The Bretton Woods transcripts: available online

Para todos os que se interessam pela história "íntima" (se ouso dizer) de Bretton Woods, aqui vai uma dica:

The Bretton Woods Transcripts

Edited by Kurt Schuler and Andrew Rosenberg

The Transcripts | Did You Know? | Documents and Memorabilia | Blog | The Project
The Bretton Woods Transcripts, edited by Center for Financial Stability (CFS) Senior Fellow Kurt Schuler and CFS Research Associate Andrew Rosenberg, offer the reader a front row seat at the conference that has shaped the international monetary system for nearly 70 years. The Bretton Woods Transcripts were never intended for publication, and give an inside perspective of what participants at this major international gathering said behind closed doors.
The Transcripts reveal an untold story from World War II, as well as the vision of luminaries such as John Maynard Keynes, future presidents, prime ministers, and other world leaders. Despite a war still waging in 1944, delegates from 44 nations worked tirelessly in Bretton Woods, New Hampshire to construct a financial system that would promote growth, minimize global imbalances, and foster stability. Show More

Quotes from The Bretton Woods Transcripts

Harry Dexter White (left), chief U.S. negotiator of the Bretton Woods agreements, and John Maynard Keynes, chief British negotiator, at the first meeting of the IMF and World Bank governors in 1946. Enlarge

On international economic cooperation…
Fred Vinson (U.S. delegate, future Supreme Court chief justice): We are met here in Bretton Woods in an experimental test, probably the first time in the history of the world, that forty-four nations have convened seeking to solve difficult economic problems. We fight together on sodden battlefields. We sail together on the majestic blue. We fly together in the ethereal sky. The test of this conference is whether we can walk together, solve our economic problems, down the road to peace as we today march to victory. Sometimes [certain] problems seem to be most important on a particular day. Some folks think that the problems of the world were made to be solved in a day or in one conference. That can’t be. We must have cooperation, collaboration; utilize the machinery, the instrumentalities, that have been set up to provide succor to those who are hungry and ill; to set up, establish instrumentalities that will stabilize or tend toward stabilization of economies of our world.
(Commission I, seventh meeting)

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Praise for The Bretton Woods Transcripts

“Schuler, along with his coeditor, Andrew Rosenberg, has done a superb job in putting this treasure trove in shape for publication. Even though there have been thousands and thousands of pages written about the Bretton Woods Conference, nothing beats the transcripts for a first-hand feel of what transpired.”
From the preface by Jacques de Larosière, Managing Director of the IMF from 1978-1987, and Steve H. Hanke, Professor of Applied Economics, Johns Hopkins University, Baltimore
“Kurt Schuler, Andrew Rosenberg and the Center for Financial Stability deserve our thanks and congratulations for having unearthed and then nicely reproduced and edited the original Bretton Woods transcripts. This is truly a treasure trove for historians, showing exactly who said what to whom, when and why at that iconic Conference.”
Charles Goodhart, Financial Markets Group, London School of Economics; Former Chief Advisor, Bank of England
“The global economy is stuck with low growth rates and over indebtedness in very many leading countries today. The two issues - growth and fiscal/private debt overhangs - are the classical scopes of work of the International Monetary Fund; and we see that in this epoch the global institution named, has been relegated only to a back seat, while the so called ‘Troika’ does most of the diagnosis and most of the decision-making.

“Thus, what better than to counter now with a primary testimony of how the founding fathers of the IMF and the World Bank discussed, convened, negotiated and came about to a broad consensus at Mount Washington, New Hampshire, in order to create an institutionality with a clear technical, financial, and macro mandate?”
Eduardo Aninat, Former Deputy Managing Director, IMF; Former Finance Minister of Chile; Present, Director General, UNIAPAC Foundation, Paris
“Bretton Woods set the standard for all future international economic conferences. These transcripts are a precious contribution to historical study and more importantly an inspiration for those charged with shaping the future.”
Lawrence H. Summers, Former Secretary, US Treasury; Charles W. Eliot University Professor of Harvard University, Harvard Kennedy School, Mossavar-Rahmani Center for Business and Government
“A fascinating and useful new e-book, The Bretton Woods Transcripts, has just been published by the Center for Financial Stability (CFS). While an 822 page ‘transcript’ might turn off all but the most serious monetary scholars, Kurt Schuler, who discovered the transcripts in the Treasury, and his coeditor Andrew Rosenberg have done a remarkable job of making the book user friendly. Their commentary is fascinating in its own right. Moreover, standard search engines allow one to easily scan through the document looking for topics or participants.

