Dan Banik and Daron Acemoglu discuss the role of institutions and how and why the pursuit of liberty and development progresses along a narrow corridor, using the examples of South Africa, China, India, the United States and Scandinavia.
In the bestselling book – Why Nations Fail: The Origins of Power, Prosperity, and Poverty (2012), Daron Acemoglu and James Robinson ask why some nations are rich and others poor, divided by wealth and poverty, health and sickness, food and famine. They claim that it is neither culture, weather, nor geography. Rather, they argue that economic success depends on man-made political and economic institutions. In their latest book, The Narrow Corridor: States, Societies, and the Fate of Liberty (2019), Daron and Jim show that liberal-democratic states exist in between the alternatives of lawlessness and authoritarianism. And while the state is needed to protect people from domination at the hands of others in society, the state can also become an instrument of violence and repression. Society’s default condition is anarchy (or the "Absent Leviathan"). The alternatives to chaos are despotism (the "Despotic Leviathan"), the powerless state (the "Paper Leviathan"), and the "Shackled Leviathan" (or state which equals the corridor between the Absent, Paper, and Despotic Leviathans). Thus, liberty originates from a delicate balance of power between state and society.
Daron Acemoglu is Institute Professor in the Department of Economics at the Massachusetts Institute of Technology (MIT).
Professor Dan Banik, University of Oslo, Twitter: @danbanik @GlobalDevPod
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Banik Daron, I'm just so excited to see you. Welcome to the show.
Acemoglu Thank you, Dan. It's a great pleasure and honor to be on your show.
Banik Let us get started with discussing something very overarching. This show is about development. We're trying to understand how societies actually develop, however way we understand that concept. But, as you know, the development concept is of course very contested. People have different understandings or visions of versions of what development means. So, let me ask you right at the outset, how do you view development?
Acemoglu Well, I think it's a good question because my own thinking on this has changed and there are legitimate reasons for wondering what's the right sort of notion. If you look at history, there are so many instances where modernization of some sort became a mantra, but then was to beat down people. So, what is it really about economic development that we think is so essential? And how to make that cohere with what people want and with some sort of values that we think would be worth pursuing. I think there is broad agreement among people in developing countries at the moment that prosperity is desirable. And that's what we start with in Why Nations Fail that in some sense it's a failure if countries don't realize their potential in terms of prosperity. But in some of the later work, we're also trying to get to the nitty-gritty of how do you make this consistent with people's traditions, existing values, and how do you make it consistent with liberty and other things that perhaps they value deeply?
Banik Exactly, so the critique of modernization was that one was advocating irrelevant western models. Like this preaching which by the way we still do from the Global North. There are certain values that we cherish, and sometimes this can be seen to be dictating or preaching to others. But going back to this understanding of development and of course in your work, you've been highlighting the importance of property rights, different types of opportunities for economic growth. In Why Nations Fail you talk about the key role of economic but also political institutions. And in addition to all of this, you have also been concerned with how not to build a state. On the one hand, we know some sort of an idea of development, but also how we shouldn't proceed. And I've read your work on Colombia, where you're saying that basically this kind of security first approach, the role of military, it was just a bad idea. Because again, going back to how we started, it's about who's doing development for whom. So, applying the lens of Why Nations Fail to Afghanistan, how should we understand what we committed in terms of mistakes?
