MALE SPEAKER: Thanks
everybody for coming.
I'm very pleased to
introduce Dr. James Robinson,
a university professor at the
Harris School of Public Policy
at University of Chicago.
Prior to his work in Chicago,
he was a professor of government
at Harvard University.
He's a distinguished scholar
of comparative economics
and political development
with a focus on the long run.
His book "Why Nations
Fail" is a summary
of nearly 20 years of academic
research and publications.
Its central theme is that
the economic fate of nations
is determined by
their institutions.
Today, when you look
around the world,
there are enormous
differences in income
per capita, development
outcomes, life expectancy,
education, and other measures
of human development.
Professor Robinson
proposes a framework
for understanding
these differences.
And importantly, this
framework is also
used to examine
patterns of development
to better understand the
historical context of today's
inequality.
So please join me in welcoming
Professor James Robinson.
JAMES ROBINSON: OK,
thanks very much.
So I'm gonna give a half
hour version of the book,
"Why Nations Fail," and then I
think people can ask questions
and things like that.
So there's lots of different
ways of talking about this.
I'll introduce the
argument in the book.
And in the book,
the first chapter
is about the long run history
of North America and South
America, and why North
America ended up so different
from South America.
But that takes a bit of time to
get into to do justice to it.
So I find in a short
talk the easiest way
to explain everything
that the book is
about is to look
at this photograph
of the Korean
peninsula at night.
And you can see quite a
few things about this.
Because in South Korea,
there's lots of electricity,
and light bulbs.
And it's very bright.
And North Korea is very dark.
You can see a little spot
of light there in Pyongyang.
It's probably the presidential
compound in Pyongyang.
The previous president, he used
to have a big wave machine.
So you probably need
a lot of electricity
to drive a wave
machine and light bulbs
to light you while you're
surfing or whatever.
So anyway, so you can see that.
There's a lot of electricity
and light in South Korea,
and not very much
in North Korea.
And this is a very interesting
proxy for economic success.
Most unsuccessful
countries in the world,
economically, if
you look at them
at night, sub-Saharan
Africa, they're very black.
There's a lot of electricity
and light bulbs in South Korea.
North Korea has
the level of income
per capita prosperity of a
sub-Saharan African country.
South Korea is one of the
most successful economies
in the world in the
last 40, 50 years.
It's a member of the OECD.
So what's the difference between
an economically successful
country, like South Korea, and
an economically unsuccessful
country, like North Korea?
So that's what
the book is about.
The book is called
"Why Nations Fail."
Fail is an ambiguous
word, but it's
really about comparative
economic development,
and trying to propose a
simple way of thinking
about these differences.
And you could be sitting
there thinking, well,
we know the difference between
North Korea and South Korea.
North Korea is a
communist country,
and South Korea is a
capitalist country.
But that's not
the generalization
we make in the book.
And I don't think it's a
very useful generalization,
actually.
A country like North
Korea, though it
might be avowedly
communist, actually has
a lot in common with nearly
every poor country that
doesn't say it's communist or
doesn't claim to be communist.
So that's not going to
be the distinction, OK?
So what is the difference
between North Korea and South
Korea?
Well, South Korea has a
lot of technology, OK?
So here you can see it
has electricity and light
bulbs, not very new technology,
but it has a lot of technology.
And economists have
known since the work
of Robert Solow in
the 1950s that what
drives economic development
over the long run is innovation.
So I don't need to say that
to people sitting in Google,
I guess.
It's all about innovation,
about new technologies,
raising living standards,
raising productivity.
So what Solow showed
is that that drove long
run economic development.
And if you look around
the world today,
and you say what's
the difference
in some kind of accounting
sense between poor countries
and rich countries, it's
that poor countries just
don't use all of
this technology that
has such incredibly positive
consequences for living
standards and productivity.
Like, they don't use electricity
and light bulbs in North Korea.
OK?
So
Why is that?
It's not something mysterious.
I mentioned light
bulbs and electricity
being around a long time.
It's not that Google
just invented it,
and the North Koreans
haven't heard about it yet.
So this has been around
for a long, long time,
but somehow they
just don't use it.
So why is that?
Well, the book provides a simple
way of thinking about that.
And going back to innovation
and technological change,
what Robert Solow called
total factor productivity,
makes you ask what drives
these differences between North
Korea and South Korea?
And that's got something
to do with the way
the economy is organized.
So, yes, I said it's not about
socialism and capitalism,
but it is about the way
these different countries are
organized.
What's interesting
about the Korean case,
of course, is that North Korea
and South Korea were pretty
similar 50, 60 years ago.
So this divergence is
not some deep, long run
historical thing.
It's something that
happened pretty recently.
And the most obvious reason,
I think, why it happened
is that North and South
Korea got organized
in very different ways.
The economy got organized
in very different ways.
And in South Korea,
a society emerged
where there were incentives
and opportunities for people
who wanted to
innovate, who wanted
to create new technologies.
And in North Korea, there
were neither incentives
nor opportunities
for anyone who wanted
to do anything like that.
So I think the
communism-socialism captures
some idea about
opportunities and incentives,
but the whole problem is
much different from that,
and much more general than
communism versus capitalism.
So big differences in
economic development,
big differences in
the use of technology,
big differences in people's
incentives and opportunities.
I'm gonna come back also to
the last layer of it, which
is gonna be, how come
North Korea and South
Korea got organized like that?
How come in South Korea a
society got organized which
created incentives and
opportunities for people
to innovate and adopt technology
and North Korea didn't?
And that's also,
obviously, something
to do with the politics
of those societies.
So in the book, the book is
about comparative economic
development.
It says, there's
these layers of trying
to understand comparative
economic development.
There's the economic
layer, innovation,
technological change,
what induces that?
What creates very
different patterns
of that in different countries?
But then lying behind that is a
deeper question in some sense,
which is why is it that
some societies got organized
in a way that creates
incentives and opportunities,
and other societies
didn't, or don't?
So maybe I shouldn't show who
this gentleman is in Google,
but I couldn't resist
the temptation.
Let me give you
another example which
does come up in the first book.
So I talked about it
in the first chapter.
