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Romney-Ryan's Why Nations Fail Economy vs. Obama's Built to Last Economy

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Why Nations Fail (by Daron Acemoglu and James R. Robinson) has been lionized by liberal and conservative economists alike for its analysis of the factors that make some nations rich and others poor. Built to Last (by Porris and Collins) defines the characteristics of great organizations, and can be extrapolated to great nations.

One cannot be reading Why Nations Fail during this campaign season (as I have just done) without recognizing on every page the authors' criteria for successful nations fulfilled by President Obama's built-to-last economic policies and the failing nations' policies being consciously pursued by Romney-Ryan (and their paymasters, such as the Kochs) policies.

Why Nations Fail begins with a simple premise, that

"all economic institutions are created by society" and that "politics is the process by which a society chooses the rules that will govern it. Politics surrounds institutions for the simple reason that while inclusive institutions may be good for the economic prosperity of the nation, some people or groups....may be much better off by setting up institutions that are extractive" (p. 79).

At least since the New Deal, the United States has operated under a grand consensus that inclusive institutions that provide prosperity for the nation must be pursued against those that would skew the rules so that they could extract gains for themselves at the expense of the people. Starting in the early 1970s, a group of wealthy, extreme right-wing families, including the Kochs who supported the John Birch society, have systematically chipped away at that consensus, destroying the middle class economically, and now trying to end the middle class's political power (anti-union measures, voter ID laws). The economic and social policies enacted during and after the New Deal, created the prosperity this country enjoyed until the radical right-wing seized control in 2001, and began tearing down those policies.

Citizens United v FEC (aka "Citizens United"), overturning 100 years of settled campaign finance law, was decided by a group of Justices who a) were not even asked by plaintiffs to overturn the law; and b) ascended to the bench as a culmination of a long-term right-wing strategy to capture the judiciary with a mission to undo inclusive institutions. Why Nations Fail tells us that that is the road to economic ruin.

The basic conclusion of Why Nations Fail is that a nation's political institutions determine the economic institutions that determine whether a nation is rich or poor:

"It is the political process that determines what economic institutions people live under, and it is the political institutions that determine how this process works" (p.42).

Further:

"For example, it is the political institutions of a nation that determine the ability of citizens to control politicians and influence how they behave. This in turn determines whether politicians are agents of the citizens, albeit imperfect, or are able to abuse the power entrusted to them, or that they have usurped, to amass their own fortunes and to pursue their own agendas, ones detrimental to those of the citizens." (ibid).

Consider, for example, subsidies to the oil companies. The majority of Democrats and Independents and Republicans favor ending this 70+ year giveaway from taxpayers, who are already feathering oil companies' nests by paying exorbitant prices at the pump. Yet, the bill to eliminate those subsidies fails. That can only mean that American Republican politicians are abusing the power entrusted to them to amass the fortunes of themselves and their paymasters. That is a prescription for a failed nation.

Or, similarly, the majority of Democrats, Independents and Republicans favor increasing taxes on the wealthy to help reduce the deficits. Yet, no bill to do that can pass Congress. Moreover, even if some bill passes in a Democratic-controlled Congress, the tax increases will be minor. Again, evidence of a political process purchased by the wealthy. Again, a prescription for a failed nation. Romney-Ryan are in full support of this policy.

This, of course, is no surprise. But, it has been discussed primarily as an issue of fairness. Why Nations Fail indicates it is something much worse--exactly the policies that lead to not only to a poor economy, but a failed nation, not just economically, but politically as well.

This is what the right-wing has been doing sub rosa for the last decades. Now, emboldened, by the Republican victories in the 2010 elections, they no longer believe they have to hide it.

Further:

"To function well, society also needs other public services; roads and a transport network... a public infrastructure so that economic activity can flourish; and some type of basic regulation to prevent fraud and malfeasance.... The state is thus inexorably intertwined with economic institutions, as the enforcer of law and order, private property, and contracts, and often as a key provider of public services. Inclusive economic institutions need and use the state." p. 76.

Just reflect on the last year. The right-wing rails against any use of the government to foster economic growth, opposed every measure to build infrastructure, and tried to prevent the Administration from enforcing anti-fraud regulations against the financial industry that nearly brought the entire world economy to ruin.

Compare:

"But, the key to understanding why South Korea and the Uited States have inclusive economic institutions is not just their pluralistic political institutions, but also their sufficiently centralized and powerful states" (p. 80, emphasis added).

It is impossible to reach any other conclusion that Republicans are pursuing policies that are designed to cause a nation, any nation, to fail.

Further:

Inclusive economic institutions create inclusive markets, which not only give people the freedom to pursue the vocations that best suit them... but also provides a level playing field that gives the opportunity to do so... pave the way for two other engines of prosperity: technology and education. (p.76)

Today, non-defense discretionary spending (including education, science, technology, foreign aid, earthquake warning systems, securing nuclear weapons, and so forth) accounts for 12.5% of our federal budget. Republicans have already tried to cut the heart out of those expenditures -- the Ryan budget would reduce all of that to 3.5% by 2050.

These Romney-Ryan policies follow point-by-point Why Nations Fail's prescription for failure. The president's built-to-last proposals not only embrace the strategies of the eponymous book, but also follow the success path set forth in Why Nations Fail.

It is worth noting that Why Nations Fail provides not just a social and political justification for the middle class to demand government use its powers for its benefits, it demonstrates that economic prosperity demands it.

It is almost as if the Romney-Ryan policies were deliberately lifted, one-by-one, from Why Nations Fail so that we, the 99%, as a nation, would fail. That is exactly what Why Nations Fail tells us extractive elites want to happen, not as an unfortunate consequence of their policies, but as a deliberate goal.

And, those are the groups in American society Romney-Ryan and the modern Republican Party actually represent.

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