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Political – Economic Interactions: Acemoglu and Robinson’s Extractive and Inclusive Institutions . Why nations fail: Geography hypothesis Culture hypothesis Ignorance hypothesis  Prescriptions Authoritarian growth Modernization Theory – Stages of Growth Washington Consensus.

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political economic interactions acemoglu and robinson s extractive and inclusive institutions

Political – Economic Interactions: Acemoglu and Robinson’sExtractive and Inclusive Institutions

Why nations fail:

Geography hypothesis

Culture hypothesis

Ignorance hypothesis

 Prescriptions

Authoritarian growth

Modernization Theory – Stages of Growth

Washington Consensus

slide2

Washington consensus:

1. Fiscal policy discipline;

2. Redirect public spending away from subsidies and toward pro-growth, pro-poor services (education, health, infrastructure investments;

3. Tax reform – broadening the tax base and adopting moderate marginal tax rates;

4. Interest rates that are market determined and positive (but moderate) in real terms;

5. Competitive exchange rates: neither fixed nor free-floating;

6. Trade liberalization ;

7. Liberalization of inward foreign direct investment;

8. Privatization of state enterprises;

9. Deregulation… except prudent oversight of financial institutions; and,

10. Legal security for property rights.

why nations fail institutions hypothesis
Why Nations Fail: Institutions Hypothesis
  • Economic institutions
  • Insecure property rights
  • Slavery
    • Plantation system
  • Encomienda
    • Mita/Repartimiento
  • Monopoly
    • La Serrata
  • Dual economy
  • Crony capitalism
  • Marketing boards
  • Political institutions
  • Absolutism
    • Infighting
    • Failed state
      • Ethnic fractionalization
  • Iron Law of Oligarchy
  • Elites
    • Librod’Oro
  • Indirect rule
  • Patronage networks

Extractive Institutions  Vicious Circles

“Redemption – Jim Crow

Apartheid

Status Quo

why nations fail institutions hypothesis1
Why Nations Fail: Institutions Hypothesis
  • Economic institutions
  • Enforced property rights
    • Patent protection
  • Rule of law
  • Open Markets
    • Commenda
  • Political institutions
  • Pluralism
  • Constraint on executive
  • Secret ballot
  • Free media
    • Muckrakers

Inclusive Institutions  Virtuous Circles

Creative Destruction

(pursuit of transient rents)

transition to inclusion and growth
Transition to Inclusion and Growth

Critical junctures

  • Disrupt existing institutions
  • Open opportunities ... Seize opportunities! ... Contingency

Critical junctures in Acemoglu and Robinson’s “history”

Ideas as Critical Junctures

Christopher Columbus

Isaac Newton/Enlightenment

Benjamin Franklin/AdamSmith

John Locke/James Madison

Vladimir Lenin

Maynard Keynes/Friedrich Hayek

Martin Luther King, Jr.

  • Neolithic revolution
  • Fall of Rome
  • Black plague
  • Atlantic trade
  • Glorious Revolution
  • Industrial Revolution
  • French Revolution
  • Colonialism
  • World War I
  • Post-colonialism
  • Black empowerment
  • Mao’s death
transition to inclusion and growth1
Transition to Inclusion and Growth
  • Institutional drift  small differences
    • Disease environment
  • Critical junctures
    • Reversal of fortune
  • Centralized state
  • Pluralist coalition