The Great Degeneration: How Institutions Decay and Economies Die (14 page)

3
. Ron Unz, ‘Race, IQ and Wealth’,
American Conservative
(August 2012), a devastating critique of Richard Lynn and Tatu Vanhanen,
IQ
and the Wealth of Nations
(Westport, CT, 2002).

4
. Calculated from Emmanuel Saez’s file TabFig2010.xls, figure A1, available at http://emlab.berkeley.edu/users/saez/.

5
. Ibid., data-Fig A1, available at http://emlab.berkeley.edu/users/saez/.

6
. McKinsey Global Institute,
Urban World: Cities and the Rise of the Consuming Class
(June 2012), p. 20. See also McKinsey Global Institute,
India’s Urban Awakening: Building Inclusive Cities, Sustaining Economic Growth
(April 2010).

7
. Geoffrey West, ‘Why Cities Keep Growing, Corporations and People Always Die, and Life Gets Faster’,
Edge
, 17 July 2011. See also West’s dazzling TED lecture: http://www.ted.com/talks/geoffrey_west_the_surprising_math_of_cities_and_corporations.html.

8
. Based on data in David Cohen, ‘Earth’s Natural Wealth: An Audit’,
New Scientist
, 23 May 2007, fossil-fuel statistics from BP and market prices in mid-2011.

9
. Michael Milken, ‘Where’s Sputnik? Summoning the Will to Create the Next American Century’,
Milken Institute Review
, 2nd Quarter (2011), pp. 1–20.

10
. Ernst & Young,
The World is Bumpy: Globalization and New Strategies for Growth
(2012), figure 4, p. 8.

11
. Steven Pinker,
The Better Angels of our Nature: The Decline of Violence and its Psychological Roots
(New York, 2011).

12
. Andrew Odlyzko, ‘Crushing National Debts, Economic Revolutions, and Extraordinary Popular Delusions’, University of Minnesota Working Paper (2012).

13
. Carmen M. Reinhart, Vincent R. Reinhart and Kenneth S. Rogoff, ‘Debt Overhangs: Past and Present’, NBER Working Paper 18015 (April 2012).

14
. Paul Krugman, ‘Money for Nothing’,
New York Times
, 26 July 2012.

15
. Peter Thiel, ‘Swift Blind Horseman’,
National Review
, 3 October 2011.

16
. Peter Turchin, ‘Dynamics of Political Instability in the United States, 1780–2010’,
Journal of Peace Research
.

17
. Remarks by the President at a Campaign Event in Roanoke, Virginia, 13 July 2012: http://www.whitehouse.gov/the-press-office/2012/07/13/remarks-president-campaign-event-roanoke-virginia.

This book began life as the BBC Radio 4 Reith Lectures 2012, so I must begin by thanking Gwyneth Williams, who invited me to give the lectures, Hugh Levinson, who edited them, Jane Beresford, who produced them, and Sue Lawley, who introduced them. Previous Reith lecturers constitute some of the hardest acts in the world to follow. The BBC team made the task less intimidating and more fun than I had anticipated.

Thanks are also due to Leeann Saw, who acted as my research assistant for this project, Simon Winder and Ann Godoff, my editors in, respectively, London and New York, and Andrew Wylie, my agent.

A number of expert friends generously read and commented on drafts of the lectures or chapters. In particular, I would like to thank Charles Béar, Harold Carter, Douglas Flint and Paul Tucker. Thanks are also due to my colleagues at Greenmantle: Pierpaolo Barbieri, Joshua Lachter, Hassan Malik and Jason Rockett, who contributed directly and indirectly to the completion of the manuscript.

Those academics who have written on the subject of institutions and development are acknowledged in the text and notes. I cannot unfortunately do the same for all the audience members who asked insightful questions after I delivered the lectures, though I am grateful to them, too. I can and do thank the four institutions that hosted the lectures: the London School of Economics, the New York Historical Society, Gresham College and the Royal Society of Edinburgh.

Finally, these lectures were devised, written, delivered and turned into a book during the first seven months of my youngest son’s life. This book is dedicated to him.

*
On a purchasing-power parity basis, adjusting for the fact that non-tradable goods and services are much cheaper in China than in the United States. In current dollar terms, the Chinese economy will still be 60 per cent the size of the American in 2016 – compared with just 8 per cent in 1989.

*
Moore’s Law, formulated by Intel co-founder George Moore in 1965, predicted a doubling of the number of transistors that can be packed on to a computer chip every two years.

*
Note that I leave aside the very large private debts that have been incurred by households and by financial and non-financial corporations. If one adds these together with the government debts, the burdens have no precedent in history: Japan 512 per cent of GDP, Britain 507 per cent, France 346 per cent, Italy 314 per cent, the United States 279 per cent, Germany 278 per cent.

*
A few months after the March 2012 coup in Mali, I was struck by the following observation by an American anthropologist in Bamako: ‘There is an inchoate notion among young people that the political class is taking away their futures.’ At some point this same inchoate notion will start playing a major role in US politics.

*
In the United States by (among other measures) the International Lending Supervision Act of 1983, the Financial Institutions Reform, Recovery, and Enforcement Act of 1989 and the Federal Deposit Insurance Corporation Improvement Act of 1991.

*
Those countries that make it harder for new entities to enter the market do not reap benefits in terms of product quality. They do exhibit sharply higher levels of corruption and larger black or grey economies.

*
In our ongoing work on ‘The Spirit of the Common Law’, Charles Béar QC and I seek to explore in detail how precisely this evolution has worked, looking at the changing meaning of legal concepts over time rather than approaching the law in the functionalist, present-minded spirit of Shleifer
et al
.

*
The appearance of Belarus on the list is a reminder, of course, that such datasets must be used with caution.

*
Strictly speaking, Magdalen is part of a state-funded university, the independence of which has intermittently been challenged by the government. But the college remains a self-governing entity with its own endowment.

*
In West’s words: ‘One of the bad things about open-ended growth, growing faster than exponentially, is that open-ended growth eventually leads to collapse. It leads to collapse mathematically because of something called finite times singularity. You hit something that’s called a singularity, which is a technical term, and it turns out as you approach this singularity, the system, if it reaches it, will collapse.’

*
The phrase was coined by the American hedge-fund manager Ray Dalio, whose hedge fund Bridgewater performed exceptionally well during the financial crisis.

*
The maximum length of a Twitter ‘tweet’.