In this article, Daron Acemoglu
and James Robinson discuss key points from their new book, Why Nation’s Fail
, within the context of China's potential for continued economic growth. Below are a few excerpts:
Our research on national economies throughout world history shows that long-term economic growth, while indeed based on technological innovation, only sustains itself in the presence of democratic political institutions that provide people with incentives to innovate. China may continue to grow in the near term, but the limited rights it affords its citizens places major restrictions on the country's longer-term possibilities for prosperity.
To create innovation more broadly, people need incentives such as the right to their own labor, to business profits, and to patents.
However, the biggest questions about China's future growth do not involve its next economic investments, but rather, its political essence. Unless China fundamentally reforms its political institutions, a change that seems unlikely in the short term, a trajectory of economic growth followed by relative decline is more likely than a trajectory of long-term increasing prosperity.