Growth, Distribution and Politics

ii Introduction In 1997, a person born in Luxembourg could expect to receive during his lifetime an average real income that would allow him to purchase goods for a value roughly 66 times as high as that of a person born in Ethiopia. The citizen of Luxembourg would also be able to enjoy the goods purchased with that income for a oonger amount of time: she could expect to live 76 years, while an average Ethiopian would be lucky to reach his forty-fourth birthday. Indeed, the Ethiopian was fourteen times as likely to die as an infant and 26 times as likely to die before reaching the age of …ve.And while the average resident of Luixembourg was almost certain to learn to read and write by the early years of childhood, the avergae Ethiopian had only a one-in-…ve chance of attaining these skills. This book is concerned with understanding how the political process a¤ects economic performance. It will attempt to convince readers that one of the key reasons for which there exist such vast di¤erences in levels of economic well-being between nations is the existence of di¤erences among nations in the way in which power is allocaed among competing groups. In short, the key hypothesis of this work is that the institutions that allocate economic and political power in Ethiopia are extremely inferior to those that do the same job for Luxembourg. [Illustrate with speci…c reference to examples]. [This is by no means to argue that politics is the only reason for which these countries di¤er. But it is a very important one.] The marshaling of our knowledge of politics to the understanding of economic performance requires that we apply political economy. In this book, I will de…ne Political Economy as the study of the interaction of the political and the economic. The main argument of this book-that the allocation of political power among groups is central to understanding di¤erences in economic performance-is an example of a topic covered by the study of political economy. It refers to an economic question-why some economies are wealthier than others-but gives a political answer-the institutions that characterize its distribution of power. Our de…nition of political economy begs the question of de…nition of politics and de…nition of economics. We de…ne economics as the set of processes by which individuals interact with their natural and social environments in order iii iv INTRODUCTION to supply the …