The Rise and Decline of Nations: Economic Growth, Stagflation, and Social Rigidities Paperback – September 10, 1984

Mancur Olson is one of the intellectual giants of our time. He was nominated for the Nobel Prize for ground breaking work which he presented in his prior major work, "The Logic of Collective Action." This work, as with any economic theorizing that must be taken seriously by the establishment, is formal and quantitative, as are his many published papers in the peer reviewed press.In the "Rise and Decline of Nations" Mancur Olson revealed the teacher in himself with a lucid readable account that left the mathematics in the footnotes. It was one of those books that Samuel Britten would give to his bright nephew who wants to know what it is all about without doing the difficult math.His thesis can be simply expressed as follows: societies that are governed by an encompassing interest will function better than societies that are governed by exclusive interests, whether these be tyrants, kings, oligarchs or representative democratic institutions corrupted by narrow interests. It is the inexorable development of the influence of powerful but minority groups that threatens to bring down the efficiency of governments in countries that have been stable for a long time. There is much to say for this interpretation of the evidence. But Olson says more than this. Why, he asks, does this occur?Why does a successful and vital democratic system become hollowed out from inside? Olson points to the tragedy of the commons. Reviewers on Amazon seem to have missed this central point. Olson shows with rigorous logic why this occurs, and why it is inevitable. An average voter generally feels that his voice is tiny in the sea of a wider electorate. He instinctively knows that a large personal investment in becoming aware of the details of the political and economic life of his country yields a poor individual return, and so he lets someone else do it, or trusts that the politicians will not mess it up too badly. This is a limitation on the ability of the mass to govern itself in addition to the inability of that segment of the electorate that do not have enough schooling to grasp the salient issues. Unless someone is a political pundit, paid for expressing informed political opinion, he will go with the flow or vote according to superficial impressions and imperfect heuristics.On the other hand, the logic is quite different when the individuals are lobbying for a minority interest that may return direct minority benefits. The commons is smaller. The Coaseian bargain easier to put together. There is a structural bias for those who wish to corrupt the system in the favour of narrow interests to want to invest more effort to do so. That bias easily outweighs any inclination for average citizens to prevent it from happening. And so, in the long term, the governments of stable nations become progressively more corrupt and less representative.Mancur Olson did not live to see how vividly his theory would be confirmed under the presidency of Bush, junior. It is we who can see this as one more piece of empirical evidence that Olson's theory is correct.Olson's theory predicts that this will get worse, not better. On the other hand, it is also Olson's prediction that when a very serious crisis takes place, many of the corrupting forces clustered about the centre of power can be flushed away. It is precisely this process in the form of Mao's Cultural Revolution that wiped out the middle cadre of the Communist Party in China, that paved the way for the Chinese miracle taking place today.We might ask, if we follow Olson's logic, whether the coming economic crash that the current Republican administration of the USA is engineering will be severe enough to bring about a thorough going clean out and an American revival? (And let's face it; Bush's economic policies are incompetent to the point of ruinous. His military and political ones too.) Or will the USA continue throughout the coming 50 years to sink inexorably into a quagmire of economic and political rigidities, to become a has-been nation as the UK did in the last century? Olson seems to predict the latter.

The economy no longer has to worry about "stagflation" like we did when this book was published but we do need to dissect the current economic stagnation. The U.S. economy has slowed, the income inequality gap has widened, and the U.S. is in economic decline. Mancur Olson had insight on the broader US economy and predicted that the increasing oligarchic tendency of our contemporary representative government.published in 1982, helped explain how stable, affluent societies tend to get in trouble. The book turns out to be a surprisingly useful guide to the current crisis.In Olson’s telling, successful countries give rise to interest groups that accumulate more and more influence over time. Eventually, the groups become powerful enough to win government favors, in the form of new laws or friendly regulators. These favors allow the groups to benefit at the expense of everyone else; not only do they end up with a larger piece of the economy’s pie, but they do so in a way that keeps the pie from growing as much as it otherwise would. Trade barriers and tariffs are the classic example. They help the domestic manufacturer of a product at the expense of millions of consumers, who must pay high prices and choose from a limited selection of goods.the defining challenge of our time: rising income inequality and lack of economic mobility, can be met if we focus our government on the interests of the people rather than special interests.Refocussing government on the broad interests of our society and away from the interests of the “donor class”, or as John Dos Passos called it Big Money requires public financing of elections. Public financing can be accomplished by issuing an equal amount of non-transferable political payment certificates to all registered voters. No other kind of currency or payment in kind would be allowed. Recipients of the people’s political donations such as commercial firms, media, etc. could redeem their certificates at an Federal Reserve Bank.No one really can guess how this would affect policy or what effect it would have on office seekers but, for sure, they would be more dedicated to the common welfare and changes in public policy that would benefit our society broadly.My goal for nearly 20 years has been to level the playing field for the inventors of the 2nd generation superconducting Maglev transport technology, but have been unable to breakthrough the barriers established by the more influential transport interests. Drs. James Powell, Gordon Danby and I have tried writing about our experience in "The Fight for Maglev" and "Maglev America" both available on Amazon, in hopes of gaining public support for this system which is described on www.magneticglide.com. We know the technology is inevitable because of the shift in oil supplies and the realities of global warming so we want the United States to benefit from the new superconducting industry that would develop from deployment of Maglev guideways along the Interstate Highway System. This 300 mph National Maglev Network would allow every American to save, annually, $1,000 in reduced cost of goods and travel. We are trying to urge the Congress to authorize a Government Test Facility similar to those funded by the governments of Germany, Japan (using Powell and Danby's invention), Korea, China, and Brazil.Olson's analysis of the influence of existing, more affluent industries like the airlines has been used countless times in correspondence and in our books to try and persuade the public policy people that not only are the affluent taking a larger piece of the pie they are also shrink the whole pie. That is what has been happening to the U.S. economy.

Great insight, hard read. This is the best theory about the decline of the USA that I have ever seen. I bought this book because it was mentioned in a George Will column. I am very glad I did. I did skip over some of the mathematical part though. The theory and conclusions are so obvious once you have read them, but Olson put the idea into words. He was right.