Category Archives: Economic Empowerment

Max Weber: The Protestant Ethic

The Protestant Ethic and the Spirit of Capitalism is a book written by Max Weber, a German sociologist, economist, and politician. In his book, Weber argues that the theological ideas of protestant sects such as the Calvinists played a role in creating the morality of capitalism. Calvinists believe in predestination–that God has already determined who is saved and damned. As Calvinism developed, a deep psychological need for clues about whether one was actually saved arose, and Calvinists looked to their success in worldly activity for those clues. Thus, they came to equate material success and financial gain as signs of God’s favor.

Weber asserts that the modern spirit of capitalism sees profit as an end in itself, and the pursuit of profit as a virtuous endeavor. As a consequence, capitalism promotes the notion that socioeconomic differences are the measure of one’s virtue — or lack thereof. Theologically this has resulted in the emergence of what has been termed The Prosperity Gospel — socioeconomic differences are divinely ordained, therefore, material prosperity is the sign of God’s blessing upon the faithful while those who lack means have been deemed unworthy.

The ethical problem with such a simplistic political and religious model is that it not only provides credence for the vilification of the poor, but it also supplies a moral justification for failing to seek a more egalitarian social arrangement. Things are the way they should be, any lack of equality is due to a lack of virtue, effort or God’s favor. This relieves adherents of any duty to acknowledge that social injustices such as corruption, patronage or exploitation occur, let alone that they have any moral responsibility in  effectuating change.

Video supplied by the BBC Radio 4 series about life’s big questions – A History of Ideas. http://www.bbc.co.uk/historyofideas

This project is from the BBC in partnership with The Open University, the animations were created by Cognitive.

Robert Reich: Inequality for All (2013)

Synopsis: In 2008, the Wall Street giant Lehman Brothers collapsed triggering the worst financial crisis since the Great Depression. Unlike the New Deal era reforms, the financial response to our modern crisis was to entrench existing wealth through government assistance. Meanwhile, millions of working class Americans lost their homes, pensions and employment. During the economic recovery period, the top 1 percent of Americans have captured approximately 95 percent of the income gains while the middle class has been forced to accept pay cuts.  As a result, the current divide between the top 1 percent of Americans and the lowest 99 percent is the greatest it ever been since the Great Depression.

Bill Moyer and political economist, Robert Reich, discuss the growing income equality in America.  Reich warns the middle class in America is shrinking at an alarming rate and the record income gap is undermining our democracy. Reich is currently Chancellor’s Professor of Public Policy at the Goldman School of Public Policy at the University of California, Berkeley. He served in the administrations of presidents Gerald Ford and Jimmy Carter and was Secretary of Labor from 1993-1997 under the Bill Clinton administration.

Noam Chomsky: Corporate Assault on Public Education (2012)

Synopsis: Noam Chomsky delivered his lecture on the goals of Public Education on March 16, 2012, at St. Phillip’s Episcopal Church in Harlem, NY. Chomsky discusses the longstanding tradition of utilizing public education as a means of breeding civic passivity and conformity, while discouraging free and independent thought. Chomsky sets forth the premise that the ruling class utilizes public education to naturalize individuals into the established corporate ethos and to dissuade them from challenging the dominant ideology and economic structure. Chomsky cuts through the political rhetoric with a detailed historical analysis of the Western practice of using social institutions to indoctrinate the young.

Maladjusted

Modern Psychology has a word that is probably used more than any other word in Psychology. It is the word maladjusted. It is the ringing cry of modern child psychology — maladjusted. Now of course we all want to live the well adjusted life in order to avoid neurotic and schizophrenic personalities. But as I move toward my conclusion, I would like to say to you today, in a very honest manner, there’s some things in our society, and some things in our world, for which I am proud to be maladjusted. And I call upon all men of good will to be maladjusted to these things until the Good Society is realized.

I must honestly say to you that I never intend to adjust myself to racial segregation and discrimination. I never intend to adjust myself to religious bigotry. I never intend to adjust myself to economic conditions that will take necessities from the many to give luxuries to the few and leave millions of God’s children smothering in an airtight cage of poverty in the midst of an affluent society.

