Challenging Nine Nobel Laureates in Economics
Although the Nobel Memorial Prize in Economic Sciences was not one of the awards originally established by Alfred Nobel, most of the world’s population and media treat it as such, with that impression strengthened because it is announced around the same time.
Just as with the Nobel Prizes in Physics or Medicine, the award in Economics is often shared between two or three recipients, and a couple of weeks ago the 2024 honors fell to Daron Acemoglu, Simon Johnson, and James A. Robinson.
The Myth of American M...
Buy New $29.99
(as of 12:31 UTC - Details)
Not having expertise in that field, I can’t judge their academic work, but only their more public-facing activities. Johnson, an MIT professor, had served as the chief economist of the IMF and over the years I’d seen him regularly quoted on economic matters in my newspapers, with most of his comments being pretty sensible ones to a layman such as myself.
However, Acemoglu and Robinson were much better known to me, and my opinion of them had been far less favorable. In 2012 they had received considerable attention as the authors of Why Nations Fail, a national bestseller. One of their main themes had been comparing the political and economic systems of America and China, very much to the benefit of the former. But although their work received a long list of glowing endorsements by leading economists including Johnson, as well as other prominent public intellectuals such as Niall Ferguson, Steven Pinker, and Francis Fukuyama, my own appraisal had been decidedly negative.
Their book was released just a few years after America’s disastrous financial crisis had so severely damaged the world economy and not so long after our equally disastrous Iraq War had done much the same both to international law and to the political landscape of the Middle East, so I was greatly surprised by their apparent approval of our neoliberal economic policies and our neoconservative geopolitics. That prompted me to write a long article that similarly compared America and China but came to strikingly different conclusions, with much of my analysis sharply critiquing their Panglossian vision of America’s economic and political system.
I opened my discussion with the following couple of paragraphs:
The rise of China surely ranks among the most important world developments of the last 100 years. With America still trapped in its fifth year of economic hardship, and the Chinese economy poised to surpass our own before the end of this decade, China looms very large on the horizon. We are living in the early years of what journalists once dubbed “The Pacific Century,” yet there are worrisome signs it may instead become known as “The Chinese Century.”
But does the Chinese giant have feet of clay? In a recently published book, Why Nations Fail, economists Daron Acemoglu and James A. Robinson characterize China’s ruling elites as “extractive”—parasitic and corrupt—and predict that Chinese economic growth will soon falter and decline, while America’s “inclusive” governing institutions have taken us from strength to strength. They argue that a country governed as a one-party state, without the free media or checks and balances of our own democratic system, cannot long prosper in the modern world. The glowing tributes this book has received from a vast array of America’s most prominent public intellectuals, including six Nobel laureates in economics, testifies to the widespread popularity of this optimistic message.
I described the enormous economic success that China had enjoyed over the previous thirty years and sharply contrasted it with the difficulties that ordinary Americans had experienced in that same period.
During the three decades to 2010, China achieved perhaps the most rapid sustained rate of economic development in the history of the human species, with its real economy growing almost 40-fold between 1978 and 2010. In 1978, America’s economy was 15 times larger, but according to most international estimates, China is now set to surpass America’s total economic output within just another few years.
Furthermore, the vast majority of China’s newly created economic wealth has flowed to ordinary Chinese workers, who have moved from oxen and bicycles to the verge of automobiles in just a single generation. While median American incomes have been stagnant for almost forty years, those in China have nearly doubled every decade, with the real wages of workers outside the farm-sector rising about 150 percent over the last ten years alone. The Chinese of 1980 were desperately poor compared to Pakistanis, Nigerians, or Kenyans; but today, they are several times wealthier, representing more than a tenfold shift in relative income.
A World Bank report recently highlighted the huge drop in global poverty rates from 1980 to 2008, but critics noted that over 100 percent of that decline came from China alone: the number of Chinese living in dire poverty fell by a remarkable 662 million, while the impoverished population in the rest of the world actually rose by 13 million. And although India is often paired with China in the Western media, a large fraction of Indians have actually grown poorer over time. The bottom half of India’s still rapidly growing population has seen its daily caloric intake steadily decline for the last 30 years, with half of all children under five now being malnourished.
