6 ms·

Why some nations become wealthy while others remain stuck in poverty

52 points by Mitt 15y ago

ilaksh 15y ago
I am a technological optimist and I do believe a lot of things that Kurzweil and his friends say, but this is one area where I think that whole group and most of the mainstream is living in a fairytale land. I actually think most of the crazier sounding stuff in videos you see on the internet is more or less correct (not 100% but a lot of it). I think reality is a lot crazier than fiction. So, although I used to be completely left-leaning and liberal, now I buy most of it to a certain degree, not just the crazy left stuff -- from the singularity stuff, the zeitgeist stuff, but also a lot of that stuff Alex Jones says (I shouldn't admit that, and I am not sure about a lot of it, for instance I don't think that there are too many vaccines involved in population control, but I can't eliminate the possibility). What I have learned from the "batshit insane conspiracy theorists", well, a lot of it might be crazy. But I do know that they are right about some things -- governments aren't good to the people, and the United States is no exception, and the crap they tell us about world events on TV is just lies. Empires didn't just happen for the whole of recorded history and then just suddenly stop around the time that moving pictures came out. I really believe that the American dominance should truly be considered an extension of the British Empire and in many ways has been and continues to be even more brutal and oppressive. The world bank and the like do exercise economic warfare. The second and third world are exploited and repressed. You don't have to be crazy to consider things from this point of view. All you have to do is stop subjecting yourself to STOPTHINK. In other words, just realize that "oh, that sounds like a crazy conspiracy theory" is not a reason to put your fingers in your ears. http://www.globalresearch.ca/ http://www.globalresearch.ca/
- moilolita 15y ago
  Don't you think it's funny that the same people who are able to classify nations as "inclusive"(USA) and "extractive"(the others) fail to see how USA and Europe are "inclusive" internally but highly exclusive and "extractive" externally (they exclusively rule the world using the United Nations puppet organization and when it does not obey enough, they attack others anyways). And if we look again, how it's possible to say that US/Europe are inclusive when the wealth and income polarization is at it's peak and the policy is made by the rich for the rich ? My feeling is that both US and Europe are in fact internally exclusive and "extractive" but the people will not see clearly this until US/Europe will fail to extract enough wealth from the rest of the world anymore.
  - alexro 15y ago
    Historically this is a proven strategy exercised by all empires and there is nothing new to it: expand and enrich your citizens in good times and milk them in tough times; rinse and repeat.
  - ilaksh 15y ago
    I think it is very strange. But the reason, I think, is that many academics and others have a worldview that has been warped by propaganda and a general and common trust of authority, or at least some basic trust of their government. I think that this trust of authority and faith in the worldview presented by authority is a general characteristic of social groups of all sizes. In some ways it is a great failure, as in these cases. In other ways it is necessary, since a group without a common belief system probably couldn't function. Maybe group membership and belief systems are somewhat directly connected.
  - berntb 15y ago
    Democracies in the rest of the world is also "inclusive". In general, the only dictatorships that are tolerated, are those which the democracies are dependent on... But please give counter examples?
- psyconn 15y ago
  The one thing governments are very good at is solving the violence problem. It pays off really good not to have half of male population killed by the other half. http://www.ted.com/talks/view/lang/en//id/163 http://www.ted.com/talks/view/lang/en//id/163
  - alexro 15y ago
    The whole 20th century was total mess for Europe and the East. That there were no global wars after 2000 doesn't mean 21st century will be less horrible, given the amount of warfare present.
    - berntb 15y ago
      afaik, the number of wars are getting lower and lower. The same with really poor people. Also, democracies are increasing in number, so there should be less wars -- the democratic peace theory seems to have good statistical support (see Wikipedia).
      - alexro 15y ago
        I hope you are right. But back in the days with never-ending wars there were never times like ours with the possibility to blow up the world in a go. So, the wars get smaller but have bigger impact.
- jbattle 15y ago
  I won't argue the USA is totally benign and acts out of anything other that crude self interest (in the vast majority of cases) - but I think the evidence is fairly compelling that the US 'empire' IS more benign and rules with a lighter hand than most historical empires. The US for example has killed a lot of civilians in Afghanistan (bad). But you don't have to look back very far at all in time to see the Russians and even the British taking a much more brutal approach. I guess generally I agree with you that the US acts in ways that are contrary to its stated principles, but I do have some optimism that each world empire does seem to get progressively "kinder".
  - moilolita 15y ago
    I appreciate your pragmatic view. I would add only the fact that the empires seem kinder only when the resources are abundant. If the oil discoveries fail to keep pace with the consumption and no serious alternatives are found, I foresee some nasty imperial wars ahead and the next "totalen krieg" will be fought with nuclear weapons.
  - berntb 15y ago
    I'd rather argue that democracies implement "realpolitik" as much as dictators -- and lie about it. The difference seems to be that democracies are nicer when the voters at home care (which is more and more common) -- and/or if it doesn't cost lots of money to be nice. For no other reason that it is in the democracies' own interest if other countries start to work better (everyone loves a richer customer). It is getting better generally, but disgusting regimes the western world is dependent on, like Saudi Arabia, can still literally get away with murder. This is the best reference I have on the subject of the article, btw. http://reason.com/archives/2006/03/01/why-poor-countries-are-poor/singlepage http://reason.com/archives/2006/03/01/why-poor-countries-are...