Acemoglu Well, I think there are so many layers to your excellent questions. These are absolutely central questions. Before I come to Afghanistan, let me say something about the first part of your question. I think the sort of modern western modernization view has been hugely problematic in every one of its versions. For example, that was the essence of Martin Seymour Lipset's argument that all you need to do is increase GDP, perhaps a little bit of investment in education and everything else will come together. Sort of a broad symbiotic view of all aspects of development from civil rights, rights for women, democracy, political voice. And I think it's just so completely wrong that we shouldn't even waste time on it. I mean, it's completely contradicted by data, by history, by the logic of how development process takes place. But if you look at it, it still is overwhelmingly dominant in policy circles and even in some academic circles what is called the modernization hypothesis. I think this is just hugely influential still. My work shows how incorrect it is both empirically and historically, but I think more needs to be done to do that. The second version that is sometimes associated with Francis Fukuyama. That somehow there is an inexorable path to a western style liberal democracy market mechanism etc. The end of history. I think that again, that's been now shown to fail all sorts of recent reality tests, but it's still highly influential. But perhaps even more pernicious, has been what the US has done in Afghanistan and other places which is a view of modernization that is built on two pillars that are both problematic. One is that modernization is something that is good even if people on the ground don't understand it. So, you should impose it on people. And two that it always has to start by one group, however flawed, that is having a monopoly of violence and complete control and domination over the rest of society.
Banik So, we have to have a state that looks like ours, correct?
Acemoglu Something like a state, although not in most of the time it's not really a state because it doesn't have many things that we associate with state. Bureaucracy, autonomy, regulation, capacity, etc. But it has coercive, overwhelming course of force. And it's great from the American perspective or from the European perspective. If these forces allied with the US or with themselves, and that's essentially what was the root of all the problems in Afghanistan. The US went in there with the view that they were going to anoint a group. It happened to be Karzai and his entourage. That group was going to build a state, so a huge amount of money poured into their coffers which of course got siphoned off. US military was in their support and all sorts of local grievances, local sensibilities and traditions were cast aside because either they were on the side of opposition to Karzai, therefore they were bad. Because the way you wanted to do this was to set up a powerful group first that was going to implement its will and the will of the United States, or they didn't know what was good for them. Like, it was really good for them to send girls to school, l and they didn't want to send their girls to school, therefore they had to be coerced to send them to school. Well, I completely agree it would be amazing to have more female schooling. But the perspective that people on the ground don't know what's good for them, and modernization means we teach them I think it's going to run into trouble, obviously.
Banik Here we have a situation where we think that people want to live under what we think is the modern state, but you mentioned Fukuyama. You know he's a friend of mine and I see that sequencing development is being increasingly challenged. About what comes first. But I was thinking of another person who's been my mentor – James C. Scott. He argues that not everybody who wants to live under the state. They want to maybe flee from the state. They don't want to be dominated; so we are assuming that in Afghanistan there was the need for that kind of state-building from the outside. We were going to impose, engineer a solution, impose these solutions on society without really understanding what society wanted.
Acemoglu Absolutely, absolutely. And I'm really glad you brought up James Scott's work. I'm a huge fan. I think he's had many original crucial ideas, which he often developed with great flair. But I also think it is very important to pit his ideas against those of Samuel Huntington and Francis Fukuyama because I think they both have some truth, but they miss an important common set of elements. But also, I think both of them make short shrift of some of the real paradoxes, dilemmas here. Let me first say what I mean by it's a good counterweight to Fukuyama-Huntington. This is exactly what you hinted at, which is that oftentimes people want to flee the state. State-building has a frequently pernicious way of trying to bring order on society. So, it's the complete opposite of the Huntington-Fukuyama view that somehow, if you set up the state, good things will eventually develop. And for James Scott, bringing the state structure is often going to lead to worse things. But both of those miss, in my opinion, the space in between, and that's both for good and bad. The space in between is for good when this tension between people avoidance and uprising against this state somehow acts as a brake on the worst instincts of state builders. And that's the modus operandi of what we've called a narrow corridor that creates that space in between where new ideas, new dynamics, balances can evolve, we can talk more about that. But also, I think it does really bypass a lot of these ethical dilemmas, which I always struggle with. When people are fleeing the state, they are often doing that with traditions, norms, and morays that are quite problematic. Like this is what we call the cage of norms in the narrow corridor, it creates a very tight constricting set of rules that are very unequal and sometimes very repressive. Again, women I think are the number one target of these norms, so they are the ones who suffer most in the cage of norms. And there are exceptions. There are absolutely exceptions of stateless societies that respect women's rights. But if you look at Afghanistan, Somalia, many parts of the Balkans, statelessness or resistance to the state often came with very tight restrictions, repression, violence against women, and of course, denial of women's rights to take part in economic activities, in schooling, and make decisions about themselves. But on the other hand, if you go with the we're going to bring modernization, it creates this tension. Fine, you're trying to perhaps liberate women, but what about what people on the ground can live with? And how is that going to be perceived by them? So, that delicate balance, I think, is one of the hardest things in Afghanistan. I think it is extremely sad to see today in Afghanistan, all the advances that women made being rolled back, but it is also an indication of a failure that billions of dollars of aid, so many years of NGO work, they made very little progress except in Kabul in changing people's attitudes towards gender and that's a failure too. And how do we start thinking about that failure? I think those are going to be some of the key issues for 21st century development.
