Wealthy Nation Begins With Healthy Me Essay

Financial Health is Public Health

Written by Jason Q. Purnell, Washington University in St. Louis


“If you want to lower my blood pressure, help me pay my electricity bill.”

That statement from a resident of Rochester, NY, has remained with me for several years because it so intuitively speaks to the connection between financial health and physical and mental health. When the American Psychological Association released the results of its “Stress in America Survey” in early 2015, money topped the list of worries, ahead of work, family, and health issues. Seventy-two percent of adults worried about money “at least some of the time,” and 26 percent worried about their finances “most or all of the time.” The connection of financial stress to health is quite explicit in the survey results, with nearly one-third of respondents who say that struggling to get by financially affects their ability to lead a healthy lifestyle, and more than 20 percent who say that they have either considered or have skipped medical visits because they lacked the financial resources. Not surprisingly, adults with lower incomes experience financial stress more acutely, and those who experience high levels of stress related to their finances are more likely to cope by smoking, eating, drinking alcohol, and watching television in excess, all of which increase their risk for chronic conditions like diabetes and heart disease.1

It isn’t just adults who suffer the consequences of stress when money is tight. Groundbreaking research reviewed in a 2011 report from the American Academy of Pediatrics finds that childhood exposure to poverty and stress has both immediate and long-term effects on development, behavior, and health.2 Scientists have identified differences in the structures and functioning of the brains of children in poverty, making them more sensitive to even mildly stressful situations and less likely to be able to learn new information.3 Children who experience a particularly severe type of stress called “toxic stress” are also at increased risk for negative behavioral and health outcomes as adolescents and adults.

Though commonly thought of as a purely subjective experience of feeling overwhelmed by life’s demands, stress is a complex set of physical processes that start in the brain and extend throughout the body’s various organs and systems. In the face of mild-to-moderate, isolated and short-lived periods of stress, this response is quite adaptive. It helps us to focus the mental and physical resources necessary to either confront or escape threatening situations. However, when there are multiple sources of severe or inescapable stress, the stress response essentially never turns off, and the body begins to break down. The immune system is compromised, inflammation increases, and the ability to adapt to future stress is disrupted. This is why children who are exposed to abuse, neglect, domestic violence, unstable caregivers, and mentally ill or incarcerated members of their households — all examples of what are called “adverse childhood experiences” by an eponymous study — are at greater risk for social, emotional, and health problems well into adulthood. These children are also more likely to take up risky behaviors as a means of coping in adolescence and adulthood, such as smoking, drug use, overeating, problem gambling, and unsafe sexual practices.4 This exacerbates the harm that toxic stress placed on their bodies as young children. When these young people become parents, the cycle often continues.

Stress and its related impacts are part of a broader concept in the field of public health called the “social determinants of health.” The World Health Organization defines social determinants of health as “the conditions in which people are born, grow, live, work, and age” that are “shaped by the distribution of money, power, and resources at global, national, and local levels.” We know that both health behaviors (e.g., smoking, leisure-time physical activity, cancer screening) and health outcomes (i.e., disease, disability, and death) follow a general pattern by which those with incrementally more education, income, and wealth also have incrementally better health. This “socioeconomic gradient in health” not only influences individuals and families, but also the health and vitality of communities and nations.

The Wealth (and Health) of Nations

The United States is the wealthiest country in the world, with a gross domestic product of nearly $17 trillion, between 17 percent and 18 percent of which is spent on health care. Yet our health lags that of other wealthy nations.5 The poor showing is the result of more limited health care access and affordability; riskier behaviors such as high-calorie diets, drug use, and violence; physical environments that discourage physical activity; higher rates of child poverty; greater income inequality; lower economic mobility; and a weaker social safety net. Our outcomes can’t be explained away by our diversity or blamed entirely on the poor. Even white, college-educated, high-income adults with health insurance have worse health outcomes than their similarly situated peers in other nations.

Simply providing more and better health care is unlikely to solve the problem of health disparities. That means that even legislation hailed as the most momentous social policy in at least a generation, the Affordable Care Act (ACA), is not sufficient to the task of alleviating persistent health inequality. Although the ACA gives significant nods to prevention and population health, its central provisions — expanding health insurance coverage to millions of Americans — are not expected to significantly change the outlook for health disparities, if evidence from similar reform in the State of Massachusetts is any indication.6 One simple explanation for why this might be the case comes from the United Kingdom, which has had universal access to health care since the 1940s. The landmark Whitehall Studies of British civil servants find a clear link between employment class or rank of civil servants and health. Those in higher-status jobs enjoyed better health and longer lives than those lower down the employment scale. Even in a country with universal health care, health inequality remains.

