This session is about emergence and emergent futures and emergent leaders. Why the discussion of emergence? Because many societies in the world, economically and politically, are hamstrung in a sense by their past. And so a lot of the research that Daron Acemoglu and Simon Johnson and I did, for which we received the Nobel Prize, was about this legacy of the past. And I want to just emphasize two aspects of the research for which we won the Nobel Prize. One is the connection between institutions and prosperity—in particular, what we call inclusive institutions and prosperity. And the second point I'm going to emphasize, which is important for thinking about this issue of the weight of the past or the burden of history, is how history has shaped the distribution of institutions and prosperity in the world today.
Okay, so the first part: why are inclusive institutions so important for understanding the prosperity of society? I always like to illustrate this—and I'll come back to the light bulb theme—I like to illustrate this with the patent, Thomas Edison's patent for a light bulb. So Thomas Edison, the great 19th century innovator, he invented the light bulb and after he came up with the light bulb, he took out a patent. So a patent is a very interesting economic institution—it's something which protects your intellectual property rights. So economists have known since the work of Robert Solow in the 1950s that what drives economic development is innovation—it's new technologies, new ideas, new ways of raising productivity. Okay, so when you come up with an idea, that's something which is very easy for other people to borrow, to take, to use. A patent is something which is meant to protect your intellectual property rights, that's meant to create incentives for innovation. Okay, and so the patent is very important as a tool for raising innovation and technological change, but it also has a particular property which is connected to this word inclusion.
So who was Thomas Edison, for example? He was homeschooled, his father was a roofing contractor. He wasn't an elite, he didn't grow up wealthy—he was just a man with a lot of energy and creativity, a lot of ideas, a lot of drive. If you look at people like Edison who took out patents in 19th century United States, when the United States became the world technology leader, you see something very similar: you see people who come from all over the social spectrum. Talent, ideas, creativity—it's spread out everywhere in society. You don't know who those people are who have that. So what you need to do is to create a set of rules, a set of institutions, that allows all that talent to come to the top. And that's what the patent system did. The patent system—you could file a patent, there was a board that evaluated your innovation, everyone could pay the same fee, and the state enforced your intellectual property rights. So it was inclusive; it was an inclusive institution in a particular sense that it created very broad-based opportunities and incentives. Okay, so we know inclusive institutions are associated with prosperity. Why doesn't the whole world have inclusive institutions and prosperity? Well, that's where history comes in.
So one of the things we showed in our work is that if you look at variation in institutions in the world, it's heavily associated with historical events, in particular European colonialism. So I don't want to go into details of these figures, but in our work we emphasized a lot that within the colonial world you see very, very different societies with very different types of institutions emerging, depending on the circumstances that Europeans faced. And in particular, in places with very high disease burdens for Europeans, Europeans couldn't settle and it was very unlikely to have inclusive institutions in those societies. So here I separate the former colonial world into red, blue, and green. Think of green countries as places that were healthy for Europeans to live in, red were places that were extremely unhealthy, and green is somewhere in the middle. On the different axes here there are different measures of institutions today—corruption, rule of law and accountability—and average of different indices, the rule of law from the World Bank. It doesn't really matter how you measure this: countries which historically hundreds of years ago had very bad disease environments for Europeans systematically have worse institutions today. And that's because of the way colonial societies formed in those places.
Okay, that doesn't matter for institutions. Here's just institutions. Here's the connection to prosperity: you find the same thing—places with high levels of mortality such as Mali or Nigeria tend to be much poorer today than places in the former colonial world like the United States, which historically had much more benign disease environments for Europeans. Okay, so here's the weight of history. How come that persists? How do we know it persists? Well, we can just look at that data over time. So if I separate the world into high, medium, and low mortality for Europeans, and I just measure institutions one way—kind of putting together corruption, rule of law, accountability—you can see for the last 120 years there's been this distribution: places which were healthy for Europeans in the colonial period have much better institutions, and that's been like that for a long time. And you see these things are just very persistent over time. Okay, so yes, history has shaped the distribution of institutions in the world today and the prosperity in the world today.
Why does that happen? Well, because institutions create incentives, they create opportunities, they reproduce themselves because people's decisions are shaped by those incentives. I could give lots of examples of this. I was going to give one example—oh, which disappeared from the slide. Uh, no, here it is—which is how the United States in the 19th century and Latin American countries dealt with distributing frontier land. Okay, in the United States they passed something called the Homestead Act. This is application number one—this is the first person, Daniel Freedman, who applied for 160 acres of land in Nebraska under the Homestead Act. He applied for the land, he was given 160 acres, and he got this beautiful title, you see. Made—you know, it has all of the details of exactly where his plot of land in Nebraska was. So in the 19th century, countries all over the Americas had to face this problem of dividing frontier land. The United States divided it in this very equal way. Why did they do that? Because the society was sufficiently democratic that frontier land had to be opened up for everybody. If you contrast that with Latin America—in Latin America, frontier land was divided between politically connected elites in a kind of oligarchic land grab.