Martin Luther King, Jr. (1963)

Black Reconstruction in America (1935)

W. E. B. Du Bois’s seminal work, Black Reconstruction in America, was written within the conceptual backdrop of the plight of African Americans during the Great Depression. While the Great Depression was pushing the working class toward urban unemployment and rural subsistence, Du Bois was the intellectual voice of radicalization which took root in the black ghettos.

The immense labor struggles in the years preceding the first World War forced Du Bois to consider the importance of class divisions within American society. He observed that the struggles waged by the working class during the Progressive Era led capitalists to utilize divide and conquer strategies in an attempt to prevent black and white labor from organizing.  The competition over Northern industrial jobs between unskilled European immigrants and blacks migrating from the South further exacerbated the already seismic tensions between blacks and whites which were prevalent throughout American culture in the aftermath of slavery. Black Reconstruction in America reflects this crisis in its analysis of the plight of the minority working class between the Reformation Era and the Great Depression. Dubois asserts  “[t]he emancipation of man is the emancipation of labor, and the emancipation of labor is the freeing of that basic majority of workers who are yellow, brown and black.”

Dubois praised the efforts of mid-Nineteenth century intellectual leaders such as Charles Sumner and Thaddeus Stevens in the “new attempt to expand and implement democracy.” He viewed the U.S. Bureau of Refugees, Freedmen and Abandoned Lands, popularly known as the Freedmen’s Bureau, as “the most extraordinary and far-reaching institution of social uplift that America has ever attempted.” The Freedmen’s Bureau was established in 1865 by Congress to help former black slaves and poor whites in the South in the aftermath of the U.S. Civil War (1861-65).

The Freedmen’s Bureau provided food, housing and medical aid, established schools and offered legal assistance. It also attempted to settle former slaves on Confederate lands confiscated or abandoned during the war. However, the bureau was prevented from fully carrying out its programs due to a shortage of funds and personnel, along with the politics of race and Reconstruction. In 1872, Congress, in part under pressure from white Southern interests, closed the bureau.

Du Bois saw the Freedmen’s Bureau as an attempt to curb landowners and capitalists “in the interest of a black and white labor class.” While it did “an extraordinary piece of work,” its accomplishment was small in comparison with what it might have done, as if Du Bois suggests, it had been made permanent and been given ample funding and personnel.

According to Dubois, “[t]he greatest opportunity for a real national labor movement which the nation ever saw, or is likely to see for many decades,” was found in the South after the Civil War. However, labor organizers, “with but few exceptions,” did not realize it, and when the South united to disenfranchise the Negroes it “cut the voting power of the laboring class in two.” While the Negroes turned to political action to attain equal standing, Northern white labor moved in the opposite direction to suppress social equality, with the end result being that labor “went into the great war of 1877 against Northern capitalists” not only without the support of the Negro but with no interest in the Negro and his problems.

W. E. B. Du Bois is an important American voice in the struggle for social equality. His work resists easy classification. Cornel West puts Du Bois  in the camp of the pragmatists of the “Emersonian tradition” who sought to evade traditional philosophical problems altogether and turned instead to the empowerment of individuals and communities. More recent scholarship has credited Du Bois with being a highly influential critical theorist, whose work is purposefully  interdisciplinary in nature, utilizing  multiple perspectives to form his critique of power [1].

What distinguishes Du Bois from many of his contemporaries is his affinity towards the oppressed and afflicted. West  describes Du Bois as having an impassioned and focused concern for “the wretched of the earth” guided by a desire to find pragmatic solutions for alleviating their plight [2]. This is the spirit which drives Black Reconstruction in America, as Du Bois boldly asserts, “There can be no compromise” in the fight for social and economic equality, for “this is the last great battle of the West.”

A scanned version of the Book in digital format may be found HERE

[1] Rabaka, Reiland. W. E. B. Du Bois and the Problems of the Twenty-First Century: An Essay on Africana Critical Theory (Lanham, MD.: Lexington Books, 2007); p. 2.