I talked about North
Korea, South Korea.
Let me give you
another example we use,
which has got us into a bit
of trouble, which is the two
richest men in the world.
I know fortunes go up and down,
but they're usually up there
in the top three or four--
Bill Gates and Carlos
Slim in Mexico.
So what we get you to think
about in the first chapter
of the book is it's very telling
to understand why the United
States is more economically
successful than Mexico,
say, to think about how
Carlos Slim and Bill
Gates made their money.
Bill Gates made his
money by innovating.
This picture is
very significant.
I'm gonna come back
to it in a second.
Bill Gates made his
money by innovating.
Carlos Slim made his
money with monopolies.
Bill Gates, he made a
fortune, but he also
created a lot of wealth
for other people.
He created lots of
positive externalities
in the computer industry.
So he created a lot
more wealth than he
himself was able to grab.
Carlos Slim,
according to the OECD,
reduced GDP in Mexico
by about 2% a year.
So this is a very conservative
kind of deadweight.
For the economists in the room,
deadweight losses of monopoly
reduces the Mexican
GDP by about 2% a year.
So he actually reduced GDP in
Mexico, according to the OECD,
by more than his own fortune.
So it's not just a matter of
taking wealth from Mexicans
and giving it to him.
It's actually reducing
income in Mexico.
So in the US, innovation,
you make a lot of money.
It has all these spillovers.
In Mexico, the way to make
money is not through innovation.
The way to make money
is to get monopolies,
and that actually
makes you very rich,
but it actually reduces the
prosperity of the society.
So this is the United
States and Mexico,
but I want you to think
this is really what goes on
in North Korea and South Korea.
In both cases, you have
economies, some of which
are designed to create
incentives and opportunities
for innovation, but
other ones where you have
very different incentives,
very different opportunities,
with very different
consequences for the economy.
Now, I said Carlos
Slim was a monopolist
and Bill Gates was an innovator.
But of course, this
is not about people.
This is about systems.
Bill Gates wanted to
be a monopolist too.
Everyone wants to
be a monopolist.
Professors want to be
intellectual monopolists.
Google, heaven forbid,
they'd probably
like to be a monopolist too,
if they could get away with it.
But this is Bill
Gates giving evidence
to the US antitrust authorities.
This is, I swear to tell
the truth, the whole truth,
and nothing but the truth.
So here politics starts
seeping in as well.
So it's not just that there's
incentives and opportunities
in some places and
not in other places,
but there's a
system, what we call
institutions in social science.
There's a system of institutions
that creates and sustains
those incentives and
those opportunities.
And that involves, in
this case, the state.
It involves the implementation
of antitrust policy,
and that's an old
story in the US.
This is a contemporary
cartoon from early
in the last century, the octopus
of the Standard Oil Company.
So the Standard Oil Company was
one of the big, famous trusts,
Rockefeller's trust.
And here it is,
with its tentacles
around Congress and
the White House.
And this was the robber
barons, the first age
of great monopolization
in the US economy
in the late 19th century.
And what as the consequence
of the robber barons?
The consequence was
the origin of antitrust
and indeed, the
Standard Oil Company
was broken up by US antitrust as
was Bell Telephones, et cetera,
subsequently.
So there's an old history of
fighting against monopolies
in the US, and sustaining an
institutional environment which
creates these incentives
and opportunities.
So in the book, I'm
painting a dichotomy here.
The world's more complicated.
There's lots of
nuances and gray areas.
But just for the
sake of the argument,
it's helpful to think of two
different types of societies,
societies where somehow
things get organized,
institutions get
organized in a way
which creates these
incentives and opportunities.
That creates innovation.
It creates prosperity.
And there's other places
where things work differently.
Maybe it's Mexico.
Maybe it's North Korea.
Maybe it's the
Democratic Republic
of the Congo, where I
do a lot of research.
Part of the story with
electricity, of course,
is it's not just the
private sector or innovation
in the private sector,
but the public sector
has to be incentivized
to provide
basic public goods, like roads.
So this is what they call
interstate number one.
This is one of the main highways
in the Democratic Republic
of Congo.
Now, the government
doesn't bother
providing any infrastructure.
You can see what this is like.
This is the dry season.
You have to dig yourself
out every kilometer or so.
If it was the wet season, you
wouldn't be going anywhere.
So this is an even
more dramatic failure
in terms of provision of basic
public goods and services
than you'd find in North Korea.
So we put some labels on these
different economic systems.
We say, what is it that South
Korea and the United States
has in common with
other prosperous places?
It has these economic
institutions,
rules that incentivize people,
and create opportunities.
And we call them inclusive.
So we say if you think about
the economy, what's common
in these places
is that they have
inclusive economic institutions.
So why this word inclusive?
So let me go back
to the light bulb.
So here's Edison's patent
for the light bulb.
So I have one thing in
common with Thomas Edison.
He had very bad hearing.
He had very bad hearing as well.
So that's probably
the only thing
I have in common
with Thomas Edison.
So Edison patented the
light bulb in 1880.
Now, patents are very
interesting things.
Patents are very
closely connected
to incentivizing innovation.
Patents have a long history.
Patents were in the
US Constitution.
The first patent
board met in 1790.
It was so important that
Thomas Jefferson was on it.
So what was so important
about the patents
and giving out
patents and stuff?
Well, it was about creating
incentives for innovation.
Innovation creates
positive externalities.
So any person thinking
about innovating
is never gonna benefit
from all the wealth
that they create because
of these externalities.
So the idea here was, patents
bring the private return
to innovation closer
to the social return.
Now, what's
particularly interesting
about patents is if you study
who took out patents in the US,
historically, like who was
it that took out patents?
And what's interesting about the
social background of patentees
is that they come from all
over the social spectrum.
So I don't know if people
have an analysis of who
works for Google, but
economic historians
did an analysis of 19th
century patenting in the US.
And what they showed was,
who took out patents?
Artisans, farmers,
elites, non-elites,
professional people,
uneducated people.
Thomas Edison hardly had
any formal schooling.
He was basically home
schooled by his mother.
