Unconscious Perpetuation of Vicious Cycles

Not all people who allow and encourage vicious cycles of corruption and greed do so in the name of personal profit. Not everyone purposefully sets out to further twist the system. In some cases, like Columbia and Argentina, the general population knows what their government (or at least, the people in charge) is doing is wrong; the problem is that the ones in charge use force and fear to subdue resistance.



However, in some places, the leaders don't need to make that effort. Though they benefit from vicious cycles and probably do know they're wrong, the citizens might not. If a vicious cycle has been going on for a while, it may just be another part of everyday life. This article on fighting corruption in Africa states that "one of the greatest areas of corruption risk can lie within an organisation's own workforce. Unless trained otherwise, employees who have been brought up in Africa may not consider facilitation payments or bribes as wrong" and "Up until a decade ago, bribery and corruption were an accepted part of doing business." The article seems to imply that corruption is waning due to the increasing risk of losing business; however I believe that, in order to cut corruption and vicious cycles at their roots, education needs to begin early that these methods are wrong and shouldn't be tolerated in any circumstance. It may be fanciful to say that considering that education in Africa isn't the best, but even if a few people learn this in schools, they could influence their peers, eventually helping to halt the reign of a vicious cycle and bring about a more virtuous one. 

Modern Vicious Cycle

In Thailand, police are having to deal with thousands of protestors who  overran the capital and  cut power to the Finance Ministry according to USA TODAY. The protestors are taking action against the government and are trying to  oust the the Prime Minister Yingluck  Shinawatra, claiming that they want to force civil servants to stop working, crippling the government. The Thailand government is calling the movement a coup, the protesters are saying that Yingluck is allowing his brother to run the government, even though the brother was convicted of corruption charges. This sad, political turmoil is just another example of the vicious cycle. Yingluck's brother,  Thaksni Shinawatra, was in charge until 2008 when the military forcibly removed him. However, instead of things getting, better, they remained bad in Thailand, with a brother of the removed leader taking charge in the so called democracy. The situation can be linked to that of Guatemala in Why Nations Fail, where leaders who were removed were just continuously replaced by family members, with the same original families remaining in charge from the colonial period into fairly modern history. As Thailand shows, the vicious cycle is alive and thriving.

Iowans, Ethanol, and Influence on Institutions

In Chapter 3, A & R argue that  politics determine the institutions a nation has and the nature of an economy is determined by incentives created by institutions. The debate surrounding ethanol policies and elections in Iowa illustrate the ties between economic and political institutions. Much of Iowa's economy depends on corn. In order to win votes in Iowa (politics), politicians would support federal backing of ethanol (an institution) providing a surge in demand for corn and a massive economic incentive for corn farmers. Recently, however, there has been much concern about the environmental impact of the massive amounts of corn farming as farmers farm on land meant for conservation and the economic impact of the high price of corn on food prices - particularly since the Associated Press published this report. This month, the Obama administration proposed cutting the required amount of ethanol in the nation's fuel supply for the first time since a standard was established in 2007, and the impact of the lack of political popularity of ethanol policies on the economy and institutions of Iowa could be huge.

The Vicious Cycle Amongst Us

Besides political vicious cycles, there is another, less publicized version of the vicious cycle, one that haunts us here at UVa. We witness it every day, perhaps even take place in it. History has taught us that it is difficult to break a vicious cycle, but for their own sakes, the ones caught in this vicious cycle must try.

This is the vicious cycle of procrastination.

You’ve had a tough Monday, but the one bright spot of the week is your COLA. After all, it’s only once a week, it’s one credit, and everyone in the class is super awesome. You can push off that reading until Monday night. You can do that blog at 11:32pm on Sunday. Whew, you got it all done in time. Wow, that was a lot of work… You really don’t feel like doing anything else because you’ve just worked so hard, and- wow! A new meme! Wait, it’s Sunday again? Another blog? Oh dang…

And voila. You’ve begun your own vicious cycle of procrastination.

So where do we begin with breaking this cycle? Can it even be done? To answer this, we must understand where the problem stems from. Procrastination typically results from feeling overwhelmed, which is pretty easy to feel as a first year. Classes you may have every day, or every other day, pile up and take precedence over ‘minor things,’ which, a week later, somehow don’t feel so minor any more. However, fear not. There are ways to combat it. In fact, this article highlights 29 helpful ways to beat procrastination. They’re all hunky dory, but honestly I believe number 10 is the best. By carrying out the other methods, you’re actually probably just prolonging your procrastination.

If you want things done, just do them, and stick to your goals, no wayward paths, no YouTube, no Facebook, no email, no memes. Just do it. It’s easier said than done, but just take a deep breath, let yourself focus, see that it’s not the end of the world. You can do it! And if you stick to your course, you’ll find that the stress off your shoulders is well worth it in the end. 

