SEVERAL CENTURIES ago, there was a nation that rose to become a world power on the strength of its innovation and its dedication to capitalist enterprise. It became a major center of trade, a financial powerhouse whose name was well known across the planet. It was blessed with an unusual society that rewarded talent and hard work, not social position – one of the few places where a person who had nothing could realistically dream of a far better life. And then this vibrant place, the envy of the world, suddenly collapsed. Its economy shrank; its people left.
The place was Venice, and if it is hard to imagine the charming tourist destination was once one of the richest places on the Earth, then that is precisely what MIT economist Daron Acemoglu wants me to understand. I had come to the Sloan School of Management cafeteria, its tall windows framing the Charles River, for coffee and a discussion of his favorite topic – why nations fail.
It is a question that has intrigued people for thousands of years, but now Acemoglu and Harvard’s James Robinson offer an answer in an ambitious new book. Their theory, the fruit of a long intellectual partnership and research that digs back to the origins of agriculture, explains why some countries succeed and others do not, why some are awash in prosperity, while others are consumed by poverty and suffering. It explains how a city-state like Venice can rise to prominence, then quickly fail. And it offers a chastening message about the prospects for our own country.
So why do nations fail? Acemoglu has a one-word answer: “Politics.”
What this means, he explains, is that nations succeed in the long term when they are able to share power broadly. They either develop inclusive institutions or “extractive institutions,” designed to plunder wealth for the few.
Throughout history, says Acemoglu, “the great struggle is between the masses and elites who seek to capture the government and put it to their own uses.”
It is a less obvious answer, with more surprising implications, than is immediately apparent.
To begin with, consider the factors that the two reject. Geography, for example, has long been a favorite explanation for the success of nations. Some places are blessed with natural advantages, while others are not. Certainly, sitting on coveted goods brings great wealth: witness Saudi Arabia or, for that matter, Russia. But over the long reach of history, geography fails to explain which nations have staying power. One can make a convincing list of all the geographical benefits that have accrued to the United States, but when Europeans first arrived in the 15th century, it was South America, not North, that was rich and (relatively) thickly settled.
Culture is also not an answer. Loose theories about a nation’s work ethic are not well supported by the data, the book argues. Of course there is some interplay between culture and a society’s institutions, but it is in the latter, not in some supposed general spirit of diligence or indolence, where a country’s future is forged.
Their book, “Why Nations Fail,” holds implications for the future of geopolitics. For example, China’s seemingly unstoppable growth is bound to hit a ceiling.
But for Americans, the most important thing to know is that past performance is no guarantee of future success. In the haunting story of Venice, a monied elite managed to take more and more political power, limiting opportunities for the general population so they could feed at the trough, sabotaging the future. This has happened many times, in many places.
Acemoglu gives the example of Facebook, which required not just Mark Zuckerberg, but a specific set of circumstances to become a business. And one of the first of those conditions was educational opportunity. In Uzbekistan, Acemoglu says, the children go to school, but they are required to pick cotton because this enriches the nation’s leadership.
“There could be several Mark Zuckerbergs in Uzbekistan,” Acemoglu says, “but they will never see the light of day because they have wasted their most formative years picking cotton.”
The United States is not in any imminent danger of converting its schools into work camps, but one cannot help but be alarmed. Economic inequality is marching upward, and, historically, this tends to spill over into political disenfranchisement. Money is becoming an increasingly powerful force in American politics. Whatever the constitutional merits of the Supreme Court’s Citizens United decision, the new era of the super PACs looks, from the perspective of world history, like a very familiar kind of disaster about to unfold.
This country has righted itself before – after the widespread graft of the Civil War era, after the Gilded Age. Both the Tea Party and Occupy Wall Street, flawed as they may be, are at least encouraging signs that people will resist the capture of our two major political parties by monied elites. Yet we live in a dangerous time.
As Acemoglu spoke with me, the sun streamed in and students noisily milled around. I couldn’t help but wonder if one of them had a great idea that might be benefiting us all in a few years. These students require opportunity, and they’ll require more of it.
By any historical standard, the United States has achieved greatness. We cannot forget what brought us here.