  - alexro 15y ago
    What scale shall we use to compare the results of, say, Hirasima/Nagasaki nuclear bombing with what, say, Mongolians did? Or is it all about being able to manage the public image?
    - 15y ago
- wturner 15y ago
  A lot of the conspiracy stuff is based on cult psychology intended to make a buck or simply get the demagogues rocks off with clapping followers. Alex Jones makes his money off being a sensationalist, and mixing truth in with all his subjective proclamations and fear mongering. It's the same tactics politicians and religious zealots use to enhance their "careers".The only difference is Mr Jones does it with a different constituency and outside formal politics to make his living. Someone like John Perkins I look at as to-the-point and about sharing his first-hand story, Alex Jones on the other hand is more about making everyone "feel" like the grand illuminati new world order lizard people are about inject their children with epoxy laced vaccines.
hansbo 15y ago
It's a very simple premise, but I've always felt it to be true. Give people the sense of being in control, or at least have the potential to be in control (Democracy, property rights, et.c.), and they will work hard for a better future. This tends to give a lot of stable growth.
- alexro 15y ago
  In Soviet Union people had no property rights but there were millions enthusiastically working for the future. Now there are property rights and everybody fights for them. Also, investment bankers economics is killing the West too.
  - bdunbar 15y ago
    millions enthusiastically working for the future. Were these the 14 million in Gulag, or the 20 million that Stalin murdered?
    - alexro 15y ago
      Funny enough how otherwise objective HN community tends to support bold statements like this, which usually come up in a brainwashing activities. The only fact that gets tossed out is that Russia was never a peaceful country, and there were never times without a violent regime. How about this: for every 1 who suffered in Soviet Union there were 10 who benefited. But how many do suffer now for every 1 oligarch to benefit?
      - bdunbar 15y ago
        How about this: for every 1 who suffered in Soviet Union there were 10 who benefited 'Suffering' is a funny way to pronounce 'murder'. But how many do suffer now for every 1 oligarch to benefit? Speaking of 'brain wash' - buzzword much?
        alexro 15y ago
        You take bold statement too literary. 20 million died in the WW2, they were murdered by Germans.
nsns 15y ago
Amazing, not one word about colonialism. "by the late 1700s, England had embarked on the largest sustained period of economic growth since the Neolithic age" Right, and many countries in the world still try to resurrect themselves from that "economic growth" (hint: it was based on pirating their national and human resources). The other "thriving" European countries followed suit (e.g. http://en.wikipedia.org/wiki/Scramble_for_Africa http://en.wikipedia.org/wiki/Scramble_for_Africa). After less than six decades since the abolition of explicit colonialism, it's still quite early to say why some countries recovered quickly while others didn't. While I'm a great believer in democracy, I think we should be aware that a lot of these approaches are nothing but self serving democratic propaganda (propaganda, not science).
- alexro 15y ago
  Add to this current monetary system which favours the US dollar and is backed with tons of gun power. Not exactly the ideal world of free trade I'd say.
- _delirium 15y ago
  This article doesn't mention it, but the book itself does discuss colonialism quite a bit. To simplify, it argues that "bad" institutions are those that are extractive, in that they primarily benefit a small elite, and that such institutions tend to perpetuate themselves. They do blame colonialism for the existence of such institutions in much of Africa, arguing that the institutions there were originally set up as extractive by the European powers (since the goal was to extract wealth for the colonial power), and after independence they tended to perpetuate themselves, but extracting wealth for a new African elite instead. The authors were also involved in an earlier, quite influential, paper that showed a statistical correlation between European settlement and post-colonial institution quality (http://www.jstor.org/stable/2677930 http://www.jstor.org/stable/2677930). Their causal hypothesis (which is harder to prove) is that colonized countries with extensive European settlement were forced to set up institutions that were less extractive (since they politically had to serve at least these settlers, who demanded things like basic infrastructure) than those that had only a small group of administrators living there and no settlement, which were run completely on a basis of extracting wealth for the remote power.
wslh 15y ago
This is overthinking and the answer is pretty simple many times. I live in Argentina, a perfect and beautiful country from the weather, geography, agricultural, business potential, touristic perspectives. But the corruption IS the system and there are not incentives to work harder. So, it is the society (including politicians) in this case.
- janus 15y ago
  And it's unavoidable to mention that really sucessful people are mostly suspects of being unethical, because of historical issues (and the most public and rich people usually are, like most politicians) The sad thing is, this doesn't seem to be changing at all anytime soon, despite people brainwashed by the government saying that this is the best time ever for the country. My philosophy to stay sane is avoid reading most of the common trend topics and most of the news, and just work hard hoping to have some financial security for the future (which is not an easy thing to achieve here)
- RyanMcGreal 15y ago
  That explanation just begs the question. We have to ask: why is the system corrupt?
  - wslh 15y ago
