Professional Documents
Culture Documents
Lecturer
Peter Zeitz
Why do many states with inclusive political institutions fail to adopt good economic institutions?
Weak vs. Strong States
State strength is similar to a technology.
A Strong state tends to persist over time.
Political Risk
Theory says that democracies should have more stable growth patterns. Growth in non-democracies should be more unstable.
GDP
Tax 20%
GDP
Tax 20%
Elites earn most capital income. Extractive growth implies policies that maximize capital income.
No collective bargaining No minimum wage No Antitrust enforcement
Recall the Carlos Slim, worlds wealthiest individual
Profit 40%
GDP
Tax 20%
Hmm country has relatively dense population relative to fertility, lacks indigenous government Hmm country has sparse population and lacks natural resources
Settle there, use inclusive economic institutions, eventually inclusive political institutions United States, Canada, Singapore, Hong Kong -> Inclusive Economic Institutions, Strong State These settler economies have done very well in the long-run.
Strong democracy
GDP per capita (nominal and PPP) similar to Malaysia 19 times higher than neighboring Madagascar
Mita: Legally Designated Slave gathering Area in Inca empire Map shows Mita boundaries in Peru and Bolivia
Agency Problem: Bribery makes subcontracting less effective in China than in Britain.
Workers pay foreperson annual fees for jobs (two weeks wages).
Forepersons belong to criminal organization, Green Gang. Gang brokers sale of labor.
Controls recruitment of rural labor (fee-based or indentures). Gang networks important in urban job search. Instigates strikes and riots to coerce firms.
Forepersons profit from job placements. Gang earns additional profits through control of recruitment. Blacklists discourage workers from seeking jobs directly. Collective action is used to force excessive hiring. "the principal trouble [in management labor relations] is that a
mill is practically forced to employ more people than is necessary and wages are only of secondary importance. (Barker 1934)
Perspectives in Acemoglu and Robinson are very Eurocentric and focused on 19th and 20th century history. Perhaps inclusive democracies are not the only/best way of sustaining growth.
Is it adequate to characterize countries as either democracies or nondemocracies?
A considerable diversity of institutions exists within each group.
The coexistence of bad institutions and great growth China Puzzle Use of Western standards to measure institutions ignores important Chinese institutions that deal with incentive problems. Institutions are related to Chinas long imperial history.
Emperor
Territorial Control
Personnel
Finance
Justice
Industry
Personnel
Finance
Justice
Industry
Central Gov't
Territorial Control
Personnel
Finance
Agriculture
Industry
Personnel
Finance
Agriculture
Industry
Regional competition encourages some provinces to invent new institutional arrangements to promote economic growth.
Land Reform, Special Economic Zones, Privatization, New Forms of Enterprises
What about the evidence? How does a Chinese provincial leader get promoted?
1) By knowing the right people 2) By submitting tax revenue to the Central Govt (achieving GDP growth doesnt matter in practice)