“In reading through various passages, I was most impressed by the foresight of the participants at the conference and their spirit of international cooperation, as they hammered out the agreements.”
John B. Taylor, Former Under Secretary, US Treasury; Mary and Robert Raymond Professor of Economics, Stanford University; and George P. Shultz Senior Fellow and Chair of Working Group on Economic Policy, Hoover Institution
“Everyone thinks they know what happened at Bretton Woods, but what they know has been filtered by generations of historical accounts. By publishing the Bretton Woods transcripts, Kurt Schuler and Andrew Rosenberg provide the unfiltered version. International monetary history will never be the same.”
Barry Eichengreen, George C. Pardee and Helen N. Pardee Professor of Economics and Political Science, University of California, Berkeley
“Historical memory, as we well know, can often fade, becoming encrusted with distortions and misperceptions. With the publication of these transcripts, Kurt Schuler and Andrew Rosenberg have done us all a lasting service. Economists and historians will gain fresh insight into what really happened and what was really intended at Bretton Woods. Diplomats and policy makers can gain valuable lessons about how to successfully organize and manage a complex international negotiation.”
Benjamin J. Cohen, Louis G. Lancaster Professor of International Political Economy, University of California, Santa Barbara

Contact

If you would like to contribute information or have questions about Bretton Woods, please contact Kurt Schuler, kschuler@the-cfs.org.

Buy for Kindle Buy for Nook Other Editions; Libraries Book Details eBook: 800 pages Publisher: Center for Financial Stability Price: $9.00 ISBN-13: 9781941801000 Read Excerpt Excerpt includes table of contents, preface, introduction, and sample transcript.

Jared Diamond - The World Until Yesterday (most recent book)

O mais recente livro do autor de Armas, Germes e Aço e de Colapso.

The World Until Yesterday

by Jared Diamond

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This book is available for download on your iPhone, iPad, or iPod touch with iBooks and on your computer with iTunes. Books must be read on an iOS device.

Description

Most of us take for granted the features of our modern society, from air travel and telecommunications to literacy and obesity. Yet for nearly all of its six million years of existence, human society had none of these things. While the gulf that divides us from our primitive ancestors may seem unbridgeably wide, we can glimpse much of our former lifestyle in those largely traditional societies still or recently in existence. Societies like those of the New Guinea Highlanders remind us that it was only yesterday—in evolutionary time—when everything changed and that we moderns still possess bodies and social practices often better adapted to traditional than to modern conditions.

The World Until Yesterday provides a mesmerizing firsthand picture of the human past as it had been for millions of years—a past that has mostly vanished—and considers what the differences between that past and our present mean for our lives today.
This is Jared Diamond’s most personal book to date, as he draws extensively from his decades of field work in the Pacific islands, as well as evidence from Inuit, Amazonian Indians, Kalahari San people, and others. Diamond doesn’t romanticize traditional societies—after all, we are shocked by some of their practices—but he finds that their solutions to universal human problems such as child rearing, elder care, dispute resolution, risk, and physical fitness have much to teach us. A characteristically provocative, enlightening, and entertaining book, The World Until Yesterday will be essential and delightful reading.
 

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• Available on iPhone, iPad, or iPod touch.
• Category: World
• Expected Release: Dec 31, 2012
• Publisher: Penguin Group US
• Seller: Penguin Group (USA) Inc.
• Print Length: 512 Pages
• Language: English
• Requirements: This book requires iBooks 1.3.1 or later and iOS 4.3.3 or later. Books can only be viewed using iBooks on an iPad, iPhone (3G or later), or iPod touch (2nd generation or later).

Livros e cultura: o mundo complexo e seus descontentes - Brink Lindsey

DALIBOR ROHAC

A Complex World and Its Discontents

Who’s lagging behind in the modern economy, and what can we do about it?

The City Journal, 28 September 2012

Human Capitalism: How Economic Growth Has Made Us Smarter—and More Unequal, by Brink Lindsey (Princeton University Press, e-book, $3.82)

Every year in the United States, the amount of new information stored on paper, film, and electronic media reaches roughly 2 trillion megabytes—or 15,000 new book collections the size of the Library of Congress. Think about the mind-boggling number of e-mails, phone calls, and text messages that Americans send each other every day, and you’ll realize that our lives have become more complex and interconnected than ever before. However, some social groups have fallen behind in the increasingly complex modern economy. In his short and highly readable book, Brink Lindsey tries to explain why this happened and what can be done about it.

