Tuesday, January 15, 2013

Why Lebanon's economy fails: Interview with Harvard Prof. James A. Robinson

[Originally posted at NOW]

What makes one country richer than another? How is it that some states, despite having ample natural resources and hard-working populations, lag behind others without such benefits? Are politics, culture, religion or geography to blame? And how can a dysfunctional economy reverse its fortunes?

In the sleek, sea-view Hamra offices of the Lebanese Center for Policy Studies (LCPS) on Monday morning, these were among the questions addressed by James A. Robinson, the David Florence Professor of Government at Harvard University and recent co-author of “Why Nations Fail." NOW took part in a roundtable discussion with Robinson led by LCPS Director Sami Atallah, after which the below follow-up questions were asked.

The core argument of “Why Nations Fail,” says Robinson, is that it is political institutions above all that determine economic prosperity. He cites the examples of post-apartheid South Africa, and the US vis-à-vis Latin America, to dismiss cultural and geographic explanations, respectively. Though he confesses he is “not an expert on the Middle East,” he believes his findings on Latin America and sub-Saharan Africa are universally valid, rejecting the idea that Islam or anything particular about Arab culture are of relevance. Wherever you look around the world, he says, “Politics are the crucial thing that determines economic growth.”

Specifically, Robinson distinguishes between “inclusive” political systems, which incentivize and reward a broad section of society for their productivity, and “extractive” ones, which divert economic gains toward an elite minority. Before the British Industrial Revolution, he says, all governments were extractive, and average incomes varied little from country to country. Ever since then, average incomes have both increased significantly and become significantly more unequal across countries, with inclusive systems at the top and extractive ones dragging behind. The key to achieving prosperity, therefore, is “the transition from extractive to inclusive institutions.”

Within the region, he cites Hosni Mubarak’s Egypt and Bashar al-Assad’s Syria as classic examples of extractive systems. That they have both faced a popular challenge, he says, makes him “much more optimistic about the Middle East than before,” though he is concerned about the Egyptian Muslim Brotherhood’s attempts to concentrate power too narrowly among themselves at the expense of broader inclusivity.

As for Lebanon, he calls it a “fascinating” and perhaps unprecedented example. “For 2,000 years no one managed to dominate Lebanon.

“There’s no useful European model for comparison.”

NOW: You recently co-wrote an article enumerating ten ways that states fail. Lebanon’s problems seem closest to your Colombia and Somalia examples; i.e., a weak, almost absent central state and little law and order. How can these be tackled?

Prof. James A. Robinson: That’s a very hard question. If you think historically about how states are formed, it usually involves one group in society managing to effectively dominate the others. Which usually means, as in the English case, it’s part coercion and part buying people off. After the War of the Roses, Henry VII had so weakened the aristocracy that he demilitarized them and created a monopoly on violence. And then he bought them off by incorporating them into the state.

Does that model work here? It’s hard to think of the Maronites, or the Shiites, or whoever, creating a coercive monopoly over the other groups, disarming them and going down the British road. But there’s no reason that every country has to go down that road.

It seems here they’ve been trying to find a constitutional solution to the problem, but the difficulty is that no group wants to create an effective central state because they’re just too scared that it’ll be dominated or captured by other groups. And so you’re in this perpetual flux, whereby those who know power is changing to their benefit have no incentive to hand it over, while those who know it’s changing to their disadvantage don’t want that to be formally acknowledged.

How do you stabilize that situation? I don’t think the British model is relevant for thinking about Lebanon. Maybe the current system does offer some advantages. After all, Lebanon’s communities have been coexisting for over 1,000 years. In some ways it seems to be outside interference that exacerbates the problems. If everybody just left Lebanon alone, I think it would be much better off.

NOW: It’s interesting you mention demilitarization, because as you may know, at the end of the Lebanese civil war, every militia agreed to disarm with the exception of Hezbollah, whose arsenal today is substantial. What effect does that have?

Robinson: Well I think that’s probably a very bad thing, because then there is no equality of arms. You would hope to have no arms at all, of course, but an equality of arms is at least better than asymmetry, which then raises the fears of all the other groups and leads to them arming in turn.

NOW: You’ve also written recently on Israel and Palestine. Why are Israelis so much better off than Palestinians?

Robinson: Israelis are so much better off because they’ve imported so many resources; education, human capital, technology and so forth. They also have highly inclusive institutions, while Palestinian ones tend to be more extractive. At the same time, Israel has throttled Gaza, where there’s no movement of labor and highly limited trade. And they’ve done the same, to a lesser extent, in the West Bank.

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