I'm not advocating
lack of schooling
as a strategy for
innovation, but I'm just
saying talent,
ideas, creativity,
that's spread out very
broadly in society.
You don't know where that is.
So you need to create a
system which can harness
all of that latent talent.
And this was part of the system.
And why the word inclusive?
Well, because you need to
include everybody in this.
Patenting, it didn't
matter who you were.
You could take out a patent.
You paid a fee, and the
state enforced your patent.
The government
enforced your patent
like the government
enforced antitrust.
This inspired this word
inclusive in the research
we do, but that's
the economics of it.
If you want to have innovation,
you want to have prosperity,
you need to have these
inclusive economic institutions.
What's the opposite of that?
Well, extractive
economic institutions.
That's what they
have in North Korea,
or that's what they
have in Mexico.
You could say, North
Korea and Mexico,
those place are really
different, aren't they?
Well, yeah, they are.
But what one thing we do
in the book is to say,
if you look at poor
countries in the world today,
they look terribly different.
Uzbekistan, North
Korea, Sierra Leone,
Columbia, what do those
places have in common?
All the details look
different, but this idea
of extractive institutions
or inclusive institutions
is supposed to say, yes,
all these details look very
different, but actually, from
the economic point of view,
they all have this
consequence of blocking
talent and creativity.
So that's the economics of it.
But what's more
interesting, I think,
and more innovative, at least
academically, is to say,
but you need to get beyond that.
We need to ask why
was it that in the US
they were so obsessed with
setting up this patent system?
Or, why was it they
created a state
that was able to enforce
antitrust, and drag the richest
man in the world into a court?
Why was it that the US created
such a political society,
or such a set of
political institutions?
So we emphasize,
again, something
which is obvious from
the Korean example, which
is lying behind these
different economic systems
are different political
systems somehow.
So what creates inclusive
economic institutions
are inclusive
political institutions.
And what creates extracting
economic institutions
are extractive
political institutions.
So we emphasize two dimensions
of political institutions,
both of which will come up in--
I was gonna say the discussion,
but it's not a discussion.
It's more like a pontification.
So why was it?
What does it take?
I'm asking what does it take
to create an inclusive economy?
What does it take to create
a patent system which
is open to everybody
on the same terms,
with a state which can
come along and enforce
that system once it's set up?
Well, we emphasize two
dimensions of that, one,
which is really something
like state capacity,
or we call it political
centralization, which
is that what happened in
the United States was,
they created a state,
a model state, which
was able to enforce rules.
So this is a crucial
part of having
inclusive economic institutions.
A problem in the
Congo, for example,
is the Congo doesn't have
a state, which is actually
capable of raising resources
or enforcing rules.
The state doesn't exist.
The state is so corrupt and
patrimonial and ineffective,
so that's part of the story.
The other thing we emphasize
is that political power
has to be broadly
distributed in society.
So the reason that the
patent system got set up
the way it did in
the United States
is because the
United States in 1790
wasn't the modern democracy in
the way political scientists
would describe it.
But it was a situation
where political power
was very broadly based
in society, at least
amongst adult males.
So power was too
broadly distributed
to create some
oligarchic patent system.
So these are the two elements
of inclusive political
institutions.
So when those things fail, when
you either have a weak state
or you lack a state, or
political power is narrowly
concentrated, that's
a situation where
we say you have extractive
political institutions.
So here's an example
of extractive political
institutions.
It's a fun example.
President Mugabe, who's
been President of Zimbabwe
since 1980, you might know he's
a very successful politician.
He's also a very lucky man.
He won the lottery here.
So that's impressive.
He's the President, and
he wins the lottery.
So here's a situation
where there's
a very narrow concentration
of political power.
There's a lack of
accountability.
That's not a
circumstance in which
you're gonna get inclusive
economic institutions.
So if you were gonna put the
whole thesis in a matrix--
they wouldn't let us
put this in the book.
This was too complicated.
No, no.
You can't put that in the book.
But it's very useful
when you give talks.
Again, this dichotomy
is very simplistic,
and I'm happy to
talk about nuance.
But the idea is to say,
think about the matrix.
Then poor countries,
where are poor countries?
Poor countries are in
this cell of the matrix
here, with extractive
economic institutions
underpinned by extractive
political institutions.
Economically
successful countries
are in the cell of
the matrix where
there's inclusive
economic institutions.
That drives innovation,
drives growth.
But they have to be underpinned
by inclusive political
institutions.
So what about the off diagonals?
Well, what we say
about the off diagonals
is that the off
diagonals are unstable.
We emphasize a lot of
the sort of stability
of extractive-extractive
and the stability
of inclusive-inclusive.
There's lots of feedback
loops, that once you
get an extractive
society set up,
it tends to persist over time.
And once you get an
inclusive society set up,
that tends to persist
over time as well.
So those states are
pretty persistent.
But the off diagonals
are unstable.
For example, you think about a
transition from an extractive
to a more inclusive
society, South Africa.
In 1994, South Africa moved
to a much more inclusive
political society.
Black people got to vote,
instead of just white people,
and Nelson Mandela
was elected president.
So that's like going
from a situation where
you had extractive political
institutions to inclusive
political institutions.
Now, what did the
economy in South Africa
look like before then?
Well, it was something
called Apartheid.
And Apartheid was
a massive system
to benefit white people at
the expense of Africans.
There was a labor
market in Apartheid,
and the labor market essentially
massively discriminated
against black people in
favor of white people.
Until the early 1980s, there was
something called the color bar,
and the color bar was a
huge list of occupations
that only white people could
undertake that black people
couldn't undertake.
But the point is,
imagine you transition
from extractive
political institutions
to inclusive political
institutions,
like they did after 1994.
You've got this
extractive economy.
Those two things can't coexist.
You can't have an economy which
is extractive and discriminates
against black people, when
suddenly black people have
political power.
So then extractive economy
crumbles, and then you
move in that direction.
It's a little bit
more complicated
than that in South Africa,
but that's the idea.
So what about the
other off diagonal?
Well, you could think
of China, for example.
How does China fit
into this theory?
Well, in the 1970s,
China was here.
It had extractive
economic institutions.
