Post date: Jan 26, 2017 10:51:10 PM
Let me begin by saying that I think few people have done more for economic history over the last two decades than Daron Acemoglu (and by extension James Robinson and to a lesser extent Simon Johnson). Economic historians now take identification much more seriously in large part due to Acemoglu. Although we occasionally go too far (myself included), this has been a net positive for the field and has certainly helped us get into the top journals. Likewise, development economists really take economic history seriously now, in no small part due to Acemoglu’s pioneering work. So what follows is not meant to denigrate Acemoglu’s many important contributions. It is merely meant to put them into what I believe is the appropriate context and to spell out the limitations of his most important works.
In a recent Foreign Policy article, which Tom Pepinsky brought to my attention in an excellent blogpost, Acemoglu makes an argument that is seemingly an about-face on most of his important works on institutions (e.g., here, here, and here). The theme running through most of these works – which may very well win him a Nobel someday – is that political institutions matter. Ok fine. But how and why do they matter? My reading of his works, especially Why Nations Fail (with James Robinson), is that “inclusive institutions” are the key. Put simply, if a state has political institutions that are inclusive – meaning that they give rights and representation to a broad set of the population and not just a small swath of the elite – good things follow. It is a nice idea that makes intuitive sense; if a society has inclusive institutions, it should be able to limit rent seeking by the elite, public goods should be provided if they benefit the masses, taxes are likely to be more progressive, property rights should be protected for all (not just the well-connected), and so forth. I buy this. But it raises two important questions. First, can economic success arise in the absence of inclusive institutions? This is not a question I address here. It clearly can (see China since 1978), but there is plenty in Acemoglu’s work that is consistent with this. The more important question, which I address below, is why do some societies have inclusive institutions and some societies not?
Acemoglu makes an about-face in his Foreign Policy article by claiming that the political institutions of the U.S. are not enough to save us from Donald Trump and his brand of (hopefully potential) authoritarianism. Instead, he claims, civil society is our last hope against a devolution into something like another country Acemoglu knows well, his native country Turkey. For anyone who has followed Acemoglu’s work over the last couple of decades this a bit surprising. Acemoglu’s work is central to what I will call the “augmented Washington consensus” (or AWC, for short) – the neoconservative foreign policy platform adhered to during the Bush (43) administration, and to a lesser extent the Obama administration, that democratic institutions (small d) are a panacea. That is, where there is democracy there will be inclusion, and where there is inclusion there are good economic outcomes. Nowhere in the AWC playbook is there anything about “civil society”, unless Acemoglu has in mind the masses that might rebel if things get too out of hand. But I don’t think that is what he means. I think he means civil society in the way it is commonly meant – those non-governmental organizations, norms, and institutions that represent the masses and check the power players. But this presents a contradiction: if civil society is the only thing that can save us from a Trumpish authoritarian, and civil society’s voice is dependent on inclusive institutions, what happens when the authoritarian undermines the inclusivity of institutions? How can civil society work to constrain the Trumps of the world?
The answers to these questions are embedded in the more important question asked above: why do some societies have inclusive institutions and some societies not? Although I do not make this argument explicit in my forthcoming book (out in February 2017), a clear implication of my book’s arguments is that inclusive institutions are often a byproduct of other, more deeply-entrenched institutions. These institutions are the ones that determine a society’s economic trajectory; inclusive institutions are not necessary and they definitely are not sufficient for a society to have “good” economic outcomes.
What are these more deeply entrenched institutions? My book suggests that the key to understanding political decision-making is to focus on how institutions provide costs and benefits to those in power for enacting various law and policies. This is not to say that there is a universal set of “good” institutions (i.e., those that are ‘inclusive’) or what works in one society will work in another. Instead, the important consideration is what the political elite do to stay in power. Rulers have two means of staying in power: coercion and legitimacy. The relative costs and benefits of using coercion and power are determined by a society’s institutions, and these are the deeply entrenched institutions that matter. Coercion is useful because those with enough guns can stay in power, so long as they keep the users of guns (i.e., military) on their side. Legitimacy is more subtle. A simple definition is that a ruler is viewed as legitimate if people believe (s)he has the right to rule. Donald Trump is a legitimate ruler because he won an election. Anything that threatens to undermine the legitimacy of the fairness of the election, such as the possibility that the Putin propaganda machine played a role in the election, in turn threatens Trump’s legitimacy. To be clear, I suspect that a large share of Trump’s supporters will view him as legitimate regardless of what he does or has done. But it would not take much of a drop in his support – say to around 30% approval – for an erstwhile supportive GOP establishment to turn their back on him. So any even small threat to Trump’s legitimacy may carry large consequences.