Banik I had Jim Scott on the show last year and his key argument was can we domesticate the state, or will it domesticate us? For him that really is the key thing, because of technology and stuff you are also interested in. AI, automation, Big Brother watching us. It's very difficult these days to actually flee the state because the state is everywhere. That I think is interesting in relation to the narrow corridor, whether we can domesticate the state. And I really enjoyed reading the book because you and Jim Robinson argue that this pursuing liberty, I'm pursuing development here, the pursuit of liberty and development is along that very narrow corridor. Because on the one hand you have the despotic states, you could say China is an example of that – having achieved development but represses freedoms etc. On the other hand, you have those lawless absent states. You could also have in between, and we'll discuss this. The “Paper Leviathans”, which I thought was an interesting concept, but for you in this book, prosperity depends on a so-called “Shackled Leviathan”. So, I've read it, but could you please explain to my listeners what does that mean?
Acemoglu Well, I think it follows naturally from the discussion that we had a second ago that I think the view of Fukuyama-Huntington is wrong or inadequate at the very least because it ignores first of all what people want. And second, it downplays the dangers that a strong state or a strong group that controls the state apparatus is going to be able to impose its will. So, there are examples in history where people become dictators or very powerful and then do good things. But then there are many examples most of the time, Lord Acton was right, power corrupts, and absolute power corrupts absolutely and that applies no more clearly to anything than state institutions. But on the other hand, if you turn your back on state institutions, you're going to miss out on a lot of things that we think are critical for human fulfillment and essential for the rights and desires of people. Peaceful resolution of disputes, opportunities, markets that can be supported, which often require some sort of state institutions protection for the weak. Again, there are traditions and norms that sometimes offer those, but if you look at it, no society in history has offered a type of protection for people who are economically disadvantaged disabled or have other impairments as say for example Nordic welfare states or Germany. So, European welfare states, US is not quite there, but by its own standards and by historical standards, US offers an amazing protection for people who are unlucky or economically unfortunate. Those things are impossible without a state. So hence, Jim and I argue that what you need is a state, but its worst instincts are controlled, and that's where shackles come in. But critically, and we knew that from the beginning, that's why we put a lot of emphasis on this, but we don't want those shackles to be interpreted as constitutional limits. Of course, constitutions have an important role, but our argument throughout is that, in contrast to Madison or Montesquieu type reasoning, this isn't a separation of powers or constitutional limits on what sovereigns or presidents can do. It really needs to come from society. It needs to come up from a bottom-up organization in various ways, it needs to. It could be democratic institutions, but it could be village councils. It could be protests, it could be other types of mobilization, and that's part of the difficulty that often when you look at traditional societies, they are very imperfect in many ways, but they do have their own ways of organizing resistance to rulers. And often in the name of modernization, you destroy those.
Banik I notice that in the book there is this skepticism you have, and I share that, that one can't just rely on a constitution or sort of these legal frameworks to automatically generate development. I've studied say the right to food in India and the Supreme Court in India has been very vociferous. Regular hearings, all kinds of judgments issued. The trouble is the courts can issue judgments, but if the politicians don't act upon them, it doesn't mean anything. So, those have to be operational. I really like this fact that you emphasize in The Narrow Corridor that the state and society have to be running together -- the "Red Queen Effect". And they have to run equally fast because you can't slack off. Because if you do a not so nice sort of outcome will happen. So, the sweet spot then is arrived at by this constant running. And trust is important, cooperation is important. I notice that of course you highlight the role that say Nelson Mandela played in pushing South Africa on that path. But when I go to South Africa these days, I don't see it. For me South Africa doesn't seem to be in that sweet spot. So, am I wrong there? Have I misunderstood you?
