KUALA LUMPUR, Malaysia, Oct 22 (IPS) – New Institutional Economics (NIE) has won another so-called Nobel Prize. On the surface, this is a credit for reasserting that good institutions and democratic governance guarantee growth, development, equity, and democracy.
But the trio ignores North’s more nuanced later claims. For AJR, ‘good institutions’ were implanted by Anglophone European (‘Anglo’) settler colonialism. Methodologically they may be new, but their approach to economic history is reductionist, distorted, and misleading.
Not a caricature
AJR reveres property rights as critical to economic inclusion, growth and democracy. They ignore and even deny the very different economic analyzes of liberals such as John Stuart Mill, Dadabhai Naoroji, John Hobson, and John Maynard Keynes.
Historians and anthropologists are familiar with the various claims and rights over economic assets such as farmland (e.g. usufruct). Even property rights are much more diverse and complex.
The legal creation of ‘intellectual property rights’ grants monopoly rights by denying other rights. However, the NIE’s Anglo-American concept of property rights ignores the history of ideas, the sociology of knowledge, and economic history.
Historically, more nuanced understandings of property, imperialism, and globalization have coalesced. AJR makes little distinction between different types of capital accumulation through trade, credit, resource extraction, and various modes of production, including slavery, serfdom, peonage, indentured servitude, and wage labor.
John Locke, Wikipedia’s ‘father of liberalism’, also drafted the constitutions of the two US slave states, the Carolinas. AJR’s treatment of culture, creed, and ethnicity is reminiscent of the clash of civilizations conceived by Samuel Huntington. Most sociologists and anthropologists would cringe.
Colonial and postcolonial subjects remain passive and unable to create their own history. Post-colonial countries are treated similarly and are seen as unable to successfully deploy investment, technology, industrial and development policies.
Among them, Thorstein Veblen and Karl Polanyi have long debated the system of political economy. But instead of advancing institutional economics, NIE’s methodological opportunism and simplification have hindered it.
Another NIE Nobel Prize
For the AJR, property rights created and distributed wealth in British settler colonies, including the American and British territories. Their advantage is said to be due to ‘inclusive’ economic and political systems resulting from Anglo property rights.
Changes in economic performance are due to successful transplantation and political colonial rule by settlers. In sparsely populated temperate regions, more land became available, especially after genocide, ethnic cleansing, and displacement decimated indigenous populations.
They have poor ‘transport capacity’ and have had much lower population densities for thousands of years. Abundant land made possible the widespread ownership deemed necessary for economic and political inclusion. British settler colonies were therefore ‘successful’ in establishing such property rights in land-rich temperate environments.
Such colonial settlements were much less feasible in the tropics, which had long supported much denser indigenous populations. Tropical diseases also hindered new settlers in temperate regions. Therefore, the life expectancy of settlers became both a cause and a result of institutional transplantation.
The difference between the ‘good institutions’ of the ‘west’, including the British settler colonies, and the ‘bad institutions’ of the ‘rest’ is central to AJR’s analysis. The low life expectancy and high rates of disease of white settlers in the tropics were blamed on their inability to establish good institutions.
British settler privileges
However, it is important to interpret statistical results correctly. Sanjay Reddy offers a very different take on AJR’s econometric analysis.
The greater success of Anglo settlers may have been due to colonial ethnic prejudices in their favor rather than better institutions. Of course, Winston Churchill was an imperialist racist. History of the English-speaking peoplesIt celebrates those English-speaking Europeans.
The AJR’s evidence, which has been criticized as misleading in other respects, does not necessarily support the idea that institutional quality (equated with property rights enforcement) is actually important for growth, development and equality.
Reddy points out that international economic conditions favorable to the Anglos shaped growth and development. British imperial privileges favored such settlers over exploitative tropical colonies. The settler colonies also received most of their British investment from overseas.
For Reddy, strengthening Anglo-American private property rights is neither necessary nor sufficient to sustain economic growth. For example, East Asian economies have made practical use of alternative institutional arrangements to encourage catch-up.
He notes that the “authors’ inverted approach to the concept” has confounded “a property rights-enforcing economy they favor as ‘inclusive’ as opposed to a resource-driven ‘extractive’ economy.”
Property rights and public rights
AJR’s claim that property rights guarantee an ‘inclusive’ economy is also not self-evident. Reddy points out that Rawlsian property-owning democracy, with widespread ownership, stands in sharp contrast to plutocratic oligarchy.
Nor does AJR convincingly explain how property rights ensured political inclusion. Colonial settlers, protected by law, often violently defended land they had acquired from ‘hostile’ indigenous people, denying indigenous land rights and demanding property for their own.
The ‘comprehensive’ political concessions of the British Empire were largely limited to settler-colonial territories. In other colonies self-government and popular franchises were reluctantly granted under pressure.
The prior exclusion of indigenous rights and claims makes such inclusion possible, especially when surviving ‘indigenous peoples’ no longer pose a threat. Traditional indigenous rights were limited, if not eliminated, by settler colonists.
Strengthening property rights has also strengthened injustice and inefficiency. Many of those rights advocates are often opposed to democracy and other inclusive and participatory political systems that help alleviate conflict.
The Nobel Committee supports the NIE’s legalization of property/wealth inequality and unequal development. Reparations for AJR also seek to re-legitimize the neoliberal project at a time when it is being rejected more widely than ever.
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© Interpress Service (2024) — All Rights ReservedOriginal source: Interpress Service
