The Cure for Humanity's Natural State of Abject Poverty

A review of Why Nations Fail: The Origins of Power, Prosperity, and Poverty.

(Page 2 of 2)

Whereas Acemoglu and Robinson stress historical contingency in their analysis, North and his colleagues operate at a higher level of abstraction. Their analysis identifies three “doorstep conditions” that enable the development of open access orders: (1) Rule of law for elites; (2) Perpetually lived forms of public and private elite organizations, including the state itself; and (3) Consolidated political control of the military. Essentially the state becomes depersonalized, no longer depending upon the operation of patron-client networks. 

What is crucial is that the steps toward an open access order must be in the interests of the elites. For example, expanding the rule of law to non-elites give elite members greater opportunities to engage in profitable transactions. The existence of these “doorstep conditions” does not guarantee a transition from a natural state to open access, but North and colleagues persuasively assert that such a transition will not happen without them. The insight that all human societies before two to three hundred years ago have been organized as patron-client networks helps clarify the historical processes identified by Acemoglu and Robinson.

It’s probably unfair to take the authors to task for not looking at an issue that is arguably outside the scope of their analysis, but can the virtuous circle of inclusive institutions spin out control? Never mind reactionary elites; is it possible for reactionary populaces to kill off innovation and stifle economic growth? Creative destruction doesn’t just destabilize the economic prospects of elites. Acemoglu and Robinson cite the Luddites in Britain for destroying mechanical weaving machines in the early 19th century as a threat to their livelihoods. 

In his 2002 The Gifts of Athena: The Historical Origins of the Knowledge Economy, Northwestern University economist Joel Mokyr notes, "Technological progress inevitably involves losers, and these losers...tend to be concentrated and usually find it easy to organize.” He adds, "Sooner or later in any society the progress of technology will grind to a halt because the forces that used to support innovation become vested interests. In a purely dialectical fashion, technological progress creates the very forces that eventually destroy it." In order to forestall this possibility, political institutions must surely be inclusive but they must also be limited in scope.

Now that the institutions that are required to raise people out of natural abject poverty are known, is there anything that can be done to push along their development? Not much. “You can’t engineer prosperity,” flatly assert Acemoglu and Robinson. They reject the notion that the process of modernization leads ineluctably toward open institutions, pointing out that growth fueled by abundant resources has not produced inclusive institutions in places like Venezuela or Saudi Arabia. Hundreds of billions of dollars in foreign aid have been showered on extractive elites in poor countries with almost no effect on poverty in their countries. Development economists' fond hope that enlightening rulers about the proper economic and political policies will in fact do no good since those leaders well understand that implementing such policies would undermine their power.

Assuming that a country meets the three doorstop conditions identified by North and his colleagues, empowering broad coalitions of citizens is the only process that has led to the development of inclusive institutions in the world. So is there any way to kickstart their empowerment? “The honest answer of course is that there is no recipe for building such institutions,” conclude Acemoglu and Robinson. They do hold out a faint hope that the spread of media and information technology will enable people to more easily form the sorts of pluralistic coalitions that can eventually generate inclusive political and economic institutions. In addition, information technology might also produce a kind of demonstration effect in which people can see how inclusive institutions operate.

Acemoglu and Robinson have convincingly identified the cure for poverty, but no one has yet figured out how to get the patients to take the medicine.

*I mistakenly gave Professor Robinson's affilation as MIT in the original review.

Ronald Bailey is Reason's science correspondent. His book Liberation Biology: The Scientific and Moral Case for the Biotech Revolution is now available from Prometheus Books

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  • Harvard||

    But...but...it takes a village dammit!

  • The Derider||

    So far, I like the book. History viewed through an economic lens is always interesting IMHO. This book takes up where "Guns, Germs and Steel" left of.

    Also, these guys aren't crazy. "rich countries... have governments [that] provide services, including health care, education, roads, and law and order" (P. 41)

    Government services make people rich and not poor? Heresy!