Acemoglu Well, I think there are two issues here. We can come back to India because I think it's an excellent example, but perhaps it's not something I have to bring up in response to your current question. And of course, the fact that you know India much better than I do is a disadvantage, so we'll handle that one later. But your description was very apt, and immediately it implies that a narrow corridor is never going to be a tidy place. If we lived in a world in which it's really in the kind of world that Madison believed in, which is, you have essentially well-meaning elites. Only if you can write down the right constitutional rules and those elites can be made to act in constrained ways. And they control the base instincts of the masses. Democracy was not a good word for Madison. If that was the right conceptualization, there could be a tidy, stable world. It's rule bound. It's led by a small group of people who are enlightened and can constrain each other in predictable ways. So, we're saying that's not realistic. That's not empirically relevant. But the alternative, exactly what bothered Madison, is that democracy is chaotic and problematically rambunctious. So, as a result, the corridor is often a messy place. So, that is for example what, when the Chinese leadership looks at Europe or the US, they don't understand. They think that is a sign of weakness. The decadence of the West that the Communist Party's rule is avoiding in China. But if Jim and I are right, that is the ultimate source of strength of these more bottom-up institutions. Now, looked at it from that way, where does South Africa fit? I don't know because South Africa given its huge size, heterogeneity, poverty, inequality was never going to be like a little Switzerland on the savanna. But Jacob Zuma's term did really lead to a huge increase in corruption. It's brought the worst. It started eroding some of the trust in institutions, power of courts. But I'm actually still optimistic about South Africa.
Banik So, they're still on the track. Have they moved out since you wrote the book you think?
Acemoglu I wouldn't say they have. I mean the country has a huge inequality problem, a huge crime problem, so it has to bring those things under control. But you know, so does the US. US has a crime problem, has an inequality problem, has an incarceration problem, has a polarization problem. But I wouldn't say the US has left the corridor yet. I mean, in both cases I think there is a big risk. But still, we're in the heart of the matter right now. We're in a critical juncture, so to speak.
Banik So, this is messy. This process, we are running a marathon, I suppose. A state and society, it's a long-term thing and you have countries coming in and out of the corridors. And if one, let's say society can't keep up, this is what I suppose some would say about India at the moment. In your book you talk about India mainly in relation to the cage of norms, caste as having constrained development and that's why there is still so much poverty. But some would say that society isn't unwilling. Society wants to run fast with the state. But in India, perhaps, and in other countries, the state is becoming extremely innovative at creating obstacles. So, it's not for lack of interest in running fast, but the impediments that is slowing society down. So, in those circumstances, in India and elsewhere, how do you think this so-called Red Queen Effect can be unleashed?
Acemoglu Well, I mean, I think what you are describing can be understood even more sharply with the case of China. China has not been in the corridor for millennia, certainly not recently. But the existential challenge of the Chinese system is how can a small group controlling the state, or the Communist Party maintain its grip and dominance over society? And I think the issue has become very different over the last two decades because of advances in technology that have expanded the tools that are available for that type of control. The Chinese social credit system is an amazing innovation. Before China, Google and Facebook had that, but that actually speaks to the current problems in the United States in my opinion. But it is changing that balance that we talked about. And I think it is indicative of a broader phenomenon, which is that, because the balance between state and society is very fragile, when there are huge technological innovations, it requires perhaps a gargantuan effort to reestablish that effort. And so, perhaps it's going to fail. So that's, I think something we have to grapple with in the United States, in Europe. In India, it is more complex in some sense. India's government does not have anything close to the control that the Chinese government has or even the US government has over society. But it's increasing rapidly, but I think in India, by its own history, there's an unusual degree of tolerance of malfeasance by the government. Again, I'm not a student of India, but my reading is that that's not something that you see in the 50s or 60s or 70s or 80s, but today Modi's government. I was shocked for example by those NSO group revelations of the Pegasus software that the Modi government was essentially doing the worst kind of illegal wiretaps or surveillance of all sorts of media and opposition politicians. It was the worst abuser of NSO technologies anywhere in the world, according to the revelations. And very little seems to have been done of that in India itself, which is just shocking relative to what you would expect from India from the 80s or 90s.