[2] West, Cornel. The American Evasion of Philosophy: A Genealogy of Pragmatism (Madison, WI: The University of Wisconsin Press, 1989); p. 138.

 

The Natural Aristocracy: Thomas Jefferson’s Letter to John Adams (1813)

Thomas Jefferson to John Adams

28 Oct. 1813  Cappon 2:387–92

According to the reservation between us, of taking up one of the subjects of our correspondence at a time, I turn to your letters of Aug. 16. and Sep. 2.

The passage you quote from Theognis, I think has an Ethical, rather than a political object. The whole piece is a moral exhortation, parainesis, and this passage particularly seems to be a reproof to man, who, while with his domestic animals he is curious to improve the race by employing always the finest male, pays no attention to the improvement of his own race, but intermarries with the vicious, the ugly, or the old, for considerations of wealth or ambition. It is in conformity with the principle adopted afterwards by the Pythagoreans, and expressed by Ocellus in another form. Peri de tes ek twn allelwn anthrwpwngenesews etc.–oux hedones henekahe mixis . Which, as literally as intelligibility will admit, may be thus translated. “Concerning the interprocreation of men, how, and of whom it shall be, in a perfect manner, and according to the laws of modesty and sanctity, conjointly, this is what I think right. First to lay it down that we do not commix for the sake of pleasure, but of the procreation of children. For the powers, the organs and desires for coition have not been given by god to man for the sake of pleasure, but for the procreation of the race. For as it were incongruous for a mortal born to partake of divine life, the immortality of the race being taken away, god fulfilled the purpose by making the generations uninterrupted and continuous. This therefore we are especially to lay down as a principle, that coition is not for the sake of pleasure.” But Nature, not trusting to this moral and abstract motive, seems to have provided more securely for the perpetuation of the species by making it the effect of the oestrum implanted in the constitution of both sexes. And not only has the commerce of love been indulged on this unhallowed impulse, but made subservient also to wealth and ambition by marriages without regard to the beauty, the healthiness, the understanding, or virtue of the subject from which we are to breed. The selecting the best male for a Haram of well chosen females also, which Theognis seems to recommend from the example of our sheep and asses, would doubtless improve the human, as it does the brute animal, and produce a race of veritable aristoi[aristocrats]. For experience proves that the moral and physical qualities of man, whether good or evil, are transmissible in a certain degree from father to son. But I suspect that the equal rights of men will rise up against this privileged Solomon, and oblige us to continue acquiescence under theAmaurwsis geneos astwn [the degeneration of the race of men] which Theognis complains of, and to content ourselves with the accidental aristoi produced by the fortuitous concourse of breeders. For I agree with you that there is a natural aristocracy among men. The grounds of this are virtue and talents. Formerly bodily powers gave place among the aristoi. But since the invention of gunpowder has armed the weak as well as the strong with missile death, bodily strength, like beauty, good humor, politeness and other accomplishments, has become but an auxiliary ground of distinction. There is also an artificial aristocracy founded on wealth and birth, without either virtue or talents; for with these it would belong to the first class. The natural aristocracy I consider as the most precious gift of nature for the instruction, the trusts, and government of society. And indeed it would have been inconsistent in creation to have formed man for the social state, and not to have provided virtue and wisdom enough to manage the concerns of the society. May we not even say that that form of government is the best which provides the most effectually for a pure selection of these natural aristoi into the offices of government? The artificial aristocracy is a mischievous ingredient in government, and provision should be made to prevent it’s ascendancy. On the question, What is the best provision, you and I differ; but we differ as rational friends, using the free exercise of our own reason, and mutually indulging it’s errors. You think it best to put the Pseudo-aristoi into a separate chamber of legislation where they may be hindered from doing mischief by their coordinate branches, and where also they may be a protection to wealth against the Agrarian and plundering enterprises of the Majority of the people. I think that to give them power in order to prevent them from doing mischief, is arming them for it, and increasing instead of remedying the evil. For if the coordinate branches can arrest their action, so may they that of the coordinates. Mischief may be done negatively as well as positively. Of this a cabal in the Senate of the U. S. has furnished many proofs. Nor do I believe them necessary to protect the wealthy; because enough of these will find their way into every branch of the legislation to protect themselves. From 15. to 20. legislatures of our own, in action for 30. years past, have proved that no fears of an equalisation of property are to be apprehended from them.