It had extractive
political institutions.
It was a poor, technologically
backward place.
Starting in 1978, they started
moving economic institutions
in a more inclusive direction.
So the whole way you'd think
about Chinese economic growth
in the context of
this theory would
be, Chinese economic
growth is exactly
induced by this movement
towards more inclusive
economic institutions.
So the whole deregulation
of agriculture,
the household
responsibility system,
that was about creating
incentives in agriculture.
What was the consequence?
Massive increase in
agricultural productivity.
That spread to the industrial
sector in the 1980s.
But what does the theory say?
The theory says,
the Chinese moved
from having extractive
to inclusive
economic institutions.
They didn't move the same
way South Africa did.
They moved in this
direction, but they
maintained their extractive
political institutions.
So we say, well,
that can't happen.
You can't have an
inclusive economy
underpinned by extractive
political institutions.
And what we tried
to do in the book
is to give lots of
historical examples
to suggest that narrowly
concentrated political power
always ends up getting abused
at the expense of the economy.
So fundamentally
underpinning things
like the rule of
law or something
like a patent system
which is open to everybody
on the same terms, that's
got to be underpinned
by inclusive political
institutions.
Otherwise, it can't last.
So that's the basic idea.
And then we used
this matrix-- we
don't have the matrix in the
book-- we used the matrix
to basically talk
about what does it
take to transition from
an extractive society
to an inclusive society?
So there's no one
way of doing it.
If you look at different
cases, historically,
different societies have
moved from extractive
to inclusive in different ways.
But I guess we do emphasize
very much the politics of this,
that this way of thinking
suggests that poverty is really
a political problem.
It's not an engineering,
technical problem.
The problem in
Congo or North Korea
is not that people
don't know that if they
used all this wonderful
technology, et cetera,
they'd be much richer.
It's that the way
things are organized
doesn't create
incentives for people
to use that technology
or opportunity.
There's no incentive to be a
businessman in North Korea.
You can't be a businessman
because businessmen are just
not tolerated.
In the Congo, you
could be a businessman,
but if you became
a businessman, you
might get predated
on by the state
or predated on by other people.
The state doesn't provide
any complementary inputs
or public goods.
The money gets stolen by the
politicians such as it is.
So there's just many elements
of extractive economic and
political institutions, which
means if you're in the Congo,
you just can't make money
as a businessperson.
There's just no
way you can do it
in that institutional
environment.
So how do you
solve that problem?
Our perspective is, sure
there are cases where somebody
has come along and said,
like Deng Xiaoping,
let's move the economy.
Let's move the economy
in this direction,
and stuff is going to happen.
And there are examples of that.
But what we try to
argue in the book
is that the more
enduring path to having
a really consolidated,
inclusive society,
and prosperous society, is
that political change precedes
economic change.
So the story in the
British case, for example,
historically in Britain,
is very much like the story
I gave in South Africa, which
is that political transition,
political institutions
became much more inclusive,
and that drove
much more inclusion
in the economic sphere.
So if you are asking,
how do I think
about solving the economic
problems of a poor country
like Colombia or the Democratic
Republic of the Congo, I'd say
you have to focus
on the politics.
You have to think about trying
to make political institutions
more inclusive.
Of course, that's a
difficult thing to do,
because there's a good reason
why political institutions are
extractive.
States tend to be dysfunctional
in poor countries,
because states are used
as a way of organizing
power and authority.
And obviously, narrowly
based political power
is not given away,
usually for a good reason.
In the case of South
Africa, why was it
South Africa became much
more democratic in 1994?
That was not because
white people woke up one
day and said, oh my
god, this is terrible.
We've been discriminating
against all these black people.
It's shocking.
We've got to do
something about it.
They gave away political power,
because they were forced to,
and because the whole white
society in South Africa
became unsustainable because
of international pressure,
because of domestic
mobilization by black people.
So we emphasize a
lot of conflict.
There's a lot of conflict
over institutions.
And typically, transition
from extractive to inclusive
institutions involves
a lot of conflict.
So this is a theory of the world
where poor countries are poor,
but there's a lot of people who
have interest in that system.
In North Korea, there's a
personalized dictatorship.
It's the Communist
Party, but it's
very personalized
as well, which has
a big interest in that
system, and can't see
how it could be running a
different type of society.
And that's true in most
poor countries as well.
So there's a lot
of interest in it,
and that's the thing which makes
a transition from extractive
to inclusive a difficult
problem to solve,
because it's fundamentally
a political problem, not
an economic problem.
It's not a matter of
hiring better economists
from the University of
Chicago or Harvard University
to come up with some
clever solution.
There's fundamental political
conflicts in society
that have to be resolved
or overcome in order
to reorganize the economy
to make it more prosperous.
AUDIENCE: How do you go from
extractive both political and
economic institutions?
I get the sense you can't
just do it stepwise.
You can't start with the
political institutions becoming
inclusive, and then
economic just follows suit.
I mean, presumably it has to
happen simultaneously, right?
You're gonna change
some institutions,
and then you bring in
foreign investment,
or there's domestic
innovation, and then
you start to change
other institutions.
There's a feedback
loop, or is it
just everything happens
at once politically,
and then the economics follows?
JAMES ROBINSON: I'm not
sure anything happens
that quickly, but I think
that we emphasize very much
this idea that if
you can move to more
inclusive political
institutions,
then the economy will tend
to naturally sort itself out.
So you could
imagine that there's
feedback from the economy
to political institutions.
But I guess our academic
researchers has always
led us to be very
skeptical about that.
So for example, one of
the reasons we emphasize
that in the bottom the bottom
left cell of the matrix, where
you move to a more inclusive
economy but politics
stays extractive,
you could say, well,
moving to an inclusive
economy, doesn't that
naturally tend to push
more political inclusion?
But I do think that's
actually true in the data.
So that's something that
political scientists called
the modernization
hypothesis, this idea
that economic development
tends to promote democracy,
or it tends to promote
political inclusion.
But that's actually
not true in the data.
We did a lot of
research on this.
If you look in the
postwar period or even
the longer period
of time, there's
no tendency for countries
which grow faster
to become more democratic.
