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“The Ukrainian education system has retained its Soviet shape,” Kasianov said. “It worked in a mono-ideological system with a centralized economic and social system. But now it is outdated. It needs to be reformed to meet the needs of a mobile market economy, a globalized world, and a fluid society.”

Donor states started withholding aid, which makes up 40 percent of the country’s budget.

“For every one I have arrested,” she said of government crooks, “I have lost a whole village of votes.”

In February the health minister admitted that Malawi’s central medical stores held only 5 percent of the drugs they were supposed to stock.

Dr. Chiudzu blamed not corruption but an overcentralized state: The hospital is barred from buying supplies itself, yet the Health Ministry, which holds all the procurement power, is unable to meet needs.

Ms. Banda appeared to agree that poor governance was as lethal as corruption. “

Complementing the role of speculation, activist states have played several roles in encouraging innovation.

Occasionally, the object of speculation has been one of those fundamental technologies – canals, railroads, electrification, radio, automobiles, microelectronics, computing, the Internet – for which financial speculators have mobilized capital on a scale far beyond what “rational” investors would provide. From the wreckage that has inevitably followed, a succession of new economies has emerged.

In the United States, the government constructed transformational networks (the interstate highway system), massively subsidized their construction (the transcontinental railroads), or played the foundational role in their design and early development (the Internet).

For countries following an innovative leader, the path is clear. Mercantilist policies of protection and subsidy have been effective instruments of an economically active state.

List noted how Britain’s emergence as “the first industrial nation” at the end of the eighteenth century depended on prior state policies to promote British industry. “Had the English left everything to itself,” he wrote, “the Belgians would be still manufacturing cloth for the English, [and] England would still have been the sheepyard for the [Hanseatic League].”

To begin, the “national champions” of the catch-up phase must be rendered accessible to competitive assault. More generally, the state’s role must shift from executing well-defined programs to supporting trial-and-error experimentation and tolerating entrepreneurial failure. And the debilitating “corruption tax” that seems inevitably to accompany economic revolutions must be curbed, as it was in Britain during the nineteenth century and America during the twentieth.

Unfortunately, often supervisors in charge of the failing entity in the years of the debt run up were the ones charged with uncovering the problems.

Spain was the leader in the introduction of a dynamic provision – a provisioning tool that forces banks to increase provisions without reference to any specific loan. The intention of this tool was twofold: to mitigate the bad times, and to cool the booms in the good times (Holmstrom and Tirole 1997). Dynamic provisions were endorsed as part of the Basel III standards in December 2010, in part on the strength of Spain’s experience. And indeed the existing evidence (Jiménez et al. 2012) shows that the tool worked as intended, dampening the credit boom and softening somewhat the credit crunch. However, it is clear by now that their level was not nearly enough, as their size – 3% of GDP at their highest point (2004) – was simply not of a magnitude commensurate with the credit losses.

Without the provisions, the reality of the cajas' accounts would have become much faster a concern, and would have imposed itself on the regulator

Had the Banco de España ordered an audit of the system after uncovering numerous irregularities in CCM, it would have not been able to deal with the capital shortfalls uncovered as there was no appropriate resolution regime in Spain at the time

governance played a critical role in the development of the Spanish crisis. In the Spanish case, the supervisor, confronted with powerful and well connected ex-politicians decided to look the other way in the face of obvious building trouble.

More systematic evidence of the role played by these governance issues is provided in a 2009 paper (Cuñat and Garicano 2009b) where we showed that cajas with chief executives who had no previous banking experience (!), no graduate education, and were politically connected did substantially worse in the run up to the crisis (granting more real estate developer loan, up to half of the entire loan book in some instances) and during the crisis (with higher NPLs).

Eastern Valencia said it was asking for central government help as it could not refinance loans that must be paid off this year.

Valencia, which has long been run by Rajoy's PP, is emblematic of Spain's current crisis. A property crash has hit both regional government income and the region's banks, with its three main banks having to be rescued. Local politicians, meanwhile, have a growing reputation for corruption and frivolous spending.

Valencia mopped up a quarter of the €17bn (£13.2bn) of extra money made available by central government in April to pay a backlog of regional government bills.

Last year the regions not only failed to meet government-set deficit reduction targets, but actually increased their joint deficit.

