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WHY NATIONS FAIL
Karl Arnold Belser
22 September 2017




I have been observing in this blog that government central mandates by faceless bureaucrats has caused and is causing many problems in society. The politicians have no way of knowing what is really happening at the local level. I have asserted that people at the community level must discover what works by trial and error with thousands of trials over a very large population.  The discoverers must reap the benefits of what they do in order to motivate them. This discovery process is what Joseph Schumpeter called Creative Destruction

The development of the welfare state has undermined the discovery process. The welfare recipients get something  for doing nothing which in turn causes the tyranny of the majority in order to receive more. This behavior  is called social justice or humanitarianism.   I think that the excesses of the welfare state bodes poorly for the future of the United States. 

The book Why Nations Fail
articulates the fact that extractive politics and the corresponding economic policies lead to failure., whereas inclusive politics and the corresponding economics lea to success. Success is implicitly assumed to be the greatest good for the greatest number of people. The authors give many examples in recent history that support this case. A very good summary of the book is at the ReviseSocialogy website. The book asserts that the United States has an inclusive political system and inclusive economic policy. Hence it should be a winner in the future. I want to discuss this conclusion.

The book makes the point that there is apparently momentum in government policy. That is, if a country was colonized and managed extractively, there is no experience with inclusive government. Hence they point out that The Iron Law of Oligarchy
apparently holds in most cases.                                            

The "iron law of oligarchy" states that all forms of organization, regardless of how democratic they may be at the start, will eventually and inevitably develop oligarchic tendencies, thus making true democracy practically and theoretically impossible, especially in large groups and complex organizations. (Wikipedia)

.Hence I question the book's conclusion that the United States will do well in the future. What happens when the US citizens realize that the emperor has no clothes, That is, that the promises of social benefits cannot be kept. There are some $250 trillion in present value of these promises. Public pensions is an example.

We are seeing some of the struggle today. The congress is having trouble reigning in entitlements such as medical costs. President Trump does understand what needs to be done and he is getting crucified with false accusations in the media. The media blitz is a pandering to the left with no regard to the millions of US citizens that are suffering because of poor government policy.  See my post, Phillips Curve Discussion.

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Note: It is apparently very difficult or maybe impossible to implement a democratic, inclusive government when the previous governments have been extractive. I wondered how did the US end up as an inclusive  democracy.

The answer given in the book is that in a new open territory like the United States was 200 years ago, people who others tried to exploit just left and went west. There was economic and political escape. Toqueville's Democracy in America showed how really good the political situation in America had become by 1835. There were many communities that managed most of their domestic issues without central government interference. The government incurred no cost in doing what the communities were in fact capable of doing. See my post Democracy in America.

It looks to me like the only way out of the excessive promises by the welfare state would be dictatorship. If the Iron Law of Oligarchy is in fact true, then there is only a small chance that democracy would ever be re-established   after a dictatorship. One can only hope that the rule of law and the respect for private property parts of the US constitution would remain. Otherwise, it would be the end of US democracy.

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Looking at the very big picture, that is the history of the world, it is not clear that democracy will ever survive. Maybe extractive, nations states will be the end result of societal evolution. In this case nations would be born and die just like every other life form is born and dies. After all the law of nature is competition, survival and reproduction. There is no social justice or humanitarianism in nature. nature does not care about political correctness.
 
Last updated October 9, 2017
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