We just plot the data.
It's just a cloud.
So we we're very skeptical about
this idea of modernization.
We don't think there's
any natural tendency
for economic
development on its own
to promote political
inclusion, so that's
why I guess we don't emphasize
the feedback that you're
talking about, and
why we emphasize
these political dynamics.
What we do emphasize a lot is
that political change, what
looks like political
change, doesn't necessarily
lead to a more inclusive
political society.
So we use this terminology
from sociology.
We call it the Iron
Law of Oligarchy,
which is this idea that there
may be political change,
but political change is
usually just one elite
replacing another elite.
Think about Egypt.
Think about the Arab
Spring in Egypt.
What did that do?
Nothing.
It just led to a
rotation of elites,
but the whole system
basically stayed the same.
So think about Latin America.
Latin America, it's like the
continent of revolutions,
but revolutions
just tend to rotate
who's running the
country rather than
lead to fundamental
institutional change.
So we talk a lot about
that type of change,
and what sort of things
precipitate real change
to more inclusive
political institutions.
But we don't emphasize
the feedback you're
discussing for that reason.
AUDIENCE: Are there
examples of countries
that have escaped
from the lower right?
And is a country always the
right level of a generality?
Is it sometimes
a smaller portion
of a country or a larger region?
JAMES ROBINSON: Yeah,
so that's a good point.
So the country may
not necessarily
be the right focus at all.
So in the book,
we talk about lots
of different sub-regional cases,
like in the US, for example.
I mean, there's a huge
variation in the US.
Think about the US South.
So we talk about the US
South, and why was it
the US South was much
poorer, historically,
than the rest of the country?
Why did it stay poor
until the 1950s?
And that's because of
extractive institutions.
And then those extractive
institutions disintegrated.
But probably thinking about
sub-national variations
is very important for thinking
about how stuff changes.
Because often you can imagine
that some stuff changes.
Like if you think about Brazil
in some sense, parts of Brazil
changed a lot at a very
local level, Porto Alegre,
and then those things scaled
up to a national level,
and people took the model
that worked in Porto Alegre,
and then they tried to
expand it in other places.
So I think thinking about
sub-national variations
is interesting
intellectually, but also
maybe in understanding
transitions it's important,
because sometimes things
start in a much smaller way,
and then they spread
through learning,
or some sort of diffusion.
So I think you're
right about that.
The country is not necessary
the right level to look at.
And in the book,
we certainly talk
about lots of examples of
sub-national variation.
It's just that a lot of
the debate in economics
tends to take place at
this national level,
even though both
things are interesting.
AUDIENCE: So considering
China for a second,
you mentioned how there's
this economic inclusiveness
with political-- what was it?
JAMES ROBINSON: Extractiveness.
AUDIENCE: Extractiveness,
so that makes sense.
You have these entrepreneurs
who have made large companies,
have made huge
fortunes, and then you
have journalists
who get prosecuted
for commenting on the stock
market or something like that.
So it seems like
you have innovation
in the private sector,
like building companies,
whereas there's stagnation
imposed by the government.
So to what extent do you
think that innovation
in one of those areas is
dependent on the other?
If one is being
suppressed, whereas one
seems to be performing better?
JAMES ROBINSON: I mean, I would
say China's been so successful,
because it's able to
borrow or appropriate ideas
and technologies, which
were created somewhere else.
In the 1970s, it was
just extremely backwards,
and it's been very
successful at just
borrowing all of these things.
It's much more difficult
to actually create
innovation yourself than to
borrow it from somewhere else.
So I guess I would say this
impulse of the Communist Party
to suffocate anything that
looks vaguely threatening
to it politically
is fundamentally
inconsistent with having the
kind of innovation in society.
That would be my perspective.
So they're much more
interested in keeping control.
So information is dangerous,
and people talking is dangerous,
and whatever.
And you want to suppress that.
I don't see how that's
consistent with having
an innovative society.
So I think the model they
have only works at some point.
I mean, China's so large, it's
easy to sit there and think,
oh, that can't be right,
because it's so large,
and it's just so impressive.
But in the book, we use the
example of the Soviet Union.
Some people here are
probably as old as I am.
I mean, when I was an
undergraduate in England,
we learned that the one really
big economic success story
of the century was
the Soviet Union.
If you wanted to have rapid
economic growth-- I'm serious.
This is the early 1980s.
I'm serious.
If you want to have
rapid economic growth,
you have an economy organized
like the Soviet Union.
Now, you're a young guy, so
you'd laugh at that idea now,
but it was actually enshrined
in every economics textbook
up until the late 1980s.
In Paul Samuelson's
economic textbook,
there was a graph
showing when the Soviet
Union was gonna overtake the
US in terms of GDP per capita.
It started in the
late 1950s, and then
when they rewrote the book,
every subsequent addition
it would move five
years to the right.
So it was 1975, then
it was '80, then
it was '85, that it was '90.
And then that graph
disappeared from the book.
And then 10 years
later, it came back
with the Soviet Union
replaced by China.
So I think there's lots of
differences between China
and the Soviet Union.
The Soviet Union
never got to export,
and exporting is a good
constraint on quality
and things like that.
So the Chinese have done
stuff that the Soviets
didn't manage to do.
But it's worth reminding
ourselves that for 40 years,
everyone was completely
convinced that the Soviet
Union had this wonderful
model of economic development
and success.
And everyone was convinced.
The CIA was convinced.
The Soviet Union, the Soviet
leadership was convinced.
So we use that example
not because it looks just
like China, but just to
say as a reality check.
because China is so big, and
it's been growing so rapidly,
so this theory can't be right.
Of course, the
theory at this level
is way too vague and
imprecise to actually make
some sort of prediction about--
I wouldn't be stupid enough
to make some predictions about
when things will go wrong
in China.
And if you think
about the Arab Spring,
it's terribly difficult
to predict when
these things will collapse.
When I was a graduate student,
I had all these friends
who were sovietologists, who
were in their late 20s, who
were planning a long academic
career studying the Soviet
Union.
And then suddenly the Soviet
Union didn't exist anymore.
