Harvard economist Melissa Dell, in a conversation with Tyler Cowen, delves into the concept of ‘persistence’ in economic development.
She discusses how historical events and structures can have long-lasting impacts on a region’s economic trajectory, using examples from Vietnam, Mexico, South Korea, and the Philippines.
Predictive Power of Historical State
The historical state of a region can provide insights into its future development.
However, the world is fundamentally complex and there are many factors at play in economic development.
Struggles of Self-Governance
Regions that lacked a strong centralized state in the past often struggle with self-governance today.
These regions, typically ruled by local lords, did not have a regular taxation system or organized local government.
As a result, they struggle to fill positions on their local city councils and provide local public goods effectively.
Power Dynamics in Economic Development
Those with power and economic resources will do everything in their capacity to maintain them, leading to persistence in economic structures and development.
Significance of Historical Events
Historical events can explain up to 10% of the variation in economic development, which is significant given the complexity of the factors involved.
For instance, the Mexican Revolution and the different development paths of northern and southern Vietnam can illustrate this.
Influence of Institutions
Institutions play a significant role in economic development.
For example, in Vietnam, the presence of institutions was a significant factor in economic development, even when controlling for the percentage of the population that identifies as Chinese.
Historical Governance and Economic Development
Regions with a history of strong, centralized states tend to have better functioning local governments and are economically better off today.
This is due to their experience in collecting local taxes, organizing military conscripts, and implementing laws mandated by a central state.
Historical State and Crisis Management
The historical state of a region can play a crucial role in dealing with current crises.
For instance, Vietnam’s success in handling the COVID-19 pandemic, despite sharing a border with China, can be attributed to its history of having a strong centralized state that coordinates well with local governments.
State Capacity and Economic Development
Having a state that is capable of monopolizing violence and providing public goods is largely a prerequisite for economic development.
However, the state’s capacity can be used for good or bad, depending on what the state wants to do.
Places that have a long history of governance seem better able to do that more recently… they’re richer, they’re better off. – Melissa Dell
Persistence in Vietnamese History
The Vietnamese state was very effective at integrating new territories, which led to the persistence of local norms and customs.
This, in turn, influenced local governance and economic development.
Historians vs Economists
Historians tend to focus on a very narrow context, while economists look at broader impacts.
In her work on the Mexican Revolution, Dell was able to explain 10% of the variation in the data, which she considers significant given the complexity of the world.
Having a state that is capable of monopolizing violence and providing public goods is largely a prerequisite for economic development. – Melissa Dell
Persistence Due to Lack of Change
The persistence of economic development is largely due to the lack of a force to bring about change.
In the absence of a strong state or external pressure, the existing structures for governing and economic organization tend to reproduce over time.
Divergent Development Paths
Countries with similar histories can have different development paths due to differences in their historical state structures.
For example, South Korea and the Philippines, despite having similar histories, have had different development paths due to the differences in their historical state structures.
