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Informal institutions and development

by Andreas Praksch, Georg Schäfer
Johannes Jütting, Denis Drechsler, Sebastian Bartsch, Indra de Soysa (Eds.): Informal institutions – How social norms help or hinder development. Development Centre Studies, OECD, Paris 2007, 174 p., €35.00, ISBN 978-92-64-03906-3

Do informal institutions, such as traditions and social norms, promote or hinder development? The OECD Development Centre examined the matter over a period of three years. In December 2006, it presented its findings at an international seminar organised in conjunction with the OECD/DAC Network on Governance. The most important results are elaborated in this book. The articles deal with gender equality, governance and private- sector development. The book also includes introductions by Susan van der Merwe, South Africa’s deputy minister of foreign affairs, and the editors as well as lessons for development policy drawn by Richard Manning, then Chairman of the OECD Development Assistance Committee, and Eduard Westreicher of Germany’s Federal Ministry for Economic Cooperation and Development (BMZ).

It comes as no surprise that all articles emphasise the relevance of informal norms and social relationships in development – not only in the developing countries, but also in affluent societies. An article by Stephen Nicholas and Elizabeth Maitland dealing with the private sector in China and India points out that informal arrangements do not always have a negative impact on development. Rather, traditional norms can serve business and promote the development of appropriate formal mechanisms, such as commercial arbitration.

The chapter by Nils Boesen on governance refers to examples from Bolivia, India, Indonesia and Uganda, showing that the interaction of traditional authorities and formal institutions of governance can be both mutually ­complementary and mutually obstructive. In contrast, traditional norms and attitudes tend to always oppose gender equality, and reform of formal law can lead to significant improvements. Gita Sen refers to examples from Egypt, India and Pakistan to illustrate the subject.

The authors agree that policymaking, business and social reforms can only succeed when informal institutions and social norms are taken into consideration. Simply imposing ideas from outside has little prospect of success. To minimise the factors which inhibit development, it is important
– to strengthen the reform momentum in a country,
– to incorporate straightforward and helpful customary norms in codified law, and
– to cautiously adapt traditional attitudes by way of formal reform.
All summed up, this is an inspiring book which provides many suggestions for development cooperation without attempting to oversimplify the complex subject matter by offering glib solutions.

Andreas Proksch / Georg Schäfer