I think the best remedy is exactly that provided by all our constitutions, to leave to the citizens the free election and separation of the aristoi from the pseudo-aristoi, of the wheat from the chaff. In general they will elect the real good and wise. In some instances, wealth may corrupt, and birth blind them; but not in sufficient degree to endanger the society.

It is probable that our difference of opinion may in some measure be produced by a difference of character in those among whom we live. From what I have seen of Massachusets and Connecticut myself, and still more from what I have heard, and the character given of the former by yourself, who know them so much better, there seems to be in those two states a traditionary reverence for certain families, which has rendered the offices of the government nearly hereditary in those families. I presume that from an early period of your history, members of these families happening to possess virtue and talents, have honestly exercised them for the good of the people, and by their services have endeared their names to them.

In coupling Connecticut with you, I mean it politically only, not morally. For having made the Bible the Common law of their land they seem to have modelled their morality on the story of Jacob and Laban. But altho’ this hereditary succession to office with you may in some degree be founded in real family merit, yet in a much higher degree it has proceeded from your strict alliance of church and state. These families are canonised in the eyes of the people on the common principle “you tickle me, and I will tickle you.” In Virginia we have nothing of this. Our clergy, before the revolution, having been secured against rivalship by fixed salaries, did not give themselves the trouble of acquiring influence over the people. Of wealth, there were great accumulations in particular families, handed down from generation to generation under the English law of entails. But the only object of ambition for the wealthy was a seat in the king’s council. All their court then was paid to the crown and it’s creatures; and they Philipised in all collisions between the king and people. Hence they were unpopular; and that unpopularity continues attached to their names. A Randolph, a Carter, or a Burwell must have great personal superiority over a common competitor to be elected by the people, even at this day.

At the first session of our legislature after the Declaration of Independance, we passed a law abolishing entails. And this was followed by one abolishing the privilege of Primogeniture, and dividing the lands of intestates equally among all their children, or other representatives. These laws, drawn by myself, laid the axe to the root of Pseudoaristocracy. And had another which I prepared been adopted by the legislature, our work would have been compleat. It was a Bill for the more general diffusion of learning. This proposed to divide every county into wards of 5. or 6. miles square, like your townships; to establish in each ward a free school for reading, writing and common arithmetic; to provide for the annual selection of the best subjects from these schools who might receive at the public expense a higher degree of education at a district school; and from these district schools to select a certain number of the most promising subjects to be compleated at an University, where all the useful sciences should be taught. Worth and genius would thus have been sought out from every condition of life, and compleatly prepared by education for defeating the competition of wealth and birth for public trusts.

My proposition had for a further object to impart to these wards those portions of self-government for which they are best qualified, by confiding to them the care of their poor, their roads, police, elections, the nomination of jurors, administration of justice in small cases, elementary exercises of militia, in short, to have made them little republics, with a Warden at the head of each, for all those concerns which, being under their eye, they would better manage than the larger republics of the county or state. A general call of ward-meetings by their Wardens on the same day thro’ the state would at any time produce the genuine sense of the people on any required point, and would enable the state to act in mass, as your people have so often done, and with so much effect, by their town meetings. The law for religious freedom, which made a part of this system, having put down the aristocracy of the clergy, and restored to the citizen the freedom of the mind, and those of entails and descents nurturing an equality of condition among them, this on Education would have raised the mass of the people to the high ground of moral respectability necessary to their own safety, and to orderly government; and would have compleated the great object of qualifying them to select the veritable aristoi, for the trusts of government, to the exclusion of the Pseudalists: and the same Theognis who has furnished the epigraphs of your two letters assures us that “oudemian pw kurnagathoi polin hwlesan andres[“Curnis, good men have never harmed any city”]. Altho’ this law has not yet been acted on but in a small and inefficient degree, it is still considered as before the legislature, with other bills of the revised code, not yet taken up, and I have great hope that some patriotic spirit will, at a favorable moment, call it up, and make it the key-stone of the arch of our government.