Under the best of circumstances, the ACA will not achieve universal coverage, and the decision of the Supreme Court to allow individual states to decide whether to expand Medicaid means that many disadvantaged adults will continue to go without insurance coverage. Health care alone is not enough to change disparities, particularly in premature death, because its contribution to the explanation of such deaths is only 10 percent. That is because the contribution of medical care to the overall explanation of premature death in the United States is estimated at only 10 percent. The other 90 percent is a matter of lifestyle behaviors, genetics, social circumstances, and environmental exposures.

Dr. Thomas Frieden, director of the Centers for Disease Control and Prevention, has another way of describing the relative influence of different kinds of interventions on the health of the population. He calls it the “Health Impact Pyramid” (Figure 1).7

Source: Frieden TR. Am J Public Health 2010;100(4):590-5
Figure 1. The Health Impact Pyramid

At the top of the pyramid are interventions that have the smallest total impact on population health. These are familiar counseling and education activities, such as helping patients with diabetes monitor their blood glucose and eat a healthy diet. At the next level are interventions such as medications to control blood pressure and cholesterol, much of what we think of as at the heart of medical care. This set of activities still has a relatively small impact on population health. “Long-lasting protective interventions” have a larger impact, and include immunizations against disease, certain cancer screenings, and smoking cessation programs. The bigger impacts come from changes in the environment that make healthy decisions easier, such as adding fluoride to the water supply to prevent cavities or removing lead from paint. These are interventions that protect people from potential threats to health without their having to exert much energy to benefit from them. At the very bottom of the pyramid are social and economic factors such as poverty, education, and adequate housing. These most fundamental resources also have the largest overall impact on health. As Frieden notes, they are also the most politically difficult to address. Indeed, it is at the nexus of culture and politics where the battle for America’s financial, physical, and mental health must be fought.

Necessary but Not Sufficient

Individualism is a guiding ethic in America, and it provides the lens through which many interpret societal outcomes. Even among those with the most glaring disadvantages, a strong moral sense of personal responsibility for one’s lot in life pervades. Nothing delights the American public more than heroic efforts to assume such responsibility in the face of very difficult circumstances. An early 2015 news story featuring a 56-year-old Detroit factory worker who walked more than 20 miles a day to and from work inspired a national outpouring of generosity totaling more than $350,000, including a new car worth $35,000. The flipside of this giddy support for individual heroism is a tendency to very quickly blame individuals or groups who are struggling for their lack of personal responsibility. In a nation in which nearly three-quarters of adults worry about money at least some of the time, where income and wealth inequality are at all-time highs, and where the rate of child poverty is among the highest in the developed world, it is fair to ask whether individual effort can be the total answer to what literally ails, and ultimately kills, Americans.

There is a turn of phrase in science: Conditions can be “necessary but not sufficient” for a particular effect or outcome. For example, water is necessary but not sufficient for ice. No matter how much one may will or wish it to be otherwise, water will not become ice unless it is exposed to a temperature at or below 32 degrees Fahrenheit. In a similar way, individual effort is necessary but not sufficient for what we commonly define as aspects of a successful life: completing education, holding a job, starting and sustaining a family, supporting oneself in retirement and throughout old age. Think of individual effort as the water in this scenario. The average person cannot hope to achieve any of these outcomes without a significant amount of effort, perseverance, and determination — all of which is absolutely necessary, but not sufficient. Young children do not raise themselves nor do they determine their parents’ marital status, education levels, or annual incomes. Vaunted though meritocracy may be as an ideal, many people get their first and subsequent jobs through networks of connection rather than laboriously wading through job postings. And a whole host of policies prop up the economic well-being of the relatively well-to-do, from home mortgage deductions to tax-deferred college and retirement savings accounts. Think of these and a multitude of other factors as the freezing temperatures, the context in which the “water” of individual effort is transformed into the “ice” of individual benefit — not merely material benefit, but the very length and quality of life itself.

