Working Papers

Failed States, Vicious Cycles, and a Proposal - Working Paper 243

3/2/11
Raghuram G. Rajan
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Photo: UN | Sophia Paris

In this working paper, Raghuram Rajan examines the problems of failed states, including the repeated return to power of former warlords, which he argues causes institutions to become weaker and people to get poorer. He notes that economic power through property holdings or human capital gives people the means to hold their leaders accountable. In the absence of such distributed power, dictators reign.

Rajan argues that in failed states, economic growth leading to empowered citizenry is more likely if a neutral party presides. He proposes a unique solution to allow the electorate to choose a foreigner, who would govern for a fixed term. Candidates could be proposed by the UN or retired leaders from other countries; they would campaign on a platform to build the basic foundations of government and create a sustainable distribution of power.

Rajan emphasizes that this is not a return to the colonial mode—the external candidate (like all the others) would be on a ballot and the electorate would choose whether he or she was their best chance to escape fragility.

This paper has a foreword by senior fellow Vijaya Ramachandran. Raghuram Rajan is the Eric J. Gleacher Distinguished Service Professor of Finance at the University of Chicago’s Booth School of Business.

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