Key Takeaway:
Daron Acemoglu, Simon Johnson, and James Robinson were awarded the 2024 Nobel Memorial Prize in economics for their book Why Nations Fail, which argued that countries succeed when they adopt inclusive institutions like democracy, while extractive institutions stifle growth by concentrating power and wealth in elites. However, their theory has faced criticism for oversimplification and overlooking the complex realities of economic growth, such as corruption and colonialism. A more nuanced approach is needed to address economic inequality and historical injustices.
When Daron Acemoglu, Simon Johnson, and James Robinson were awarded the 2024 Nobel Memorial Prize in economics, it was a long-awaited recognition for their work connecting societal institutions to economic development. Their influential book Why Nations Fail shaped a global debate, offering a simple premise: countries succeed when they adopt “inclusive institutions” like democracy, while “extractive institutions” stifle growth by concentrating power and wealth in the hands of elites. But the theory has faced criticism for oversimplification, especially when applied to real-world examples.
Acemoglu, Johnson, and Robinson argue that inclusive institutions, which protect property rights and limit corruption, lead to economic prosperity, while extractive institutions do the opposite. This framework has certainly influenced policymakers worldwide, but it faces a significant challenge: historical evidence suggests that countries like Singapore, South Korea, and China experienced rapid growth without having these supposedly vital “inclusive institutions” in place from the start.
Critics argue that this view ignores the complex realities of economic growth. Scholars like Mushtaq Khan and Yuen Yuen Ang point out that economic progress has historically occurred even in corrupt environments, as seen in China’s meteoric rise. Moreover, Ang notes that Western countries, including the United States, were rife with corruption during their developmental stages. This raises the question of whether inclusive institutions are truly a prerequisite for growth.
The laureates also skirt the darker aspects of colonialism. Their research suggests that settler colonies like the U.S. and Australia developed stronger institutions over time, while non-settler colonies were left with extractive systems. However, this analysis largely glosses over the brutal realities of colonization, including the violence and exploitation that accompanied the imposition of these institutions. While Acemoglu has stated that their work doesn’t judge colonialism as “good or bad,” this neutral stance has been criticized for downplaying the catastrophic effects of imperialism on colonized nations.
This reluctance to engage with the moral implications of their findings reflects a broader issue within economics. The discipline often prides itself on neutrality, avoiding value judgments in favor of cold, hard data. However, this detachment from ethical considerations may limit the field’s ability to address the complex socio-economic challenges faced by the world today.
In fact, the Nobel Prize in economics itself has been criticized for its insularity. The prize, which was not part of Alfred Nobel’s original set of awards, is largely dominated by scholars from elite American institutions, perpetuating a narrow geographic and institutional focus. This year’s winners follow the trend, sparking renewed debate over whether the field is engaging deeply enough with difficult issues like colonialism, imperialism, and capitalism.
Acemoglu, Johnson, and Robinson’s work has undeniably shaped the global conversation on development, but it’s also clear that their framework has its limitations. As the world continues to grapple with economic inequality and historical injustices, a more nuanced approach is needed—one that doesn’t shy away from difficult questions about the structures that underpin global prosperity.