    It is really difficult to find the root cause. An explanation from historians is required for that. I can say that historically people in Argentina does not have a strong incentive to collaborate economically because in the past you could live very well from the land within less than 2500 m2 that was easy to obtain. In some places you are enforced to collaborate. Also the system was always corrupt in some areas. For example the port of Buenos Aires.
- forinti 15y ago
  I don't see why Argentina shouldn't do at least as well as Italy if corruption is the only thing that hinders it.
  - 15y ago
nickik 15y ago
The other of the Book was in the Econtalk podcast (talking about the book). I highly recomend it. http://www.econtalk.org/archives/2012/03/acemoglu_on_why.html http://www.econtalk.org/archives/2012/03/acemoglu_on_why.htm...
spurgu 15y ago
Wealthy? Doesn't the US have massive debt?
- maxerickson 15y ago
  The government has significant debt. It owes quite a chunk of that money to the people of the U.S. (no really) and there is plenty of wealth split up among the citizens (I suppose much of the private debt is also owed to other U.S. entities). Even setting those factors aside, the debt represents ~1 year of economic output for the U.S., the infrastructure and goods sitting around in the country represent much more than that.
  - alexro 15y ago
    Even if you are right 'technically' how about being right 'psychophysically' - what are these willing to occupy the wall streets do not understand?
forinti 15y ago
The high standard of living of Europe and the US is a very recent achievement. If you look at the last 3000 years, India and China had the technological edge for most of that period. Looking at the future, China will probably get back to the first position. Latin America seems to be finding its own model and will soon reach a pretty decent standard of living. So I think it was too narrow a period of time that was analysed to reach such grand conclusions.
- iwwr 15y ago
  For most of human history (and before that), the norm is not growth, but stagnation. Centralized empires tend to strangle economic development. The ascendancy of Europe was not a fluke, but rather a condition where a free market philosophy could take hold in a decentralized political system. Had Europe been ruled by a monolithic empire, it would have been very easy to snuff out the industrial revolution before it had a chance to be entrenched.
  - Symmetry 15y ago
    Yes and no. Too much centralization can be bad, but then again it took until around 1600 or so for Europe to finally catch up with China in terms of general wealth and technology. So clearly the fact that China was a centralized empire at peace with itself had something to do with it having developed such a large lead. I suspect that the actual situation is far more complex than either "centralization is good" or "centralization is bad", and that different ways of being centralized or decentralized are better or worse, and that different stages of technological development might have different ideal conditions.
    - iwwr 15y ago
      The point about decentralization is to ensure development can continue unhindered by political factors. With an empire it's very easy for the ruling aristocracy (or autocrat) to kill development. Yes, you can have enlightened rulers, but then the system hinges precariously on just a few people. For that matter, it's much more devastating when an uncontested empire falls, rather than when one of many powers may fail.
grepherder 15y ago
I know Daron Acemoglu as a prolific academic, and he has some good ideas but I don't buy the general idea he has established here. As pointed out by others I find it to be serving democratic propaganda rather than any rational train of thought. Otherwise he couldn't have overlooked such a big flaw in his reasoning, one of cause and effect. The only possible example - if even that - he could use in his argument could be the divergence of North and South America. There are no other regions in the world which weren't already poor because of a myriad of other reasons, where he can say "Oh look, they were doing good, but then turned to repression and declined." Back to Americas, he argues it can't have geographic reasons because at the time of colonialism South was actually more advanced than North. And it should be emphasized here the sole reason South was more advanced was geography. The flaw is, what happens thereafter is, indeed not anymore a function of the geography of Americas, but also not of the democratic institutions in place, but of the economics and politics of the colonial empires involved. Unlike North America, South America was exploited and then left without a concentration of central political authority, leading to huge regional gaps of power which then lead to those kind of extractive institutions with some kind of elite on the top. That is the effect, the result, not the cause. To grossly simplify, the region becomes poor or the power controlling the region declines, which leads to extractive institutions, which then keeps the region from developing but that is a wholly different assertion than what Acemoglu defends for this specific case. The reasons for the outcome in Americas could be found by looking at the power struggle between the colonial empires, and the decline of the Spanish Empire. North America, where mainly England and France had influence was of course bound to overtake South America. I see no reason at all to buy this romantic "because the people were given freedom!" idea.
ballstothewalls 15y ago
Although I suspect what he is saying is a factor, to say it is THE reason is a major oversimplification. You have to examine a whole host of things. For instance, geography/natural resource endowments have to be taken into account. Just look at Saudi Arabia. It is a country where a few do really well but compared to other developing countries it is doing pretty well as a whole, all because it has large oil deposits.
lifebeyondfife 15y ago
I can't recommend Tim Harford's 'The Undercover Economist' enough. There's a great chapter on Cameroon and exactly why it's the way it is.
kstenerud 15y ago
Another major factor is geography. America could not have become the powerhouse she is today if she didn't control the entire Mississippi river and bordering lands. The only other country that comes close in this regard is China.

