"Countries differ in their economic success because of their different institutions, the rules influencing how the economy works, and the incentives that motivate people,” write Acemoglu and Robinson. Extractive institutions, whether feudalism in medieval Europe or the use of schoolchildren to harvest cotton in contemporary Uzbekistan, transfer wealth from the masses to elites.
In contrast, inclusive institutions—based on property rights, the rule of law, equal provision of public services, and free economic choices—create incentives for citizens to gain skills, make capital investments, and pursue technological innovation, all of which increase productivity and generate wealth. Economic institutions are themselves the products of political processes, which depend on political institutions.
These can also be extractive, if they enable an elite to maintain its dominance over society, or inclusive, if many groups have access to the political process. Poverty is not an accident: “Poor countries are poor because those who have power make choices that create poverty.” Therefore, Acemoglu and Robinson argue, it is ultimately politics that matters.
The logic of extractive and inclusive institutions explains why growth is not foreordained. Where a cohesive elite can use its political dominance to get rich at the expense of ordinary people, it has no need for markets and free enterprise, which can create political competitors. In addition, because control of the state can be highly lucrative, infighting among contenders for power produces instability and violence. This vicious circle keeps societies poor.
In more fortunate countries, pluralistic political institutions prevent any one group from monopolizing resources for itself, while free markets empower a large class of people with an interest in defending the current system against absolutism. This virtuous circle, which first took form in seventeenth-century England, is the secret to economic growth."
James Kwak, Failure Is An Option, Democracy: A Journal of Ideas, Summer 2012
"I have this feeling in my stomach that I felt in other countries, much poorer countries, countries that were headed into really difficult economic situation. When there's a small group of people who got you into a disaster, and who were still powerful. Disaster even made them more powerful. And you know you need to come in and break that power. And you can't. You're stuck.
The powerful people are the insiders. They're the CEOs of these banks. They're the people who run these banks. They're the people who pay themselves the massive bonuses at the end of the last year. Now, those bonuses are not the essence of the problem, but they are a symptom of an arrogance, and a feeling of invincibility, that tells you a lot about the culture of those organizations, and the attitudes of the people who lead them.
But it really shows you the arrogance, and I think these people think that they've won. They think it's over. These people are throughout the system of government. They are very much at the forefront of the Treasury. The Treasury is apparently calling the shots on their economic policies. This is a decisive moment. Either you break the power or we're stuck for a long time with this arrangement."
Bill Moyer's Journal - Interview with Simon Johnson, February, 2009.
I think that the problems are well known now, and the the probable course for a revitalization of the economy and the nation are withing the grasp of reasonable informed people.
The difficulty is that so many are paid and otherwise motivated to prevent any reform that might disadvantage the Western kleptocracy.
Why bother then to restate solutions and a call to sensible reforms that favor growth and general prosperity?
Gold and silver were hammered.
The dollar bounced.
Oil is threatening to break out along with natural gas.
Inflation is running strong. Duh.
Stocks took a pretty stiff hit today, led by the tech concentrated NDX.
Things do not look good. This has to be the biggest understated crisis in the US that I have ever seen.
During the fall of Berlin gangs of ardent Nazi cultists went around hanging their own citizens, lashing out against the innocent as ashes consumed their mad fever dreams.
We are starting to see some of that here today — the drowning of innocence in the madness and great apostasy from love.
The wages of sin will be paid, and it will get ugly.
Have a pleasant evening.