The Gospel of Matthew

For everyone who has will be given more, and he will have an abundance. Whoever does not have, even what he has will be taken from him. Matthew 25:29

While reading Why Nations Fail by Acemoğlu and Robinson, this Bible passage came to mind. In this quote, Jesus is talking about spiritual awareness. He points out the fact that when one has a little faith in spiritual matters, that faith provides room for letting more awareness and understanding come to him. But the one who does not have spiritual awareness or faith will not be able grow spiritually. That path will be closed off to him because he doesn't give it a chance. This is remarkably similar to the vicious and virtuous cycles written about in Why Nations Fail, with inclusive and extractive institutions taking the place of spiritual awareness. Countries like England, which had some inclusive institutions had the chance to grow and prosper, becoming more inclusive and more wealthy with time. Countries like Sierra Leone, which have almost no inclusive institutions, do not have the chance to grow economically or to become more inclusive, and instead stay very poor. This is how vicious and virtuous cycles parallel the teachings of Jesus.

http://ourrabbijesus.com/articles/those-who-have-much-will-be-given-more/

The Results of Low Infrastructural Power in Argentina

Argentina used to be a complicit partner in the international drug trade through its participation as a hub and trade route for drug smuggling. But as various narcotics agencies in large drug production nations have constricted and damaged many large-scale drug operations in their own borders, it has bubbled up in other places such as Argentina. Even more discouraging, is that the response from Argentine authorities has been weak and funding to combat an exponentially expanding drug production and distribution network has only been increased by 6% for the coming fiscal year. Keeping in mind that independent economic sources place Argentine inflation at around 25% it becomes clear that this is in fact a worrisome decrease in narcotics enforcement funding that will surely allow the drug empires in Argentina to snowball to ever more power.
     It seems to be the low infrastructural power resulting from weak state institutions and an ineffective bureaucracy that have allowed this ballooning to occur in Argentina. Hopefully, Argentina can reach a critical juncture that causes an institutional development which makes possible the strict and effective enforcement of laws relating to narcotics. Until that happens though, the drug lords will ensure the most negative of persistence by continuing to perpetuate and defend the extractive economic institutions that they have created to extract money from the Argentine people and state through the drug trade and drug related crime will continue to sky-rocket, naturally lowering quality of life for the Argentine people.

The Egyptian Iron Fist of Oligarchy

In Why Nations Fail, Acemoglu and Robinson talk about the "iron fist of oligarchy." Under this notion, new leaders replace old ones, promising radical change, but at the end of the day, the new leader brings nothing but more of the same extractive institutions that existed under the previous ruler. In Egypt, President Mohamed Morsy was the first democratically elected president following the absolutist rule of Hosni Mubarak. Amrou Kotb writes in Egypt and the Death of Liberalism, that liberals in Egypt demanded Morsy's resignation as they believe Morsy "used his electoral victory as a free pass to enforce an authoritarian style of government which denied its people basic human rights, supervised an increase in sectarian violence, and prioritized a regional Islamist agenda over the basic needs of the Egyptian people."

Morsy put his own wants, needs, and desires, over those of the people of Egypt. The lack of inclusiveness in Egypt will keep the Egyptian people from ever experiencing democratic freedoms and rights that exist and nations such as the United States. Kotb writes, "An Egypt which serves the interests of Bread, Freedom, and Social Justice cannot exist without a pluralistic society participating in an inclusive democracy."The extractive institutions in Egypt run by a minority of the population, prohibit the nation from prospering politically and economically. 

5 Ways to Ruin an Economy

Though not an especially inclusive economy under former President Hugo Chavez by any means, Argentina's new president Nicholas Maduro seems to be ill-advisably leading his nation's economy down the road of extractive institutions.  As the "Global Public Square" staff details in this article, the new regime has taken multiple steps towards more extractive institutions, starting with passing a decree granting Maduro "the ability to pass laws without consulting Congress."  Additionally, the military has taken steps to nationalize big business, and despite sitting on one of the world's largest oil reserves, the government is providing massive subsidies for it to its population as well as Cuba's.
Argentina is making the classic mistakes A and R lay out for why nations fail.  The government has made its political institutions even more extractive, and, as predicted, its economy is suffering from the results.  The authors of this article have a foreboding warning for President Maduro: "It is beginning to resemble North Korea, simply by following the most ruinous set of policies in the world."

When Extraction Goes Too Far

As exampled in this clip (starting around :20) from a documentary filmed in Africa, extractive political and economic institutions can and do go too far, resulting in total collapse of a nation.

If a leader, in this case the former king, keeps creative destruction in mind, he can keep his kingdom running smoothly. What’s important is that the former king realized that he had to maintain a balance between growth and harvesting in order for all walks of life to be comfortably sustained- he did not exploit the land for the sake of his own indulgences.

However, some people get greedy and want more out of the moment. As the rest of the documentary shows, the former king was overthrown in a coup by one of these greedy individuals. This new king focused too much on his personal benefit in the moment and failed to plan the allocation of resources for the future. For a while his new dynasty could run off the steam of the old, but this was mere destruction, and as AR states, “growth without creative destruction… (is) not sustainable” (94).

This example can be related to the USSR, which “achieved rapid economic growth (but)… little technological change” leading to the “abrupt end” of their period of prosperity, and eventually their total downfall (AR 94). Coming back to the dialogue of this clip, the new king wrung the land dry of its resources, leaving the kingdom’s inhabitants with no choice but to move on to more habitable lands, and hopefully do better with them, or perish.

