[Music] James Robinson Rob well inclusive institutions are institutions that create incentives and opportunities for people in society to do all the things that economists know make a country prosperous to invest in capital in education Innovation adopting technology starting businesses economists know what makes a society economically successful but the difficult thing is just creating structures institutions rules which incentivize and give opportunities to people to kind of do all of those things so inclusive institutions are institutions that create those incentives and opportunities and extractive institutions are institutions that block that don't create incentives and don't create opportunities what well monopolies in the first chapter we start off by talking about monopolies many Latin American countries you have many sectors which are monopolized so if you have a monopoly that doesn't create any opportunities nobody can enter new businesses can't enter somebody makes enormous amounts of profits it's not a context in which which stimulates entry which stimulates opportunities incentives more broadly in society Gates but I think that comparison between how those men made their money it tells you everything about why North America is much economic much more economically successful than Latin America Bill Gates made his money through Innovation he brought thousands of people into the software industry uh Carlos Slim made his money with monopolies in telmex and elsewhere where and according to the oecd that reduced national income in Mexico so it's not just a matter of caros slim taking money from Mexicans it's a matter of he he does that but he also reduces income for everybody Bill Gates increased income for everybody but I what's powerful about that example is that this is not a difference between like good guys and bad guys or different cultures or Bill Gates wanted to be a monopolist too everybody wants to be a monopolist it's just in the United States there's law there's the rule of law there's antitrust there's the government Stopping You establishing monopolies so so so it illustrates many things about our theory about Economic Institutions incentives Innovation the fact that these cultural differences are not what's significant but the fact that behind all of these economics is politics is the state is the state enforcing the rule of law and the Level Playing Field for business people well I think I you know I think it's both I mean I think that you know if you wanted to think about why Latin America was different from North America that is a product of history of diverging history and of you know what we you know what I would say called sort of path dependent institutional Dynamics but today when you think about you know what keeps these extractive institutions in place in large in lots of parts of Latin America or what keeps inclusive institutions in place in North America that is the politics it's a politics that kind of sustains and helps these different sorts of Institutions to reproduce themselves I think it's I think I think everybody you know I think everybody you know that that that in any society you know I mean we emphasize a lot in the book that the problem in creating a more inclusive Society is that some people have a lot of interests in extractive institutions you know that's how you know caros slim has huge personal interest economic interest in extractive institutions so so so that is you know to create a more inclusive Society you have to change the way things work you have to change institutions you have to replace extractive institutions with inclusive institutions and yes that's a political problem but you know politics isn't just about what politicians do it's about what everyone does about citizens citizens have a voice they have an interest citizens are organize they can campaign they can you know I tend to think that you know politicians you know politicians tend to do what citizens want them to do because they like to exercise power and they like to stay in office so I think it's everybody's responsibility to try to change the way things work and everybody has a collective interest in at some level in making things work although you know some people as I say benefit from the status quo and that's part of the problem yes absolutely so so what we emphasize in the book is that you know the overwhelming empirical kind of scientific evidence shows that you know that there's a very close connection between inclusive Economic Institutions and prosperity so for example uh some of the work we did we showed that you know there's this enormous strong connection between security of property rights and economic development vment well defined property rights secure property rights but nevertheless you can have what we we call extractive growth in the book transitory periods of economic growth based on different sorts of Institutions based on deals based on some Coalition of interests based on you know so so this happened in many times in history but it's never been uh sustained so it doesn't it's not a path to uh sustainable Prosperity that's what we emphasize if you want that then you have to move the society in a more inclusive Direction institutions in a more inclusive Direction I think both you know if you think you know just think of some examples of unsustainable extractive growth in Latin American history Mexico you know before the Civil War you know when porfilio Diaz was running Mexico there was economic growth you know there was exports went up there was diversification he built railroads he even did some institutional reforms in the legal sphere corporate law you know he abolished remnants of colonial institutions so so there was some reform there was some economic growth but that went along with enormous political uh exclusion it went along with uh massive increases in in inequality of expropriation of indigenous people of a miseration you know if you look at army recruits they got shorter over that period so so so this created enormous political inequality enormous economic inequality and it created these all these these grievances that exploded in the Mexican Revolution you know Argentina before the first world war is another wonderful experience of unsustainable growth you know without the right kind of institutional basis to create sustain prosperity and and and you know and and and and not just but you but and stability social stability political uh stability you know even growth