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Why Nations Fail: The Origins of Power, Prosperity and Poverty |
Why are some nations more prosperous than others? Why Nations Fail by Daron Acemoglu and James A. Robinson, argues that it is not down to climate, geography or culture, but because of institutions. Drawing on an extraordinary range of contemporary and historical examples, from ancient Rome through the Tudors to modern-day China, Acemoglu and Robinson show that to invest and prosper, people need to know that if they work hard, they can make money and actually keep it – and this means sound institutions that allow virtuous circles of innovation, expansion and peace. Based on 15 years of research, and answering the competing arguments of authors ranging from Max Weber to Jeffrey Sachs and Jared Diamond, they blend economics, politics, history and current affairs to provide a new, powerful and persuasive way of understanding wealth and poverty. They offer a pragmatic basis for the hope that at ‘critical junctures’ in history, those mired in poverty can be placed on the path to prosperity – with important consequences for our views on everything from the role of aid to the future of China. James Robinson talks about Why Nations Fail in this special free event.
James Robinson is a political scientist and economist and the Florence Professor of Government at Harvard University, and a world-renowned expert on Latin America and Africa. He is the co-author with Daron Acemoglu of Economic Origins of Dictatorship and Democracy, which won numerous prizes, and Why Nations Fail: The Origins of Power, Prosperity and Poverty.
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March 7th, 2012 at 7:00 am
Without being dismissive of the 15 years of academic research that James Robinson told us has gone into his book, his underlying message seemed fairly straightforward.
Successful nations have inclusive economic institutions underpinned by inclusive political institutions, operating within a framework of political centralization. An inclusive society, Robinson explained, is one with an equal distribution of political power where all citizens have the opportunity for advancement through the utilization of their natural skills and talents.
On the other hand, failing nations are characterised by “extractive” institutions which concentrate power in the hands of an elite, and the political and economic set-up is structured in such a way as to funnel wealth in their direction.
Using the Americas as an example, Robinson told us that the huge inequalities between the nations of North and South America can be explained by the way their respective societies were organised during the colonial period.
Spanish-style systems designed to exploit indigenous peoples in South America failed in the less populous North, leading elites there to offer the colonists inclusive and increasingly democratic arrangements in an attempt to kick-start wealth creation.
These systems became self-reproducing, leading to entrenched discrepancies in economic success that have endured until our own time.
Robinson’s conclusion? Throwing aid at failing countries is merely a temporary sticking plaster. Only a reorganization of political institutions along inclusive lines will allow a similar transition with regard to a nation’s economic institutions, and thereby create the conditions for economic success.
At one point, Robinson stated that there were “no deep geographical or cultural reasons” that explained global inequality, so I asked him if I should go home and bin my copy of Jared Diamond’s “Guns, Germs and Steel”. Robinson came back with a helping of mixed messages. He told us that Diamond’s book addresses inequality between continents at the start of the modern period but doesn’t explain inequality today within continents, and that he doesn’t agree with Diamond’s arguments anyway. However, Diamond is a friend of his and GG&S is a wonderful book.
To me the most telling moment came when Robinson discussed China. Seeing parallels with the Soviet Union, he suggested that China’s current “economic miracle” cannot be sustained. Of course – providing China’s governance remains broadly unchanged – if this prediction were to be proved correct then Robinson’s theory of the necessity of “inclusive” political institutions would be vindicated.
Ah, China. Eleven years ago, in his book “The Coming Collapse of China”, Gordon Chang told us that the Middle Kingdom was about to spectacularly implode at any minute. Hmmm… as the great Steven Patrick Morrissey once asked – “How Soon Is Now?”. For me, the jury is still out on China’s particular version of capitalism.
I’m not saying that Robinson didn’t make some important points. But as China continues to grow, the US stumbles through one of its less “inclusive” phases and European democracy is sidelined in favour of “technocrats” (or Gauleiters, in the words of Nicholas Wapshott), theories that effectively bolster the claims of liberal democracy sound increasingly like reassuring mantras chanted in the dark.