So academics are very bad at
predicting stuff like that.
So that's my point
about innovation.
It just seems to
me that the thing
that the Communist Party
are really interested in
is keeping power.
And eventually,
that's going to run
into what you need to do to
have economic prosperity.
And I think this issue of
innovation is the crux of it.
I don't know what's
gonna happen,
whether China will just
converge to some level of income
per capita and stay there,
but that's beyond my--
AUDIENCE: I'd also like to
ask about China, but not China
today, but about ancient China.
Because I believe that up until
the Industrial Revolution,
China one might say was
the technologically most
advanced place in the world.
And the innovation also didn't
come from somewhere else,
right?
But at the same time,
China has always
been a place with an emperor.
It's not a democratic system
since maybe 4,000 years ago.
And so there seems to be a
disagreement there as well.
And I wonder how does
that fit into your theory.
JAMES ROBINSON:
Yeah, so one thing
that's interesting
about China, one reason
why China's able
to do what it does
is that they are able
to tap into this very
long history of centralized
authority in China.
As I said, I work
in the DRC a lot,
and I got to know the
prime minister in the DRC.
And he keeps on asking me,
what about the Chinese model?
Couldn't we be using the
Chinese model in the DRC?
And then I said, why don't
you just get the people
from the Chinese embassy
to come and tell you
what that model is?
And he says oh, they won't.
They just want to do business.
They won't talk about ideas.
But you tell me.
And I said, well,
here's what they did
in 1978 in the rural sector.
They reorganized
property rights.
They did all of this stuff.
If you wanted to do that in
Congo, could you do that?
He said, no.
No, of course we can't.
How could we do that?
We don't have that.
We could pass a law, but
no one would do anything.
So there's this element
in China that there
is this history of
state centralization,
a system of authority,
bureaucracy,
that can actually move
society in a particular way
if it wants to.
But I think the
example you give shows
the limitation of this model.
The consensus amongst
historians, as I understand it,
is that the reason that all this
innovation went into reverse
after the Song Period in China
is because the state decided
it was too destabilizing.
They banned
interoceanic shipping.
There was a regress
in favor of stability
rather than innovation.
There are historians
who disagree with that,
but one of the standard
explanations for why China
was so technologically advanced
but then went into reverse
is that the state turned
against innovation,
and it turned against mercantile
trade, and other things.
It moved everybody
from the coast.
It preferred political
stability rather than
having a more
innovative society.
So that example would be
consistent with this idea
that the same thing
is going to happen.
But I do think it's interesting.
Why is it that you have all
this economic development
in East Asia that you don't
see in sub-Saharan Africa
or other parts of the world?
I think that does
have a lot to do
with the nature of the
state, that South Korea had
a history, again, of
bureaucracy and state authority
that allows it to do
stuff that you could never
achieve in the Congo or
some African country.
AUDIENCE: Which would you
say has a better track
record among developing
nations, democracy
or authoritarian government?
Because there are plenty of
examples of young democracies
that do poorly, and
authoritarian governments,
like Singapore,
China, and Russia
for the last 10 years that
have led to substantial growth.
JAMES ROBINSON:
Well, what the data
says is that, on average,
democracies grow faster.
In the postwar period,
democracies on average
grow faster than dictatorships.
So that's the data says.
You could say there's a lot
of heterogeneity in the data,
meaning there are some
sorts of dictatorships
that do better than democracies,
or some types of democracies.
But I think Russia is
doing well, because it
has lots of natural resources.
I don't think there's
any other reason why
Russia is doing well.
I think there are these
examples from East
Asia of successful so-called
developmental dictatorships,
but I think that has a lot to
do with what I'm talking about.
If you look at Africa,
for example, and you say,
what are the parts of Africa
that are doing well today?
That's Rwanda.
Why is that?
Because Rwanda is more
or less the one country
in sub-Saharan Africa where
a very bureaucratized,
pre-colonial state emerged
as a post-colonial nation.
So if you've been to Rwanda,
anyone's been to Rwanda,
people obey the rules in Rwanda.
People don't cross except when
the little person is green.
It's not like a normal
African country.
It's a place with a lot
of centralized authority,
and it has been for a long time.
So that, to me, is like
an East Asian country.
The government in
Rwanda is able to tap
into this history of political
centralization and authority,
which is part of what you need
to have economic development.
But they don't have
the other part.
They don't have the
pluralistic part.
it's a very militarized,
autocratic version
of development.
So I would say that's
not a sustainable
model of development.
So I think if you
look in the data,
you can find examples
of dictatorships
that do well economically,
at least for some periods.
And that's because
they're in places
where you have some history of
centralization of authority.
But what I'm saying here is
that's not a sustainable model.
The Singaporean case, that's
a very anomalous case.
Most dictatorships don't
look like Singapore.
Why emphasize Singapore?
Why not emphasize
the Philippines?
Why not emphasize Japan?
Japan was really economically
successful after the Second
World War when it became
much more inclusive.
So there's a lot of
heterogeneity within East Asia.
And I would say the
balance of the evidence
suggests that in
some circumstances,
you can have rapid growth
under dictatorial regimes,
but it's in very
specific circumstances,
and it doesn't last.
Well, in the Singaporean
case, it did,
but that's constructing a theory
from the [? error ?] term,
it seems to me.
AUDIENCE: Many of the
institutions you talked about
as being important for the
inclusivity in the United
States seem to be weakening.
Like, it's very expensive
now to participate
in the patent system, both
to file and to defend.
The government doesn't
seem to get involved
in defending patents very much.
There were no penalties
imposed on Microsoft
for acting in a
monopolistic fashion,
and then you have
other monopolies
like broadband monopolies
that remain well protected.
JAMES ROBINSON: Yeah.
AUDIENCE: Is there much research
on societies that transition
from an inclusive to
an extractive state?
So
JAMES ROBINSON: We talk
a little bit about that
historically in the book.
We give this example of Venice.
Venice was probably the
most prosperous part-- maybe
it wasn't as
innovative as China,
but at least it was the
most prosperous part
of Europe in the Middle Ages.
