, with a strong emphasis on private property and checks against government power.
II. The colonization strategy was influenced by the feasibility of settlements.
III. The colonial state and institutions persisted even after independence.
It can be concluded that the world is dissected in developed and developing nations, which reflects the institutional structure among these two halves. So, institutional strengthening is the prerequisite for a strong economic base in order to grow at a sustainable rate.
Pakistan Chapter
From its inception, Pakistan’s progress, economic as well as administrative, has been opposed by institutional problems. Various institutional sectors have been remained deprived of resources and lack of efficiency, accountability and transparency, which leads them to failure. Education, health, judiciary and many other sectors have been facing extreme challenges due to fragmented institutional structures, overlapping and conflicting decision-making structures, and strong tendencies of exclusive institutional structures. Pakistan has been facing political inefficiency since the very onset which is the most pivotal factor in the failure of the institutional failure in the country.
- Organizational Culture
One of the reasons for the institutional failure is the abysmal organizational culture. Lack of work ethics, ineffective rules and regulations, and adhocism adopted by the management of the organization always damaged the institutional working system. More people working than the required in an organization prompts the management to allocate the resources to the non-developmental projects and the outcome of an organization starts diminishing. Structural reforms, need of this modern era, are uncertain to adopt due to a weak institutional system. So to overcome this organizational gap a system of mutual assumptions, value and belief system, which tells how people how to behave in an organization. These collective value systems have a strong influence on the people in the organization and dictate how they dress, act, and perform their jobs.
- Corruption, Kickbacks, and Lack of Accountability
Corruption is the misuse of a trusted position for illicit private ends. It ranges across phenomena, including bribery, extortion, fraud, nepotism, and outright theft. The major factors responsible for the pervasive corruption in the country include poor governance and the dismal performance on the part of institutions. It is a fact of the matter that the very foundation of any institution lays in the process of appointment. If such process is carried out transparently, the institution becomes the model of efficiency and performance. However, in Pakistan, the appointments are being made on the basis of favoritism and nepotism to a great extent. Therefore, the development and innovation in these institutions remain stagnant rather these become the hub of politics. That’s why the institutions become the burden on the country’s fund. In the absence of efficient accountability, institutions turn into dens of corruption.
- Political System
The political system of any country should be competent enough to manage a country’s resources and affairs through transparency. It maintains responsiveness, equity, effectiveness and accountability. Ineffectiveness of a political system become an open ground for corruption, nepotism, institutional imbalances, economic mismanagement, and inability to provide justice.
Conclusion
The inefficiency of institutions sabotages the progress in Pakistan. The institutions are the most pivotal instrument of national power which enhances the capability, power and strength of a nation. Pakistan has a great potential but the need is to make this institution stronger through the continuation of national policies, activation of responsibility in the political system, ensuring accountability and transparency, and eradication of corruption. Equal importance should be given to each individual institution in order to increase their capability and capacity so that to put this country on the track of progress and prosperity.
