The principles of a prosperous state are summarized under the term “good governance”. These include:

11.1 Corruption

Corruption is one of the enemies of constitutional states. It directs money into the hands of those who contribute nothing to prosperity. It does not reward achievement, but rather the illicit exercise of power. Entrepreneurs who have to give the Mafia part of their profits become frustrated. They wonder why they have to work while others earn money by doing nothing. Anyone in a powerful position in the government who receives private money in return for a permit is diverting funds into the pockets of those who have done nothing to earn it. They frustrate those who work and even prevent them from working in their chosen professions, hindering the success of those who labor. Those who collect such funds privately prevent its use for progress. Public servants should be selected according to their aptitudes and abilities (meritocracy) and not because of who they know.

Corruption of any kind lowers productivity and thus prosperity.Footnote 1

Developing countries that observe the rules of good governance achieve success faster than corrupt countries. There are those who argue that countries that do not practice good governance should not be supported, because aid money flows into the wrong pockets, seeping away without bringing successful results.

11.2 Constitutional State with Separation of Powers

The structure of the state with separate legislative, executive and judicial branches is a key element for success, whereby each branch must work independently and efficiently. Where one branch is above the other, the latter is no longer independent but carries out the wishes of the other power. This is the case when an autocrat subordinates either the parliament (legislative branch) or the judiciary branch or both. In such states, the legislative branch and/or the judicial branch do not function freely and independently. Both elements are a prerequisite for a thriving economy. In regions where the judicial branch is controlled by autocrats, the economy becomes wary of arbitrariness. It cannot develop freely, and foreign investment is discouraged. However, it is not enough for the judicial branch to be independent. It must also function efficiently so that the economy can rely on neutral rulings within a reasonable amount of time.

If a legal process takes too long, those concerned will begin asking themselves whether or not they want to call on the legal system at all—even if by doing so, they would receive justice. Anyone who has to wait too long for justice to be served begins looking for different types of solutions. As a result, people begin to avoid fulfilling contractual obligations because, after all, the other party cannot do anything about it anyway. White-collar criminals benefit because it is not worth the effort to prosecute. Except in genuinely complex cases, court proceedings should not take longer than a couple of months. This is quite possible as the courts in central and northern Europe have shown. On the other hand, Italy is an example of a country with an independent but inefficient judiciary. Court proceedings last for about 1 year. As a result, those seeking justice are denied their rights and often give up activities that are dependent on the law.

The rule of law and in particular judicial independence are essential for economic success. The former president of the European Court of Human Rights experienced a rather alarming example of an attempt to interfere with the courts. After retiring because of his age, he granted the Neue Zurcher Zeitung an interview (issue from 16 April, 2019 pages 13/15) Extracts from this interview are reproduced here (only his statements regarding Russia). The questions are shown in bold italics.

… I am particularly critical about how Russia has been dealt with.

Why?

In hindsight, I believe that Russia should not (yet) have been admitted into the Council of Europe in 1996. Significantly, this was also the conclusion reached at the time by the Council of Europe Commission, which carried out the relevant enquiries. Russia was simply not ready, and this was known. From the very beginning there were difficulties. Russia interfered in the smallest of matters, they even intervened in secretarial appointments at the highest level. They made it clear that they did not respect the independence of the Court of Justice. One day the Russian ambassador came to my office and on behalf of Putin demanded that I instruct the judges of the European Court of Human Rights (ECHR) as to how they were to decide in a particular case. Of course, I refused to do so in no uncertain terms. I made it clear to him, that this was an absolutely unacceptable violation of the independence of the courts.

What were the results?

The ambassador warned me that he would write a report about his visit and send it to Moscow. His face was quite red, and he left my office without saying goodbye. It was to be understood as nothing less than an open threat.

And how did you react?

First of all, I discussed the situation with my family. Was the situation too dangerous for us? My children were already adults at that time, so they gave me the freedom to decide for myself. I felt we could deal with the risk. Had my family reacted differently, I might have resigned as President of the Court. One thing was clear: Giving in to Russia’s demands was out of the question. And I made that clear to Russia.