52 points by Mitt 15y ago

I am a technological optimist and I do believe a lot of things that Kurzweil and his friends say, but this is one area where I think that whole group and most of the mainstream is living in a fairytale land. I actually think most of the crazier sounding stuff in videos you see on the internet is more or less correct (not 100% but a lot of it). I think reality is a lot crazier than fiction. So, although I used to be completely left-leaning and liberal, now I buy most of it to a certain degree, not just the crazy left stuff -- from the singularity stuff, the zeitgeist stuff, but also a lot of that stuff Alex Jones says (I shouldn't admit that, and I am not sure about a lot of it, for instance I don't think that there are too many vaccines involved in population control, but I can't eliminate the possibility). What I have learned from the "batshit insane conspiracy theorists", well, a lot of it might be crazy. But I do know that they are right about some things -- governments aren't good to the people, and the United States is no exception, and the crap they tell us about world events on TV is just lies. Empires didn't just happen for the whole of recorded history and then just suddenly stop around the time that moving pictures came out. I really believe that the American dominance should truly be considered an extension of the British Empire and in many ways has been and continues to be even more brutal and oppressive. The world bank and the like do exercise economic warfare. The second and third world are exploited and repressed. You don't have to be crazy to consider things from this point of view. All you have to do is stop subjecting yourself to STOPTHINK. In other words, just realize that "oh, that sounds like a crazy conspiracy theory" is not a reason to put your fingers in your ears. http://www.globalresearch.ca/ http://www.globalresearch.ca/