  • ||

    I know this hard to understand, but in order for government to provide services, they have to take from some people to give to others (either paying government employees, or direct handouts).

    So when someone says that government services make people poor, it is a fact - whether or not they make other people rich at the same time.

  • The Derider||

    No, when someone says that government provided "health care, education, roads and law and order" make people poor, they're just wrong.

    Again, this is part of the book's argument.

  • Sevo||

    "In order to forestall this possibility, political institutions must surely be inclusive but they must also be limited in scope."
    Sort of missed that, didn't you?

  • The Derider||

    The book argues that that limited scope encompasses health care, education, infrastructure, and the rule of law.

  • Sevo||

    The Derider|4.10.12 @ 8:03PM|#
    "The book argues that that limited scope encompasses health care, education, infrastructure, and the rule of law."
    Having not yet read the book, I'll take your word that the book is wrong about certain details.

  • The Derider||

    Read > Comprehend > Post is how the pros do it.

  • Sevo||

    The Derider|4.10.12 @ 8:32PM|#
    "Read > Comprehend >"
    You should take your own advice, bozo.
    Really loved that crap about the QUERTY keyboards in "Guns.." did you?
    Go ahead, show us what an ignoramus you are.

  • ||

    How does the government get the money to provide those things hmm?

    It either taxes citizens, imposes tariffs on foreign goods, or prints more money. Usually a combination of the three. Explain to me again how the objective fact that all three of those things mean less money in my or someone else's pocket =/= poorer.

  • thirtyandseven||

    Post hoc ergo propter hoc.

  • The Derider||

    So you're saying it's a coincidence that all the "rich" countries have government institutions that provide education, health care, infrastructure, and rule of law?

    Do you have a model that disproves that correlation? The authors of this book didn't find one.

  • Sevo||

    The Derider|4.10.12 @ 7:41PM|#
    "So you're saying it's a coincidence that all the "rich" countries have government institutions that provide education, health care, infrastructure, and rule of law?"
    Is Greece "rich"?
    The fact that 'there's a lot of ruin' in a country in no way suggest the 'ruin' is the cause of prosperity.
    The USSR was 'prosperous' compared to Czarist Russia. For a while.

  • The Derider||

    So no, you have no model where a country is rich without the government providing things like education, health care, infrastructure, and the rule of law.

  • Sevo||

    The Derider|4.10.12 @ 8:02PM|#
    "So no, you have no model where a country is rich without the government providing things like education, health care, infrastructure, and the rule of law."
    Can't you read? I just pointed out one that had none of those things and was 'prosperous' for a while.

  • The Derider||

    Every country is "prosperous" compared to Czarist Russia, you moron. And the USSR did provide education, health care, infrastructure, and the rule of law, so your nonsense isn't even internally consistent.

    Stop posting.

  • ||

    And the USSR did provide education, health care, infrastructure, and the rule of law, so your nonsense isn't even internally consistent.

    And life there was wonderful, right? That is to say if you were willing to put up with the purges, the internal surveillance, state control of the arts and public expression, and a total lack of political freedom.

    When government monopolizes access to all basic needs and services, opposition to the state is death by slow starvation. Democracy won't save you, because it's either mob rule or rule by the party in charge.

  • Sevo||

    Agreed, but bozo's claims are false, period.
    The USSR provided education to those the government selected as valuable to the state; everyone else got 'education'.
    The USSR provided healthcare to the cadres; the rest got aspirin if it was available (see: Cuba)
    The USSR provided infrastructure (ROADZ!) when they lead to weapons factories.
    The USSR provided the rule of law never.
    Stuff it, derider.

  • Sevo||

    "And the USSR did provide education, health care, infrastructure, and the rule of law,"

    Oh, that's GREAT!
    I'll bet you got a million of them!
    Thank you for proving you're an ignoramus.

  • KPres||

    "So no, you have no model where a country is rich without the government providing things like education, health care, infrastructure, and the rule of law."