Despite stacks of studies showing that financial health and physical and mental health are connected and that the conditions in which we live also affect how well and how long we can expect to live, the description above of how individual effort interacts with environment and resources to produce life outcomes remains a tough sell in the current political climate. We are told that the poor and the wealthy alike have gotten what they “deserved” by virtue of their individual successes and failures alone. Even providing health insurance to more Americans is controversial, in part, because it suggests that government is doing what individuals ought to be doing on their own. Either we continue down an unhealthy and ultimately untenable path of ever-increasing health care expenditures for suboptimal and unequal outcomes, or we somehow change the trajectory by changing the way we deliver the message. The latter of these alternatives is the path of a growing number of public health professionals who are convinced by the data supporting the power of the social determinants of health, but also aware that the public and policymakers may not be. In fact, they may not even be aware that the relationships between factors such as household financial status, education, and health are as strong as they are, and that is not their fault. Academics and public health and medical professionals are pretty adept at talking to one another, but their efforts to communicate information clearly and convincingly to the lay public often leave much to be desired.

New models are needed for translating information about the social and economic determinants of health for decision makers from parents to politicians. This was the argument made in a paper in the Annual Review of Public Health in early 2015.8 In it, lead author Dr. Steven Woolf and his team at the Center on Society and Health at Virginia Commonwealth University and my team and I at Washington University in St. Louis offered a framework that includes rigorous research as its basis, but also places emphasis on strategic forms of communication, a thorough understanding of the decision-making context, particularly for policymakers, and thoughtful engagement with key stakeholders. We use as examples of this framework the Education and Health Initiative, a national project led by Dr. Woolf’s center, and a local project I lead to improve the health and well-being of African Americans in St. Louis called For the Sake of All. Although developed separately, each initiative uses the full arsenal of modern communications, from policy briefs and reports to websites, YouTube videos, Twitter feeds, and blog posts to tell the story of how social and economic factors are affecting the health of ordinary individuals. We have some early evidence that the approach is working, or at least that people are talking and thinking in new ways about these issues. The response as measured by web traffic, social media mentions, and local, national, and even international media coverage suggests that this work has hit a nerve. Whether that can translate to changes in policy remains to be seen.

At a recent American Public Health Association meeting to discuss that organization’s goal of making America the “healthiest nation in a generation,” advanced medical technology was hardly mentioned at all. That was not because any of the speakers (including myself and Dr. Woolf) had a bias against medicine or truly life-saving scientific discoveries made every day. Rather, it was because the speakers recognized the wisdom of that simple statement by the man from Rochester. If we want to help people to live full and healthy lives, we must attend to their livelihoods; to the resources that make life possible from the very earliest stages of development to the waning days of old age. We must invest in interventions that address such things as high-quality early childhood development and that provide support for families at all income levels to accumulate and preserve assets. We must redouble our efforts to ensure that all children receive excellent elementary and secondary education and that the most vulnerable children receive the mental and physical health, social, and other services to help them succeed. Those children will also need support in completing postsecondary education and finding jobs with wages that will sustain them and their families, along with a set of benefits such as family and sick leave, retirement savings, and yes, affordable health insurance. And we must not only invest in individuals. We know that poverty, violence, and inadequate resources, services, and amenities affect the health of communities as well. We must find creative ways of making health promotion a central part of community and economic development. In these and many other ways, the inextricable, often stress-laden link between financial well-being and physical and mental health must become the centerpiece of public understanding and public policy. Both our economic health as a nation and the very lives of the American people depend on it.


  1. American Psychological Association, “Stress in America: Paying with Our Health.” (Washington, DC: American Psychological Association, February 4, 2015).
  2. Jack P. Shonkoff, Andrew S. Garner, and The Committee on Psychosocial Aspects of Child and Family Health, Committee on Early Childhood, Adoption, and Dependent Care, & Section on Developmental and Behavioral Pediatrics, “The Lifelong Effects of Early Childhood Adversity and Toxic Stress,” Pediatrics 129 (1) (2012): e232–e246.
  3. Ibid.
  4. Ibid.
  5. In fact, a recent report from the Institute of Medicine found that the U.S. fares worse than many advanced economies on a long list of outcomes, including low birth weight and infant mortality; life expectancy at birth; injuries and homicides; teen pregnancy and sexually transmitted disease; HIV/AIDS; obesity; diabetes; heart disease; disability; and chronic lung disease. National Research Council and Institute of Medicine. (2013). U.S. Health in International Perspective: Shorter Lives, Poorer Health. Panel on Understanding Cross-National Health Differences Among High-Income Countries, Steven H. Woolf and Laudan Eron, Eds. Committee on Population, Division of Behavioral and Social Sciences and Education, and Board on Population Health and Public Health Practice, Institute of Medicine. Washington, DC: The National Academies Press.
  6. Danny McCormick et al., “Effect of Massachusetts Healthcare Reform on Racial and Ethnic Disparities in Admissions to Hospital for Ambulatory Care Sensitive Conditions: Retrospective Analysis of Hospital Episode Statistics,” BMJ (2015) 350:h1480; Brian D. Smedley, “Moving beyond Access: Achieving Equity in State Health Care Reform,” Health Affairs 27 (2) (2008): 447–455.
  7. Thomas R. Frieden, “A Framework for Public Health Action: The Health Impact Pyramid,”
  8. Steven H. Woolf et al., “Translating Evidence into Population Health Improvement: Strategies and Barriers,” Annual Review of Public Health 36 (2015): 463–482.