Banik I buy a lot of the argument that you make about the cage of norms having shackled India's development. If I can put it that way, some would of course say that India actually has a very centralized state. The problem is its federal set up, just like the US, have far too many cooks spoiling the broth, and this constant tug of war between a vision of development from Delhi versus in the regional aspects. You could also say it's a very heterogeneous society, it has diverse religion, some would even say it's geography here that matters. I think the caste thing does play a role still, but perhaps not to the extent which you may think it does. Things are changing in the sense that in rural India, sure, you still see viral videos of this. I just saw this morning a Muslim woman in a burka being chased by a mob.
Acemoglu I saw that too.
Banik What I think is really a big problem is this lack of identity of being Indian sometimes. I don't know if you can relate to this. It could also be in the US. You know, it's like you're Californian, you're from Boston, that kind of stuff. I think it's this kind of complex set of things that bring all of this together, not just the cage of norms. So, what do you think?
Acemoglu Well, couple of things. First of all, we're dancing around this issue, but there is no doubt that it's important. When you look at South Africa, Brazil, India, the US, the development and political problems in these countries are very complex because they are so large and so heterogeneous. So, in some sense, it is inevitable that India is going to have strong regional governments and strong regional imprints on its economic strategies because its regions are so different. And in some sense, that's been part of the success of India. That Indian democracy despite all the criticism that this has received, has also allowed some regions to pursue better public good provision and so on. But there is a struggle in that. Modi government is trying to exert a greater degree of control than previous governments had. The second thing I would say is, you're absolutely right that our discussion of India was much more apt for the 60s, 70s, 80s than today, where in urban areas caste has become less important. But still, it sets the scene for political interactions. Again, I'm not in the scholar of India, so I'm not sure how important really it is. But I read these interviews by Indian scientists in Silicon Valley a couple of years ago and they were fascinating because many of these people came from low caste background and some of them had actually changed their names so that they would not be recognized. And they told these stories of other Indians from Brahmin background coming to Silicon Valley themselves as engineers and trying to find out their background and questioning them to find out whether they were really low caste or not because that was critical for the social hierarchy that they were expecting to set up among the Indian sub-community of Google or Facebook or whatever it is. So again, I think caste is dying, but it's not dying fast enough.
Banik Returning to China, in the book you write that liberty with Chinese characteristics is no liberty at all. And I wondered whether one could or if you would appreciate that one could have some sort of economic liberty, economic freedom. The Chinese middle class, when I go to Beijing, when I teach there, they seem to be satisfied. I'm not sure whether they really are generally satisfied, but there's this feeling that political liberty can wait because we still have sustained economic liberty, even though one doesn't live in a democracy, etc. Shouldn't that count for something? Economic liberty?
Acemoglu Well, it absolutely does count for something. But first of all, in the book, we don't define liberty as economic liberty. We try to take the more political and dominance-related aspects of liberty to be more important. But second, you know that's exactly the bargain that the Communist Party has offered to the middle classes. In China there is a recent history of famine, hunger, economic hardship, insecurity, fear, and now the Communist Party offered a bargain which is, especially after Tiananmen Square. We're going to keep a very tight control, prevent any sort of political action that in other countries would be expected from the middle class in return for economic security. And in some sense, perhaps if things could be frozen in the way that they were in the 1990s, we could debate about whether that's desirable or not. I think it's an ethical issue. It's a normative issue. It's a philosophical issue. But I don't think you can keep things frozen in there in the way that they were in the 1990s when the iron grip of the Communist Party was strong but was not completely stifling. Today we're moving more and more towards complete control of the Communist Party with facial recognition cameras everywhere, all sorts of data being collected, no room for any type of dissent. According to the New York Times or the Guardian, one of their investigative journalists calculated that last year tens of millions of plane and high-speed train trips were not allowed because people had too low social credit. That isn't the economic security and economic liberty we're talking about, and it's an inevitable stage of this totalitarian control.