Formerly vice president for research at the Cato Institute, Lindsey is now a senior fellow at the Kauffman Foundation, a think tank focused on promoting entrepreneurship. He has devoted his career to talking economic sense to those on the political Left, with whom he shares some views on social issues.

Lindsey’s central argument focuses on the increasing complexity of modern societies. As we get richer, our world gets more complicated. In pre-industrial societies, the accident of birth broadly determined social roles, and technology remained stationary. People did things the way they or their ancestors had always done them. In today’s world, such a mindset obviously wouldn’t get you very far. In the United States, for example, as a larger part of the economy revolves around processing information, competition is fiercer than ever before.

The economy thus places increasing pressure on our cognitive abilities. Psychologists believe that if we gave American children in 1932 an IQ test normed in 1997, their average IQ would come out to about 80—borderline deficient by today’s standards. The secular trend in measured IQ, known as the Flynn effect, is, according to Lindsey, a result of the rising complexity of the environments in which humans operate.

Unfortunately, while the United States has become much wealthier, some social classes lag behind—and others have done disproportionately well. Lindsey’s focus here is not on the “top 1 percent,” but rather on the growing disconnect between the top 30 percent—mostly highly skilled college graduates—and the rest of the income-distribution curve. Why haven’t poor people been more successful? Lindsey suggests two main reasons. The first is skills-based technological change. In modern economies, routine, rules-based jobs are more easily replaceable with computers, whereas jobs that involve problem-solving in complex environments become ever more valuable and lucrative.

The second reason is the persistent divide between “elite” culture and that of the bottom 70 percent. Because of the persistence of cultural norms, social groups in danger of becoming obsolete in the modern economy are not adapting by investing more in their human capital. “Culture is trumping economics,” says Lindsey, hence a fostering a “strong tendency for children immersed in working-class culture to remain in that culture through their adult lives.”

This is not a novel argument. Charles Murray, for one, has advanced it for decades, including in his recent book. Lindsey criticizes Murray, though, for offering little more than “plaintive moralizing.” But if the problem is cultural, then a change in culture and rhetoric has to be part of the solution. And, arguably, Murray is right-on when he advises people to “recognize that the guy who works on your lawn every week is morally superior in this regard to your neighbor’s college-educated son who won’t take a ‘demeaning’ job.”

Unlike Murray, Lindsey doesn’t offer a coherent theory for the growing cultural divide between the lower classes and the successful denizens of the global economy. Why have poor people retained detrimental cultural habits? Lindsey offers no justification for why cultural norms may have gotten more persistent in recent decades. He doesn’t ponder at least one plausible explanation: that material incentives favoring certain behaviors shape values in a way that locks people into poverty and dependence. This is a thesis that Murray has explored in great detail, as have others, including economist Walter Williams.

Even if some of Lindsey’s arguments leave a reader unconvinced, it’s difficult to object to his policy ideas. He proposes a reform of K-12 and college education, including limiting college-tuition subsidies, and he’s optimistic about early-childhood intervention among underprivileged children. Similarly, it’s tough to argue against a reform of entitlements that would motivate individuals to seek employment instead of encouraging dependency on the welfare system; or against removing barriers to entrepreneurship. But the hard truth is that, unless accompanied by a sustained change in culture and rhetoric among the poor, even the wisest policies are unlikely to make much of a difference.

Dalibor Rohac is an economist at the Legatum Institute in London. Follow him on Twitter at @daliborrohac.

Historia do pensamento economico - livro Sylvia Nasar

EH.NET BOOK REVIEW ------

Title: Grand Pursuit: The Story of Economic Genius

Published by EH.Net (July 2012)

Sylvia Nasar, Grand Pursuit: The Story of Economic Genius. New York: Simon & Schuster, 2011. xv + 559 pp. $35 (hardcover), ISBN: 978-0-684-87298-8.

Reviewed for EH.Net by Robert E. Prasch, Department of Economics, Middlebury College.

Sylvia Nasar, the author of A Beautiful Mind, has undertaken another ambitious project, this time a larger survey of economic thought. The result is a colorful and fast-moving narrative, brimming with fascinating characters and lively anecdotes. In a word, this book is a pleasure to read. Nasar’s experiences as a successful writer and professor of journalism enable her to bring a distinct talent for story-telling along with an outsider’s perspective to a field too often overlooked within and without the citadels of academe.

