Why are some countries rich and others poor? The Origin of Power, Prosperity and Poverty by Daron Acemoglu and James Robinson
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Daron Acemoglu, James A. Robinson
Why are some countries rich and others poor? The Origin of Power, Prosperity and Poverty
Dedicated to Arda and Asu - D.A.
Para María Angélica, mi vida y mi alma - J.R.
Daron Acemoglu, James A. Robinson
WHY NATIONS FAIL
The Origins of Power, Prosperity, and Poverty
Back cover photo: MIT Economics / L. Barry Hetherington Svein, Inge Meland
Preface to the Russian edition
The book you have opened is certainly one of the most significant economic works of the last decade. I am not sure that it is I, a person who has not been professionally engaged in economics for a long time, who is the most successful candidate for the authorship of the preface to it. Everything that I can write here will probably be subjective and passed through my own practical experience. It so happened that for a whole decade of Russian history I had to take an active part in large-scale social, economic and political transformations in our country. Therefore, I can classify myself rather as a consumer of scientific knowledge in this area.
I am extremely interested in the fundamental discussion unfolding in world social science thought - why some countries prosper economically, while others do not. If you look at the list of topics for which their authors have been awarded the Nobel Prize in Economics over the past fifteen years, you will not see anything close to the topic I have named. Nevertheless, it seems to me that this particular problem is, in a sense, the pinnacle of economic knowledge. After all, in order to take a swing at it, you need professional knowledge of the history of peoples on all five continents for at least the last 10 thousand years. In addition, it is necessary to deeply comprehend the most modern achievements of economic science, ethnography, sociology, biology, philosophy, cultural studies, demography, political science and several other independent areas of scientific knowledge. It’s also good to have at least basic technological trends, to understand industry relationships from the medieval to the modern economy. But the demand for results here is so great that several schools of scientific thought have formed in this area. Without claiming to be complete, I would describe them in the following way.
geographic determinism. The essence of the position of its supporters is that the most significant factor that determines the long-term trends of country economic development is geographical location. Probably, the climatic factor should also be included here, since, for obvious reasons, these two factors are rigidly interconnected over centuries or even millennia of historical periods. The most serious proponents of this approach include Jared Diamond, whose book Guns, Germs and Steel: The Fate of Human Societies, translated into Russian in 2009, was a great success in our country. The authors of this book include Geoffrey Sachs in the same school. Quite rightly, in my opinion, they call Montesquieu the founder of this approach, who directly wrote about the influence of climate on laws. It must be said that the seriousness of this school in the eyes of professional Russian readers was somewhat undermined by one of its own Russian followers, who tried to understand why Russia is not America. However, I would not, because of one graphomaniac, derogatoryly judge an entire school, although I can in no way consider myself one of its followers.
Another scientific school is cultural determinism, the essence of which is most aphoristically formulated by one of its leading Russian followers Andrei Konchalovsky: "Culture is destiny." I think that the founder of this school should be considered Max Weber with his main scientific work "The Protestant Ethic and the Spirit of Capitalism". And although today, against the background of the recent acute and not yet completed crisis in relations between the North and the South of Europe, the ideas of his book have been re-claimed, it seems to me much more important is not so much the Protestant component of his work as the basic idea of the significance of cultural values and traditions themselves. for economic development, the level of well-being and, in fact, the fate of peoples. This belief system has experienced a tumultuous renaissance in the past two decades, especially since Samuel Huntington's 1993 classic Clash of Civilizations. The works of Mariano Grandona, Lawrence Harrison (especially the recently translated into Russian "Jews, Confucians and Protestants: Cultural Capital and the End of Multiculturalism") simply sweep away the poor framework of political correctness and, undoubtedly, put forward the school of cultural determinism among the most advanced and bright.
This is probably why, for the authors of this work, it is the school of cultural determinism that seems to me to be the most serious opponent. They themselves, identifying themselves as supporters of the institutional school, repeatedly return to the dispute with "cultural determinists" in the text of their work. But the institutionalists themselves, as you know, have great teachers - it is no coincidence that one of the fundamental categories on which the logical constructions of this book are based is the "creative destruction" introduced into scientific circulation by Schumpeter.
But there is another school with no less rich scientific roots, which proceeds from the fact that the main factor determining both the level of development of society and the degree of maturity of its political institutions is the level of economic development itself. From the point of view of its supporters, it is the economy and its material basis that determine the trends of socio-political development. This approach brings together authors who sometimes have diametrically opposed political views. Suffice it to name, say, the founder of Marxism and Yegor Gaidar, the theorist and practitioner of the most ambitious transition from socialism to capitalism in history. According to Marx, as we remember, it is the development of productive forces that must inevitably lead to a change in socio-economic formations. And Gaidar, in his most important, from my point of view, work “Long Time”, an entire chapter is devoted to economic determinism and the experience of the twentieth century. The notion that the emergence of a middle class in modern societies forms the demand for democracy and creates the basis for its sustainability is quite common both in the scientific community and far beyond its borders. Unfortunately, for reasons that are not clear to me, the authors of this work paid almost no attention to this scientific school.
This could complete the list of schools, but the authors describe another one - the "school of ignorance", as they call it. The basic idea is that the authorities make erroneous decisions simply because they lack the necessary knowledge. Of course, it is pointless to dispute the thesis about the need for professional knowledge in government, however, in my opinion, this is so banal that it is hardly worth proving this need seriously. On this issue, I would definitely agree with the authors of the monograph, who placed the description of this school in a chapter called "Theories that do not work."
On this, as we can see, a very thoroughly plowed scientific field with fundamental scientific roots and rapid development in the last one and a half to two decades, it is not at all easy to make an independent breakthrough. If someone gets the impression from my description that the authors simply marked their place on it by referring their work to the institutional school, then this, of course, is not so. The book, no doubt, advances both the institutional school itself and, in general, scientific research in this area. By themselves, the categories of extractive and inclusive institutions introduced by the authors contain both scientific novelty and, probably, a certain predictive power. The intuitive "comprehensibility" of these terms does not in any way reduce the level of fundamentality of the theoretical constructions based on them. The authors managed to overcome exactly what is the main difficulty of this kind of research, and offer a language that allows you to meaningfully reveal and describe the reasons for the prosperity of peoples and countries over a historical period of about 10 thousand years and with a geographical spread across all five continents. Paradoxically, their descriptions of the reasons for the relative success of the British colonization of North America and the relative failure of the Portuguese and Spanish colonization of South and Latin America look no less convincing than the analysis of the reasons for the success of William of Orange's Glorious Revolution in England in 1688 or the failure of North Korea in our days. And although the logic of the authors, as was said, is based on the categories of inclusive and extractive political and economic institutions that they introduced, it is, of course, not limited to them. If it is permissible for the author of the preface to significantly simplify the essence of the concept presented in the book, it looks something like this.
1. Over a long period of time (decades, centuries, and sometimes millennia), peoples accumulate minor changes in the level of complexity of society and the social mechanisms operating in it, which may differ slightly even among geographically neighboring peoples.
2. At some historical moment, a large-scale change in the external environment occurs (for example, geographical discoveries create colossal trade opportunities, or, say, colonists who land on new lands encounter a completely new natural, climatic and ethnographic environment).
3. Some societies are able not only to accept these challenges, but to adapt, integrate them into their culture through inclusive institutions that are being born at this moment, while for others, the same development process goes through the strengthening of pre-existing extractive institutions. This is how divergence begins - the divergence of states that are close in terms of development, sometimes neighboring, on different historical trajectories. It is not always immediately obvious which of the options gives a long-term result. Let's say the Spanish colonization of Latin America led to a powerful flow of gold into the country, in contrast to the English colonization of North America. However, it was precisely this flow of gold that increased the extractiveness of the Spanish state, and the separation of the wealthy Spanish crown (which, as we would say now, had a monopoly of foreign trade) from other classes became the “beginning of the decline” of the medieval Spanish monarchy.
4. In itself, the emergence of inclusive institutions requires the coincidence of several prerequisites at the only correct historical moment in time (“the breaking point”). The main of these prerequisites is the presence of a broad coalition of heterogeneous forces interested in creating new institutions, and the long-term recognition of each of them the right of other forces to protect their interests. This, according to the authors, is the basis for the survival of inclusive institutions - the unconditional recognition by their participants of the absolute value of pluralism.
5. Inclusive and extractive institutions trigger complex feedback loops that can be either positive (“feedback”) or negative (“vicious circle”).
6. Inclusive institutions create sustainable long-term growth in wealth. Extractive institutions are also capable of launching growth, but it will be unsustainable and short-lived. Growth under inclusive institutions allows for "creative destruction" and thus supports technological progress and innovation. Extractive institutions are only capable of launching innovative processes on a very limited scale.
7. In any case, the most important prerequisite for the effectiveness of not only extractive, but also inclusive institutions, the authors consider the presence of a significant level of "centralization", which enables the state to extend the action of the institutions themselves throughout its territory.
The authors are categorically against the concepts of "historical determinism" and therefore are reserved in assessing the predictive power of their own theory. However, it was interesting to get acquainted with their views (sometimes obvious, sometimes unexpected) on the possibilities of economic growth in a number of countries in the coming decades. So, say, Brazil and Botswana fall into the optimistic forecasts, and Venezuela and China fall into the pessimistic ones. Russia, of course, was not the focus of the authors' attention, but from their concise analysis they draw a pessimistic conclusion about our future. Without entering into an argument, I note that if the authors had done a more detailed analysis of our history over the last, say, a hundred years, they would have found a clearly visible dominance in different periods of extractive or inclusive institutions. I think that both periods could be easily seen both in our history from 1917 to 1991 and in recent history.
Despite the attractiveness of the intellectual construction created by the authors, it is not without some weaknesses. In my opinion, the underlying logic of the authors seems to be excessively linear, explicitly or implicitly giving the term "inclusiveness" an inseparable positive connotation. But even at the level of common sense, it is clear that the delay in the transition to inclusiveness for many countries had historical grounds. Thus, the authors themselves convincingly show that the victory of the northerners in the US Civil War, although formally ensured the adoption in 1865 of an amendment to the Constitution prohibiting slavery, however, in fact, extractive political and economic institutions operated in the US South for about a hundred more years. It is clear that such a complex and long period of history could not but have deep cultural, social and economic reasons. And in itself, the estate structure of most modern states up to the 19th century also had its own fundamental foundations. At the very least, this means that a historically premature "forceful" transition to inclusive institutions may have a simply unacceptable socio-economic price. Therefore, “inclusiveness”, for all its natural attractiveness, cannot be elevated to an absolute. Actually, this is exactly what the very recent history of Iraq, Libya and Egypt shows us. It seems to me that the theme of the “premature inclusiveness trap” is waiting for its study (by the authors or their followers), which may well be carried out not through destruction, but through the development of the concept proposed in the book.
Summing up, I will say that this book does not just pose questions, it gives answers that, of course, bring a new understanding of the reasons for the successes and failures of the development of societies and states over millenniums of historical periods. Not only that, it offers a universal key to understanding these causes. At the same time, the authors managed to describe this grandiose task in a very simple living language, which practically does not require serious professional training from the reader. I am sure that its translation into Russian (which, in my opinion, is done very well) will open new knowledge about our country and the world to a wide range of Russian intellectuals.
A. B. Chubais
Foreword
This book focuses on the huge income and standard of living gaps that separate the richest countries such as the US, UK and Germany from the poorest countries in sub-Saharan Africa, Central America and South Asia.