Banik Which brings me then to the issue of liberty, and you mentioned that the kind of definition or the approach you take. I'm thinking about Isaiah Berlin, his sort of famous distinction between positive freedom and negative freedom. Negative as in the freedom of interference and positive as in all the opportunities capabilities. To use Amartya Sen's approach to all the stuff that we really can do and want to do. So, what kind of freedom or liberty do you see? And I was struggling to understand that actually in the book is it mainly the positive kind that you are highlighting?
Acemoglu Well, that's why I'm a huge fan of Isaiah Berlin, but I always thought the positive versus negative was an amazingly useful way of thinking about problems. But also, was too rigid, and perhaps we should have gotten into that discussion and clarified it more. But the reason why we go with Philip Pettit's definition, which I'll repeat here is because we wanted to chart a middle ground between positive and negative. And there's no doubt that the negative freedoms that Isaiah Berlin discusses or delineates are minimal. They are very, very important. They're critical, but they are also minimal in the sense that they're not sufficient. But the positive I think may have a way of becoming too expensive. So, for that reason, we think the definition that Philippe Pettit suggested, which is the ability of individuals to avoid being dominated or avoid dominance, is critical. That doesn't mean that it's enough to be free, that you're allowed to do what you want. If you are allowed to do what you want, but at the same time somebody has huge power over you economically, culturally, socially, that's not freedom, so the cage of norms is not a freedom. If it's internalized, like, imagine the following state situation. We talked about the cage of norms. In one society women have no rights. They have to do the cooking, the dishes, they cannot go out of the house because they are coerced. If they try to do that, their husband or their cousins are going to beat them up. In the neighboring villages, exactly the same thing, but women have completely internalized that, and they don't even try to go out. Are they free in the second one? No, I wouldn't say that. I wouldn't say that despite the fact that in the second one we can say they're free because nobody is preventing them from doing so. No, because that internalization has happened with overwhelming power and dominance over them. In the same way, you're not free if you are afraid that your family can go hungry and therefore you feel you have to do everything your boss says, that you can never object, you can never express your opinion, you are under constant fear that your boss is going to fire you, so you're not free in that situation. So, economic opportunities, economic security is critical. But you see this as I'm not defining this as a positive freedom. I'm not defining this as you have a positive right to a TV. I think that's meaningless. That really is counterproductive, but it is also insufficient in my opinion, to go with the negative. If you have the ability to be let alone by the government, you're free. That's also not true, so in some sense Franklin Roosevelt, despite all his faults, actually got that right when he talked of the freedom from the huge needs that people have.
Banik I wrote a Ph.D. thesis many moons ago and I was looking at Amartya Sen's notion of public action, famine prevention in India, looking at democracy development. And in relation to that I was thinking, in your book, you don't really talk so much about democracy. There's a preference for liberty, and here's my take on it. And you can tell me if this is why you chose liberty and not democracy, because liberty is about a wider set of issues, so you could have some form of freedom even though you live in a non-democracy.
Acemoglu That's part of it, exactly. We argue that autonomy, the ability to make decisions, not to be dominated, not to be threatened, is a basic human desire. And also, democracy, if you define it narrowly, as western democracy is too narrow. If you look at history, there are so many other ways in which people can participate in politics, from petitions to bottom-up protests, from assemblies to village councils. I think trying to sort of create a dichotomy. I'm a huge fan of democracy. I think democracy is the future and I think we have to double down on democracy. Don't get me wrong, but from the historical way, and especially in the context of economic development to say it's democracy or nothing is not enough. And it ignores all of these indigenous methods that people have developed in order to keep their rulers under check.