China’s economic progress is especially impressive when matched against historical parallels. Between 1870 and 1900, America enjoyed unprecedented industrial expansion, such that even Karl Marx and his followers began to doubt that a Communist revolution would be necessary or even possible in a country whose people were achieving such widely shared prosperity through capitalistic expansion. During those 30 years America’s real per capita income grew by 100 percent. But over the last 30 years, real per capita income in China has grown by more than 1,300 percent.
Ordinary Chinese workers have increased their real income by well over 1,000 percent in recent decades, while the corresponding figure for most American workers has been close to zero. If typical American wages were doubling every decade, there would be far less anger in our own society directed against the “One Percent.” Indeed, under the standard GINI index used to measure wealth inequality, China’s score is not particularly high, being roughly the same as that of the United States, though certainly indicating greater inequality than most of the social democracies of Western Europe.
These facts do not provide much evidence for the thesis in Why Nations Fail that China’s leaders constitute a self-serving and venal “extractive” elite. Unfortunately, such indications seem far more apparent when we direct our gaze inward, toward the recent economic and social trajectory of our own country.
Against the backdrop of remarkable Chinese progress, America mostly presents a very gloomy picture. Certainly America’s top engineers and entrepreneurs have created many of the world’s most important technologies, sometimes becoming enormously wealthy in the process. But these economic successes are not typical nor have their benefits been widely distributed. Over the last 40 years, a large majority of American workers have seen their real incomes stagnate or decline.
Meanwhile, the rapid concentration of American wealth continues apace: the richest 1 percent of America’s population now holds as much net wealth as the bottom 90–95 percent, and these trends may even be accelerating. A recent study revealed that during our supposed recovery of the last couple of years, 93 percent of the total increase in national income went to the top 1 percent, with an astonishing 37 percent being captured by just the wealthiest 0.01 percent of the population, 15,000 households in a nation of well over 300 million people.
The central theme of Why Nations Fail is that political institutions and the behavior of ruling elites largely determine the economic success or failure of countries. If most Americans have experienced virtually no economic gains for decades, perhaps we should cast our gaze at these factors in our own society.
One of my last paragraphs summarized my rather negative verdict on the weighty volume produced by those two future Nobel laureates.
Thus, the ideas presented in Why Nations Fail seem both true and false. The claim that harmful political institutions and corrupt elites can inflict huge economic damage upon a society seems absolutely correct. But while the authors turn a harsh eye toward elite misbehavior across time and space—from ancient Rome to Czarist Russia to rising China—their vision seems to turn rosy-tinted when they consider present-day America, the society in which they themselves live and whose ruling elites lavishly fund the academic institutions with which they are affiliated. Given the American realities of the last dozen years, it is quite remarkable that the scholars who wrote a book entitled Why Nations Fail never glanced outside their own office windows.
My provocative article prompted considerable discussion and attracted quite a bit of favorable attention in the opinion media.
- China’s Rise, America’s Fall
Ron Unz • The American Conservative • April 17, 2012 • 7,000 Words
In recently revisiting the Acemoglu/Robinson book, I noticed that the name of Prof. Jeffrey Sachs of Columbia University was notably missing from the long list of academic luminaries who had provided glowing endorsements, and that hardly surprised me. I suspect that his reaction may not have been too different from my own given that he had been a strong critic of both the Iraq War and our reigning neoliberal economic policies.
Moreover, he had long worked closely with the Chinese and praised their successful efforts to promote global economic development and alleviate poverty, so I doubt he regarded their country as run by a corrupt, extractive elite, whose mistaken policies would soon lead to the failure and collapse of their economic development model.
Twelve years have now passed and a few days ago I happened to watch his illuminating discussion with Leung Chun-ying, a former head of the Hong Kong government who now holds a senior position in the Chinese government.
