(Published in the NEWS Wednesday, July 9, 1997. The writer works for the IMF in Washington, DC. The views expressed are his own)

In the post war world, numerous attempts at all levels--multinational, bilateral and domestic-- have been made to foster growth and development in the low income world so that these countries could catch up with their richer brethren from the industrial countries. Why has growth not been faster? What can be done to make these countries achieve a more balanced and sustainable growth? These are the important questions of the day that are preoccupying all serious positive social science and development policymaking. To a large extent, many of the answers that are being derived relate to the failure of these countries to develop key institutions. Most practitioners and thinkers are now in agreement on this issue but remain perplexed at what is required to develop these institutions. Public sector*s attempts at developing the institutions within its fold have not succeeded. The fostering of non-governmental institutions also remains fairly uneven in its results. Donor funding for institutional support too has had very limited results in view of the extensive history of sectoral and institutional reform supported by substantial financial technical assistance resources now has not yielded the expected results.

One area that the practitioners and thinkers in the area of institution-building seem to be paying little attention to is the origins and development of more successful institutions in the world. Most of the institutions that command international respect are in the western industrial countries. These include major universities such as Oxford, Cambridge, Harvard, and Chicago, think tanks such as the Brookings, Carnegie, Rand, court systems, Stock exchanges and central banks etc. How did these come to be established and develop to gain respect of the society around them? What was their contribution tot eh society in which they were situated? These are important questions that may allow us to understand the difficulties with institution building in the low-income countries.

1. The University of Chicago

The University of Chicago (UofC) offers us a wonderful opportunity to look at institutional development in modern times and at a rapid rate. The traditional universities such as Oxford, Cambridge, and Harvard have along history of development. UofC, on the other hand, was set up in 1892 and had established itself as a major research university by the turn of the century and was a few years later had begun to contribute to key economic policy issues such as the setting up of the Federal Reserve Board and to major advances in science such as the splitting of the atom. Let us review the essential ingredients of this success.

2. The Philanthropist/Institution-Builder

The birth of university was the result of a happy circumstance where a major philanthropist, John D. Rockefeller (JDR), was supported and joined by the entire educational community of the time to in the venture to set up a major higher education establishment in Chicago. JDR, the richest man of the time and given to very aggressive business practices, remains one of the most important philanthropists of all time. In his life, he gave some half a billion dollars to various institution-building enterprises and set in motion a tradition that his children are continuing to date. This is an even larger some of money if we adjust for amount of inflation that has taken place in the last 80 years or so since his death. In today*s prices, JDR would have given away something like $ 7.7 billion.

However, even more interesting is the manner in which JDR made his gifts to allow the flower of an institution to grow. JDR was not a distant or an overbearing contributor or interested in receiving accolades. He took a keen interest in selecting the man who it was generally believed could undertake such an enterprise--William Rainey Harper. JDR lacked the arrogance that came of power and money. He would not expect Harper and others who were interested in the *proposed college at Chicago* to come to him. He would not summon them as he could given his wealth and power. Instead numerous letters written by Harper to others involved in the project show that JDR would undertake lengthy journeys to visit him in places like Poughkeepsie and New Haven and as Harper records *he seemed to have nothing to do except to talk with me.* He would even wait while Harper taught his class so that they could resume the discussion.

When the university started functioning, JDR announced through Gates, his close associate in most charitable and personal investment and business matters, *While he (JDR) is, of course, closely interested in the conduct of the institution, he has refrained from making suggestions, and would prefer in general not to take an active part in the counsels of the management. He prefers to rest the whole weight of the management on the shoulders of the proper officers. Donors can be certain that their gifts will be preserved and made continuously and largely useful, after their own voices can be no longer heard, only in so far as they see wisdom and skill in the management, quite independently of themselves, now. No management can gain skill except as it exercises its functions independently, with the privilege of making errors and the authority to correct them.* Goodspeed another member of the group involved in setting up the university also records that *Mr. Rockefeller, never, under any circumstances, could be induced to recommend the employment or dismissal of a member of the faculty or give any advice whatever regarding the teaching force.* JDR resisted the overbearing management of and interfering benefactor who drunk on his wealth presumed to know it all. In fact frequent references to his restraint and respect for professional management can be cited.

JDR was not interested in accolades or praise. When the university opened its doors in 1892, he was invited to a formal opening ceremony with pomp and show, but *he advised against any formal opening ceremonies and thought it would in any case be hardly possible for him to attend.* He did not visit the university till he was finally persuaded to attend the quinquennial and the decennial celebrations those being the only two occasions that he visited UofC. His sentiments are best captures by his own speech at the quinquennial celebration, *why shouldn*t people give the University of Chicago money, time and their best efforts? Why not? It is the grandest opportunity ever presented. Where were gathered, ever, a better Board of Trustees, a better faculty? I am profoundly thankful that I had anything to do with this affair. The good lord gave me the money and how could I withhold it from Chicago?* He noted that he had merely made *a beginning* and said that *you have the privilege to complete it.* The institution-building philanthropist realized that his money was only a part of the process and without the main participants doing their bit, his donation no matter how large would not bear fruit if a dedicated management did not emerge to develop an outstanding academic environment. He was therefore conscious of not exaggerating his role and therefore stifling the venture.

