“graduation” from emerging market status is a long, painful process that can take 75 years or more to complete.
Rogoff is writing about the Euro zone and Greece, but this observation in in the tradition of Hayek, North et al regarding the process of economic change in general. This process is incremental and, given the evolutionary nature of discovery, very time consuming. The implications of this view - simplified by Bill Easterly in his contrast of Planners with Searchers, are very clear in terms of the role of the state.
To the extent that the state supports a spontaneous order through a focus on general rules (the law) the "graduation" that Rogoff describes can emerge. To the extent that the state begins the process of specific rules (legislation) the environment of society will be constrained by arbitrary applications of power that hinder or warp the evolution of institutions that incentivize wealth producing entrepreneurial activity and growth.
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