And then Venice became
this economic backwater,
exactly because of
its institutions.
Basically, it lost all
this inclusiveness.
It put it all into reverse.
So I think in the
book, we emphasize
that in any inclusive society,
that's always incentives
to make stuff more extractive.
if you can get away
with it, there's
always going to be
incentives for people
to do that-- set up
monopolies, to make connections
and politicians.
And that's what Rockefeller,
and Vanderbilt, and all
these characters
were trying to do.
But as we just emphasize
there's feedback.
In an inclusive society,
there's feedback
which tends to stop that.
In the US, there's
a lot of concern
about whether things are
working much less well than they
used to in the past.
There's very interesting
research at the moment,
actually, by some guys at
Michigan about big investment
funds.
The investment funds buy up
shares and lots of different--
and there's a study
of investment funds,
like BlackRock, who bought
up lots of airline companies,
showing that when they
started investing in airlines,
multiple airlines, the
airline prices all went up,
because they could coordinate
collusion between the airlines.
So I don't know how big
in the world that is.
I usually find myself--
it's very difficult for me
to talk about
questions like that.
I think these are really
legitimate questions.
I find it difficult for
me to talk about it,
because I spend most of my time
working in Africa and Colombia
and places like that.
And after you've been
in Congo for a summer,
and you come back to
the United States,
you just think everything
is so functional here.
It's very difficult for me to be
objective about the challenges
that people face in the US.
So I don't want
to belittle them.
And that's also Raj Chetty,
my former colleague at Harvard
who just moved to
Stanford, who's
been looking at this question
of the social background
of patentees today.
So let's look at who
takes out patents today,
how rich were they,
where did they
come from, what was their
social background, et cetera,
et cetera.
So that's a very
interesting project
to try to revisit this more
historical work in the US,
and ask the question, with all
these problems about patents
and stuff now that
you're alluding to,
if we asked the same
question today in the US,
what does it look
like, historically,
or has something really changed
in a more oligarchic way?
So I don't really know what
the findings of that research
is, but again, if you saw
something very different,
you'd be concerned.
But I guess the
big picture I see,
if you talk to Harvard
undergraduates--
I don't know about
Chicago undergraduates,
but Chicago undergraduates
want to be like Schopenhauer
or Heidegger or somebody.
But Harvard undergraduates, they
all just want to be innovators.
They want to do some startup.
There's still very
much this focus
on innovation and creativity.
So that seems to be
a good sign, I think.
AUDIENCE: Thanks.
And thanks for the talk and
the nice Q&A. I'm wondering.
I work on international
product analytics myself.
With our team, we try
to understand countries,
their development
potential, and how
we can help countries to develop
on a technological front.
How would you measure
the political situation
in a country and the
political setting?
How would you
recommend to do that?
And what I wanna say
is that, our offer
is that it seems
to be relatively
easy to read economic data.
And then you have
all these numbers,
and you have percentages.
But it seems to be much
more difficult to read
the political element here.
And if I was to answer, just to
put us into a simple situation,
if I was to answer which
countries is more extractive,
India or Indonesia, how would
you find an answer to that?
JAMES ROBINSON:
Well, I think you'd
have to weigh different things.
So if you're going
to be more practical,
if you're going to talk
about a particular country,
then you have to weight
different things, not just
in terms of how
democratic you are,
but what's the
quality of democracy,
and how does democracy work?
That seems to be
incredibly important.
You can get some political
science data set,
and they'll say all these
countries are listed
as democracy, but democracy
works in very different ways
in different countries, and
it puts much more or much less
pressure.
That's much more accountability
in some contexts,
or there's much more emphasis
on public good provision,
or there could be
much more vote buying,
or much more clientelism.
So you need to look at,
I guess, the quality.
We emphasize here this issue
of how political power is
distributed in society, but
if you look at democracy,
it's not just about democracy
versus dictatorship.
There's massively varying
quality of democracy.
Even dictatorships vary a lot.
But I guess I would
also emphasize
the issue of the state, the
state capacity, the capacity
of the state.
So India does have at
least this tradition
at the top of immense
bureaucratic capacity.
Of course, at the bottom,
it can be very different,
but it does have-- so I guess
you'd have to pull apart
the state, and the strengths
and weaknesses of the state,
and the strengths and weaknesses
of the democratic system,
and how those two
things interact.
I mean, there are databases.
There's databases on the
effectiveness of the state,
or how bureaucratized
the state is.
I don't know how well they
capture any particular case,
but the devil, I guess, is
in the details of these two
dimensions and how
they fit together.
The Indonesian case is
an interesting case also,
where there was period of
desire to promote development.
And they brought in
capacity from Berkeley,
if I remember correctly,
the Berkeley boys.
They had the Berkeley
boys in Indonesia,
where there wasn't
really democracy,
but there was an impulse
coming from the top
to push development.
But again, that wasn't
a very sustainable model
it turned out.
But now they have a different, a
much more open political system
now.
But I guess, anyway--
AUDIENCE: It would be nice
for them to measure it right?
JAMES ROBINSON: Yeah, I
mean, there is work on that,
but you're right.
It's very little
compared to what work
goes into economic indicators.
And it's not a sexy
activity in academia either.
You're creating this
massive public good, which
everyone is free-riding off.
So it's difficult to
get people to fund that,
and it's difficult to get people
to put a lot of effort into it.
I mean, people asked us.
I'm equally to blame.
People have asked us.
You should put together some
indices of how inclusive
and how extractive
countries are.
And I guess we're nervous.
We're nervous about doing that.
But maybe there's no
professional return
to doing it either.
I don't know the thinking
why we haven't done it.
I guess we haven't
done it, because we're
not-- we're not in the business
of selling some product, Darren
and I. We're
academic scribblers,
as John Maynard Keynes said.
So I'm not interested in running
around the world consulting.
So maybe I'm worried that if
we look like we have a product,
people will want us
to start providing it.
And that's not
what we do, really.
But I understand
the point that it
would be much better to have--
thinking about the state
and the way the
state works, there's
precious little comparative
evidence on stuff like that.
There's attempts by
sociologists to do it,
but there's a paucity
of data on that.