Why Nations Fail: The Origins of Power, Prosperity, and Poverty

by Daron Acemoglu and James A. Robinson

Crown, 529 pp., $30.00

The fence that divides the city of Nogales is part of a natural experiment in organizing human societies. North of the fence lies the American city of Nogales, Arizona; south of it lies the Mexican city of Nogales, Sonora. On the American side, average income and life expectancy are higher, crime and corruption are lower, health and roads are better, and elections are more democratic. Yet the geographic environment is identical on both sides of the fence, and the ethnic makeup of the human population is similar. The reasons for those differences between the two Nogaleses are the differences between the current political and economic institutions of the US and Mexico.

This example, which introduces Why Nations Fail by Daron Acemoglu and James Robinson, illustrates on a small scale the book’s subject.* Power, prosperity, and poverty vary greatly around the world. Norway, the world’s richest country, is 496 times richer than Burundi, the world’s poorest country (average per capita incomes $84,290 and $170 respectively, according to the World Bank). Why? That’s a central question of economics.

Different economists have different views about the relative importance of the conditions and factors that make countries richer or poorer. The factors they most discuss are so-called “good institutions,” which may be defined as laws and practices that motivate people to work hard, become economically productive, and thereby enrich both themselves and their countries. They are the basis of the Nogales anecdote, and the focus of Why Nations Fail. In the authors’ words:

The reason that Nogales, Arizona, is much richer than Nogales, Sonora, is simple: it is because of the very different institutions on the two sides of the border, which create very different incentives for the inhabitants of Nogales, Arizona, versus Nogales, Sonora.

Among the good economic institutions that motivate people to become productive are the protection of their private property rights, predictable enforcement of their contracts, opportunities to invest and retain control of their money, control of inflation, and open exchange of currency. For instance, people are motivated to work hard if they have opportunities to invest their earnings profitably, but not if they have few such opportunities or if their earnings or profits are likely to be confiscated.

The strongest evidence supporting this view comes from natural experiments involving borders: i.e., division of a uniform environment and initially uniform human population by a political border that eventually comes to separate different economic and political institutions, which create differences in wealth. Besides Nogales, examples include the contrasts between North and South Korea and between the former East and West Germany. Many or most economists, including Acemoglu and Robinson, generalize from these examples of bordering countries and deduce that good institutions also explain the differences in wealth between nations that aren’t neighbors and that differ greatly in their geographic environments and human populations.

There is no doubt that good institutions are important in determining a country’s wealth. But why have some countries ended up with good institutions, while others haven’t? The most important factor behind their emergence is the historical duration of centralized government. Until the rise of the world’s first states, beginning around 3400 BC, all human societies were bands or tribes or chiefdoms, without any of the complex economic institutions of governments. A long history of government doesn’t guarantee good institutions but at least permits them; a short history makes them very unlikely. One can’t just suddenly introduce government institutions and expect people to adopt them and to unlearn their long history of tribal organization.

That cruel reality underlies the tragedy of modern nations, such as Papua New Guinea, whose societies were until recently tribal. Oil and mining companies there pay royalties intended for local landowners through village leaders, but the leaders often keep the royalties for themselves. That’s because they have internalized their society’s practice by which clan leaders pursue their personal interests and their own clan’s interests, rather than representing everyone’s interests.

The various durations of government around the world are linked to the various durations and productivities of farming that was the prerequisite for the rise of governments. For example, Europe began to acquire highly productive agriculture 9,000 years ago and state government by at least 4,000 years ago, but subequatorial Africa acquired less productive agriculture only between 2,000 and 1,800 years ago and state government even more recently. Those historical differences prove to have huge effects on the modern distribution of wealth. Ola Olsson and Douglas Hibbs showed that, on average, nations in which agriculture arose many millennia ago—e.g., European nations—tend to be richer today than nations with a shorter history of agriculture (e.g., subequatorial African nations), and that this factor explains about half of all the modern national variation in wealth. Valerie Bockstette, Areendam Chanda, and Louis Putterman showed further that, if one compares countries that were equally poor fifty years ago (e.g., South Korea and Ghana), the countries with a long history of state government (e.g., South Korea) have on the average been getting rich faster than those with a short history (e.g., Ghana).

