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cross-posted from: https://feddit.org/post/4157628
cross-posted from: https://feddit.org/post/4157529
James Robinson, along with Daron Acemoglu and Simon Johnson, has been awarded this year’s Nobel Prize in Economics for his research on the critical role institutions play in fostering national prosperity. In [this Q&A session]l with EL PAÍS, he explains that his work also seeks to highlight how the legacy of colonialism has impeded economic development in certain regions, particularly in Latin America and Africa.
James Robinson: […] we make a simple division, focusing on the presence of inclusive institutions or extractive institutions. Inclusive institutions create broad incentives and opportunities for all people equally, while extractive institutions concentrate benefits and incentives in the hands of a few. Many economists say that development comes from entrepreneurship and innovation, but in reality it comes from people’s dreams, creativity and aspirations. To be prosperous, you have to create a series of institutions that can cultivate this talent. However, if you look at countries like Colombia or Nigeria, talent is wasted because people do not have opportunities.
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Institutions can be an obstacle to competitiveness. However, one should consider the impact that European integration had on countries such as Spain, Portugal or the former Soviet countries. These are remarkable success stories. There has been an almost unprecedented transition. It is true that there may be too much regulation or inefficient rules, but broadly speaking the effects of European institutions has been largely positive over the past 50 years.
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[Immigration] is one of the big questions we have to solve. […] it can be difficult. It is not easy to quickly incorporate the millions of people who cross the Mediterranean [trying to reach Europe]. One of the possible ways is to help them develop in order to improve the terrible situation in their own countries. However, one of the biggest complications is that the policies recommended by Western institutions are not in tune with what is happening in these [developing] countries. At the World Bank, for example, you cannot talk about politics. How do we expect them to solve real problems when you cannot talk about them? Frankly, it doesn’t make sense. If we really want to change the world, we have to have honest conversations. I see that as a long way off.
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The reality is that democratic countries have shown that they are better at managing public services and achieving rapid growth. You can find impressive examples like China among autocratic countries, but you cannot achieve an inclusive economy with an authoritarian regime and a model like the Chinese one.
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I don’t think the Chinese model can continue. If you look at other authoritarian regimes, like Iran or Russia, they are incredibly weak economically and technologically. The economy cannot flourish in an authoritarian regime. Right now, technological dynamism is concentrated in one such country and in the Western world. However, one has to consider that, with Donald Trump, the institutions that have made the United States great are being seriously questioned. This could affect the context, and that is why the European Union and NATO are so important.
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[Populism is linked to the growing disconnect between governments and citizens] and an example of this is Latin America. Democracy promised too much and did not always deliver. People’s lives did not change, and they sought new alternatives. There are various factors why democracy has not achieved transformations, such as clientelism and corruption. […] Venezuela was governed in a deeply corrupt manner, and Hugo Chávez was clever in taking advantage of it. You also see this with Donald Trump, who has gone far because he realized there was widespread dissatisfaction with traditional politics. The failures of democratic institutions are real, and that is why we have to think about how to make them more empathetic to what people need.
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Artificial intelligence can be wonderful, but like all technologies, it depends on how it is used. If artificial intelligence is used to create replacements for humans, that could be devastating. […] It is all about how it is used, and that depends on our governments. I think that these decisions should not be left to the tech gurus. They only think about what makes them the most money, even if this is not related to the general well-being of society. In the case of artificial intelligence, it is very important, because it could have a tectonic impact on the world.
Now, I get the appeal to authority, and the arguments against it. Obviously they wanted the cachet of the Nobel name for their economics prize, but economists often worry about the wrong thing. Yes, stagnant capital is bad for the economy, and a stagnant economy is bad for society, but having a vibrant economy doesn’t necessarily mean society is benefiting. Most economists don’t worry too much about that, and many businesses don’t, either. And that’s where the problems come in.
While companies are going about making profits, they rarely worry about the world or society they operate in. This is why they will happily pollute the planet, underpay their employees, or produce goods and services that maximize profits rather than better suit their customers’, and society’s, needs. Hence, fossil fuel companies desperately hanging onto their current profit model while storms rage and cities flood, or light bulbs being made to burn out (or, in the case of LEDs, just a certain component so they can be easily ‘recycled’). And this is where society needs to have strong government to step in and curb the ravenous hunger of capitalism and direct that energy in ways that help society.
So, for good or ill, more housing needs to be built, even if that means housing prices are stagnant or even drop. Food has to be affordable, or people with less income need to be supported so they aren’t starving. People need to be educated well, so they don’t make imprudent choices and have better opportunities in life. Healthcare needs to be accessible, so society is happier, healthier, and can also further drive that economy.
Keep capitalism for what it is good for (or find a way to replace it with something better, preferably without burning civilization down), which is finding innovative ways to get things done, and looking for new and interesting things to make society better. And use government to set limits and direction, such as incentivizing needed housing that isn’t profitable.
Couldn’t agree more.
The Economy (namelly GDP) is a deeply flawed metric when what one wants is The Greatest Good For The Greatest Number (the basic Leftwing principle), since it’s a Trade-centric metric hence measures just one part of the human experience and even that done in a pretty unrepresentative way - either countrywide numbers that ignore the proportion of it per people are used or when we do get per-capita numbers they’re based on mean values (that suffer from the “if 1 guy has 10 chickens and 9 have 0 chickens, then in average each has 1 chicken” problem) never the mode which is the one that best covers most people’s experience.
The point about housing is especially puignant because it’s how a lot of GDP “growth” was fabricated during the last couple of decades: house prices go up which is counted as more raw GDP but the house price Inflation (which is the entirety of that price raise, as there was no actual improvement of the houses themselves) is not counted in the Inflation index used to Deflate the raw GDP to create the supposedly inflation-free Real GDP (the official one) so house price increases make that figure which has been made politically important look good whilst the thing is not at all good - the value of a house has no utility value for those who live in it (who would have to sell the house to realize it but also buy another one at equally inflated prices so ultimatelly gain nothing from high prices) whilst it presents a massive problem for those who don’t own their own house (also because rent prices follow house prices) with, for example, the situation in Portugal that the average age a person leaves their parents’ home is 34 and half the people who graduate with a Degree leave the country because salaries are low and cost of living (which for a recent graduate is more than half housing) are very high in proportion to it, something that’s also causing lower birth rates in one of the most aged countries in the World since people have children later and don’thave as much available money to pay for the costs of them, hence have fewer (in average below the number that’s necessary to keep the population number steady).
GDP goes up but homeowners saw no improvement since their house is not in fact any better and in some cases are even worse of because if they want to get a better house - say, to get a room for their children - the difference they have to pay in price between the old one and new one is larger, whilst those who do not own their house have to pay larger rents, so have less free money for other things since salaries have not gone up anywhere as fast. Only “investors” are better of from this, and they’re a tiny fraction of Society (and here in Portugal a large part, if not most, don’t even live here, so they’re not even in this Society).
And this is just one thing were The Economy and how it’s measured is unrepresentative. Don’t get me started on Ecology and how Nature is treated in this has having little or no value for people.