Economy
Related: About this forumWhy Some Countries Go Bust
By his own admission, Daron Acemoglu is a slightly pudgy and fairly nerdy guy with an unpronounceable last name. But when I mentioned that I was interviewing him to two econ buffs, they each gasped and said, I love Daron Acemoglu, as if I were talking about Keith Richards. The Turkish M.I.T. professor who, right now, is about as hot as economists get acquired his renown for serious advances in answering the single most important question in his profession, the same one that compelled Adam Smith to write The Wealth of Nations: why are some countries rich while others are poor?
Over the centuries, proposed answers have varied greatly. Smith declared that the difference between wealth and poverty resulted from the relative freedom of the markets; Thomas Malthus said poverty comes from overpopulation; and John Maynard Keynes claimed it was a byproduct of a lack of technocrats. (Of course, everyone knows that politicians love listening to wonky bureaucrats!) Jeffrey Sachs, one of the worlds most famous economists, asserts that poor soil, lack of navigable rivers and tropical diseases are, in part, to blame. Others point to culture, geography, climate, colonization and military might. The list goes on.
But through a series of legendary and somewhat controversial academic papers published over the past decade, Acemoglu has persuasively challenged many of the previous theories. (If poverty were primarily the result of geography, say, or an unfortunate history, how can we account for the successes of Botswana, Costa Rica or Thailand?) Now, in their new book, Why Nations Fail, Acemoglu and his collaborator, James Robinson, argue that the wealth of a country is most closely correlated with the degree to which the average person shares in the overall growth of its economy. Its an idea that was first raised by Smith but was then largely ignored for centuries as economics became focused on theoretical models of ideal economies rather than the not-at-all-ideal problems of real nations.
Consider Acemoglus idea from the perspective of a poor farmer. In parts of modern sub-Saharan Africa, as was true in medieval Europe or the antebellum South, the people who work the fields lack any incentive to improve their yield because any surplus is taken by the wealthy elite. This mind-set changes only when farmers are given strong property rights and discover that they can profit from extra production. In 1978, China began allowing farmers to benefit from any surplus they produced. The decision, most economists agree, helped spark the countrys astounding growth.
http://www.nytimes.com/2012/03/18/magazine/why-countries-go-bust.html?nl=todaysheadlines&emc=edit_th_20120318
dkf
(37,305 posts)Everyone needs a profit motive to excel.
Except teachers?
1StrongBlackMan
(31,849 posts)And couldn't help but think, "well, duh!"
But it seems that the authors are pulling back the curtain on the primary failing of capitalism - that the political system, that which should serve as a check to/on the economic system is/has been co-opted by those with economic power.
"Acemoglu and Robinsons frequent collaborator Simon Johnson, the former chief economist at the International Monetary Fund, told me that financial firms have so thoroughly co-opted the political process that the American economy has become fundamentally unsound. Its bad and getting worse, he told me. Barring some major shift in our political system, he suggested, the United States could be on its way to serious economic failure."
I found it interesting that Johnson (formerly of the IMF) would support Acemoglu and Robinson's work/conclusions, while having worked to impose the exact opposite "solution" to global economics.
It has been my understanding that the IMF has, in recent times, opted for austerity programming and top-down turn-around strategies.
groovedaddy
(6,229 posts)n/t
1StrongBlackMan
(31,849 posts)I was thinking about Greece ... and attempting to avoid any absolutionist objections.
mbperrin
(7,672 posts)That is how a country with few resources, but many factories and imported resources, like England, were wealthy in 1776, while countries with many resources, but no factories, like the Congo, were desperately poor.
But yes, if people do not share in the production of a country, why produce?