The Books Interview: James A Robinson

The co-author of "Why Nations Fail" on what really creates economic growth.

Could one boil down the thesis of your book Why Nations Fail to the James Carville-style slogan, “It’s the institutions, stupid”?                                                                        I suppose that’s fair. It’s the way that societies organise their economy and their policy that is crucial for how successful they are. When I teach Latin American development, I tell my students to look at the Americas today and rank all the countries in terms of prosperity. You start with the US and Canada and you get to Chile, Argentina, Mexico, Colombia and Bolivia, with Haiti down at the bottom. If you go back 100 years, that ranking is the same, so there’s some sort of inertial historical process generating these differences. And I don’t think you can explain it in terms of the US having had better leaders and better ideas. That never struck me as the right way to talk about it.

So the error of the IMF and others in the late 1980s and early 1990s was to suppose that certain sorts of policies lead inevitably to prosperity?                                          Yes, in the sense that you can’t implement certain policies in a system that’s resistant to them. Take central bank independence. In Zimbabwe, Robert Mugabe allowed the IMF to make the central bank independent. But that didn’t really make any difference to monetary policy in Zimbabwe. And, shortly after the central bank became independent, there was hyperinflation.

You downplay the role of geography in driving growth and prosperity, don’t you?   Yes. I’ve worked a lot in sub-Saharan Africa in the past 20 years and I find the idea that Sierra Leone, for example, is poor because of malaria or because it’s in the tropics absurd. I don’t think there’s any reason why Sierra Leone can’t be prosperous. It’s near Europe; it’s on the coast. You talk to people there and they have the same aspirations as you or I have – they want a nice house, running water, electricity; they want to be able to travel; they want to have decent schools for their children; they want opportunities.

Take two prosperous states – Britain and Japan. They have very different kinds of political institutions and political cultures. Isn’t that a problem for your argument?Consider the Meiji Restoration, which took place in Japan in the 19th century. It fits very well with the argument of the book. This is clearly a case in which very large changes take place in political and economic institutions. You can’t have any kind of economic development without a sufficient amount of centralised political authority. What distinguishes east Asia from, say, sub-Saharan Africa, is the history of political centralisation in that part of the world. It’s interesting you ask me about Japan; most people ask me about China.

Let’s talk about China. In the book, you argue that Chinese growth and prosperity are unsustainable. Why?                                                                                                     Thirty years ago, everyone thought that the Soviet Union was an economic miracle. It was a role model for all the developing countries. Think about India after independence, for instance. Look at a 1970s undergraduate economics textbook and you’ll find a graph with the Soviet Union overtaking the US. But as the editions go on, the date at which the Russians overtake the Americans is delayed and delayed. And then, at some point, the picture disappears altogether. I think that’s powerful because it shows how delusional we can all be. It’s a good reality check to say: “Well, we got this wrong in the past.” The thing the Chinese Communist Party really cares about is staying in power. And if it comes to a choice between allowing the institutional changes that will drive development or staying in power, it will choose staying in power.

Do economists need to take more notice of the role that political institutions play in fostering economic growth?                                                                                                I think they do but they are very resistant to that. My own impression is that the economic crisis has had very little impact on academic economics. At Harvard, where I teach, people in the economics department discourage students from doing research on political economy. They say that political economy is not a well-defined field in economics.

James A Robinson and Daron Acemoglu's "Why Nations Fail' is published by Profile Books (£25)