An additional factor behind the origin of the good institutions that I discussed above is termed “the reversal of fortune,” and is the subject of Chapter 9 of Why Nations Fail. Among non-European countries colonized by Europeans during the last five hundred years, those that were initially richer and more advanced tend paradoxically to be poorer today. That’s because, in formerly rich countries with dense native populations, such as Peru, Indonesia, and India, Europeans introduced corrupt “extractive” economic institutions, such as forced labor and confiscation of produce, to drain wealth and labor from the natives. (By extractive economic institutions, Acemoglu and Robinson mean practices and policies “designed to extract incomes and wealth from one subset of society [the masses] to benefit a different subset [the governing elite].”)

But in formerly poor countries with sparse native populations, such as Costa Rica and Australia, European settlers had to work themselves and developed institutional incentives rewarding work. When the former colonies achieved independence, they variously inherited either the extractive institutions that coerced the masses to produce wealth for dictators and the elite, or else institutions by which the government shared power and gave people incentives to pursue. The extractive institutions retarded economic development, but incentivizing institutions promoted it.

The remaining factor contributing to good institutions, of which Acemoglu and Robinson mention some examples, involves another paradox, termed “the curse of natural resources.” One might naively expect countries generously endowed with natural resources (such as minerals, oil, and tropical hardwoods) to be richer than countries poorer in natural resources. In fact, the trend is opposite, the result of the many ways in which national dependence on certain types of natural resources (like diamonds and oil) tends to promote bad institutions, such as corruption, civil wars, inflation, and neglect of education.

An example, mentioned in Chapter 12, is the diamond boom in Sierra Leone, which contributed to that nation’s impoverishment. Other examples are Nigeria’s and the Congo’s poverty despite their wealth in oil and minerals respectively. In all three of those cases, selfish dictators or elites found that they themselves could become richer by taking the profits from natural resources for their personal gain, rather than investing the profits for the good of their nation. But some countries with prescient leaders or citizens avoided the curse of natural resources by investing the proceeds in economic development and education. As a result, oil-producing Norway is now the world’s richest country, and oil-producing Trinidad and Tobago now enjoys an income approaching that of Britain, its former colonial ruler.

Those are the main sets of institutional factors promoting power, prosperity, or poverty, and their roots. The other large set consists of geographic factors with direct economic consequences not mediated by institutions. One of those geographic factors leaps out of a map of the world in Why Nations Fail that depicts national incomes. On that map, both Africa and the Americas resemble peanut butter sandwiches, with thick cores of poor tropical countries squeezed between two thin slices of richer countries in the north and south temperate zones.

In the New World the two north temperate countries (the US and Canada, average incomes respectively $47,390 and $43,270) and the three south temperate countries (Uruguay, Chile, and Argentina, respectively $10,590, $10,120, and $8,620) are all richer—on the average five times richer—than almost all of the intervening seventeen tropical countries of mainland Central and South America (incomes mostly between $1,110 and $6,970). Similarly, mainland Africa is a sandwich of thirty-seven mostly desperately poor tropical countries, flanked by two thin slices each consisting of five modestly affluent or less desperately poor countries in Africa’s north and south temperate zones (see map).

While institutions are undoubtedly part of the explanation, they leave much unexplained: some of those richer temperate countries are notorious for their histories of bad institutions (think of Algeria, Argentina, Egypt, and Libya), while some of the tropical countries (e.g., Costa Rica and Tanzania) have had relatively more honest governments. What are the economic disadvantages of a tropical location?

Two major factors contribute to the poverty of tropical countries compared to temperate countries: diseases and agricultural productivity. The tropics are notoriously unhealthy. Tropical diseases differ on average from temperate diseases, in several respects. First, there are far more parasitic diseases (such as elephantiasis and schistosomiasis) in tropical areas, because cold temperate winters kill parasite stages outside our bodies, but tropical parasites can thrive outside our bodies all year long. Second, disease vectors, such as mosquitoes and ticks, are far more diverse in tropical than in temperate areas.

Finally, biological characteristics of the responsible microbes have made it easier to develop vaccines against major infectious diseases of temperate areas than against tropical diseases; we still aren’t close to a vaccine against malaria, despite billions of dollars invested. Hence tropical diseases impose a huge burden on economies of tropical countries. At any given moment, much of the population is sick and unable to work efficiently. Many women in tropical areas can’t join the workforce because they are constantly nursing and caring for babies conceived as insurance against the expected deaths of some of their older children from malaria.

