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Institutes do not make countries richer
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Researchers who proved the Nobel Prize for Economics that “right” institutions contribute to economic prosperity. However, critics argue that the success of Western countries is explained not by the creation of institutions, but by the exploitation of colonized peoples.
Roman Kolevatov talked with economists who criticized the award of the prize, and explains why the introduction of institutions does not make countries richer.
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Vitya ErshovPublication
October 21, 2024
On October 14, the Swedish Academy of Sciences announced the Nobel Prize for Economics. The winners were Daron Ajemoglu, James Robinson and Simon Johnson - authors of influential studies that the well -being of countries directly depends on inclusive institutions such as private property, free trade and honest elections.
After presenting the award, economist Sergei Guriev in an interview with Medusa said that the research of the laureates inspire optimism: they say, and Russia has a chance for a bright future, if such institutions are introduced. In the logic of Russian liberals, authoritarianism and economic backwardness are a direct consequence of the fact that Russia has not accepted liberal democracy built according to Western patterns. But is it so?
The award was criticized by economists who deal with global inequality. They argue that laureates ignore many factors that contribute to the economic rise in the Western countries: primarily genocide of the indigenous peoples, slave trade and uneven development.
Why can not the prosperity of the Western countries explain the “right” institutions and what mistakes did the authors make in their interpretation of historical events?
The most famous book by Ajemoglu and Robinson is eloquently called Why Nations Fail - “Why are nations falling” (in Russian it is from a distance “Why are some countries rich and other poor. The origin of power, prosperity and poverty”). This work, published in 2012, became a bestseller and was translated into 40 languages.
The main idea of the book is that the prosperity of society depends on what institutions prevail in it: extractive or inclusive. When supporting at extractive institutions, the economy is aimed at extracting rent Income received by ownership of any asset. Such income includes income from natural resources, land and intellectual property. . This type of institutions include authoritarian management, monopolies, forced labor, the concentration of economic benefits in the hands of people or associations close to power. This leads to the fact that the economy becomes backward and oligarchic power is being formed.
Conversely, countries become prosperous if inclusive institutions prevail in them, which "allow and, moreover, stimulate the participation of large groups of the population in economic activity." These include protection of private property rights, independent courts, equal opportunities for citizens' participation in economic activity, competitive economy and democratic management.
The current state of most countries around the world, according to Ajemoglu and Robinson, is still associated with what institutions European colonialists built. Where Europeans could settle, they created inclusive institutions that allowed local people to participate in economic activity. In the unequal colonies, Europeans built extractive institutions, pumping out resources from them and forcing the local population to borneal work.
The authors compare the level of well -being of various countries and compare it with two types of colonies. This allows them to conclude that the countries that were settlement colonies turned out to be more successful in economic terms. Economists explain this difference by the presence of inclusive institutions. The problem is that the colonialists have introduced them not everywhere.
How did the Europeans decide where to bring the “right” institutions? Ajemoglu and Robinson explain this, in fact, by geographical reasons: the colonialists settled where they could supplant the indigenous population and not die from local diseases - in particular, in climatically moderate regions. In tropical densely populated areas of local residents, it was more difficult to completely displace or subordinate. Then the metropolis made a choice in favor of an extractive regime.
Laureates call the colonial story a “natural experiment”, which allows you to understand how the well -being of modern countries can be associated with political institutions built by colonialists, as well as the mortality rate of settlers and the size of the indigenous population. The theme of colonization and its benefits becomes central to the work of the winners, but they bypass its negative consequences. In his speech on the occasion of the award, Adjemoglu said :
“Instead of wondering if the colonialism was a positive or negative phenomenon, we focus on how different colonial strategies have led to various institutional characteristics that remain in time.”
One of the researchers who criticizes research by Adjemoglu, Johnson and Robinson - economist Ingrid Kwangrave Associate center for the International Development program and the software director of the undergraduate at the Royal College of London. . In a conversation with me, she notes that laureates ignore the fact that colonial regimes in different countries did not exist separately, but were part of the global system. In particular, the well -being of settlement regimes is directly related to the operation of the unequal colonies.
“Ajemoglu, Johnson and Robinson do not understand at all that capitalism developed in the global north thanks to global processes, such as pumping resources from colonies and a transatlantic slave trade. They consider colonialism as an external impact on a separate society and therefore absolutely miss that capitalism is a global system that is characterized by uneven development. ”
In addition, the authors distort how the settlement colonialism actually looked like, which was not exhausted by the construction of inclusive institutions. Before the protection of property rights appeared in the settlement colonies, this property in the form of land was seized with indigenous residents who lived on it for a long time and used it to satisfy their needs. Kwangraven adds:
“Colonialism in the USA, Canada, New Zealand and Australia was accompanied by massive deprivation of property and violence in relation to indigenous peoples. In these countries, during their development, there was no strong property rights, on the contrary, property violations were widespread. ”
Norwegian economist Eric Rainert Professor of the University of Tallinn and Honorary Professor of the University College of London, an economic historian (unlike, by the way, from the authors of Why Nations Fail) and the author of the book How Rich Countries Got Rich (“How rich countries have become rich and why poor countries remain poor”). He criticizes the laureates for confusing the cause and investigation. Answering my questions, he indicates that institutions do not precede economic development, but act as a solution to problems in the process of this development:
“Most useful institutions are created to solve existing economic problems. The Venetians did not invent “insurance” to engage in distant trade transportation. They already had an extensive and very risky international trade over long distances. The risk was leveled by the fact that 40 people owned 2.5% of the ship and cargo. It was very confusing. Therefore, they created the insurance institution.