Persistence in Egypt

Less than two years ago, a revolution in Egypt to oust its authoritarian regime became a central storyline for the world to follow. Less than half a year ago, the country removed its authoritative president Mohamed Morsi from power. Today, however, it is seeming less likely that it will break out of its extractive chains and evolve into a more inclusive state. The reason for this, of course, is persistance. The very same revolutionaries that fought for inclusiveness and democracy just months ago  "have since supported the increasingly authoritarian decisions of the interim government which followed".

"An Egypt which serves the interests of Bread, Freedom, and Social Justice cannot exist without a pluralistic society participating in an inclusive democracy, the principles of which struggle to survive within the minds of a powerless minority."

The revolutionaries have backed measures that would do little to "scale back military authority and secure basic civil liberties". As A&R have asserted, persistence is a major reason that states seem to be bound to the vicious cycle of extractive institutions. Despite the initial intentions of the liberal revolutionaries in Egypt, a backslide into extractive institutions was always a possibility given the shaky foundation of the pluralism and inclusiveness that it was supposed to foster.

Migrant Laborers' Strife in Qatar

Migrant Laborer's Strife in Qatar

In a twist on labor extraction in the modern world economy, there are rising allegations that migrant workers employed in the construction sector of Qatar are being coerced into working long, unpaid hours in dangerously high summer temperatures. The spotlight has been placed on Qatar by Amnesty International following the country's successful bid to host the 2022 World Cup.

The significance of this report is the parallelism between the coercion of the migrant workers and aspects of a dual economy or apartheid system. The dual economy arises from the fact that Qatar is "one of the richest countries in the world" but that the wealth is consolidated in the hands of a few individuals at the head of crude oil extracting industries; certainly not in the hands of the laborers. Secondly, the coercion of the migrant labor force, which is deprived of political rights and delegated to specific low-paying job sectors, is similar to an apartheid system in which a nation's own citizens are subjected to political and labor inequalities.

Critical Juncture in Congo

Recently, the M23 rebels in the Democratic Republic of Congo were defeated by the Congolese army and UN peace-keeping force. Prior to this, the rebels had been fairly successful, capturing numerous cities including the economic hub, Goma. It is now expected that a peace document will be signed between the rebels and the Congolese government.

The signing of this document provides a critical juncture for Congo. It is unclear whether the political grievances of the rebels will be addressed and/or whether any definitive change will come out of this document. Acemoglu and Robinson point to critical junctures like this as a crucial point for economic development. The changes coming out of this document could have a significant impact on the future of Congo.

Indonesian Leader's Corruption (Again)

One will know that a country's extractive political institution is at its worst state when a judge, that supposedly upholds the constitution, actually violates it. Just last month, Indonesia's Constitutional Court chief justice, Akil Mochtar was arrested for allegedly accepting a bribery over an election dispute case in Central Kalimantan - one of the provinces in Indonesia. 

This sheds a negative light onto the legal institution and surely shows how prevalent and deeply rooted extractive political institution in Indonesia is. This also brings into question the commitment and possibility of Indonesia in moving forward to eradicate corruption and extractive institutions in the future since the political leaders (the high-ranking judge in this case), whose responsibility is to put an end in corruption, are exactly the ones who actually commit the crime.

Merry Christmas and Happy Extractive Institutions!

Surprise! Christmas came early. Or at least it did this year when Venezuela's President Nicolas Maduro declared November 10th Christmas.

Extractive state control of aluminum, iron, and bauxite factories have ultimately caused Venezuela's economy to struggle with an annual inflation greater than 45% and a government shortage of foreign currency. The country is visibly suffering, and in order to boost his popularity prior to the December 8th elections, Maduro has declared that all workers would receive 2/3 of their bonuses and pensions on November 10th. And he created a new cabinet post called the Deputy Minister of Supreme Happiness. Will the Christmas spirit be enough to boost his popularity despite the damage his extractive economy has wrought?

Afghanistan Air Force reaches Critical Juncture

The Air Force in Afghanistan has reached a new milestone, marking a huge development since its creation, according to USA Today. The Air Force has now mastered the ability to take soldiers who have been injured off the battlefield without the help of the US. Previously, they had not had the skills to be able to do this. The amount of causality missions has increased by 341, a huge deal in their fight against the Taliban. This is a critical juncture because it is the first time the Air Force is able to support themselves and their troops without the US. Since the US removed aid, the forces in Afghanistan have been struggling. However, this huge accomplishment shows self sufficiency and the ability for Afghanistan to begin to develop their own programs, a huge step from the country we went into 12 years ago.

