Trump is a response to institutional failure, says Nobel winner Robinson

The laureate described the current global situation as a “crisis of the liberal model of growth" and said we need to reimagine more inclusive models of development. He also believes that the next inequality shock is coming—artificial intelligence will make it worse.

Mint caught up with him for a conversation on current economic affairs, the rise of China and India, and the next big economic puzzle. Edited excerpts from an interview:

What are the lessons from Trump undermining institutions in the past few months? Are institutions as deep rooted as they are made up to be, even in mature Western democracies?

Well, that’s not really the way I think about it. What’s going on now is a sort of backlash against the failure of institutions. I don’t think the right picture to have in your mind is that there are these wonderful institutions that President Trump is trying to undermine. The institutions in the US have not generated shared prosperity over the last 50 years. If you look at the real wages of people who did not complete college, which is the majority of the people in the US, they’re lower now than they were 50 or 60 years ago. This is a staggering fact about the failure of institutions to be inclusive. Economic institutions failed to adjust to globalization, to technical change, computerization, changes in the labour market. It’s unbelievable that 85% of people in a Pew poll last year said that elected politicians don’t care about people like me. I think President Trump is a response to institutional failure, not the source of institutional failure. His very personalistic way of operating—the reason he can do that is because there is so little trust and belief in the institutions.

Is this decline in public trust in governments and the attacks on democratic processes a symptom of institutions not being inclusive enough?

Yes. I think this US model of inclusions fell apart in the last 50 years, and it needs to be rebuilt in some way, or reconstructed on some new basis. On what basis? I don’t know. We don’t really see that at the moment, but I think it's inevitable. Actually, what happened is inevitable as the previous situation was just unsustainable. The political class was completely out of touch with what was going on. President Biden had no idea what was going on in the country. My favourite example is one of his flagship policies—spending billions of dollars forgiving student loan debt. These are the winners in the US in the last 50 years. So, you’re handing out billions of dollars to the winners from all of this. So how does that make any sense whatsoever? And President Trump… somehow he knew there were all these grievances and unhappiness and he could build this coalition around that.

Do you see parallels in other parts of the world?

Yes, and no. Samuel Huntington, the political scientist, 35 years ago, showed that, if you look historically, democracy goes in waves. Countries democratize, sort of together, and then you get a reverse wave. When countries democratize, people expect the world. They think democracy will change their lives, transform society. But, democracy in a country with clientelistic politics and very weak state institutions, does not transform people’s societies, and people are disillusioned. And I think that disillusionment is common, whether it’s in the US, whether it’s in the Philippines, whether it’s in Brazil. And then people look for an alternative. And then all sorts of models come on to the table. Realistic models and unrealistic models.

The global fragmentation which is happening right now… do you see it as kind of inevitable?

I think it’s inevitable in the sense that globalization had all of these negative distributional consequences that nobody did anything about. Most people in the US have not benefited at all from globalization. So, why would you want to defend it politically? It’s not surprising at all that the US is retreating from globalization because President Trump’s core supporters have not benefited at all from it. Of course, the rich have, and the elites have. Is that true everywhere in the world? No, of course not. Think about China. Think about India. Greater integration in the world economy has pulled millions of people out of poverty. So, the kind of benefits have diffused much more broadly.

But, my sense is that the big problem for globalization now is really coming from this. What’s going on in the US? I think China, Korea, like most places, are still committed to globalization. But the US can make a democratic decision to withdraw from the global economic order. And then one could just move on without it. This could happen. I mean, look at the Soviet Union. The Soviet Union didn’t take any part in the global quarter. But still, globalization boomed after the Second World War. So, the world moves on.

How do you view the global response to challenges like climate change? Does it reinforce or challenge your conviction on the primacy of institutions?

That’s a very difficult problem to solve. Climate change, in some sense, needs new institutions, global institutions. And the authority of those global institutions is sort of under threat at the moment. That’s a problem. When I think about the US political economy, some issues are less visceral…like tariffs, for example. I don’t think President Trump likes tariffs… he’s not ideologically committed to having tariffs. And I think this issue of global warming and environmental problems, ultimately, that’s sort of the same…I don’t see a kind of ideological commitment to that (climate change) in the same way as there is an ideological commitment to restricting immigration. Yeah, I think it’s a pretty bleak moment.

In your book, The Narrow Corridor (published in 2019), you present India as a democracy, with a deeply fragmented society, unable to build state capacity. Has your view changed?

I am not an expert on India, but we wanted to say something about India’s trajectory and what people thought were puzzles about India. Once you start reading Indian history, the first thing you realise is it’s not at all a puzzle that India has had democracy since independence, because it had thousands of years of democratic history. But, of course, we also talk about the caste system (and we quote Dr Ambedkar) and how, in some sense, the kind of cultural system that was created in India is a fundamental barrier to inclusion, in just the way he described.

I am not an expert on Indian society, but, for example, there’s very recent research by economists studying the impact of the caste system, which suggests that it’s still an extremely powerful mechanism in the labour market, which is impeding social mobility, which is impeding talent getting ahead. In order to have a more effective state, society also has to kind of get more effective. So, for all of the optimism about India, and obviously, you know, since the 1990s there’s been economic growth, it seems India still performs wildly below its potential because there are still those fundamental cultural impediments to economic development. But cultures change and culture adapts. That’s not for me to say— it’s for Indians to decide what sort of society they want to live in. That’s how we try to analyse the sort of success of India, but (also) the failure relative to its potential.

