Douglass C. North, PhD, co-recipient of the 1993 Nobel Memorial Prize in Economic Sciences and the Spencer T. Olin Professor Emeritus in Arts & Sciences at Washington University in St. Louis, died Monday, Nov. 23, 2015, at his summer home in Benzonia, Mich. He was 95.
An economic historian, North examined the effects of institutions on the development of economies through time. His work shed new light on economic development in Europe and the United States before and in connection with the industrial revolution. He emphasized the role of property rights and institutions.
North joined Washington University in 1983 as the Henry R. Luce Professor of Law and Liberty in the Department of Economics in Arts & Sciences after serving 33 years on the economics faculty at the University of Washington in Seattle.
He also served as director of Arts & Sciences’ Center in Political Economy from 1984 to 1990. He remained active in teaching and research at Washington University until his health began failing over the past few years.
He and Robert Fogel, PhD, an economist then with the University of Chicago, were co-recipients of the 1993 Nobel in economic sciences “for having renewed research in economic history by applying economic theory and quantitative methods in order to explain economic and institutional change.”
I just read Chris Blattman’s response to the UK Prime Minister’s op-ed in the Journal. It reminded me of a lot of the things that I have been reading lately in preparation for my fieldwork (My dissertation will tackle the subject of legislative (under)development in Africa, with a focus on the Kenyan and Zambian legislatures).
Cameron’s sentiments in the op-ed are emblematic of the problems of development assistance. Like in all kinds of foreign intervention, developed states often try to externalize their institutions (and more generally, ways of doing things). These attempts often ignore the lived realities of the countries being assisted.
Forgetting the history of his own country (think autocratic monarchs, monopolies, limited suffrage), Cameron thinks that democracy, human rights and free markets (all great things) will magically create jobs in the developing states of the world. They don’t. In fact, they often lag the job creation process. For development assistance to be effective it must eschew these feel-good approaches to the problem of underdevelopment.
Blattman is spot on on a number of points:
- Unchecked leaders are bad for economic development (this is why I am so much into PARLIAMENTS!!!): Also, democracy is NOT synonymous with limited government. Heads of state like Queen Victoria or Hu Jintao or Bismarck or even Seretse Khama were in no measure democrats. However, they ruled under systems with strong (sometimes extra-constitutional) checks to their power. That made a difference.
- Institutions rule, yes, but the right kinds of institutions: 1688 moments do not drop out of the sky. They are often preceded by decades if not centuries of civil strife, economic change and plain old learning. Institutional development takes time. Plus each society requires its own unique and appropriate mix of institutional arrangements to meet unique economic and social needs. A procrustean approach to institutional development (embodied in global capacity building) will inevitably fail. Institutional development must never be allowed to be captured by those who think that we can transform Chad simply by having them adopt Swedish institutions.
- Growth will require creation of jobs, i.e. industrial development: The poor countries of the world need real jobs for high school-leavers and other less educated people. The present focus on the “sexy” entrepreneurial sectors – whether they are small businesses for the poor or tech hubs for the very highly educated – as the engines for growth in the developing world is misguided. I reiterate, starting a business is a very risky venture that should be left to the wealthy and the occasional dare devil. The poor in the global south need stable 9-5 jobs. Lots of them.
And lastly, where do strong institutions come from? There is no easy answer to this question. What we know is:
- History matters: Present countries with a long history of stateness have a better track record of building strong institutions for development. Yes, they may not always be democratic, but countries with a long history of centralized rule have strong states (and institutions) that deliver for their people (for more on this see Englebert and Gennaioli and Rainer).
- Democracy does not always create strong institutions: Since 1945 many have chosen to forget the fact that universal suffrage is a pretty recent phenomenon in the political history of the world. For the longest time world polities were ruled by power barons who held de facto power (as opposed to the procedural de jure power in democracies). When democracy came along after the Enlightenment the resulting structures of rule often reflected these de facto configurations of power. Over time institutions in these countries were cemented enough to allow for complete outsiders like say the current president of the United States to be elected without upsetting the balance of power (in another era he would have had to have mounted a coup). This is the challenge of the democratization in the new post-WWII states. How do you make democracy serve the interests of the people, rather that purely that of the elite? How do you use democracy to create strong institutions? Is this even possible? And if not, what other options do we have?