Against the backdrop of ongoing upheavals in the Middle East, James Robinson of Harvard University, co-author of the new book Why Nations Fail: The Origins of Power, Prosperity, and Poverty, discussed how man-made political and economic institutions determine global gaps in wealth and poverty, health and sickness, and food and famine. Robinson spoke about this theory at an event hosted by the Carnegie Middle East Center.
 
Based on fifteen years of original research, Robinson and his co-author, Daron Acemoglu of the Massachussetts Institute of Technology, analyzed historical evidence from the Mayan city-states, the Roman Empire, medieval Venice, and the Soviet Union to produce a new and insightful theory of political economy that holds significance for today’s tumultuous Arab world. 

The Argument

  • Reasons for Success: Robinson explained that although the title of the book is Why Nations Fail, an equally important question is why some actually succeed. He pointed to the Korean Peninsula to demonstrate the importance of man-made political and economic institutions in determining economic prosperity. North Korea, he said, is currently plagued by mass famine, malnutrition, and abysmal standards of living. South Korea, in contrast, is a dynamic and prosperous country despite the fact that most industries were located in the North fifty years ago. Robinson argued that North Korea’s centrally-planned economy blocked the opportunities and incentives of its citizens while South Korea’s inclusive political and economic institutions fostered growth. 
     
  • Inclusive Institutions: At the heart of the book, Robinson explained, is the idea that economically successful societies manage to develop a set of institutions that harness the talents, skills, and energy of their respective citizenries. Robinson referred to these conditions as inclusive economic institutions, contrasting them with extractive economic institutions that inhibit and deincentivize productivity.

Why Do Different Societies End up With Different Economic Institutions?

Robinson argued that different sets of political institutions also underlie different economic structures. He explained that two aspects in particular are central to inclusive economic institutions:
  • Broad Distribution of Power: Robinson cited the examples of seventeenth-century Britain and post-apartheid South Africa to discuss political institutions. He noted that in each case, both countries had followed an extractive model. South Africa, in particular, began a long struggle in 1976 to broaden the distribution of power and create inclusive institutions.
     
  • Effective Central State: Robinson argued that a strong central government provides citizens with basic provisions, in addition to maintaining public order. He pointed to the example of Somalia, which although having a broad distribution of power among different tribes, lacked an effective central government. The result was Somalia becoming a failed state in the 1990s.

Which Conflicts Lead to Inclusive Economic Institutions?

  • Coalition of Interests: Using history as a guide, Robinson argued that broad coalitions of interests and strategies are key to yielding inclusive institutions. During England’s revolution in 1688, for instance, large swaths of the public coalesced in order to stop the absolutism of the monarchy. This broad coalition of interests persisted and ultimately led to economic success. 
     
  • A Lack of Coherence: Robinson juxtaposed the English example with the Bolshevik revolution in Russia. He argued that the goal of removing the Russian monarchy was not tied to a comprehensive plan, which subsequently led to economic and political institutions that were not inclusive.
Robinson concluded his lecture by noting that he found no evidence that any specific religious or cultural values were more likely to lead to economic prosperity. Rather, his analysis of historical evidence demonstrates that man-made institutions underlie economic success. In short, he said, the development of inclusive economic institutions is the best predictor of a successful state.