    The country you live in became the world's wealthiest providing only the latter two via the state, and many others became wealthy before institutionalizing those services through the state as well.

    Also, it's not hard to look back at world GDP and see that it begins it's exponential rise without government education or health care, proving those two, at least, are unnecessary.

  • ||

    "So you're saying it's a coincidence that all the "rich" countries have government institutions that provide education, health care, infrastructure, and rule of law?"

    I will, sure. Those rich countries just conjured all that shit out of thin air while they were still poor and *poof* they became rich. Right. I think you should go back and read thirtyandseven's post. Look it up hoss.

  • Bill Dalasio||

    I can't speak for thirtyandseven, but a much more plausible explanation is that as societies grow rich, they demand higher levels of education, health care and infrastructure.

  • Sevo||

    Sorta like those countries that get prosperous enough to worry about ecology.

  • newshutz||

    health care and education "services" are attempts by elites to reimpose a patronage structure.

  • Maelstrom||

    good insight here

  • TELLMOFF||

    Hong Kong is very livable but has absolutely nothing going for it compared to some poor countries filled with natural resources. Countries are poor because their citizens cannot trust each other and work together.

  • The Derider||

    Hong Kong has efficient institutions. The point of the book is that there's more to building efficient institutions than trust and cooperation.

  • Sevo||

    The Derider|4.10.12 @ 6:54PM|#
    "Hong Kong has efficient institutions...."

    And those came about as a result of the intelligent 'ignorance' of a guy named Cowperthwaite. You should look it up, bozo.

  • Old Mexican||

    There's nothing new in Acemoglu's and Robinson's thesis. Hernando De Soto argued the same thing: that more liberal institutions that better protected property [i.e. capital] rights spurred economic development in those countries that enjoyed them whereas other countries that had less institutionalized property rights did not enjoy much economic development.

    However, the belief that institutions are akin to capital stands the concept on its head: More liberal institutions simply represent less restriction on people's personal freedoms. Calling this "capital" is like saying the longer chain on a dog is a measure of his "freedom."

    Capital is anything that can be used to transform goods of lesser value into goods of higher value. How the FUCK can one construe the fact that you only have to present two sets of permits in triplicate, instead of SIX sets, to mean "capital"? Only in the mind of the economics ignorant, like some that dwell in MIT.

  • The Derider||

    Because not all government is bad.

  • ||

    That still doesn't make 2 sets of permits instead of 6 = capital.

  • The Derider||

    Let's say the government uses permits to guarantee private property rights. A government that needs two permits is more efficient, marginally, than one that needs six. More efficient institutions embody more capital than less efficient ones, just as more efficient machines embody more capital than less efficient ones.

  • Sevo||

    The Derider|4.10.12 @ 6:45PM|#
    "Let's say the government uses permits to guarantee private property rights."
    Let's say purple is green.
    Try again.

  • The Derider||

    Let's say you're a moron. Better?

  • Sevo||

    The Derider|4.10.12 @ 8:05PM|#
    "Let's say you're a moron. Better?"
    Nope.
    You're a brain-dead ignoramus. That's what we're looking for.

  • The Derider||

    You admit that government has a valid role in protecting private property rights, but you can't imagine how they'd use permits to do that?

    Shut. The. Fuck. Up. You. Moron.

  • Sevo||

    The Derider|4.10.12 @ 8:28PM|#
    "You admit that government has a valid role in protecting private property rights, but you can't imagine how they'd use permits to do that?"

    Oh, I can imagine how an ignoramus could fantasize such.
    Is that enough for you, dipshit?

  • VG Zaytsev||

    You admit that government has a valid role in protecting private property rights, but you can't imagine how they'd use permits to do that?

    Because permits are not the mechanism used to protect private property.

    They are the mechanism used to limit action, usually at an individual level.

    Hint: it's in the name permit -to allow to do something; as in your action is precluded by the threat of force absent the permit.