With respect to Aristocracy, we should further consider that, before the establishment of the American states, nothing was known to History but the Man of the old world, crouded within limits either small or overcharged, and steeped in the vices which that situation generates. A government adapted to such men would be one thing; but a very different one that for the Man of these states. Here every one may have land to labor for himself if he chuses; or, preferring the exercise of any other industry, may exact for it such compensation as not only to afford a comfortable subsistence, but wherewith to provide for a cessation from labor in old age. Every one, by his property, or by his satisfactory situation, is interested in the support of law and order. And such men may safely and advantageously reserve to themselves a wholsome controul over their public affairs, and a degree of freedom, which in the hands of the Canaille of the cities of Europe, would be instantly perverted to the demolition and destruction of every thing public and private. The history of the last 25. years of France, and of the last 40. years in America, nay of it’s last 200. years, proves the truth of both parts of this observation.

But even in Europe a change has sensibly taken place in the mind of Man. Science had liberated the ideas of those who read and reflect, and the American example had kindled feelings of right in the people. An insurrection has consequently begun, of science, talents and courage against rank and birth, which have fallen into contempt. It has failed in it’s first effort, because the mobs of the cities, the instrument used for it’s accomplishment, debased by ignorance, poverty and vice, could not be restrained to rational action. But the world will recover from the panic of this first catastrophe. Science is progressive, and talents and enterprize on the alert. Resort may be had to the people of the country, a more governable power from their principles and subordination; and rank, and birth, and tinsel-aristocracy will finally shrink into insignificance, even there. This however we have no right to meddle with. It suffices for us, if the moral and physical condition of our own citizens qualifies them to select the able and good for the direction of their government, with a recurrence of elections at such short periods as will enable them to displace an unfaithful servant before the mischief he meditates may be irremediable.

I have thus stated my opinion on a point on which we differ, not with a view to controversy, for we are both too old to change opinions which are the result of a long life of inquiry and reflection; but on the suggestion of a former letter of yours, that we ought not to die before we have explained ourselves to each other. We acted in perfect harmony thro’ a long and perilous contest for our liberty and independance. A constitution has been acquired which, tho neither of us think perfect, yet both consider as competent to render our fellow-citizens the happiest and the securest on whom the sun has ever shone. If we do not think exactly alike as to it’s imperfections, it matters little to our country which, after devoting to it long lives of disinterested labor, we have delivered over to our successors in life, who will be able to take care of it, and of themselves.


The Founders’ Constitution
Volume 1, Chapter 15, Document 61
http://press-pubs.uchicago.edu/founders/documents/v1ch15s61.html
The University of Chicago Press

The Adams-Jefferson Letters: The Complete Correspondence between Thomas Jefferson and Abigail and John Adams. Edited by Lester J. Cappon. 2 vols. Chapel Hill: University of North Carolina Press for the Institute of Early American History and Culture, Williamsburg, Virginia, 1959.