While writing this foreword, we were caught by the "Arab Spring", which began with the so-called "Jasmine Revolution" in Tunisia and affected many countries in North Africa and the Middle East. The "Jasmine Revolution" was sparked by the self-immolation of street vendor Mohammed Bouazizi on December 17, 2010, which sparked outrage and popular unrest throughout the country. Already on January 14, President Zine El Abidine Ben Ali, who had ruled Tunisia since 1987, was forced to resign, which, however, did not calm the protesters, but, on the contrary, increased their dissatisfaction with the ruling elite of Tunisia. Moreover, revolutionary sentiments spread to neighboring countries. Hosni Mubarak, who ruled Egypt with an iron fist for almost thirty years, was removed from his post on February 11, 2011. The fate of the political regimes of Bahrain, Libya, Syria and Yemen was still unknown when we were finishing this preface.
The causes of popular discontent in these countries are rooted in the poverty of the majority of the population. The average Egyptian earns about 12% of what the average American earns, and his life expectancy is ten years less. Twenty percent of the population of Egypt live below the poverty line. But although the difference between the US and Egypt is quite significant, it is still less than the gulf that separates the US and the world's poorest countries, such as North Korea, Sierra Leone or Zimbabwe, where more than half of the population lives in absolute, terrible poverty.
Why is Egypt so poorer than the US? What's stopping him from getting richer? Can poverty be eradicated in Egypt or is it inevitable? To find answers to these questions, it is worth listening to how the Egyptians themselves explain their problems and the reasons for the uprising against Mubarak. Noha Hamed, 24, an employee at a Cairo advertising agency, made her point clear during a demonstration in Tahrir Square: “We suffer from corruption, repression and poor education. We survive despite this corrupt system and we want to change it.” Another demonstrator, 20-year-old pharmaceutical student Mosaab el-Shami, agreed: “I hope that by the end of this year we will have a popularly elected government, human rights and freedoms will be protected, and the corruption that is eating away at this country will be put an end to." The protesters in Tahrir Square were unanimous that the government was mired in corruption, unable to provide basic services to the population and achieve equality of opportunity for all citizens.
Those who took to the square were especially outraged by the lack of political rights and repression. Former Director General of the International Atomic Energy Agency (IAEA), Egyptian Mohammed ElBaradei, tweeted on January 13, 2011: "Tunisia: repression + social injustice + lack of channels for peaceful system change = time bomb." The inhabitants of Egypt, as well as those of Tunisia, were sure that their economic difficulties were due primarily to their lack of political rights. When the demonstrators began to put forward more specific demands, the first twelve points - they were formulated by the programmer and blogger Wael Khalil, one of the leaders of the protests - turned out to be exclusively political. Issues such as raising the minimum wage were supposed to be resolved later.
According to the Egyptians themselves, the problems that prevent them from developing are, first of all, an inefficient and corrupt government and inefficient social structures that do not allow citizens to use their talents, skills and education (even what they manage to get). Economic difficulties are a direct consequence of the monopolization of power by a narrow elite and how it disposes of this power. Therefore, the Egyptian demonstrators conclude, it is necessary to start with a change in the political system.
However, this conclusion is completely at odds with the generally accepted theory that explains the difficulties of Egypt. When scholars and commentators talk about why Egypt and similar countries are so poor, they give completely different reasons. Some argue that Egypt's poverty is due to geographical factors: most of the country is desert, the soil is poor, there is not enough rainfall to irrigate the land, and in general the climate is not conducive to the development of efficient agriculture. Others point to the cultural traditions of the Egyptians, which they see as unfavorable for economic development and the accumulation of wealth. The Egyptians, according to these critics, lack the work ethic that enabled other nations to prosper. Moreover, the majority of Egyptians profess Islam, and this religion is also incompatible with economic success. Finally, still others (most of them among economists and economic reformers) assure that the rulers of Egypt simply do not know what exactly will bring prosperity to their country, and disentangle the consequences of their own erroneous policies in the past. Now, if these rulers received the right advice - from the right advisers - the country would embark on the path of prosperity, these analysts are sure. All these scholars and experts do not at all consider the key to understanding the economic problems facing Egypt to be the fact that the country is run by a narrow stratum of the elite, which enriches itself at the expense of the rest of the population.
In this book, we will show that it was the ordinary Egyptians who took to Tahrir Square, and not the economists and experts at all, who were right. In fact, Egypt is poor precisely because it was ruled by a narrow stratum of the elite, which organized the economy in such a way as to enrich itself at the expense of the rest of the population. Political power in the country was concentrated in one hand and used to enrich the power elite, such as President Mubarak himself, whose fortune was estimated at $70 billion. The losers in this system were ordinary Egyptians. And it was they, the Egyptians, and not outsiders, albeit well-educated observers, who understood what was happening.
In this book, we will also demonstrate that this explanation of a country's poverty—an explanation given by the citizens themselves—is universal and can be applied to any poor country. Whether it's North Korea, Sierra Leone, or Zimbabwe, we'll show that all poor countries are poor for the same reasons Egypt is. And countries like the US and the UK got rich because their citizens overthrew the elite that controlled power and created a society in which political power is much more evenly distributed, the government is accountable and responsive to citizens, and economic incentives and opportunity to get rich is among the general population. We will try to explain why, in order to find the origins of the huge inequality in the modern world, you need to delve into the past and trace the dynamics of historical processes. In particular, we will see that today Great Britain is richer than Egypt because in 1688 a revolution took place in it (to be precise, in England), which changed the political system, and then the economy of the country. Its citizens won political rights and used them to expand their own economic opportunities. The result was two fundamentally different trajectories of political and economic development for Britain and Egypt. Great Britain, its trajectory soon led, in particular, to the industrial revolution.
But in Egypt, the Industrial Revolution did not happen and the technologies it brought to mankind did not spread - because Egypt at that time was under the rule of the Ottoman Empire, which ruled it in much the same way that Hosni Mubarak would rule centuries later. The rule of the Turks in Egypt ended after the Egyptian campaign of Napoleon (1798), but soon the country fell into the orbit of influence of the British colonial empire, which was no more interested in the prosperity of Egypt than the Ottoman Empire. And although the Egyptians were eventually able to get rid of British rule, as they had got rid of the Ottoman one, and in 1952 they overthrew their king, it still did not look like the “Glorious Revolution” in England: instead of fundamentally changing the political regime in Egypt, this coup only brought to power another group of the elite, as narrow and no more interested in the economic development of the country than the Turks and the British were interested in it. As a result, the social structure of society and the economic system remained the same, and this doomed Egypt to poverty, which has not been overcome so far.
In this book, we will see how a variety of countries over and over again begin to move along a trajectory of development similar to that of Egypt, and why only in some cases this trajectory is replaced by another, ascending one - as happened in 1688 in England and in 1789 in France . This will help us understand whether the situation in Egypt has changed now and whether the revolution that toppled Mubarak can lead to the creation of political and economic institutions that will ensure Egypt's prosperity. The revolutions that took place in Egypt in the past did not change the situation in the country, because those who came to power as a result simply took the place of the overthrown elite and recreated a system of self-enrichment at the expense of all other inhabitants.
It is really not easy for ordinary citizens to concentrate real power in their hands and change the economic system in the country. However, this is possible, and we will see how it worked out, not only in England, France or the USA, but also in Japan, Botswana and Brazil. Changing the political regime is where the key to getting out of poverty and, ultimately, the key to prosperity. In Egypt, there are signs of just such a political transformation. Here is what Reda Metwali, another protester in Tahrir Square, says: “Now Muslims and Christians, young and old, are gathered here together, and they are all moving towards one common goal.” As we will see later, it was precisely such a broad social movement that became the engine of successful political transformations. If we understand where and why these transformations succeeded, we can better appreciate the potential of today's revolutionary events - whether after them everything will return to normal, as it happened more than once in the past, or the system will fundamentally change and bring success and prosperity to millions of people.
Daron Acemoglu and James Robinson. Why are some countries rich and others poor? The Origin of Power, Prosperity and Poverty / Daron Acemoglu and James Robinson. Why Nations Fail: The Origins of Power, Prosperity, and Poverty.
This book was published in Russian translation, but I read it in English, so all quotes and terms from the book are in my translation.
By the way, why did the translators distort the title of the book so much? What's wrong with the title: "Why do nations fail (or simply, why do they fail?)
Daron Acemoglu, one of the authors, in 2014. had to enter the so-called. Reform Council under the President of Ukraine, together with Bendukidze. It is very unfortunate that this did not happen. Although the book did not convince me, nevertheless, a person who advocates the expansion of citizens' rights and economic freedoms would be in the Reform Council in his place.
If we briefly convey the contents of this extensive book (529 pages), we get 4 theses:
1. Nations fail because of extractive institutions that prevent the whole people from being involved in critical political and economic decisions. A court in which only the privileged can get their way, thanks to bribes or imperfect legislation, is an example of such an extractive institution.
2. Extractive institutions can generate limited wealth by distributing it among a small top. In addition, E.i. tend to create monopolies. Therefore, e.i. natural, logical and widespread in history. (149)
3. The only way to change these institutions is to force the elites to create more pluralistic or inclusive institutions.
4. Precisely to force, because the elites never give up their rights voluntarily.
Of course, this method cannot be called strictly scientific. There will always be examples that will contradict the main theory of the authors. For example, the Czech Republic. As part of the Austro-Hungarian Empire, the Czech Republic was the most developed and richest part of it. Czechoslovakia was one of the most prosperous Warsaw Pact countries, second only to the GDR. Finally, the Czech Republic is the richest country of all post-socialist countries. What's the matter? Are Czech institutions much better than, say, Hungarian or Polish ones?
The second problem is that the authors nowhere give a clear and consistent definition of extractive institutions. For example, the authors talk about Chinese institutions as predominantly extractive. They conclude that "China has achieved spectacular success not because of e.i., but in spite of it." (443) But in reality, the Communist Party's monopoly on supreme power in the country does not make all Chinese institutions inherently extractive. If one conducts a study of, say, the judicial systems of China, India, Brazil, and Russia, it may well turn out that the Chinese judicial system is the most inclusive, to use the terminology of the authors, i.e. ensuring maximum fairness in these four countries. The same could happen with property rights - this most important institution of modern society, we repeat, if research on ensuring property rights were carried out. Therefore, the hypothesis about the predominant extractiveness of Chinese institutions hangs in the air, as well as the conclusion about China's impressive achievements despite the e.i.
Once upon a time, Great Britain and Egypt had comparable indicators in terms of living standards. However, now Great Britain is a prosperous country, and Egypt is a poor country and shaken by social upheavals. To understand why Britain is richer than Egypt, we must turn to history. 1688 is the point of divergence between Britain and Egypt. This year, a revolution took place in Foggy Albion, which transformed the politics and, consequently, the economy of the nation. People got more rights and economic opportunities. Revolutions also took place in Egypt, which, however, did not bring anything good. Approximately such comparisons and digressions into history are filled with the whole book.
The only way to change these institutions is to force the elites to create more pluralistic institutions. The authors emphasize that the elites never presented democracy to the masses voluntarily, and the masses forcibly took away the right to participate in decision-making from the elites. For example, the Great French Revolution brought a lot of trouble and suffering, but thanks to it, France and with it another half of Europe freed themselves from the shackles of extractive institutions and went along the path of progress, while the Russian, Austro-Hungarian and Ottoman empires remained mothballed in order to demonstrate the world its failure during WWI.
Is it worth reading the book? Yes, it is worth it, skipping numerous and extensive excursions into the history of Ancient Rome, the Republic of Venice, the Ottoman Empire, etc. Much can be learned about these countries and eras from the best sources, especially since the authors do not achieve their goals.
A new book from well-known Western political economists with an introductory article by Chubais gives the right direction to unravel this mystery.
