A theory rich enough to explain prosperity for most part
'It has a tail-chasing quality to it.'
Guest Column : Clive Crook
“Why Nations Fail” by Daron Acemoglu and James Robinson is getting lavish praise. Mostly, the book deserves it.
It asks why some countries are rich and others poor. The answer isn’t geography. It isn’t culture either. According to Acemoglu and Robinson, it’s politics. Get the politics right, and you’ll prosper.
It’s admirable to grapple with a question of such vast consequence and offer such a big, bold answer. The authors make getting there a rare intellectual treat. Nonetheless, I dare to be disappointed.
The book’s geographical and historical range is remarkable. It describes the varying economic and political impacts of the Black Death in Europe; the legacy of British colonialism in the United States and the shockingly different imprint it left on Africa; the contrast in the 1500s between, on the one hand, the Charruas and Querandi of what is now Argentina and, on the other, the Guarani of what is now Paraguay; political unrest in England in the 18th century; and political unrest in Egypt in 2011. One chapter is described as: “What Stalin, King Shyaam, the Neolithic Revolution and the Maya city-states all had in common and how this explains why China’s current economic growth cannot last.”
Better still, the truth the authors keep coming back to is one whose importance would be hard to exaggerate. Prosperity depends not on culture or geography or rulers’ expertise but on “institutions, institutions, institutions,” and on these above all: property rights, economic freedom, equality before the law, and trusted enforcement of contracts. Markets aren’t enough. For economies to prosper, governments must supply these institutions, and only governments can.
The trouble is, as an explanation of development, “institutions matter” may be true, but it isn’t new. To have a theory of development to call their own, the authors needed to go further. They do this by arguing in effect that politics is more fundamental than economics. The challenge isn’t so much to create the right economic institutions. It’s to create the right political institutions. Do that, and the right economic institutions will emerge.