According to Acemoglu’s thesis, when a nation’s institutions prevent the poor from profiting from their work, no amount of disease eradication, good economic advice or foreign aid seems to help. I observed this firsthand when I visited a group of Haitian mango farmers a few years ago. Each farmer had no more than one or two mango trees, even though their land lay along a river that could irrigate their fields and support hundreds of trees. So why didn’t they install irrigation pipes? Were they ignorant, indifferent? In fact, they were quite savvy and lived in a region teeming with well-intended foreign-aid programs. But these farmers also knew that nobody in their village had clear title to the land they farmed. If they suddenly grew a few hundred mango trees, it was likely that a well-connected member of the elite would show up and claim their land and its spoils. What was the point?

I encountered another side of Acemoglu’s thesis during what must have been one of history’s great natural economic experiments: post-Saddam Hussein Baghdad. On April 9, 2003, the day the city was captured, one of the world’s most tightly controlled economies suddenly became a free-for-all. Amid the chaos, many former state functionaries turned into entrepreneurs. Nearly every engineer from the ministry of housing, it seemed, had opened his own construction company. Satellite TVs, once illegal to all but a very small elite, were sold on every major street. Under Hussein, only one company (widely rumored to be monitored by the intelligence service) offered Internet access, and it was incredibly bad and expensive. After it was gone, there were so many new Internet companies that I had far more access options then than I do today in Brooklyn.

Image Credit... Peter Oumanski

Yet the American authorities, who had not planned for this budding free market, all but destroyed it when they gave the bulk of new contracts to large companies outside the country. Often, these outsiders subcontracted to Iraqi firms with close ties to the state’s new political establishment. By the anniversary of the United States invasion, it was clear that economic success would again come from connections and corruption rather than talent and hard work. Today, Transparency International ranks Iraq as one of the most corrupt nations on earth. An Iraqi friend once told me that he had hoped we would teach the Iraqis how to be Americans. Instead, the Americans learned how to be Iraqi.

Acemoglu, Robinson and their collaborators did not come up with the idea that incentives matter, of course, nor the notion that politics play a role in economic development. Their great contribution has been a series of clever historical studies that persuasively argue that the cheesiest of slogans is actually correct: the true value of a nation is its people. If national institutions give even their poorest and least educated citizens some shot at improving their own lives — through property rights, a reliable judicial system or access to markets — those citizens will do what it takes to make themselves and their country richer. This suggests, among other things, that instead of supporting one-off programs promoting health or agricultural productivity, the international community should focus its aid efforts on deep political and economic change.