Improving the Prosperity of First Nations: Lessons From Two Nobel Laureates in Economics

Commentary

Many Western Canadians, especially those in rural areas, could answer this question: “If you were blindfolded and dropped off on a First Nation or a Hutterite colony, would you know where you were if you did not see any people?”

While the question and possible answers may be considered politically incorrect, to most Westerners, the answer seems apparent.

In a First Nations community, one might find dilapidated, overcrowded houses, potholes in the roads, and unkempt, flea-infested dogs roaming around. In contrast, a Hutterite colony would exhibit well-kept houses, maintained barns and workshops, large gardens, and well-cared-for animals.

When these two communities are in close proximity, the differences cannot be solely attributed to geography, soil conditions, or weather. So what could be the determining factor?

The answer lies in the book “Why Nations Fail: The Origins of Power, Prosperity, and Poverty” by Daron Acemoglu and James A. Robinson. This book, cited by the Nobel Committee in awarding them the Nobel Prize in Economics, explores the reasons behind the varying levels of prosperity and poverty in different communities.

The theory they present is straightforward: some communities have extractive economic and political cultures, while others have inclusive ones. Inclusive communities have institutions that protect property rights, foster relationships, and encourage investments, leading to job creation. On the other hand, extractive communities exploit resources from the masses, lack property rights protection, hinder economic and political development, and face scarcity of jobs.

In inclusive communities, power is distributed widely with a central authority ensuring public safety, whereas in extractive communities, power is concentrated among a few who use it for personal gain, leading to resentment and instability.

Although no community is perfect, inclusive communities foster opportunities and healthy competition, while extractive communities perpetuate a cycle of resentment and unhealthy competition. Acemoglu and Robinson emphasize that communities can transition from extractive to inclusive institutions through critical junctures such as epidemics, conflicts, or policy changes implemented by leaders.

Communities must assess their existing institutions and tailor strategies to progress towards inclusivity and prosperity. Acemoglu and Robinson’s work highlights the importance of understanding and transforming economic and political cultures for sustainable development.

Canadians hope for a future where both First Nations and Hutterite colonies embody inclusivity, prosperity, and safety. Indigenous communities can learn from “Why Nations Fail” to create institutions that facilitate economic growth and well-being.

Rodney A. Clifton, Professor Emeritus at the University of Manitoba and Senior Fellow at the Frontier Centre for Public Policy, co-edited the book “From Truth Comes Reconciliation: An Assessment of the Truth and Reconciliation Commission Report.”

Opinions expressed in this article are solely those of the author and do not necessarily reflect the views of The Epoch Times.