Nobel Prize rewards research
on poor and rich countries
A trio is awarded this year's economics prize
in memory of Alfred Nobel. Daron Acemoglu, Simon Johnson and James A Robinson
have asked why some countries are poor
and others rich. They have found the answer in the colonization of the
Europeans.
Daron Acemoglu, is on video link from Athens
when the award is presented at a press conference at the Royal Academy of
Sciences. - It's a real shock, says Acemoglu, who was, however, among the
pre-selected favourites.
This year's prize is about understanding why
some countries are rich and others poor. To arrive at that, the trio studied
the Europeans' colonization of the world centuries back and what kind of
political and economic institutions were introduced or retained in the various
countries.
The research has been able to show the importance of good social
institutions for a country's prosperity. - It is very important because it
provides a good tool for how to attack poverty and other types of problems that
we see around the world, says Tommy Andersson, professor of economics and
member of the prize committee. According to Andersson, previous theories have
assumed that countries that become rich automatically get democracy.
This year's award winners have shown that it
is often the other way around - that countries
with good institutions often become rich. The research has also shown that
countries that were relatively rich when they were colonized today have
generally ended up in a worse situation than countries that were poor when they
were colonized. - In countries where you could exploit a lot of resources, you
typically introduced institutions that benefited a small elite.
This meant that countries that were previously
rich got exploitative institutions that in the long run turned out to be very
bad for prosperity, says Andersson.
Poorer and more sparsely populated
"colonies gave more space to larger settler colonies.- Europeans who came to those areas wanted to
create a system that certainly benefited themselves, but also benefited others
through better protection of property rights, for example, so they could
invest in their new home countries, says Tommy Andersson.
Institutions
that protected property rights proved to be good for long-term growth. According
to Tommy Andersson, the research has, among other things, influenced several
bodies within the UN. - It is among their 2030 goals to create inclusive
institutions. In that sense, they have contributed to bringing up the
importance of institutions on the agenda, he says. All three prize winners are
active at universities in the United States.
Todde
Also
check: https://axiom1b.blogspot.com/2024/05/we-europeans-are-becoming-tiny-minority.html
The research helps us
understand gaps
Memes?
Weak social institutions are one of the
explanations why some countries continue to be poor. Daron Acemoglu, Simon
Johnson and James A Robinson, who research economic differences, receive this year's
economics award. Why did this trio receive the award?
Today, the richest fifth of the world's
countries are around thirty times richer than the poorest fifth. Although all
countries have become richer in recent decades, the income gap between the richest
and poorest has not decreased. The prize winners' research has helped us
understand why this is the case - i.e. why
some countries are poor and others rich. This was stated by Jan Teorell,
professor of political science at Stockholm University, in connection with the
announcement of this year's economics award.
What explains the large gap between rich and
poor countries? The laureates' research shows that a large part of income differences is due to different countries having
developed different economic and political institutions. Countries with
so-called inclusive institutions – with democracy and protected property rights
(C2) – have become richer than countries with exclusionary institutions that
pose great risks of expropriation and autocracy.
One of the reasons why some countries have
inclusive and others have exclusionary institutions can be traced far back in
time – to differences in what happened in different colonies after Europe
colonized large parts of the world, beginning in the 16th century.
More Europeans moved to colonies with fewer
diseases and lower death rates. This in turn led to the creation of more
inclusive institutions in these colonies. In colonies where fewer Europeans
moved - due to diseases such as malaria and yellow fever - on the contrary,
more exclusionary institutions were formed where the colonial powers usurped
the country's resources at the expense of the local population.
The laureates' research also shows that the
colonies that were the poorest in the 16th century are today the richest, and
vice versa. One of the reasons is that the poorest colonies were more sparsely
populated. This led to more settlers
moving there, which in turn led to the colony gaining more inclusive
institutions.
Over the centuries, all this has led to large
differences between how much the economy has grown in different countries. Is
it not possible to simply introduce inclusive institutions? It's not really
that simple - something that the award winners manage with the so-called
"commitment problem." In
countries without democracy and inclusive institutions, the people will
constantly fear that the assets they may have managed to build up will be
confiscated by the ruling elite, even when the elite promises economic
reforms. It inhibits people's incentive
to create value for themselves, and in turn the country's economic
development and opportunities to grow rich.
The so-called "commitment problem"
is also one of the explanations for why authoritarian states sometimes turn
into democracies. The elite know that the only way for the country to get rid
of the "commitment problem" - and thus become rich - is to introduce
democracy.
Todde
Also
check: https://axiom1b.blogspot.com/2024/02/we-are-good-guys-it-is-excellent-to.html
Poverty is not the fault of
rich countries
The question is whether an economics prize has
ever had such immediate relevance to contemporary issues as the one awarded
this year to Daron Acemoglu, Simon Johnson and James Robinson. Above all,
Acemoglu and Robinson show in their best moments why both the self-hatred of
the left and the complacency of populism are false alternatives. In the
influential book "Why nations fail",
Acemoglu and Robinson show that vocal
parts of the academic left have a fundamental error in their social analysis:
It is not the fault of rich countries that poor countries are poor. For
example, Sweden was not poor in the 19th century because Great Britain was
rich. On the contrary, we could also become rich when we copied reforms such as
freedom of business and democratization. Thanks to these better institutions –
Acemoglu and Robinson call them inclusive – Sweden was able to quickly build
its own prosperity, with good help from other countries that had made, or were
about to make, the same journey.
So we don't have to feel guilty because we
live in a rich country; the wealth we created has not been taken from anyone
else. Most important among these
inclusive institutions is the right to property. It means that you can
trust that you have access to what you have created, also in the future. It
allows us to work for others, sign contracts, invest, give credit and make
business plans to get higher income in the long run. It is in such societies
that prosperity grows.
Poverty is inversely related to the difficulty
of establishing functioning institutions. There
is always a temptation for those in power to seize the resources available,
which undermines ownership and the ability to build wealth in the long term.
Acemoglu and Robinson call it extractive institutions. In their follow-up book
"The Narrow corridor" (Penguin Press), Acemoglu and Robinson show how even strong clans keep societies in
poverty and lack of freedom. But the fact that power is limited by the rule
of law and individual rights such as freedom of speech, and is only on loan
during the term of office until the next election, also makes it difficult for
rulers to enrich themselves and their friends in the short term.
As, among others, Acemoglu and Robinson's
research has helped to show, democracies
therefore generally have better economic development than authoritarian regimes.
Even the extractive logic is unfortunately
highly topical in our time. Namely, it is driving the authoritarian and
populist trend that is sweeping the world. As the author and journalist Anne
Applebaum recently showed in her book "Autocracy Inc" (Allen Lane),
it is precisely the ruling clique's will to enrich themselves (and stay in power) that unites
communist, nationalist and Islamist governments these days. These regimes not only spread unfreedom and
geopolitical instability, but also economic stagnation in societies where it is
easier to plunder.
Acemoglu and Robinson show that, contrary to the notions often found on
left-leaning culture pages, property rights and economic freedom contribute to
creating and underpinning common interests, trust and community.
In addition, they have shown that democracy's division of powers,
equality before the law and individual rights such as freedom of expression are
also important for economic prosperity. In short: We can become richer and
freer - and so can all other countries.
Todde
Also
check: https://axiom1b.blogspot.com/2023/05/overpopulation-and-future-of-mankind.html
