I read a interesting book "Why nations fail" by Daron Acemoglu and James Robinson.
This book should be on the reading list of Putin, but I doubt that he will use it for the benefit of his country. More likely he will use it to undermine other countries.
The book notice that since end of modern age the same countries from the West are leading in terms of economy, education and welfare.The only countries outside Europe and North America which share the same prosperity are the one who have the same inclusive political and economical institutions as in the West: Japan,South Korea, Australia,New Zeeland.
The book argues that the difference between prosper and poor nations is due to the difference between inclusive and extractive institutions.
For example West Germany was more prosperous because had inclusive institutions: parliament elected, by all citizens, freedom to travel, freedom to own propriety, freedom to speak freely and to be informed. In short more people were accepted into political and economic systems and the benefits were widely distributed.
East Germany on the other side had extractive institutions, the benefits of political power were shared only within communist party. Private propriety was not existing.
Same country same culture, different institutions,different results.
In inclusive institutions you have rights by birth, in extractive institutions you have granted some privileges.
The book says that in order to achieve a inclusive society, you should have a centralized state, you can't have inclusive solutions in Somalia or Congo were it is anarchy.
But if the centralized state is ruled by an absolutist ruler and not by law, with time the elite will try to concentrate all the economic power in their hand, and exclude others from the benefits, and innovation brought by outsiders will not have an impact in economy. So the second condition is that the government should not have a complete control over the population.
Russia is a classical example of extractive state, till XIX century it exploited its serfs, and since 1917 it exploited its peasants and workers. The rule of law was not present during the tsarist regime, was not present during communism and it is not present today.
In my opinion an inclusive society exist in a security sweet spot. The government has enough power to protect you from thieves, but the law and institutions can uphold you propriety rights against the government so you are not afraid that government will confiscate propriety and close your business.
If a country changes it's government from anarchy to centralisation, it will have a an economic growth regardless of institutions, because a lot of money used for protection or saved for rainy days will be spent or invested. All communist states had a period of growth after the war, because it was a demand for goods that compensate for the low quality, but when the economic power was in a grip of a elite, who was busy to exploit it, things got worse. No one had an incentive to work, everybody tried to climb the hierarchical ladder to improve his revenues.
Finally the extractive institutions will impoverish the country ruin the infrastructure and the army, the country will descend into chaos or it will be conquered.
This book should be on the reading list of Putin, but I doubt that he will use it for the benefit of his country. More likely he will use it to undermine other countries.
The book notice that since end of modern age the same countries from the West are leading in terms of economy, education and welfare.The only countries outside Europe and North America which share the same prosperity are the one who have the same inclusive political and economical institutions as in the West: Japan,South Korea, Australia,New Zeeland.
The book argues that the difference between prosper and poor nations is due to the difference between inclusive and extractive institutions.
For example West Germany was more prosperous because had inclusive institutions: parliament elected, by all citizens, freedom to travel, freedom to own propriety, freedom to speak freely and to be informed. In short more people were accepted into political and economic systems and the benefits were widely distributed.
East Germany on the other side had extractive institutions, the benefits of political power were shared only within communist party. Private propriety was not existing.
Same country same culture, different institutions,different results.
In inclusive institutions you have rights by birth, in extractive institutions you have granted some privileges.
The book says that in order to achieve a inclusive society, you should have a centralized state, you can't have inclusive solutions in Somalia or Congo were it is anarchy.
But if the centralized state is ruled by an absolutist ruler and not by law, with time the elite will try to concentrate all the economic power in their hand, and exclude others from the benefits, and innovation brought by outsiders will not have an impact in economy. So the second condition is that the government should not have a complete control over the population.
Russia is a classical example of extractive state, till XIX century it exploited its serfs, and since 1917 it exploited its peasants and workers. The rule of law was not present during the tsarist regime, was not present during communism and it is not present today.
In my opinion an inclusive society exist in a security sweet spot. The government has enough power to protect you from thieves, but the law and institutions can uphold you propriety rights against the government so you are not afraid that government will confiscate propriety and close your business.
If a country changes it's government from anarchy to centralisation, it will have a an economic growth regardless of institutions, because a lot of money used for protection or saved for rainy days will be spent or invested. All communist states had a period of growth after the war, because it was a demand for goods that compensate for the low quality, but when the economic power was in a grip of a elite, who was busy to exploit it, things got worse. No one had an incentive to work, everybody tried to climb the hierarchical ladder to improve his revenues.
Finally the extractive institutions will impoverish the country ruin the infrastructure and the army, the country will descend into chaos or it will be conquered.
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