under Samoa wasn't so bad in this country before the 19 before the Revolution but that was economic growth you know of a very extractive sort that created all sorts of problems in society and and just just very unsustainable well I no I don't think I don't think there is I mean I not quite sure how to characterize what happens in Nicaragua today I would say you know if I if I looked at the history of Latin America you know over the past 30 or 40 years the first thing to observe is it's very hard to kind of Dismount from authoritarianism you know you look at Peru Bolivia Argentina Brazil you know Nicaragua you know the first thing that happens after you get a transition from a dictatorship is you get hyperinflation you know everywhere all of those countries they had you know suddenly the society becomes much more open it becomes more democratic it becomes you know more inclusive politically there's all these pressures and the political institutions can't cope can't cope with them and all of those countries they've struggled to create democracies you know there's been populism there's been you know clientalism there's been all sorts of problems so I think it's a it's a work in progress creating inclusive political institutions and I would say the big picture in Latin America you know and even in Nicaragua from my limited knowledge of the country is that there has been a lot of progress compared to the Past like today so so you know much more about it than I do so you know there's lots of imperfections and lack of transparency and and but but I you know the big picture it seems to me is that there's a big movement towards more inclusive political institutions you know there's elections maybe the quality of Elections is a work in progress you know maybe there's a lack of political competition and but that takes time to build you know the question is now how can you make democracy work better how can you make it more comp competitive higher quality how can you make the state work better how can you make political institutions in Nicaragua more inclusive you know and that's that's in everyone's interests I think well I I you know has authoritarianism been very stable in Latin America I mean I you know I tend to think you know if you thought about the history of Latin America you know democracy has never really had a chance you know to prove itself I mean how how how much democracy was there ever in this country you know before the last 20 years like practically never was there you know and I think that's true in most parts of Central America you know Costa Rica has had Democratic stability since 1948 uh you know uh most countries it seems to me have done better under democracy than in dictatorship it's true that you know in Eastern Eastern Asia you have these experiences of very successful stability development under much more itarian regimes but I to me that has a lot to do with very specific characteristics of East Asian societies and the state and the relationship between the state and society and Latin America is not like that Africa is not like that either and so that model is not a model for Latin Americans to to learn from and and and and you know so I I you know I think they're in the they're going in the right direction there's a lot of work to do yeah yeah I mean you know the state in many Latin American countries is very weak you know it's it's it's very clientelistic you know contracts are not awarded in a in a proper open transparent way a lot of employment you know is politically motivated and the state gives favors and you know people think that that you know and the you know so that the state has to be depoliticized you you have to gradually try to reform these practices and reform the way the state Works reform the way the bureaucracy works and just you know try to create you know that's so so so that's you know that's a difficult thing to do but you know it seems to me there's a lot of pressures in that directions nowadays you know there's a lot of international pressure there's a lot of international best practi yeah well I think I think those those countries are obvious you know I think Chile is an obvious example of that I think Costa Rica is an obvious example of that they have much more inclusive institutions and they're much more economically successful you know uh than other countries so so you know in the book we talk a little bit about Brazil about whether there's been a change in Brazil maybe we we were quite optimistic in the book about Brazil about the nature of the Workers Party and this connection to sort of local you know this local upsurge of accountability and participatory budgeting but it's very difficult to read what's going on in Brazil now depending on who you talk to it's it's you know this is a good sign because it's now middle-class people are complaining about corruption they're complaining about the lack of services I think in Mexico in many ways you know people are very pessimistic about Mexico now but Mexico is also you know it's made a transition to a very competitive democracy There's real political parties you it has an immensely Diversified economy you know so yes they have problems in Mexico you know they have this system which the PRI set up which is not well adapted to to to the political system they have now you know this relationship between the governors and the national state and so so you know things need to change I think in terms of political institutions but I you know I would be very optimistic about Mexico for example in you know if if you ask me you know the next 20 30 years who's going to do well in Latin America you're just looking at the economy Mexican's economy to me looks much more Diversified and much more strong and dynamic than anywhere else uh does inene yeah like you know I think this is this is a this is a feature of Latin American history you know one of the things that Latin America inherited from the colonial period was this immense inequality you know there's enormous inequality there's enormous inequity you know lack of social mobility and opportunities in Latin America and I think that that can create you know very dysfunctional politics socialism you know in Latin America doesn't really look like socialism in Western Europe and you know it has very calistic very authoritarian aspects to it you know I mean one of the unfortunate things about these experiences you know often they're motiv you know who why did President chis come to power in Venezuela