The Extractive Nature of Corporate Publishing

http://uwire.com/2012/04/20/editorial-amazons-dirt-cheap-e-book-prices-hurt-authors/

     Writers and creative minds alike are often demoralized by the extractive nature of large, professional publishers. Authors can dedicate years of their lives researching and writing literature, convincing editors to publish them, and tweaking their work to fit the ideals and needs of the publisher. Upon finally entering a contract with a publisher, according to the Wall Street Journal, modern artists will only receive $1,000-$5,000 as an advance (usually just enough to cover a month's rent if they're lucky).  This advance has vastly decreased from past advances which could reach $100,000 to $500,000 for fiction. It's estimated that only 15% of the revenue from a hardcover book, upon sale in a store or online, will return to the author, while a publisher will earn 50% of the sale. An author might see a higher percentage return (25%) on an eBook, however electronic copies of books are sold at such a discounted rate that this return is often lower than that of a physical copy. Still, authors are almost forced to use a corporate publisher over electing to self-publish because oftentimes they themselves don't have the time, or access to markets, advertising, and resources that the corporations have. This subjugation of the creative minds behind literature is basically a vicious cycle because they don't have any other reasonable options than to bring their work to a mass-publisher. This makes me wonder what kind of returns Why Nations Fail brought to Acemoglu and Robinson, who would have to split the probably minimal profits between themselves for co-authoring the book.

Article: "Authors Feel Pinch in Age of E-Books" Jeffrey Trachtenberg
online.wsj.com/news/articles/SB10001424052748703369704575461542987870022

Apartheid Photographer

     This article by CNN's Errol Barnett offers a look into the life of one of Africa's most distinguished photographers, David Goldblatt. He is followed through as he captures images of the African Apartheid  and the havoc that it wrecks on the working class. His images show the purposeful and designed poverty of the Apartheid system.


     Through his moving images we see the direct results of extractive political institutions and the resulting brutally uneven distribution of wealth and power that comes along with them. Sadly, A&R's idea of persistence has been exemplified in the long existence of the Apartheid until 1994, from which point the political and economic imbalance has largely persisted.

Critical Juncture in Mongolia

The country on Mongolia has experienced growth recently, with economic growth rates upwards of 10% the past three years in a row. This growth has been largely due to coal production and mining exploration associated with a project called Oyu Tolgoi. However, recently the sustainability of Mongolia's economic growth has been threatened.

An article titled "Mongolia's Economy is at a Crossroads" highlights the threats to economic growth in Mongolia. The article points to "nervous foreign investors, a drop in Chinese demand for coal, and uncertainty surrounding Oyu  Tolgoi" as challenges facing the economy. Mongolia's is now at what Acemoglu and Robinson would call a "critical juncture". The actions of the Mongolian citizens and leaders will determine whether they continue on the path of economic growth.

The Smartphone Revolution

In Why Nations Fail, Acemoglu and Robinson discuss at end about the importance of the Industrial Revolution and the roll it played in a country's ability to prosper economically in the future. Countries that received the effects and benefits of the Industrial Revolution ultimately have gone on to become the more prosperous countries of today. On the other hand, countries that did not participate in the Industrial Revolution went on to struggle economically in the future. The entire continent of Africa missed the Industrial Revolution and its benefits and have felt the effects of this for decades.

The continent however is not missing the Smartphone Revolution. Nmachi Jidenma argues in The real mobile revolution: Africa's smartphone future, that the rise of smartphones in Africa will improve the daily lives of Africans. The rise in smartphone popularity has driven app developers on the continent "to invest their skills acquisition and app development" in Africa's smartphone future. For Africans, these smartphone apps would be useful in solving "key pain points in their day to day lives from mobile commerce to transit ticketing." GoMetro, as pictured, "Aims to improve commuting in South Africa by providing real-time train schedules, associated platform changes, a trip planner, fare calculator and route maps." Africa missed the Industrial Revolution, ultimately hindering the continent's ability to experience economic prosperity for decades. The smartphone revolution however will have a profound impact on the continent, as it will greatly improve the African people's day to day lives, ultimately improving their productivity as a whole.

Cocoa Crisis in the Ivory Coast

An Ivory Coast court has sentenced 15 prominent "cocoa barons" for embezzlement that began during the tenure of former President Laurent Gbagbo. The corruption of the Ivory Coast's most lucrative industry is of no surprise. Gbagbo's term in office was mired by corruption, violence, and crimes against humanity. Charges are currently pending on the former president. Upon his defeat in the Ivory Coast's latest election, Gbagbo refused to leave office before finally being forcefully removed. As A&R have proven, this created a highly extractive and volatile dynamic that allowed the "cocoa barons" to exploit such economic and political institutions to their benefits. When the political arrangement allows for such corruption at the highest levels of government, it should be of no surprise that society organizes itself in an exploitative and extractive manner.

Ex-Felon Disenfranchisement In Virginia

In Chapter 10 of Why Nations Fail Acemoglu and Robinson highlight the beneficial and inclusive impact of the introduction of adult white male suffrage in Australia over 150 years ago. Here in Virginia, that has still yet to be achieved. Virginia is one of four states in the Union that permanently denies ex-felons their right to vote. Ari Mebler writes in an article on msnbc.com, that in the most recent Virginia election "over 300,000 citizens will be missing from the voting rolls – including 20% of the state’s black population". 

This problem goes deeper than mere felony disenfranchisement, it's a matter of racial marginalization. Nationwide this figure is even more stark with 1/3 of the Nation's African-American males being denied the right to vote, largely due to our country's "war on drugs". Acemoglu and Robinson often use America as the poster-child for inclusivity, but seeing the correlation between the states that currently enact restrictive voting laws that disenfranchise African Americans and the states with strong histories of slavery, segregation, and discrimination, it's clear that these legacies are persistent and we aren't as far from the days of Jim Crow as we'd like to think.