Though this book is a history of economic thought, it is far from comprehensive. Why certain figures or subjects are included and others neglected is, it must be said, something of a mystery. As far as I can tell, the answer seems to be how well they fit the larger project, which is to present an unabashedly Whig history of economics. However, that said, I was pleased that she elected to devote several pages to figures such as Henry Mayhew (pp. 18-22 and 28-32) and a full chapter to Beatrice Webb (Chapter 3). As Nasar correctly points out, each of them made substantial contributions to popular and elite discussions of poverty and what might be done to alleviate it. Unmentioned, but as important, was that they set an example of engaged empirical work that would lead to improved methods of data collection and analysis. Over time, these efforts would greatly improve our understanding of what we know, or think we know, about the actual economic condition of our fellow citizens. Again, Nasar is to be commended for this inclusion because, as readers of EH.Net are probably aware, books on the history of economic thought generally stress the development of economic theory to the neglect of other pursuits.

Now, that said, historians of economic thought will find much to criticize. As mentioned, this history is far from comprehensive. With its whiggish perspective providing a powerful filter, some important movements and writers are treated at length, others mentioned only briefly (and too-often inaccurately), and others neglected altogether. For example, the German Historicists are summarized and then dismissed as if they all merely echoed Gustav Schmoller on matters of economic theory and policy. Elsewhere, Nasar makes a passing reference to “so-called institutionalists” without suggesting why she wishes to downplay their role, although in another place Wesley C. Mitchell is referred to as a leader in business cycle research. John Commons makes no appearance whatsoever despite the prominence of the Wisconsin School in policy discussions throughout the Progressive Era. Another peculiar omission, since she so clearly appreciates the empirical studies conducted by Mayhew and Webb, is that the several prominent figures of the English Historical School fail to appear at all.

With regard to the subjects covered, the weakest link is her treatment of Karl Marx. She clearly dislikes him, which in itself is not objectionable, except insofar as it constitutes a barrier to her analysis. For example, the Labor Theory of Value is dismissed in a cavalier manner before any serious effort is made to present or understand it. She then suggests that things might have gone better if Marx had “engaged brilliant contemporaries such as John Stuart Mill” (p. 89). She appears not to notice that John Stuart Mill dutifully followed his mentor David Ricardo in adhering to the Labor Theory of Value. If Marx was confused on the theory of value, he was in excellent company.

The treatment of the post-World War II scene is also idiosyncratic. She begins with an extended and highly compelling treatment of Paul Samuelson. Few would doubt rationale for this emphasis. However, the discussion then moves on to a lengthy discussion of Joan Robinson followed by a similarly in-depth review of the life and work of Amartya Sen. Now, I have read and learned from the work of both of these prominent scholars. However, economists and historians of economic thought would likely agree that even a passing discussion of the past fifty years of economic analysis must include more than a brief reference to the work of John Hicks, Kenneth Arrow, the Chicago School, the rise and decline of Monetarism, and the Rational Expectations “revolution” of the 1970s and 1980s. Finally, the most mysterious lacuna of all, in light of Nasar’s wonderfully successful book on John Nash, may be the absence of any discussion of how Game Theory evolved from a fringe subject to its now-central place in contemporary microeconomics, Organizational Theory, and Industrial Organization.

But let us set these objections aside so that we may emphasize the most important aspect of this book. For too long the history of economic thought has not had an accessible, fun, and potentially popular book that we can recommend to our friends, colleagues, and students who are not members of our “guild.” While Nasar’s political commitments are very different, her entertaining style and captivating narrative suggests that her book has the potential to occupy the several niches once dominated by Robert Heilbroner’s The Worldly Philosophers. Should this occur, and her work contribute to a revival of interest in the history of economic thought, we will all be in debt to Professor Nasar.

Robert Prasch is the co-editor of Thorstein Veblen and the Revival of Free Market Capitalism (2007).

Copyright (c) 2012 by EH.Net. All rights reserved. This work may be copied for non-profit educational uses if proper credit is given to the author and the list. For other permission, please contact the EH.Net Administrator (administrator@eh.net). Published by EH.Net (July 2012). All EH.Net reviews are archived at http://www.eh.net/BookReview.

