There Are Reasons Some Prosper and Others Do Not

This year’s Nobel Prizes are closely connected to Korea. First, Korean author Han Kang was selected as the winner of the Nobel Prize in Literature. Second, Professor Daron Acemoglu of MIT in the United States—who, using South Korea and North Korea as major case studies, explored “why some countries prosper and others do not”—was selected as a Nobel laureate in economics. Given this, it is only natural that in Korea, interest in the Nobel Prize and in the works and writings of its recipients has risen far more than in previous years. It is said that Han Kang’s novels, after she won the Nobel Prize in Literature, sold out almost instantly in bookstores across the country.

While the reaction in Korea to the work of a Nobel Prize in Literature winner has been this passionate, the response to books by Nobel Prize in Economics winners—especially those using South Korea and North Korea as representative examples—has been almost one of indifference. Is it because in one case the recipient is Korean, whereas in the other, although Korea and North Korea are central examples, the recipient is a foreigner? Or is it because one is “high-minded” literature, while the other concerns the supposedly “low-level” matter of “making a living”? Whatever the reason, it is regrettable that the response to the Nobel Prize in Economics has been so lukewarm. Is there not an old saying, “Only when one has ample means does one know propriety”? In other words, only a society that eats well and lives well can also produce great literary works.

The core message of Why Nations Fail, written by Acemoglu and his co-authors, is simple and clear: prosperous countries have reasons for being prosperous, and poor countries have reasons for being poor. The book is a journey of inquiry spanning more than 700 pages (in the Korean translation), undertaken to identify and verify what those reasons are.

As mentioned earlier, the journey begins by comparing South Korea and North Korea on the Korean Peninsula, East Germany and West Germany, and Nogales in the United States and Nogales in Mexico—once a single community, now divided in two. The result of that comparison is encapsulated in a single photograph: an image showing “South Korea at night shining as brightly as day, and North Korea in pitch-black darkness”—the nighttime satellite photo of the Korean Peninsula with which we are all well familiar.

The authors’ intention in starting with South Korea and North Korea, East Germany and West Germany, and the two Nogales cities is clear. It is to show that several common explanations for why some people live well and others do not are wrong. For example, there are claims that a country’s wealth or poverty is determined by its geographic location, or that cultural differences lead to differences in prosperity. The authors argue that all such claims are mistaken. The clearest evidence is the gap between South Korea and North Korea: they occupy “the same region” and once shared “one people and the same culture.” Therefore, if we want to understand why some countries prosper and others do not, we must look elsewhere—not to geography or cultural differences.

Although they use somewhat vague terms such as “inclusive economic institutions” and “extractive economic institutions,” the answer the authors ultimately arrive at is the difference in economic order. In other words, what determines whether a country becomes rich or remains poor is whether it chooses a market economic order or a socialist command-and-control economic order.

If one were to summarize the authors’ entire 700-page journey briefly, it would be this: “As we all know, we are one people. Our language, culture, history, customs, and conventions were all the same, and after liberation we began from the same starting line... The only difference between the Republic of Korea and North Korea was their economic order. The Republic of Korea chose a market economic order, while North Korea chose a socialist command-and-control economic order. That choice at that very moment divided the Republic of Korea and North Korea into what may be called heaven and hell.” (From the author’s Understanding Economics Properly.)

Why Nations Fail also teaches us something important in another respect. It helps us see who wants us to prosper and who wants to make us poor. By looking at who defends the market economic order and who shuns it, and who rejects the command economy order and who prefers it, it is not difficult to judge what kind of people they are.

Hyukchul Kwon, Director, Free Market Institute

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Original title: 잘 살고 못 사는 데에는 다 이유가 있다

Author: Hyeok-cheol Kwon

Date: 2024-10-23

Source: https://www.cfe.org/bbs/bbsDetail.php?cid=column&pn=1&idx=26940