The Heavy Censorship In China

- [Knock, knock]

- Who is it?

- Room Service (in Hotel) / Checking water usage (at Home)!

- Ok. [Open the door]

- Freeze! Police! 

This might be an effective way to catch a crafty criminal. However, imagine it in everyday life, when one day you are staying at home, surfing on the Internet and suddenly get caught like that without knowing why. Wouldn't that be horrifying? This scenario actually happens in China often, even today. Unlike the American government, which protects and supports the free media and makes sure other forces can’t silence it (thanks to the virtuous circle), the Chinese government itself actually silences/forbids the free media a lot due to its extractive structure: Facebook, YouTube and a lot of other international websites are made inaccessible in China and many of the political related articles, history books that describe the truth but oppose the government's opinions or reveal some of its down sides can't be published and sold in Mainland China and can only be read secretly. People are not allowed to discuss the sensitive issues online or to spread any anti-government thoughts. If they do so, the contents will soon be "Hexie" - an Internet censorship - and they themselves might be caught/guarded using the way of "Room Service" of "Check Water Usage" mentioned above.

Google's Going to Try to Cure Death.

On October 30th, Jon Stewart joked about Google's newest ventures that seemed to have little to do with their search engines. It's newest investment, a company called Calico, and a cover story in Time Magazine have caused quite a stir. 

Short for the California Life Company, Calico has a fairly ambitious goal: to solve death. Tim Cook, Chief Executive Officer to Apple wrote in his own Google+ statement:

OK … so you’re probably thinking wow!  That’s a lot different from what Google does today.  And you’re right.  But as we explained in our first letter to shareholders, there’s tremendous potential for technology more generally to improve people’s lives.  So don’t be surprised if we invest in projects that seem strange or speculative compared with our existing Internet businesses.

Google's goal may be lofty - Larry Page, Google's CEO, calls it a "moon shot" - but it's a goal to benefit society. However, should Google achieve this goal, the company itself would benefit too.
In chapter 3 of Why Nations Fail, Acemoglu and Robinson argue that economic prosperity is the result of "inclusive economic institutions [which] foster economic activity, productivity growth, and economic prosperity." (p. 75) Acemoglu and Robinson highlight the importance of property rights and how, when people have confidence due to inclusive economic institutions that they will gain from their own innovations, they creatively invent benefitting the public. Without these property rights, US companies would not take the risks they are taking today. 
No one's saying Google's reversing the aging process any time soon but within the economically inclusive institutions of the US, they're going to try.

The Overlooked Costs

The Congo literally is too rich for its own good. It boasts “abundant deposits of copper, gold, diamonds, cobalt, uranium, coltan, and oil,” but, in tradition of the country, laid out in this article, they continue to be obtained in an extractive manner that destroys not only wallets but, more importantly, lives. Dictators and the elite “(bleed) the country of billions of dollars”, while “nothing but misery and death (has been brought) to the very people who live on top” of the whole country's potential fortune and future. 

This is the true shame of the situation. Most of our focus is on economic failure, as if an economy is a life to mourn. That situation is of course lamentable and leads to wide scale “human suffering” (as we saw in the downfall of South America and the unfathomable toll of the slave trade) , but we get wrapped up in the big picture and fail to connect with the individual human loss like Innocent.

Cooperatives

Acemoglu and Robinson discuss at length the issues with extractive institutions, arguing instead for more inclusive ones that maximize and broaden social participation and individual freedom. One way to do this in a broadly capitalist context is through cooperatives. Generally speaking, cooperatives tend to be small-scale organizations like local credit unions or co-op markets. One, however, is very different than the rest - the Mondragon Corporation. It was founded in the 1950's by a Basque priest, originally as a miniscule manufacturing company. Today, it is a large firm that operates in multiple sectors of the economy. Mondragon is a remarkably successful story of how cooperation between capital and labor - that is, a more inclusive business model within a generally inclusive economy - can work wonders.

 Mondragon's motto - "Humanity at Work" 

Taken from UnitedDiversity.coop

As economist John C. Medaille writes,

"Mondragón has a unique form of industrial organization. Each worker is a member of two organizations, the General Assembly and the Social Council. The first is the supreme governing body of the corporation, while the second functions in a manner analogous to a labor union. The General Assembly represents the workers as owners, while the Social Council represents the owners as workers. Voting in the General Assembly is on the basis of 'one worker, one vote,' and since the corporation operates entirely form internal funds, there are no outside shareholders to outvote the workers in their own cooperatives. Moreover, it is impossible for the managers to form a separate class which lords it over both shareholders and workers and appropriates to itself the rewards that belong to both; the salaries of the highest-paid employee is limited to 8 times that of the lowest paid. Mondragón has a 50 year history of growth that no capitalist organization can match," ("The Economics of Distributism V: The Practice of Distributism").

It's clear that Mondragon is a model of institutional inclusivity. By empowering rather than using its workers, the whole company thrives. 

