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Jul 27, 2012

Beyond leadership

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Africa|System|Africa|North America|South America|South Africa|United Kingdom|Energy|James Robinson|Nelson Mandela|Power
Africa|System|Africa|||Energy|Power
africa-company|system|africa|north-america|south-america|south-africa|united-kingdom|energy|james-robinson|nelson-mandela|power
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The clamour for leadership in South Africa has become so loud as to be deafening.

For that reason, I sat up and paid serious attention when Professor James Robinson – the Harvard academic who co-authored the acclaimed book Why Nations Fail: The Origins of Power, Prosperity and Poverty with Daron Acemoglu – downplayed leadership as a major determinant of a country’s economic and developmental success, or otherwise.

Speaking in South Africa recently, Robinson argued that “leadership is great when you can get it, but seems hard to rely on” to explain systematic facts around the comparative advances made, for instance, in North America, as opposed to South America.

“Sitting in South Africa, you tend to think about Nelson Mandela and his amazing leadership,” he mused. “But Mandela can only do so much . . . he can push in a particular direction, but he can’t determine any kind of future.”

Instead, Robison and Acemoglu fixate on “institutions, institutions, institutions” and, in their book, they describe two kinds of political and economic institutions: extractive and inclusive.

The former involves a narrow distribution of political power and economic institutions that fail to create the incentives needed for private citizens to save, invest and innovate.

Inclusive political and economic institutions, by contrast, involve a broad distribution of political rights across society, a State that is sufficiently centralised and strong to be in a position to provide basic public goods and economic institutions that harness the talent, innovation and energy of the broadest spectrum of the citizenry.

The details vary, but the book shows that many of the world’s prevailing extractive institutions have direct links to the colonial period and the course that colonisation took in different countries. It also shows that these institutional patterns can persist (even re-invent themselves) following political conflicts designed primarily to remove such constraints.

For South Africa, where the policy of apartheid is arguably an archetypal extractive model, this raises many questions.

Will the move toward political inclusivity ensure greater economic inclusivity? Or, will the formal restrictions be replaced by a series of informal, or underground, institutional arrangements that further entrench inequality.

Will black economic empowerment compensate for past discrimination and serve to deracialise and broaden the business milieu? Or will it simply result in a new oligarchy, whereby the new economic elite captures the political system?

The main safeguard against the worst, Robison and Acemoglu argue, is the creation of a broad societal coalition that is able to defend inclusive institutions from attack by predatory elites.

The example held up in the book is the so-called ‘Glorious Revolution’ of 1688 in England, where more pluralistic political institutions laid the foundation for a State that relied more heavily on talent than political appointments and, in turn, fostered more inclusive economic institutions. These institutions favoured innovators and entrepreneurs just at a time when major advances were being made in transportation, metallurgy and steam power.

Without question, the task of building a broad-based coalition that is supportive of inclusivity over extraction is easier said than done. But it is arguably a more realistic, and ultimately a more rewarding, endeavour than one that obsessively hankers for one messianic leader after the next.

Edited by: Terence Creamer
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