{"id":4647,"date":"2017-10-29T16:12:27","date_gmt":"2017-10-29T13:12:27","guid":{"rendered":"https:\/\/www.ellopos.com\/blog\/?p=4647"},"modified":"2017-10-29T16:12:27","modified_gmt":"2017-10-29T13:12:27","slug":"acemoglu-robinson-how-can-a-nation-become-richer","status":"publish","type":"post","link":"https:\/\/www.ellopos.com\/blog\/4647\/acemoglu-robinson-how-can-a-nation-become-richer\/","title":{"rendered":"Acemoglu, Robinson: How can a nation become richer"},"content":{"rendered":"

Excerpts from “Why Nations Fail”, by D. Acemoglu and J. Robinson<\/a><\/p>\n

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In rich countries, individuals are healthier, live longer, and are much better educated. They also have access to a range of amenities and options in life, from vacations to career paths, that people in poor countries can only dream of. People in rich countries also drive on roads without potholes, and enjoy toilets, electricity, and running water in their houses.<\/p>\n

They also typically have governments that do not arbitrarily arrest or harass them; on the contrary, the governments provide services, including education, health care, roads, and law and order. Notable, too, is the fact that the citizens vote in elections and have some voice in the political direction their countries take.<\/p>\n

The great differences in world inequality are evident to everyone, even to those in poor countries, though many lack access to television or the Internet. It is the perception and reality of these differences that drive people to cross the Rio Grande or the Mediterranean Sea illegally to have the chance to experience rich-country living standards and opportunities.<\/p>\n

This inequality doesn’t just have consequences for the lives of individual people in poor countries; it also causes grievances and resentment, with huge political consequences in the United States and elsewhere…<\/p>\n

The average citizen of the United States is seven times as prosperous as the average Mexican and more than ten times as the resident of Peru or Central America… About twenty times as prosperous as the average inhabitant of sub-Saharan Africa, and almost forty times as those living in the poorest African countries such as Mali, Ethiopia, and Sierra Leone. And it’s not just the United States.<\/p>\n

There is a small but growing group of rich countries -mostly in Europe and North America, joined by Australia, Japan, New Zealand, Singapore, South Korea, and Taiwan -whose citizens enjoy very different lives from those of the inhabitants of the rest of the globe.<\/p>\n

The reason that Nogales, Arizona, is much richer than Nogales, Sonora, is simple; it is because of the very different institutions on the two sides of the border, which create very different incentives for the inhabitants of Nogales, Arizona, versus Nogales, Sonora. The United States is also far richer today than either Mexico or Peru because of the way its institutions, both economic and political, shape the incentives of businesses, individuals, and politicians.<\/p>\n

Each society functions with a set of economic and political rules created and enforced by the state and the citizens collectively. Economic institutions shape economic incentives: the incentives to become educated, to save and invest, to innovate and adopt new technologies, and so on.<\/p>\n

It is the political process that determines what economic institutions people live under, and it is the political institutions that determine how this process works.<\/p>\n

For example, it is the political institutions of a nation that determine the ability of citizens to control politicians and influence how they behave. This in turn determines whether politicians are agents of the citizens, albeit imperfect, or are able to abuse the power entrusted to them, or that they have usurped, to amass their own fortunes and to pursue their own agendas, ones detrimental to those of the citizens.<\/p>\n

Political institutions include but are not limited to written constitutions and to whether the society is a democracy. They include the power and capacity of the state to regulate and govern society. It is also necessary to consider more broadly the factors that determine how political power is distributed in society, particularly the ability of different groups to act collectively to pursue their objectives or to stop other people from pursuing theirs.<\/p>\n

As institutions influence behavior and incentives in real life, they forge the success or failure of nations. Individual talent matters at every level of society, but even that needs an institutional framework to transform it into a positive force.<\/p>\n

Bill Gates, like other legendary figures in the information technology industry (such as Paul Allen, Steve Ballmer, Steve Jobs, Larry Page, Sergey Brin, and Jeff Bezos), had immense talent and ambition. But he ultimately responded to incentives.<\/p>\n