IBM

                 In 1980, IBM owned about three-quarters of the computer market. They were huge, and the CEO, John Opel, had plans for more growth in the future. He challenged the company to grow to create $100 billion in revenue per year by 1990, up from $40 billion when he made the challenge. But this plan changed the behaviors of IBM's employees. With their director's grand vision in mind,  they set about business strategies that maximized profit in predictable ways. The business increased output of existing technologies and neglected new markets. IBM's profits increased in the next few years. But with technology changing every year, other companies like Compaq grew faster by embracing new technology. Because of this mistake, IBM lost it's place as a major player in the PC marketplace.
                IBM's business strategy is similar to the Soviet Union's central control strategy in the 20th century. Like IBM, the Soviet Union tried to attain growth by allocating resources to the areas where they already knew they would succeed, and by trying to motivate workers with incentives. Both grew rapidly at first, and then fell apart later. Both institutions ultimately lost their power because they did not have incentives for innovation and new technology.

http://www.devilsadvocategroup.com/ibm-beware-of-bhags/

Oil: Blessing or Curse?

In one of the poorest regions of the world lie the resources that allow some men to make a killing.  Diamonds, iron ore, and especially oil have proven to be detrimental to the masses in Africa in the past, leading to inhumane practices and gross mistreatment of human beings.  One simply has to watch the movie "Blood Diamond" to gain perspective on this issue.  However, as this article states, "For the first time in decades, though, there is some reason to hope that a better model is emerging that may be more successful in bringing the benefits of Africa's extraordinary endowments to the people who need them most."
New regulations from the EU and United States are being put in place to keep the money earned from these exploits in the country themselves, rather than being sent offshore to executives' bank accounts.  However, not all are optimistic about these safeguards from extractive institutions.  The chair of the Global Alliance for Tax Justice argues that there will still be corrupt officials, regardless of the inclusive institutions put in place.  However, one universal idea underlies the crux of Africa's problems, one that A and R would agree with.  Without a stable, centralized government, the discovery of oil in Africa will remain a curse, not a blessing.  

Improvement and Persistance in Liberia

The recently released Ibrahim Index of African Governance has Liberia ranked as the most improved nation "in terms of overall governance since 2000". With the ending of Liberia's devastating civil war over 10 years ago, the country began the transition into more inclusive institutions. Their overall progress is positive, with the biggest improvements seen in the category of "Safety and Rule of Law". This improvement suggests that the Liberian government is becoming more centralized, a key aspect of a move toward inclusive institutions. However, despite major improvements, Liberia had its lowest ranking in the category of "Sustainable Economic Opportunity". Without economic opportunities to provide incentive, the country will not be able to experience significant sustained growth.

Another article also discusses the corruption that persists in the Liberian police force. According to the article, the police "simply take what they like"from street vendors. It is this sort of insecure property rights that Acemoglu and Robinson point to as stifling the incentive for entrepreneurship.

Obamacare and Creative Destruction

     For fifteen million Americans that utilize private health insurance, challenges with Obamacare are incredibly frustrating. The anxieties and frustrations expressed over this massive shift in health insurance is due to its difficulty in transitioning into a functional institution, and especially with the difficulty of transitions in the private sector of health insurance.
     These frustrations are aggravated by misunderstandings, as well; Obama frequently said that Americans who were satisfied with their plans would not have to change their plans. It seems now that Obama only meant this in reference to people whose health insturance was provided through their employer, Medicare, or Medicaid. It is likely that Obama was trying to divert these fears of creative destruction in order to gain support for Obamacare.

      Initial understandings claimed that policies which were in effect since March 23, 2010 were originally expected to be grandfathered in without any changes, but later the Department of Health and Human Services elaborated further that if any part of a health insurance policy was changed since that date, it would not be grandfathered in (any change such as to co-pay, deductible, benefits, etc.).  Estimates claim that "because of normal turnover in the individual insurance market, “40 to 67 percent” of customers will not be able to keep their policy," NBC reports.
      Policies that don't match standards will have to be dropped; old policies are being dropped for new ones and two million Americans that previously used private health insurance have been notified that they will have to change their plan, The Atlantic reports. It is quite obvious that the massive reconstruction and shifts within the health insurance market is ultimately what is driving the fear and anger of many Americans. The plan is intended to greatly increase health insurance of the masses in the long term, but for many Americans it is completely undesirable in the short term.

Google Glass

Google Glass

The new "connected eyeware", Google Glass, provides an excellent example of the economic innovation that contract enforcement, technology development, private entrepreneurial investment yield.  While the article was an initial report on a conspicuous barge located in the San Francisco Bay, which was later confirmed to be a future "floating Google store", the background is a profound example of many modern economic institutions that have brought prosperity to modern states and individuals.

Several miraculous economic stimulants and safeguards were casually mentioned throughout the article. The first was the description of leasing agreements, which are enforced by the United States courts, and allow economic agreements to take place without fear of a contractual partner reneging on the terms. The second was the mention of a patent for a water-based cooling system for data centers. Patents allow entrepreneurs to make major informational and financial investments to innovate their industries without having their patented ideas stolen by business competitors. The third, a regulation on business by the state, is the requirement of a permit to dock the barge near the San Franciscan shoreline, which would require the permit to be purchased from the city. In short, political institutions may implement a variety of policies that bring about economic prosperity as well as legislate regulations on businesses, some of which allow the state to extract some of the profits both directly and indirectly.

