The Need for Strong Institutions

Institutions are a set of formal and informal rules governing the actions of individuals and organizations as well as the interaction of participants in the development process. Formal institutions include laws, regulations, and rules that establish the basis for production, exchange, and distribution. An important explanation for state fragility is the state’s incompetence in economic management and lack of administrative capacity to translate goals into resource allocation. It could also mean that commitments for resource allocation are not credible. In many fragile states, conflict leads to institutional voids and people engage in novel and informal partnerships to compensate for these institutional gaps. Existing institutions become inefficient and fragmentary, and people must work together to fill these organizational gaps.