moilolita 15y ago
Don't you think it's funny that the same people who are able to classify nations as "inclusive"(USA) and "extractive"(the others) fail to see how USA and Europe are "inclusive" internally but highly exclusive and "extractive" externally (they exclusively rule the world using the United Nations puppet organization and when it does not obey enough, they attack others anyways). And if we look again, how it's possible to say that US/Europe are inclusive when the wealth and income polarization is at it's peak and the policy is made by the rich for the rich ? My feeling is that both US and Europe are in fact internally exclusive and "extractive" but the people will not see clearly this until US/Europe will fail to extract enough wealth from the rest of the world anymore.
- alexro 15y ago
  Historically this is a proven strategy exercised by all empires and there is nothing new to it: expand and enrich your citizens in good times and milk them in tough times; rinse and repeat.
- ilaksh 15y ago
  I think it is very strange. But the reason, I think, is that many academics and others have a worldview that has been warped by propaganda and a general and common trust of authority, or at least some basic trust of their government. I think that this trust of authority and faith in the worldview presented by authority is a general characteristic of social groups of all sizes. In some ways it is a great failure, as in these cases. In other ways it is necessary, since a group without a common belief system probably couldn't function. Maybe group membership and belief systems are somewhat directly connected.
- berntb 15y ago
  Democracies in the rest of the world is also "inclusive". In general, the only dictatorships that are tolerated, are those which the democracies are dependent on... But please give counter examples?
psyconn 15y ago
The one thing governments are very good at is solving the violence problem. It pays off really good not to have half of male population killed by the other half. http://www.ted.com/talks/view/lang/en//id/163 http://www.ted.com/talks/view/lang/en//id/163
- alexro 15y ago
  The whole 20th century was total mess for Europe and the East. That there were no global wars after 2000 doesn't mean 21st century will be less horrible, given the amount of warfare present.
  - berntb 15y ago
    afaik, the number of wars are getting lower and lower. The same with really poor people. Also, democracies are increasing in number, so there should be less wars -- the democratic peace theory seems to have good statistical support (see Wikipedia).
    - alexro 15y ago
      I hope you are right. But back in the days with never-ending wars there were never times like ours with the possibility to blow up the world in a go. So, the wars get smaller but have bigger impact.
jbattle 15y ago
I won't argue the USA is totally benign and acts out of anything other that crude self interest (in the vast majority of cases) - but I think the evidence is fairly compelling that the US 'empire' IS more benign and rules with a lighter hand than most historical empires. The US for example has killed a lot of civilians in Afghanistan (bad). But you don't have to look back very far at all in time to see the Russians and even the British taking a much more brutal approach. I guess generally I agree with you that the US acts in ways that are contrary to its stated principles, but I do have some optimism that each world empire does seem to get progressively "kinder".
- moilolita 15y ago
  I appreciate your pragmatic view. I would add only the fact that the empires seem kinder only when the resources are abundant. If the oil discoveries fail to keep pace with the consumption and no serious alternatives are found, I foresee some nasty imperial wars ahead and the next "totalen krieg" will be fought with nuclear weapons.
- berntb 15y ago
  I'd rather argue that democracies implement "realpolitik" as much as dictators -- and lie about it. The difference seems to be that democracies are nicer when the voters at home care (which is more and more common) -- and/or if it doesn't cost lots of money to be nice. For no other reason that it is in the democracies' own interest if other countries start to work better (everyone loves a richer customer). It is getting better generally, but disgusting regimes the western world is dependent on, like Saudi Arabia, can still literally get away with murder. This is the best reference I have on the subject of the article, btw. http://reason.com/archives/2006/03/01/why-poor-countries-are-poor/singlepage http://reason.com/archives/2006/03/01/why-poor-countries-are...
- alexro 15y ago
  What scale shall we use to compare the results of, say, Hirasima/Nagasaki nuclear bombing with what, say, Mongolians did? Or is it all about being able to manage the public image?
  - 15y ago
wturner 15y ago
A lot of the conspiracy stuff is based on cult psychology intended to make a buck or simply get the demagogues rocks off with clapping followers. Alex Jones makes his money off being a sensationalist, and mixing truth in with all his subjective proclamations and fear mongering. It's the same tactics politicians and religious zealots use to enhance their "careers".The only difference is Mr Jones does it with a different constituency and outside formal politics to make his living. Someone like John Perkins I look at as to-the-point and about sharing his first-hand story, Alex Jones on the other hand is more about making everyone "feel" like the grand illuminati new world order lizard people are about inject their children with epoxy laced vaccines.

hansbo 15y ago

It's a very simple premise, but I've always felt it to be true. Give people the sense of being in control, or at least have the potential to be in control (Democracy, property rights, et.c.), and they will work hard for a better future. This tends to give a lot of stable growth.