Parasitas e desenvolvimento economico: um livro de historia

Existem vários tipos de parasitas no mundo, especialmente os de duas patas e de gravata. Vários deles prejudicam terrivelmente o desenvolvimento econômico.
Mas, vamos ver um livro sobre determinadas espécies de parasitas, com mais de duas patas...
Paulo Roberto de Almeida 

------ EH.NET BOOK REVIEW ------

Title: Parasites, Pathogens, and Progress: Diseases and Economic Development

Published by EH.Net (May 2012)

Robert A. McGuire and Philip R. P. Coelho:

Parasites, Pathogens, and Progress: Diseases and Economic Development. 

Cambridge, MA: MIT Press, 2011. viii + 343 pp. $30 (hardcover), ISBN: 978-0-262-01566-0.

Reviewed for EH.Net by John E. Murray, Department of Economics, Rhodes College.

An old saw proposes that holding a hammer makes everything look like a nail.  When Robert McGuire and Philip Coelho suggest (p. 5) that Jared Diamond’s bestseller (1997) should have been titled Germs, Germs, and Germs, the reader may think that the authors carry not a hammer but a microscope.  Everywhere in this history, germs appear as the critical and virtually only influence on economic development.  By the end the reader better understands microbes in American history, but may still wonder if natural resource endowments, property rights and contract law, accumulating human capital, and flexible markets played a role as well.

Parasites, Pathogens, and Progress synthesizes a considerable literature on infectious disease and U.S. economic history, particularly before 1900.  On the purely economic side, a set of verbal and flowchart models of economic growth stress connections between ever greater population density and increasing infectious disease rates.  These connections, they argue, counterbalance better known Smithian growth models in which increasing density leads to the division of labor and Malthusian anti-growth models in which increasing density leads to food shortages.  Traditionally in neither of these stories do infectious diseases play much of a role.  This book aims to fix that omission.  The authors write (p. 6), “We do not claim that we are the first to bring parasites and pathogens into the history of humanity and the economy, but we do so with emphasis and conviction that are missing in other histories.”  Here is truth in advertising.  Readers familiar with the work of world historians such as William McNeill, Philip Curtin, or Alfred Crosby, or historians of medicine such as Kenneth Kiple, Todd Savitt, or Margaret Humphreys will find little new here.  The same disease agents, transmission processes, and racial differentials appear in this book as in the works of those historians.  To these factors the authors attribute monocausal explanatory power with iron single-mindedness.

Disease in economic development (or stagnation) is fascinating, and this book brings out much of that inherent interest, but with little subtlety.  Much of the authors’ case moves forward without reference to work of previous historians.  Concerning European contact with the New World, they write (p. 33), “The assumptions that the biological environment is unchanging and that the ecology is exogenous to human actions are spectacularly incorrect.”  But after McNeill’s Plagues and Peoples (1976) and Crosby’s Ecological Imperialism (1986), very few scholars believe in a static global disease environment.  The idea that disease might explain some of a historical episode rather than all of it generally is absent.  Two pages concern the irresistible Antebellum Paradox of declining adult heights and life expectancies in an era of increasing per capita incomes.  Expanding transportation networks integrated local, and then regional, and then national disease pools.  The authors conclude, “The deteriorating disease environment affected the biological standard of living and, as a result, average heights fell” (p. 53).  Full stop.  But no scholar doubts that disease mattered, and most try to account for its influences.  Despite the strongly worded conclusion, no evidence supports their absolute attribution, nor can the authors rule out the explanatory power of trends in pork production, income distribution, infant mortality, and urbanization.  The publication with the best evidence for the transport-disease connection (Haines, Craig, and Weiss 2003) is not cited in this book.

The bulk of the book is given over to the importance of infectious disease, primarily malaria, in determining that the labor force in the South would be drawn from African slaves rather than bound Europeans or Indians.  The authors cast their story of racial differentials in malaria susceptibility against Kenneth Stampp’s claim in The Peculiar Institution (1956) that Africans, Europeans, and their descendants were equally vulnerable to Plasmodium.  In contrast, write McGuire and Coelho, a sound scientific literature has arisen that attributes differential mortality rates by race to physiological differences such as the presence or absence of sickle cells or the Duffy antigen.  This discussion, in Chapter 6, is clearly presented, even in its technical parts, as well as engaging and informative.  But it is a bit beside the point because the hypothesis of differential malaria susceptibility and its consequences for our history is widely accepted by historians.  As a typical example, Humphreys concluded ten years ago in her Malaria (2001, p. 28; not cited in this book), “While no simple cause and effect can be directly established, and other diseases such as yellow fever certainly played their part, it can at least be concluded that malaria had a substantial impact on labor and settlement patterns in the American colonies, patterns that would ultimately lead to the Civil War.”