After reading the sensational world bestseller , Albert Bikbov, an economic observer for the online newspaper Realnoe Vremya, notes that the truly grandiose work contains very sound ideas regarding the eternal problem of economic growth, and warmly recommends it for reading.
The eternal problem of the economy
Even in the Bible, in the Old Testament, it is said: "A generation comes and a generation goes, but the earth remains forever." The current socio-economic crisis will end sooner or later, because crises come and go, but for economists the problem of economic growth is precisely that "unshakable land", that problem that is eternal. And no one has yet been able to solve it in the entire history of mankind in the form of a ready-made, and most importantly, guaranteed recipe. The problem of economic growth is the most important issue in economics today. As Nobel Laureate in Economics Robert Lucas so aptly remarked, “Once you think about economic growth, it’s hard for an economist to think about anything else.”
In part, to understand where to move and how, we are helped by the centuries-old experience of mankind. Her Majesty History allows us to see the fruits of economic and social experiments carried out on a large scale, so to speak, in “natural conditions”. And since the fruits are visible, it is not difficult to see the patterns of economic growth. But what a difficult task!
After all, in order to take a swing at it, you need professional knowledge of the history of peoples on all five continents for at least the last 10 thousand years. In addition, it is necessary to deeply comprehend the most modern achievements of economic science, ethnography, sociology, biology, philosophy, cultural studies, demography, political science and several other independent areas of scientific knowledge. It’s also good to have at least basic technological trends, to understand industry relationships from the medieval to the modern economy.
Therefore, it is not surprising that any breakthrough in this area is certainly worthy of the closest consideration.
Among colleagues, Daron is characterized as a "superman" due to his amazing scientific abilities, and they say about his works: "This is high-tech economics." Photo mit.edu
Why do nations fall?
The 2012 book Why Nations Fail: The Origins of Power, Prosperity, and Poverty (Crown Business, New York, 2012) was such a breakthrough.
Its authors are MIT economics professor Daron Acemoglu and Harvard political scientist Professor James A. Robinson. These are truly outstanding scientists - for example, Daron Acemoglu in January 2016 once again topped the ranking of the most influential economists in the world according to the Internet project "Research Articles in Economics" (RePEc), ahead of all Nobel laureates in economics.
Acemoglu was born and raised in Turkey, in Istanbul, in a family of Armenian origin. He received his higher economic education in the UK, then taught at the London School of Economics. Currently, he is a professor at the Massachusetts Institute of Technology. Recognized as a major specialist in the field of modern political economy and development economics.
In 2005, Daron won the John Bates Clark Award; this prize is awarded to the most outstanding American economist under 40 years of age and is second only to the Nobel Prize in prestige. The Nobel Prize has not yet been awarded due to his age (and he is only 48 years old, which is almost infancy by Nobel standards). Among colleagues, Daron is characterized as a "superman" due to his amazing scientific abilities, and they say about his works: "This is high-tech economics." One of the best economic theorists, Nobel laureate Robert Solow, publicly spoke of one of Daron's works as follows: with a modern airliner.
Why Nations Fail became an instant global bestseller and received rave reviews from international peers, including an impressive cohort of Nobel laureates.
As Konstantin Sonin, one of the leading Russian economists, noted: “This, it must be said, is not just an outstanding book - it looks like it will fall into the number of such books that, like the books of Smith, Ricardo, Fisher, Samuelson, Schelling, really change the world. That is, in 100 years in the history of economic thought there will be a chapter “Theory of Acemoglu and Robinson”. I myself, of course, can be biased, but in this case one can judge at least by influence: only a few of the serious books on economics written by prominent scientists end up on book stands at airports.
There are really a lot of rave reviews, often this book is called the new "paradigm of thinking of the entire Western establishment." The more interesting it is for us.
After 3 years from the date of publication, in 2015, the book Why Nations Fail reached Russia. But even here there was some intrigue: at first, this book in Russian was simply not allowed for free sale - the entire circulation was ordered from the AST publishing house by Sberbank of the Russian Federation, and then withdrawn by the bank. In addition to the top of Sberbank, the printed version of the book was managed by those few lucky ones who got to German Gref's seminar at the St. Petersburg Economic Forum on June 18, 2015.
But on the eve of 2016, the AST publishing house unexpectedly made a generous gift by putting the book on free sale with a circulation of 3,000 copies throughout Russia. Moreover, even with the preface of the "great and terrible" A. B. Chubais!
So, get acquainted with this book in Russian translation: Why are some countries rich and others poor? The Origin of Power, Prosperity and Poverty”, 2015, 693 pages.
It is still sold in Kazan stores, the prices are also divine - about 700 rubles per book, so hurry up (because the circulation is small for such a large country).
At first, this book in Russian was simply not allowed for free sale - the entire circulation was ordered from the AST publishing house by Sberbank of the Russian Federation. Photo avito.ru
Global political economy bestseller
The scale of coverage of events in the book is striking: the reader is constantly moving from one historical era to another, from one continent to another, from one country to another. The colonial past of many states is closely intertwined with today, and the roots of the economic success of the leading countries of our world go back to the depths of centuries. Lots of historical cases. Reading a book, you feel like a traveler in a time machine.
Another undoubted advantage of the book is the deliberately made simplification of the main ideas, a very clear and not devoid of artistic taste text. The authors deliberately wrote it as a bestseller, which should be understandable even to a housewife. No math or complex economics. But the same Daron Acemoglu usually writes in such a way that only people with very good mathematical and economic training can understand him. If you dig deeper, under the seemingly simple text of this book hides a lot of complex political economy theories. Here are the models of expanding the political franchise, and the models of kleptocracy and oligarchic society, and the model of the stability of inefficient regimes, etc., etc.). But it is packaged so masterfully that most of the ideas presented seem very easy to understand.
To retell the whole book in a very concise way, it can be done in three words: "Institutions decide everything." There are simply no other explanations for development or backwardness (in terms of climate, geography, culture, etc.).
Recently, in advanced Western economic studies, there has been a tendency to focus not on purely economic factors, but on the distribution of power in society, the organization of violence - on everything that is meant by the concept of "political institutions". In a word, the most Marxist approach to historical change triumphs. Such an inseparable connection between economics and politics provides a lot of food for thought and very accurately explains the real history of success or failure of certain countries.
Chubais did a rather strange act: in the preface to the book, he succinctly outlined its main content. Photo kremlin.ru
Anatoly Borisovich Chubais committed a rather strange act: in the preface to the book, he concisely (it is not clear why) outlined its main content:
- Over a long period of time (decades, centuries, and sometimes millennia), peoples accumulate minor changes in the level of complexity of society and the social mechanisms operating in it, which may differ slightly even among geographically neighboring peoples.
- At some historical moment, a large-scale change in the external environment occurs (for example, geographical discoveries create colossal trading opportunities, or, say, colonists who land on new lands encounter a completely new natural, climatic and ethnographic environment).
- Some societies are able not only to accept these challenges, but to adapt, integrate them into their culture through inclusive institutions that are being born at this moment, while for others, this same process of development goes through the strengthening of pre-existing extractive institutions. This is how divergence begins - the divergence of states that are close in terms of development, sometimes neighboring, on different historical trajectories. It is not always immediately obvious which of the options gives a long-term result. Let's say the Spanish colonization of Latin America led to a powerful flow of gold into the country, in contrast to the English colonization of North America. However, it was precisely this flow of gold that increased the extractiveness of the Spanish state, and the separation of the wealthy Spanish crown (which, as we would say now, had a monopoly of foreign trade) from other classes became the “beginning of the decline” of the medieval Spanish monarchy.
- In itself, the emergence of inclusive institutions requires the coincidence of several prerequisites at the only correct historical moment in time (“the breaking point”). The main of these prerequisites is the presence of a broad coalition of heterogeneous forces interested in creating new institutions, and the long-term recognition of each of them the right of other forces to protect their interests. This, according to the authors, is the basis for the survival of inclusive institutions - the unconditional recognition by their participants of the absolute value of pluralism.
- Inclusive and extractive institutions trigger complex feedback loops that can be either positive (“feedback”) or negative (“vicious circle”).
- Inclusive institutions create sustainable long-term growth in wealth. Extractive institutions are also capable of launching growth, but it will be unsustainable and short-lived. Growth under inclusive institutions allows for "creative destruction" and thus supports technological progress and innovation. Extractive institutions are only capable of launching innovative processes on a very limited scale.
- In any case, the most important prerequisite for the effectiveness of not only extractive, but also inclusive institutions, the authors consider the existence of a significant level of "centralization", which enables the state to extend the action of the institutions themselves throughout its territory..
Extractive or inclusive?
Of course, a deciphering of the concepts of inclusive and extractive political and economic institutions is required. Let's give the floor to the authors themselves:
“Every society lives by economic and political rules [institutions, - approx. ed.], which are supported by the state and - collectively - by all citizens.
Economic institutions determine economic incentives: for education, for investment, for inventing and implementing innovations, and so on. The development of economic institutions and rules occurs in the course of the political process, the features of which, in turn, depend on political institutions. For example, political institutions determine whether citizens can control politicians and influence their decisions.
In other words, will politicians (albeit with reservations) act in the interests and on behalf of citizens, or will they be able to use the power entrusted to them by society (or even usurped by them) for their own enrichment and pursuing a policy that is beneficial only to them, but completely unfavorable to voters. These political institutions include, but are not limited to, the constitution and the political system (for example, democratic). They also include the ability of the state to regulate social processes.
It is equally important to consider in a broader context exactly how power is distributed in society: what are the opportunities for different groups of citizens to set common goals and achieve them, and on the other hand, to limit other groups of citizens in achieving their goals.
Institutions influence the behavior and incentives of people, they determine the success or failure of the country. Personal talent is important at every step of society, but even this requires institutional conditions in order for it to be realized. Bill Gates, like other legendary figures from the world of information technology (for example, Paul Allen, Steve Ballmer, Steve Jobs, Larry Page, Sergey Brin or Jeff Bezos), had great talent and ambition. But he also responded to incentives. The school system provided Gates and his ilk with unique skills that helped them realize their talent. The economic institutions made it easy for all of them to start their own companies without facing insurmountable barriers. These same institutions provided initial funding for their projects. The American labor market allowed them to find and hire qualified specialists, and a relatively competitive market environment allowed them to build a business and get the product to the buyer. These entrepreneurs were sure from the start that their dreams could come true: they could count on the institutions and the rule of law they guaranteed; they could not fear for their copyrights. Finally, political institutions ensured stability and continuity.
From the very beginning, these entrepreneurs were sure that their dreams could come true: they could count on the institutions and the rule of law guaranteed by them. Photo microsoft.com (Bill Gates)
That is, firstly, they guaranteed that a dictator would not come to power and would not change the rules of the game, would not expropriate their wealth, would not put them in jail, would not be able to threaten their lives and property.
Second, institutions ensured that no particular interests could steer public policy toward economic disaster. In other words, since state power is both limited and fairly widely distributed among various social groups, economic institutions that promote prosperity can emerge and develop.
Economic institutions like those in the United States or South Korea we will call inclusive. They allow and, moreover, encourage the participation of large groups of the population in economic activity, and this allows the best use of their talents and skills, while leaving the choice - where exactly to work and what exactly to buy - for each individual. Protected private property rights, an impartial justice system, and equal opportunities for all citizens to participate in economic activity are necessarily part of inclusive institutions; these institutions should also ensure free entry to the market for new companies and free choice of profession and career for all citizens.
The differences between north and south Korea or between the US and Latin America illustrate a fundamental principle. Inclusive institutions drive economic growth, productivity and prosperity.”
It is clear that extractive institutions are directly opposed to inclusive ones.
