Why Nations Fail

In early 1966, armed with a letter of introduction, I went to the Harvard offices of Seymour Martin Lipset, arguably at that time the most distinguished political scientist in the USA, if not the world. His offices were simple but extensive. You passed from one to another until you arrived at the real office. He had more books on his shelves in the other offices than had my first university. The great man was most pleasant, affable and prepared to give me time. It must have been what was inside the letter of introduction, whose contents I did not see. Anyway, he asked what I was planning to do with myself. I had a PhD, had been to Oxford and had now spent some most useful time at the Institute for Social Research at the University of Michigan. Lipset was pretty good at survey research himself.

   ‘So you’re planning to do an Australian version of that stuff, are you?’

   I said modestly that I was.

   He didn’t quite explode. ‘No, no, no! That’s all been done!’ (It hadn’t actually, and I was later to do it). ‘What you need to do is to compare Australia and Argentina. They were both at the same stage in the 19^thcentury. Australia has grown and grown. Argentina is a basket case. No one’s done that work, and it’s important!’

   I had never thought of such a project, and had no Spanish except how to ask for beer (for those who need such assistance, ‘podria tomar una cerveza, por favor). A thoroughly thirsty look, raised eyebrows, and the word ‘therevetha, por favor’ will get you a fair way. The Spanish pronunciation gives you ‘th’ for our ‘c’, and the stress is on the second last syllable — vaytha.

   I didn’t in fact do that job, and to the best of my knowledge no-one else has, either. But it is a great question, and it is partly answered in another fascinating book I’ve been reading: Why Nations Fail: the Origins of Power, Prosperity and Poverty, by Acemoglu and Robinson. Oh no, you think, another economists’ bible. But it isn’t. If anything, the authors are political scientists, and their approach is political. Again, this is a long book, but great reading. The general argument I think I know, and knew, but the astonishing detail just filled me with admiration. And the shifts from continent to continent and era to era were no less impressive.

So here is my summary. Some nations succeed, and for a long time. Then slowly, or quickly, something goes wrong. Why? The authors offer three candidate explanations which anyone who is interested in history will have come across. The most popular is the geographic explanation. The successful nations lie in the temperate zone where conditions are just right for agriculture, for animal husbandry and for weather (plenty of rain plus good soils for the most part). You can’t do much in deserts. The authors do a neat job of demolishing that one, though it has a lot going for it. For one thing, the early civilisations were in the torrid zone, and today’s Singapore is hardly temperate.

Culture is the second. Some ‘nations’ just don’t develop a culture that encourages agriculture. They never invent the wheel, for example; they don’t protect and domesticate animals; they get set in hunter-gatherer cultures that work for them. If there are not too many of them, moving from place to place makes good sense; they know where the good food is at the right time. But this strategy keeps birth-rates and population slow, and such ‘nations’ are barely more than tribes. Pre-1788 Australia provides a good example. But other groups in similar situations did learn about domestication, food production and settlements. Why not the indigenous Australians?

Ignorance is the third. Some populations simply don’t ever get it, and continue not to get it. Here there is a mixture of culture and ignorance. The authors point out that similar groups in similar situations do in fact sort it out, and get past ignorance. In those cases what happens then is a growth in wealth for the community.

Who gets the wealth? Ah. The authors distinguish between ‘extractive’ and ’inclusive’ political systems. In the first a small group — elites — gain control and tax the others. They build palaces, tombs, pyramids, and live in a luxurious style. The inclusive system offers everyone, or most people, an opportunity to do their own thing, and to prosper. Most political systems are extractive, but the vibrant, prosperous ones are inclusive. Australia is one, the USA another. So are the ‘Western democracies’. But they were not always like this. England was the first, and it took time and civil unrest to reduce the power of the wealthy and to open trade, both internal and foreign, to anyone who wanted to engage in it. Once this had happened it was impossible for the elites to recapture their former power. More, the political system became increasingly democratic, which increased inclusiveness. Why didn’t Australia become ‘extractive’? Slavery, the source of wealth in the 17th and 18^thcenturies, was not possible — there simply weren’t enough indigenous people, unlike Africa. There was an attempt at a kind of local aristocracy in Australia, but it failed: too many people objected, and their labour was needed everywhere. Inclusiveness won quite quickly. Nonetheless there is still a move towards elites in Australia, people with a great deal of wealth, just as there is in all the inclusive democracies. They see themselves as the real rulers of our country.

What prevents the return of the extractive elites? Democratic elections, a strong central government, the rule of law, and so on. These are more or less embedded in our system. They are not immovable, however, and they need protection. Why doesn’t Somalia, for example, follow our example, and simply copy what we do and have done? First, no strong central government, second, no shared sense of values, third, no decent public service or police force, fourth strong tribal loyalties that are more important than national feeling. Changing this is possible, either through popular demand or through the dominance of one tribal heavy over the others. Both are difficult. The tribal heavy is likely to extract as much wealth as he can, and Somalia is engaged in tribal conflicts as I write. Yet it has been done, and it could be done.

A lot has been done through simply copying, especially where countries are close and cultures are similar. But, to repeat, none of it is easy. The authors have scads of examples to offer, and they are as interesting as the general argument. And why didn’t Argentina succeed like Australia? My guess is that despite enormous foreign investment, fertile land and a lot of immigration, Argentina was beset with local wars and a failure to establish a strong central government that defended inclusiveness. Their rulers throughout the19th century were too keen on extracting as much as they could for themselves. We in Australia have to watch out for the ‘extractors’. They’re always there, waiting.