Daron Acemoğlu Quote

The situation was similar in the Soviet Union, with industry playing the role of sugar in the Caribbean. Industrial growth in the Soviet Union was further facilitated because its technology was so backward relative to what was available in Europe and the United States, so large gains could be reaped by reallocating resources to the industrial sector, even if all this was done inefficiently and by force. Before 1928 most Russians lived in the countryside. The technology used by peasants was primitive, and there were few incentives to be productive. Indeed, the last vestiges of Russian feudalism were eradicated only shortly before the First World War. There was thus huge unrealized economic potential from reallocating this labor from agriculture to industry. Stalinist industrialization was one brutal way of unlocking this potential. By fiat, Stalin moved these very poorly used resources into industry, where they could be employed more productively, even if industry itself was very inefficiently organized relative to what could have been achieved. In fact, between 1928 and 1960 national income grew at 6 percent a year, probably the most rapid spurt of economic growth in history up until then. This quick economic growth was not created by technological change, but by reallocating labor and by capital accumulation through the creation of new tools and factories. Growth was so rapid that it took in generations of Westerners, not just Lincoln Steffens. It took in the Central Intelligence Agency of the United States. It even took in the Soviet Union’s own leaders, such as Nikita Khrushchev, who famously boasted in a speech to Western diplomats in 1956 that we will bury you [the West]. As late as 1977, a leading academic textbook by an English economist argued that Soviet-style economies were superior to capitalist ones in terms of economic growth, providing full employment and price stability and even in producing people with altruistic motivation. Poor old Western capitalism did better only at providing political freedom. Indeed, the most widely used university textbook in economics, written by Nobel Prize–winner Paul Samuelson, repeatedly predicted the coming economic dominance of the Soviet Union. In the 1961 edition, Samuelson predicted that Soviet national income would overtake that of the United States possibly by 1984, but probably by 1997. In the 1980 edition there was little change in the analysis, though the two dates were delayed to 2002 and 2012. Though the policies of Stalin and subsequent Soviet leaders could produce rapid economic growth, they could not do so in a sustained way. By the 1970s, economic growth had all but stopped. The most important lesson is that extractive institutions cannot generate sustained technological change for two reasons: the lack of economic incentives and resistance by the elites. In addition, once all the very inefficiently used resources had been reallocated to industry, there were few economic gains to be had by fiat. Then the Soviet system hit a roadblock, with lack of innovation and poor economic incentives preventing any further progress. The only area in which the Soviets did manage to sustain some innovation was through enormous efforts in military and aerospace technology. As a result they managed to put the first dog, Leika, and the first man, Yuri Gagarin, in space. They also left the world the AK-47 as one of their legacies. Gosplan was the supposedly all-powerful planning agency in charge of the central planning of the Soviet economy.

Daron Acemoğlu

The situation was similar in the Soviet Union, with industry playing the role of sugar in the Caribbean. Industrial growth in the Soviet Union was further facilitated because its technology was so backward relative to what was available in Europe and the United States, so large gains could be reaped by reallocating resources to the industrial sector, even if all this was done inefficiently and by force. Before 1928 most Russians lived in the countryside. The technology used by peasants was primitive, and there were few incentives to be productive. Indeed, the last vestiges of Russian feudalism were eradicated only shortly before the First World War. There was thus huge unrealized economic potential from reallocating this labor from agriculture to industry. Stalinist industrialization was one brutal way of unlocking this potential. By fiat, Stalin moved these very poorly used resources into industry, where they could be employed more productively, even if industry itself was very inefficiently organized relative to what could have been achieved. In fact, between 1928 and 1960 national income grew at 6 percent a year, probably the most rapid spurt of economic growth in history up until then. This quick economic growth was not created by technological change, but by reallocating labor and by capital accumulation through the creation of new tools and factories. Growth was so rapid that it took in generations of Westerners, not just Lincoln Steffens. It took in the Central Intelligence Agency of the United States. It even took in the Soviet Union’s own leaders, such as Nikita Khrushchev, who famously boasted in a speech to Western diplomats in 1956 that we will bury you [the West]. As late as 1977, a leading academic textbook by an English economist argued that Soviet-style economies were superior to capitalist ones in terms of economic growth, providing full employment and price stability and even in producing people with altruistic motivation. Poor old Western capitalism did better only at providing political freedom. Indeed, the most widely used university textbook in economics, written by Nobel Prize–winner Paul Samuelson, repeatedly predicted the coming economic dominance of the Soviet Union. In the 1961 edition, Samuelson predicted that Soviet national income would overtake that of the United States possibly by 1984, but probably by 1997. In the 1980 edition there was little change in the analysis, though the two dates were delayed to 2002 and 2012. Though the policies of Stalin and subsequent Soviet leaders could produce rapid economic growth, they could not do so in a sustained way. By the 1970s, economic growth had all but stopped. The most important lesson is that extractive institutions cannot generate sustained technological change for two reasons: the lack of economic incentives and resistance by the elites. In addition, once all the very inefficiently used resources had been reallocated to industry, there were few economic gains to be had by fiat. Then the Soviet system hit a roadblock, with lack of innovation and poor economic incentives preventing any further progress. The only area in which the Soviets did manage to sustain some innovation was through enormous efforts in military and aerospace technology. As a result they managed to put the first dog, Leika, and the first man, Yuri Gagarin, in space. They also left the world the AK-47 as one of their legacies. Gosplan was the supposedly all-powerful planning agency in charge of the central planning of the Soviet economy.

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About Daron Acemoğlu

Kamer Daron Acemoğlu (Turkish: [daˈɾon aˈdʒemoːɫu]; born September 3, 1967) is a Turkish-born American economist who has taught at the Massachusetts Institute of Technology since 1993, where he is currently the Elizabeth and James Killian Professor of Economics. He received the John Bates Clark Medal in 2005, and was named an Institute Professor at MIT in 2019.Born to Armenian parents in Istanbul, Acemoglu received a BA from the University of York in 1989, and a PhD from the London School of Economics (LSE) in 1992. He lectured at LSE for a year before joining the Department of Economics at the Massachusetts Institute of Technology. He was awarded the John Bates Clark Medal in 2005. Acemoglu is best known for his work on political economy. He has authored hundreds of papers, many of them with his long-time collaborators Simon Johnson and James A. Robinson. With Robinson, he co-authored the books Economic Origins of Dictatorship and Democracy (2006) and Why Nations Fail (2012). The latter, an influential book on the role that institutions play in shaping nations' economic outcomes, receive wide scholarly and media attention. Described as a centrist, he believes in a regulated market economy. He regularly comments on political issues, economic inequality, and a variety of specific policies.
Acemoglu ranked third, behind Paul Krugman and Greg Mankiw, in the list of "Favorite Living Economists Under Age 60" in a 2011 survey among American economists. In 2015, he was named the most cited economist of the past 10 years per Research Papers in Economics (RePEc) data. According to the Open Syllabus Project, Acemoglu is the third most frequently cited author on college syllabi for economics courses after Mankiw and Krugman.