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Max Borders: Nation-Building or Gene-Splicing? ^ | June 1, 2006 | Max Borders

Posted on 06/01/2006 12:13:25 PM PDT by Tolik

iraq-dnaPerhaps the key to nation-building is not to "build" a nation at all, but allow it to emerge spontaneously from vital institutions. But can institutions be transplanted?

With the formation of the new Iraqi government, it's a good time to take stock -- not just of the current situation, but of the very idea of nation building.

Many people who read this publication are familiar with the concept known as spontaneous order. The economist Friedrich Hayek pointed out it's the kind of economic and social order that emerges without central planning. Indeed, such order cannot be planned because it is far too complex. The wealth of nations cannot be planned. Neither can nations themselves.

Such ideas underlie one of the primary critiques of "nation-building" -- that it is impossible because it requires central planning, which almost always fails. For example, of nation-building, political scientist Gus di Zerega writes: "I think it is criminal, immoral, and hideous. Here I take my Hayekianism pretty seriously. Societies cannot be easily molded, the task is too complex, local knowledge is too important."

Negative Spontaneous Orders

But while recognizing the importance of spontaneous order, perhaps it is sometimes forgotten that there are such things as negative spontaneous orders. For any organic network of incentives and interests that arises from agents interacting in complex ways, there may be an evil twin. Although power in illiberal states is often largely consolidated and centralized, organic networks of incentives and interests are still the rule here, too -- except these networks are maintained by a complex system of patronage, payoffs, theft and fear.

Negative spontaneous orders are today found all over the world, particularly in Africa, Central Asia and the Middle East. And these have a way of sticking around, particularly in the humus soil of foreign aid. Dangerous or failed states, with their legions of poor, emerge like an ergot in the garden of human possibility.

Whatever we think about nation building, we should all be able to agree that both positive and negative spontaneous orders can and do emerge. A key question becomes: from what do they emerge? Institutions, where institutions are, roughly speaking, the internal rule-sets by which a country operates. And there are good institutions and bad institutions.

So -- like cancers -- dangerous, corrupt, poor, inhumane, confiscatory, and even homicidal states occupy a great swath of the world. The reason for the persistence of negative spontaneous orders is that endogenous institutional change, such as revolution, is both difficult and rare. In addition they persist because spontaneous orders -- positive and negative -- follow their own logic.

Neither type of order has a telos or end, but each has an interest, metaphorically speaking, in its own furtherance, its own survival. Orders, as organisms in their own right, don't care about rights, democracy, prosperity or liberty. Like the processes of evolution, the order's logic is blind, largely internal, and indifferent to the temporal wishes of human actors. That's because deeply entrenched incentive-structures keep any order in place, and in the negative cases, allow predatory leaders and their cronies to suppress dissent and protect their interests -- interests that extend through an entire system of venality. And this is in large measure why we should be concerned about negative spontaneous orders wherever they fester.

Threats to Extended Order

Many critics of nation-building exercises are virtually silent on the question of what to do about negative orders, except to say "let them alone." After all, as John Quincy Adams's admonished: "[America] goes not abroad, in search of monsters to destroy. She is the well-wisher to the freedom and independence of all. She is the champion and vindicator only of her own."

There may be a kernel of truth in Adams's remark. But it has been distorted by critics of nation-building so as to downplay the global interconnections that hold the potential to turn monsters abroad into monsters at home.

If we accept that negative orders follow their own brutal logic of self-perpetuation, we are left with the difficult, rather imperfect job of determining whether those negative orders threaten our own extended order. This is no easy task. But, as globalization pulls both possibilities and problems to our shores, they are very much ours to reckon with.

Neoconservative thinkers have long urged that we should be concerned with the 'moral fabric' of various regimes. What they may clumsily or vaguely have been pointing to are the orders that extend from bad institutions, formal and informal. Failed states and dangerous regimes, while they may not be prosperous and free, often still have a growth trajectory. Such growth will have ramifications for our extended order, whether we want to admit it or not. So while neoconservative concern for the moral makeup of dangerous and failed states may strike the Hayekian ear as somewhat dissonant, we have good reason to listen to their intonations.

Transplantation Is Possible

So what is to be done?

