Monday, April 2, 2012

It is among the grandest topics in scholarship: Why do some nations, such as the United States, become wealthy and powerful, while others remain stuck in poverty? And why do some of those powers, from ancient Rome to the modern Soviet Union, expand and then collapse?

 Why nations grow and fail interesting reading. Aivars Lode
From Adam Smith and Max Weber to the current day, scores of writers have grappled with these questions. Some scholars, like Weber, have argued that religious or cultural differences create vastly different economic outcomes among countries. Others have asserted that a lack of natural resources or technical expertise has prevented poor countries from creating self-sustaining economic growth.

Economists Daron Acemoglu of MIT and James Robinson of Harvard University have another answer: Politics makes the difference. Countries that have what they call “inclusive” political governments — those extending political and property rights as broadly as possible, while enforcing laws and providing some public infrastructure — experience the greatest growth over the long run. By contrast, Acemoglu and Robinson assert, countries with “extractive” political systems — in which power is wielded by a small elite — either fail to grow broadly or wither away after short bursts of economic expansion.

“You need political equality to underpin economic prosperity,” says Acemoglu, the Elizabeth and James Killian Professor of Economics at MIT. More specifically, he says, economic growth depends on widespread technological innovation. But widespread innovation is only sustained where countries promote rights, giving more people the incentive to invent things.

And while Acemoglu and Robinson have documented this thesis during roughly 15 years of joint research, now, in their new book, Why Nations Fail, released this week by Crown Publishers, they look more closely than ever at the collapse or stagnation of countries that lack these inclusive political systems.

Elites, Why Nations Fail asserts, resist innovation because they have a vested interest in resisting change — and new technologies that create growth can alter the balance of economic or political assets in a country.

“Technological innovation makes human societies prosperous, but also involves the replacement of the old with the new, and the destruction of the economic privileges and political power of certain people,” Acemoglu and Robinson write. Yet when elites temporarily preserve power by preventing innovation, they ultimately impoverish their own states.

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