Titlepage book Waarom sommige landen rijk zijn en andere arm

Waarom sommige landen rijk zijn en andere arm --- Coloured arguments for an intriguing paradigm

Publication: Nieuw Amsterdam Uitgevers (2012, Amsterdam)

First insertion on Heterodoxe Gazet Sam de Wolff: 9 may 2014

E.A. Bakkum is a blogger for the Sociaal Consultatiekantoor. He loves to reflect on the labour movement.

The loyal reader is familiar with the fascination of your reviewer regarding the relation between economic growth and social processes. More than once a search along the shelves of the left-wing bookshop De rooie rat in Utrecht has yielded fascinating literature about this theme. The book Waarom sommige landen rijk zijn en andere arm (English title: Why nations fail) by the professors Daron Acemoglu and James Robinson is also acquired from this goldmine. It is an impressive work (496 pages), which uses a similar approach as the Historical School and the American Institutionalists.

The message of the authors is simple: the national institutions determine the possible welfare of a state. Extractive institutions at best lead to stagnation, whereas inclusive institutions further the durable growth. Although here a distinction is made between the economic institutions (markets and the like) and the political institutions (the administration), yet the essence is that both indissolubly affect each other. Since that theorie is meant to explain the reality, the western states must evidently have inclusive institutions, whereas for instance South America and especially Central Africa have extractive institutions.

The essential difference between the extractive and inclusive systems is the extent of the social input. Extractive political institutions occur under a small ruling elite, such as in the case of feudalism, or of the absolute king. Thanks to her power the elite can exclude the rest of the people from the rule. Usually, and according to the authors always, the elite is seduced into excessively enriching herself. For this purpose she also appropriates the economic power, in the form of monopolies, concessions, and protection. This type of administration is conservative, because the elite obviously does not want to lose its privileges. Other groups remain powerless, unless they first destroy the elite and themselves take over command. Thus violence and oppression become the typical hallmarks.

On the other hand inclusive political institutions are fairly democratic, so that a significant part of the population obtains access to power. The political leaders can not unseemly enrich themselves, because then during elections they would be exchanged for others. They also have insufficient power for making economic concessions to their nearest congenials. Therefore the free market is the characteristic economic institution, which belongs to this type of system. Under inclusive institutions the individuals are incited to compete. It is worth the effort to acquire skills, because everybody can keep the proceeds of their labour1.

Besides, the creative destruction, a term of the economist Joseph Schumpeter, can unfold. That is to say, the entrepreneurs can oust each other from the market due to their own skills. Thus the difference in welfare between the inclusive and extractive systems becomes clear. For, the economic growth requires innovation, and innovation is accompanied by creative destruction. Progress is only possible under inclusive institutions. Under extractive institutions the innovations are blocked. In that case merely extensive growth is possible, by expanding the size of production. That can not continue forever, and must end in stagnation.

This is in a nutshell the paradigm of the authors. For this theoretical expatiation, say, a small 100 pages would have sufficed. However, the impressive size of the book is yet necessary, because the theory about the institutions must still be made plausible. For, other scientists explain the economic welfare by the climate, the geography, or the culture. Therefore Acemoglu and Robinson study tens of old and present civilizations, from all continents, in order to prove that they are right. Such a wide analysis eliminates other possible causes of welfare. The Inca's and Maya's, the Roman empire, the ancient Venice, Ethiopia, Somalia, South-Africa, Botswana, the southern states of North-America, Argentina and many other states are discussed.

The pride of the authors is yet Great Britain, which in their eyes is the textbook case of the development towards inclusive political and economic institutions. In the early Middle Ages England was still feudal, like the rest of Europe. The emancipation started with the Magna Charta of 1215, and via the civil war of 1642 ended in the Glorious revolution of 1688. Thus the development towards inclusion became durable, and became a "positive spiral". It is perfectly logical. This is obviously hopeful for modern people, who believe in the participation of all. Has this indeed ended the clash of ideologies?

The reader will understand: reality is different. The problem is mainly in the examples of reality, that are presented as proofs by the authors. Take for instance the appreciation of Acemoglu and Robinson for the British historical development. In fact the British state has been one of the most rapacious and murderous in human history. During its raids it has made millions of victims, and that continued until the twentieth century. This is charity, aimed at oneself2.

The authors indeed admit, that precisely the British imperialism and colonialism have led to the spread of extractive institutions, in India, the Middle East, and in the Central- and South-African states. Those populations were oppressed and enslaved. The British colonization produced inclusive institutions only in North-America and Australia, albeit just, and at the cost of the native people. Apparently even (especially?) the inclusive systems yet often have strongly extractive traits3.

This somewhat obscured counter-argument shows that the book is certainly not free from dogmatism. Doctrinary tendencies can also be observed in the appreciation, that Acemoglu and Robinson show for the Washington consensus. On p.433 they conclude: "The Washington Consensus is a list of improvements, that the poor states ought to implement". Their only and mild criticism is: "Although many of these reforms can be meaningful in itself, the approach of the international organizations still does not take into account the role of the political institutions and the restrictions, that they impose on policy formation". That judgement is clearly deficient. In truth the Washington Consensus has become discredited. For instance, the economist and Nobel price winner Joseph Stiglitz has given a slashing criticism.

