To say that good institutions are a fundamental condition to foster economic growth is close to platitude. However, it is important to explain how it happens, and therefore the main aim of this chapter is to present and discuss the role played by both private and public institutions in decision making processes related to the implementation of economic policies encouraging economic growth. By discussing the lessons from the Iberian experience throughout the nineteenth and twentieth centuries, the chapter tries to disclose the similarities and differences between both countries, with a main focus on the way how the institutional environment helps to explain the circumstances that favour or hinder economic performance. This comparative approach begins with the age of the liberal revolutions in the early years of the nineteenth century and closes with the processes of democracy building and European integration in the two last decades of the twentieth century. The study of institutional changes and continuities in Spain and Portugal during this long period offers multiple opportunities to better understand the articulation between the economic and business environment, the dynamics of the markets and the economic policies designed or implemented by the state, in fulfilment of its regulatory role.

In May 2000 the world’s leading financial weekly announced that there was little hope for the future of Africa. Under the headline ‘The hopeless continent’, The Economist’s cover showed a young man, presumably a rebel, carrying an anti-tank rocket launcher, over a cut-out of the region. The dark background spelled doom.

The Economist was not alone in its Afro-pessimism. In a seminal 1999 paper, development economists Paul Collier and Jan Willem Gunning attributed most of the malaise to Africa’s poor integration in the global economy, a result of import-substitution and exchange controls. They concluded that African countries were left with challenges that ‘are much more difficult to correct than exchange rate and trade policies, and so the policy reform effort needs to be intensified. However, even widespread policy reforms in this area might not be sufficient to induce a recovery in private investment, since recent economic reforms are never fully credible.’