On the Rise and Decline of Nations

Abstract

This is an important addition to the literature of that growing field along the boundaries of economics, political science, sociology, and economic history. Mancur Olson, Jr. has extended the profound insight of his The Logic of Collective Action (1965) and used it to explain rapid national economic growth and subsequent decline. Growth, he argues, is impossible in a society riddled with vested interests, which frequently take the form of what he calls 'distributional coalitions' (sometimes called 'rent-seekers'), that spend their energy more on income distribution than on production. Thus, the Industrial Revolution in England occurred initially in the north and northwest, outside those areas dominated by guilds; and the economic miracle of German growth after World War II was made possible by that war's (and Naziism's) effect in dissolving the tangle of vested interests. Sustained economic growth with stable boundaries and political institutions is likely to slow down a society's capacity to adopt new technologies and to reallocate resources in response to changing conditions. Encrusted with collective organizations which get in each other's way-monopolies, conglomerates, cartels, pressure groups, lobbies, unions, trade associations and the like-economies become arteriosclerotic and arthritic. (Olsen says they become, 'rheumatic', but as a younger man than I he is inadequately acquainted with geriatrics to know of such matters.) Distributional coalitions have crowded agendas, difficulty in reaching effective decisions in timely fashion; they increase the complexity of regulation, require enlargement of the role of government and add to the difficulty of achieving social understanding. Traumatic shock may be required to escape their clutches. This is big-picture political economy and economic-cum-social history, of the order of the interpretations of Marx on class struggle, North and Thomas on property rights, Shonfield on economic planning, Rostow on take-off, Friedman and-on a somewhat different level-Vilar on the centrality of money (Vilar, 1976). Olson is careful to say that his theory is not monocausal. He pauses frequently in particular situations to say that one must allow for an admixture of many causal elements. He somewhat dilutes the modesty of these admissions, however, by recurring, time and again, to the need for a theory to be parsimonious, stripped to basics and to the smallest number of elements that will serve to explain outcomes. He clearly believes that his 'theory' is robust and rich enough to delineate the outline of economic history. Olson's ideas are advanced as a 'theory' of economic history, well short of a theorem, but more encompassing than a law, model or effect. Theorems may be limited to a small portion of the area to be explained, but within it have universality and susceptivity to refutation by counterexample. Laws also typically deal with limited aspects of economics and are general statements of tendencies, as in Engel's