In that interview, Sachs noted with astonishment the rise of the Greater Bay Area, a Chinese region bordering Hong Kong. Its largest city is Shenzhen, which in the late 1970s had been a small, impoverished fishing town with a population of around 25,000. But in less than two generations, the population has expanded by nearly a thousand-fold, creating the wealthiest city in all of China and the third largest after Shanghai and Beijing, with the surrounding region now including 85 million people. He noted that region was not merely a global leader in one or two important areas, but in so many of them, including technological development, industrial production, financial services, shipping, and higher education, with no other area of the world having that combined distinction.
Predicting China’s Global Rise More Than a Century Ago
Acemoglu and Robinson have now been elevated into the pantheon of Nobel laureates, but a dozen years provides a reasonable time frame for evaluating their predictions about the world’s largest economy, and those have proven sufficiently erroneous as to raise serious doubts about the theoretical framework that they had championed. According to their analysis, China’s economic rise should have long since sputtered to an end, but despite the unprecedented regime of Western sanctions that America recently imposed, aimed at crippling or killing China’s most important global champions such as Huawei, this has not happened, and China’s growth rate has merely been reduced.
Indeed, despite the glowing public accolades they had received in 2012 when they boasted of America’s enormous economic and institutional superiority over China, many powerful elements of the DC establishment quickly concluded that such braggadocio was completely unwarranted. Within just a couple of years, our political elites became so alarmed at China’s seemingly unstoppable economic rise that they began reorienting America’s entire global strategy towards containing that country, whose growing power seemed likely to challenge our worldwide hegemony. I discussed that geopolitical watershed in a recent article.
- American Pravda: A Rising China Faces the West
Ron Unz • The Unz Review • August 19, 2024 • 9,600 Words
In that piece, I’d noted that according to the official economic statistics provided by the CIA World Factbook China’s real productive economy—perhaps the most reliable measure of global economic power—is already more than three times larger than that of the U.S. and also growing far more rapidly. Indeed, according to that important economic metric, China now easily outweighs the combined total of the entire American-led bloc—the United States, the rest of the Anglosphere, the European Union, and Japan—an astonishing achievement, and something completely contrary to what one might have expected from reading Why Nations Fail when it appeared in print.
America’s Cultur...
Best Price: $8.50
Buy New $12.90
(as of 11:43 UTC - Details)
Moreover, as I recently reread portions of their 2012 bestseller, I noticed that Acemoglu and Robinson argued that China’s great economic progress had almost entirely been based upon copying Western products. According to them, the Chinese were merely following in our technological wake, so they were unlikely to produce future innovations of their own, and would be doomed to second-rate status. For decades, this sort of comforting myth has been a staple of arrogant Americans regarding those countries that challenged our primacy, and it has certainly proven entirely false in the case of our Chinese competitor, which now leads the world in numerous important technologies, including batteries, electric vehicles, and quantum computing.
Those who loosely apply superlatives in order to attract undeserved attention should be criticized. But such statements are entirely warranted in the case of China’s economic and technological rise, which seems unprecedented in all of human history. One would think that economists such as Acemoglu and Robinson who failed to recognize the dramatic events unfolding before their very eyes would lose credibility with their peers, but apparently that has not been the case, at least with regard to those prestigious international bodies that are totally dominated by the West’s reigning neoliberal economic establishment.
Meanwhile, that same economic establishment has successfully sheltered its illusions within the propaganda-bubble created by its closely-allied Western media organs. Declining regimes such as that of the old Soviet Union often require their captive media outlets to hide embarrassing facts, and in the case of the West, that effort is made much easier because the global informational landscape has been totally dominated for generations by the Western media.
So anyone casually reading our elite or mainstream media outlets would get the distinct impression that China’s recent 5% real economic growth rate is far below the 1% or 2% enjoyed by the American-led bloc. But despite such concealment and obfuscation, in the real world, 5 is always larger than 1 or 2, and that difference is even starker in real per capita economic growth or if we restricted our focus to the productive sectors of the two economies.