The Subdivision of Property: Thomas Jefferson’s Letter to James Madison

Thomas Jefferson to James Madison

28 Oct. 1785 Papers 8:681–82

Seven o’clock, and retired to my fireside, I have determined to enter into conversation with you; this [Fontainebleau] is a village of about 5,000 inhabitants when the court is not here and 20,000 when they are, occupying a valley thro’ which runs a brook, and on each side of it a ridge of small mountains most of which are naked rock. The king comes here in the fall always, to hunt. His court attend him, as do also the foreign diplomatic corps. But as this is not indispensably required, and my finances do not admit the expence of a continued residence here, I propose to come occasionally to attend the king’s levees, returning again to Paris, distant 40 miles. This being the first trip, I set out yesterday morning to take a view of the place. For this purpose I shaped my course towards the highest of the mountains in sight, to the top of which was about a league. As soon as I had got clear of the town I fell in with a poor woman walking at the same rate with myself and going the same course. Wishing to know the condition of the labouring poor I entered into conversation with her, which I began by enquiries for the path which would lead me into the mountain: and thence proceeded to enquiries into her vocation, condition and circumstance. She told me she was a day labourer, at 8. sous or 4 d. sterling the day; that she had two children to maintain, and to pay a rent of 30 livres for her house (which would consume the hire of 75 days), that often she could get no emploiment, and of course was without bread. As we had walked together near a mile and she had so far served me as a guide, I gave her, on parting 24 sous. She burst into tears of a gratitude which I could perceive was unfeigned, because she was unable to utter a word. She had probably never before received so great an aid. This little attendrissement, with the solitude of my walk led me into a train of reflections on that unequal division of property which occasions the numberless instances of wretchedness which I had observed in this country and is to be observed all over Europe. The property of this country is absolutely concentered in a very few hands, having revenues of from half a million of guineas a year downwards. These employ the flower of the country as servants, some of them having as many as 200 domestics, not labouring. They employ also a great number of manufacturers, and tradesmen, and lastly the class of labouring husbandmen. But after all these comes the most numerous of all the classes, that is, the poor who cannot find work. I asked myself what could be the reason that so many should be permitted to beg who are willing to work, in a country where there is a very considerable proportion of uncultivated lands? These lands are kept idle mostly for the sake of game. It should seem then that it must be because of the enormous wealth of the proprietors which places them above attention to the increase of their revenues by permitting these lands to be laboured. I am conscious that an equal division of property is impracticable. But the consequences of this enormous inequality producing so much misery to the bulk of mankind, legislators cannot invent too many devices for subdividing property, only taking care to let their subdivisions go hand in hand with the natural affections of the human mind. The descent of property of every kind therefore to all the children, or to all the brothers and sisters, or other relations in equal degree is a politic measure, and a practicable one. Another means of silently lessening the inequality of property is to exempt all from taxation below a certain point, and to tax the higher portions of property in geometrical progression as they rise. Whenever there is in any country, uncultivated lands and unemployed poor, it is clear that the laws of property have been so far extended as to violate natural right. The earth is given as a common stock for man to labour and live on. If, for the encouragement of industry we allow it to be appropriated, we must take care that other employment be furnished to those excluded from the appropriation. If we do not the fundamental right to labour the earth returns to the unemployed. It is too soon yet in our country to say that every man who cannot find employment but who can find uncultivated land, shall be at liberty to cultivate it, paying a moderate rent. But it is not too soon to provide by every possible means that as few as possible shall be without a little portion of land. The small landholders are the most precious part of a state.


The Founders’ Constitution
Volume 1, Chapter 15, Document 32
http://press-pubs.uchicago.edu/founders/documents/v1ch15s32.html
The University of Chicago Press

The Papers of Thomas Jefferson. Edited by Julian P. Boyd et al. Princeton: Princeton University Press, 1950–.

Discourse On The Origin of Inequality Among Mankind (1751)

In his Discourse on the Origin of Inequality Among Mankind, Jean-Jacques Rousseau explores the origins of social inequality. Rousseau argues moral inequality is established by convention. In the modern world, human beings come to derive their very sense of self from the opinion of others, a fact which Rousseau sees as corrosive of freedom and destructive of individual authenticity.

Rousseau begins with humanity’s historical transition from its original state of isolated independence to the development of organized communities. According to Rousseau, man’s state of nature was a peaceful and quixotic time. People lived solitary, uncomplicated lives and their needs were easily satisfied by nature. Because of the natural abundance which existed, there was little need for competition. As a result, humans were naturally endowed with the capacity for compassion and were not inclined to harm one another for material gain.

