Tuesday, September 4, 2012

Some Thoughts on "Why Nations Fail"

I recently finished Acemoglu and Robinson's Why Nations Fail. I also recently finished Graeber's Debt: The First 5000 Years (more on that later).

My reaction was similar to Fukuyama's (response from Acemoglu and Robinson).

I'd just like to add a few things.

First of all, the bit on Rome I found unconvincing. Building on what Fukuyama already said, it is also possible to look at the transition from Republic to Empire as being a result of new economic realities and creative destruction. Arguably, the "new men," such as Cicero, had interests in businesses different from those of the old Senatorial class and particularly in different areas, outside of the immediate area of Rome and out in the provinces. While the Roman Constitution gave at least some rights to those within Rome itself, it did a very poor job of representing the interests of provincials; the Imperial system may have provided more access.

This raises some important questions regarding putting inclusiveness on an axis. Can it really be represented this way, or are the questions of who is represented, to what extant, and how separate questions? For the Roman case, which was more inclusive; a system that opened elections (to some extent) to many different economic levels but was dominated by a largely closed class of aristocrats and excluded those that could not be present in the city itself, or a system that granted access to the elites throughout the provinces, providing at least some access to the provincials in those provinces, even if less access for all economic groups within the capital itself? How much did representation by tribes matter? How much does indirect vs. direct representation matter for putting a society on this access? I'm not convinced we can meaningfully get policy recommendations or enhance our understanding along such an undefined axis.

Some other critiques, that are more or less serious. Regarding the ignorance critique, while true enough for the modern world it does seem to be dismissed too readily from a historical perspective. Aside from the Soviet Union, Qing China also believed it had a superior system and was unwilling to undergo social change to emulate the West. This wasn't simply fear of creative destruction. they were invested heavily in an ideological system that led to the conclusion that many western style reforms would ultimately be bad for the people as well as the empire. While ignorance probably isn't the best term for this, it is definitely possible to have ideas about how the world works that leads people into poverty that are honestly held by decent, upstanding people. The world is not so simple that resistance to reform can be attributed to the selfish actions of a rentier class resisting change.

Regarding China, I also feel the need to add that I find it a stretch to attribute the Qing evacuation of the coast to economic concerns. That action was taken as a result of Ming remnants taking to the sea. At the time, the Qing were little more than invading barbarians trying to institute a legitimate government. Opposition from overseas Ming emperors, and later Koxinga, led to successive Qing emperors feeling that the seacoast was inherently politically unstable. It was political resistance against the old regime, and security concerns, not economic concerns that were responsible for Qing policies.

A second piece of the China puzzle is that the Qing focused strongly on their borders with nomadic groups. Being of nomadic stock themselves added understanding to the urgency of this problem. It was well known that raids from these people caused great economic damage along with a security problem. In addition, the Qing were very innovative in dealing with this threat and orienting state policy towards it. They were also very open to allowing new economic actors to enter this area and were constantly seeking new ways to interest the private sector in this area. Aside from the northwest frontier, the Chinese generally were very market oriented, the largest difference in their economy from western Europe is how much less influence the Chinese state had on its economy, even taking into account their attitude towards the sea (this leaves open an argument that sea-borne international trade was particularly important, but the Chinese were open to international trade, such as that with Russia, provided it took place on land). Western countries intervened much more heavily in their economies, in particular granting support to their companies (most notably the great joint-stock companies such as the British East India Company), while the Chinese were much more hands off.

The point being, I don't really think their two axes of inclusive vs. extractive political and economic institutions are very helpful. In broad brush strokes I agree, I've thought the same thing myself. But get into the details and it is harder to see how to apply these concepts to make specific recommendations or to place individual states along the lines. Is the Roman Republic or the Roman Empire more truly inclusive? How about Qing China vs. Prussia? Is Confucian ideology really extractive?*

This said, the book is well worth reading. I was particularly pleased that they mentioned the importance of state centralization to economic growth, they did a much better job of exploring the actual links between the state and economy than most economists I've read who see the state simply as a barrier to overcome (an all too common fallacy that I haven't seen any historical support for). While I don't think their two axes are nearly sufficient, I do think that the idea of inclusive vs. extractive institutions is broadly right. My problem is that I don't see how to narrow this down to something beyond broad brush strokes. It simply seems too vague to help understand individual situations or to make broad generalizations about worldwide trends. Interesting and thought provoking, and perhaps a starting point for further research, but the brush strokes remain too broad to be really satisfying.

*A big part of Confucian ideology is its emphasis on returning money to the people. The various Chinese empires had extremely low tax states and were able to conduct many tasks which we see as public privately. In some sense this was extractive, Chinese merchants and landowners were certainly skillful at making themselves wealthy on the labor of others by conducting otherwise public functions themselves. But so were British industrialists, it is hard for me to see how British industrialists were less extractive than their Chinese equivalents. But this raises some real questions about what extractive institutions are, Marxists would certainly argue that capitalism is a form of extractive institution more absolute than previous variants.

1 comment:

  1. Beliveing that your current system is perfect is not the only way to fall into that trap. For example, you can imagine that some mythic system from the past was perfect, and determine to "reinstate" it. The fact that your image of the past is fantasy doesn't matter.

    Why does it seem like I've encountered that approach in recent political campaigns...?