“The late economist Mancur Olson has argued that economies tend to grow more slowly as rent-seeking coalitions become pervasive and ubiquitous, since they divert resources from wealth-creating to wealth-consuming uses. This is one reason, he argues, why the United States grew so rapidly in the nineteenth century, and why West Germany and Japan grew so rapidly in the two or three decades after World War II. At such times, these economies were open to investment and entrepreneurship, and, as a consequence, they enjoyed historically high rates of growth. With the passage of time, all of these systems were gradually encumbered by coalitions seeking benefits through the state. Political paralysis and slow growth, Olson argues, are by-products of political systems captured by rent-seeking coalitions. These groups, operating collectively, can block any overall effort to cut spending or to address the problems of deficits and debt.”
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Samizdata quote of the dayJune 8th, 2012 |
 17 comments to Samizdata quote of the day |
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So we need a purging war? Sounds like purgatory to me.
I read Olson’s The Rise and Decline of Nations when it first came out, and was greatly impressed. Maybe someone should now write a sequel entitled The Rise and Decline of the World, about how lobbies have gone global and are slowly but surely capturing everything.
Actually, there is better news. When a substantial number of people realise that they are being shafted by a predatory elite, in Olson world, they rebel, and impose something more like what is in the interests of the majority. I think that’s the story.
So long as the story doesn’t turn out to be “Animal Farm.”
West Germany and Japan grew quickly because they were behind the leading countries but reformed their institutions to be equally good. It is much easier to adopt practices already developed and used elsewhere than to invent new and better ones, essentially.
US is the 19th century is a good example, however.
Growth also has slowed recently around the world compared with the post-war era. The question is, do countries like the US have more or less rent-seeking now than in the 60s and early 70s?
Not to deny the negative effects of rent seeking, I’d postulate that another important factor is simply diminishing returns. Isn’t their a tendency in economic growth to harvest the low hanging fruit first. And then for growth to decline as increasing productivity begins to depend on hard won technological progress and non-obvious ideas/innovations.
I know technological progress is a big part of economic growth and I have seen it argued that scientific advances are slowing down purely again due to diminishing returns.
Brian,
The Evolution of Civilizations (1961, Liberty Fund 1979) by Carroll Quigley as well as his subsequent Tragedy and Hope (1966), which treats with the prospects of our Western Civilization, should fit your quest to enlarge upon Olson’s theory of the effects of “collective action” (1965) and the formations of Distributional Coalitions (1982), which is distinct from Rent Seeking (as developed by Gordon Tullock –Vol 5, Selected Works- Liberty Fund 2005). Both scholars, Quigley and Olson, identify stagnating characteristics of developments within social orders. Sad to say, but all seem (to me) to point pessimistically to continuing stagnation of our form of social order, and ultimate decline – unless – some confluence of events occurs to foment a third expansion, with the possible movement of the core of our civilization westward once again; no doubt in some greatly modified form.
Eurymachus,
That idea has been well noted by Tyler Cowen in his The Great Stagnation. Worth a read in the Kindle Ed.
I’m with mdc on this one. The fastest-growing nations are always the ones playing catchup – laying down basic infrastructure, putting a big pile of modern technologies into play at once, or adopting things like the rule of law. China today doesn’t lack for rent-seeking, but simply loosening the reins and letting people adopt some good ideas instead of forcing them into entirely terrible ones is enough to yield decades of 10% growth.
A bit of pedantry:
As noted above, Pierson conflates Rent Seekers with Olson’s carefully described Distrbutional Coalitions.
There is a particular political effect of the Rent Seeking (through governmental actions) that is equally important to the points he makes.
That is the essential “value” to Rent Seekers of the establishment and rise in powers of Bureauracies within governments (at all levels) as the sources of Rent Granting.
The establishment of Bureauracies and their evolution within the administrative state (usually displacing representative legislative actions) is a classical example of “Institutionalization” which is noted by Quigley as a stagnating factor. That is, the operators of the Institution (such as a Bureau, Agency or Department) come to determine its objectives and the modes of obtaining them, rather than determination by those whose objectives led to the creation of the organization.
Many of the political, economic and social effects of Rent Seeking and the actions of Distributional coalitions are similar, if varying in degrees, so it is possible to conflate the two.
But the symbiosis of Rent Seeking and Bureaucracies is a growing paramount danger.
For an in-depth review of the (Institutionalized) Regulatory State – the effects of bureaucracies:
http//www.nationalaffairs.com/publications/page/our-regulatory-state-preview
I don’t think it’s behind a pay-wall.
http.www.nationalaffairs.com/publications/page/our-regulatory-state-preview(Link)
Summarised from the opening paragraph of the Wikipedia article: The Soviet Union, officially the Union of Soviet Socialist Republics (USSR; Russian: CCCP), was a constitutionally socialist state that existed in Eurasia between 1922 and 1991.
Note this: it died after 69 years. During that period, in many ways, the lives of its inhabitants (?citizens) improved in many ways. But not as much of those in The West, nor many others elsewhere: … and … it … eventually … died.
A primary cause of that death, IMHO and probably that of many others, is that it believed in too much central planning; also several other stupidities found more commonly in government circles than elsewhere.
[Aside: and then there were the Romans.]
The ‘Western Democracies’ should beware: death does await political systems that are uncompetitive or otherwise stagnant. Though it does usually take a long time: well, several decades to a modest number of centuries. [Aside: only the combination of both strong enemies and/or even more serious stupidity than average, makes shorter the life of any mainstream political philosophy.]
But there is hope: a society (or even one of its more dominant political philosophies) that looks in the mirror often enough (and worries about what it sees) can change to its advantage. Even if it will not live forever (and what can), it can live both much longer and much better.
All it needs is to look in the mirror hard enough to see: and avoid the lack of courage brought about by too comfy a complacency.
Best regards
The reason Germany and Japan grew so fast is because they didn’t have to pay for military expenditures, the US provided it.
Giving the vote to employees of the government is always a problem, especially in the west.
But the real problem is that the west has nothing to expand into economically now that the whole world is able to build cars, gadgets, ships,etc.
Not quite so. The West fell behind in its innovations in production because of “stagnation” in the ways in which we built things. But despite the Distributive Coalitions (such as Unions) drag on changes, the flexibilty within the social organizations that make up the social orders of Western Civilization, particularly at its present core in the U S, and the continuing simplifications of communication for information transfers (fewer dialects, languages and taboos of speech) are likely to maintain some degree of cultural and economic “expansions” at the peripheraries.
Thanks to RRS for suggesting the article “The Regulatory State,” by Christopher DeMuth. Corrected URL:
http://www.nationalaffairs.com/publications/page/our-regulatory-state-preview
Iron Chancellor, George Osborne, vetoed any public money for the Jubilee Pageant down the Thames on rainy Sunday.
Fair enough we’d say… but it was possibly a little hopeful of him to think that he could complain to the event’s PRs that the hospitality that he and his family
had been given hadn’t been good enough, and expect them not to share this story.
A journalist who covered the Jubilee near Piers Morgan at Tower Bridge said “the expression on Morgan’s face when told he had to use the portaloo like everyone else was priceless”.