The Economics Nobel

MINHAZ MERCHANT The writer is the biographer of Rajiv Gandhi and Aditya Birla and author of The New Clash of Civilizations (Rupa 2014). He is founder of Sterling Newspapers Pvt Ltd., which was acquired by the Indian Express Group

- MINHAZ MERCHANT

IN THEIR 2012 BOOK Why Nations Fail, Daren Acemoglu and James Robinson discussed how institutions determine the success or failure of democracies. Last month Acemoglu and Robinson, along with Simon Johnson, won the 2024 Nobel Prize for economics for work on much the same subject. Acemoglu and Johnson are professors at the Massachusetts Institute of Technology. Robinson is a professor at the University of Chicago.

Their conclusions in brief: those geographies Europeans colonized to settle in and where Native populations were sparse, developed better long-term institutions of democracy. Geographies where the local population was large, permanent settlement by European colonists was difficult. These regions developed imperfect institutions of democracy. This is a version of the Great Divergence that took place in 1700-1900. Relatively backward Europe overtook China and India even as it colonized thinly populated territories (North America, South America and Australia) as well as densely populated territories (India and Hong Kong).

The economic outcomes diverged. As the Royal Swedish Academy of Sciences said pointedly in a statement announcing the 2024 Nobel Prize for economics: “The laureates demonstrated that the places that were the richest at their time of colonization are now among the poorest.” The three 2024 economics Nobel laureates examined successful colonial settlements in the United States, Canada, Australia and New Zealand. All four have robust democratic institutions. The Native populations were exterminated or marginalized in Reservations, allowing European colonists free rein over their newly conquered territories.