Why Nations Fail

As a follow on to the Bear Skin blog post several weeks ago titled ‘What would Machiavelli Do?‘ comes this short comment on the book “Why Nations Fail” by Daron Acemoglu and James Robinson.

While Niccolo Machiavelli gave a very well thought out treatise on what Princes, or individuals of power, should do to maintain a stable state, Acemoglu and Robinson give a very well thought out treatise on how complex political and economic systems contribute to the prosperity [or failure] of a state.

In brief, their book puts emphasis on the need for centralised power in much the same way Machiavelli does. Their argument is that prosperity is generated by investment and innovation. Without centralised power, there is disorder, which is anathema to investment.

However, for investment and innovation to flourish, entrepreneurs and inventors must have good reasons to think that, if successful, they will not be plundered by the powerful. If the institutions of power enable the elite to serve its own interest – a structure they term “extractive institutions” – these interests ultimately undermine the very innovation and investment necessary for prosperity.

Numerous case studies are listed of both ‘inclusive’ and ‘extractive’ systems of government creating both ‘virtuous circle’ and ‘viscous circle’ of national prosperity or decline. Botswana is lauded as a contemporary example of a nation which has prospered under good leadership. At the critical juncture of independence from colonial rule, wise Botswanan leaders such as its first president, Seretse Khama, [see A United Kingdom] and his Botswana Democratic Party chose democracy over dictatorship and the public interest over private greed. Botswana holds regular elections, has not since had a civil war and enforces property rights. When diamonds were discovered, a far-sighted law ensured that the newfound riches were shared for the national good, not elite gain.

What is of most startling interest when contrasting the two works of political theory and philosophy, is that Machiavelli eschewed ‘morality’ and what ‘should’ be done, in favour of what is most politically expedient while Acemoglu and Robinson seem to be pointing us back to ancient wisdom. Acemoglu and Robinson argue for leadership that cedes short term power and gain for long term national good and which promotes public interest over private greed. Yet they argue for this from economic rather than morally grounded reasons.

This begs the question, do ancient moral codes derive their wisdom from systems thinking? And are they less divinely illuminated and more beholden to insight taken from the consequences of decisions across generations rather than within the lifespan of any individual?

Once could counter Machiavelli on his point:

He who neglects what is done for what ought to be done, sooner effects his ruin than his preservation.

… with the counter wisdom that, one [a ruler] who neglects what ought to be done, sooner effects the ruin of future generations. This alone should give any leader pause to consider their decisions lest their short term success indeed bring about ruin for those who follow.