This dynamic gradually changes as man begins to organize into communities. For Rousseau, civil society began as an irrational deception perpetrated upon humanity by individuals seeking to place their own interests above those of the community. Rousseau argues:

“The first man who, having fenced in a piece of land, said “This is mine,” and found people naive enough to believe him, that man was the true founder of civil society. From how many crimes, wars, and murders, from how many horrors and misfortunes might not any one have saved mankind, by pulling up the stakes, or filling up the ditch, and crying to his fellows: Beware of listening to this impostor; you are undone if you once forget that the fruits of the earth belong to us all, and the earth itself to nobody.”

Rousseau asserts, the weaker members of society are persuaded that the establishment of laws will provide them greater security by preserving their rights. Meanwhile, laws are created to entrench an artificial social hierarchy which seeks to preserve power and legitimize its exploitation of the more vulnerable members of society. The ensuing competition over property and social status corrupts human nature by extinguishing the compassion towards one another which existed in man’s original state of nature. This creates dangerous and unstable relationships, leading to the constant threat of violence.

Rousseau concludes that social inequality is only acceptable where it relates to differences in individual ability and talent. The moral deficiency of modern civilization, however, is that man’s liberty is undermined through an unnatural social construct which equates material gain with virtue. This creates a perverse incentive for individuals to increase their own privilege and status through the exploitation of their fellow citizens.

Rousseau envisions society as becoming increasingly hostile, eventually requiring despotic rule to maintain the inequality. As wealth becomes more concentrated, the potential for violent conflict increases. Rousseau argues this outcome may be avoided through a more equitable economic arrangement, but is pessimistic that this arrangement can be achieved through voluntary concessions by those in power.

A downloadable PDF version of the book may be found HERE 

A version of the Book in digital format may be found HERE  

Why Nations Fail: The Origins of Power, Prosperity, and Poverty (2012)

Why Nations Fail, by Daron Acemoglu and James A. Robinson, is a grand exploration into the history of European colonialism and the economic success and/or failure of the social institutions it has established. Based on numerous historical case studies, the authors theorize that the sustained economic success of a country depends less on its policies, geography, culture, or value systems than on the political institutions it establishes to determine its economic outcomes.

Acemoglu and Robinson identify two different economic structures which they term “extractive” and “inclusive.” They argue that the common feature in all “extractive” systems is a small, dominant class of individuals who seek to concentrate power and exploit labor, resources and capital. According to the authors. “Wherever those with political power felt threatened by technology and innovation, they prevented it, and by doing so they effectively prevented wealth creation and prosperity.”  In contrast, “inclusive” systems seek to distribute power among a larger segment of society in an effort to promote competition and innovation. They create positive feedback loops which keep the elites in check, ensuring their own expansion and persistence.

Acemoglu and Robinson, conclude that, historically, the countries which have experienced sustainable economic growth are those which have sufficiently decentralized power to protect the integrity of essential public functions, such as the enforcement of contracts and the administration of justice.

“In order for the virtuous cycle to work the first precondition is to have pluralism, which will constitute the rule of law and lead to more inclusive economic institutions. Inclusive economic institutions will remove the need for extraction since those in power will gain little but lose a lot if engaged in a repression and constraining democracy. Finally, they also recognize the importance of free media to provide information on threats against inclusive institutions.”

The authors assert that extractive institutions may deliver growth for a limited period, but ultimately fail because their interest in maintaining the existing power structure stifles innovation and competition. Conversely, inclusive institutions allow for the creative destruction of inefficient models, encouraging the development of new practices and technologies which spur economic growth.

“The virtuous cycle explains how the reforms of the political system in England or the US became irreversible, since those in power understood that any possible deviation would endanger their own position. The examples of British consolidation and its slow, contingent path to democracy in which the people gradually demanded and gradually received more rights; or the trust-busting in the US in the beginning of the 20th century; or the failed attempts of President Roosevelt to limit the power of the US Supreme Court illustrate this point.”

Acemoglu and Robinson find that historically, the artificial growth within extractive systems eventually comes to a crashing halt, most often resulting in political instability and regime change. Therefore, we should opt to avoid harsh economic consequences and political turmoil by establishing inclusive institutions.

A scanned version of the Book in digital format may be found HERE

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