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5b769d4 But all this does not imply that foreign aid, except the humanitarian kind, should cease. Putting an end to foreign aid is impractical and would likely lead to additional human suffering. It is impractical because citizens of many Western nations feel guilt and unease about the economic and humanitarian disasters around the world, and foreign aid makes them believe that something is being done to combat the problems. Even if this something .. Daron Acemoğlu
a65f943 every elite would, all else being equal, like to encourage as much growth as possible in order to have more to extract. Extractive institutions that have achieved at least a minimal degree of political centralization are often able to generate some amount of growth. What is crucial, however, is that growth under extractive institutions will not be sustained, for two key reasons. First, sustained economic growth requires innovation, and inno.. Daron Acemoğlu
565d65d in 1500 standards of living were probably at least as high in China as they were in Europe. Daron Acemoğlu
1445e44 The records of a relatively small bank, C. Hoare's & Co. in London, which have survived intact from the period 1702-1724, illustrate this point. Though the bank did lend money to aristocrats and lords, fully two-thirds of the biggest borrowers from Hoare's over this period were not from the privileged social classes. Daron Acemoğlu
5a52898 In Egypt, for instance, the first printing press was set up only in 1798, by Frenchmen who were part of the abortive attempt by Napoleon Bonaparte to capture the country. Daron Acemoğlu
3ef278f The English textile industry not only was the driving force behind the Industrial Revolution but also revolutionized the world economy. Daron Acemoğlu
8518c3f English exports, led by cotton textiles, doubled between 1780 and 1800. It was the growth in this sector that pulled ahead the whole economy. The combination of technological and organizational innovation provides the model for economic progress that transformed the economies of the world that became rich. Daron Acemoğlu
87cc923 To be inclusive, economic institutions must feature secure private property, an unbiased system of law, and a provision of public services that provides a level playing field in which people can exchange and contract; it also must permit the entry of new businesses and allow people to choose their careers. Daron Acemoğlu
e8cbf9a these densely settled civilizations interacted in a perverse way with European colonialism to create a "reversal of fortune," making the places that were previously relatively wealthy in the Americas relatively poor. Today it is the United States and Canada, which were then far behind the complex civilizations in Mexico, Peru, and Bolivia, that are much richer than the rest of the Americas." Daron Acemoğlu
4f47eba Now imagine a different society, for example the Congo or Haiti, where a large fraction of the population has no means of attending school, or where, if they manage to go to school, the quality of teaching is lamentable, where teachers do not show up for work, and even if they do, there may not be any books. Daron Acemoğlu
7e560fa Japan and Singapore never had more than a sprinkling of inhabitants of European descent, yet they are as prosperous as many parts of Western Europe. Daron Acemoğlu
04bc045 For example, a merchant in a colony such as New Spain, roughly modern Mexico, could not trade directly with anyone in New Granada, modern Colombia. These restrictions on trade within the Spanish Empire reduced its economic prosperity and also, indirectly, the potential benefits that Spain could have gained by trading with another, more prosperous empire. Daron Acemoğlu
d8f09d7 revolution that overthrew Mubarak will lead to a new set of institutions capable of bringing prosperity Daron Acemoğlu
a2e57df even if industry itself was very inefficiently organized relative to what could have been achieved. In fact, between 1928 and 1960 national income grew at 6 percent a year, probably the most rapid spurt of economic growth in history up until then. Daron Acemoğlu
455fd6d in which the Soviets did manage to sustain some innovation was through enormous efforts in military and aerospace technology. As a result they managed to put the first dog, Leika, and the first man, Yuri Gagarin, in space. They also left the world the AK-47 as one of their legacies. Daron Acemoğlu
1c4383d selling patents was a good idea only for someone like Edison, who had ideas faster than he could put them to practice. (He had a world-record 1,093 patents issued to him in the United States and 1,500 worldwide.) Daron Acemoğlu
491b7da after 1688 the state began to rely more on talent and less on political appointees, and developed a powerful infrastructure to run the country. Daron Acemoğlu
a7f4f77 Fruits of unsustainable extractive growth: Zheng He's ship alongside Columbus's Santa Maria Gregory A. Harlin/National Geographic Stock Daron Acemoğlu
735637f Noha Hamed, twenty-four, a worker at an advertising agency in Cairo, made her views clear as she demonstrated in Tahrir Square: "We are suffering from corruption, oppression and bad education." Daron Acemoğlu
ca595ae model broke down, Daron Acemoğlu
9c60849 but it also meant that there were checks within Parliament against any single group becoming too powerful and abusing its power. It was the critical factor in the emergence of pluralistic political institutions. Daron Acemoğlu
bd8a01d If these rulers would only get the right advice from the right advisers, the thinking goes, prosperity would follow. Daron Acemoğlu
7cdbf23 Absolutism and a lack of, or weak, political centralization are two different barriers to the spread of industry. But they are also connected; both are kept in place by fear of creative destruction and because the process of political centralization often creates a tendency toward absolutism. Resistance to political centralization is motivated by reasons similar to resistance to inclusive political institutions: fear of losing political pow.. Daron Acemoğlu
48bce4e The people who suffer from the extractive economic institutions cannot hope for absolutist rulers to voluntarily change political institutions and redistribute power in society. The only way to change these political institutions is to force the elite to create more pluralistic institutions. Daron Acemoğlu
88240d9 Ignorance can explain at best a small part of world inequality. Daron Acemoğlu
21105e8 Nations fail when they have extractive economics institutions, supported by extractive political institutions that impede and even block economic growth. But this means that the choice of institutions--that is, the politics of institutions--is central to our quest for understanding the reasons for the success and failure of nations. Daron Acemoğlu