The Diffusion of Destruction

In chapter 10, Acemoglu and Robinson make the argument that it was France's invasion into much of Western Europe that allowed it to impose inclusive political institutions in those areas including rule of law, the dismantling of the feudal system, and the weakening of guilds which eventually led to the creation of wealth.

However, unlike France's invasions, America's invasion of Iraq did not result in the establishment of inclusive political and economic institutions. Why have America's efforts to stabilize the country not had the same results? This issue is incredibly complex, but from a perspective geared towards the reading, I argue that America failed to promote centralization, establish rule of law, and stamp out corruption based on religious differences in the country. Citizens cannot participate inclusive institutions like voting when their government is unable to guarantee basic security and ensure fair elections. Terrorism and Iraq's dark history with extractive institutions make an easy, quick transition to an inclusive government a dream. The United States should have made strengthening the government, reducing corruption, and establishing rule of law priorities over large military engagements. Institutional solidarity, created with Iraq's unique culture in mind, should have been a bigger priority.

Extractive Dual Economy in Zimbabwe

Robinson and Acemoglu merely mention Zimbabwe's dual economy (and that it was a result of land allocation acts like in South Africa), but they do discuss the negative impact a dual economy has on growth and the disenfranchisement of huge amounts of people and needed to support the extractive economic institutions (particularly surrounding the mining industry) that stem from an apartheid-born dual economy.

The extractive institutions of Zimbabwean mining industry, diamond mining in particular, are representative of the extraction from the days of Rhodesian neo-apartheid. Celia W. Dugger writes in a 2009 New York Times Article: "Zimbabwe’s military, controlled by President Robert Mugabe’s political party, violently took over diamond fields in Zimbabwe last year and has used the illicit revenues to buy the loyalty of restive soldiers and enrich party leaders, Human Right's Watch charged in a report released Friday." The corruption, however, goes further than that. A News24.com article explains that "About $2 billion in Zimbabwe's diamond revenues have been unaccounted for since 2008" and goes on to explain that this money could be funding much worse than Robert Mugabe's super-mansion.

Espionage Scandal

This past week, information has come out that the United States has been using resources to spy on over 60 million phone calls in Spain, according to USA TODAY. Jose Manuel Garcia Margallo, the Prime Minister of Foreign Relations in Spain, is outraged, saying that he has asked the US Embassy previously for information on this. He claims that it could severely change relations between the US and Spain. A document provided by former NSA employee Edward Snowden allegedly shows that the NSA collected this information from December 2012 until January 2013. This is an extremely important critical juncture in foreign affairs between the USA and Europe. If these reports are in fact true, the trust that has long existed between Spain and other European countries and the United States could be lost, making further international relations extremely difficult. As a nation, the United States needs to provide an explanation before relations with these other powerful countries cease being lucrative. Other countries that have been implicated in this NSA scandal include France and Germany, who are both demanding explanations from the White House. A nation needs to keep its allies, and if these reports are validated, the United States will be at a risk of losing the friendly relations it has enjoyed, and as history has shown time and time again, nothing good comes from hostile relations.

Change is Brewing in Saudi Arabia

     Acemoglu and Robinsons' idea of persistence and path dependency may appear to hold historically, but Saudi Arabia seems to be quite dissatisfied with this idea. They are opting for "Plan B": generate a critical juncture or two and perpetuate meaningful change. Saudi Arabia has been broiled in conflict in recent history and has fallen into civil war; their populace is aching for change.
   

      Their most recent push for cultural change has come as long oppressed Saudi women have begun to attempt to push off many of the long held restrictions that they have been held over. Currently, women in Saudi Arabia are not permitted to drive because of extremely strict interpretations of religious texts, but they are taking to the streets to demonstrate against this inequality. Women have planned group drives through main thoroughfares to bring the issue to the attention of their fellow women, their oppressors, and the world at large. Although no rules have been changed as of yet, support is growing, and change is imminent. Hopefully, this progressive movement won't stop with just new driving laws.

The Royal African Company

             In 1672 a new company was formed in England, The Royal African Company. This company was comprised entirely of wealthy merchants from London looking to make a profit on the slave trade. It was a monopoly given by the King Charles II. This company was very profitable not only because it was granted a monopoly, but also because there was a high demand for slaves in the Caribbean. Between 1680 and 1686 an average of 5000 slaves a year were transported to the Caribbean. 
            However, after the Glorious Revolution in 1688, Parliament gained a lot more power relative to the Crown. English economics became more inclusive, partly because different groups could petition Parliament with their own cause, and if it was just, Parliament was likely to listen. Groups like the Society of Merchant Venturers had more power and influenced Parliament to repeal the Royal African Company's monopoly on the slave trade. This is just one example of how the critical juncture, the Glorious Revolution changed English economics to be more inclusive.

