Malaria might have determined the economic trajectory of the world…. through institutions
It’s an old paper, but I just came across The Colonial Origins of Comparative Development: An Empirical Investigation
by Daron Acemoglu, Simon Johnson and James A. Robinson, originally published in the The American Economic Review back in 2001.
They take rough data of settler deaths back in the seventeenth and eighteenth centuries and plot them against the GDP of several countries from 1995. I’ve included the plot on the right. What they found was that a higher number of European settler deaths was associated with a long term decline in economic output.
Settling in the seventeenth and eighteenth centuries was a dangerous business, particularly in Sub-Saharan Africa and less so in what is now the United States, New Zealand and Australia. Malaria and yellow fever were responsible for killing up to 100% of groups brave enough to attempt the journey.
Acemoglu, et al.’s argument is as follows:
1. There were different types of colonization policies which created different sets of institutions. At one extreme, European powers set up “extractive states,” exemplified by the Belgian colonization of the Congo. These institutions did not introduce much protection for private property, nor did they provide checks and balances against government expropriation. In fact, the main purpose of the extractive state was to transfer as much of the resources of the colony to the colonizer. At the other extreme, many Europeans migrated and settled in a number of colonies, creating what the historian Alfred Crosby (1986) calls “Neo-Europes.” The settlers tried to replicated European institutions, with strong emphasis on private property and checks against government power. Primary examples of this include Australia, New Zealand, Canada, and the United States.
2. The colonization strategy was influenced by the feasibility of settlements. In places where the disease environment was not favorable to European settlement, the cards were stacked against the creation of Neo-Europes, and the formation of the extractive state was more likely.
3. The colonial state and institutions persisted even after independence.
They argue that the disease environment determined the nature of settlements, which determine the nature of institutions which, in term, determined the economic trajectory of a country.
Interestingly, they control for all of the things that one might control for, such as distance from the equator and the percentage of inhabitants that were European, being landlocked and the ruling power, ruling out the effect of some obvious potential influences. Property rights, a solid judiciary and limits on political power in the colonies and upon independence, they argue, had a greater effect on long term GDP, and the development of those institutions was enabled or inhibited by early settler mortality.
It’s a fairly compelling argument, though not without its critics.
A few gems from the paper interested me. One, the return on investment in the British colonies during the nineteenth century was a whopping 25%, far more than one could have expected domestically. In the late 19th and early 20th centuries, this dropped so that returns on colonial and domestic investments were the same.
I found (finally!) a reference to indicate the willful choosing of high altitude and thus less malarious areas for colonial settlements. Note that in Europe and the US, the location of cities is often along river ways and sea sides, where in Africa large cities tend to be placed inland (with some exceptions). There has been no industrial revolution in Africa and little regional trade (a condition which persists to this day) so that cities along water based shipping routes are not necessary. Extraction in Africa was largely done by rail, further alleviating the need to be close to rivers.
What I’m Reading Now
Like anyone at all cares what I’m ever reading, but… here we go:
Words Will Break Cement: The Passion of Pussy Riot – Masha Gessen (2013) – For some reason, I was asleep when the Pussy Riot debacle was underway. Perhaps it was a result of my disdain and fatigue for independent music. I’m not sure why, but if this great book is any indication, Pussy Riot could possibly have been the most amazing rock act of the 21st century, despite not even being a real band. A group of women read radical feminist theory and note the paucity of feminist activism in modern day Russia. They then create an elaborate video project to protest Putin’s authoritarian government eventually staging a video shoot in one of Russia’s most sacred Orthodox churches. 40 seconds of screaming and dancing in a church while wearing colorful balaclavas earns them 660 days in prison.
Notwithstanding the intellectual depth of the project, the court cases were a damning indictment of post-Soviet Russia’s faux-democracy. Corrupt lawyers, pro-state judges and willful disregard for the popular outrage toward an entrenched and self-interested government are all at play during the trial and sentencing of the members of Pussy Riot. That supporters and participants in Putin’s heavy handed state participated in the senseless persecution of a group of “intellectual pranksters” is no surprise. Most perplexing were the testimonies of the few people who were in the Cathedral that day. Much of the case depended on the “hurt feelings” of the people who were visiting the church. I am wondering how a group of girls screaming in a corner could lead one to suffer PTSD but apparently it happens. I never knew God was that weak. Great book. BUY HERE
Social Democratic America – Lane Kenworthy (2012) – Could social democratic policies such as those of Sweden be beneficial to the United States? Is it even possible to implement them? I’m happy to see this book, if only that it helps validate some of my positions (one needs those moments). Kenworthy rolls through what social democracy is, how it works in the Scandinavian countries and how it might be applied within the United States. It’s a realistic assessment of where US policy fails and a practical prescription to deal with the future.
