High quality public institutions generate prosperity

The Nobel prize laureates in the economic sciences are Daron Acemoglu, Simon Johnson and James Robinson. They have demonstrated the importance of societal institutions for a countrys prosperity. Societies with a poor rule of law and institutions that exploit the population do not generate growth or change for the better, reads the official statement of The Royal Swedish Academy of Sciences. In particular, they argue that inclusive governments (that extend political liberties and property rights as broadly as possible) experience the greatest growth in the long run. By contrast, countries with extractive governments (where power is wielded by a small elite) either fail to generate broad-based growth or see their growth wither away after short bursts of economic expansion. Today we look at the Worldwide Governance Indicators (WGI) that are designed to help assess broad patterns in perceptions of governance across countries and over time. The Rule of Law indicator shows a visible improvement in Serbia and Czechia over last two decades. Despite the improvement, Serbia remains the lowest rated country within the region. Other CEE countries have sustained their positions with Hungary being the stark exception, where rule of law assessment deteriorated quite visibly to 63 and pairs with Romania. Western economies such as Netherlands, Finland or Switzerland, that may serve as a reference point, have their scores between 90 and 100.