alexro 15y ago
In Soviet Union people had no property rights but there were millions enthusiastically working for the future. Now there are property rights and everybody fights for them. Also, investment bankers economics is killing the West too.
- bdunbar 15y ago
  millions enthusiastically working for the future. Were these the 14 million in Gulag, or the 20 million that Stalin murdered?
  - alexro 15y ago
    Funny enough how otherwise objective HN community tends to support bold statements like this, which usually come up in a brainwashing activities. The only fact that gets tossed out is that Russia was never a peaceful country, and there were never times without a violent regime. How about this: for every 1 who suffered in Soviet Union there were 10 who benefited. But how many do suffer now for every 1 oligarch to benefit?
    - bdunbar 15y ago
      How about this: for every 1 who suffered in Soviet Union there were 10 who benefited 'Suffering' is a funny way to pronounce 'murder'. But how many do suffer now for every 1 oligarch to benefit? Speaking of 'brain wash' - buzzword much?
      - alexro 15y ago
        You take bold statement too literary. 20 million died in the WW2, they were murdered by Germans.

nsns 15y ago

Amazing, not one word about colonialism. "by the late 1700s, England had embarked on the largest sustained period of economic growth since the Neolithic age" Right, and many countries in the world still try to resurrect themselves from that "economic growth" (hint: it was based on pirating their national and human resources). The other "thriving" European countries followed suit (e.g. http://en.wikipedia.org/wiki/Scramble_for_Africa http://en.wikipedia.org/wiki/Scramble_for_Africa). After less than six decades since the abolition of explicit colonialism, it's still quite early to say why some countries recovered quickly while others didn't. While I'm a great believer in democracy, I think we should be aware that a lot of these approaches are nothing but self serving democratic propaganda (propaganda, not science).

alexro 15y ago
Add to this current monetary system which favours the US dollar and is backed with tons of gun power. Not exactly the ideal world of free trade I'd say.
_delirium 15y ago
This article doesn't mention it, but the book itself does discuss colonialism quite a bit. To simplify, it argues that "bad" institutions are those that are extractive, in that they primarily benefit a small elite, and that such institutions tend to perpetuate themselves. They do blame colonialism for the existence of such institutions in much of Africa, arguing that the institutions there were originally set up as extractive by the European powers (since the goal was to extract wealth for the colonial power), and after independence they tended to perpetuate themselves, but extracting wealth for a new African elite instead. The authors were also involved in an earlier, quite influential, paper that showed a statistical correlation between European settlement and post-colonial institution quality (http://www.jstor.org/stable/2677930 http://www.jstor.org/stable/2677930). Their causal hypothesis (which is harder to prove) is that colonized countries with extensive European settlement were forced to set up institutions that were less extractive (since they politically had to serve at least these settlers, who demanded things like basic infrastructure) than those that had only a small group of administrators living there and no settlement, which were run completely on a basis of extracting wealth for the remote power.

wslh 15y ago

This is overthinking and the answer is pretty simple many times. I live in Argentina, a perfect and beautiful country from the weather, geography, agricultural, business potential, touristic perspectives. But the corruption IS the system and there are not incentives to work harder. So, it is the society (including politicians) in this case.

janus 15y ago
And it's unavoidable to mention that really sucessful people are mostly suspects of being unethical, because of historical issues (and the most public and rich people usually are, like most politicians) The sad thing is, this doesn't seem to be changing at all anytime soon, despite people brainwashed by the government saying that this is the best time ever for the country. My philosophy to stay sane is avoid reading most of the common trend topics and most of the news, and just work hard hoping to have some financial security for the future (which is not an easy thing to achieve here)
RyanMcGreal 15y ago
That explanation just begs the question. We have to ask: why is the system corrupt?
- wslh 15y ago
  It is really difficult to find the root cause. An explanation from historians is required for that. I can say that historically people in Argentina does not have a strong incentive to collaborate economically because in the past you could live very well from the land within less than 2500 m2 that was easy to obtain. In some places you are enforced to collaborate. Also the system was always corrupt in some areas. For example the port of Buenos Aires.
forinti 15y ago
I don't see why Argentina shouldn't do at least as well as Italy if corruption is the only thing that hinders it.
- 15y ago

nickik 15y ago

The other of the Book was in the Econtalk podcast (talking about the book). I highly recomend it. http://www.econtalk.org/archives/2012/03/acemoglu_on_why.html http://www.econtalk.org/archives/2012/03/acemoglu_on_why.htm...