As for agricultural productivity, it averages lower in tropical than in temperate areas, again for several reasons. First, temperate plants store more energy in parts edible to us humans (such as seeds and tubers) than do tropical plants. Second, diseases borne by insects and other pests reduce crop yields more in the tropics than in the temperate zones, because the pests are more diverse and survive better year-round in tropical than in temperate areas. Third, glaciers repeatedly advanced and retreated over temperate areas, creating young nutrient-rich soils. Tropical lowland areas haven’t been glaciated and hence tend to have older soils, leached of their nutrients by rain for thousands of years. (Young fertile volcanic and alluvial soils are exceptions.) Fourth, the higher average rainfall of tropical than of temperate areas results in more nutrients being leached out of the soil by rain.

Finally, higher tropical temperatures cause dead leaves and other organic matter falling to the ground to be broken down quickly by microbes and other organisms, releasing their nutrients to be leached away. Hence in temperate areas soil fertility is on average higher, crop losses to pests lower, and agricultural productivity higher than in tropical areas. That’s why Argentina in South America’s south temperate zone, despite its conspicuous lack (for most of its history) of the good institutions praised by economists, is the leading food exporter in Latin America, and one of the leading ones in the world.

Thus, geographical latitude acting independently of institutions is an important geographic factor affecting power, prosperity, and poverty. The other important geographic factor is whether an area is accessible to ocean-going ships because it lies either on the sea coast or on a navigable river. It costs roughly seven times more to ship a ton of cargo by land than by sea. That puts landlocked countries at an economic disadvantage, and helps explain why landlocked Bolivia and semilandlocked Paraguay are the poorest countries of South America. It also helps explain why Africa, with no river navigable to the sea for hundreds of miles except the Nile, and with fifteen landlocked nations, is the poorest continent. Eleven of those fifteen landlocked African nations have average incomes of $600 or less; only two countries outside Africa (Afghanistan and Nepal, both also landlocked) are as poor.

The remaining major factor underlying wealth and poverty is the state of the natural environment. All human populations depend to varying degrees on renewable natural resources—especially on forests, water, soils, and seafood. It’s tricky to manage such resources sustainably. Countries that excessively deplete their resources—whether inadvertently or intentionally—tend to impoverish themselves, although the difficulty of estimating accurately the costs of resource destruction causes economists to ignore it. It helps explain why notoriously deforested countries—such as Haiti, Rwanda, Burundi, Madagascar, and Nepal—tend to be notoriously poor and politically unstable.

These, then, are the main factors invoked to understand why nations differ in wealth. The factors are multiple and diverse. We all know, from our personal experience, that there isn’t one simple answer to the question why each of us becomes richer or poorer: it depends on inheritance, education, ambition, talent, health, personal connections, opportunities, and luck, just to mention some factors. Hence we shouldn’t be surprised that the question of why whole societies become richer or poorer also cannot be given one simple answer.

Within this frame, Acemoglu and Robinson focus on institutional factors: initially on economic institutions, and then on the political institutions that create them. In their words, “while economic institutions are critical for determining whether a country is poor or prosperous, it is politics and political institutions that determine what economic institutions a country has.” In particular, they stress what they term inclusive economic and political institutions: “Inclusive economic institutions…are those that allow and encourage participation by the great mass of people in economic activities that make best use of their talents and skills and that enable individuals to make the choices they wish.” For example, in South Korea but not in North Korea people can get a good education, own property, start a business, sell products and services, accumulate and invest capital, spend money in open markets, take out a mortgage to buy a house, and thereby expect that by working harder they may enjoy a good life.

Such inclusive economic institutions in turn arise from “political institutions that distribute power broadly in society and subject it to constraints…. Instead of being vested in a single individual or a narrow group, [inclusive] political power rests with a broad coalition or a plurality of groups.” South Korea recently, and Britain and the US beginning much earlier, do have broad participation of citizens in political decisions; North Korea does not. Inclusive economic and political institutions provide individuals with incentives to increase their economic productivity as they think best. Such inclusive institutions are to be contrasted with absolutist political institutions that narrowly concentrate political power, and with extractive economic institutions that force people to work largely for the benefit of dictators. The ultimate development of inclusive political institutions to date is in modern Scandinavian democracies with universal suffrage and relatively egalitarian societies. However, compared to modern dictatorships (like North Korea) and the absolute monarchies widespread in the past, societies (such as eighteenth-century Britain) in which only a minority of citizens could vote or participate in political decisions still represented a big advance toward inclusiveness.

