Daron Acemoglu on the Struggle Between State and Society

Daron Acemoglu — MIT economist and co-author of Why Nations Fail — joins Tyler Cowen to discuss his then-new book The Narrow Corridor: States, Societies, and the Fate of Liberty, tracing how liberty emerges from the contested balance of power between state and society rather than from geography, culture, or religion. Episode 81, recorded October 2019.

Key ideas

1. Geography explains very little; colonial institutions explain nearly everything. The striking correlation between distance from the equator and income per capita is largely an artefact of which areas Europeans chose to colonise and how. Densely populated, resource-rich tropical regions attracted extractive institutions — the systematic extraction of labour and resources for the coloniser’s benefit rather than local development. Empty, disease-ridden settler destinations such as the US and Australia ended up with better institutions than the colonisers’ home countries because settlers demanded them.
2. Liberty lives in a narrow corridor between anarchy and despotism. Most of human history falls into one of two failure modes: stateless societies (no centralised law, third-party enforcement, or public goods) or despotic states (centralised power that ignores and suppresses society). The corridor — where state capacity and social mobilisation grow together in competitive tension — is rare, fragile, and historically exceptional. Acemoglu calls this dynamic the Red Queen effect: each side must keep running just to stay in place, but the race, when it does not turn destructive, strengthens both.
3. European exceptionalism traces to Germanic assembly politics meeting Roman institutional legacy. The Franks and other Germanic tribes brought no literacy, no theology of liberty, and no sophisticated economics — but they had deep norms of assembly politics and the expectation that chiefs must answer to the people. When those norms fused with the surviving administrative machinery of the Roman Empire, they produced the institutional ingredients of the corridor. Byzantine Christianity, by contrast, had the Roman institutions without the bottom-up participation, and produced no comparable liberty.
4. Democratisation causes growth, not merely the reverse. Controlling for the fact that crises tend to trigger both economic downturns and political openings, countries that democratise add roughly 20–25 per cent to GDP per capita over subsequent decades. The main mechanism is fiscal: democracies tax more and spend more on education and health. Casey Mulligan’s contrary finding that democracy barely shifts budgets fails to account for this endogeneity.
5. China is attempting something historically unprecedented — and likely to fall short. No previous despotic society has tried to maintain tight authoritarian control while systematically pursuing technological leadership. China is pouring resources into AI, telecoms, and digital infrastructure while the Communist Party tightens its grip. Acemoglu expects partial success but not a transformation: the radical innovation that frontier technology requires depends on the kind of individual experimentation and risk-taking that a surveillance state suppresses.

Content

Why geography is a proxy, not a cause

Cowen opens with the striking R-squared of latitude on income. Acemoglu concedes the pattern is real but argues it is a historical accident: European colonial powers — for reasons that may include climate and disease burden — pulled ahead of the rest of the world and then imposed very different institutional settlements on different territories. In densely populated, already-organised societies (the Inca, Aztec, and Mughal empires; North Africa), Europeans found the infrastructure ready for extraction — labour to control, surplus to harvest. In relatively empty, disease-hostile settler territories, colonisers who were going to live there had every reason to build property rights, assemblies, and legal order. The famous Reversal of Fortune paper — places that were relatively prosperous in 1500 are relatively poor today, and vice versa — is, Acemoglu argues, a decisive test against purely geographic theories: geography did not change between 1500 and today, but relative prosperity did.

Cowen pushes on human capital: if Russian immigrants to the US rapidly converge to North American income levels, does that not prove the resource travels with the person rather than with the institution? Acemoglu partially concedes — Soviet mathematical education was genuinely exceptional — but notes that the republics where those educational institutions collapsed during post-Soviet civil conflicts showed how quickly human capital advantage dissolves without the institutional substrate that maintains it.

The narrow corridor: a theory of liberty as process

Acemoglu introduces the book’s central metaphor. Most political theory oscillates between the benefits of state capacity (public goods, rule of law, protection) and the dangers of state power (extraction, repression, loss of autonomy). The Narrow Corridor argues the dichotomy is false: the best outcome is not a balance between a weak state and a strong society, or vice versa, but a race in which each side develops capacity in response to the other. The state grows more capable because society demands accountability; society grows more organised because the state creates incentives for collective action. Neither side is merely a constraint on the other — each is a resource for the other’s development.

This competitive relationship is why liberty, historically, has been so unstable: it requires both elements to be present and neither to win decisively. Stateless societies (he instances pre-colonial African polities with thin populations and limited centralised authority) lack the public goods that make complex economies possible. Despotic states (the Ottoman Empire, Tsarist Russia, Qing China at various moments) have capacity but no societal check. The corridor demands both and is easily lost.

Germanic assembly politics and the roots of European liberty

Asked what the best pre-existing predictor of entering the corridor is, Acemoglu names two prerequisites: mobilised society with traditions of political participation, and an institutional legacy for how state administration is run. He illustrates with the puzzle of European exceptionalism — why did representative institutions take strongest root in Europe?