The authors occasionally succumb to the temptation to let inferences from their model replace historical evidence.  Here are two examples.  First, on the transition from temporarily-bound Europeans to permanently-bound Africans:  The authors describe a process of natural selection in favor of relative resistance of white people to cold weather diseases and of black people to hot weather diseases, which more or less accords with the scientific literature.  “As a result,” they write (p. 100), “there is (sic) an increase in the migration of European indentured servants” to the northern colonies.  To explain the absence of evidence for this claim, they note (p. 100) that “reliable data for indentured servants bound for New England are not available.”  They seem unaware that the lack of such data, reliable or otherwise, was due to the tendency of indentured servants to avoid New England in the first place, contrary to the conclusions of the authors’ model.  A second example concerns antebellum medical practice.  With no reference to its price, they assert (p. 161) that planters could afford quinine for their slaves, that a sufficient quantity of quinine to stem a malarial episode was cheaper than replacing a slave (almost certainly true), and there they stop.  Did planters actually provide quinine to their slaves?  We know from a standard work, Savitt’s Medicine and Slavery (1981, p. 155; not cited in this book), that in fact quinine was widely used on plantations.  A simple citation to Savitt’s findings would have completed their argument.

Disease has played an important role in American history, and the number of historians who think so are greater than this book seems to assume.  If infectious disease might have been overlooked at some point in the historiography, this book will help gain greater attention for its multifaceted influences.  Still, it would have helped the authors’ case if they had contented themselves with nominating parasites and pathogens to join the ranks of relevant subjects for historical study, rather than asserting their near-exclusive primacy.

References:

Crosby, Alfred. Ecological Imperialism: The Biological Expansion of Europe, 900-1900. New York: Cambridge University Press, 1986.

Diamond, Jared. Guns, Germs, and Steel: The Fates of Human Societies. New York: W.W. Norton, 1997.

Haines, Michael, Lee Craig, and Thomas Weiss.  “The Short and the Dead: Nutrition, Mortality, and the ‘Antebellum Puzzle’ in the United States,” Journal of Economic History 63 (2003): 382-413.

Humphreys, Margaret. Malaria: Poverty, Race, and Public Health in the United States.  Baltimore: Johns Hopkins University Press, 2001.

McNeill, William. Plagues and Peoples. New York: Anchor Press, 1976.

Savitt, Todd L. Medicine and Slavery: The Diseases and Health Care of Blacks in Antebellum Virginia.  Urbana: University of Illinois Press, 1978.

Stampp, Kenneth. The Peculiar Institution: Slavery in the Ante-Bellum South. New York: Vintage Books, 1956.

John E. Murray is Joseph R. Hyde III Professor of Political Economy at Rhodes College in Memphis, Tennessee.  His next book, The Charleston Orphan House: Children’s Lives in the First Public Orphanage in America, will be published by the University of Chicago in early 2013.

Copyright (c) 2012 by EH.Net. All rights reserved. This work may be copied for non-profit educational uses if proper credit is given to the author and the list. For other permission, please contact the EH.Net Administrator (administrator@eh.net). Published by EH.Net (May 2012). All EH.Net reviews are archived at http://www.eh.net/BookReview.

Historiadores econômicos vs Economistas historiadores: luta de classes? (3) - The Economist

Fim do debate, e aqui deveria ser o começo: a resenha do livro.

Creating economic wealth

The big why

Nations fail because their leaders are greedy, selfish and ignorant of history

Mar 10th 2012 | from the print edition

Why Nations Fail: The Origins of Power, Prosperity and Poverty. By Daron Acemoglu and James Robinson. Crown; 529 pages; $30. Profile; £25. Buy fromAmazon.com, Amazon.co.uk

THE rich world’s troubles and inequalities have been making headlines for some time now. Yet a more important story for human welfare is the persistence of yawning gaps between the world’s haves and have-nots. Adjusted for purchasing power, the average American income is 50 times that of a typical Afghan and 100 times that of a Zimbabwean. Despite two centuries of economic growth, over a billion people remain in dire poverty.