From this striking dichotomy, the authors draw thought-provoking conclusions. While absolutist regimes with extractive economic institutions can sometimes achieve economic growth, that growth is based on existing technology, and is nonsustainable and prone to collapse; whereas inclusive institutions are required for sustained growth based on technological change. One might naively expect dictators to promote long-term economic growth, because such growth would generate more wealth for them to extract. But their efforts are warped, because what’s economically good for individual citizens may be bad for the political elite, and because economic growth may be best promoted by political institutions that would shake the elite’s hegemony.

Why Nations Fail offers case studies to illustrate these points: the economic rises and subsequent declines of the Soviet Union and the Ottoman Empire; the resistance of tsarist Russia and the Habsburg Empire to building railroads, out of fear that they would undermine the landed aristocracy’s power and foster revolution; and, especially relevant today, the likely future trajectory of Communist China, whose growth prospects appear unlimited to many Western observers—but not to Acemoglu and Robinson, who write that China’s growth “is likely to run out of steam.”

In their narrow focus on inclusive institutions, however, the authors ignore or dismiss other factors. I mentioned earlier the effects of an area’s being landlocked or of environmental damage, factors that they don’t discuss. Even within the focus on institutions, the concentration specifically on inclusive institutions causes the authors to give inadequate accounts of the ways that natural resources can be a curse. True, the book provides anecdotes of the resource curse (Sierra Leone cursed by diamonds), and of how the curse was successfully avoided (in Botswana). But the book doesn’t explain which resources especially lend themselves to the curse (diamonds yes, iron no) and why. Nor does the book show how some big resource producers like the US and Australia avoid the curse (they are democracies whose economies depend on much else besides resource exports), nor which other resource-dependent countries besides Sierra Leone and Botswana respectively succumbed to or overcame the curse. The chapter on reversal of fortune surprisingly doesn’t mention the authors’ own interesting findings about how the degree of reversal depends on prior wealth and on health threats to Europeans.

Two major factors that Acemoglu and Robinson do mention, only to dismiss them in a few sentences, are tropical diseases and tropical agricultural productivity:

Tropical diseases obviously cause much suffering and high rates of infant mortality in Africa, but they are not the reason Africa is poor. Disease is largely a consequence of poverty and of governments being unable or unwilling to undertake the public health measures necessary to eradicate them…. The prime determinant of why agricultural productivity—agricultural output per acre—is so low in many poor countries, particularly in sub-Saharan Africa, has little to do with soil quality. Rather, it is a consequence of the ownership structure of the land and the incentives that are created for farmers by the governments and institutions under which they live.

These sweeping statements, which will astonish anyone knowledgeable about the subjects, brush off two entire fields of science, tropical medicine and agricultural science. As I summarized above, the well-known facts of tropical biology, geology, and climatology saddle tropical countries with much bigger problems than temperate countries.

A second weakness involves the historical origins of what Acemoglu and Robinson identify as inclusive economic and political institutions, with their consequences for wealth. Some countries, such as Britain and Japan, have such institutions, while other countries, such as Ethiopia and the Congo, don’t. To explain why, the authors give a just-so story of each country’s history, which ends by concluding that that story explains why that country either did or didn’t develop good institutions. For instance, Britain adopted inclusive institutions, we are told, as a result of the Glorious Revolution of 1688 and preceding events; and Japan reformed its institutions after 1868; but Ethiopia remained absolutist. Acemoglu and Robinson’s view of history is that small effects at critical junctures have long-lasting effects, so it’s hard to make predictions. While they don’t say so explicitly, this view suggests that good institutions should have cropped up randomly around the world, depending on who happened to decide what at some particular place and time.

But it’s obvious that good institutions, and the wealth and power that they spawned, did not crop up randomly. For instance, all Western European countries ended up richer and with better institutions than any tropical African country. Big underlying differences led to this divergence of outcomes. Europe has had a long history (of up to nine thousand years) of agriculture based on the world’s most productive crops and domestic animals, both of which were domesticated in and introduced to Europe from the Fertile Crescent, the crescent-shaped region running from the Persian Gulf through southeastern Turkey to Upper Egypt. Agriculture in tropical Africa is only between 1,800 and 5,000 years old and based on less productive domesticated crops and imported animals.