Okay, so in both cases the initial institutions create incentives to allocate land in particular ways, and the outcome of that reproduces the circumstances that gave rise to it. So that's why institutions persist—institutions persist because they create particular incentives. So that's why history matters. But I think once you start thinking about these—these are facts—but not every country fits into that pattern, and history may create incentives and opportunities and people make choices as a consequence of that. But people can make different choices—people don't have to take the choices that reproduce the past. So I think history is not destiny. And that's the first, the second point I want to make: you know, here's a great example—Deng Xiaoping famously said, 'Poverty is not socialism; to be rich is glorious.' Okay, so here's someone who made decisions about how to organize this society that didn't reproduce the past at all. And my point here is he didn't have to do that.
Coming back to the theme of light bulbs—uh, here is the Korean Peninsula at night. And I want to point out the difference not just between South Korea and North Korea, but North Korea and China. Okay, so Deng Xiaoping could have reproduced the communist model in China in the same way they have done in North Korea and kept China poor. There was nothing inevitable about what he did—he just decided to do something different. Okay, so there's an example of people making choices. Here's an African example that I like very much. I work a lot in Sub-Saharan Africa. Here's on the right, in the suit, Seretse Khama—the first president of Botswana at independence. Here he is with Harry Oppenheimer, the head of De Beers' diamond mining company, at the opening of the Orapa diamond mine. What did Seretse Khama do? Seretse Khama persuaded the Tswana people to change the law to take the diamonds. And instead of the diamonds being the possession of the Tswana people—the Orapa diamond mine was in Tswana land—to change the law so the diamond money accrued to the state instead of the diamonds accruing to the tribe. The diamonds accrued to the state. Okay, so that was a remarkable decision that changed the trajectory of Botswana. He didn't have to do that, but he decided that this was in the interest of the country.
So history is not destiny because you can make different choices. But I think it's actually even more interesting than that because if you start thinking about these cases, you see history is not a kind of burden that you escape from by making different choices—it's also opportunities. History presents opportunities. And in fact, most of these successful experiences of transitions involve leveraging history in constructive ways. Okay, back to Seretse Khama. I mentioned Seretse Khama—here he is in 1949. I didn't tell you something else about Seretse Khama. Seretse Khama was actually the traditional chief of the Bangwato people—he was a kgosi, he was the chief. So the chief persuaded his tribesmen to take the diamonds and vest them in the state. So it was his legitimacy that allowed that to happen. Here he is addressing the kgotla, which is the traditional tribal assembly, in 1949, bringing his Bangwato people along with his plan to change the country.
I think many examples are similar to that. Here's in the middle of this: President Paul Kagame of Rwanda. How does President Kagame get Rwanda to move so dramatically? Yes, there are huge burdens of history in Rwanda, but he leverages history to change the society. So the largest policy implementation program in Rwanda is called imihigo. Imihigo is a precolonial social norm about making promises to deliver, to achieve something, and if you don't achieve it, you're humiliated—it brings social sanctions and ostracism. So he took that, starting in 2006, that traditional practice because it resonates in Rwandan society, and he built that into an enormous policy implementation scheme. Okay, so that's using history—it's leveraging history to change the future. You know, how do I know that works? Here's some data from the recent data from the World Bank looking at the application of imihigo to rural electrification in Rwanda. So President Kagame and the government have used that to spread electricity throughout rural Rwanda in a way—you know, in a dramatic kind of transformation. All right, just some data.
Another example closer to UAE, with a lot of involvement by the UAE interestingly enough—Somaliland. Somaliland, the Republic of, you know, the former British colony in the north of Somalia, which became de facto independent 24 years ago, spent 10 years rewriting and restructuring its institutions to build a state. How did it do that? It did it in its cultural context. It created a legislative body that represented clans within the state, so using the past to kind of build institutions in a novel way. Okay, so I think if you start thinking about it, many of these transitions use the past as an opportunity. Think about the Meiji Restoration in 19th century Japan—one of the most successful experiences of transition to kind of modern economic growth, modern institutions. The Meiji Restoration built the transition on restoring the emperor and recreating many of the norms around the emperor. Okay, so using the past for me seems to be key for kind of building a political project, making it legitimate, getting people to move along with it.
I would say the words that many people would use about what Deng Xiaoping did or what Seretse Khama did—you can think of many other examples—would be agency. People in business schools talk about agency. We don't have good social science theories about agency. You know, social science is all about structures. So we look at the environment in which people make these decisions and we try to think about why did Seretse Khama do what he did. And I think there's two facilitating factors, you could say. One we understand much better than the other. The thing we understand much better is—I showed you a picture of him in front of the kgotla, the traditional assembly. Okay, so situations for accountability of deliberation. The kgotla is not like the British Parliament—you know, people don't stand up and vote, 51 in favor, 50 no. That's not how things work in Africa. It's a consensus deliberation—discussion. It's very different, but it's a form of accountability deliberation. You can think that encourages agency in the collective welfare.
The other aspect, which is much less well understood, is something to do with political culture. What is it about the political culture that encourages agency in the collective interest? You know, in the case of China, you could say going back to the Zhou period in ancient China, there's this notion of the Mandate of Heaven. Rulers have the Mandate of Heaven, and if you don't act in the collective good you lose the Mandate of Heaven. So there's a deep political culture associated with leaders acting in the public welfare. Okay, of course the interesting thing about Western social science is it heavily emphasizes this sort of notion of institutions—of political institutions—and has much less to say about one meaning a culture of rulership or a political culture which tends to get leaders to act in the collective interest. Much less is said about that in Western social science. But I don't know if you've been following the news like I have in the United States—I'm a little worried that we may have underemphasized number one. Okay, thank you.
