The explanation, especially of economic theories, is always open to question. In fact, there is no perfect explanation. Yet, this year’s Nobel Prize in Economic Sciences has gone to Daron Acemoglu and Simon Johnson of MIT, and James A. Robinson of the University of Chicago, for explaining why some countries are rich and others poor. In the early 20th century, Max Weber argued that Protestant Calvinism helped Europe progress by offering a concept of worldly “calling” and giving worldly activity a religious character. Half a century later, David S Landes, in ‘The Wealth and Poverty of Nations’, concluded that the ability to adapt to change and new technology helped some nations become rich. In hindsight, however, we realise that while these explanations were insightful, they didn’t capture the whole truth and were, therefore, flawed.
The growing economic disparity between nations and within nations is a matter of global concern. Wealth is increasingly concentrated in fewer nations and fewer hands. For instance, Oxfam India’s report on inequality shows that 5% of Indians own more than 60% of the country’s wealth, while the bottom 50% possess only 3%. It is in this context that the Swedish Committee awarded the three economists. They argued that the rule of law and the absence of exploitation of the weak by the strong are essential for growth. Wherever colonial rulers focused solely on extracting resources without investing in development, those colonies became poorer. Their conclusion is that democracy and lack of exploitation are key to becoming wealthy. Ultimately, the work of Acemoglu, Johnson, and Robinson highlights the importance of governance and fairness in shaping a nation’s prosperity. Their findings remind us that economic growth is not just about resources or technology, but about creating inclusive systems that benefit all.