In this section

• »The big why
• Comfort, joy and disagreement
• Creation story
• My family and other animals
• Godzilla’s grandchildren

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Related topics

• Amazon
• Africa
• Europe
• Zimbabwe
• Botswana

This conundrum demands ambitious answers. In the late 1990s Jared Diamond and David Landes tackled head-on the most vexing questions: why did Europe discover modern economic growth and why is its spread so limited? Now, Daron Acemoglu, an economist at MIT, and James Robinson, professor of government at Harvard, follow in their footsteps with “Why Nations Fail”. They spurn the cultural and geographic stories of their forebears in favour of an approach rooted solely in institutional economics, which studies the impact of political environments on economic outcomes. Neither culture nor geography can explain gaps between neighbouring American and Mexican cities, they argue, to say nothing of disparities between North and South Korea.

They offer instead a striking diagnosis: some governments get it wrong on purpose. Amid weak and accommodating institutions, there is little to discourage a leader from looting. Such environments channel society’s output towards a parasitic elite, discouraging investment and innovation. Extractive institutions are the historical norm. Inclusive institutions protect individual rights and encourage investment and effort. Where inclusive governments emerge, great wealth follows.

Britain, wellspring of the industrial revolution, is the chief proof of this theory. Small medieval differences in the absolutism of English and Spanish monarchs were amplified by historical chance. When European exploration began, Britain’s more constrained crown left trade in the hands of privateers, whereas Spain favoured state control of ocean commerce. The New World’s riches solidified Spanish tyranny but nurtured a merchant elite in Britain. Its members helped to tilt the scales against monarchy in the Glorious Revolution of 1688 and counterbalanced the landed aristocracy, securing pluralism and sowing the seeds of economic growth. Within a system robust enough to tolerate creative destruction, British ingenuity (not so different from French or Chinese inventiveness) was free to flourish.

This fortunate accident was not easily replicated. In Central and South America European explorers found dense populations ripe for plundering. They built suitably exploitative states. Britain’s North American colonies, by contrast, made poor ground for extractive institutions; indigenous populations were too dispersed to enslave. Colonial governors used market incentives to motivate early settlers in Virginia and Massachusetts. Political reforms made the grant of economic rights credible. Where pluralism took root, American industry and wealth bloomed. Where it lapsed, in southern slaveholding colonies, a long period of economic backwardness resulted. A century after the American civil war the segregated South remained poor.

Extractive rules are self-reinforcing. In the Spanish New World, plunder further empowered the elite. Revolution and independence rarely provide escape from this tyranny. New leadership is tempted to retain the benefits of the old system. Inclusive economies, by contrast, encourage innovation and new blood. This destabilises existing industries, keeping economic and political power dispersed.

Failure is the rule. Here, Venice provides a cautionary tale. Upward mobility drove the city-state’s wealth and power. Its innovative commenda, a partnership in which capital-poor sailors and rich Venetians shared the profits from voyages, allowed those of modest background to rise through the ranks. This fluidity threatened established wealth, however. From the late 13th century the ducal council began restricting political and economic rights, banning the commenda and nationalising trade. By 1500, with a stagnant economy and falling population, Venice’s descent from great power was well under way.

Moves towards greater inclusivity are disappointingly rare. The French revolution provides an example, but also demonstrates the authors’ unfortunate habit of ignoring historical detail. Revolution put paid to absolutism and led, after a long and messy struggle, to the creation of an enduring republic. Institutions, in the form of a fledgling merchant class, provided momentum for reform, making the difference between the successful French revolution and failed uprisings elsewhere. But the authors give short shrift to the presence and meaning of Enlightenment ideals. It is difficult to believe this did not matter for the French transition, yet the intellectual climate is left out of the story. History is contingent, the authors apologise, but history is what they hope to explain.

The story of Botswana is also unsatisfying. There, a co-operative effort by tribal leaders secured the protection of the British government against the marauding imperialism of Cecil Rhodes. Despite its considerable diamond wealth, which might have spawned a corrupt and abusive elite, Botswana became a rare success in Africa, assisted by the benevolence of its leaders and by having a tiny population. At times the authors come dangerously close to attributing success to successfulness.

The intuition behind the theory is nonetheless compelling, which makes the scarcity of policy prescriptions frustrating. The book is sceptical of the Chinese model. China’s growth may be rooted in the removal of highly oppressive Maoist institutions, but its communist government remains fundamentally extractive. It may engineer growth by mobilising people and resources from low-productivity activities, like subsistence agriculture, toward industry. But without political reform and the possibility of creative destruction, growth will grind to a halt.