I agree.
AUDIENCE: I've got this.
I'm visiting here.
I'm visiting from Papua New
Guinea, where my wife is
working in development work.
And that's perhaps too
complex and distant
from your own
experience, but there
are a couple of countries
close to where you've
worked in Africa, and
I'm thinking of Zambia,
and I'm thinking of Botswana.
And I'm just
wondering if you feel
you know enough about
those countries to use them
as examples about how to go
from what is more inclusive now
politically in both to
something which is less poor.
Zambia in particular is
very deeply, deeply poor.
And it's one of the great
challenges of development
in that country, is to
try to develop policies
that will lift more than an
elite out of that deep poverty.
JAMES ROBINSON: Yeah.
I don't know that
much about Zambia,
but I know a lot about Botswana.
I did a lot of
research in Botswana.
We talk about
Botswana in the book,
about why is Botswana
different, and why has Botswana
been so successful?
And I think that
that has a lot to do
with historical differences.
Like Rwanda, Botswana is
not a place historically,
in the 19th century
before colonialism came,
it didn't have one centralized,
uniform political system,
but it had a group of political
systems, these Tswana tribes,
that had the same
types of institutions.
There were all culturally
and historically related
to each other.
And so they had
centralized authority.
They had bureaucracy.
They had accountability, also.
Botswana's very interesting.
Botswana hasn't just been
successful since 1965.
It was very successful in
the 19th century, also.
So they had a long
period of innovation.
They understood that
the whites were coming,
and this was a problem,
and they needed
to start innovating and changing
and all to cope with that.
So I think the story
in Botswana is,
yeah, it's a very
interesting story of how they
had these historical
institutions which had elements
of centralization,
of accountability,
and they modernized those.
So if you go to
Gaborone, in Gabarone,
when they built
Gaborone, they built it
from scratch at the time
just before independence,
because the British ruled
them from South Africa,
from Mafeking and Vryburg.
What they did was, they
built this new city,
but they incorporated all
the traditional elements
into the city.
So they took these kgotlas,
these traditional meeting
places and they built
kgotlas in Gaborone.
And they're still doing it now.
I was just there last
November, actually.
And so they modernized
tradition at the same time
as preserving it.
But I think those
traditional institutions
they created a lot
of accountability
on these post-independent
politicians in Botswana.
If you read, like,
Seretse Khama, who
was the first president,
his biography,
he'd go around the country
justifying his policies
and explaining why
they were doing stuff.
What African president did
that after independence?
They might have gone
around throwing money out
of the window of
their car or something
like Mobutu used to do.
But trying to get
people on board,
and trying to create some
consensus about what they were
going to do, I think
that's very much
because of the way authority
worked in traditional Tswana
society.
But I think what's interesting
about it is the way they
modernized this tradition.
They kept the best bits of it.
How were they able to do that?
Well, they didn't get screwed
up by British colonialism
for one thing.
British colonialism messed
up lots of similar types
of institutions all over.
Like in Lozi
Barotse, for example,
who had very similar
types of institutions.
Or even Lesotho, who
were ethnically related
to the Tswana, they screwed up.
Lesotho just got
screwed up by becoming--
can I say that on camera?
They became a labor recruiting
ground for the mines
in Johannesburg.
So I think colonialism
distorted all of these things.
But I think that's
the story of Botswana.
I was recently in Abu Dhabi.
And it's interesting.
In Abu Dhabi, they're
trying to do the same thing.
They're trying to
modernize tradition.
They had this traditional
organization of the sheikdom,
and all these tribes,
and et cetera.
And they've taken
that, and they tried
to map it onto a modern
state, which I thought
was absolutely fascinating.
So the tribes get
ministries now.
So instead of just getting
handouts from the sheik,
they've recreated the system.
I don't know if it's
gonna work, but it's
absolutely fascinating.
I mean, it's not so
different-- I mean,
the details are different,
of course, but at some level,
the spirit of it is
quite similar to what
they did in Botswana.
Of course, there's much
less accountability,
I think, in the traditional
state in Abu Dhabi
than there was in Botswana.
But anyway, I think that sounds
like a very idiosyncratic story
about why Botswana did
well, how they managed
to build inclusive
institutions, how they managed
to build-- that has a lot to do
with having an effective state,
also.
There's a lot of inequality.
If you've been to Botswana,
it's a quite oligarchic place.
There's a lot of
hierarchy, and there's
a lot of deference towards
elites in Botswana.
So think that's
still an elements
of these inclusive institutions
that maybe is not there.
And maybe that's one reason why
Botswana has done very well.
It has a state.
It takes natural resources.
It uses the natural resources
to provide public goods,
and there's enough
accountability
to make that work.
But there's other
elements of inclusion
that don't work very well.
Chile is like that.
I always say Botswana
is very much like Chile.
Chile has a long history
of state centralization.
It has a state which is able
to take the natural resource
wealth and use it to provide
public goods, and build roads,
and stuff like that.
But also Chile is a
ridiculously oligarchic society.
If you go to Santiago, everyone
is married to everybody else.
They went to four
Catholic boys schools,
and there's an
enormous impediment
to broader inclusion.
There's enough accountability
so that the system works,
and the money
doesn't get stolen,
and public goods get
provided, but there's
a big barrier to going to
the next level of really
not becoming a Latin American,
but becoming something
different.
That's very hard, because
it's so oligarghic.
I think Botswana is
a bit like that too.
But Zambia, I don't know
so much about Zambia.
I mean, that story
about Botswana,
it sounds very idiosyncratic.
And I think the world is
a bit like that, though.
I think that there's
many different paths
to inclusive institutions
and extractive institutions.
If you think historically,
it's difficult to say
there's some well defined
basin of attraction,
where if you're here, then
you're gonna become inclusive.
If you're there, you're
gonna become extractive.
Somehow there's a lot
of idiosyncratic ways
that countries built
inclusive institutions,
amd how Botswana
did it looks very
different from the way
Britain did historically,
or Sweden for that
matter, or even the US.
MALE SPEAKER: Let's
thank Professor Robinson
for a great talk.
[APPLAUSE]