Both your books and research place a heavy emphasis on history. For a democracy which is trying to build more inclusive institutions, which historical lessons are the most important?

I tend to think very historically about everything. You think about South Korea… It is absolutely fascinating. It went from an extremely poor country in the 1960s to like an OECD country within a generation—just an incredible transformation, cultural, social… In 1970, 10% of South Korean exports was human hair…those examples are so fascinating, because you think, well, if South Korea can do that, why can’t India or Myanmar or some African country?

But, if you ask me, okay, what’s the South Korean model, I can describe some things that they did, but I don’t know if that would work anywhere else. That’s the problem from my perspective. Social sciences, economics even, are very embedded in a cultural and political and social context. And it’s not just a matter of taking some economic policy and saying, the Koreans did this. They subsidized exports. If you just subsidize exports, the same thing is going to happen. No, we’re lacking understanding on that kind of level in social science.

What about China? It fell outside your model but later you said you believe that it will run out of steam sooner rather than later.

If you look at world history, power tends to corrupt and absolute power corrupts absolutely. That’s our sort of view on China. And now what you have is this personalistic dictatorship. You could say China is different culturally, so those rules don’t apply. Well, remember the Cultural Revolution, where absolute power corrupted absolutely. So, I still believe the Chinese model will go off the rails. But, it’s an interesting discussion. If you look at the history of the Chinese state, or you look at Chinese political philosophy, Confucianism, it’s very different from Western ideas about the state and legitimate governance, how you kind of create all the governance and society. I’m not sure there’s any lessons for another country, because it’s so embedded in that culture.

But culture is not really an explanation you accept, isn’t it?

Well, in Why Nations Fail, we don’t talk about culture, but now I would say I would talk about culture. But I think social scientists have studied culture very badly. There’s a lot of work to do in terms of conceptualising culture. When I trained as an economist, economics was just a bunch of equations and supply and demand and markets and things like that. It was only when I wanted to understand the world, and I started working in developing countries, that I realised I can’t explain any of this unless I start bringing things into the theory. So, the first things we tried to bring into theory were politics and political institutions. Now, I think the role of ideas is enormously underestimated in social science. It’s much too materialist. I don’t know who to blame for that, Karl Marx or Adam Smith. I still think power and politics is important, but it’s not the only thing.

We are seeing massive investments in artificial intelligence (AI). From an institutional perspective, what do you think is the greatest danger? Do you see it perpetuating inequality?

Absolutely, it’s going to drive inequality through the roof. Who’s going to get access to this? Because if you look at where the investments are happening, it’s already in the rich countries who could afford all this investment in power and data centres. That’s going to lead to huge productivity improvements in rich countries. How is that going to happen in (say) Nigeria? You know, it’s not. Also, within developed countries, it’s going to lead to a huge increase in inequality. Who owns the robots? Who owns self driving cars?

What policy interventions are needed?

You need a very aggressive policy to counterbalance that. But that’s not going to happen in the US at the moment. AI needs to be regulated. There are several layers here. One layer is inequality, this ownership. But there’s also the question of the direction of this technology. The logic of American capitalism is we’re going to use this technology to replace workers. I’ve never seen a calculation which justifies this is what we should be focusing on. But it’s going to have enormous social consequences. Innovators are not thinking through the consequences. And I’m not saying that somehow the robots are going to take over the world and we’ll all be living in the matrix. I don’t see that but the effects on wages and employment, on people’s lives, that is for real. And you know, it’s happening and it’s coming, and that I’m much more worried about.

Following the recognition of your work with the Nobel Prize, what policy shift do you hope to see globally that will give you some satisfaction that your research is being applied constructively?

I think in academia you have to just put your ideas out there, and then see what gains traction with people. If you went to an international institution like the World Bank nowadays, people are willing to talk about politics and institutions, and all sorts of things that they would never have talked about 20 years ago. That being the case, they don’t know what to do about it.

In social science, you come up with simple ways of trying to see the commonalities in the world. But once you’re in the business of actually giving advice or trying to change the world, then suddenly all those details you abstract from become extremely important. So that’s one of the reasons why my view of the world doesn’t lend itself to some simple policy advice. The way I think about the success of my ideas is more like, what are young people doing research on, what sort of questions are they asking. And also, the thing I’m most passionate about is, are young people actually trying to learn something about the world and something about other people’s societies and other people’s cultures, and kind of genuinely engaging with all of the complexity in the world.

What is the big question about the world that is currently dominating your intellectual focus?

The one thing we’ve been thinking a lot about is the role of ideas. For example, in Why Nations Fail, we talk about the Glorious Revolution, and we talk about the emergence of some kind of inclusive economic and political institutions in early modern Britain, but we never talk about John Locke’s Second Treatise of Government. It was kind of the intellectual Bible for the Glorious Revolution, a kind of landmark work in liberal philosophy. So how did we not talk about its role in creating this change? So, I think that’s what we’re sort of grappling with at the moment—how to talk about, and how to develop a framework to talk about, the role of ideas and ideology underpinning institutional equilibria.