Introduction
This article discusses the Nobel-winning work of Daron Acemoglu, Simon Johnson, and James Robinson (AJR) on how institutions impact economic growth. Their research suggests that “inclusive” institutions (which allow participation and protect rights) lead to prosperity, while “extractive” institutions (which benefit only a few) keep nations poor.
However, the article critiques AJR’s work for being too focused on European ideas, oversimplifying history, and overlooking diverse development paths. It highlights that other scholars argue that economic success can follow different models suited to each country’s unique history and conditions.
Article Explanation
Daron Acemoglu, Simon Johnson, and James Robinson (AJR) won the 2024 Nobel Prize in Economic Sciences for showing how institutions (like laws and rules) impact a country’s economy.
Their work suggests that when institutions are “inclusive,” meaning they allow people to participate in the economy and protect their rights, countries tend to prosper. However, if institutions are “extractive” and benefit only a small group, they hold back economic growth. AJR argue that this difference can be traced back to colonial times. Where Europeans could settle comfortably, they set up inclusive systems; where they couldn’t, they set up extractive systems to exploit resources. AJR argue that this has shaped the wealth and poverty of nations today.
However, many scholars feel that AJR’s view is too focused on European experiences (Eurocentric). They argue that development doesn’t have a one-size-fits-all path and shouldn’t be based only on what worked for Europe. Here are five main critiques of AJR’s work:
- European-Centered View: AJR’s model assumes that the way Europe developed is the “right way” and should be copied by other countries. Critics argue that each region has its own history and might need different strategies to develop. For example, Yuen Yuen Ang, a scholar, argues that China grew economically not by starting with inclusive institutions but through “directed improvisation.” This means that local governments experimented with policies suited to China’s unique context, showing that growth can come first, with inclusive institutions following later.
- Western Development Misunderstood: AJR’s view of Europe’s development as “inclusive” is seen as incomplete. Critics argue that Europe’s progress involved not only inclusive policies but also exploitation. For example, during the Industrial Revolution, Britain’s growth came partly from exploiting labour, not just from fair, inclusive systems. AJR tend to ignore how exclusion and corruption also played a role in early European development.
- Overly Simple and Ignoring History: AJR’s model divides institutions into only two types — inclusive or extractive — which critics say is too simplistic. For example, economist Ha-Joon Chang argues that many rich countries relied on “extractive” practices, like government intervention and protectionism, during their early growth. Only after becoming wealthy did they shift to more inclusive policies.
- Missing Complexity in Colonial Influence: AJR’s framework doesn’t capture the full picture of colonial institutions. Colonial powers often mixed local governance with foreign control, creating hybrid systems that don’t fit neatly into inclusive or extractive categories. This mix led to diverse post-colonial outcomes that AJR’s simple classification cannot fully explain.
- Ignoring Long-Term Colonial Impact: Finally, AJR’s model overlooks how colonialism drained resources from colonized countries to benefit Europe. These “extractive” structures often left former colonies underdeveloped, like in Africa, where resources were taken out to build European wealth, leaving these regions impoverished. AJR’s idea of “choice” in institution-building doesn’t consider how deeply colonialism entrenched inequality.
In conclusion, while AJR’s work on how institutions affect economic growth has been influential, critics argue that it is too focused on European ideas and doesn’t account for the many unique pathways to growth worldwide.
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