Daron Acemoglu on “Extractive” Politics and Us

Click to listen to Chris’ conversation with Daron Acemoglu (42 min, 19 meg)

Daron Acemoglu pops up in his office at MIT with the big bold energy of the book that’s made him famous. Like Why Nations Fail, Professor Acemoglu is large-size and learned, young in spirit, digressive, reader-friendly and not at all shy about the after-argument around the epic account of economic inequality he wrote with political scientist James Robinson at Harvard.

The book is a theory of “development” wound through 500 years of mostly predatory colonial history. The argument can be made simple enough: that the mal-distribution of money and happiness in our polarized world is rooted not, for example, in the geography of foodstuffs (the Jared Diamond account in Guns, Germs and Steel), and not in the burdens of climate, bad soil and disease (a main line in Jeffrey Sachs’ The End of Poverty). No, no no… Acemoglu and Robinson affirm what feels intuitive anyway. The big difference in the world is between political arrangements designed and built to serve the many — or the few. It’s between state structures (usually resembling their dominant industries) that are purposefully maintained as “inclusive,” in the interest of pluralism, innovation and the common good; or “extractive,” for the benefit of an economic and power elite.

It’s the after-argument around Why Nations Fail that becomes the core of our conversation. I’m asking: isn’t a main warning in Why Nations Fail directed at the United States? Aren’t the scariest symptoms of “extractive” politics on our home turf, where the financial elite is throwing billions this year at both parties to block economic reform and taxes on itself? And shouldn’t we see a striking fit here with historian Tony Judt’s last judgment in Ill Fares the Land that an American “way of life” is on a cliff edge, desperately in need of a new public conversation?

On the broad questions Daron Acemoglu is both gravely worried and tentatively optimistic. What “really worries” him about the United States is that we’ve “already started the slide toward extractive institutions.” It’s not just the wealth inequality “that has soared over the last three or four decades.” It’s the eclipse of the myth and often the reality that Average Joes rule our politics. “That you cannot say today. Today the political system, I believe, is largely just listening to the very rich. The SuperPacs are the icing on the cake. It’s lobbying and campaign contributions — just the fact that whenever politicians want to get advice they turn to the very wealthy.” Citizens United and SuperPacs made a bad situation worse. “That’s where the slide becomes very serious,” he said.

And still, Acemoglu is optimistic because “we’ve been here before.” At the end of the 19th Century and the Gilded Age, when economic inequality was even higher than today, American politics was open enough to let Populist and Progressive movements take root in both parties, to enlist Teddy Roosevelt in the war against monopolists and “malefactors of great wealth,” to sustain a long reform era that delivered antitrust laws, direct election of Senators and voting rights for women. “That sort of thing was possible 100 years ago. The question is: is it possible today?”

The sharpest rejoinder is from Acemoglu’s close friend and MIT colleague Simon Johnson of Thirteen Bankers fame, the onetime IMF economist who described our problem as “state capture” by the financial industry, meaning we’re a banana republic owned by big money. “The Acemoglu-Robinson book is ultimately upbeat about the United States. We have built strong economic and political institutions, and these will prevail. I’m not so sanguine,” Johnson wrote in the New York Times recently. “I’m surveying the political landscape closely for anyone who can play the role of Teddy Roosevelt, using legal tools to break monopoly “trusts” and shifting the mainstream consensus decisively toward imposing constraints on the abuse of power by powerful individuals. So far, I see no one truly in the Roosevelt tradition with a realistic chance of election, while the rich become more powerful and the powerful become even richer.”

Professor Acemoglu concurred heartily with the Johnson diagnosis, then tossed the question back at us — that is, at all of us. “Is the system open enough to finally rally around somebody to stop the slide?”

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  • Sean McElroy

    A few working pluralistic systems (in no particular order): public broadcasting, free speech, free software movement, makers, artisans, locavores, vegetable gardeners, occupy movement, (original) tea party, the internet (minus the service providers), street artists, museums, many forms of local government (hired managers notwithstanding), libraries, coursera, Khan academy, … Pluralism implies disbursed, unconcentrated, with no locus of repsonsibility, inconsequential …

    The point is not that pluralistic systems don’t exist, it’s that they don’t get any cred. This is where the power in the equation makes pluralistic solutions untenable. The powerful can ignore, disparage, denigrate, marginalize and obfuscate pluralistic solutions while at the same time taking advantage of those aspects of those systems that increase their own power in an exponential accumulation.

  • chris

    Thank you, Mark! Your list makes a powerful point, and it cheers me up, some.

  • nother

    Great list! And National Parks, too. Ken Burns had it right when he called them Americans best idea. And Teddy R. had a lot to say about that as well.

    And Chris Matthews had it right when he took on Romney for saying the Rich like him should be “congratulated.”

    His statement is so preposterous that on principle my brain cells refuse to process his rationale much less dignify it with a refutation.

  • He couldn’t be more wrong when he says people can choose their occupations and that our schools are “egalitarian”. The question to ask is — after receiving a regular public school education in the U.S. what is the average poor kid able to do or be? The answer is not very much and as a teacher I see the results every week.

  • I have similar reservations as Drego. The education system is segregated along economic lines, with many lower income schools having many of the qualities of prisons. The scholarship system, a corrective force, in many ways seems biased against those it should help most, being terribly time consuming and requiring knowledge of how to appeal to the sensibilities of a different class. The American education system is not without merits. That university classrooms are full of students of such varied ages shows the system is flexible in certain ways (though the number of students returning after a long absence should make us ask why so many needed to leave). But one has to wonder by what standard of measure the American system is “egalitarian.”

    Similarly, what is meant by choice of occupation needs to be defined. In every country, choice of occupation is limited by what industries exist in the country, the needs and access to resources each industry has, and it’s difficult (though not meaningless) to compare countries based on those metrics. In the United States there are functioning institutions in place to make sure that race, sex, and physical disability are not insurmountable obstacles to employment, which can not be undervalued. That many companies judge applicants based on their credit history is very, very troubling.

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  • Christopher,

    Cudos to you for drilling in to define Professor Acemoglu’s views on how his analysis of “extractive institutions” applies to the USA. This is not covered in the book. He was very reluctant to respond until you pressed him. I have read the book carefully and my reactions are here: http://notesfrommylibrary.wordpress.com/2012/07/01/why-economists-fail/. His answers were encouraging, but I think that he is helpless to really understand the world from his prison cell within the insane world of neo-classical economics. For a more interesting interview, I suggest Yanis Varoufakis: http://yanisvaroufakis.eu/. Thanks for what you do.

    Randal Samstag

  • Dave Swager

    The question I wished had been asked – If we’ve been down this path before, at the end of the 19th century, why are we traveling that path again? I suggest an answer – the extractive economic and political institutions may have retreated from time to time but have nevertheless remained intact.

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