spurgu 15y ago

Wealthy? Doesn't the US have massive debt?

maxerickson 15y ago
The government has significant debt. It owes quite a chunk of that money to the people of the U.S. (no really) and there is plenty of wealth split up among the citizens (I suppose much of the private debt is also owed to other U.S. entities). Even setting those factors aside, the debt represents ~1 year of economic output for the U.S., the infrastructure and goods sitting around in the country represent much more than that.
- alexro 15y ago
  Even if you are right 'technically' how about being right 'psychophysically' - what are these willing to occupy the wall streets do not understand?

forinti 15y ago

The high standard of living of Europe and the US is a very recent achievement. If you look at the last 3000 years, India and China had the technological edge for most of that period. Looking at the future, China will probably get back to the first position. Latin America seems to be finding its own model and will soon reach a pretty decent standard of living. So I think it was too narrow a period of time that was analysed to reach such grand conclusions.

iwwr 15y ago
For most of human history (and before that), the norm is not growth, but stagnation. Centralized empires tend to strangle economic development. The ascendancy of Europe was not a fluke, but rather a condition where a free market philosophy could take hold in a decentralized political system. Had Europe been ruled by a monolithic empire, it would have been very easy to snuff out the industrial revolution before it had a chance to be entrenched.
- Symmetry 15y ago
  Yes and no. Too much centralization can be bad, but then again it took until around 1600 or so for Europe to finally catch up with China in terms of general wealth and technology. So clearly the fact that China was a centralized empire at peace with itself had something to do with it having developed such a large lead. I suspect that the actual situation is far more complex than either "centralization is good" or "centralization is bad", and that different ways of being centralized or decentralized are better or worse, and that different stages of technological development might have different ideal conditions.
  - iwwr 15y ago
    The point about decentralization is to ensure development can continue unhindered by political factors. With an empire it's very easy for the ruling aristocracy (or autocrat) to kill development. Yes, you can have enlightened rulers, but then the system hinges precariously on just a few people. For that matter, it's much more devastating when an uncontested empire falls, rather than when one of many powers may fail.

grepherder 15y ago

I know Daron Acemoglu as a prolific academic, and he has some good ideas but I don't buy the general idea he has established here. As pointed out by others I find it to be serving democratic propaganda rather than any rational train of thought. Otherwise he couldn't have overlooked such a big flaw in his reasoning, one of cause and effect. The only possible example - if even that - he could use in his argument could be the divergence of North and South America. There are no other regions in the world which weren't already poor because of a myriad of other reasons, where he can say "Oh look, they were doing good, but then turned to repression and declined." Back to Americas, he argues it can't have geographic reasons because at the time of colonialism South was actually more advanced than North. And it should be emphasized here the sole reason South was more advanced was geography. The flaw is, what happens thereafter is, indeed not anymore a function of the geography of Americas, but also not of the democratic institutions in place, but of the economics and politics of the colonial empires involved. Unlike North America, South America was exploited and then left without a concentration of central political authority, leading to huge regional gaps of power which then lead to those kind of extractive institutions with some kind of elite on the top. That is the effect, the result, not the cause. To grossly simplify, the region becomes poor or the power controlling the region declines, which leads to extractive institutions, which then keeps the region from developing but that is a wholly different assertion than what Acemoglu defends for this specific case. The reasons for the outcome in Americas could be found by looking at the power struggle between the colonial empires, and the decline of the Spanish Empire. North America, where mainly England and France had influence was of course bound to overtake South America. I see no reason at all to buy this romantic "because the people were given freedom!" idea.

ballstothewalls 15y ago

Although I suspect what he is saying is a factor, to say it is THE reason is a major oversimplification. You have to examine a whole host of things. For instance, geography/natural resource endowments have to be taken into account. Just look at Saudi Arabia. It is a country where a few do really well but compared to other developing countries it is doing pretty well as a whole, all because it has large oil deposits.

lifebeyondfife 15y ago

I can't recommend Tim Harford's 'The Undercover Economist' enough. There's a great chapter on Cameroon and exactly why it's the way it is.

kstenerud 15y ago

Another major factor is geography. America could not have become the powerhouse she is today if she didn't control the entire Mississippi river and bordering lands. The only other country that comes close in this regard is China.