“Countries in which extractive economic institutions operate, based on political institutions that hinder (or even stop) economic growth, sooner or later fail and die. This is why the political process of choosing institutions is central to understanding why some countries succeed and others fail. We must understand why, in some countries, political processes lead to the creation of inclusive institutions that promote economic growth, while in most countries of the world throughout the history of mankind, political processes have led and lead to exactly the opposite result: the establishment of extractive institutions that prevent the economy from growing.
This dissatisfaction had its own - and, unfortunately, convincing - logic. Economic growth and technological innovation are created through a process that the great economist Joseph Schumpeter called "creative destruction." During this process, old technologies are replaced by new ones; new sectors of the economy attract resources at the expense of old ones; new companies are crowding out previously recognized leaders. New technologies make old equipment and skills unnecessary. Thus, inclusive institutions and the economic growth they spur produce both winners and losers, among economic and political players alike. The fear of creative destruction often underlies resistance to the creation of inclusive economic and political institutions.”
Between 1928 and 1960, the national income of the USSR grew by 6% per year - apparently a world record at that time. Photo nstarikov.ru
“Stalin's industrialization was just one possible - and extremely cruel - way to realize this potential. By forcing masses of poor, low-productivity peasants to move to the cities to work in factories, Stalin achieved a sharp increase in labor productivity, even taking into account the fact that these factories themselves were organized very inefficiently. Between 1928 and 1960, the national income of the USSR grew by 6% per year - apparently a world record at that time. This rapid growth was not due to technological breakthroughs, but only due to more efficient distribution of labor resources and public investment in new plants and factories.
The most widespread textbook on economics, written by Paul Samuelson, Nobel Prize winner in economics, predicted the coming dominance of the USSR in the economy. The 1961 edition stated that the national income of the Soviet Union would surpass that of the United States, if not by 1984, then certainly by 1997. In the 1980 edition, the prediction changed little, except that the dates were shifted to 2002 or 2012.
By the 1970s, growth had almost stopped. The main lesson to be learned from this is that extractive institutions cannot support continuous technological innovation: both the lack of economic incentives and the resistance of the elites prevent this.
Great China slowdown
“While Chinese economic institutions are incomparably more inclusive today than they were three decades ago, China is an example of extractive economic growth. Despite the emphasis on innovation and technology, China's growth is based on the assimilation of existing technologies and rapid investment, not creative destruction. An important aspect of the economic situation remains that property rights in China are still not sufficiently protected. From time to time some businessmen are deprived of their property. Labor mobility is tightly regulated, and the most basic right of property - the right to sell one's own labor at one's own discretion - is still not fully respected.
Because of party control over economic institutions, creative destruction is severely limited, and the situation will not change without radical reform of political institutions. As in its time in the Soviet Union, extractive economic growth in China was facilitated by the fact that the country had a lot to make up for. China's per capita income still cannot be compared to American or Western European standards. Of course, Chinese growth is much more diversified than the Soviet one, and it is not only in the field of armaments or heavy industry, and Chinese businessmen are showing a fair degree of enterprise. Yet this growth will fizzle out if extractive political institutions are not replaced by inclusive ones. As long as the latter remain extractive, Chinese economic growth will be limited, as it has been in many similar cases.
An important aspect of the economic situation remains that property rights in China are still not sufficiently protected. Photo top.rbk.ru
In the case of China, the catch-up growth process, based on the import of foreign technology and the export of low-tech industrial products, will continue for some time.
And yet it will end - at least when China reaches a standard of living comparable to the average developed countries in transition. The most likely scenario here is that power will remain in the hands of the Communist Party and China's growing economic elite over the coming decades. In that case, historical experience and our theory suggest that economic growth with creative destruction and real innovation will never come, and the outstanding performance of Chinese growth will begin to decline.”
To summarize the above, the book “Why some countries are rich and others are poor. The Origin of Power, Prosperity, and Poverty by Daron Acemoglu and James Robinson is one of the worldview-shaping things that everyone should definitely read. I sincerely and warmly recommend: must read!
Bikbov Albert
This book is one of the major political economy bestsellers of recent times. The authors ask a question that has worried historians, economists and philosophers for centuries: what are the origins of world inequality, why is world wealth distributed so unevenly across countries and regions of the world? The answer to this question is given at the intersection of history, political science and economics, with the involvement of an unusually extensive historical material from all eras and all continents, which turns the book into a real encyclopedia of advanced political and economic thought.
Daron Acemoglu, James A. Robinson. Why are some countries rich and others poor? The origin of power, prosperity and poverty. – M.: AST, 2015. – 720 p.
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Preface to the Russian edition
In principle, Anatoly Chubais, the author of the preface, did my usual job of summarizing the book. He listed four schools dealing with the issues under discussion and summarized the conclusions.
School No. 1 is geographical determinism, introduced by Jared Diamond with his book: The Fate of Human Societies, first published in Russian in 2009. School No. 2 is cultural determinism. The founder of this school should be considered Max Weber with his main scientific work. See also Samuel Huntington. Lawrence Harrison. Jews, Confucians, and Protestants: Cultural Capital and the End of Multiculturalism. School No. 3, to which the authors of the book belong, is an institutional school. Joseph Schumpeter with his "creative destruction" is considered its founder. See also Alexander Auzan. . And, finally, the materialistic school, which believes that the main factor determining both the level of development of society and the degree of maturity of its political institutions is the level of economic development itself. This approach brings together authors who sometimes have diametrically opposed political views. Suffice it to name, say, the founder of Marxism and Yegor Gaidar (see Long time). The authors describe another "school of ignorance". The basic idea is that the authorities make erroneous decisions simply because they lack the necessary knowledge.
Basic concepts of the book. Over a long period of time (centuries, and sometimes even millennia), peoples accumulate minor changes in the level of complexity of society and the social mechanisms operating in it. At some historical moment, a large-scale change in the external environment occurs (for example, colonists who landed on new lands encounter a completely new environment). Some societies are able not only to accept these challenges, but to adapt, integrate them into their culture through inclusive institutions that are being born at this moment, while for others, this same process of development goes through the strengthening of pre-existing extractive institutions. In itself, the emergence of inclusive institutions requires the coincidence of several prerequisites at the only correct historical moment in time (“the breaking point”). The main of these prerequisites is the presence of a broad coalition of heterogeneous forces interested in creating new institutions, and the long-term recognition of each of them the right of other forces to protect their interests. Inclusive and extractive institutions trigger complex feedback loops that can be either positive (“feedback”) or negative (“vicious circle”). Inclusive institutions create sustainable long-term growth in wealth. Extractive institutions can start growth, but it will be unsustainable and short-lived. Growth under inclusive institutions allows for "creative destruction" and thus supports technological progress and innovation. Extractive institutions are only capable of launching innovative processes on a very limited scale.
A. B. Chubais
Chapter 1
The city of Nogales is divided in half by a wall. North of the wall is American Nogales: Santa Cruz County, Arizona, USA. The median income for a family in this city is $30,000 a year. South of the wall is Mexican Nogales, Sonora. The income of an average family in it is approximately $10,000 (Fig. 1).
Rice. 1. Nogales - a city divided by a wall: to the north - the state of Arizona (USA), to the south - the state of Sonora (Mexico)
16th century - the beginning of the colonization of America. After an initial period of looting and hunting for gold and silver, the Spaniards created a network of institutions aimed at exploiting the native population. All measures were aimed at reducing the living standards of the natives to a minimum and withholding all income above this minimum in favor of the Spaniards. This result was achieved by expropriation of land, forced labor, high taxes and high prices for goods, the purchase of which was also forced. While these institutions enriched the Spanish crown and made the conquistadors and their descendants very wealthy, they also made Latin America the most unequal continent in the world and undermined its economic potential.
When the Spaniards began their conquest of the Americas in the 1490s, England was a minor European nation just recovering from the devastating aftermath of the Scarlet and White Rose Civil War. She was unable to either take part in the fight for gold and other booty of the colonialists, or engage in profitable exploitation of the indigenous population of the New World. But about a hundred years later, in 1588, Europe was shocked by the unexpected defeat of the "Invincible Armada" - the flotilla that the Spanish king Philip II tried to use to invade England. The British victory was not just a military success, it was a sign of their growing confidence in their forces at sea, and this confidence will eventually allow England to take part in the rivalry of colonial empires.
The first attempt by the British to establish a colony on Roanoke Island in North Carolina took place in 1585-1587 and turned into a complete failure. In 1607 they tried again. On May 14, 1607, the Jamestown Colony in Virginia was founded. It was led by Captain John Smith. Smith was the first to realize that the highly successful model of colonization that Pizarro and Cortés had created simply did not work in North America. Its differences from the South were too fundamental. Smith found that the Virginians, unlike the Incas and Aztecs, had no gold and could not be forced to work for the colonists. Smith realized that in order to have a chance to create a viable colony, the colonists themselves must work in it.
It took the Virginia Company time to realize that the original model of colonization had failed in North America. Since force enforcement did not work either against the local population or against the settlers themselves, incentives had to be created for the latter to work. In 1618, the company adopted a "capitation system" under which each male settler received 50 acres of land, plus an equal amount for each member of his family and for each servant that the family could bring with them to Virginia. The settlers received ownership of their homes and were freed from forced labor, and in 1619 a General Assembly was established in the colony, and every adult male could now participate in the development of laws and the administration of the colony. This event marked the beginning of democracy in the United States.
As North America developed, the British would again and again try to follow the example of the Spaniards and establish institutions that would severely restrict the economic and political rights of all but the most privileged colonists. However, each time these plans will fail, just as they did in Virginia.
In 1663, the colony of Carolina was founded and granted to eight Lord Proprietors (including Sir Anthony Ashley Cooper). Ashley Cooper and his consultant, the great English philosopher John Locke, produced a document called The Founding Ordinances of the Carolinas, which outlined the ideal of a hierarchical society controlled by a landed elite. The preamble reads: “The administration of this province is to be brought into conformity with the institutions of our monarchy, of which this province is a part; and we should avoid building a crowded democracy.”
However, the attempt to establish these draconian laws in Maryland and the Carolinas failed, just as a similar attempt had previously failed in Virginia. The reasons for the failure turned out to be similar: in all three cases, it proved impossible to force the settlers into the rigid confines of a hierarchical society, simply because they had too many other options in the New World. By the 1720s, all the colonies that would make up the United States had similar forms of government. All had governors and assemblies based on the representation of all men who owned any property.
It was by no means a democracy; women, slaves, and colonists who had no property could not vote in the assembly. However, the colonists had much more political rights than in most states of that time. It was these assemblies and their leaders that united to hold the First Continental Congress in 1774, which became the prelude to the declaration of US independence. The assemblies believed that they had the right to determine the principles of their own formation and independently establish taxes. This, as we know, caused great problems for the British colonial authorities.
It is no coincidence that the United States, and not Mexico, built its development on fundamental documents that declared the principles of democracy, limited the possibilities of the government and left more levers of power at the disposal of civil society. The document which the delegates of the states came to write in Philadelphia in May, 1787, was the result of a long process which began with the establishment of the General Assembly at Jamestown in 1619.
Antonio López de Santa Anna was president 11 times, and during his tenure, Mexico lost the Alamo and Texas and lost the disastrous Mexican-American War, losing what would later become the US states of Arizona and New Mexico as a result. Between 1824 and 1867, there were 52 Presidents in Mexico, and only a few of them came to power in accordance with the rules of the constitution. The implications of this unprecedented political instability for economic institutions and incentives are clear. First of all, instability led to the fact that property rights were not protected.
