Governance, Growth, and Development Decision-making - School of ...

What Do We Know
About the Relationship
between the Political and
Economic Dimensions of
Development?
Francis Fukuyama
1. Overview and Definitions
This note outlines what we know about the relationship between the
economic and political dimensions of development, and draws some
implications of this for development strategies.
I define economic development simply as increases in per capita
gross domestic product (GDP) over time.
Political development is more complex, and involves at least
three separate components. The first is state-building, which involves
creating a legitimate monopoly of coercive power; defining the state’s
territorial extent; and creating administrative capacity in the form
of public bureaucracies that can enforce rules, extract taxes, and
provide basic public goods. The second component is rule of law, in
which the state’s discretion is limited by clear and transparent formal
rules. Rule of law is the basis for property rights and the adjudication
of commercial claims, and protects a private sphere and individual
human rights. Finally, democracy is the exercise of popular sovereignty
through regular multiparty elections. Consolidated democracies
employ other mechanisms for holding governments accountable
to the people besides elections, such as separated powers by which
different parts of the state monitor each other’s behavior, and a free
press and civil society outside of the formal political system that can
monitor and check the government’s performance.
In addition to economic and political development, there is a
separate sphere of social development. The latter consists of the
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