His answer: it was not Christianity, not Greco-Roman heritage per se, and not geography. It was the collision between the Germanic tribes’ deep norms of assembly politics — chiefs temporarily appointed during wartime, decisions taken collectively in open assemblies, the explicit expectation that authority must answer to the governed — and the surviving Roman administrative apparatus. The Merovingians and Carolingians who created early medieval Europe brought no high human capital and no theological sophistication, but they brought political norms that Julius Caesar and Tacitus had already noted with astonishment.

Cowen’s pushback — that Christianity introduced individualism, the conciliar movement, and ideas of personal dignity that drove political liberalisation — Acemoglu addresses through the counter-case of Byzantium. The Eastern Roman Empire had stronger Christian institutions, better-preserved Roman bureaucracy, and higher continuity of learning than the West, yet produced no comparable liberty tradition. The missing ingredient was the bottom-up, participatory element. In Byzantium, state and church reinforced each other from the top down; there was no Germanic assembly tradition to resist and contest.

China: the despotic innovation experiment

Acemoglu treats China as the most interesting contemporary test of his framework. Early Chinese growth in the 1980s and 1990s, he argues, was not unusual — it mirrors the Prussian, Russian, and Soviet growth patterns of removing the most inefficient regulations, rationalising state enterprises, and allowing some private entry. What is genuinely unprecedented is Xi Jinping’s attempt to combine tightening authoritarian control with systematic pursuit of technological leadership.

Every previous despotic state, Acemoglu notes, has tried to absorb and use technology — but none has tried to generate it at the frontier while suppressing the social and epistemic conditions that frontier innovation requires. He expects the experiment to produce genuine but bounded results: China will have real capacity in applied technology and in areas where the state can direct large resources at defined targets. But the radical innovations that come from individual experimentation, risk-taking, and the freedom to fail in public — the kind that produced the internet, biotechnology, and the smartphone — require an institutional environment that the Chinese Communist Party’s model is structurally unable to provide.

Liberty as process: women, caste, and the incomplete corridor

Cowen raises women’s autonomy as a complication — Victorian Britain counted as inside the corridor even as women lacked the vote and basic property rights. Acemoglu’s answer is that liberty is not a state but a process. The corridor does not guarantee universal freedom; it provides the contested institutional space in which social hierarchies are challenged and eroded one by one. Women’s political and economic freedom expanded, in his account, not because men eventually decided to be generous, but through organised political pressure and — critically — parallel cultural-norm change. Getting the vote was necessary but not sufficient; the deep discrimination that persisted in employment and family law took decades of further norm change to shift.

On the Indian caste system, Cowen notes that India is richer than Pakistan and Bangladesh, so the caste system cannot be the dominant factor. Acemoglu’s reply: Pakistani Muslims were part of the same caste-shaped social hierarchy and inherited the most feudal land-tenure arrangements of the subcontinent. On Guatemala versus Costa Rica, he defends the institutions-over-ethnicity interpretation: in the mid-19th century the two countries were similar; the divergence came from how each responded to the new economic opportunities created by the coffee trade. Guatemala’s existing landowning class doubled down on coercive labour extraction of indigenous people; Costa Rica’s relative land scarcity pushed toward smallholder agriculture. The income gap between indigenous and non-indigenous Guatemalans today reflects a century and a half of unequal political economy, not an underlying ethnic endowment.

Country picks and the limits of prediction

Asked which countries he would be bullish on, Acemoglu names Uruguay and Chile in Latin America — both have made durable investments in both bottom-up political participation and functional state institutions, despite deep inequality in Chile’s case. Ethiopia he mentions as one to watch: decades of brutal dictatorship overlay a state-institution tradition stronger than most of sub-Saharan Africa, and Abiy Ahmed’s early attempts to open political space were, at the time of recording, promising. Lagos he cites as an instructive micro-case of the corridor in action: a city that was a byword for chaos in which successive governors learned that promising better services in exchange for better civic monitoring was politically viable — and delivered.

He is candid about the limits of prediction. The framework identifies fault lines and comparative advantages but cannot forecast individual crises, leadership quality, or the precise timing of transitions. Nigeria’s ethnic and regional complexity makes top-down development strategies unlikely to work; Rwanda and Ethiopia’s stronger state-institution traditions give them a different option set. But even that is a tendency, not a forecast.

Related

• What Makes Economies Grow — theme; Acemoglu anchors the institutions camp (the narrow corridor; geography is a proxy, not a cause) and the live forecast that China’s authoritarian innovation push falls short
• Daron Acemoglu — speaker; MIT economist, Nobel laureate, co-author of Why Nations Fail and The Narrow Corridor
• Tyler Cowen — host
• Joe Studwell on Africa, Asia, and What Development Actually Requires — related episode on development economics; Studwell and Acemoglu share the institution-over-geography framing