Banik When we look at The Narrow Corridor, I loved the cover of this version.
Acemoglu Oh, thank you. That's the British version.
Banik Yes, I got it from amazon.uk, so that explains it. You are of course a fan of the Scandinavian model and Sweden comes up quite often in the book and there was one thing that I thought, I don't know if you're aware of this, that could be of interest. How is it that state and society are running at the same time and equally fast? How is that checks and balances are being undertaken on a daily basis? And there's something and, I don't know if you're aware, called the "Janteloven". And it's based on this satiric piece by a Danish-Norwegian author Aksel Sandemose. And it denotes this attitude of disapproving expressions of individuality, which you have much more in the US and personal success. We have the Olympics going on in Beijing. So, the typical expression of this would be if I win the gold medal and I've worked for four years. I've done everything right. When I'm interviewed on TV, I'm not supposed to say I deserve it, and I'm good, I'm number one. You're supposed to be modest and tone it down. And some would call this false modesty. But this idea that don't think that you are someone, don't think that you're better than us. And I think there's something there that maintains that Scandinavian model. I mean, this varies across Scandinavia. Norway, you're not supposed to say you're the best, others can say so, and so this applies to politicians, they can't get too powerful. We always want to make sure that everybody, even the royal family, should be like us.
Acemoglu I think the same is true actually in Britain. That was one of the things that is a shock when you come from Britain to the US. You think there's so much parallel between them but in Britain, except unless you're Boris Johnson, singing your own praises is completely unacceptable. Everybody would make fun of you; you'll be ridiculed. And in the US, that's accepted. So, if you look at Scandinavia, I think it is really an amazing mix of, but it's too good to be true, but it's an amazing mix. When people hear of individualism, you have two different contradictory thoughts that come to people's mind. One is, people are individualistic, so they pretend, they maintain their freedom. They're not being driven by the herd. But at the same time they don't invest in community. So, in the US you have the second kind of individualism. Quite strong. It's like the whole sort of quasi-libertarian attitude of Silicon Valley disruption. We don't care about anything that is a child of that second aspect of individualism in Scandinavia. If you look at surveys, people are very individualistic but at the same time they are very respectful of institutions, community. A sense of trying to restrain your selfish behavior for the good of the community. So, I think achieving that is a huge achievement, huge accomplishment. But it's not, people sometimes say that's the Scandinavian culture. Well, it certainly wasn't like that 100 years ago, Scandinavia was among the most unequal places. Agrarian society, completely elite-dominated. So, it's something that has been institutionally achieved, that forging of the alliance. And you see that in the economy as well, it is a private property-based economy. Firms are innovative. But there's a lot of rent sharing. There's a lot of acceptance that you're not going to trample on other people, but in a way that still respects firms, incentives, and innovation. But there are two pillars of this that are critical and there are two pillars of this that are lucky for Scandinavia. And those two lucky pillars, I don't know where they're going to go in the future, the two pillars that are critical it was that Scandinavia built amazingly good state institutions in conjunction with the trade union movement and other things. So, those state institutions really bolstered it, and via a series of reforms and fortuitous changes, it also flattened out huge wealth inequality. So, from Finland to Norway and Sweden, economic inequality that was very, very high at the beginning of the 20th century came down over time. So, there are very rich people or rich businesses in Sweden for example but there is a limit on that. And that maintains some degree of limit on the power of the very rich, even though they are still motivated by international profits and so on. But there are also two dimensions of the Scandinavian model that enabled them to achieve these things in a rather easy way. One is that Scandinavia really benefited from the US. US provided both international security for Scandinavian countries, so they did not have to have a militarized state against Russian threat, etc. And also, the United States created a much more cutthroat form of capitalism at home that then allowed Swedish firms to benefit from the innovations in those countries and the markets in those countries. So, Swedish firms could be still very innovative. But here, by the rules of the social welfare state. If you think of an economy that just consisted of Scandinavia, Norway, and Denmark, I don't know how that would have looked like. So, the second aspect is homogeneity, we've danced around this issue from the earliest in India, Brazil, the US, South Africa. They have a huge heterogeneity problem, both ethnically, culturally, economically. And all of these countries, again, inequality was high early on, but it started coming down, so they are economically somewhat homogeneous, culturally, quite homogeneous, ethnically homogeneous, and you're seeing the problems in Sweden after the fraction of the population with immigrant-origin has increased, politics has become much more contentious. Swedish Democrats, you had no party like that for over 100 years, and now they're one of the strongest parties in the country. So, I think about how they're going to navigate. And think of the problem in the US. US politics is so racial, so interwoven with anti-immigrant feelings, so heterogeneous between South, Northwest, all of these difficulties Scandinavian countries avoided. So, it's great for me to have Scandinavia as an example of what we can achieve. But I know it's a little bit vacuous to say the US should emulate Denmark. I mean, that's really much easier said than done.