Analysts believe most regions will miss this year's 1.5 percent deficit target. The government last week asked at least eight of them to revise their 2012 budgets, threatening to take over the finances of some of them.

At its peak, the Zambia Consolidated Copper Mines company employed more than 65,000 Zambians and carried out services like water delivery and waste collection for five cities in the Copper Belt Province.

Mining employment has dropped to just 30,000, half of its glory-days peak, and the job of maintaining all that company housing and infrastructure has reverted back to the government.

The stats identify Switzerland as Zambia’s primary export market. This is not an indicator that Zambia hosts a thriving chocolate and suspenders sector, but rather that its copper trades are booked in the jurisdiction where they are least likely to be taxed.

Many of the mining companies pay just 0.6 percent royalties to Zambia, far below the already-meager industry standard of three percent.

This is Namwile Uzondile, the director of a rural health education project.

Last year Namwile conducted a survey of prostitutes here in Kitwe, and found that at least half of them had education certificates, but couldn’t find work. Most had been married off early, 15 or 16, and since then had either left their husbands or lost them to AIDS.

First, you go to the tribal chief. Ninety-four percent of the land in Zambia is customary or traditional, no one has a title to it. It’s not just sitting there, people are living on it, farming, grazing animals, it’s just technically under the control of a chief.

In Zambia most of the chiefs require a gift just to get a meeting. This might mean taking them lunch at a restaurant in Lusaka, or it could mean buying their daughter a car—it’s up to them.

Another reason Zambia lacks skills is that some parts of the workforce operate as cartels. Take lawyers. Zambia only has 1,000 of them, and they’re concentrated where the money is: Lusaka (government), Copper Belt (mining) and Livingstone (safari tourists).

Last year, only six lawyers were admitted to the bar out of 164 who took the exam. The year before that, it was 16 out of 145. Keep in mind, these aren’t people coming in off the streets. These are people who have a law degree.

More than 60 percent of Zambia’s government revenue comes from the copper mines.

Taxing all this informal activity would be costly in both resources and voter goodwill. In 2012, Zambia collected just $2.3 million in income taxes from its citizens.

It goes as high up as you want to follow it. Michael Sata, the president of Zambia, appointed his uncle the finance minister, his nephew the deputy finance minister, his niece the local government minister, and cousins as ambassador to Japan and chief justice.

Zambia’s cabinet has ballooned to 20 ministers and 47 deputy ministers, the largest in Africa. With salaries three to four times higher than opposition MPs and each ministerial post bundled with perks like a company car, free fuel, house servants, and mobile phone talk-time, you get the feeling politicians aren’t jumping from opposition into government on moral sentiment alone.

In 2011, Zambia spent a total of $4.3 billion running itself. Stretch that to cover every man, woman, and child, and it amounts to just $325 per person per year. That amount—less than a dollar per person per day—has to cover education, health care, infrastructure, law enforcement, foreign debt … everything.

Now she goes all NGO. “Little government capacity,” she says, is the nicest way to put it. “There are simply no systems for routine government services,” she says. Getting a license, a permit, certificates, approvals to start work, visas for expats to fly down here—nothing is in one place, nothing is fast or easy.

“Sometimes we have to pay for the inspectors to come to our mines,” Jane says.

The conversation goes like this: Jane tells the local certification body that she needs an inspector to sign off for a permit. The local certification body tells her that they would be happy to come out to the site, but they don’t have fuel for their cars, or enough petty cash to pay per diems. Jane offers to pay their costs, but only their costs, and the payments aren’t related to clearing the inspection.

The company has even paid the police to follow up on complaints or to investigate thefts. “They say, ‘We don’t have this in our budget’ or ‘We’ll need you to pay for it,’” Jane says. So the company fixes the police cars, covers their travel expenses, treats them to lunch.

“We tell them, ‘The company I work for, we’re not going to pay up.’ But at the end of the day, they know you’re on a short timeline, and they aren’t.”

Thomas’ family told him his nephews didn’t need to be in school. From their perspective, that’s not totally irrational. In a country with so few formal jobs and so much competition for getting them, I can see how spending hundreds of hours, thousands of kwachas, on education would seem superfluous. Thomas’ daughter wants to become a lawyer. You could almost forgive Thomas if he told her that the bar exam failure rate is more than 90 percent, so what’s the use?

International investors pledged $750 million last year to build infrastructure.