Kenworthy advocates for increased spending (as a percent of GDP) on broad social insurance programs (safety nets), an income based taxed credit to bolster the wages of low and middle income workers, a national consumption tax to support them and a resurgence of labor unions and labor protections. He rightly points out that the presence of none of these precludes economic growth or affluence. Sweden is hardly the totalitarian state that American right wingers would suggest. In fact, the economic security afforded by it’s generous welfare state is far more supportive of entrepreneurship and innovation than the American system.
While I certainly like these ideas, I am pessimistic as to whether they could even be applied here. Though we do right by offering the earned income tax credit, I can’t see it’s expansion as politically feasible. The United States (at least on the state level) is far too entrenched in a Tea Party mentality and far too fractured to come to a reasonable consensus. Until the United States citizenry starts thinking big and stops thinking solely of individual self-preservation, we’ll have little to look forward to in terms of the implementation of smart policy.BUY HERE
*Again, please excuse the Amazon links. Though it looks like I’m an Amazon shill, I sincerely want to review these books, particularly books that I like. However, I have to be creative in thinking of ways to support this blog. Please, if your are going to purchase these books, use the links. I get 2% of the amount spent. That money goes to helping pay for the yearly fees associated with keeping this web site up. Thanks.
Where is the happy medium between free markets and social justice?
Clearly, if American politics are any indication, no one knows.
I’ll have to make this short, but an interesting article appeared in this mornings NYT: “Questions for Free Market Moralists” from Oxford trained philosopher and musician Amia Srinivasen.
Not being a political philosopher myself, much of philosophical the debate on justice, markets and freedom is foreign to me, though I’ve long been interested in the work of John Rawls and his monumental 1971 work “A Theory of Justice.”
Rawls explored the limits of distributive justice, that is, how goods, services and rights can be equitably pass around in a society to maximize benefits to both individuals and society. In a Rawlsian society, each individual has equal access to the same rights and opportunities as all others. Moreover, inequalities (assumed to be inevitable) are arranged such that they benefit the weakest members of society.
Nozick, penned the 1974 book “Anarchy, State and Utopia” (which I have not read) in response to Rawls’ work. He argued that goods and services can only be justly distributed through pure free exchange. The state then serves merely to facilitate exchange by protecting the rights of property.
Srinivasen rightly indicates that most large democracies are decidedly Rawlsian in construction, but that ideologies, particularly in the United States, are swinging toward Nozick (though people might argue that we are becoming more Randian than Nozickian).
Rawls and Nozick represent the two poles of mainstream Western political discourse: welfare liberalism and laissez-faire liberalism, respectively. (It’s hardly a wide ideological spectrum, but that’s the mainstream for you.) On the whole, Western societies are still more Rawlsian than Nozickian: they tend to have social welfare systems and redistribute wealth through taxation. But since the 1970s, they have become steadily more Nozickian. Such creeping changes as the erosion of the welfare state, the privatization of the public sphere and increased protections for corporations go along with a moral worldview according to which the free market is the embodiment of justice. This rise in Nozickian thinking coincides with a dramatic increase in economic inequality in the United States over the past five decades — the top 1 percent of Americans saw their income multiply by 275 percent in the period from 1979 and 2007, while the middle 60 percent of Americans saw only a 40 percent increase.
Nozick’s libertarian position (like Rand), however, leads to some inevitable moral quandries. Is pure “free trade” always fair? Is the exploitation of workers facing few other employment options, and the resultant maximization of profit fair to society?
The problems with Nozick’s position is a problem inherent in neo-classical assumptions that supply and demand markets are based on perfect information between buyers and sellers. It is assumed that buyers know all prices and can make informed choices on purchases.
We know this not to be the case, which is exactly why health markets in the United States are so inefficient and prices so vastly inflated. If one is unconscious from a heart attack, does one really have time to shop around for the best deal possible? Our market approach to health care in the United States has created a system that is neither fair nor efficient.
But the issue here is one of morals. Is it acceptable that we allow for example, loan sharks to exploit the desperate conditions of poverty, or that we allow the poor to sell their organs (or even their daughters), or that we allow the Wal Marts of the world to pay absurdly low wages and offer few benefits, simply because they operate in unemployment-endemic areas of the country?
to concede that there is more to freedom than consent, that there is such a thing as nonviolent exploitation, that people shouldn’t be rewarded and punished for accidents of birth, that we have moral obligations that extend beyond those we contractually incur — this is to concede that the entire Nozickian edifice is structurally unsound. The proponent of free market morality has lost his foundations.
Clearly, there is no happy medium between equality and freedom. What one might call freedom, for example, from exploitation, will be seen as an imposition of the other to realize his or her economic dreams.
OK, gotta go.