The schooling system in the United States enabled Gates and others like him to acquire a unique set of skills to complement their talents. The economic institutions in the United States enabled these men to start companies with ease, without facing insurmountable barriers. Those institutions also made the financing of their projects feasible. The U.S. labor markets enabled them to hire qualified personnel, and the relatively competitive market environment enabled them to expand their companies and market their products.<\/p>\n

These entrepreneurs were confident from the beginning that their dream projects could be implemented: they trusted the institutions and the rule of law that these generated and they did not worry about the security of their property rights.<\/p>\n

Finally, the political institutions ensured stability and continuity. For one thing, they made sure that there was no risk of a dictator taking power and changing the rules of the game, expropriating their wealth, imprisoning them, or threatening their lives and livelihoods.<\/p>\n

They also made sure that no particular interest in society could warp the government in an economically disastrous direction, because political power was both limited and distributed sufficiently broadly that a set of economic institutions that created the incentives for prosperity could emerge…<\/p>\n

While economic institutions are critical for determining whether a country is poor or prosperous, it is politics and political institutions that determine what economic institutions a country has. Ultimately the good economic institutions of the United States resulted from the political institutions that gradually emerged after 1619….<\/p>\n

Different patterns of institutions today are deeply rooted in the past because once society gets organized in a particular way, this tends to persist…. This persistence and the forces that create it also explain why it is so difficult to remove world inequality and to make poor countries prosperous…<\/p>\n

There is no necessity for a society to develop or adopt the institutions that are best for economic growth or the welfare of its citizens, because other institutions may be even better for those who control politics and political institutions.<\/p>\n

The powerful and the rest of society will often disagree about which set of institutions should remain in place and which ones should be changed. Carlos Slim would not have been happy to see his political connections disappear and the entry barriers protecting his businesses fizzle-no matter that the entry of new businesses would enrich millions of Mexicans. Because there is no such consensus, what rules society ends up with is determined by politics: who has power and how this power can be exercised.<\/p>\n

Carlos Slim has the power to get what he wants. Bill Gates’s power is far more limited. That’s why our theory is about not just economics but also politics. It is about the effects of institutions on the success and failure of nations — thus the economics of poverty and prosperity; it is also about how institutions are determined and change over time, and how they fail to change even when they create poverty and misery for millions — thus the politics of poverty and prosperity.<\/p>\n","protected":false},"excerpt":{"rendered":"

Excerpts from “Why Nations Fail”, by D. Acemoglu and J. Robinson In rich countries, individuals are healthier, live longer, and are much better educated. They also have access to a range of amenities and options in life, from vacations to career paths, that people in poor countries can only dream of. People in rich countries […]<\/p>\n","protected":false},"author":4,"featured_media":0,"comment_status":"closed","ping_status":"closed","sticky":false,"template":"","format":"standard","meta":{"footnotes":"","_disable_autopaging":false},"categories":[5,9,6],"tags":[2397,572,7850,2955],"class_list":["post-4647","post","type-post","status-publish","format-standard","hentry","category-education","category-europe","category-politics","tag-development","tag-poverty","tag-progress","tag-prosperity"],"_links":{"self":[{"href":"https:\/\/www.ellopos.com\/blog\/wp-json\/wp\/v2\/posts\/4647","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/www.ellopos.com\/blog\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/www.ellopos.com\/blog\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/www.ellopos.com\/blog\/wp-json\/wp\/v2\/users\/4"}],"replies":[{"embeddable":true,"href":"https:\/\/www.ellopos.com\/blog\/wp-json\/wp\/v2\/comments?post=4647"}],"version-history":[{"count":0,"href":"https:\/\/www.ellopos.com\/blog\/wp-json\/wp\/v2\/posts\/4647\/revisions"}],"wp:attachment":[{"href":"https:\/\/www.ellopos.com\/blog\/wp-json\/wp\/v2\/media?parent=4647"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/www.ellopos.com\/blog\/wp-json\/wp\/v2\/categories?post=4647"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/www.ellopos.com\/blog\/wp-json\/wp\/v2\/tags?post=4647"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}