In this regard a comparison is a revelation. In 2003 professor Michel Chossudovsky wrote The globalization of poverty4, a book that in its abundance of facts does not yield to Why nations fail. According to Acemoglu and Robinson, Somalia and Ethiopia would be poor due to their highly extractive institutions. But Chossudovsky shows, that traditionally both states were fairly self-supporting. It were precisely the attempts of the IMF and the Worldbank to force these states to install a more inclusive system, that lead to a general collapse and famines. The poor states are forced to economize in a draconic manner in order to be able to pay their debts to the western banks. Chossudovsky is critical as well about the interference in South-America (Brasil, Peru and Bolivia). Here the so-called inclusive institutions (IMF and Worldbank) also force the concerned states to construct an extractive system.

This does not imply, that Chossudovsky has refuted the inclusion theory. But he does advance incriminating facts, which have not been addressed by Acemoglu and Robinson. Besides, both latter authors have a leaning towards sensation, which improves the readability, but not the credibility. An example: they state that Stalin's rule has caused the death of 40 million people (p.378). Perhaps this is true, but what does it say? Are the victims of the civil war included in that number, or those of the Second Worldwar? This remains vague. Another example: on p.132-134 the authors claim that the Soviet Union has collapsed due to the system of bonuses. Your reviewer has sufficient knowledge about the Leninist system to question this assertion.

Is Waarom sommige landen rijk zijn en andere arm then a failure? No, that judgement would be too harsh. The book gives an interesting illustration of the methods of the Historical School. And in spite of the deficient proof the inclusion theory remains intriguing. And the book contains a wealth of facts, albeit rather one-sided and filtered (but now the reader is warned). Above all the contents shows that the more powerful people can ruthlessly and without scruples exploit their less fortunate subjects. It is worse than one would expect. That insight is essential for all, who want to improve the world in a down-to-earth manner. Indeed, Waarom sommige landen rijk zijn en andere arm can be recommended.

  1. Acemoglu and Robinson reckon also the primitive community of farmers among the inclusive systems, and give various examples. Aar van de Werfhorst describes in his novel De grote stille knecht these types of institutions (p.34): The first thursday after Pentecost, at sunrise, the meeting is held. The judge of the village asks the policeman the usual questions. He says, that the village is dissatisfied with the servant, who works at the farm of Wijnoldt Greven. He has allowed an ox to walk in the [collective EB] corn field and keeps a white goat [forbidden for servants EB]. They already know that! Now the complaints of the farmers accumulate. He is a nuisance for everybody. He roams through the village after dark and the children fear him. It is decided to expel the servant. The writer of the village notes in the large village book: - The servant, who is called the large, quiet one, into the service of the farm of Wijnoldt Greven, is henceforth forbidden to serve in the village. [then the servant starts his own farm in the forest, and finally returns to the village as a farmer. There are opportunities for social mobility EB] (back)
  2. A.B. Kleerekoper cites in the column Effect en effecten from the volume Oproerige krabbels a leading article of the newspaper N.R.C. (p.13): Yesterday on the New York exchange the stock-prices were falling. However, in the afternoon the fall in prices was replaced by rising prices. "The course of affairs in the political world" - thus Reuters telegraphs - appeared to have a positive effect". It is well known what it means, when the New York exchange judges the political developments in a positive manner. The chance of a quick peace is gone. Kleerekoper adds cynically: Alas! friends, what a wonderful fact ... Peace threatens. The prices fall ... In the afternoon the reassurance ... They refuse the peace proposal ... Sighs of relief ... The prices rise again ... A beneficial effect ... (back)
  3. The British history is mirrored in its jokes. For instance, during the invasion of Italy in Abessinia (now Ethiopia) a Brit asks an Italian: "What do you want there?" The Italian replies: "We will modernise the state, and next we will exploit the raw materials". The Brit laughs: "Raw materials? If Abessinia would have raw materials, we English would have captured them long ago!" Or: in Central Africa a British town major is commanded by telegraph to immediately intern all hostile foreigners. Several hours later in London his reply is received by telegraph: "Have arrested seven Dutchmen, four Frenchmen, three Italians, two Americans and one German - stop - Request immediate notice: war with whom?" Incidentally, in England the internal politics is also ruthless. A child asks his grandfather: "What is the difference between a Tory and a Whig?" The grandfather answers: "A Tory is a monarchist and a man of authority, who defends our traditions. A Whig is a revolutionary, in short a treasonous vilain". The child asks: "And what are you, grandfather, a Tory or a Whig?" And: immediately before the elections a man listens to the speeches of three candidates for a seat in parliament. A friend asks him: "And what do you think of them?" The man replies: "I must say: thank God that just one of them can enter parliament!" (back)
  4. See The globalization of poverty and the new world order (2003, Global Research) by M. Chossudovsky. This fascinating book was also acquired while poking about in the bookshop De rooie rat. Your reviewer owes these alert booksellers a great deal. Incidentally, Chossudovsky himself seems to be rather selective in gathering his facts. (back)