3. The Visionary and His Plan

JDR*s respect for academics and professionalism, and his skill as an institution-builder again shows up when he decides to give complete autonomous control to Harper who was the major visionary of the time. JDR was hoping to set up a college with a few hundred thousand dollars. Harper wished for a university and with an emphasis on research and graduate education at a time when even Harvard was a mere undergraduate institution. Harper*s plan was much larger in scale than that envisaged by others who were involved in the project. As Rockefeller biographers, Harr and Johnson note, *he wanted to rival Oxford and Cambridge, the great German Universities, and the best schools in Eastern United States.* Harper*s thinking prevailed because JDR always maintained that he was merely providing the money and he did not wish to involve himself in running a university.

Harper set himself the task of *organizing an institution of a distinctly new type* and considered it to be an *educational experiment* that had to prove itself. From the beginning, he planned a university steeped in original research and investigation. He encouraged publication and developed the concept of a university press. As a result the now famous University of Chicago press, the publisher of the Encyclopedia Britannica was founded. To encourage research, departmental journals were encouraged. Among those that were founded then, several such as the Journal of Political Economy are now among the leading research publications in the world. He encouraged continuing and extension where part-time education was encouraged. To make education more convenient for the student, he developed the quarter system with continuous graduation, thereby breaking away from the tradition of graduating only in the summer.

The success of Harper*s experiment is evident in the following. First, almost all his ideas are universally accepted now with all major universities adopting the themes that he propounded. Second, UofC remains one of the finest universities in the world claiming among the largest number of Nobel recipients on its faculty. Third, UofC*s name has been associated with many of the important academic events of this century.

4. Hiring the Best Faculty for a Fine University

Harper set about hiring a faculty before the university was established. He wanted to get the very best and in particular was looking for *head professors* who would develop their own departments. Good speed notes that *He sought big men, men already established and recognized as exceptionally able.* Harper worked very hard to get the faculty he wanted. He was willing to increase the salaries of people he wanted by substantial amounts. Harr and Johnson not that *he (Harper) wanted to assemble the most brilliant brilliant faculty in the world by paying an unheard-of salary of $ 7,000 per year.*

Harper knew that in order to attract a good faculty, he must provide them with an atmosphere to flourish. Though himself an academic of considerable achievements with many books and publications and numerous important university appointments, he was not in competition with his faculty. He recognized the need to encourage and develop is faculty. *He rejoiced in the growing reputation of members of the faculty as though they were his own. Every distinction they received gave him pleasure. Every book they published was a source of satisfaction to him...he was proud of the honors they received and he watched the development of growing scholars with joy and pride.*

Harper*s principle was to hire the best, attracting them with incentive pay packages, and allow them to do their research and writing free fo restraints.

5. The Donation and the Results

An undertaking of this size was not possible without major funding. Between 1892 and 1915, JDR provided a princely sum of about $ 35 million to the UofC in keeping with his vision of participating in *the grandest opportunity ever presented.* In today*s dollars, this is equivalent to about $536 million. It was a large and liberal grant tht allowed the academic vision of harper to flourish. To place this in perspective, consider some of the loans arranged by the World Bank which is a large multilateral develoipment finance institution finances the development of education in developing economies for the reform od the entire education sectors in developing countries. For example, in Paksitan, the World Bank arranged a Social Action Program part of which is education with financing of $ 200 million in 1994. Similalry, a sector loan for the rerform of the *middle schooliong* was provided for $115 million in 1992. Contrast with JDR*s donation, the numbers are worthy of further thought.

The upshot of this marriage between a generaous grant from a non-interfering philanthropist and a talented visionary for rearing the institution created a marvel in the academic world. The university started in the year 1892 with a very strong faculty of 128 faculty members who were to teach 594 students with 276 in undergraduate departments. *Harper succeded in attracting extraordinary faculty and a large and impressive student body and in establishing important innovations in higher education.* Over the years, the university has been among the foremost contributers to fundamental research in many areas. Many notable academics, nobel prizewinners, path breakers in their own subjects have been associated with the UofC-- too many to enumerate in a paper such as this. In academics, the UofC established a name for itself very early in its life and retained a position of eminence, thanks to the ingenuity of its founders.

And that is something that we should try to learn from. I would invite the reader to contrast this superlative philanthropic effort with those at home where philanthropists cannot let go of their *investments.*