Key Messages
The Key To A Successful Society: Encouraging People Through Good Institutions
It’s widely accepted that the key to a society’s power and prosperity lies in the strength of its institutions.
Without the right set of rules and boundaries to hold individuals accountable and force them to think about the common good, it’s impossible for a nation to reach its fullest potential.
A clear example of this is seen in comparing East and West Germany.
Here are two countries with essentially the same population, and yet West Germany flourished while East Germany remained stagnant.
The main difference? Good vs bad institutional structures.
In West Germany, people were incentivized by political and economic systems to strive for goals that would lead to greater success, like fostering innovation or starting businesses.
On the other hand, East Germany discouraged these efforts.
It’s also worth noting how institutions can play a role in more subtle aspects than just economics – they also affect social issues such as legal disputes or even criminal justice systems, which play an integral part in determining overall prosperity.
After all, if you don’t have strong institutions protecting citizens and encouraging them to do good things with their lives then you won’t end up with a productive society!
In conclusion, it’s clear that strong institutions are absolutely essential for any nation looking to achieve success on multiple fronts; weak institutions will inevitably dampen any chance of long term growth or meaningful change.
The Great Divergence Happened Because Western Nations Developed The Best Institutions
For the past 500 years, Western nations have been dominant forces in global affairs.
This is due in no small part to their impressive institutional framework.
Through the creation of a functional legislature that protected the rights of individual citizens, western countries created an atmosphere of progress and growth.
This then spurned economic development, establishing empires around the world through trade.
In contrast, many non-western nations experienced stagnation during these centuries as autocratic leaderships actively discouraged or even prevented structural reform.
For example, China suffered deeply under the all-powerful corruption of its political institutions, making it impossible for citizens to gain any true sense of security or incentive to work hard and achieve success.
Ultimately, what we can see is that while having a strong institutional base isn’t the exclusive factor in success, it has certainly been instrumental in helping western nations dominate over the last 500 years.
The Decline Of Western Institutions Is Contributing To The West’S Economic Detwwrmination
It is obvious that the Western nations are in relative decline, with the rest of the world rapidly catching up.
This can be directly attributed to their institutional reform, or lack thereof.
The once powerful financial institutions have found themselves in utter turmoil because of the corrupt practices of bankers who have gone unpunished and the red tape created by governments which now severely inhibits businesses.
It is these weak institutions that are dragging down an entire region, as they were previously responsible for making it strong.
It is not enough to imitate the policies and economics of Western countries; it requires strong and well-functioning institutions to generate economic growth and discourage fraudulent activity.
Until these issues are addressed and rectified, the West may not be able to recover its former economic strength.
The Cross-Generational Contract Has Been Broken In The West, Resulting In Intergenerational Injustice And Unsustainable Public Debt
The current generation in the West is prospering at the expense of future generations.
Though Edmund Burke argued that society should operate in a way that takes into account all generations, it seems as though the older and middle-aged generations are living selfishly today, and foregoing care for those who will come after them.
This has mainly been accomplished through generous government benefits, as wages, healthcare plans, and pensions constitute a large portion of government expenditure.
As governments continue along this path, Japan’s public debt has reached a staggering level – almost 2.5 times their gross domestic product- making it clear that this unsustainable trend must stop.
It can be argued that the democratic form of government plays a role in the continuation of these policies, as many elderly and public sector workers have much to lose from policy changes that take away their extravagant benefits; thus they consistently vote to uphold them regardless of the cost involved.
Additionally, government officials often seem to purposefully hide debt levels from younger voters, who rarely understand what they are signing up for when they support business-as-usual policies, even if it goes against their own interests in the long term.
Effective Regulations Should Be Simple, Flexible, And Based On Historical Study To Avoid Past Mistakes
The financial system is an incredibly complex web of interactions between companies, banks, government entities and more.
This means that it evolves in an unpredictable and inconsistent manner, making effective regulation very difficult.
Take the example of banking regulation in the 1980s for instance.
Regulations were put in place to encourage banks to increase the amount of assets under their control relative to their capital.
While this solution increased profitability from a short-term perspective, it also made them more fragile and susceptible to insolvency during a financial crisis.
This shows just how hard it can be to regulate efficiently within such a complex system since any change could have unforeseen consequences elsewhere.
This highlights why it can be so difficult to regulate the financial system effectively: it needs to be simple and flexible enough not to choke off enterprise, while accounting for changes in its environment without following a predictable or consistent pattern.