Mexican Corruption

Acemoglu and Robinson, authors of Why Nations Fail, argue that political institutions have a direct correlation to the economic success of nations. Living conditions in Mexico vary greatly with those of the United States. A reason for these differences is the difference in the solidty of the nations'  central governement. Mexico's central government is considerably weaker than that of the United States and is full of corruption which has crippled the nation's ability to advance for decades. In, Corruption in Mexico, Once Rarely Exposed, Is Starting to Come to Light  , Karla Zabludovsky writes about the corruption of Mexican governor, Andrés Granier. Granier says in a recording, “We go to Fifth Avenue and buy a pair of shoes; $600. I took clothes to Miami, I took clothes to Cancún, I took clothes to my house, and I have leftovers. I’m going to auction them off.” This is an interesting lifestyle for a government official who makes a reported $92,000 a year. It is also very interesting that Granier lived this lavish lifestyle considering his successor discovered that about $190 million in government funds were unaccounted for under Granier. This money could have been used to improve state programs and institutions for the people of Mexico, but instead was used to fund the extravagant lifestyle of a corrupt government official. Corruption in Mexico's central government is the reason there is so much poverty in Mexico today. 

Free Elections in Madagascar

Since gaining independence in 1960, the island nation of Madagascar has been a hotbed for divisive and often violent politics. In 2009, a coup ousted elected president Marc Ravalomanana as concern over the distribution of the nation's economic growth arose. While Madagascar operated as a constitutional democracy, the economic growth was highly unbalanced and extractive leading to much tension that culminated in the coup that removed Ravalomanana from the presidency.

But four years later, it appears that Madagascar is finally taking steps to return to more inclusive political institutions. The nation held a presidential election Friday that appears to reflect the genuine will of the public. Because power has been transferred back to the people, both candidates have campaigned on platforms that intend to "help the unemployed" and improve education standards. Free elections have effectively forced political candidates to take on positions that are politically, economically, and socially inclusive.

While the results of the election will not be known for weeks, it will take even longer to gauge the success of Madagascar's transition to inclusive institutions. If free elections can turn the tide that has risen in the last four years of social unrest, then Madagascar may be in for sustainable economic growth in the future.

India's bridge collapse prior to Commonwealth Game 2010

One and a half month before Commonwealth Game 2010 was hosted in India, the bridge next to Jawaharial Nehru Stadium, the main venue for the Commonwealth Game, collapsed into three pieces. This only added up to the already bad conditions prior to the Game, such as security concern where two tourists have been shot outside Jama Masjid, the prevalent spread of dengue fever, and the traffic chaos. These unfavorable conditions to host the Game has caused some athletes to pull out of the competition.

I believe that India's poor preparation for the Commonwealth Game is correlated with the still-existing traces of extractive institution in Indian government. The practice of bribery is commonplace in India and this results in an ineffective allocation of resources. For example, looking specifically at the bridge collapse case, construction companies could bribe the government to take on the bridge building project and hence, the government may not choose the most decent company to take on this project. This might explain why the "costs are running 17 times the original estimates, and the government's anti-corruption watchdog has identified 16 projects with suspect financing." Unless the prevalence of graft could be reduced and minimized, it will be a great impediment to the creation of inclusive political and economic situation where individuals or companies can compete on equal footing.

Singapores Dual Economy

During the recession in 2009 it became clear that Singapore has a dual economy. The recession made "exports [plung] across the world and Singapore’s economy contracted by double-digits." Oddly enough, "shopping malls were still bustling with people, [and] expensive eateries still packed with customers." The explanation to this was Singapore's dual economy which consists of a local, small enterprises, sector and an international, multinational corporations, sector. When the world economy tanked, the international sector was pulled down with it; however the local sector was left close to untouched.

This dual economy is a bit different from the classic model of a dual economy of which South Africa is a good example. In Singapore "the 2 sectors does not fall within the class distinction of the have and the have-nots, ie. one where income and wealth inequality explains much of the difference between the two classes," and therefore one sector does not work as an extractive power over the other. The international sector "did not seem to boost the welfare of ordinary Singaporeans as much as the GDP growth numbers implied, and they are not hurting Singaporeans very much on the way down, either."

Obamacare and Medical Monopolies

     As Obamacare officially became law with the reopening of our government, the importance of healthcare and healthcare costs in America will only grow. Healthcare in America is already very expensive because our system is incredibly complex, it is for profit, and government oversight is severely lacking both in quality and quantity. With the new mandate that (just about) every citizen must have insurance by around March, the medical market place is about to become much more complicated. However, a critical flaw in our medical system that is entirely unnecessary is the presence of medical monopolies.

     Certain hospitals across America are merging together to form a monopoly on healthcare services. Once in possession of these monopolies, hospitals can drive prices even higher than they already are. Of course, these aren't official monopolies but steps to "streamline" healthcare for the consumer. Much like England from the 15th to the end of the 17th century, monopolies are still an issue in America because companies continually find loopholes to exploit the system. Combine this problem with the impeding shortage of primary care physicians, the lack of residencies to train doctors who actually have MDs so that they can work, and an aging population, the roller coaster ride that is healthcare is just getting started. It seems to be the natural instinct of both American and English businessmen to use the system to reach the top, then destroy the ladder so no one else can challenge them.