The Great Divergence encapsulates the economic and political disparities between East and West, exacerbated by colonial legacies. Nobel laureates Acemoglu, Johnson, and Robinson emphasize the importance of institutions in shaping economic growth. Their research distinguishes between extractive and inclusive institutions, highlighting their long-lasting effects on countries’ development trajectories. Critiques of their approach raise important discussions on Western biases and the complex realities of colonialism.
The term “Great Divergence” highlights the economic and political divides between East and West, rooted in the 17th and 18th centuries. Western Europe’s industrial growth enabled it to exert political influence globally, leading to economic benefits. A significant insight from this research is that institutions set up during colonial times exert lasting effects even after nations gain independence. Economics Nobel laureates Daron Acemoglu, Simon Johnson, and James Robinson (AJR) pioneered research emphasizing institutions’ vital role in development. They define institutions as the rules shaping human behavior, akin to laws that prevent misuse of coercive power by states or elites. Such constraints can influence actions through incentives resembling how fines deter speeding. AJR’s research underscores the impact of extractive institutions, historically prevalent in many regions, which concentrate wealth among a few elites at the expense of broader progress. In contrast, inclusive institutions foster rules encouraging societal participation and growth. Their exploration revealed colonialism’s footprint, particularly in less developed areas compared to regions like North America, where fewer extractive practices exist. Using historical data, AJR examined how natural experiments revealed economic growth’s link to settler mortality rates based on disease prevalence. Such analyses prompted further inquiries into historical events’ long-term economic impacts, particularly in India. Studies by Abhijit Banerjee and Lakshmi Iyer uncovered reduced agricultural investment and infrastructure deficits stemming from colonial land systems. Political power influences economic institutions, distinguished by de jure power—officially granted like the U.S. presidency—and de facto power, as seen in Equatorial Guinea’s long-serving leadership. AJR’s findings suggest resolving issues in extractive institutions involves navigating complex group interests, complicating consensus on beneficial reforms. AJR’s contributions shifted the economics field favoring diagnostic approaches over one-size-fits-all policies, like shock therapy. While their skepticism toward China’s growth due to rising extractive institutions sparked debate, some scholars criticize their preference for Western models. This perspective overlooks America’s historical struggles with corruption and exclusion, challenging the narrative that inclusive institutions equate to Western values. Academics, including Onur Ulas Ince, critique AJR’s insufficient engagement with the nuances of colonialism and its implications on economic systems. The discourse surrounding these findings not only enriches our understanding of development but also emphasizes the historical complexities underlying today’s institutions.
The concept of the “Great Divergence” represents the widening economic gap between developed Western countries and the developing East, particularly influenced by historical events such as colonialism and industrialization. Scholars like Acemoglu, Johnson, and Robinson delve into how institutional frameworks established during colonial times have lasting economic implications for former colonies. Their work in new institutional economics aims to illuminate the significant role institutions play in a country’s growth trajectory. The research undertaken by AJR and their contemporaries emphasizes the legacy of colonialism and its effects on modern economic structures, particularly in developing regions like Sub-Saharan Africa and South Asia. By analyzing historical data and settler experiences, they investigate how institutions can either facilitate growth or perpetuate inequality.
The exploration of institutional economics by Nobel winners Acemoglu, Johnson, and Robinson sheds light on how colonial legacies shape contemporary economic landscapes. Their investigation into extractive versus inclusive institutions offers critical insights into societal growth potential. While the framework they propose is met with some criticism, it invites deeper reflection on the interconnections between historical events, political power, and economic development, urging a reevaluation of accepted narratives.
Original Source: www.thehindu.com
