Why do nations fail?

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The Nutgraph

The Nutgraph

After the 1MDB row, the opposition has been calling Malaysia a failed nation. Under what circumstances does a nation fail?

Recently I read the book “Why Nations Fail?” by Daron Acemoglu and James A Robinson. The two authors took 15 years to research into cases of both failure and success of nations and analyze their causes.

The authors believe the key to the success or failure of a nation is whether they practise “extractive” or “inclusive” political and economic policy. An inclusive economic system would bring about inclusive political system and vice-versa. Many dictatorial regimes would deliberately destroy the “creative destruction” to the economy and allow the country to fall in order to guarantee its power to rule solely.

For example in the 16th Century, Queen Elizabeth I decreed that all her subjects must wear weaved hats. In order to free his mother and sisters from endless weaving, fresh graduate William Lee invented the first knitting machine. When he presented his invention to the Queen, it was rejected because the knitting machine would cause unemployment to the British.

An even more horrible example cited in the book is that of Sierra Leone leader Siaka Stevens in 1970. At that time, the British had built a railway line in that British colony to transport diamonds, coffee and cocoa beans.

However, the coffee farmers voted for his rivals and thus Siaka chose to demolish the British-built railway line and leave the stations to ruin. The example shows that in order to protect his power, he was willing to sacrifice one of the lifelines of the nation’s economy.

As for Malaysia, we embrace democracy although ours is biased towards authoritarian democracy. We are fortunate that the Government has chosen to build railways lines and expressways to win the support of voters in the east coast and east Malaysia instead of demolishing railway lines and not trying to reverse creative destruction. Nevertheless, there is still room for improvement in our administrative approaches.

Our national leaders should ensure the development of an inclusive economic model. Besides abolishing monopoly held by cronies and government-linked corporations in many sectors, the Government should offer better incentives to encourage people to invest their money in businesses which could promote social innovations, instead of keeping a tight grip on their wallets. Some have much of their savings conned by money game operators just because they don’t want to see their money eaten away by inflation.

In politics, there are many reforms which cannot be delayed, such as a clean and fair election system, a parliamentary procedure fairer to the opposition, more open data on government investments, and resolving issues relating to the monopoly of agricultural products, including rice.

The government can roll out more blue prints but if such basic issues are not solved, they are just treating the symptoms and not the causes.

When the people become poorer, more will depend on government aid and more will vote for the ruling party after receiving government aid. But what is achieved is short-term political gains. The whole country will suffer over the long term.

Original Source: 国家为什么会失败?