A shining city on a hill: How strong U.S. institutions endure beyond elections

Executive Summary

While elections may spur short-term economic adjustments, long-term U.S. economic resilience rests on pillars like the rule of law, decentralized governance, and transparent elections, which foster persistent innovation and reliable growth. The U.S. institutional framework, bolstered by independent monetary policy and broad economic freedom, makes it uniquely appealing to global investors. Despite potential political shifts, structural integrity endures, ensuring the sustained economic security and innovation. This is at the core of why the U.S. is a “shining city on a hill.”

In the short run, elections matter; in the long run, institutions matter more

Institutions as the fundamental source of prosperity

The 2024 Nobel Prize in Economic Sciences was awarded jointly to Daron Acemoglu, Simon Johnson, and James A. Robinson "for studies of how institutions are formed and affect prosperity.” Their book ‘Why Nations Fail’ (2013), and their seminal paper ‘Institutions as a Fundamental Cause of Long-Run Growth’ (2004) illustrate how the quality of institutions determine long-term prosperity.

These economists state that institutions—such as political and economic systems—are the fundamental drivers of long-term economic growth and prosperity.

• Inclusive institutions provide broad access to economic opportunities and are backed by a stable, transparent legal framework, which foster growth by encouraging innovation, entrepreneurship, and efficient resource allocation.
• In contrast, extractive institutions – where power and resources are concentrated in the hands of a few – hinder growth by limiting opportunity and stifling incentives for broader societal contributions. Extractive systems create environments where asset owners have little motivation to invest in broader economic progress, focusing instead on maintaining control and wealth.