The Mexican Declaration of Independence was adopted to protect the economic institutions formed during the colonial period, the very institutions that, in the words of the great German geographer and explorer of Latin America, Alexander von Humboldt, turned Mexico into a “land of inequality” (curiously, Alexander was an older brother, see). These institutions, while perpetuating the exploitation of the indigenous population as the basis of the economy and society as a whole, blocked the incentives that would encourage citizens to take the initiative. And in the same years that the Industrial Revolution came to the United States, Mexico began to get poorer.
Although economic institutions determine whether a country is poor or rich, it is politics and political institutions that determine the choice of these economic institutions. Ultimately, the good economic institutions in the United States came about as a result of the work of political institutions, which developed gradually, starting in 1619. Our theory of inequality will show how political and economic institutions interact and create wealth and poverty, and how different parts of the world acquire these or those institutions. The various combinations of institutions that exist today in different countries are deeply rooted in history, because once a society has been organized in a certain way, these institutions change rarely and slowly.
This institutional resilience, and the forces behind it, also help explain why inequality is so difficult to tackle. While institutions are responsible for the difference between Mexico and the United States, this does not mean that there is a consensus in Mexico that institutions need to be changed. The powers that be and the rest of the citizens often disagree about which institutions should be preserved and which should be changed.
Chapter 2 Theories That Don't Work
Most of the theories proposed by scientists in various social sciences and trying to find the origins of wealth and poverty simply do not work and cannot explain the current state of affairs.
One of the most widespread and popular theories that explain the world's inequality is the theory of the influence of geographical conditions. However, global inequality cannot be explained through the effects of climate, disease, or other factors mentioned in different versions of geographic theory. Just remember the city of Nogales. One part of it is separated from the other not by different climatic zones, geographical distance or epidemiological situation, but simply by the border between the United States and Mexico. It was not geographical conditions that determined the fact that the Neolithic revolution unfolded precisely in the Middle East, and it was not geographical conditions that caused its subsequent comparative lag. The expansion and consolidation of the Ottoman Empire and its institutional legacy is what hinders the prosperity of the Middle East today.
Another popular theory links the prosperity of nations to cultural factors. This theory, like the geographic one, has a noble lineage and can trace its origins back at least to the great German sociologist Max Weber, who argued that the Reformation and the Protestant ethic that underpinned it were key factors in the rapid development of industrial society in Western Europe. .
Many people believe that Latin America will never be rich, because its inhabitants are by nature spendthrifts and beggars, hostages of a special Iberian culture - the “manana culture” (from Spanish. tomorrow). And once upon a time, many believed that the traditions of Chinese culture, in particular Confucian values, were unfavorable for economic growth. Now, however, the role of the Chinese work ethic in the rapid economic growth in China, Hong Kong and Singapore is not only being talked about by the lazy.
Culture-impact theory is useful in that culture-related social norms are important, difficult to change, and often perpetuate the institutional differences that we argue in this book can explain global inequalities. But for the most part, this theory is useless, because those aspects of culture that most often attract attention - religion, ethical principles, "African" or "Hispanic" values - are just not very important for understanding how the current inequality arose. and why is it so stable. Other aspects of culture—such as the level of trust in a society and the propensity of members of that society to cooperate with each other—are more important, but they are mostly the result of certain institutions rather than the independent cause of inequality.
What about the Protestant ethic of Max Weber? The Netherlands and England, predominantly Protestant countries, may have been the first examples of an economic miracle in modern times, but there was no particular connection between their success and their religion. France, a predominantly Catholic country, repeated the success of the Dutch and the British already in the 19th century, and today Italy has joined this group of prosperous countries (Inspired by the work of Max Weber, I decided to show how his ideas were reflected at the beginning of the 21st century. Alas ... Their statistics does not confirm, see).
Most economists and government advisers are always focused on how to do "everything right", but what really needs to be understood is why poor countries do "everything wrong". You need to understand how decisions are actually made, who gets the right to make them, and why these people make the decisions they make. Traditionally, economists have ignored politics, but understanding how the political system works is the key to explaining global economic inequality.
We argue that the path to prosperity lies through the solution of basic political problems. Precisely because the economy assumed that the political problems had already been solved, it could not find a convincing explanation for the world's inequality.
Chapter 3. How Wealth and Poverty Arise
The economic disaster in North Korea, which plunged millions of people into the abyss of starvation, is especially striking when compared with the situation in South Korea: neither culture, nor geography, nor the difference in education can explain the ever-divergence trajectories of the two Koreas. We must study the institutions of these countries to find the key.
We will call economic institutions such as those in the United States or South Korea inclusive (from the English inclusive - “including”, “unifying”). They stimulate the participation of large groups of the population in economic activity. Protected private property rights, an impartial justice system, and equal opportunities for all citizens to participate in economic activity are necessarily part of inclusive institutions; these institutions should also ensure free entry to the market for new companies and free choice of profession and career for all citizens. We call the institutions opposite to inclusive, extractive, that is, aimed at squeezing the maximum income from the exploitation of one part of society and directing it to the enrichment of another part (from the English to extract - “extract”, “squeeze out”).
Inclusive economic institutions set the stage for the success of two of the most important engines of economic growth and prosperity: technological innovation and education.
Political institutions are a set of rules that form a system of incentives for various political players. Political institutions determine who has power in society and how that someone can use it. Absolutist political institutions, such as those in North Korea or colonial Latin America, help those in power to tailor economic institutions to suit themselves, that is, to tailor them for their own enrichment. Political institutions that distribute power among different forces and groups in society, and in doing so limit all these groups in the exercise of this power, give rise to pluralistic political systems.
There is a direct link between political pluralism and inclusive economic institutions. A sufficiently centralized and strong state also plays an important role. We will refer to inclusive political institutions as being sufficiently pluralistic and centralized at the same time. If at least one of these conditions is not met, we will classify political institutions as extractive. There is a strong synergy between economic and political institutions. Extractive political institutions concentrate power in the hands of the elite and do not limit it in how and on what this power can be used.
Their synergy, however, is not limited to this. If, in the context of extractive political institutions, a competing group with different interests appears and succeeds in winning, it, like its predecessors, is almost unlimited in how and for what it uses the received power. This creates incentives for the group that has come to power to maintain extractive political institutions and recreate extractive economic institutions.
In turn, inclusive economic institutions emerge from the work of inclusive political institutions that distribute power among a wide range of citizens and impose restrictions on its arbitrary use. And inclusive economic institutions, meanwhile, distribute income and assets to a wider range of people, which ensures the sustainability of inclusive political institutions.
It may seem self-evident that everyone, without exception, is interested in building institutions that lead to prosperity. But it's not.
Economic growth and technological innovation are created through a process that the great economist Joseph Schumpeter called "creative destruction." During this process, old technologies are replaced by new ones; new sectors of the economy attract resources at the expense of old ones; new companies are crowding out previously recognized leaders. New technologies make old equipment and skills unnecessary. Thus, inclusive institutions and the economic growth they spur produce both winners and losers, among economic and political players alike. The fear of creative destruction often underlies resistance to the creation of inclusive economic and political institutions.
Chapter 4
Plague pandemic in the middle of the XIV century. swept across Europe, and about the same proportion of the population perished everywhere. From a demographic point of view, the consequences of the plague in Eastern Europe were the same as in England and Western Europe. The socio-economic consequences of the plague were the same: there were not enough workers, and people began to demand more freedom from their masters. However, in the east of Europe, labor shortages stimulated the feudal lords to maintain the extractive nature of the labor market, which was based on serf labor. In England, the feudal lords tried to achieve the same goal. However, there the bargaining power of the peasants was sufficient for them to achieve their goal. This was not the case in Eastern Europe.
Although in 1346 there was no great difference between the political and economic institutions of Western and Eastern Europe, by the beginning of the 17th century they were already two different worlds. In the West, workers were free from feudal obligations and the fetters of feudal law, and they would soon find themselves in the very center of a booming market economy. The peasants of Eastern Europe also became part of the market economy, but only as serfs, who were forced to work for the owner and grow agricultural products that were in demand in the West. It is interesting that such an institutional divergence happened precisely in those two regions that differed very little at the beginning of the journey: in the east, the feudal lords were a little more united, they had somewhat more rights, and their land holdings were less geographically dispersed. At the same time, the cities of Eastern Europe were smaller and poorer, and the peasants were less organized. On the scale of history, these differences seem small. However, they turned out to be very important for the inhabitants of both regions: when the feudal order was undermined by the Black Death, these small differences sent Western and Eastern Europe along different trajectories of institutional development.
The Black Death is a prime example of a historical "tipping point": a major event or set of circumstances that disrupts the existing economic and political order. The turning point is like a double-edged sword, the blow of which can sharply turn the trajectory of the country's development both in one direction and in the other. On the one hand, at the turning point, the vicious circle of reproduction of extractive institutions may be broken and replaced by more inclusive institutions, as happened in England. On the other hand, extractive institutions may become even stronger, as happened in Eastern Europe.
England was the first country to make a breakthrough and achieve sustained economic growth in the 17th century. Great shifts in the English economy were preceded by the English Revolutions, which changed the country's economic and political institutions, making them far more inclusive than ever before. These institutions did not come about by consensus; on the contrary, they were born of a bitter struggle for power between various factions that challenged each other's legitimacy and sought to establish institutions that would benefit only themselves. The conflict that unfolded in the 16th-17th centuries culminated in two events: the English Civil War (1642-1651) and the Glorious Revolution (1688). The latter limited the power of the king and his ministers and delegated to parliament the power to form economic institutions.
The state created a system of institutions that stimulated investment, innovation and trade. It strongly defended property rights, including the ownership of patented ideas, which was essential to spurring innovation. The state maintained law and order in the country. Unprecedented in English history was the extension of the principles of English law to all citizens. The arbitrary imposition of new taxes ceased, and almost all monopolies were abolished.
The institutions of Western Europe were not always so different from their counterparts in the East. Divergence began in the 14th century with the Black Death. The differences that existed before were small. Indeed, England and Hungary were even ruled by members of the same family, the House of Angevin. Fundamental differences between the West and the East emerged only after the plague pandemic, and it was they that predetermined the growing divergence of development trajectories in the 17th–19th centuries (Fig. 2).
Rice. 2. Serfdom in Europe in 1800 (modern state borders are indicated)
At the same time, the path of development is not historically determined, inevitable: it depends on the specific circumstances at the turning point. Which path of institutional development the country will take depends, in particular, on which of the warring groups will prevail, which groups will be able to form a coalition with others, which political leaders will be able to turn the situation in their favor.
Chapter 5. Economic Growth under Extractive Institutions
After about 9600 BC. e. Earth's average temperature rose by 7°C in just one decade and hasn't dropped to Ice Age lows since. Archaeologist Brian Fagan calls this period, which is still ongoing, the "long summer". The warming of the climate was a turning point that led to the "Neolithic Revolution", during which people switched to a settled way of life and began to engage in agriculture and animal husbandry.
The earliest evidence of agriculture and animal husbandry, and in particular the domestication of plants and animals, is found in the Middle East, mainly at the foot of the hills in an area that stretches from the south of modern Israel to northern Iraq.
The geographically determined explanation for the causes of the Neolithic Revolution - an explanation that is central to Jared Diamond's theory - is that it took place where people - simply by a happy coincidence - had many kinds of plants and animals available for domestication. Farming and cattle breeding became attractive and encouraged people to settle down. And after people became sedentary, a hierarchy appeared in society, religion and other social institutions arose.
This approach has many supporters, but the study of the monuments of the Natufian culture indicates that the cart in Diamond's theory is put before the horse. Institutional change took place in ancient communities before they moved to settled agriculture. And it was these institutional changes that caused both the transition to settled life and the Neolithic revolution (the transition to agriculture). Although the economic growth among the Natufians was a very important, revolutionary phenomenon for its time, it still remained growth under the conditions of extractive institutions.