Or another example: the Venetians lived in a huge city, which needed to organize ownership. For this purpose, they created Catasto (cadastre) - a system of registration of property rights. This does not mean that they first had a system of property rights, and only then, thanks to its existence, they were able to build a city. ”
In addition, the presence of “correct” institutions alone is not enough for economic growth, which is indicated by both Kwangraven and Rainert. Kwangraven notes that the introduction of inclusive institutions in poor countries will not change the fact of uneven development of global capitalism. Rainert adds that such a picture is ignored by the fact that inclusive institutions begin to function only in those societies that reach a certain level of industry development:
“They ignore that the lack of industrialization is the main cause of poverty . In the 2006 UN report, I wrote : “History shows that only those societies that have reached a certain level of industrial production and/or other types of activities with increasing return have ever reached“ correct ”institutions or any degree of“ competitiveness ”.” Centuries of accumulated experience show that today's slogan “make institutions correct” cannot be embodied in reality without “involving the right types of economic activity”.
In addition, in history there are enough examples of how the countries became rich and avoided poverty traps A position in which poverty is “inherited” from previous generations due to stable self-reproducing social mechanisms. without using the institutions that have developed in the West. These include East Asian countries: Singapore, South Korea, Taiwan and recently China. Political researcher Yuen Yuen Ang in her book “China 's Gilded Age” shows how such a “wrong” institution as corruption did not interfere with Chinese economic development. She criticized the award of the Nobel Prize and noted that the winners could not explain the economic growth not only in the PRC, but also in the West. For example, Yuen Ang notes that in the United States during the most active development, known as the “gilded age” (1870-1890s), corrupt officials felt quite comfortable.
The problem of the ideas of Ademoglu, Johnson and Robinson is that it is not just theory. This is part of the dominant ideology, which also dictates the conditions for the economic development of poor countries. According to this ideology, poor countries need to reduce state control behind the market to a minimum, and self -regulating markets with high external and internal competition themselves will put the economy in order.
Western countries have become rich thanks to state intervention and protectionism, and now they refuse the right to develop such instruments to developing countries
For example, the International Monetary Fund, which provides loans to developing countries, imposes serious conditions on them in the form of removing tariff restrictions and introducing free trade. As a result, instead of economic development, the reverse process takes place: for example, after the collapse of the socialist bloc of Mongolia, following the instructions of the IMF, from an industrial country degraded to the level of shepherd, and in Peru, after similar procedures since the 1970s, the level of salaries catastrophically decreased throughout the country.
A wide layer of research convincingly proves that the Western countries, and then the capitalist countries of Asia have become rich not thanks to free trade and “right” institutions, but thanks to state intervention and protectionism Protectionist restrictions include duties on goods imported into the country (so that they are more expensive, and the goods produced in the country are cheaper), restrictions on the import of certain goods, state subsidies for domestic manufacturers. . So, in the United States, almost throughout their history (from 1816 until the 1960s), tough protectionist restrictions were carried out , primarily high tariffs for imports. This allowed the state to develop its own industry. And now the West refuses the right to such instruments by the developing and poor countries of the global south Mostly former colonies, that is, modern countries of Latin America, Africa and Asia, which were previously under the control of Western countries. .
Ingrid Kwangraveven is not surprised that the economy ignores the structural problems of capitalism and colonialism, because, in her opinion, this science serves the legitimation of the global system. In a conversation with me, she notes that there are many studies of uneven development, including within the framework of Marxist and post -colonial traditions. However, economists, as a rule, ignore them.
“As a result, instead of referring to the structural problems of capitalism and imperialism, such economists are looking for shortcomings in the countries of the global south.”
Russia is a good example of why the import of “right” institutions does not work. The liberals of the 90s, led by Boris Yeltsin, carried out market reforms and built institutions, not focusing on the masses of people. The creation of private property through shock therapy and collateral auctions became more priority than the power of the people. The idea that at first the “right” institutions, and then democracy, freedom and well -being, did not work. The mistake is not that the institutions were transferred somehow wrong, or that they were transferred by some bad people. An error in the very idea.
In order to build a prosperous Russia, we need to figure out how democratic control over the economy may look, which will ensure the equality and well -being of all Russians. To do this, you need to discard the theory, according to which you just need to copy and insert the “right” institutions. Especially when we see that throughout the West these institutions are in a strong crisis, as a result of which authoritarian ultra -right politicians come to power.
In this column, our author understands why you can’t just do it “like in the West”. We think that it is important to discuss such ideas in order to figure out how to get out of the current political impasse. Support us so that we continue to publish such texts.