Why Nations Fail—and Why Burma May Succeed

By The Irrawaddy 23 April 2012

“Why Nations Fail: The Origins of Power, Prosperity and Poverty” is arguably the most talked-about social science book of 2012. James A. Robinson, a Harvard political scientist, and Daron Acemoglu, an economist at the Massachusetts Institute of Technology, collaborated to find and outline answers to a big question: Why are some nations rich and others poor, divided by wealth and poverty, health and sickness, food and famine?

After 15 years of research and looking at historical evidence from the Roman Empire, Mayan city states, medieval Venice, and across Africa, Asia, Europe and the Americas, Robinson and Acemoglu conclude that it is man-made political and economic institutions that matter most.

The cover of “Why Nations Fail: The Origins of Power, Prosperity and Poverty,” by Daron Acemoglu and James A. Robinson (Photo: Random House)
The cover of “Why Nations Fail: The Origins of Power, Prosperity and Poverty,” by Daron Acemoglu and James A. Robinson (Photo: Random House)

The authors also take a look at some of the big issues for today: Will China’s authoritarian growth model trump the West? Will the US falter? How can economically struggling countries—such as Burma—achieve prosperity?

Simon Roughneen discussed Burma with the the authors, getting their thoughts on what might come next for the country that is on a military-backed reform course, after a half-century of army rule.

Question: In your new book you discuss how governments often become “extractive institutions,” effectively looting the country they are supposed to govern and undermining development in the process. This sounds remarkably like Burma under the military junta. So do you see Burma—at least in its pre-2011 guise—as a case in point for your thesis?

Answer: Yes, absolutely. The “extractiveness” of the political institutions is manifest in two ways, we think. First, political power has been narrowly controlled by the army. Even now that there has been an opening of the system, this is really just an attempt by the army to institutionalize their power in a way which they think will be more enduring.

Second, the state is not very strong. For example, there are large, almost independent parts of the country outside of the Irrawaddy Valley. The extractive political institutions have led to an extractive economy to the benefit of the military elite but at the expense of Burma’s development.

Q: In 2010, a few weeks before the Burma parliamentary elections, you wrote, “Burma’s rulers may be paving the way for their own eventual eclipse.” In the light of the elections and the developments in the country since, do you think this “turkeys voting for Christmas”-type assessment still stands?

A: As we said above, this is obviously an attempt to institutionalize military rule, but it may backfire. For example, to make the thing work and look serious, they had to allow Aung San Suu Kyi out of house arrest and let her run.

They hope to manage this, make the regime look more respectable. But it is a gamble for them, they may fail. If they do, it will be much harder now to use repression like they have in the past, so we were just arguing that the transition was more hopeful than the status quo, where a really successful attempt to overthrow the military might just have led to civil war. Now there is more hope for change, though of course if there is change, the military still intends to be able to influence it. But again, this is probably better than the previous situation.

Q: Many of the old oppressive laws are still on the books in Burma, and in February UK consultancy Maplecroft released a report saying that, despite reforms, “corruption, a weak legal system and judiciary, continuing human rights abuses and a lack of protection for investors are also significant risks that may take some time for Myanmar to fully address.” What institutional changes does the Burmese government need to implement to effectively bring about reform, in your view? And will merely changing the laws on paper be enough, in the Burmese context?

A: Well, we are not Burma experts. To suggest detailed reforms you need to know the country well and understand how institutions function today. However, we wouldn’t doubt that there are bad laws on the books. Hopefully these will not be enforced (like the clause in the Alabama constitution which says that whites and blacks cannot be schooled together).

For things to get better, passing laws is not the thing to focus on, or even economic reforms. The thing is that political institutions have to change and become more inclusive. Which means that the state has to become stronger and political power has to be more widely spread. At some level, this rests on the failure of the military’s legitimization strategy. If that succeeds, Burma will likely be condemned to a long period of extractive economic institutions and very poor growth. We would think that if political change really comes then there will be a lot of real pressure to reform things like the judiciary, clamp down on human rights abuses, etc.

Q: Some reviews of your book suggest that the role of intangibles such as culture, religion, were not dealt with in your thesis. Some might say that this needs to be factored into any analysis of Burma, given that over the years, the ruling junta has undertaken some startling and in some ways inexplicable decisions, such as changing the country’s currency to notes denominated in multiples of 9, decisions which some Burmese put down to the rulers’ attachment to various forms of arcane superstition. Could good institutions and effective rule of law have reined in or prevented such lurid follies?

A: I don’t think that we deny that culture, religion or values can matter in some situations or contexts. But we do argue that they cannot account for the big patterns that you see in economic development in the present or the past. It could be that in this specific case the military have so much power they can do anything they like, including silly things if it gets into their heads. Some people claim that the great leap forward in China was like that—Mao would get these harebrained ideas (a blast furnace in every village) and nobody dared contradict him. But if you had good institutions there would be constraints on things like this happening.

Q: You appear skeptical about the China economic development model, which has been touted as something to be emulated by other developing economies, not least as Western economies have been struggling in recent years. What are the dos and don’ts you see in China that the Burmese government would do well to pay heed to, given that China has a massive economic and business presence in Burma?

A: We don’t think it is a model. For one thing, there seems to be a giant confusion about the nature of Chinese economic growth since the late 1970s. This growth came when the Communist Party stopped trying to control every aspect of peoples’ lives. This did not happen because of the party, but despite it. If you look at the economy today, the dynamism is in the private sector that the party has reluctantly allowed to flourish.

So I do not see the model for Burma there. So the don’ts are, don’t regulate the economy the way the Chinese state did. Of course, the role of the state is crucial in providing infrastructure and basic public goods like order and education, but what Burma needs is a flourishing private sector.

Q: Burma’s recent glasnost has been compared to Vietnam’s doi moi and subsequent opening up—establishing diplomatic and economic relations with the US in the 1990s. Since then, many multinationals have set up shop in Vietnam, including Intel, which opened its biggest plant anywhere near Saigon in late 2010. However, Vietnam’s inflation woes and recent corruption scandals have tarnished the Vietnam brand somewhat. What are the lessons to be learned from the Vietnam experience for Burma?

A: This is a hard question. I would have thought the history and institutions are very different. Vietnam has a strong centralized state and made a lot of economic gains by transitioning away from socialism, like China. But Burma does not have a strong state. The military might be powerful, but our sense is that the state is not well equipped to provide public goods. Also, the country never had Vietnamese-style socialism. So we would say there is a lot of potential for foreign investment, but the state has to be strong enough to enforce contracts, property rights. That seems to be the main issue.