Promoting Inclusive Development in Diverse Societies

Ethnic fragmentation, the division of a country's population into different ethnic groups, can have significant implications for social and economic development. In many low and low-middle-income countries, historical factors like colonial borders have led to constructed nations with diverse ethnicities. This diversity often results in conflicts over resources, hindering progress in these societies.

On the other hand, New Institutional Economics (NIE) offers insights into how institutions interact with the economy to promote growth. By emphasizing inclusive institutions that support fair competition and broad participation, NIE aims to create a conducive environment for economic transactions and development.

However, implementing NIE principles in low-income countries faces challenges such as resistance to change, cultural differences, and historical legacies. Moreover, the focus on ethnic homogeneity in NIE overlooks the complexities of countries with diverse ethnic compositions.

Research indicates that ethnic fragmentation can impede social and economic advancement, especially in nations with multiple ethnic groups. Contrasting countries like Bangladesh, which prioritizes inclusive institutions, with Pakistan underscores the impact of ethnic diversity on national unity and economic prosperity.

For constructed nations like Pakistan, addressing horizontal inequities stemming from ethnic divisions is crucial for fostering social justice and leveraging the potential of their populations. Sustainable national cohesion requires tackling both horizontal and vertical inequities across societal classes to prevent exploitation and ensure overall progress.

Understanding the dynamics of ethnic fragmentation and the principles of New Institutional Economics is essential for promoting inclusive development in diverse societies. By addressing historical legacies, promoting fair competition, and prioritizing social justice, countries can overcome the challenges posed by ethnic diversity and work towards sustainable national cohesion and economic growth.