The history of Maya civilization illustrates not only the possibilities of growth under extractive institutions, but also the fundamental limitations that this growth faces, namely the threat of political instability: various groups vying for control of rents start to fight each other, and this eventually leads to to the collapse of society and the state. The first Maya cities appeared around 500 BC. e. However, their century turned out to be relatively short-lived, and by the 1st century A.D. e. they ceased to exist. The new era - the so-called classical period - lasted from 250 to 900; This was the heyday of the Mayan culture. But over the next six hundred years, this civilization also fell into decay: by the beginning of the 16th century, when the Spanish conquistadors arrived in these parts, the majestic Mayan palaces and temples in Tikal, Palenque and Calakmul were overgrown with tropical forest. Their ruins were only rediscovered in the 19th century.
Growth under extractive institutions is unsustainable. At their core, extractive institutions do not contribute to the process of creative destruction and, at best, help to achieve very limited technological progress. As a result, economic growth based on such institutions has a natural "ceiling" and will end sooner or later. The Soviet experience illustrates this problem very clearly.
The lack of creative destruction and innovation is not the only reason why growth under extractive institutions is fundamentally limited. The history of the cities of the Mayan states illustrates a more sinister and, alas, more frequent result of such growth, also due to the internal logic of extractiveness. Since extractive institutions create enormous wealth for the elite, there is a great temptation for other social groups to take power over these institutions from the elite by force and replace the elite. Therefore, instability and armed struggle for power are generic features of extractive growth. Moreover, they not only increase inefficiency, but can also reverse the process of state consolidation, and sometimes even plunge the country into an abyss of complete anarchy and chaos, as happened with the cities of the Mayan states at the end of the classical period.
Chapter 6
One of the foundations of the economic development of Venice in the XI-XIV centuries. was a series of innovations in contract law that made economic institutions much more inclusive. The most famous of these inventions was the commenda, a rudimentary type of joint-stock company, the existence of which was limited to the duration of one trading voyage. The composition of the commendation included two partners - a merchant traveler and an investor (commendator) who remained in Venice.
Economic inclusiveness and the rise of more and more trade-rich families forced the political system to become ever more open. In the development of Venice, we again quite clearly see how inclusive economic and political institutions are beginning to support each other. However, the emergence of each new wave of enterprising young people who got rich thanks to the commend and similar economic institutions led to a decrease in the income of the old elite, which at the turn of the 13th-14th centuries. managed to limit the penetration of new people into political structures.
And the matter was not limited to a decrease in income - sometimes it was a threat to their political power. The aristocrats who sat on the Grand Council were constantly tempted to close access to the system for new people. After the political "closing" the Grand Council decided to produce an economic one as well. Along with the transition to extractive political institutions, the transition to extractive economic institutions began. The most important was the prohibition of commendation. A system of state-owned trading galleys was organized, and from 1324 citizens who wished to engage in commerce were heavily taxed. International trade was finally concentrated in the hands of the old families. This was the beginning of the end of Venice as a prosperous state.
Venice is rich these days only because people who earn money elsewhere prefer to spend it in Venice, enjoying pictures of its former glory. The fact that the development of inclusive institutions can be reversed clearly demonstrates the absence of any simple, cumulative process of institutional improvement. Moreover, the small institutional differences that play the most important role at tipping points are, by their very nature, extremely fleeting. Due to their instability, they can be reversible.
In the case of Rome, the watershed was the transition from republic (510-49 BC) to empire (49 BC-476 AD), which over time led to unrest, instability, and in the end - to the collapse of the state.
By the beginning of the 5th century, the barbarians literally stood at the gates of the Roman Empire. However, the successes of the Goths, Huns and Vandals in the fight against Rome were a symptom, not a cause, of the fall of the Roman state. Indeed, during the time of the Republic, Rome had to confront much more organized and dangerous opponents, for example, the Carthaginians. The reasons for the fall of Rome are similar to the reasons that led to the decline of the city of the Mayan state. Both here and there, this fall was predetermined by the work of ever more extractive political and economic institutions, which caused more and more strife and civil wars. The reasons for the fall of Rome can be traced back in history to the time when Augustus concentrated sole power in his hands, as a result of which political institutions gradually began to drift towards extractiveness.
Economic growth during the Roman Republic was impressive. However, this growth has been limited and unsustainable. Growth was based on relatively high productivity in agriculture, the flow of significant resources from the provinces and on international trade, but was not supported by either technological progress or creative destruction.
Despite the importance of the legacy of Rome, the development of institutions in Britain and the British Industrial Revolution were not the direct fruits of this legacy. Although historical factors determine, to one degree or another, exactly how the process of development of institutions will proceed, this is not a simple and predetermined influence, which, moreover, manifests itself only cumulatively. Ancient Rome and medieval Venice illustrate how easily the first steps towards inclusion can be reversed. The economic and institutional landscape created by Roman civilization in Europe and the Middle East did not lead to the establishment of inclusive institutions in these regions in the following centuries.
In fact, these institutions were to first emerge and develop to the greatest extent precisely in England, where the Romans had the weakest position and from where they disappeared almost overnight in the 5th century. Instead, as we discussed in Chapter 4, history does its work through institutional shifts that create institutional differences (however small for now) that are then magnified when interacting with inflection points. This is due to the fact that such differences are often so small that they can be easily smoothed out and do not always appear due to the usual cumulative process.
The collapse of Rome created a decentralized political landscape, and this in turn led to the establishment of a feudal order. The disappearance of slavery and the emergence of free cities were long-term, long-term (and, of course, not historically determined at all) by-products of this development.
Chapter 7
William Lee at the end of the 17th century invented the knitting machine. However, the attempt to obtain a patent ended in the refusal of the king: mechanization would put people out of work, create unemployment, lead to political instability and threaten royal power. The stocking loom promised a huge increase in productivity, but it also threatened to set off a process of creative destruction. The reaction to Lee's brilliant invention illustrates the main idea of this book. The fear of creative destruction is the main reason why the rise in living standards from the Neolithic era to the Industrial Revolution has not been sustainable.
The history of England is full of conflicts between the monarchy and its subjects. In 1215, the barons rebelled against King John and forced him to sign the Magna Carta in Runnymede Meadow near London. According to the charter, the king was obliged to consult with the barons if he wanted to raise taxes. The struggle for political institutions continued, and the monarch's power was further curtailed when an elected parliament was established in 1265. Many members of parliament did not like the attempts of the crown to strengthen their own power at all, and they formed the core of the resistance of the monarchy, the strength of which would manifest itself much later during the English and then the Glorious revolutions.
In economics, the extractiveness of institutions was manifested not only in cases like the story of the invention of William Lee: there were monopolies everywhere, monopolies ... By 1621, there were seven thousand monopolies in England. They prevented that self-realization of talent, which is vital for economic prosperity.
After 1688, property rights became much more secure, partly because it was in the interest of many MPs to protect them, partly because the pluralistic institutions that had been established by that time could be influenced by petitions. After 1688, the political system became much more inclusive and created conditions of relative equality in England.
The expansion of political participation was the soil in which pluralism grew after the Glorious Revolution. If all those who fought against the Stuarts had similar interests, then the overthrow of the Stuarts would resemble the victory of the Lancasters over the Yorks: the interests of one narrow group took precedence over the interests of another. In the end, this overthrow would lead to the re-creation in one form or another of all the same extractive institutions. A broad coalition meant that the demand for the creation of pluralistic political institutions would be higher. Without a certain amount of pluralism, there was a danger that one's interests would prevail at the expense of the interests of others. The fact that parliament after 1688 represented such a broad coalition is the most important reason why parliament was forced to accept petitions, even if they came from representatives of sections not represented in it, including from those who did not have any voting rights. This was a key factor in countering the attempts of any one group to establish a monopoly at the expense of others.
Chapter 8
Absolutism and lack of centralization (or weak centralization) are two different barriers to industrial development. But they are also interconnected: both are supported, on the one hand, by the fear of creative destruction, and, on the other hand, by the awareness of the fact that the process of political centralization often leads to the strengthening of absolutism. Resistance to political centralization is motivated by the same considerations as resistance to inclusive political institutions: primarily the fear of losing political power (in this case, in favor of a more centralized state and those who control it).
Peter the Great, who ruled from 1682-1725, founded a new capital, St. Petersburg, thus wresting power from the hands of the old aristocracy, the Moscow boyars. Starting to create a modern bureaucratic state and modernize the army, he dissolved the boyar Duma, which put him on the throne, and introduced the "Table of Ranks" - a completely new social hierarchical system, which was based on the sovereign's service. He also brought the Church under control. In the course of this process of political centralization, Peter took power away from other institutions and concentrated it in his own hands.
Many countries that failed to meet the critical challenges of the industrial revolution were left behind by progress and were unable to reap the benefits that the development of industry promised. This happened for various reasons - as a result of the operation of absolutist and extractive political institutions, as in the Ottoman Empire, or because of the lack of political centralization, as in Somalia.
The foundation of the Spanish state building was laid in 1492, when the marriage of Queen Isabella and King Ferdinand united the kingdoms of Aragon and Castile. In the same year, the reconquista ended - a long process of ousting Muslims from the Iberian Peninsula. Arabs and Berbers conquered these areas in the 8th century. The last Muslim state on the Iberian Peninsula, Granada, just submitted to the Christians in the same year when Aragon and Castile united, and Columbus reached the American continent and proclaimed the sovereignty of Isabella and Ferdinand over the new lands, who financed his voyage.
The process of creating and strengthening the absolutist regime in Spain was financed by the development of precious metal deposits that were discovered in America. At the time of the merger of Castile and Aragon, the Iberian Peninsula was one of the most economically successful regions in Europe. After strengthening its absolutist political system, Spain came first to a relative, and from the beginning of the 17th century to an absolute economic decline. Colonial goods, which filled the royal treasury in Spain, enriched the emerging merchant class in England. It is this merchant class that will ensure the dynamism of the early English economy in the future and become the core of the political coalition of opponents of absolutism.
Both the Kingdom of Castile and the Kingdom of Aragon had their own Cortes - a parliament representing various groups (estates) of the state. By the 15th century, only 18 cities were represented in the Cortes, each of which delegated two deputies. Therefore, the Cortes did not reflect the interests of as wide sections of society as the English Parliament, and they never turned into a body where various interests collide and which seeks to limit absolutism.
The persistence and even the strengthening of absolutism in Spain is another example of small initial differences that take on serious significance at critical inflection points. In this case, the slight differences between Spain and England consisted in the different structure and different strength of representative institutions, and the opening of America was a turning point.
Absolutism took hold not only in most of Europe, but also in Asia, and there it similarly prevented industrialization at the turning point of the industrial revolution. This is well illustrated by the examples of the Chinese Ming and Qing dynasties or the Turkish Ottoman dynasty. During the Song Dynasty (960–1279), China was the world leader in technological innovation. The Chinese invented the clock, the compass, gunpowder, paper and paper money, porcelain, the blast furnace for iron smelting - and all this much earlier than in Europe. And the spinning wheel and water wheel appeared in China at about the same time that they began to be used in Europe. As a consequence of this, the standard of living in China in 1500 was at least as good as in Europe. In addition, for many centuries in China there was a centralized state, in which posts were distributed on a meritocratic basis. However, the state system of China was an absolute monarchy, and economic growth took place in the conditions of extractive institutions.