8181c3c how to engineer prosperity. These engineering attempts come in two flavors. The first, often advocated by international organizations such as the International Monetary Fund, recognizes that poor development is caused by bad economic policies and institutions, and then proposes a list of improvements these international organizations attempt to induce poor countries to adopt. (The Washington consensus makes up one such list.) These improvem.. Daron Acemoğlu
8045768 A market economy is an abstraction that is meant to capture a situation in which all individuals and firms can freely produce, buy, and sell any products or services that they wish. When these circumstances are not present there is a "market failure." Such failures provide the basis for a theory of world inequality, since the more that market failures go unaddressed, the poorer a country is likely to be. The ignorance hypothesis maintains t.. Daron Acemoğlu
adb8878 We call such institutions, which have opposite properties to those we call inclusive, extractive economic institutions--extractive because such institutions are designed to extract incomes and wealth from one subset of society to benefit a different subset. E Daron Acemoğlu
430a89a There are two important lessons here. First, foreign aid is not a very effective means of dealing with the failure of nations around the world today. Far from it. Countries need inclusive economic and political institutions to break out of the cycle of poverty. Daron Acemoğlu
8634c56 This synergistic relationship between extractive economic and political institutions introduces a strong feedback loop: political institutions enable the elites controlling political power to choose economic institutions with few constraints or opposing forces. They also enable the elites to structure future political institutions and their evolution. Extractive economic institutions, in turn, enrich the same elites, and their economic weal.. Daron Acemoğlu
2d5ca89 Inclusive economic institutions, in turn, are forged on foundations laid by inclusive political institutions, which make power broadly distributed in society and constrain its arbitrary exercise. Such political institutions also make it harder for others to usurp power and undermine the foundations of inclusive institutions. Those controlling political power cannot easily use it to set up extractive economic institutions for their own benef.. Daron Acemoğlu
5cee181 The synergies between extractive economic and political institutions create a vicious circle, where extractive institutions, once in place, tend to persist. Similarly, there is a virtuous circle associated with inclusive economic and political institutions. Daron Acemoğlu
cb8af1e Hua could not repudiate the Cultural Revolution, and this weakened him. He was also a comparative newcomer to the centers of power, and he lacked the web of connections and informal relations that Deng had built up over many years. Daron Acemoğlu
3d44ec7 Why does the path of institutional change differ across societies? The answer to this question lies in institutional drift. In the same way that the genes of two isolated populations of organisms will drift apart slowly because of random mutations in the so-called process of evolutionary or genetic drift, two otherwise similar societies will also drift apart institutionally--albeit, again, slowly. Daron Acemoğlu
16c3cdf As early as the late eighteenth century, the great French political philosopher Montesquieu noted the geographic concentration of prosperity and poverty, and proposed an explanation for it. He argued that people in tropical climates tended to be lazy and to lack inquisitiveness. As a consequence, they didn't work hard and were not innovative, and this was the reason why they were poor. Montesquieu also speculated that lazy people tended to .. Daron Acemoğlu
854ae34 Tropical diseases obviously cause much suffering and high rates of infant mortality in Africa, but they are not the reason Africa is poor. Disease is largely a consequence of poverty and of governments being unable or unwilling to undertake the public health measures necessary to eradicate them. Daron Acemoğlu
64f08af In fact, it is known that a major technological innovation, the introduction of the steel axe among the group of Australian Aboriginal peoples known as Yir Yoront, led not to more intense production but to more sleeping, because it allowed subsistence requirements to be met more easily, with little incentive to work for more. Daron Acemoğlu
d63c0e7 Of the five hundred who entered the winter, only sixty were alive by March. The situation was so desperate that they resorted to cannibalism. Daron Acemoğlu
da27abf In our theory, Peru is so much poorer than Western Europe and the United States today because of its institutions, and to understand the reasons for this, we need to understand the historical process of institutional development in Peru. As we saw in the second chapter, five hundred years ago the Inca Empire, which occupied contemporary Peru, was richer, more technologically sophisticated, and more politically centralized than the smaller p.. Daron Acemoğlu
11f5197 Joseph Schumpeter called creative destruction. They replace the old with the new. New sectors attract resources away from old ones. New firms take business away from established ones. New technologies make existing skills and machines obsolete. The process of economic growth and the inclusive institutions upon which it is based create losers as well as winners in the political arena and in the economic marketplace. Fear of creative destruct.. Daron Acemoğlu
c5313c9 Our brief review of the history of the Americas begins to give a sense of the forces that shape political and economic institutions. Different patterns of institutions today are deeply rooted in the past because once society gets organized in a particular way, this tends to persist. We'll show that this fact comes from the way that political and economic institutions interact. This Daron Acemoğlu
ae87df3 Inclusive economic institutions that enforce property rights, create a level playing field, and encourage investments in new technologies and skills are more conducive to economic growth than extractive 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. Daron Acemoğlu
d9eaf06 The Spanish strategy of colonization was highly effective. First perfected by Cortes in Mexico, it was based on the observation that the best way for the Spanish to subdue opposition was to capture the indigenous leader. This strategy enabled the Spanish to claim the accumulated wealth of the leader and coerce the indigenous peoples to give tribute and food. The next step was setting themselves up as the new elite of the indigenous society .. Daron Acemoğlu
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