Here's where global strategist and author Thomas P.M. Barnett says it best: we don't have time to sit around and let failed states fester. The United States, for better or worse, is in a position to reverse negative spontaneous orderings through the application of military and other forces. We have a "Leviathan" force that is unequaled on the earth. And we have a deep knowledge of the vital institutions that foster peace and prosperity.

Where I disagree with Barnett is on the question of what comes after a regime change. In a recent article about his book, I emphasized institution-building over nation-building. Barnett responded by saying institution- and nation-building are merely a difference of degree, not of kind, asking: "what is a nation but a collection of institutions?" His response suggests I failed to give enough definition to my intended sense of institutions. Barnett challenged me to tackle the "'how' answers, not just the 'how not' summaries of past experience." And he's right. It's critical not just to clarify what institutions are, but to determine whether or not they can be transplanted.

On the point of clarification, formal institutions are socio-economic arrangements that bring down the costs of transacting, cooperating, and exchanging. These institutions enable people to interact more freely for mutual benefit and mutual gain, are necessary for prosperity, and ensure checks on the growth of both government and interest groups. Examples are: property rights, individual rights, separation of powers, third-party dispute resolution, suffrage, the common law, contract enforcement, finance/banking, and security.

Enthusiasts of economic history can go back through the literature and see which societies flourished and which did not according to the de facto rule-sets of a relevant era. Most of the time, institutions evolved through time. In some instances, however, they have been transplanted.

While Barnett comes from the 'send in the technocrats' side of the debate, TCS Daily's Arnold Kling comes from the 'don't send in anybody' side. Kling recently wrote: "But [...] institutions are not pre-requisites for modernization. They are results."

Kling then encouraged those engaged in the debates over institutions and nation-building to engage the arguments he fleshed out in an article titled "Group Power." The crux of Kling's position in "Group Power" is that institutions themselves are the result of endogenous evolution, not exogenous force. Thus, institution-building in Iraq won't work. What comes out of this and similar points is a general critique of nation-building based on the theoretical inability to create democracy by force and fiat.

But does this critique get it exactly right?

Consider this passage about Hong Kong by the Cato Institute's James Dorn:

Hong Kong's institutions -- its set of formal and informal rules -- ultimately are shaped by the ethos of society. Hong Kong's ethos of liberty has created a dynamic spontaneous order. Free trade and limited government have provided the opportunities for millions of individuals to use their natural talents to produce a better life for themselves and their families.

Now, here's the paradox: our admiration of Hong Kong must terminate in our admiration of an empire. Without Britannia -- with it's free-trade policies and its Common Law legal institutions -- Hong Kong might have remained a rather desolate rock. The "ethos" to which Dorn refers coevolved with institutions after a sudden rule-change. In other words, it took the forceful British territorial annexation of Hong Kong after the First Opium War in the mid-1800s to create a major center of commercial activity by 1900, and one of the world's most prosperous cities by 1997, when it was returned to the Chinese. Institutions are shaped by the ethos, yes -- but the reverse is also true.

Societal DNA

So history suggests institutional transplantation is possible -- albeit very difficult. What is it about institutions that makes transplantation possible?

Institutions are like the DNA of a society. Healthy DNA, when expressed, serves as the blueprint for a healthy organism. Likewise, healthy institutions, when in place, allow millions of individual actors to engage in cooperative, mutually beneficial behaviors, the stuff of peace and prosperity. But mutant DNA can create cancer cells. Saddam's Iraq, Mugabe's Zimbabwe and Stalin's Russia have (or had) mutant institutions. And pathologies can threaten to spread.

What's more, while institutions can and usually do develop or evolve over time -- much in the same way that DNA evolved from auto-catalytic processes and from simpler amino acids, and these from yet simpler molecules -- once genes are understood and isolated, they can be transplanted, or "spliced."

This genetic analogy suggests the presence of a rule-set[1], and actors in a given situation will find it beneficial to play by a rule-set or not. They are more likely to comply with new rules if there are positive, self-reinforcing incentives to do so (as well as harsh consequences of non-compliance). The more Iraqis come to understand the incentives generated by positive rule-sets, the more likely positive orders will emerge. But this may require a period of adjustment.

The Iraq Experiment

Iraq, then, may not turn out as we hope. If what the US military and its postwar reconstruction partners hope to achieve is institutional transplantation, then we will have to expect that, sometimes, a host will reject the transplant. With a respectful nod to Arnold Kling's view, informal institutions (culture, religion, believes, mores, etc.) may not be at a stage in which the populace is ready to accept a new system of formal rules.

