By Adebayo Olukoshi

IDS Bulletin Vol 36 No 2 June 2005

If investments are good for growth, then a question which has always exercised the minds of economists and policy-makers historically, is just how to generate, attract, secure and sustain them. This is not a question to which there are easy answers, although there is no shortage of economic models which seek to identify the determinants of growth and propose universally applicable principles.One perspective that has become dominant in policy circles suggests that “secure” property rights constitute the sine qua non for the generation of investments, as well as for increased productivity, income and growth. This perspective, which is currently being applied across developing countries, is, however, contested by another school of thought which argues that evidence on the correlation between the rights regime (or the governance environment) and the direction and pattern of investment flows is very thin indeed. China is one frequently cited example in this connection, but the cases of Nigeria and Angola, two of the most important destinations for foreign investment flows in Africa, have also been cited. Investor behaviour, though, is very often based on subjective sentiments, hunches about possibilities that may exist, and the mentality of the herd, and not so much on a priori calculations about whether or not property rights are “secure”. This article explores these alternative perspectives, examining some elements of the political economy of growth and investment.