Robust political institutions give nations the power to succeed

A year or so before Syria ushered in its blood-soaked Arab winter, I met a man named Radwan Kismaya. He operates a software company out of the miserable Damascus Free Zone. Inside, on old PCs, Syrian coders work on video games and an animated film, the first proprietary Pixar-type outfit in the Arab world.

I use the term “proprietary” loosely. Because, however innovative his company, Afkar, may appear in the Syrian context, Kismaya is Don Quixote with a smartphone.

His government offers him no intellectual property-rights protection, no ability to patent his ideas, an unwieldy and corrupt banking system and no recourse should another company rip off his products—which, of course, has happened often.

Syria is an abjectly failed state. But it is not unique in this—South Africa has neighbours that make the Assad regime appear functional. It has also not failed in a unique way.

According to Why Nations Fail: The Origins of Power, Prosperity, and Poverty (Profile) by economists Daron Acemoglu and James A Robinson, the tropes of the Syrian nightmare are only too familiar.

Their thesis is simple: inclusive political institutions lead to progressive economic institutions. Their methodology is not a 450-page trawl through a millennium of history to make that assertion stick.

Take the split city of Nogales, one half in Arizona in the United States, the other in Sonora, Mexico: they share geography, weather and language. The US part of the city enjoys an annual household income of $35 000 a year, whereas in the Mexican portion it is $9 000 a year.

What historical factors contributed to this? The Spanish colonialists’ highly extractive encomienda system (a feudal model introduced by the Spanish when they conquered South and Central America) drained Latin America of wealth and the ability to develop. Elites were unaccountable, the polity repressed and unmotivated. Now Nogales, Sonora, has poorer education, worse healthcare and smaller flatscreen televisions than its twin in the US.

Britain would have loved an encomienda system in its American colonies, but instead it developed a political framework that was highly inclusive (for propertied white men), which led to rule of law, property rights and a financial system that benefited most of the population. The political class existed to represent the people and could be replaced if it failed.

None of this happened quickly or without blood. But Acemoglu and Robinson are clear that a successful nation is never a case of the political chicken and the economic egg. Politics must come first. And “small institutional differences would be the ones that really matter”.

Paul Collier, Oxford University economics professor and author of The Bottom Billion, would probably agree, but with reservations. He sees Africa’s unique geographical challenges—the result of colonial caprice that devised landlocked, barren states such as Chad or Burkina Faso—as the key to the continent’s developmental drag. Why Nations Fail does not deny geography’s role or brush off natural or man-made calamity, but argues that political institutions must be robust enough to develop despite such exigencies.

In terms of South Africa, are the ANC’s bien pensants (orthodox thinkers) up for this?

Can they deal with the reality of genuine economic expansion, as opposed to the usual state-managed, fixed-income growth that President Jacob Zuma promised more of in this year’s State of the Nation address?

Kismaya has not failed because Arabs lack the intellectual capacity to develop first-person shooter games. He has not failed because Syria is geographically impaired or has no large herds of buffalo. He has failed because his state failed him, stifling his innovative brio in a politically exclusive, economically extractive mousetrap.

“[T]he elite,” write Acemoglu and Robinson, “especially when threatened, form a formidable barrier to innovation.” South Africans, along with the rest of Africa, have to demand political inclusivity if we hope to keep growing. We have to innovate if we intend to base that growth on something other than building condominiums in China.

Richard Poplak is writing a book with Kevin Bloom on a changing Africa. Follow him on Twitter, @poplak.

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