Did Russia make good on its threat ?

A few days after the ambassador’s visit, Russian state television broadcast a report claiming that the (ECHR) and I had been aware of the plans for a Chechen terrorist attack in Moscow but had kept it under wraps. It was a blatant attack on the credibility of the Court and on my integrity.

And how did the Court react?

I made it absolutely clear that the ECHR does not tolerate such methods. The EU backed the Court and me in a strongly worded statement, which calmed the situation on the surface. However, a Russian representative later warned me that my ‘disobedience’ to Putin had escalated the situation and I was the guilty party. This incident shows how Russia deals with the separation of powers. I have little doubt that Russian judges would be treated in the same manner as I had been.

Shortly afterwards you became ill—and this was linked to the incident.

During a trip to Russia in 2006, I suffered a life-threatening staphylococcal poisoning. The cause is unknown. The possibility that a third party administered the bacteria to me can, therefore, not be entirely eliminated. I have no proof, and I am not claiming that this is true. But it cannot be completely ruled out. At the time, I considered involving the legal authorities. However, I doubt that that would have been successful.

11.3 Respect for Civil Liberties

Respect for freedom of expression and its related human rights is essential for states that wish to rise to the top. These rights have freed the European spirit from autocratic bondage and are the basis for economic prosperity. In the meantime, human rights have been refined and supplemented with important additional fundamental rights. Civil liberties are not enough to ensure prosperity. Prosperity requires the right to own property. A free market economy presupposes the ownership of goods, the means of production, land and capital. Where property is vulnerable or poorly protected, prosperity is not possible.

Freedom of the press is one of the fundamental civil liberties. Wherever it is suppressed or even censored, there is no freedom of opinion and a true democracy is not possible.

11.4 Democracy

Is democracy a pre-requisite for economic success? With regard to China, some claim that democracy is not necessary. I addressed this question earlier (Sects. 2.3 and 2.4) and pointed out that without democratic freedom, the last stage of innovation necessary to reach the very top is missing.

Democracy is rule by the people. This rule can be exercised to different degrees. People’s influence can be limited to legislative elections every few years, with this legislature then carrying out all other elections (in particular, the election of the government) and making all decisions. It can also give the people further responsibilities, such as electing a president or judges and finally it can assign decision-making powers to the people either compulsorily or by referendums.

Economic success is not dependent on the extent of the people’s power. What is decisive, however, is that these responsibilities become so firmly rooted in the people’s conscious that they remain sacred. A change of power by popular vote is a matter of course. Should an American president turn out to be an autocrat, the 22nd amendment to the constitution, which was ratified in 1951, prevents him/her from remaining in office for life. Democracy is so firmly anchored in the USA that a president must leave office after two terms. Elsewhere, if it is possible for a dictator to seize the power of the legislature so that parliament becomes irrelevant, or if they can overrule the judicial branch, Good Governance no longer exists, and economic success will begin to erode.

Democracy plays an important role in people’s perception of their own freedom and happiness. They are more successful for this reason alone.

The subsidiarity principle, with its decentralization of responsibilities, is ultimately only possible within a democracy. It gives people the feeling that they are able to decide for themselves in their own regions and therefore they become competent and responsible citizens, who are satisfied with the system. Additionally, it promotes competition between the regions and leads to the best solutions for problems. Autocrats, on the other hand, want to exercise their authority, i.e. to centralize it, which limits success for the region.

Because autocrats are power driven, they strive for influence in other areas as well. For example, they want to expand their territory and annex other regions and they are sometimes willing to wage war in order to stay in power. They justify their aggressive foreign policy stance to their people and use it to enhance their reputations. Democracies, on the other hand, concentrate on themselves. They rarely try to exert any political influence on other countries and only go to war if they are forced to do so by autocratic aggressors.

A democracy that at the very least guarantees good governance within a country is a prerequisite for economic success.

Development in the direction previously described does not mean that the world will be perfect. It only means that the world will be better.