In the era of the Ming and Qing dynasties, which replaced the Song dynasty, the state began to tighten the screws even more. International and then coastal navigation was banned. The reason why the Ming and Qing dynasties resisted international trade is understandable to us - it is the fear of creative destruction. The main goal of power was political stability. International trade was seen as potentially destabilizing because it enriched the merchant class, who in time would inevitably raise their head and demand political rights, as happened in England during the Atlantic expansion. The consequences of such control over the economy are predictable: the Chinese economy stagnated during the 19th and early 20th centuries, while the economies of many other countries were industrializing. By 1949, when Mao Zedong established a communist regime in China, it was one of the poorest countries in the world.
Chapter 9
In the 14th and 16th centuries, Southeast Asia experienced significant economic growth thanks to the spice trade. However, at the turn of the XVI-XVII centuries. The Dutch East India Company massacred part of the population and took control of the cloves and nutmeg trade. The local population chose not to produce anything. They were afraid that the Dutch company would come here in a war over spices. We do not know what path the development of the states of Southeast Asia would have taken without the Dutch aggression. Perhaps they would have consolidated their own forms of absolutism, or perhaps they would have remained for a long time in the same political state as at the end of the 16th century. Dutch colonialism fundamentally changed the direction of economic and political development of both the Moluccas and the entire region. The peoples of Southeast Asia rejected business activity, began to lean towards isolationism and increasingly absolutist forms of government. For the next two centuries, they had no chance to take advantage of the innovations that were spreading around the world during the industrial revolution.
Given the extractive economic and political institutions based on the slave trade, industrialization did not take hold in sub-Saharan Africa. This region experienced stagnation and even regression, while other parts of the world reformed their new, modern economies.
The dual economy concept was first proposed in 1955 by Sir Arthur Lewis. Many underdeveloped or underdeveloped economies are characterized by a dual structure, a division into "modern" and "traditional" sectors. The modern sector, that is, the most developed part of the economy, is associated with the city, modern industry and the use of technological innovations. The traditional sector is associated with the countryside, agriculture, backward institutions and technology. One of these backward institutions in agriculture is communal (rather than private) land ownership. For a generation of development economists raised on Lewis's ideas, the solution to the "development problem" is simple: all you have to do is move people and money out of the traditional sector and into the modern sector. Lewis received the Nobel Prize in 1979 for his work on development economics.
Lewis's concept is largely correct, but it misses the general logic of the formation of a dual economy. Underdevelopment is a relatively recent situation and is not at all of natural origin. This situation was deliberately created by the colonialists in order to have a source of cheap labor for their own business and the opportunity to get rid of competition from black Africans. The dual economy is another example of lagging, but not naturally formed over centuries, but artificially created.
Chapter 10 Spreading Prosperity
From the end of the XVIII century. Australian colonization began. There were very few natives, so their exploitation was impossible.
New South Wales in many ways resembled Virginia's Jamestown in many ways: the colony's elite considered it in their interest to build inclusive institutions here. The only labor force here was the convicts, and the only way to make their work productive was to pay them money for it.
By 1850, suffrage in Australia had been extended to all adult white males. In 1851, the state of Victoria, spun off from New South Wales, and the state of Tasmania became the first regions in the world to introduce a truly secret ballot in elections, which reduced the possibility of vote buying and corruption. Until now, in English-speaking countries, the expression "Australian voting" is synonymous with the term "secret ballot".
The inclusive institutions built in the United States and Australia meant that the industrial revolution quickly spread to these countries and they began to get rich. Colonies such as Canada and New Zealand soon followed the same path. However, there were other paths to inclusive institutions. Most of the states of Western Europe chose the third way to come to inclusive institutions under the influence of the French Revolution, which overthrew absolutism in France and caused a series of ethnic conflicts, during which institutional reforms spread throughout almost all of Western Europe. The economic consequence of these reforms was the emergence of inclusive economic institutions in most Western European countries, the industrial revolution and economic growth.
For three centuries until 1789, France was an absolute monarchy. French society was divided into three estates. The clergy represented the first estate, the second estate was the nobility, and all the rest belonged to the third estate. The nobility and clergy did not pay taxes. The French Revolution, in one fell swoop, abolished the feudal system with all its inherent duties and taxes, and completely eliminated tax breaks for the nobility and clergy. The elimination of strict boundaries between the social and political roles of different classes led to the fall of barriers that hindered economic activity. Guilds and all professional restrictions were abolished, which created a level playing field for all competitive conditions in the cities.
The revolution was followed by several decades of unrest and war. But it was no longer possible to turn back the movement from absolutism and the extractive "old order" to inclusive political and economic institutions. The French Revolution brought with it much violence and suffering, chaos and war. And yet, thanks to her, the development of France was no longer hampered by extractive institutions that previously interfered with economic growth and prosperity, as was the case in the absolutist states of Eastern Europe, such as Austria-Hungary and Russia.
The development of the revolution was also inevitably affected by the war that broke out between France and the so-called "first coalition", which consisted of several European countries led by Austria. This war strengthened the resolve and radicalism of the revolutionaries, the so-called "sans-culottes" ( Sans culottes- French "those who do not wear culottes", that is, short pantaloons to the knees. Culottes were considered a sign of the aristocracy, in contrast to the long trousers worn by the common people). The result of radicalization was the terror that the Jacobins, led by their leaders Robespierre and Saint-Just, began to carry out and which reached unprecedented proportions after the execution of Louis XVI and Marie Antoinette.
But the terror soon got out of control, and in July 1794 its leaders themselves, Robespierre and Saint-Just, fell victim to it. This was followed by a phase of relative calm, first under the not very effective management of the Directory (1795-1799), and then with the concentration of power in the hands of the triumvirate of consuls Ducos, Sieyes and Napoleon Bonaparte. Soon the consulate was replaced by the sole rule of Napoleon. The period from 1799 to 1815 was the era of France's greatest victories. These victories allowed Napoleon to freely implement his political will - to carry out reforms and codify law in the vast territory subject to him.
Napoleon's armies captured a huge part of continental Europe, and in almost all the regions where the French invaded, there were orders that had been preserved since the Middle Ages: kings, princes and nobles were in power, everywhere - both in the city and in the countryside - there were restrictions on trade. Serfdom and feudalism were much more deeply rooted in many of these countries than in France itself. The guilds that regulated all economic activity in the cities were also traditionally stronger in the German states than in France.
The leaders of the French Revolution, and then Napoleon, exported the gains of the revolution to such countries, and this led to the destruction of absolutism and feudal land relations, to the dissolution of the guilds and the establishment of the principle of equality of all before the law. Thus, the French Revolution prepared not only France, but also b about much of the rest of Europe towards building inclusive institutions and subsequent economic growth.
Several European states, alarmed by what was happening in France, rallied around Austria to attack France. Everyone expected that the hastily assembled revolutionary armies would be quickly crushed on the battlefield. However, the French army turned out to be more combat-ready than other countries, thanks to an important innovation - universal conscription. Introduced in August 1793, universal conscription allowed the French to field a huge army and gain an advantage based on numerical superiority even before Napoleon with his military talents entered the scene.
Napoleon wanted to continue and deepen the revolutionary reforms. More importantly, he used the principles of Roman law and the idea of the equality of all before the law, making them the basis of the legislative system, which is now known as the Napoleonic code. By the middle of the 19th century, industrialization was in full swing in almost all countries previously subjected to French expansion, and only in such states as Austria or Russia, which Napoleon did not succeed in conquering, or Poland and Spain, where French dominion was temporary and limited, still stagnation continued.
Japan was an economically backward country ruled from the beginning of the 17th century by the Tokugawa house, whose founder in 1603 took the title of shogun, that is, "commander". The Japanese emperor was removed from real power, leaving him with purely ceremonial functions. Okubo Toshimiti assembled a coalition and proposed a rather radical program. Although the first paragraph stated that "the political power in the country should return to the imperial court and all laws should be issued by the court", it went on to say:
- Two legislatures, an Upper and a Lower House, should be established, and all measures of government should be based on their consent.
- Council members should be respected representatives of landowners, nobility and people, and past traditional positions that have lost their significance and meaning should be abolished.
- Foreign relations shall be regulated on the basis of a consensual decision of the council.
- Laws and norms of past years should be abolished and new ones adopted.
On January 3, 1868, the Meiji Restoration was proclaimed. Emperor Meiji was again invested with full power. The Meiji Restoration resulted in the beginning of institutional reforms in Japan. In 1869, the feudal system was abolished and three hundred fiefs came under the jurisdiction of the government and were turned into prefectures, which were governed by government-appointed governors. Taxation was centralized, and a new bureaucratic state took the place of the old feudal state. In 1869, the equality of all social groups before the law was proclaimed and all restrictions on internal travel and trade were abolished. The samurai class was abolished (although this caused several mutinies; these events were reflected in the film The Last Samurai). The right of private ownership of land was introduced, and any subject of the emperor could henceforth freely choose his profession.
By 1890, Japan was the first Asian nation to have a written constitution that provided for a constitutional monarchy, an elected parliament, and an independent judiciary. These changes were a decisive factor in making Japan the first Asian country to capitalize on the benefits of the Industrial Revolution.
Chapter 11 Favorable Feedback
The Glorious Revolution served to establish the rule of law, and this concept was especially strong in England and Britain in general. The ruling elite here were constrained by this principle to a much greater extent than they themselves could imagine. Although the Whigs were able to pass draconian, oppressive laws to eliminate the actions of the common people that hindered them, they nevertheless had to face additional obstacles that arose due to the rule of law. Of course, the rule of law is unimaginable under conditions of absolutist political institutions. It is the product of pluralistic political orders and broad political coalitions that underpin this pluralism.
But why didn't the Whigs use their influence to force the courts to apply the Black Act consistently, and why didn't they dismiss the jury every time they saw a trial take a turn to their disadvantage? The answer to this question allows us to understand more deeply the essence of the Glorious Revolution and why it did not simply replace the old absolutism with a new one - it's about the interaction of pluralism and the rule of law, as well as the dynamism of "virtuous feedback". While many parties claimed their share of power at once, the most natural was a system of laws and restrictions that could be applied to all these parties so that none of them received too much power - because this, in the end, undermined the very foundations of pluralism. Thus, the concept that there should be limits and limits to the arbitrariness of people in power - that is, the concept of the rule of law - was part of the logic of pluralism.
In addition, pluralism has created a more open society and paved the way for independent media. Note that in England censorship in the press was already abolished in 1688.
The virtuous feedback of inclusive institutions not only preserves what has already been achieved, but also paves the way for development towards greater inclusiveness.
With the end of the Civil War, the northern United States experienced rapid economic growth. Some entrepreneurs were able to take advantage of the development of the railway network, industry and trade to make themselves large fortunes. Such businessmen were called "robber barons" because they acted very rudely, trying to achieve a monopoly and prevent new players from entering the market.
The appearance on the scene of the "robber barons" with their monopoly trusts at the end of the 19th and beginning of the 20th century shows that a market economy in itself does not yet guarantee the stability of inclusive institutions. The sustainability of inclusive economic institutions requires not just a market, but an inclusive market that provides equal conditions for everyone to enter it and an economic perspective for the majority of participants. Monopolies supported by political power contradict these conditions. (It should be noted that this view of monopolies is not shared by all economists. For example, the Austrian school holds the opposite point of view, and considers antitrust legislation harmful; see Dominic Armentano. . It is also curious that already in the 21st century Georgia went the same way , which has not adopted antitrust laws, even despite pressure from the US and the EU, see Larisa Burakova. . - Note. Baguzina.)
Favorable feedback works through several mechanisms. First, the logic of pluralistic political institutions makes usurping power by a dictator, a party, or even a legitimately elected president much more difficult. Pluralism also upholds the concept of the rule of law, that is, the principle that laws should apply in the same way to all citizens, something that is completely impossible under an absolute monarchy. But the principle of the rule of law also provides that no law can be applied by one group to violate the rights of another group. More importantly, this principle opens up opportunities for greater popular participation in the political process and creates about greater inclusiveness, as it promotes the idea that people should be equal not only before the law, but also within the political system.
