THE developed world has a growth problem. Of 34 advanced economies, 28 had lower GDP per head in 2011 than they did in 2007. Forecasts for growth in the current year are anaemic. This sluggishness is generally perceived to be a hangover from the financial crisis of 2007 and 2008. But might the problem be structural rather than cyclical?

In their new book, “Why Nations Fail: The Origins of Power, Prosperity and Poverty”, Daron Acemoglu and James Robinson, a pair of economists, suggest that many countries are bedevilled by economic institutions that “are structured to extract resources from the many by the few and that fail to protect property rights or provide incentives for economic activity.” In contrast, “inclusive” economies distribute power more widely, establish law and order, and have secure property rights and free-market systems.

In an extractive economy, such as the Belgian Congo and its successor state, Zaire, a narrow elite seizes power and uses its control of resources to prevent social change. Such economies can achieve growth for a while, particularly when (as with the Soviet Union in the mid-20th century and, the authors argue, China today) resources are being transferred from the unproductive agricultural sector into manufacturing. But they run out of steam eventually.

The authors place the developed world in the “inclusive” category since they have, by definition, achieved economic success. But their description of extractive economies should ring one or two alarm bells in the minds of Western readers. “Because elites dominating extractive institutions fear creative destruction”, the authors write, “they will resist it, and any growth that germinates under extractive institutions will be ultimately short-lived.”

There are two potential candidates for extractive elites in Western economies. The first is the banking sector. The wealth of the financial industry gives it enormous lobbying power, including as contributors to American presidential campaigns or to Britain's ruling parties. By making themselves “too big to fail”, banks ensured that they had to be rescued in 2008.

Much of current economic policy seems to be driven by the need to prop up banks, whether it is record-low interest rates across the developed world or the recent provision of virtually unlimited liquidity by the once-staid European Central Bank. The long-term effects of these policies, which may be hard to reverse, are difficult to assess.

It is tougher to argue that the financial sector has inhibited growth in other areas of the economy. Indeed, both banks and venture-capital groups play a vital role in supporting new companies. Nevertheless, it is possible that the extremely high rewards in the financial industry might have diverted talented people away from other activities that could have helped rich economies to grow more sustainably. Furthermore, those high rewards could derive from “rent-seeking” by the financial sector, in the form of fees, charges and spreads, that have acted as a tax on the rest of the economy.

A second candidate for the extractive-elite category is the public sector. In some countries, such as Greece, there has been a clear policy of “clientelism” in which political parties have rewarded their supporters with jobs and benefits that have been funded by the general taxpayer. In the Anglo-Saxon world, public-sector employees now have more generous pension rights than the majority of private-sector workers.

An obvious objection to this line of reasoning is that there are too many public-sector employees for them to be regarded as an elite. Indeed, if you include the many recipients of social benefits, those dependent on the public purse comprise a majority of most rich-country populations. Such social policies are part of the inclusive model that Mr Acemoglu and Mr Robinson favour.

But it does seem likely that a high level of public-sector employment reduces the extent to which creative destruction occurs and new industries develop. Workers may prefer the security of government jobs to the riskiness of joining new businesses. As European governments are discovering, public-sector unions are often the most vocal in opposing the kind of labour-market reforms needed to reduce structural unemployment.

Just as a ship's hull acquires barnacles, a government naturally attracts all kinds of supplicants and subsidy-seekers. If such behaviour is unchecked, then eventually the system may grind to a halt.

Economist.com/blogs/buttonwood