The Extractive Institutions in US
March 15, 2012 6:54 AM Subscribe
Why Nations Fail
posted by kliuless (78 comments total)
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- In a nutshell
: "Proximately, prosperity is generated by investment and innovation, but these are acts of faith: investors and innovators must have credible reasons to think that, if successful, they will not be plundered by the powerful
. For the polity to provide such reassurance, two conditions have to hold: power has to be centralised and the institutions of power have to be inclusive."
Their explanation is that if the institutions of power enable the elite to serve its own interest – a structure they term "extractive institutions" – the interests of the elite come to collide with, and prevail over, those of the mass of the population. So, if inclusive institutions are necessary, how do they come about? Again, Acemoglu and Robinson are radical. They argue that there is no natural process... Rather, it is only in the interest of the elite to cede power to inclusive institutions if confronted by something even worse, namely the prospect of revolution. The foundations of prosperity are political struggle against privilege.
Daron Acemoglu on Inequality
- "When political power is very unequally distributed, it will inevitably be the case that those who have the political power will start using it to create a non-level playing field for themselves... money has started becoming much more important in politics. Politicians have become much more responsive to the wishes and the views and the voice of the very wealthy... by getting rid of regulation, by reducing their tax rates, by getting subsidies for their businesses and so on. That's the big picture
. The finance industry is the best exhibit for that
story... What's to blame are the institutions. We have let our institutions fail."
Francis Fukuyama on Governance
- "I would argue that the quality of governance in the U.S. tends to be low precisely because of a continuing tradition of Jacksonian populism
. Americans with their democratic roots generally do not trust elite bureaucrats to the extent that the French, Germans, British, or Japanese have in years past. This distrust leads to micromanagement by Congress through proliferating rules and complex, self-contradictory legislative mandates which make poor quality governance a self-fulfilling prophecy. The U.S. is thus caught in a low-level equilibrium trap, in which a hobbled bureaucracy validates everyone's view that the government can't do anything competently."
Matthew Yglesias on Rents
- "I've come to think that we're more broadly transitioning
into a rentier economy
in which metaphorical intellectual property rents, literal land rents (which though not relevant for the purposes of the book also involve natural resources like oil and gas), and the quasi-rents associated with air pollution and too big to fail banking are immiserating