For as long as I can remember, I’ve heard about how poor people are in many parts of the world and how we who have so much need to help them. Yet I’ve also read how so little of the aid sent to some countries gets to the people who really need it.
I’ve read how the poverty of some countries is due to exploitation by wealthier countries, including my own. I’ve read how the traditional culture is a factor, discouraging innovation, especially it is associated with cultural values different from one’s own. I’ve read in particular how the dominant religion of a society may affect its economic progress – or lack of it.
What I hadn’t seen before I read Why Nations Fail is an analysis that shows the links between politics and economics, or that explores in detail the economic history of societies in many different times and places. When I got the book from the library I wondered whether I’d be able to finish it (462 pages) before I had to return it, but it made for surprisingly quick reading.
I have long been interested in economics and in history, but far less with the parts of history that have to do with kings, governments, revolts, and laws. Yet Daron Acemoglu and James Robinson show how all these are connected, that you can’t understand a country’s economic history without studying its political history.
The thesis of their book is straightforward: sustained economic growth depends on political institutions that are both centralized and based on a broad coalition of groups within society. Those in power write laws that will benefit themselves economically. Only when power is widely shared are the economic opportunities also widely shared.
A lack of any central government, however, can be even worse than one that is ruled by a wealthy elite. A healthy economy depends on the maintenance of law and order. Where no one governing power can exercise authority over rival groups, no one’s property is safe.
The importance of property rights underlies all the discussion of political and economic rights. The authors show that people of all societies will work hard to create wealth for themselves so long as they have a reasonable expectation of keeping the fruits of their labors. The problem is that in most societies throughout history, and in many today, most people do not have that expectation.
They give a great many examples, most of which I was unfamiliar with previously, especially those in Africa and Asia, but also some details of the history of western Europe and the Americas. Whether it is outright slavery, conscripted labor, taxes that take most of one’s income, or outright appropriation on property, if people do not have control over the work they do and what they produce, they will do what they must to survive but they will have no reason to find new or better ways to do things.
Even when innovative ideas or tools are introduced from other societies, they do not produce the same benefits as elsewhere. Often, innovation is actually discouraged or even forbidden by those in power, who rightly see innovation as a gateway to larger changes in society, which will likely cause them to lose the power and wealth they currently enjoy.
Because our own history has led to increasing political freedom and economic prosperity over the centuries, we tend to think of it as the natural progress of a society. But the authors of this book show that this is not the case. It is actually much more likely for those in power to keep it, or to lose it only to others who continue the same oppressive practices.
By examining what happened in places where democracy and prosperity have developed, they identify what they see as important factors: the presence of merchants/businessmen, a tradition of some kind of assembly where there is at least some limited power sharing, and a number of different groups in society deciding to work together.
Each group is naturally going to look out for its own interests. But when circumstances develop where they see that they have more to gain by sharing power – and therefore sharing economic opportunity – with others than by trying to grasp it all for themselves, there is likely to be a move toward greater political freedom. Because none of them want to be treated unfairly, they insist on laws which are binding on everyone. Even when they find themselves on the losing side in a particular issue, there is an incentive to preserve the rule of law so they will be protected by it in the future.
All that seems so obvious to those of us fortunate enough to live in that kind of society. But for those who are in power in societies without that freedom and rule of law, the idea of being bound by laws in that way is a threat to their current enjoyment of privilege. Very few leaders willingly give up their power.
Where change has taken place, the authors show that it is the result of small changes having taken place to make that society marginally more open to representative government than in other societies, coinciding with external forces shaking up the existing order of things. Some examples of such external forces are the bubonic plague wiping out a large portion of the workforce, travel across the Atlantic providing opportunities to many new traders, and the Industrial Revolution.
Those external forces are no guarantee of change, however. Where those already in power are able to keep those changes from undermining their power, they take whatever steps they can to maintain the status quo.
All this makes a great deal of sense to me. I don’t know just how well the authors have proved their point – this review in the Wall Street Journal points out that in doing historical case studies, it is easy to look at the end result and make assumptions about which factors led to the result. But the review also gives enthusiastic praise to the book as a whole for its contribution to our understanding of what it takes for a nation to prosper.
It is much easier to show what it takes, of course, than to find ways to actually change the course of an existing nation. The authors address this at the end of the book – what can people in free and prosperous nations do for those living in poverty and oppression? Foreign aid gives very little help to those it is intended for because most of it ends up in the pockets of bureaucrats and the oppressors currently in power. (They do not, however, argue against foreign aid, both because compassion requires people to do something to help, and at least a tiny bit of the aid does get to where it is meant to go.)
Requiring recipients of aid to make certain changes to economic structures, or providing instruction on how to do things so as to be more productive/efficient, has likewise made little difference. This is because, as the authors explain, it is dealing with the symptoms rather than the cause, which is political rather than economic in nature.
One thing that does help, they point out, is education. Literate people with access to accurate information are much harder to keep under the thumb of an oppressive regime than those who can be kept ignorant. This is why oppressive regimes work so hard at controlling the media. This is harder for them with the internet and cell phones, but those in control of the nations resources can use the latest technology for their own purposes also.
In connection with this emphasis on literacy and education, I was fascinated to come across a Facebook posting yesterday that ties directly to one of the historical examples given in the book. An example of how circumstances can facilitate change where the right conditions exist, it tells about some African chieftains who visited Britain to make their case for greater British control of their territory, a “lesser evil” to protect them from the much worse prospect of being taken over by Cecil Rhodes’ British South Africa Company (as happened to the area that became Rhodesia).
What the book doesn’t tell, but which I happened to learn from the Facebook posting, is the influence of missionary John Mackenzie in helping the three chiefs get to Britain and get support for their cause. John Mackenzie was by no means unique in promoting greater freedom for the people he ministered to. Sociologist Robert Woodberry has published an article based on his research, identifying a significant link between Protestant missionary activity and the growth of democracy.
This was in large part due to their focus on literacy, so that everyone could read the Bible. Today radio and TV can convey messages to even illiterate people, but before the development of these technologies, as well as where they cannot reach today, the ability to read is necessary for information to be widely distributed. Foreign aid as a whole may provide minimal improvement in people’s lives, but contributions to their education can produce much more significant benefits.