In the case of Iraq, however, it appears the vast majority of citizens are ready to embrace their new institutions. One need only look at the successful democratic elections and public opinion polls of Iraqis to see they are ready for change. (Only a small minority of terrorists and disaffected ba'athists is making it difficult and they will have to be captured, killed or reabsorbed via positive incentives.)

This transplantation effort requires both patience and vigilance as we wait for the right kinds of orders to emerge from societal DNA sufficient for a healthy society. If Iraq is conceived as a pity party that requires more resources, more shiny new schools and more dependency, the effort will fail and its new leaders will be corrupted. But if Iraq focuses on incorporating simple systems like security, titled property, and dispute resolution, among others, then they may yet have the ingredients for success.

Nevertheless, a postwar reconstruction effort need not involve massive infusions of resources, manpower, or technical assistance -- particularly if these will make the country dependent. Instead, institutional transplantation requires finding those positive incentive structures that allow for the alignment of interests and a commitment to security. By and large, this is what the US seems to be going after in Iraq.

On the questions of nation-building, we must look for answers in both theory and practice. In practice, it looks like the Iraq adventure has, if nothing else, shaken up the status quo. Of course, the status quo for Iraq was changed abruptly at the hands of a powerful force. Now it looks like a proto-democracy has taken form, and the Iraqi people seem keen to enter into the modern world. But ripple-effects for the wider Middle East are noticeable, as well. So while democracy may not be possible through simply invading and making pronouncements, it may be possible to unleash new ordering forces via temporary social disruption and institutional transplantation.

The degree to which the shakeup brings an adjustment period of chaos and disunity may actually relate directly to the speed with which a population can adapt to the new rules, as well as the speed with which the people's sentiments (Dorn's "ethos")[2] align with the adaptation. In the case of Iraq, the understanding of democracy and freedom is starting to converge with the process of adapting to the new institutions. On the timescale of history, this has happened pretty quickly.

Success or failure in Iraq cannot be predicted by a priori theories of evolved institutions and spontaneous order alone. Rather, we must learn from our mistakes, tally up our gains, and maintain a level of cautious optimism in the face of a protracted struggle for real institutional change in the region. The rest depends on the mysterious forces deep in the hearts of Iraqis, a place unreachable by pundits of any stripe.

Max Borders is Managing Editor of

[1] A particularly good book on rules and rulesets is The Reason of Rules by Geoffrey Brennan and James Buchanan.
[2] New Institutional Economists' informal institutions.

TOPICS: Culture/Society; Editorial; Foreign Affairs; War on Terror
KEYWORDS: hongkong; iraq; maxborders; nationbuilding

1 posted on 06/01/2006 12:13:27 PM PDT by Tolik
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To: Lando Lincoln; quidnunc; .cnI redruM; Valin; King Prout; SJackson; dennisw; monkeyshine; ...

Verrrry Interesting!

This ping list is not author-specific for articles I'd like to share. Some for the perfect moral clarity, some for provocative thoughts; or simply interesting articles I'd hate to miss myself. (I don't have to agree with the author all 100% to feel the need to share an article.) I will try not to abuse the ping list and not to annoy you too much, but on some days there is more of the good stuff that is worthy of attention. You can see the list of articles I pinged to lately  on  my page.
You are welcome in or out, just freepmail me (and note which PING list you are talking about). Besides this one, I keep 2 separate PING lists for my favorite authors Victor Davis Hanson and Orson Scott Card.  

2 posted on 06/01/2006 12:15:09 PM PDT by Tolik
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To: Tolik
Nonsensical gobbleddygook.

Institutions aren't like DNA.

3 posted on 06/01/2006 12:20:52 PM PDT by tallhappy (Juntos Podemos!)
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To: tallhappy
Okay. More like Wonder Bread then? "Builds strong societies 12 ways."
4 posted on 06/01/2006 12:44:26 PM PDT by BufordP ("I am stuck on Al Franken 'cause Al Franken's stuck on me!" -- Stupid)
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To: Tolik
Interesting point of view. I don't think Hayek would quite agree with this interpretation of "spontaneous" order, though - that spontaneity is in reality an uncoordinated reaction to a specific set of economic conditions. Provide the conditions and you'll get the reaction.