  • J.Brown||

    Right !
    I would think a title deed in a title office (vehicle registration in a DMV office, &c) would be the basis of ascertaining that one holds property, to be protected by government laws.

  • ||

    Well first I'd say that government is pretty fucked up since that's one of its legitimate functions (and should be provided equally to all citizens). Next I'd say that it still isn't capital.

    "In economics, capital refers to already-produced durable goods used in production of goods or services. The capital goods are not significantly consumed, though they may depreciate in the production process."

  • Sevo||

    The Derider|4.10.12 @ 6:31PM|#
    "Because not all government is bad."
    Wanna borrow a club to beat on that strawman?

  • The Derider||

    If it's not a strawman, what government functions do you think are just and good?

    Protecting private property rights?

  • Sevo||

    The Derider|4.10.12 @ 8:07PM|#
    "Protecting private property rights?"
    Pretty much that.

  • KPres||

    You don't need government to protect property rights, only define them in case of disputes. The market can provide protection.

  • jacob the barbarian||

    While no fan of leviathan I think the market place and protection of property rights would lead to either anarchy or a Gambino style set of fiefdoms. Not a big fan if that either.

  • J.Brown||

    Umm, it is helpful when government defines crimes against property & then arrests, prosecutes those who commit such crimes. Check out, for illustration, Arizona's Title 13 revised statutes & check out mcso.org / mugshots. These are certainly proper functions of government; I don't know if we should expect the 'market' to provide hard protection services.

  • ||

    It's a strawman cause OM never mentioned government or it's inherent "badness".

  • plu1959||

    Do they say anything about (whispers) intelligence?

  • T o n y||

    There is no such thing as an inclusive market without strong liberal government institutions. Liberals and socialists have the best countries on earth as models. Libertarians have promises and excuses.

  • ||

    North Korea, Cuba, Venezuela... all outstanding successes.

  • The Derider||

    Government institutions are a necessary but not sufficient condition for a successful country. Democracy is another -- one those countries lack.

  • Sevo||

    The Derider|4.10.12 @ 7:44PM|#
    "Democracy is another -- one those countries lack."
    Venezuela lacks democracy?

  • The Derider||

    They don't have enough of it, no. It's not some binary condition.

  • Sevo||

    Sorry, Venezuela has entirely too much democracy, and not enough limits on government power.

  • The Derider||

    I agree that Venezuela lacks minority protections and effective separation of powers in its government. If they had them, they'd be a more democratic state than they are currently.

    Democracy isn't just people voting.

  • ||

    I agree that Venezuela lacks minority protections and effective separation of powers in its government. If they had them, they'd be a more democratic state than they are currently.

    Are those goal posts I hear moving? Democracy is a means to an end, not an end itself. If it leads to an erosion of liberty then to hell with democracy.

  • Sevo||

    The Derider|4.10.12 @ 8:27PM|#
    "I agree that Venezuela lacks minority protections and effective separation of powers in its government. If they had them, they'd be a more democratic state than they are currently."

    That's hilarious!

  • KPres||

    "Democracy isn't just people voting."

    Ummmm...yes it is. Things like minority protections, separation of powers are all LIMITS placed on Democracy.

  • T o n y||

    Democracy isn't popular around here. Libertarianism isn't popular in general. Coincidence?

  • ||

    Democracy is two wolves and a sheep deciding what's for dinner.

    Fuck I'm glad we live in a Constitutional Republic with three separate but equal branches (well, at least we're supposed to).

  • VG Zaytsev||

  • Redmanfms||

    The mental gymnastics you go through to justify your position of rule by mob is fucking hilarious.

    In fact, voting is everything in democracy.

    But hey, the mob voted for un-liberty in Venezuela, so obviously it isn't "democracy" because you say so, right.

  • ||

    Wrong, Venezuela may have had too much democracy on the day they elected Hugo, but for years afterwards Venezuela has had far too little. You may argue that this has been changing and the next election might prove that.

