Why Nations Fail Rachael Lee - 19831382 (The WNF Theory (Institutions =…
Why Nations Fail Rachael Lee - 19831382
Spanish had gold and silver mines
Spanish colonisation strategy: Encomienda, repartimiento, Mita system.
British did not have access to gold and silver.
British failure to copy Spanish colonisation strategy due to: 1. No gold and silver so Elizabeth I was not financially independent from parliament. 2. North America was not as densely populated as South America, therefore was difficult to control the settlers.
Theories that don't work
Protestant Ethnic Theory: Max Weber
Ignorance about Power theory
Montesk: Countries in tropics = too hot, leads to unproductivity
J Sachs: Factors that lower productivity in tropical countries.
J Diamond: 'Guns Germs and Steel"
Theory = an explanation.
The WNF Theory
Institutions = state, systems of rule and government
Max Weber's State: 1. Has international recognition 2. Fixed Boundary 3. Monopoly of legitimate violence
Inclusive institution: Pluralism and Centralised political authority
Extractive institution: Extractive political institutions enable the elites controlling political power to choose economic institutions with few constraints or opposing forces.¥ Extractive economic institutions enrich the same elites and their economic wealth and power help consolidate their political dominance.
J Schumpeter: "Economic growth and technological change are accompanied by creative destruction."
Small Differences and Critical Junctures
Critical Juncture = A major event or confluence of factors disrupting the existing economic or political balance in society.
The Black Death
Shortage of labour = peasants could place demands on nobles.
1381: The Peasants Revolt in Western Europe
The Second Serfdom in Eastern Europe
Atlantic Free Trade
1588: Spain invades England but loses.
Englands private merchant fleets could now take over Atlantic Trade -> England Merchant classes grew wealthy -> Queen had to bargain with merchant class -> Inclusion of merchants in parliament -> more pluralistic and politically inclusive institutions
The Glorious Revolution
1688: The Glorious Revolution
Conflicts that arose from creative destruction in England in 1500 and 1600s
Sumptuary Laws: Wool industry loses its economic position
Corn Laws: corn growers lost their economic position by 1820
Societies that allow creative destruction to occur = more prosperous
Requires a society based on inclusive institutions
Inclusive institutions encourage innovation and thus encourage economic prosperity
Absolutism -> Inclusive systems
Centralised state -> 2. Enforces rules and property rights -> 3. Inclusive political institutions emerge -> 4. Creative destruction allowed -> 5. Inclusive political and economic systems emerge and mutually support each other
Austro-Hungarian Empire = fear of industry
Francis I opposed to railways and development of industry
China: no shipping allowed
1433: Zhang He last mission
1949: Mao = communist china
1979: Chinas free market opens under Deng Xiapoeng
Spain: became more absolutist despite Cortes
1520: Comunero rebellion
Sierra Leone and Botswana
Sierra Leone "Vicious circle"
Railways and role of Siaka Stevens
Role of Marketing boards
Traditional Rural authority
Diamonds and the civil war
Factors working against centralised authority?
Botswana "Virtuos circle"
Successful in establishing a centralised authority
Factors creating inclusive political institutions
South Africa and Brazil
Dual Economy developed by Arthur Lewis
SA and Brazil initially successful as authoritarian states & starting to develop manufacturing capacity but then stifled by:
Global Economic Crisis in 1970
2.More capital intensive manufacturing
Rise of the labour movement & its connection to broader social movements.
Conflict with business
5.Political crisis in SA (Sharpeville, Soweto, 1985-88 crisis) and huge debt in Brazil and lead to SA (1994) & Brazil (1985) becoming more inclusive
SA & Brazil’s reliance on foreign capital -> use of capital intensive manufacturing which required skilled human resources BUT lack of skilled resources (consequence of apartheid education problems) -> declining economic growth and rise of trade unions, heightened conditions -> social movement -> more inclusive political institutions.
1 October 1949 = Formation of PRC = highly extractive
The Great Leap forward
Deng fully reconstituted Communist Party by 1985 & transformed Chinas economic institutions -> more inclusive.
Advantages that led to super-fast growth (vast supply cheap labour, access to foreign markets)
Link between existing technologies & creative destruction
Property rights issue
Consequences of state & business connections
Predictions about China’s future growth trajectory
Seymour Martin Lipset
Without effective institutions, foreign aid could have detrimental effects
Reconstruction aid to Afghanistan