And that's really a fair working description of the act of instituting democracy in Iraq. The incentive is simple - no single one of the contending groups has sole control over oil extraction, shipping, and refinement, and hence the response of groups who have every other reason to contend will - in theory - trend in the direction of maximizing each individual's self-interest. Very Hayekian.

Of course, some folks would rather kill than be rich. Some others - a fair number, it would appear - would rather kill them than see them become rich. That's the opposite dynamic, and which one proves the more persuasive is still very much in the air. IMHO, of course.

5 posted on 06/01/2006 1:32:27 PM PDT by Billthedrill
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To: Tolik is sometimes forgotten that there are such things as negative spontaneous orders. For any organic network of incentives and interests that arises from agents interacting in complex ways, there may be an evil twin.

This sentence -- as a stand alone is more insightful than most books... Stunning - real out of the box thinking.

6 posted on 06/01/2006 1:45:34 PM PDT by GOPJ ("What we have learned from history is that we haven't learned from history." B.Disraeli)
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To: Tolik
The reason for the persistence of negative spontaneous orders is

an incentive pattern of short term gain -- long term disaster. It's the most destructive human paradigm - one that includes every type of addictive behavior -- gambling, drug addiction, violence, etc. The cool thing? Incentives can be discovered and switched ... as in welfare reform.

7 posted on 06/01/2006 1:52:00 PM PDT by GOPJ ("What we have learned from history is that we haven't learned from history." B.Disraeli)
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To: Billthedrill; GOPJ

I also was pondering (silently) about societies as self-organizing systems. So, there is no surprise that I liked the article.

There are some important points worth repeating: a tyrannical society can be internally stable (at least for a quite long time) and even worth, have a tendency to metastasize. It can then get on a collision course with us, and we, contrary to not-interventionists of all stripes, are not free to ignore it.
On a positive note, transplanting our successful institutions while is not easy or guaranteed with success is nevertheless possible and did happen in the past.

8 posted on 06/01/2006 6:38:22 PM PDT by Tolik
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To: Tolik
...a tyrannical society can be internally stable...

Absolutely. Police states in particular have internal stability as their principal objective and tend to be very effective in maintaining it. I cite Cuba, Iran, North Korea, Nazi Germany, and the Soviet Union as examples.

These aren't, though, examples of spontaneous order, rather of order imposed from the top and maintained by ruthless suppression of those elements that in a more open society might constitute a threat to control. Each of these is a paragon of economic inefficiency and individual immiseration. In a normal competitive marketplace they were, or are, losers, which is one reason that all resorted to violence and the threat of violence as primary instruments of state policy.

And because of these internal stabilities they are notoriously difficult to overthrow. Successful popular revolutions on the French or Russian models depend on a ruling class that has lost its will or its ability to maintain that stability by force. To a degree that was true of Iran under the Shah. It is not true of Iran under the Ayatollahs. Yet.

9 posted on 06/01/2006 7:03:04 PM PDT by Billthedrill
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To: Billthedrill

There was a saying that the Russian Tsar was the greatest revolutionary - so pathetic and self-defeating his rule was, he practically begged to be overthrown.

Lenin defined 3 necessary conditions for the revolution to occur: tops can't rule like before, bottoms don't want to live like before, and their misery is so bad, they are ready for action. The last one prompted Lenin to declare "the worth is the better" ( meaning that worsening of conditions for workers was beneficial as fodder-maker for the revolution). He was ruthless evil genius, but a brilliant strategist and tactician, that's for sure. It was also contrary to Marx teaching that a developed capitalism is a necessary precursor for socialism, so Marxism v1.0 was upgraded to Leninism v2.0

How it applies to now and here? As you said, the tyrannical system are terribly inefficient, so they are doomed to lose. Eventually. Maybe after many years of agony. In the mean time, thanks to technological advances and the world getting smaller, the maniacs with only fraction of real power that Hitler and Stalin had can hurt us more surely and more painfully. There is no good way to hide from them. Confronting them is the only solution.

Unfortunately, instead of debating what is the best way to destroy them, we have a huge proportion of the West believing that Bush is a bigger threat to the free world than Saddam, or Iran, or various jihadists.

10 posted on 06/01/2006 8:04:29 PM PDT by Tolik
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To: Tolik

worth=worse (spellcheck better!)

11 posted on 06/01/2006 8:06:12 PM PDT by Tolik
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