INSTITUTIONS, POLICY AND GROWTH
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Not only theoretical arguments, but also the practical experience of post-socialist transition economies over the past 15 years demonstrate that faster economic growth is attained by those countries which take greater care to foster the institutional reinforcement of market economy. However, progress in market-economy institution building is not in itself sufficient to ensure greater competitiveness of enterprises, rapid economic growth and hence an improvement in living standards. Another indispensable component is an appropriately designed and implemented economic policy. It is not inconceivable that despite the institutional progress, growth rate may slow down precisely because of the deteriorating quality of the policy. This is what happened, for instance, in Poland as a result of the harmful overcooling of the economy towards the end of the previous decade. Thus what matters is not only institutions, but also policy. One should also take into account cultural factors. The key to long-term economic growth is provided by a good coordination between institutional changes and a policy that favors capital formation and optimizes its allocation.
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