Why Societies Fail

There’s been a lot of talk about Papua New Guinea recently.

It’s a lovely place in many respects and it has a wealth of natural resources. It’s also a democracy and has been since independence in 1975. Since then, Australian taxpayers must have pumped around $15 billion into the PNG economy through our aid program. Yet for all that, PNG remains a poor country. It begs a very important question. Why are some countries poor while others have become rich? If we can’t answer that question then there’s every chance much of our foreign aid is a huge waste of money. The most prosperous societies throughout the last 3,000 years have one common characteristic: strong institutions. Whether it was the ancient Greeks, the Romans and their successors the Byzantines, renaissance Italy, the British Empire or modern America, they’ve all had a strong system of governance which made their societies work. A strong system of governance is not always democratic of course. Indeed, the foundations of successful societies have more to do with the rule of law than with how the law makers get into power. Here are four examples of strong governance which are usually found in successful and prosperous societies. First, there’s a clearly defined set of laws which everyone – governed and governors alike – are expected to adhere to. If they don’t, there’s a credible judicial system regarded as reasonably respectable by the public, which administers justice. And that judiciary has to be seen to be fair to all, rich and poor alike. Stalin’s Russia, Mao’s China and much of the Arab world over the last 500 years have suffered because too often authority has been exercised in an arbitrary and unpredictable way. Stalin and Mao both had millions put to death not on the basis of clearly defined laws but because it suited their revolutionary causes. And Arab leaders like former Egyptian president Hosni Mubarak imposed one set of rules on the public and another more beneficial set for themselves and their cronies. Yet in modern Europe and to a growing extent in modern China, laws are universally applied and courts are seen to be relatively fair. They’re not perfect of course. But in both cases, power is exercised in a less arbitrary way by leaders than in failed or weak states. The second characteristic of successful societies – and it relates to the first – is that there is a system of recognised and impartially administered individual property rights which can be protected by the rule of law. After all, who is going to invest in a society which arbitrarily might confiscate property or where property is lost because the judiciary receives a healthy bribe from an acquisitive local businessperson? In countries like Britain and America property is protected. However, in Venezuela, for example, the reason foreigners are hesitant to invest there is because there is serious doubt about the state’s respect for property rights and the impartiality and incorruptibility of the legal system. Thirdly, the political system itself has to be stable. That is, the people who make the laws have to retain their credibility with the public. Now, while democracy may be the most moral system, undemocratic states can be sensitive to public concerns. No government whether it is democratic or not should be merely populist, but it has to be careful to maintain a degree of social stability. So the new president of Egypt, Mohammed Morsi, was democratically elected but he showed no interest in governing in the interests of social stability and economic reform. He merely wanted to carry out the wishes of the Muslim Brotherhood, thereby inciting social unrest. The rest is history. By contrast, the unelected rulers of China read a summary every day of public concerns expressed on the Internet. They do it because they believe one of their most basic responsibilities is to maintain social stability. To do that, they need to understand public opinion and appreciate the broad direction of public thinking. Fourthly, there is the issue of succession. There is a plethora of examples of popular and successful leaders who are replaced by everything from civil chaos to incompetence. In a mature democracy, this issue is handled by regular elections. Monarchical systems solved the problem through heredity. That usually worked unless there was a lack of clarity over who should inherit the throne. Autocrats can set up their own succession schemes which work. But they are fragile. The Arab world’s decline since the 15th century has partly been the result of internecine struggles over succession. That is still going on. They want to get rid of President Assad but who is to replace him? The Tunisian, Libyan and Egyptian autocrats were disposed of by the Arab Spring but they have been replaced by a chaotic loss of authority. Now those four characteristics – rule of law, private property, responsive leaders and smooth leadership successions – all help to create strong societies. There are other issues as well. But those four really matter. An aid program should focus much more on strengthening institutions than digging water wells. That should be the focus of our aid program in PNG.

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