Institutions govern collective life and structure the rules of the game that allow us to live in society. Will we need an institutional change in hiring human resources and selecting leaders?
What are institutions? The topic is widely debated and has allowed for interesting reflections in various domains, such as economics or sociology. In an unpretentious way, institutions are ways of doing lasting. They are enduring because they function as rules of the game of social and economic life for people and organizations. They are lasting because they are often taken for granted. Their influence is almost invisible, as they appear to be permanent in the eyes of individuals. They are durable because they are difficult to change.
It is not news to anyone that institutions are crucial to development or in responding to crises. It is the institutional architectures of a territory – the combinations of its different institutions – that limit certain socio-economic processes or allow them to accelerate their progress. Economists call this aspect institutional (dis)advantages.
Out of personal preference, I would like to recall the contributions of Douglass North, Nobel Prize in Economics*, who dedicated a significant part of his career to studying the fundamental institutions for the proper functioning of market economies, or Robert Boyer, one of the fathers of the School of French Regulation, which recently reflected on how different types of institutions have allowed national governments to respond more or less assertively to the radical uncertainty of the Covid-19 pandemic**.
It is not too bold to say that Portuguese economic growth has been limited for several reasons, many of them institutional. The institution that justifies this text is the one that governs the hiring of human resources and the selection of leaders.
It is an institution that should be based essentially on merit criteria, but which currently continues to combine forms of nepotism, clientelism, with the mere reciprocity and exchange of favors, leveraged by the attempt to maintain and reproduce power and apparently reduce the uncertainty that hires the nephew, electing the son, or appointing a lackey may bring. It encompasses the public sector, the private sector, the third sector in complex tangles.
Most of the time it does not involve any illegality and is so deeply rooted that society in general lives (almost) peacefully with it. In territories with less critical mass – as in the case of the Algarve – it is felt with greater intensity.
We cannot deny that such an institution is strongly embedded in the national and regional economy and that it gives rise to at least two serious problems. The first is the non-retention and participation of some of the most capable in work, decision-making and various collective processes of our daily life. The second is the creation of closed power nuclei, dependent on past trajectories, averse to novelty and change, which reciprocally feed themselves.
Therefore, an institutional change in the hiring of human resources and the selection of leaders seems to be essential. But this is not easy, for several reasons.
The first is the general understanding that we are facing a problem. It is clear to those in power that we are not facing any problem. Will it be a problem for ordinary people? Assuming yes, the diagnosis is accepted, how to treat this problem? An institutional change can be done in a number of ways. Abruptly, mainly by creating legislation or standards of conduct that heavily penalize these behaviors.
This option usually generates an aggressive counter-response from interested parties in maintaining the status quo, and imaginative ways to get around the barriers created. Another possibility is a gradual change, creating step by step, in a more structured way, conditions so that this does not happen.
Usually, introducing layers of institutional change, which reduce antagonism, counter-mobilization, pave the way for widespread social disapproval of this type of behavior.
The transformation of the Portuguese economy – and that of the Algarve in particular – needs this change to consolidate a path of innovation and knowledge, of new specializations and economic activities.
To allow the emergence of new actors and business ecosystems and to strengthen existing ones. To recover from the pandemic crisis and make it more capable of responding to future crises – which will soon appear on the horizon. How long will we have to make this change?
Author Hugo Pinto is a researcher and co-coordinator of NECES – Center for Studies in Economics, Science and Society of the Center for Social Studies, University of Coimbra; Professor at the Faculty of Economics of the University of Algarve
Notes:
*Bank of Sweden Prize for Economic Sciences in Memory of Alfred Nobel
**Boyer, R. (2020). Les capitalismes à l'épreuve de la pandémie🇧🇷 Paris: La Découverte. https://doi.org/10.3917/dec.boyer.2020.01;
Note 2: The content of this article does not necessarily reflect the position of the Center for Social Studies, or the Faculty of Economics, or the DR of the Order of Economists. The opinion expressed is the sole responsibility of the author.
Note 3: article published under the protocol between the Sul Informação and the Algarve Delegation of the Order of Economists
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