As a result, Europe has had up to four thousand years’ experience of government, complex institutions, and growing national identities, compared to a few centuries or less for all of sub-Saharan Africa. Europe has glaciated fertile soils, reliable summer rainfall, and few tropical diseases; tropical Africa has unglaciated and extensively infertile soils, less reliable rainfall, and many tropical diseases. Within Europe, Britain had the further advantages of being an island rarely at risk from foreign armies, and of fronting on the Atlantic Ocean, which became open after 1492 to overseas trade.

It should be no surprise that countries with those advantages ended up rich and with good institutions, while countries with those disadvantages didn’t. The chain of causation leading slowly from productive agriculture to government, state formation, complex institutions, and wealth involved agriculturally driven population explosions and accumulations of food surpluses, leading in turn to the need for centralized decision-making in societies much too populous for decision-making by face-to-face discussions involving all citizens, and the possibility of using the food surpluses to support kings and their bureaucrats. This process unfolded independently, beginning around 3400 BC, in many different parts of the ancient world with productive agriculture, including the Fertile Crescent, Egypt, China, the Indus Valley, Crete, the Valley of Mexico, the Andes, and Polynesian Hawaii.

The remaining weakness is the authors’ resort to assertion unsupported or contradicted by facts. An example is their attempt to expand their focus on institutions in order to explain the origins of agriculture. All humans were originally hunter/gatherers who independently became farmers in only about nine small areas scattered around the world. A century of research by botanists and archaeologists has shown that what made those areas exceptional was their wealth of wild plant and animal species suitable for domestication (such as wild wheats and corn).

While the usual pattern was for nomadic hunter/gatherers to become sedentary farmers, there were exceptions: some nomadic hunter/gatherers initially became nomadic farmers (Mexico and lowland New Guinea) while others never became farmers (Aboriginal Australia); some sedentary hunter/gatherers became sedentary farmers (the Fertile Crescent) while others never became farmers (Pacific Northwest Indians); and some sedentary farmers reverted to being nomadic hunter/gatherers (southern Sweden about four thousand years ago).

In their Chapter 5, Acemoglu and Robinson use one of those exceptional patterns (that for the Fertile Crescent) to assert, in the complete absence of evidence, that those particular hunter/gatherers had become sedentary because, for unknown reasons, they happened to develop innovative institutions through a hypothesized political revolution. They assert further that the origins of farming depended on their preferred explanation of institutional innovation, rather than on the local availability of domesticable wild species identified by botanists and archaeologists.

Among arguments to refute that widely shared interpretation, Acemoglu and Robinson redraw in their Map 5 on page 56 the maps on pages 56 and 66 of archaeobotanists Daniel Zohary and Maria Hopf’s book Domestication of Plants in the Old World, depicting the distributions of wild barley and of one of the two hybrid ancestors of one of the three wheats (which Acemoglu and Robinson misleadingly identify just as “wheat”). They take these maps to mean that “the ancestors of barley and wheat were distributed along a long arc” beyond the Fertile Crescent, hence that the Fertile Crescent’s unique role in agriculture’s origins “was not determined by the availability of plant and animal species.”

What Zohary and Hopf actually showed was that wild emmer wheat is confined to the Fertile Crescent, and that the areas of extensive spread of wild barley and wild einkorn wheat are also confined to the Fertile Crescent, and that the wild ancestors of all the other original Fertile Crescent crops are also confined to or centered on the Fertile Crescent, and hence that the Fertile Crescent was the only area in which local agriculture could have arisen. Acemoglu and Robinson do themselves a disservice by misstating these findings.

My overall assessment of the authors’ argument is that inclusive institutions, while not the overwhelming determinant of prosperity that they claim, are an important factor. Perhaps they provide 50 percent of the explanation for national differences in prosperity. That’s enough to establish such institutions as one of the major forces in the modern world. Why Nations Fail offers an excellent way for any interested reader to learn about them and their consequences. Whereas most writing by academic economists is incomprehensible to the lay public, Acemoglu and Robinson have written this book so that it can be understood and enjoyed by all of us who aren’t economists.

Why Nations Fail should be required reading for politicians and anyone concerned with economic development. The authors’ discussions of what can and can’t be done today to improve conditions in poor countries are thought-provoking and will stimulate debate. Donors and international agencies try to “engineer prosperity” either by foreign aid or by urging poor countries to adopt good economic policies. But there is widespread disappointment with the results of these well-intentioned efforts. Acemoglu and Robinson pithily diagnose the cause of these disappointing outcomes in their final chapter: “Attempting to engineer prosperity without confronting the root cause of the problems—extractive institutions and the politics that keeps them in place—is unlikely to bear fruit.”


'Why Nations Fail' July 26, 2012

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