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Research into the root of wealth and poverty among nations wins Economics Nobel Prize

JUANA SUMMERS, HOST:

Ever since Adam Smith wrote "The Wealth Of Nations" almost 250 years ago, economists have puzzled over why some countries grow rich while others stay poor. Today, three economists won the Nobel Prize for their efforts to answer that question by exploring the different paths that former European colonies followed. NPR's Scott Horsley reports.

SCOTT HORSLEY, BYLINE: Growing up in Barbados, James Robinson says it was impossible not to see the remnants of a former slave plantation society and wonder how those colonial roots came to shape the world. Robinson - who's at the University of Chicago - has spent the last three decades studying that, along with two colleagues from MIT - Daron Acemoglu and Simon Johnson. Their research won the three men the Nobel Prize today, on what Robinson notes happens to be a holiday honoring a European explorer and the residents of the New World he encountered.

JAMES ROBINSON: It's actually extremely appropriate that it's Columbus Day and Indigenous Peoples' Day because, you know, what our research showed is that an enormous amount of inequality in the world has been caused by the exploitation and expropriation of Indigenous people and the types of colonial societies that were created over the past 500 years.

HORSLEY: Their focus is not whether colonization was good or bad, but the different forms it took in different parts of the world. In some areas, colonists built more inclusive, democratic institutions, while in others, they were more autocratic, bent on extracting wealth for a narrow elite. Jan Teorell of the Nobel Prize committee says those different colonial forms would shape national fortunes for centuries to come.

JAN TEORELL: What they have demonstrated is that inclusive institutions are good for growth and long-run prosperity, whereas extractive institutions lead to poverty.

HORSLEY: While that history is instructive, the researchers say, it doesn't have to be binding. Some countries, like Botswana and South Korea, managed to escape their authoritarian past and prosper. At the same time, Robinson says, wealthy democracies like the United States still run the risk of sliding into autocracy.

ROBINSON: In any inclusive or relatively inclusive society, there's always incentives to put that into reverse. At the current moment in the United States, we're facing many challenges to inclusive institutions.

HORSLEY: Robinson points to former President Trump's refusal to accept the outcome of the 2020 election as a rejection of basic democratic principles. China is something of an outlier in this story. Despite its authoritarian government, China has grown to become the world's second-biggest economy and pulled hundreds of millions of people out of poverty. Nobel Laureate Acemoglu - who's originally from Turkey - acknowledges that success, but warns it may not be sustainable.

DARON ACEMOGLU: Our argument has been that authoritarian growth is often more unstable and doesn't generally lead to very rapid and original innovation.

HORSLEY: But Acemoglu also cautions that democracy is no panacea. Elections can foster conflict, he says, especially in highly polarized societies. And many people have grown skeptical that democracy can deliver the goods.

DARON ACEMOGLU: It's fascinating but worrying. If you look at data from surveys, you see that support for democracy among the population is at an all-time low.

HORSLEY: To regain the high ground, Acemoglu says, democracies need to prove they can provide good governance, clean up corruption and deliver broad-based prosperity. One other takeaway from today's Nobel Prize - all three winners were born outside the United States but now call the U.S. home. Robinson sees that as another source of this nation's wealth.

ROBINSON: The willingness of the United States to absorb immigrants and suck in talent and energy and creativity from all over the world is one of the secrets of its success. To throw that away will be to throw a lot of the potential of this country away.

HORSLEY: In addition to recognition for their research, the three men will share prize money worth just over a million dollars. Scott Horsley, NPR News. Transcript provided by NPR, Copyright NPR.

NPR transcripts are created on a rush deadline by an NPR contractor. This text may not be in its final form and may be updated or revised in the future. Accuracy and availability may vary. The authoritative record of NPR’s programming is the audio record.

Scott Horsley is NPR's Chief Economics Correspondent. He reports on ups and downs in the national economy as well as fault lines between booming and busting communities.