James Robinson, Nobel laureate in Economics: ‘You cannot achieve an inclusive economy with an authoritarian regime’

For James Robinson, economics and political science are inseparable. He has been convinced of this ever since he and his old friend, economist Daron Acemoglu, read The Rise of the Western World by Douglas North (who won the Nobel Prize in Economics in 1993) in their high school years. According to Robinson, this book provided him with an economic and historical analysis of the institutional changes that enabled the emergence of modern Europe. “It convinced us that institutions had been the driving force of the industrial revolution and economic growth at that time,” explains the economist and political scientist. Since then, he has focused his work on exploring this perspective further and applying it to contemporary contexts.

More than four decades later, Robinson, along with Acemoglu and Simon Johnson, has been awarded this year’s Nobel Prize in Economics for his research on the critical role institutions play in fostering national prosperity. In a video call with EL PAÍS, he explains that his work also seeks to highlight how the legacy of colonialism has impeded economic development in certain regions, particularly in Latin America and Africa. This idea is explored in his influential books Why Nations Fail: The Origins of Power, Prosperity, and Poverty (2012) and The Narrow Corridor: States, Societies, and the Fate of Freedom (2020).

Question. In the past, you have criticized approaches to the economy that focused on markets or businesses. Why did you decide to focus on the role of institutions?

Answer. Our work is focused on studying and understanding how institutions are organized and how they impact economic outcomes. The issue with more conventional approaches to economics is that they attempt to isolate the discipline from history and society. I don’t think that’s possible. So a lot of our work is historical and deeply political. Even sociological, to analyze why societies work in certain ways.

Q. What are the key elements that institutions must have to lead to sustainable growth in a country?

A. Institutional details vary greatly in each part of the world. However, in our book Why Nations Fail we make a simple division, focusing on the presence of inclusive institutions or extractive institutions. Inclusive institutions create broad incentives and opportunities for all people equally, while extractive institutions concentrate benefits and incentives in the hands of a few. Many economists say that development comes from entrepreneurship and innovation, but in reality it comes from people’s dreams, creativity and aspirations. To be prosperous, you have to create a series of institutions that can cultivate this talent. However, if you look at countries like Colombia or Nigeria, talent is wasted because people do not have opportunities.

Q. Some argue that the prominence of the state and excessive regulation in Europe have contributed to its current competitiveness crisis. Do you think this is true?

A. Institutions can be an obstacle to competitiveness. However, one should consider the impact that European integration had on countries such as Spain, Portugal or the former Soviet countries. These are remarkable success stories. There has been an almost unprecedented transition. It is true that there may be too much regulation or inefficient rules, but broadly speaking the effects of European institutions has been largely positive over the past 50 years.

Q. The issue of immigration is currently dividing the Western world. What could be done to improve the situation?

A. That is one of the big questions we have to solve. If we look at the United States, one of the factors that has made it so successful is its ability to attract talent from other parts of the world. Elon Musk and Steve Jobs are examples of this. However, it can be difficult. It is not easy to quickly incorporate the millions of people who cross the Mediterranean. One of the possible ways is to help them develop in order to improve the terrible situation in their own countries. However, one of the biggest complications is that the policies recommended by Western institutions are not in tune with what is happening in these [developing] countries. At the World Bank, for example, you cannot talk about politics. How do we expect them to solve real problems when you cannot talk about them? Frankly, it doesn’t make sense. If we really want to change the world, we have to have honest conversations. I see that as a long way off.

Q. Authoritarian regimes are emerging globally, positioning themselves as alternatives to democracy. Could this impact the global economy in the coming years?

A. The reality is that democratic countries have shown that they are better at managing public services and achieving rapid growth. You can find impressive examples like China among autocratic countries, but you cannot achieve an inclusive economy with an authoritarian regime and a model like the Chinese one. There are examples like the Soviet Union, which managed to grow very quickly and maintain it for 50 years, but the reality is that for every success story, there are 50 failures.

Q. In the current geopolitical context, do you think we are heading towards a more polarized world?

A. I’m not sure. As I said, I don’t think the Chinese model can continue. If you look at other authoritarian regimes, like Iran or Russia, they are incredibly weak economically and technologically. The economy cannot flourish in an authoritarian regime. Right now, technological dynamism is concentrated in one such country and in the Western world. However, one has to consider that, with Donald Trump, the institutions that have made the United States great are being seriously questioned. This could affect the context, and that is why the European Union and NATO are so important. We’ll have to see what the world and the Republican Party will be like after Trump. It’s still too early to know what will happen.

Q. Is populism linked to the growing disconnect between governments and citizens?

A. Yes, and an example of this is Latin America. Democracy promised too much and did not always deliver. People’s lives did not change, and they sought new alternatives. There are various factors why democracy has not achieved transformations, such as clientelism and corruption. Chavismo is an example of this. Venezuela was governed in a deeply corrupt manner, and Hugo Chávez was clever in taking advantage of it. You also see this with Donald Trump, who has gone far because he realized there was widespread dissatisfaction with traditional politics. The failures of democratic institutions are real, and that is why we have to think about how to make them more empathetic to what people need.

Q. You mentioned the impact of clientelism on institutions. How do relations between elites and governments influence a country's economy?

A. Elites seek to concentrate profits. In our book Why Nations Fail, we compare Bill Gates and Carlos Slim. In the book, we point out that while Gates made his fortune through innovation, Slim did so by forming a telecommunications monopoly thanks to his close relationship with the government. It is an example of the link between monopolies and clientelism that has been seen throughout history in Latin America since colonial times.

Q. Some experts are concerned about the potential impact of artificial intelligence on the global economy. What is your opinion on this?

A. Artificial intelligence can be wonderful, but like all technologies, it depends on how it is used. If artificial intelligence is used to create replacements for humans, that could be devastating. However, there is no reason to think that it will be like that. It is all about how it is used, and that depends on our governments. I think that these decisions should not be left to the tech gurus. They only think about what makes them the most money, even if this is not related to the general well-being of society. In the case of artificial intelligence, it is very important, because it could have a tectonic impact on the world.

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