Why Nations Fail, Chapters 3 and 4

Meeting Name: Jagongbi (Let’s Study Liberalism and Soar)

Book Title: Why Nations Fail

Reading Range: Chapter 3, “The Making of Prosperity and Poverty” to Chapter 4, “Small Differences and Critical Junctures”

Session: 2nd session

Date and Time: Wednesday, November 5, 2024, 20:30

Format: Online Zoom meeting

Participants: mori, J, Nanuri, Jayu, Bontureon, Sora, Hyunki Lee

Chapter 3. The Making of Prosperity and Poverty

1. In the case of North Korea, where markets like the jangmadang are taking shape, could an inclusive economic situation in which inclusive economic activity begins to emerge spontaneously become an opportunity to change exploitative politics? A spontaneously emerging market cannot be called an economic institution. Also, it is not economic institutions but political institutions that are the “key.” Political institutions are what determine the character of economic institutions. A government that holds a legitimate monopoly on violence has the power to destroy any economic institution so long as it possesses absolutist power.

2. It is necessary to understand the apparent contradiction in the coexistence of pluralism and centralization. We discussed the passage stating that “although there is naturally a close relationship between pluralism and inclusive economic institutions, Korea and the United States were able to have inclusive economic institutions not only because they had pluralistic political institutions, but also because they had centralized states.” We also talked about how autonomy, such as local self-government, is an important element in securing freedom.

3. Regarding the point that centralization must be essential if growth is to be possible, even in a limited sense, under exploitative political institutions: in light of Korea’s case, and in contrast to the many countries on the African continent that have fallen into civil war, it seemed to carry important implications that countries in which dictators emerged have, rather, steadily achieved economic development.

4. “Unless political institutions change from extractive to inclusive, the capacity to distribute and exercise power can always undermine the foundations of economic prosperity.” How did our political institutions come to change in an inclusive direction? How should we explain the process by which, in our country, economic institutions developed in an inclusive direction under a centralized military government, followed by political institutions also developing in an inclusive direction? Might Chun Doo-hwan’s own will and capabilities have played a major role? Could familiarity with the culture of Confucian centralization have created a social compulsion to realize idealistic politics, as well as pressure on leaders themselves, and could that have been a factor allowing the transfer and dispersion of power to take place without violent conflict among power groups? Might it be that defining the military government as an extractive political institution was itself mistaken? Since it was a government based on the consent of the people, perhaps it did not need a thick elite class to maintain power, one substantial enough to accept the loss of vested interests caused by institutional change. Personally, I think this part is also important to explain. If Western liberal civilization was achieved by chance, then for countries in the position of having to imitate and build that process themselves, Korea’s successful case may offer clues to the key to constructing a free and civilized society. As we continue reading this book, I believe this is a task our generation must keep seeking answers to, now and in the future.

Chapter 4. Small Differences and Critical Junctures

What was the critical juncture that Korea experienced? The colonial period dismantled the national elite class that had been firmly entrenched for about 500 years and created an opportunity for the formation of commercial capital and various other social groups capable of resisting a powerful central government. Although other countries went through the same colonial period, they produced different outcomes by reinforcing extractive political institutions; in that sense, this was a case of different responses to the same juncture. I also think the 1979 oil shock was a critical juncture. Unlike Latin America, Korea reduced government spending, cut export subsidies, tightened its belt, and used the moment as an opportunity to transform a controlled economy into an open economy. This, followed by the boom created by the “three lows,” sent Latin America and Korea in completely different directions. Why did Korea make those choices at each of these junctures? I think it remains a task for us to further discover what our political system was like that led the political sphere toward those choices.

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Original title: <국가는 왜 실패하는가> 3장, 4장

Author: Jayujuui Ipmun Dokseo Toron Moim

Date: 2024-11-05

Source: https://www.cfe.org/bbs/bbsDetail.php?cid=reading01&pn=2&idx=26995