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One of the most pressing development challenges confronting African nations is the phenomenon of premature deindustrialisation. Countries are shifting out of labour-absorptive manufacturing sooner (historically) and at lower levels of per capita income than their industrialised counterparts. The downside risk to a fast-growing youth population in this context is the likely lack of available future economic opportunity. While African countries have all attained independence from their former colonisers, the economic freedom and opportunity expected to accompany this political freedom has manifestly not materialised. This paper argues that the poor quality of institutions is largely to blame for the malaise, and problems like premature deindustrialisation are unlikely to be solved unless institutions can be built that enhance states’ capacity to govern effectively. Incentives for better governance are simultaneously undermined by coterminous phenomena such as the resource curse. Building the right institutions, however, requires a shared conceptual understanding of how institutions are forged, and how to work with the elite bargains or political settlements that generate and sustain them. The paper concludes that some of the recent divergence between New Institutional Economics (NIE) and Political Settlements scholars may inadvertently defeat this end, and thus makes the case instead for convergence.
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