Why Nations Fail (2)

choi

William Easterly, The Roots of Hardship; Despite massive amounts of aid, poor countries tend to stay poot. Maybe their institutions are the problem. Wall Street Journal, Mar 24, 2012,
http://online.wsj.com/article/SB ... 93714016708378.html
(book review on Why Nations Fail)

Quote:

(a) "Messrs Acemoglu and Robinson [author of the book under review] insist that getting the economics right requires getting politics right.

(b) "Extractive states CAN have bursts of growth. After all, even a kleptocratic elite will covet a larger economy ripe for plundering. The elites have an incentive to invest in their own businesses. But authoritarian growth miracles cannot last. As economists have understood since Joseph Schumpeter in the 1940s, sustained economic growth requires 'creative destruction,' as new technologies replace old ones. The booming Chinese economy may look impressive today, but for Messrs Acemoglu and Robinson, China's leaders revealed a critical flaw in 2003 when they arrested Dai Guofang and sentenced him to five years inprison.

"What was Mr Dai's crime? He had dared to start a low-cost steel company that would compete with Party-sponsored factories. Members of an extractive elite will not allow creative destruction to eliminate their own enterprises; the potential of existing technologies is fully exploited, but no innovation develops—and growth cannot be sustained. Messrs. Acemoglu and Robinson note that the Soviets experienced rapid growth in the 1950s and 1960s but then, hamstrung by an economy unable to innovate, fell into stagnation and collapse. The authors make a bold prediction: 'The spectacular growth rates in China will slowly evaporate,' and the Chinese will ultimately follow the Soviet trajectory.

Note:
(a) An excellent review. I recommend it.
(b) At the end of the review is an introduction to the reviewer--ang his book:
William Easterly, The White Men's Burden; Why the West's efforts to aid the rest have done so much ill snd so little good. Penguin, 2006.
(c) Regarding DAI Guofang, see

The Sad Drama of Tieben; The case of Tieben is seen as one of the biggest examples of macroeconomic control in recent Chinese history. Caixin, Jan 12, 2010 (in the column Century Weekly)
http://english.caixin.com/2010-01-12/100107610.html
("One of the government measures called for halting certain rapidly expanding private companies from undertaking overzealous development plans. The case of Tieben is seen as one of the biggest examples of macroeconomic control in recent Chinese history")