In dealing with the complexity of transforming Russia's economy, there is no substitute for the rule of law and vibrant public decision-making mechanisms. Breaking the stranglehold of Russia's elites on economic reform will only happen from the bottom-up. Similarly, if we hope to avert a civil war in Nigeria, there is no better hope than economic reform and a democratic political system that allows differences to be resolved without conflict. If we want to solve the issue of Kosovo, it won't be easy until we address the fundamental nature of an authoritarian regime in Belgrade. The very of the global economy has placed a huge magnifying glass on the institutional structures of developing nations.
Capital is incredibly fluid in today's world.
Investors and multinational corporations can, and will, move their money out of countries when fault lines appear. Again and again, we see that missteps by governments lacking public accountability can quickly lead to wholesale capital flight. Strong institutions are the only viable means to secure the triumphs that the end of the Cold War made possible and avert the staggering costs of failed states. Global Trends 2010, a study released last year by the CIA's National Intelligence Council, highlighted the importance of investments in development. The study found that growing populations, widening gaps between rich and poor, and continuing revolutions in communications have the potential to incite new civil and ethnic and civil conflicts, and could demand U.S. military intervention with increasing frequency.