February 25, 2013 7:01 pm
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”.
By contrast, political debate in the US is too often captive to procedures and principles that get in the way of pragmatic solutions – whether it is the “right to bear arms”, or an insistence on Congress’s right to veto a rise in the debt ceiling.
There are many reasons why nations can fail. The complacent worship of a dysfunctional political system could be one of them.