For Jaime Ros, in memory.
The 2024 Nobel Prize in Economics was awarded to Acemoglu, Johnson and Robinson, economists who investigate the relationship between institutions and economic development.
In his work Why nations fail they maintain that economic development is based not only in factors such as capital or geography, but decisively in the type of institutions that countries have. For them, the best inclusive institutions are those that guarantee property rights (not expropriations) and least possible political distortion (widely distributed political power, elites who play fair…).
Representatives of neoinstitutionalism, the winners are contested by voices that demonstrate that their hypothesis cannot be generalized. They do not work in realities like the Mexican one, according to Jaime Ros or Mariana Mazzucato, or they are incompatible with the possibility of solving the problems of climate change, as the controversial Kōhei Saitō maintains.
A clear example to support the Nobel Prize arguments is the comparison between South Korea and North Korea (same geography, different institutions), although its determinism falls apart if we compare, as its critics suggest, Nuevo León with Oaxaca (same institutions). or Nogales, Arizona, with Nogales, Sonora, where geography prevails to the benefit of Mexican Nogales.
The Swedish award is awarded when the basic political consensus seems to end that has existed around the neoliberal economic development modelprevailing for at least four decades. Financial and trade globalization failed to deliver the promise that there would be economic growth and development into infinity and beyond. It wasn’t like that. Inequalities deepened, poverty increased and growth rates, with exceptions (1995, 2008, 2020), remained stable at mediocre numbers.
The model held taboos dismantled at different times. It was claimed that the best industrial policy was to have no industrial policy. The function of the role of the State, reduced to absurdity. Or the case of the cap on salary increases, for fear of the specter of inflation. And let’s not talk about trade protectionism overthrown in emerging economies and reinstated in Europe or the United States…
Jaime Ros offers a critical perspective towards some ideas of Acemoglu, Johnson and Robinson, which tend to overemphasize the role of formal institutions at the expense of other factors, such as business culture, infrastructure and the historical context of each country. Institutions do not act in a vacuum and their effectiveness is conditioned by the sociocultural context. The State must play a proactive role as a regulator and as a driver of innovation through strategic investments, with policies that integrate elements of redistribution and support for key sectors that support growth.
Ros maintains that institutions are not enough to ensure growth. There are countries with inclusive institutions that still face stagnation. The quality of industrial policy and private sector dynamics are also crucial. Furthermore, in countries like Mexico, it is required that the tax system be progressive and redistribute income. “To create a welfare state, a large state is needed that distributes income from the richest to the poorest. Education, health, are not achieved without an increase in public resources…”
In the previous government, growth was lower than promised and the average of its predecessors. However, poverty decreased and family income increased. There was not more wealth in terms of GDP, but there was better distribution between classes and regions, although insufficient and unequal. The increase in salaries did not trigger inflation and labor, fiscal and social policy measures were combined in a context that clicked (virtue and fortune). Now, an alternative development model is not clear, but rather a combination of policies that were successful at a historical moment.
Different development models can be effective in different contexts. There is no single path to growth and even less so that prosperity is shared. That may be the new paradigm.
Suggested readings: The wealth of nations in the 21st centuryJaime Ros (FCE); Economy mission. Guide to changing capitalism. Mariana Mazzucato (Taurus). Slow Down. The Degrowth Manifesto. Kōhei Saitō (Astra House)
