Why Nations Fail

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Thursday lunchtime at the Watershed is what you would expect, full of local Bristolians grabbing a quick pint of fine ale and a pie before seeing the matinee. However an imposing Harvard professor sat in the corner, wearing a crisp suit, talking between mouthfuls about the worlds’ most pressing issues from climate change to sovereign debt crisis and from diamonds to road-building.

The book we were discussing deals with formation and remedy of these contemporary problems starting at the beginning of the British colonial period. James Robinson, a political scientist and his co-author Daron Acemoglu have published many academic papers, but have for the first time turned to a hardcover book. It weighs heavy in your hand but as James Robinson describes it in his robust English accent “fifty scientific papers lie behind this, some more technical, some historical but the main argument is summarised in a page and we have the rest of the book to give historical examples.”

The thrust of the book shows that what matters in the path of development of a nation is the political and social institutions. They differentiate between “inclusive” and “extractive” regimes, which can manifest themselves in the political or economic spheres. Some regimes do not give the population a voice in society and are considered politically “extractive”. Economic institutions that spread the benefits of prosperity across society instead of just enriching a narrow elite are considered “inclusive”. It is the combination of political and economic institutions that determine a nation’s success.

His mushroom risotto arrives in a tall bowl providing some hearty sustenance on what seems a busy book tour. Chapter two in the book is an onslaught on the “cultural hypothesis”, the “geography hypothesis” and the “ignorance hypothesis”. Defending this chapter, he begins humbly that he wishes that he were capable of writing as well as his friend Jarred Diamond but disagrees about the facts and the evidence. Robinson tactfully argues that the theory in Guns, Germs and Steel is of continental inequality. Why was Eurasia so far ahead of the Americas at the start of the modern age? Why nations fail tackles within continental inequality, which is as great as across the whole world, can be viewed as complementary approach. It seemed that years of teaching around the world has still not eroded his polite English manner of speech. He debunks Jeffrey Sachs’ (running for head of the World Bank) argument about climate (latitude) determining development. As in an Econ101 class, he does away with Sachs, “Correlation does not imply causality”. Seizing upon the opportunity, he emphasizes his approach is to understand the historical development of institutions. Climate changed the way that colonialisation unfolded. In tropical areas, the indigenous population received “extractive economic institutions”, as exploitation was possible in these areas. These institutions persisted over time, where political power in the states in Latin America is still concentrated in narrow elites who still extract prosperity from their societies. However, the people that Robinson really seeks to convince are the swathes of “Development economists” who adhere to an ignorance hypothesis – we simply do not know what to do about the developing world.

Having devoured the Fairtrade, Columbian roast coffee, he was primed to address the elephant in the room, what next for growth? Expecting another diplomatic answer, I was not surprised to find that he would not share strong views on the prospects of growth, but would rather suggest that the type of countries with inclusive political institutions would be best placed to make the best decisions. “If power is equally distributed within society, then it is more likely that the people who care about different things will have an influence on public policy.” In Columbia, the small number of people who run the country can avoid all the disastrous effects that constrain everyone else’s lives. They go to Miami, hire bodyguards, and build walls around their houses. Leaders that can avoid the consequences of their decisions do not make for a good society. His answer was somewhat underwhelming at the time but demonstrates the simple underlying principles of political and economic institutions that should be at the heart of our thinking for what next? Robinson says that the nuance is in the academic papers but this book seeks to engage people in the discourse of development. The tyrants in the world that stand in the way of a “good society” should tremble if this is on their summer reading lists, as it should be on ours.

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