Rich countries determined to nudge along the process of institutional development should recognise their limitations, the authors reckon. The point is well taken. It is hard to ignore the role of European expansion in the creation of the underdeveloped world’s extractive institutions which, in self-perpetuating fashion, continue to constrain reform and development. Evidence nonetheless hints that contagious ideals, propitious leadership and external pressure matter. The promise of European Union membership encouraged institutional reform in central and eastern Europe. America eventually eradicated extractive southern institutions and placed the South on a path toward economic convergence. There is no quick fix for institutional weakness, only the possibility that steady encouragement and chance will bring about progress.

Historiadores econômicos vs Economistas historiadores: luta de classes? (2) - The Economist

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Buttonwood

The question of extractive elites

Bankers and the public sector may both be enemies of growth

Apr 14th 2012 | from the print edition

THE developed world has a growth problem. Of 34 advanced economies, 28 had lower GDP per head in 2011 than they did in 2007. Forecasts for growth in the current year are anaemic. This sluggishness is generally perceived to be a hangover from the financial crisis of 2007 and 2008. But might the problem be structural rather than cyclical?

In their new book, “Why Nations Fail: The Origins of Power, Prosperity and Poverty”, Daron Acemoglu and James Robinson, a pair of economists, suggest that many countries are bedevilled by economic institutions that “are structured to extract resources from the many by the few and that fail to protect property rights or provide incentives for economic activity.” In contrast, “inclusive” economies distribute power more widely, establish law and order, and have secure property rights and free-market systems.

In this section

• After the sugar rush
• An expensive smoking gun
• »The question of extractive elites
• In the Fed’s sights
• Stately progress
• A shore thing
• Capital controversy
• Marjorie Deane internships

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Related topics

• Industries
• Financial services
• Democratic Republic of Congo
• Daron Acemoglu

In an extractive economy, such as the Belgian Congo and its successor state, Zaire, a narrow elite seizes power and uses its control of resources to prevent social change. Such economies can achieve growth for a while, particularly when (as with the Soviet Union in the mid-20th century and, the authors argue, China today) resources are being transferred from the unproductive agricultural sector into manufacturing. But they run out of steam eventually.

The authors place the developed world in the “inclusive” category since they have, by definition, achieved economic success. But their description of extractive economies should ring one or two alarm bells in the minds of Western readers. “Because elites dominating extractive institutions fear creative destruction”, the authors write, “they will resist it, and any growth that germinates under extractive institutions will be ultimately short-lived.”

There are two potential candidates for extractive elites in Western economies. The first is the banking sector. The wealth of the financial industry gives it enormous lobbying power, including as contributors to American presidential campaigns or to Britain’s ruling parties. By making themselves “too big to fail”, banks ensured that they had to be rescued in 2008.

Much of current economic policy seems to be driven by the need to prop up banks, whether it is record-low interest rates across the developed world or the recent provision of virtually unlimited liquidity by the once-staid European Central Bank. The long-term effects of these policies, which may be hard to reverse, are difficult to assess.

It is tougher to argue that the financial sector has inhibited growth in other areas of the economy. Indeed, both banks and venture-capital groups play a vital role in supporting new companies. Nevertheless, it is possible that the extremely high rewards in the financial industry might have diverted talented people away from other activities that could have helped rich economies to grow more sustainably. Furthermore, those high rewards could derive from “rent-seeking” by the financial sector, in the form of fees, charges and spreads, that have acted as a tax on the rest of the economy.

A second candidate for the extractive-elite category is the public sector. In some countries, such as Greece, there has been a clear policy of “clientelism” in which political parties have rewarded their supporters with jobs and benefits that have been funded by the general taxpayer. In the Anglo-Saxon world, public-sector employees now have more generous pension rights than the majority of private-sector workers.

An obvious objection to this line of reasoning is that there are too many public-sector employees for them to be regarded as an elite. Indeed, if you include the many recipients of social benefits, those dependent on the public purse comprise a majority of most rich-country populations. Such social policies are part of the inclusive model that Mr Acemoglu and Mr Robinson favour.

But it does seem likely that a high level of public-sector employment reduces the extent to which creative destruction occurs and new industries develop. Workers may prefer the security of government jobs to the riskiness of joining new businesses. As European governments are discovering, public-sector unions are often the most vocal in opposing the kind of labour-market reforms needed to reduce structural unemployment.

Just as a ship’s hull acquires barnacles, a government naturally attracts all kinds of supplicants and subsidy-seekers. If such behaviour is unchecked, then eventually the system may grind to a halt.

^{Economist.com/blogs/buttonwood}

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