Banik A final set of issues. The case of the Paper Leviathans. Because my show is often about many of these countries on the African continent, in Asia, Latin America that has a state, but the state is doing its best to thwart society, keeping society down. In the book you talk about Nkrumah in Ghana and some of the stuff that the so-called "Paper Leviathans" do. So, here I wonder what the future holds, I'm thinking about globalization, international trade, geopolitics in sustaining some of these Paper Leviathans. You even write about the UN. How the UN confers legitimacy on people like Robert Mugabe becoming a goodwill ambassador when he himself goes to Singapore, or used to, when he was alive, for treatment. So, what is the way forward in this day and age we live in for these Paper Leviathans?
Acemoglu Thank you. Well, I think that's a great topic for us to end on because I think it's so expensive. And so, if you go back to our discussion of James Scott versus Huntington-Fukuyama, it seemed a little bit dichotomous, right? You either don't have the state, in which case you get the autonomy. You can flee the state. You don't have to give up your traditions, your basic liberties to the state, but you miss out on all of these services. Or you get the repression of the state, but in return you get some public goods like you do in China, Russia, and so on. Well, the Paper Leviathans are the exception, meaning that you get the worst of both worlds, so you have strong looking states in the sense that they have a security apparatus that can be quite repressive that can go around and kill people. But its ability to do things is rather limited beyond repression and its ability to project its power beyond the capital is very limited where the country needs most help. Often so, as a result, you don't get regulations that are useful. Dispute resolution doesn't work, public goods are completely absent, crime or even non-state actors proliferate. And as a result, these are Leviathans that look strong but that are actually paper-thin. And we argue in the book that these have many causes, many origins. But colonialism is a very important part of it because colonial powers bolstered the scaffolding of the state in the capital without really making the inside of it very strong. And certainly, had no interest in projecting power beyond the capital. And the places that had natural resources.
Banik And elites.
Acemoglu And the elites, exactly. The indirect rule was all about that. And then the international state system. That was of course Hobbes's brainchild but has become much more of a reality in the 20th century or the second half of the 20th century really clambers to recognize states and politicians to give them legitimacy. So, the UN wouldn't know what to do if you didn't have a state representative. It just needs to reaffirm its existence. You know, by the way, I'm a huge fan of the UN in general, but this particular role of the UN has been terrible.
Banik Because it confers domestic legitimacy, right?
Acemoglu Exactly. And then it tries to increase their domestic legitimacy because it doesn't know what else to do. And then these rulers, many of them in Sub-Saharan Africa but some in Latin America or South Asia then viciously exploit this legitimacy that they get conferred from international organizations. Just like Robert Mugabe did.
Banik Perhaps you would be willing to come back on the show at some point when you finish another book. It was such a pleasure to see you and thank you so much for coming on my show today.
Acemoglu Thank you for inviting me Dan. Yes, I would love to add our new book is out April, May 2023.
Banik And what's the title? What's the preliminary title?
Acemoglu Well, it's about how we are misusing technology.