    But just because the results are populist (i.e. nationalizations, the occupation of former private buildings for the use of the people, etc) does not mean that they were reached in a democratic manner. No one would vote for Alo Presidente on the radio -- at least no majority. It's all bread and circuses, brought by a dictator.

  • Redmanfms||

    So what you're saying is that a populist who promises to make the rich pay their "fair share" and proffers freebies in return for power *isn't* democratic?

    Quite the contrary, the peasants of Venezuela engaged in a market in which they traded their vote for a perceived gain and Chavez played democracy for exactly how it was constructed. That the trade turned out to be disastrous for the people of Venezuela and liberty just means they made a bad investment. I'm sure if they had turned into some socialist heaven like Sweden, you'd be singing the praises of Castr.... Chavez.

  • J.Brown||

    Perhaps a (r)epublican form of government - complete with bicameral legislature; a separate executive; and separate independant judiciary - is more crucial to success than democracy per se. (remember, 90% voted Ja to Hitler's rule in 1934)

  • KPres||

    "Government institutions are a necessary"

    Nope. Every successful country became so BEFORE they developed those gov't institutions. The truth is that success allows for the inefficiencies of government. You have your cause and effect backwards.

  • J.Brown||

    How successful were the colonists, or should I ask how Free were they to enjoy the fruits of their labor without plunder by the George 3rd regime, before 1776 ? I wonder

  • KPres||

    "Government institutions are a necessary but not sufficient condition for a successful country."

    Not education and health care. History shows those are unnecessary.

  • J.Brown||

    It is supremely reasonable to question the premise that educational & medical services are governmental institutions, ie functions.

  • thirtyandseven||

    See what I mean? It's not actually him; I don't think even Tony was that stupid.

  • Sevo||

    You give shithead entirely too much credit.

  • Sam Grove||

    It can be claimed that big government enables a people to become wealthier.

    A better claim is that a wealthy people can afford a big government.

  • mr simple||

    I think a lot of people missed the point of why the authors were arguing. Strong institutions are important for a free and prosperous society. Institutions are not jus buildings and people and government. Rule of law is an institution. Strong private property rights is an institution. Sound money is an institution. These and other institutions are necessary for exonomic growthI may be just an anonymous poster on the internet, but Pete Boettke argues the same thing, and you're not going to find a more libertarian, Austrian economist currently in the mix.

  • Ron Bailey||

    mr simple: You are basically right. I don't quite understand what is that Derider is apparently claiming. Government has always existed - and until the last couple of centuries in the form of extractive institutions. Government is NOT what needs to be explained -- how to control government so that it is not dominated by elites is the what needs explaining. That is what this book tries to do. BTW, "inclusive institutions" means increased liberty, not more government "services."

  • Sevo||

    Ron Bailey|4.10.12 @ 11:23PM|#
    "I don't quite understand what [it] is that Derider is apparently claiming."
    Uh, I'm pretty sure you do. Derider is simply cherry-picking the words in the book that Derider can find to support the view that an unlimited government is necessary and sufficient for prosperity.

    "BTW, "inclusive institutions" means increased liberty, not more government "services."
    As should be obvious to anyone who accepts the notion of creative destruction. Even the Luddites (using the coercive methods they did) were restrained by a government protecting property and freedoms. Which government, even at that time, was a restricted, limited government.

  • juris imprudent||

    Rule of law is an institution.

    Which is a very roundabout way of saying that cultural standards count. For whatever reason, the authors don't seem interested in that aspect. I would guess because of how they would be shouted down by the diversity-mongers.

  • ||

    Ron

    You are right:

    "For example, ancient Rome ran on slavery; Russia on serfdom, Imperial China strictly limited domestic and foreign commerce; India depended upon hereditary castes; the Ottoman Empire relied on tax farming; Spanish colonies on indigenous labor levies; sub-Saharan Africa on slavery; the American South on slavery and later a form of racial apartheid not all that unlike South Africa’s; and the Soviet Union on collectivized labor and capital. The details of extraction differ but the institutions are organized to chiefly benefit elites."