The key insight here with respect to Trump is that U.S. democracy, or any democracy for that matter, is not inherently inclusive. Past U.S. presidents with legitimacy derived from (relatively) free and fair elections tended to find inclusion beneficial for their legitimacy, so democracy in the U.S. tended to be associated with increasingly inclusive institutions (well, at least for white men). But inclusive institutions are an outcome, not a cause. They are an outcome of the process through which political rulers are legitimized. Each society has its standards for what makes a legitimate ruler, and these standards are determined by the society’s culture, religion, beliefs, and social norms (the works of Avner Greif are particularly relevant here, especially his book, as is an amazingly prescient paper by Murat Iyigun). A president who can chip away at the institutions that constrained previous presidents while still maintaining some degree of legitimacy with a sufficient portion of the population can undermine inclusive institutions in the context of a democratic setting. There is nothing inherent about inclusive institutions or democracy that leads to good outcomes. What is important to answer is why democracy works in the first place – that is, why are democratically elected rulers considered legitimate and what can happen that may undermine this belief?
Viewing democracy through this lens lays transparent the bullshit of the AWC foreign policy platform that transplanting democratic institutions into settings that are not ready for them can lead to good results. (Of course, the failure of the Iraq War already did enough to undermine this idea as viable foreign policy.) One insight mentioned in my book, which is certainly pertinent to post-invasion Iraq and the post-Arab Spring Middle East more generally, is that it is not obvious that democracy will work well in a setting where rulers – or potential rulers – find religious legitimacy to be particularly effective. What is to prevent a rival with backing from the religious establishment from unseating a democratically-elected leader? More importantly, what is there to prevent a democratically-elected leader with backing from the religious establishment from undermining democratic, inclusive institutions and replacing them with rules supporting autocratic rule? It sure isn’t civil society.
To bring this back to the original point of the post: how do we square “civil society saves us from Trump” Acemoglu with “political institutions rule” Acemoglu? I think this means going beyond anything Acemoglu has written or even implied, but it is by no means to throw out most of his insights. Instead, it is simply to note that “political institutions rule” and “inclusive institutions are key” are two very different things, and one does not imply the other. My interpretation is that political institutions do matter; and indeed, inclusive institutions are often associated with positive economic outcomes. But inclusive institutions nor even democratic institutions are enough; it is what undergirds those institutions that matters. And peeling the onion back one layer reveals that it is political legitimacy that matters. So democracies can exist but not be inclusive – Turkey is a prime example in 2017. This happens when democratic rulers are able to achieve some degree of legitimacy from democratic election and some degree of legitimacy from another source. In the case of Erdogan, it would be foolish to discount the role that religious legitimacy has played in his ascent to autocrat.
What does this all mean in the age of Donald Trump? While I make no claims to have the wit or intelligence to prognosticate the future, I think I can say something with respect to Acemoglu’s claim that civil society is our best hope to resist authoritarianism. I think he is right, but not because of what I have learned from reading Acemoglu (and to be clear, I have learned a lot). He is right not because civil society can legitimize a president but because it can delegitimize a president. This has little to do with democracy. If civil society broadly considers a ruler to be legitimate, then the ruler will be able to act as (s)he pleases, democracy be damned. More importantly, if civil society begins to view the president as illegitimate, (s)he will not be able to rule effectively and will have to rely heavily on coercion to rule as an autocrat. Fortunately, American civil society is pretty strong relative to much of the rest of the world. Whether this is enough to constrain the unseemly ambitions of Trump is something for future historians to debate.
**Huge thanks to Murat Iyigun for looking over a draft and providing excellent, detailed comments!