lecture by economist Acemoglu on "why nations fail"

This is an interesting lecture on the topic: "why nations fail" (forthcoming book on economic theory).
The difference between faster and slower/non-growing economies are extractive structures that give little incentives to the employed, but secure the wealth and social position of the existing upper class while limiting creativity and especially creative destruction. Labour that secures themselves a high share of the profit or works for their own ends seems to require a supportive political environment, including creative destruction of anything (the political system, the economic system, scientific ideas and so on).

So what are your opinions on that and how can common wealth and creative destruction be handled in the future?

In military terms, I think a society with creative destruction can have a cutting edge over an opponent who has the job run by an establishment that is very conservative, no matter how well trained his soldiers are. The problem is that fighting this way can endanger the status quo of the elite at home. WWII and the Korean War for example were instrumental in giving Southern Black Americans skills that allowed them to make choices and fostered a sense of ability that fueled the Civil Rights Movement.

Thank you, Kurt. A lecture of more than an hour is too long to start to listen to unless you can expect to have sufficient time. So now, after two weeks, I took that time. At the end of the lecture I had especially the question - how does he think you go from inclusive to extractive economics. So that was the subject of the questioners.
I think there is a lot in what he says. I remember reading that the development of the Amsterdam grain market in the 16th and 17th century led to a strengthening of feudalism in Poland. But the economy of the Netherlands in the 17th century, the Golden Century of Dutch history, was a time of increased poverty for the majority of the Dutch people. And Henry George, after which the lecture was called, found in 19th century US that the railways increased the poverty of poor people, while to the contrary the railway building in China lead to wages rising faster than inflation on the coast as well as in the interior. Politics as well as external circumstances influence the outcome.
A political point is that in most societies the rich control the political institutions and are thus able to delay or even defeat the destruction of obsolete structures. You think of maintaining Goldman Sacks and other parasitic banks. It might well be that the CCP finds a way to control and hasten such destruction. It's bright enough to see the need, but will it see the possibility?

Decreasing wages for work can be compensated by an increasing workforce, including women and children, so median family income can rise despite sinking wages. That's one of the major developments discussed for the European consumer revolution. Low wages make products cheap and high family income gives buying power. It's a monetarization of previously unmonetarized services or unavailable services.
Concerning the destruction of parasitic structures, you have to find a way that makes more money and conflicts with these banks. Afterwards it's a one dollar - one vote lobbying showdown. Man,you can even do that now if you think they hurt the economy more than they benefit, just collect and organize.

Kurt said:

Decreasing wages for work can be compensated by an increasing workforce, including women and children, so median family income can rise despite sinking wages. That's one of the major developments discussed for the European consumer revolution. Low wages make products cheap and high family income gives buying power. It's a monetarization of previously unmonetarized services or unavailable services.
Concerning the destruction of parasitic structures, you have to find a way that makes more money and conflicts with these banks. Afterwards it's a one dollar - one vote lobbying showdown. Man,you can even do that now if you think they hurt the economy more than they benefit, just collect and organize.

Click to expand...

The people of Holland were really poorer in the 17th than in the 16th century. Women and children contributed their work already in the 16th century.
I wonder what will be needed to get rid of these parasitic structures. For the time being they are fed by the central banks and the treasuries of countries and the EU and so they have the money to pay the politicians, indirectly by way of their lobbyists, to continue on this disastrous road. I am of course member of a political party opposed to this madness.

Acemoglu looks at two cases: either a tiny proportion of the population has the ability to initiate ( or block ) economic developments or all people have the ability to do so. But society often consists of several classes of which a few can take economic initiatives. His model is often too simple. See Holland in the 17th century as an example. Holland was economically very successful despite the fact that only a few people were rich enough to start new enterprises and very few ( but some ) poorer people were able to climb higher.

One day I'll figure out how to start something to change things because I'm as well aware that things aren't going well. On the other hand, you have to let things get bad in order to prove the point that this is the wrong way and then it's not only you who has a good idea for change. The New Deal, the foundation of previous American power, was one of the answers to the Great Depression, the other was totalitarianism in Europe, where rich guys bought themselves an ideology to protect their exploitations (the second KKK tried the same in the US, but collapsed from internal problems). That's why the Nazi "Bonzen"(derogative for very rich guys in German) failed in the end because their system was based a lot on bribery and not so much a conviction of creating achievements for the common good. Their conviction was rather a justification for personal entitlement to loot and bribes. It's not as bad now, but we're going down a similar road that creates a doublespeak in order to justify unfairness through manipulation.
I fully agree with you that a society is split into very many groups that each make their own contribution and that individuals can be part of many contributing groups. I'm not really sure how to get a holistic picture without some deletions for simplification and I'll have to read the complete book in order to be able to say more on the subject.

The whole story reminds me about the history of ancient Rome that I imagine to have grown great based on a backbone of wealthy, but not rich, swordfighters as heavy infantry while all people they subdued had more rich guys contributing cavalry and never a heavy infantry to match the Romans. These swordfighters were trained and nourished from childhood to excellence and showed this even in the Second Punic War by fighting their ways out of Hannibal's traps. The ongoing expansion of Rome changed this country by eroding the wealth of their former middle class heavy infantry and their ability to maintain their outstanding swordplay (good individual fighters that stil needed training as a unit) that demands lots of time to train and food to nourish the strength. So in my opinion, Rome grew so powerful it could cut her roots and base her power on something new, the professional legions with foreign aristocratic cavalry mercenaries, without faltering for several centuries. In the end, Germanic militias finished off this empire that had lost the trust and support of her inhabitants. I can similarly imagine the US shifting away from her former strengths towards a new system of world dominance because of the erosion of her old powerbase and I really don't like it.