for example because there was enormous grievances you know it was a very oligarchic political system it was not performing well there was a lot of corruption and there was a lot of poverty and inequality and I understand why people voted for him because they're desperate for change they just they're desperate they want to hope that something different can happen but you know it's this very authoritarian model you know there's this AB sort of abolition of checks and balances and uh you know all of this sort of syndrome of moving towards more extractive political institutions which which undermines accountability it undermines you know participation and and uh so so so I you know I understand where it's coming from I think it's it's you know it's part of the leg historical Legacy in Latin America um and you know I don't know you know this this just maybe it's just part of this uh part of this process of you know coming out of the coming out of this historical Legacy and outgrowing it and and creating a different type of society yeah so everybody wants to say they're inclus they're inclusive and they're in favor of inclusion you're right about that you know so even dictators and they say they're all in favor of it you know I you know but I you know I think the I think it's fairly easy to see when the reality uh the when the reality is different you know well you know if you just thought about Economic Institutions or you know you think about political institutions you know you could just think about you know we emphasize a lot how power is distributed in society so I think that's that's more than that's more than elections uh but you know elections at least are easy to observe you know we know what should happen in election there should be transparency you know there should be independent election uh Administration institutions that can evaluate without political control what happened in the election there should be openness there should be not political interference and you know and you know so for example you know in the last I was before I came here I was reading some of the stuff that the Carter Center wrote and obviously there's lots of challenges in the last election in nicaragu from that point of view and there's lots of challenges in many Latin American countries in Ecuador in Colombia in Venezuela and so so you know I think that there are some areas of inclusive political institutions where there's very clear criteria I think if you look at the state you know about how people are hired in the state how contracts are awarded you know there's very well- defined best practices uh about how to make contracts processes inclusive and that you know that that just there's you know we can you can see that and you can see what what what happens you know so so here do they announced who bid for government contracts or who won the contracts or what was the process so that's a very simple question and the answer is yes or no so well they can last a they can last a long time you know I would say you know thinking about the Latin American case one of the things which has helped sustain extractive institutions is you know very dysfunctional interventions by the outside world for example you know if you thought about the history of Nicaragua with Mr Walker in the 19th century or the US in in you know the US intervention in the 1920s after all where did Samoa come from wasn't he like a creation of the United States or where did tro come from in the Republic Dominicana you know you know so so so US foreign policy you know left an enormous mess in lots of parts of the world in in Guatemala that helped reproduce extractive institutions so so far I've been kind of blaming the citizens a lot in in society but I want to say often you know in the reproduction of extractive Institutions there's a very dysfunctional interaction with the rest of the world you know the thing is societies with extractive institutions are they're not prosperous you know they're dependent they're easy to control you know and and and that you know that play a very un that there were very unfortunate you know periods in the Cold War and even earlier after the Monroe Doctrine that you know helped keep Latin American countries extractive I you know I guess in the book we emphasize that there's a there's a you know there's a there's a lot of persistence there can be a lot of persistence in extractive uh societies it's not easy to change yeah I think that's that's crucial you know in the book we avoid using the word democracy we use this word pluralism no one really gets like why you know people ask me all the time like Francis fukiyama asked me why don't you talk about democracy you know because because I think you can have the what why why is that word different well pluralism is about like power it's about the distribution of power it's not you know it's not just I show up and I vote once every 5 years you know in an election but it's like there's Society is organized you know there's many different locai of power in society so so I think you know you know you know think about detoke ville's Democracy in America you know the whole focus of that was on the society Civil Society the organization of society and I think one of the problems you know I see in many Latin American countries is that you know when when the state is weak for example the state is very bad at providing services or infrastructure whatever it it leads to a very fragmented Civil Society you know people are very obsessed with parochial interest their own interest it's very hard for them to kind of see a collective interest you know so so so so and you know that's of course that's a you know if you're running the country that's a nice thing because it's very easy to manage you know it's like but it's very it's in a very symbiotic relationship with clientalism this so so so I think you know organ you know organization is like critical you know Collective action Civil Society you know I don't know much about Civil Society in Nicaragua but that's that's very crucial you know I think that that that sustained organization you the discussion is very much about Civil Society you know about organized civil society and you know that's so I you know I think that's that's very crucial for people to organize and organize collectively and try to Define you know what habam Mas called a public sphere a public sphere where we can identify the issues and problems in in our society and debate them and discuss them [Music]