Book Review: Why Nations Fail
By Catriona Ross for the Sunday Times:
So, our cool country might have launched National Braai Day, Madiba’s 67 Minutes campaign, Lead SA and the Proudly South African concept, and we’re one of the few places on our continent where the ATMs work, but if the 2012 Happy Planet Index is anything to go by, life for the ordinary South African is comparatively short and stressful.
Recent data show our average life expectancy (52.8 years) resembles that of a Zimbabwean (51.4 years) – and Robert Mugabe’s subjects even score a notch higher for “experienced wellbeing”: us 4.7; them 4.8.
Has the dream of a wealthy, all-singing, all-dancing Rainbow Nation been rained out so swiftly? If we’re buckling under the strain of crime, unemployment, education in crisis, HIV/Aids, corruption, service non-delivery, and intermittent talk of land grabs, how can we start feeling like the economic powerhouse we want to be?
In Why Nations Fail: The Origins of Power, Prosperity and Poverty (Profile Books), Daron Acemoglu, MIT economics professor, and James A. Robinson, a professor of government at Harvard, explore this question: what makes a nation rich or poor? Why is South Korea 10 times wealthier than its neighbour, North Korea? Why is the average US citizen 20 times richer than the average inhabitant of sub-Saharan Africa?
This blockbuster blend of economics, politics and history blasts away popular theories on poverty. (If you believe certain tropical countries are poor because the people can survive on mangoes and therefore need not plan for cold winters, please read it.)
A country’s wealth, the authors conclude, isn’t determined by culture, geography or ignorance. For instance, the real reason farmers in the Kingdom of the Kongo failed to adopt the wheel and the plough, promoted during Portuguese missions to the country in 1491 and 1512, was a lack of incentive: farmers faced a high risk of all their output being expropriated and taxed by the king. These technologies might have drastically increased the wealth of today’s Democratic Republic of Congo, as they did in countries with more inclusive institutions, Acemoglu and Robinson argue. The gun, however, was adopted quickly by the Kongolese in the 1500s to capture and export slaves, a thriving industry where fortunes could be made easily.
The unsurprising star ingredient for a rich nation is incentivising people: “To invest and prosper, people need to know that if they work hard, they can make money and actually keep it.” This involves upholding the rule of law – enabling entrepreneurs to conduct business without fear of their ideas, cash, property or profit being stolen – and making it easier for people to turn ideas into businesses.
In the modern world, a rich nation is an educated nation. Where, the authors ask, would Bill Gates, Steve Jobs and Jeff Bezos be without the US schooling system, plus the ability to start companies and hire qualified staff with relative ease, and operate in a competitive market environment? The question of how many possible African Bill Gateses, inventors, scientists and entrepreneurs are working as petrol pump attendants and nannies, or are unemployed and unable to realise their potential, is chilling. Education brings freedom: educated people are able to gravitate towards work for which they have passion and aptitude, and are more likely to be successful.
Political stability and continuity are key. In a wealthy nation the entrepreneur is safe, since laws ensure there’s no risk of “a dictator taking power and changing the rules of the game, expropriating their wealth, imprisoning them, or threatening their lives and livelihoods”.
A democratic political system spawns an inclusive economic system, which leads to long-term prosperity.
The authors hail Botswana for having broken free of the African mould. Then again, Botswana came stone last on the 2012 Happy Planet Index, with a lower experienced wellbeing than ours (3.6), so perhaps wealth isn’t all it’s cracked up to be.
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Apr
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