    And America runs on oil an debt. Our crash will come just as hard as the other pretenders to the secret of prosperity.

  • Sevo||

    "For example, ancient Rome ran on slavery; Russia on serfdom, Imperial China strictly limited domestic and foreign commerce; India depended upon hereditary castes; the Ottoman Empire relied on tax farming; Spanish colonies on indigenous labor levies; sub-Saharan Africa on slavery; the American South on slavery and later a form of racial apartheid not all that unlike South Africa’s; and the Soviet Union on collectivized labor and capital. The details of extraction differ but the institutions are organized to chiefly benefit elites."
    Cite for quote, please.

  • OC in DC||

    What is BAD about poverty. We need it. Everything is not equal, people are not equal. Without poverty we can't have more. If anything the problem is too much equality between labor and capital in the US. We could use a more pliant labor force. Breaking people down to accept deals is the first step. Labor solved poverty and broke our constitution, freedom is most important in economics. And you do have to crack a few eggs.

  • OC in DC||

    What is BAD about poverty. We need it. Everything is not equal, people are not equal. Without poverty we can't have more. If anything the problem is too much equality between labor and capital in the US. We could use a more pliant labor force. Breaking people down to accept deals is the first step. Labor solved poverty and broke our constitution, freedom is most important in economics. And you do have to crack a few eggs.

  • Sevo||

    C- troll.
    Ignores article, throws out strawmen with not a hint of anything like consciousness.
    Sorry, make is a D.

  • J.Brown||

    Breaking down people to accept deals. You mean like the Germans did to the Poles, Sept 1939 ?

    We could do without the war in the streets. It should be understood by labor that if it's too costly for business to set up or keep shop where they are - business stops or goes elswhere.

    People who hope to work for a living in US (or Canada for that matter) while hollering , roughly, Eat the Rich - not stopping to ask "Hey, why is everthing on the store shelves stamped Made in China ?" - perplex me.

    Perhaps come 2013 (if Obama / Dems are voted Out Nov 12) the Wagner Act could be repealed, the NLRB could be shuttered. After that a pliant labor force may follow.

  • NotSure||

    Hilarious how the Derider considers Venezuela not a democracy, when it did everything he believes in. A government of the majority taking wealth from the rich for the poor. And no, democracy is only a government of the majority. If the government defies the wishes of the majority it is no longer a democracy, you cannot have it both ways a government that follows the wishes of the majority as long as it adheres to his liberal wish list.

  • ||

    No TRUE Scotsman Democracy...

  • Loki||

    honest bureaucracies

    oxymoron

  • Cloudbuster||

    Hernando de Soto already wrote this book a dozen years ago. "The Mystery of Capital: Why Capitalism Triumphs in the West and Fails Everywhere Else"

    http://www.amazon.com/The-Myst.....487&sr=8-1

  • ||

    From reading the review it sounds like old hat .... and been written about before as others have pointed out. De Soto's masterwork being just one of several. What I disagree with (from the review alone) is that the book seems to apply some agency or evil intent to the actions of the ruling elite: that the purposefully squash economic advancement as a risk to their power when I suspect it's the reverse. By squashing things that threaten their power (rule of law rather over them; power sharing; rise of competing institutions) they inadvertently squash development. One could argue that development started first and helped institutions emerge and it was the fact that the powers that were at the time simply accommodated them. Whether because they failed to see the risk or that they actually perceived the benefits, we do not know.

  • ||

    I was stuck in a do loop on this sentence for about 30 seconds. "The three begin by explaining that central problem confronted by societies encompassing more than a few hundred people is how to deal with the problem of violence."

    I'm guessing there's a "the" missing between the bold words?

  • دردشه عراقية||

    Thanks

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