Exits from the Four-Lane Highway to National Development: What Are the Risks to Sustained Economic Growth? | 국외연구자료

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Exits from the Four-Lane Highway to National Development: What Are the Risks to Sustained Economic Growth?

ADB

2025.05.20

Sustained rapid economic growth is empirically necessary and sufficient for reducing poverty, meeting basic needs, and achieving high levels of nearly any measure of human progress. And there are strong arguments and evidence that achieving and sustaining very high levels of economic productivity has depended on countries achieving strong, market-supporting, sufficiently inclusive institutions. However, matching up theory and evidence about economic growth and institutions in the medium run (years to decades), in which, in a play on Keynes’s famous phrase, we are not all dead, with the very long-run historical trajectory, in which we are all dead, is difficult. It is clear that having “low quality” institutions is not a barrier to initiating an episode of rapid economic growth, as the unprecedented growth of the People’s Republic of China since 1978 amply illustrates. Indeed, since the 1990s many Asian countries have embarked on very rapid growth, but in many cases these growth episodes have not only been initiated but they have also been accompanied by very weak (or negative) changes in state capability. This lack of progress in reaching the “good institutions” which are strongly associated with countries with high levels of prosperity and measures of social progress in the long-run creates the conditions in which sustained economic growth is at risk. It is possible that the feedback loops from economic growth to “institutions” like state capability will be a key factor in determining whether Asian countries will sustain rapid growth and reach high-income status or whether this growth will peter out, or worse, come to a sudden stop or reversal.

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