Aditya Chakrabortty writes in the Guardian today about “how the people at the top of some of our biggest businesses have used their positions to extract [my italics] money, rather than earn it, and how politicians and regulators have connived at this organised looting”.
This reminds me that the deepest analysis of what is happening in the world’s economies today comes from Why Nations Fail by Daron Acemoglu and James A. Robinson (see my review). Their message, in a nutshell is that there are two kinds of economy: inclusive and extractive. Inclusive economies are what the West possessed until recently, with wealth widely shared. Extractive economies are those of desperately poor dictator-ridden countries like Zimbabwe or slightly richer undemocratic countries like Russia. The concept of the extractive economy is an important one. As a few people like Chakrabortty have realised, Western societies are becoming extractive rather than inclusive. This is the road to ruin because to reconstitute an inclusive society from an extractive one is extremely difficult, as Acemoglu and Robinson point out in many vivid examples.
This reminds me that the deepest analysis of what is happening in the world’s economies today comes from Why Nations Fail by Daron Acemoglu and James A. Robinson (see my review). Their message, in a nutshell is that there are two kinds of economy: inclusive and extractive. Inclusive economies are what the West possessed until recently, with wealth widely shared. Extractive economies are those of desperately poor dictator-ridden countries like Zimbabwe or slightly richer undemocratic countries like Russia. The concept of the extractive economy is an important one. As a few people like Chakrabortty have realised, Western societies are becoming extractive rather than inclusive. This is the road to ruin because to reconstitute an inclusive society from an extractive one is extremely difficult, as Acemoglu and Robinson point out in many vivid examples.
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