Secondly, inclusive political institutions support similar economic institutions and, in turn, receive support from the latter. Inclusive economic institutions minimize the hypothetical benefits that anyone could gain - at least in the short term - from the usurpation of political power. Since economic institutions were already fairly inclusive in Britain by the 18th century, the elite, had they dared to fight for absolute power, would have gained less and, in fact, would have lost more in carrying out large-scale repression against supporters of democracy.
The situation was quite different in countries with absolutist regimes, such as Austria-Hungary and Russia, where economic institutions were still highly extractive and where repression became the answer to the demands for greater political representation in the late 19th and early 20th centuries - after all, there were too many elites. lost if she lost power.
Finally, inclusive political institutions encourage free media to flourish.
Chapter 12
The development of Sierra Leone, or rather the lack of it, can be seen as an example of a vicious circle. First, the British colonial authorities built extractive institutions, and then the politicians of an independent country happily picked up the baton.
Moreover, extractive political institutions provide no checks against the abuse of power. Whether power corrupts a person at all is debatable, but Lord Acton was certainly right when he said that "absolute power corrupts absolutely." We saw in the previous chapter that even when Franklin Roosevelt wanted to use his presidency in a way that he considered beneficial to society, and in doing so eliminate resistance from the Supreme Court, the inclusive political institutions of the United States did not allow him to go beyond the limits to which his power. However, in the conditions of extractive political institutions, there are practically no framework for power, no matter how perverted and antisocial it may be. In 1980, Sam Bangura, governor of the Central Bank of Sierra Leone, criticized the policies of Siaki Stevens and accused the dictator of waste. Soon the banker was killed: he was thrown from the top floor of the Central Bank building onto the pavement of the street. Thus, extractive political institutions create a vicious circle: after all, they do not provide for the protection of citizens from those who usurp state power and abuse it.
Another mechanism that sets in motion a vicious circle is raising the stakes in the struggle for power. This is exactly what we observed in the example of Rome and the cities of the Mayan states. In almost all of Africa, such conflicts have escalated into a series of bloody civil wars and led to economic collapse and unprecedented human suffering - and at the same time to the degradation of the state.
Just as extractive were the institutions of the southern states of the United States before the Civil War. Economic and political decisions were concentrated in the hands of the southern elite - the owners of plantations and slave farms. By the middle of the 19th century, the South was noticeably poorer than the North. The map (Fig. 3), showing the spread of slavery, shows the proportion of slaves in the population of individual US counties as of 1840.
During the civil war, 600,000 people died; there were few planters among the victims. Although the economic institution of slavery was abolished, the development of the South clearly traces the line of succession from this institution to plantation agriculture, which still required cheap labor. Extractive institutions in the southern states of the United States were shaken only after World War II, and finally collapsed only after the civil rights movement destroyed the political system that served as their basis. And only after the abandonment of this system in 1950-1960 did the South begin to slowly approach the North in terms of economic indicators.
A specific variant of the vicious circle, illustrated by the transfer of power from Haile Salassie to Mengistu, and the transition from the British colonial rule in Sierra Leone to the dictatorship of Siaki Stevens, the German sociologist Robert Michels called the "iron law of the oligarchy." Oligarchic institutions reproduce themselves not only while the same elite is in power, but even when power passes to completely new people. Many post-colonial leaders in Africa moved into the same residences, put in place the same people, practiced the same methods of managing the market and withdrawing resources as the colonial authorities or monarchs of the previous period.
A version of the vicious circle called the “iron law of the oligarchy” says that extractive political institutions create practically no restrictions on absolute power, and nothing prevents the one who has taken the place of a collapsed dictator and gained control of the state. Of course, the "iron law of the oligarchy" is not really a law - at least not in the same sense in which we speak of the laws of nature. It does not represent an inevitable, no-alternative path, as we saw in the examples of the Glorious Revolution in England or the Meiji Restoration in Japan.
The key factor in all the situations in which we saw a turn towards inclusive institutions was that one or another broad coalition was able to become powerful enough political force to stand in solidarity against absolutism and replace absolutist institutions with more inclusive and pluralistic ones.
Neither the independence movement in Sierra Leone nor the officers' conspiracy in Ethiopia were revolutionary movements under the auspices of broad coalitions. Rather, these were the actions of specific individuals and narrow groups who aspired to power in order to use this power to take goods from others. Extractive institutions not only pave the way for the next regime (which will probably be even more vicious), but also create the ground for endless conflicts and civil wars.
Chapter 14
By 1966, when Bechuanaland gained independence and became Botswana. In the whole country there were a total of 12 kilometers of paved road, 22 people with a university education, and about a hundred people with a secondary education. In the next 45 years, it became one of the most dynamically developing states in the world. Today, Botswana has the highest per capita income of any country in sub-Saharan Africa.
How has Botswana been able to break patterns? The answer is obvious – by rapidly building inclusive political and economic institutions after independence. Since that time, the country has been developing democratically, it has regular elections on a competitive basis, there have been no civil wars and interventions of foreign states in the history of Botswana. The government strengthens economic institutions based on private property rights, ensures macroeconomic stability and encourages the development of an inclusive market economy. Like England in Botswana, the degree of centralization of the state was quite high, and relatively pluralistic tribal institutions survived the fall of colonialism.
Chapter 15
Five hundred years ago, Mexico, or rather, the Aztec state located on its territory, was clearly richer than all its northern neighbors, and the United States overtook Mexico only in the 19th century. South and North Korea were economically, socially, and culturally identical until the country was divided along the 38th parallel following World War II. Likewise, most examples of huge disparities in levels of economic development date back to the last two centuries. Was the situation inevitable?
To answer this question, we need a theory to explain why some nations prosper while others fall into poverty and decline. Our theory operates on two levels. The first is the distinction between extractive and inclusive economic and political institutions. The second is our explanation of why inclusive institutions emerge in some parts of the world and not in others. The first level of our theory is concerned with the interpretation of history in the light of the development of institutions, and the second level with how history shapes the institutional development of states.
The central point of our theory is the relationship between inclusive economic and political institutions and welfare. Inclusive economic institutions that secure property rights, create a level playing field, and attract investment in new technologies and knowledge are more conducive to economic growth than extractive economic institutions that result in the extraction of resources from the majority in favor of the minority and fail to secure property rights or provide incentives. for economic activity. Inclusive economic institutions support corresponding political institutions and, in turn, rely on them. And inclusive political institutions are those that provide for a broad distribution of political power while allowing for a degree of political centralization that guarantees law and order, property rights, and an inclusive market economy. Likewise, extractive economic institutions are synergistically linked to extractive political institutions that concentrate power in the hands of a minority. It is clear that this minority seeks to maintain and develop extractive economic institutions, benefiting from them and using resources to consolidate their political power.
Growth under extractive institutions is possible, but will not be sustainable for two reasons. The first is that sustainable economic growth requires innovation, and innovation cannot but be accompanied by creative destruction, which brings a lot of new things to the economic situation and can destabilize the established political system. The second reason is that power under extractive institutions provides the opportunity to reap enormous benefits at the expense of society, and this makes political power highly desirable. As a result, there will always be many forces at work pushing a society dominated by extractive institutions towards greater political instability.
The interplay between extractive economic and political institutions creates a vicious circle in which extractive institutions tend to be consolidated and strengthened. The same can be said about the virtuous feedback linking inclusive economic and political institutions. But neither vicious circle nor virtuous feedback is preordained. Our explanation of the shift from extractive to inclusive is historical, yet it does not suggest that history is predetermined. The most important institutional changes occurred as a result of the reaction of the institutions that existed at that time to the inflection points.
Why are the ways of institutional change so different in different societies? The answer to this question must be sought in the mechanism of institutional drift. Just as in two populations of the same species isolated from one another, sets of genes begin to gradually differ more and more as a result of random mutations (the so-called "genetic drift"), two initially similar human societies will also diverge more and more due to " drift of institutions.
History is the key factor here, because it is the historical process, through institutional drift, that creates differences that will become decisive at the next critical moment. However, our theory does not declare historical determinism.
Unfortunately, the predictive power of any theory in which both small differences and unpredictability play an important role is very small. In the 15th or even the 16th century, not to mention the few centuries following the fall of the Roman Empire, few could have foreseen the major turn towards inclusive institutions that would take place in Britain. Similarly, at the height of the Cultural Revolution in China, hardly many could have imagined that this country would soon embark on a path of radical changes in its economic institutions, and subsequently on a path of rapid economic growth. Yet this cannot be considered a defect in our theory. The overview we have presented here illustrates well the point that any approach based on historical, geographic, cultural or other determinism is wrong.
Our theory allows us to make certain assumptions about what types of societies are more likely to achieve economic growth over the coming decades. There is no doubt that in the next 50 and even 100 years, the United States and Western Europe, thanks to their inclusive institutions, will remain richer (and much richer) than the countries of Sub-Saharan Africa, the Middle East, Central America and Southeast Asia.
Nations that have failed to achieve almost any level of political centralization, such as Somalia or Afghanistan, are unlikely to achieve economic growth. By contrast, the countries most likely to experience growth in the next few decades—perhaps even under extractive institutions—are those that have reached a certain level of political centralization today. In Black Africa, these are Burundi, Ethiopia, Rwanda, and also Tanzania. In Latin America, the same can be expected from Brazil, Chile and Mexico. Economic growth in China, while looking so impressive, is actually another example of growth under extractive institutions that is unlikely to translate into sustainable economic development.
Prosperity cannot be constructed. Such design attempts are made according to two models. The first, often advocated by international organizations such as the IMF, implies that poor development is caused by bad economic policies, and as a result, the "trustee" countries are offered a list of improvements.
Many countries around the world have only ostentatiously imitated such reforms. In fact, the reforms were imposed on these countries, while no one cared that the political institutions there operate as usual.
Pluralism, the cornerstone of inclusive political institutions, requires that access to political power be open to broad sections of society, therefore, when extractive institutions are the starting point, allowing only a narrow elite group to power, this means that it is necessary to start with the distribution of power in society. .
What needs to be done to start the process of empowerment, and hence the development of inclusive political institutions? The honest answer should be this: there is no such recipe. Naturally, there are several obvious factors that increase the likelihood that the process of empowerment will begin. These include the presence of a certain level of centralization of state power; the existence of entrenched political institutions that ensure a certain degree of pluralism; the presence of civil society institutions that could coordinate the protest actions of the population.
If we use Prigogine's terminology, then we can say that all systems contain subsystems that constantly fluctuate. Sometimes a single fluctuation or a combination of fluctuations can become (as a result of positive feedback) so strong that the previously existing organization cannot stand and collapses. At this turning point (at the bifurcation point), it is fundamentally impossible to predict in which direction further development will take place: whether the state of the system will become chaotic or whether it will move to a new, more differentiated and higher level of order.
The facts discovered and understood as a result of the study of highly non-equilibrium states and non-linear processes, in combination with rather complex systems endowed with feedback, led to the creation of a completely new approach that makes it possible to establish a connection between the fundamental sciences and the “peripheral” life sciences and, perhaps, even understand some social processes. (The facts in question are of equal, if not greater, significance to social, economic, or political realities. Words such as "revolution," "economic crisis," "technological shift," and "paradigm shift" take on new shades when we begin to think about the corresponding concepts in terms of fluctuations, positive feedbacks, dissipative structures, bifurcations and other elements of the conceptual lexicon of Prigogine's school.)