Additionally, any regulations created need to be based on careful study of history in order to avoid repeating old mistakes.
The Common Law System Fostered Economic Growth But Today’S Legal Systems Are Too Complex And Costly For Businesses
You only need to look at the laws of both the United Kingdom and the United States to realize that Western legislation has become so costly and complex that it no longer supports economic growth, but instead inhibits it.
The countries have evolved into global powerhouses over time largely because of their common law system.
This system offered basic protection for citizens, making them more confident to invest and innovate in their businesses.
The flexible nature of this legal framework meant it could quickly adapt itself to conditions dictated by changing technology, allowing entrepreneurs to capitalize on new ideas quickly.
Now, however, this is not the case: regulations are so complex that business owners must navigate a veritable jungle of legislation when setting up a business.
What’s worse, this does not help enterprises – instead it costs them an eye-watering $1.75 trillion per year in legal costs in the United States alone!
It’s clear that these excessively complex legal systems don’t do anything apart from line the pockets of lawyers while everyone else suffers.
So yes – Western legislation has become so costly and complex that it no longer supports economic growth but stifles it.
The Decline Of Civil Society And The Dangers Of Reliance On The Welfare State
Where the West used to have a thriving and diverse civil society, it now has an inefficient, monopolistic welfare state.
This is due to the fact that people no longer wish to take part in clubs and societies that help each other out for the common good.
Back in 1908, stats revealed that more than 33 million people were members of so-called “friendly societies” – like working men’s clubs or co-operative organizations.
But by 2001 this figure had declined to 10.5 million.
This is because citizens are able to get certain benefits from the state; such as cash benefits, health care provisions and more, without having responsibility for it themselves.
The issue here is that this type of welfare service is only available under state control – creating an inefficient monopoly on these services.
This means that once people become accustomed to free handouts and not having responsibility for their own well-being, they are less eager to return to a more proactive form of civil society which would be much more efficient way of taking care of our communities overall.
The Strength Of Institutions: Key To Sustainable Growth In Megacities
With the population of the world on track to hit nine billion by 2025, it is more and more likely that future societies are going to become increasingly urbanized.
As cities are natural centers for innovation, creativity and investment, people flock to them in search of work.
While this growth brings certain benefits, it can also lead to chaos if not managed properly.
This is where strong institutions come into play.
They provide vital rules and frameworks which make sure that a city remains orderly, secure and robust.
Without proper local government-managed infrastructure, such as roads, sewage systems and emergency services, there could easily be widespread riots or devastating epidemics caused by out-of-control growth.
Looking at history can further explain why good institutions are essential for healthy urbanization: take Rome in 410 AD as an example; its weak political, religious and social structures meant that when attacked by Visigoths it quickly collapsed into chaos which eventually spread throughout the whole Roman Empire.
This only serves to underline the importance of having strong institutions in order to ensure sustainable growth in cities across the world – no matter their location or size – so that they may enjoy a prosperous future.
The Decline Of Western Power Leads To An Unstable And Dangerous World
The decline in Western power and influence is likely to have far-reaching consequences for the future of global order.
Without the strong presence historically provided by the West, many nations will be left to battle for influence and power, resulting in a more volatile world – one that may ultimately become more dangerous.
The West’s ability to ensure security around the globe is severely weakened if it has to deleverage in order to reduce its debts.
This means withdrawing from areas where it previously had a powerful presence, such as the Middle East.
With no Western powers to limit or address security threats, smaller nations may seek out ownership of nuclear weapons while other states may fall into instabilities and even revolutions due to lack of support.
In short, without the strong Western powers we have come to rely upon, the future of our world looks uncertain and violent – something we must all become aware of in order to remain safe and secure.
Wrap Up
In The Great Degeneration, the main message is clear: the West needs to go through a period of radical reform in order to reverse its economic decline.
The West has had the advantage over the rest of the world with strong institutions such as democracy, capitalism, rule of law and civil society.
However, this period of degeneration will continue unless we take steps to make profound changes.
What lies ahead for the future? This book encourages us to think about that and consider how best we can construct a new era for our nations so that they can thrive.
The Great Degeneration lays out a road map for change in Western countries that could enable them to remain economically dominant in a more competitive global landscape.
Finally it encourages readers to share their ongoing thoughts on its summary with Sectionist by emailing their input to [email protected] with “The Great Degeneration” as the subject line.
