West complacent over why nations fail. By Gideon Rachman. Financial Times, February 25, 2013.
Rachman:
The
success of a book can sometimes tell you as much about the times as about the
book itself. That may be the case with Why
Nations Fail, which was published last year to great acclaim from reviewers
and prize juries, and even compared to Adam Smith’s Wealth of Nations.
The
book, by Professors Daron Acemoglu and James Robinson, is certainly erudite and
interesting. But the excited reception for Why
Nations Fail may also have something to do with the fact that its message
is deeply reassuring to many in the west. I finished the book this weekend,
surrounded by newspapers predicting that the US will, this week, slash its
budget so deeply that it puts hundreds of thousands of jobs at risk. Meanwhile,
the Italian elections threaten to reignite the eurozone crisis.
But do
not despair. Hurl the newspapers to one side – and take the long view. Based on
a magpie-like assembly of evidence from many centuries, the authors of Why Nations Fail have concluded that,
for all its difficulties, western-style democracy is the key to long-term
prosperity. The professors argue that countries “such as Great Britain and the
United States became rich because their citizens overthrew the elites who
controlled power and created a society where political rights were much more
broadly distributed”. Professor Ian Morris, a reviewer, summarises their
argument, thus: “It is freedom that makes the world rich.”
In
part, the discrepancy between the newspapers and the thesis of Why Nations Fail is simply a question of
time. The book deals with the evolution of societies over centuries. This
week’s Italian elections and the US sequestration are, by comparison, mere
stitches in the great tapestry of history.
But
that is not quite reassurance enough. The political situations in Italy and the
US have similar, and disturbing, long-term implications. They point to the
tendency of modern democracies to pile up debt by making unaffordable spending
promises to voters, that politicians then cannot wind back.
Investor
confidence in Italy has been restored over the past year by a government led by
Mario Monti, an unelected technocrat. But in the elections, Mr Monti looks
likely to trail in an undistinguished fourth. His reforms won the approval of
the markets – but not of the voters. Similarly, in the US, the bipartisan
Simpson-Bowles commission offered a more rational way of controlling government
spending than the meat axe of the sequestration. But the technocrats’ solution
has failed to pass the political test in Washington.
The
uneasy sense that western democracy is not working very well is heightened by
the counter-example of China’s rapid economic progress. Chinese success
challenges the conventional political wisdom formed after the cold war about
the superiority of democracy as an economic system. China’s ascent also appears
to challenge the insistence of Messrs Acemoglu and Robinson that prosperity can
be secured only by “inclusive” economic institutions, rooted in political
pluralism.
The
professors spend some time grappling with Chinese success in Why Nations Fail and conclude that
“Chinese growth ... is just another form of growth under extractive political
institutions, [and] unlikely to translate into sustained economic development.”
This
seems a remarkably dismissive verdict on almost two generations of double-digit
growth, which has dragged hundreds of millions of people out of poverty and
transformed China into the second-largest economy in the world. Nonetheless, it
reflects a strong tendency in American academia to talk down the rise of China
– and to stress the enduring strengths of the US system.
All of
this might not matter much if the arguments were confined to seminar rooms.
But, in fact, versions of the argument made in Why Nations Fail dominate western political debate. No presidential
election in the US is complete without all candidates paying obeisance to the
idea that “freedom” is not just morally superior – it is also what makes
America strong.
This
unquestioning assumption of the superiority of the American way may, in fact,
be part of what ails the US. I think that Why
Nations Fail makes a strong case that, over the long term, there is a clear
correlation between political freedom and economic success. But, in the US, a
generalised attachment to liberty has somehow turned into an unquestioning
veneration of the constitution that has become almost quasi-religious.
As a
result, Americans may be unable really to address the fact that their political
system is not working well. There is a similar problem in Europe, where the
compulsion to pay homage to the European ideal stopped many politicians from
asking hard, but necessary, questions about the continent’s single currency,
the euro.
The
Chinese system clearly has its own terrible flaws, including brutality and
corrosive corruption. But it has also had the virtue of a radical pragmatism,
captured in Deng Xiaoping’s maxim that “it doesn’t matter if a cat is black or
white, so long as it catches mice.”
