A Word of Warning: Eurocentrism in Development Economics

By: Kenny Gu

In James Robinson and Daron Acemoglu’s Why Nations Fail and other influential economic texts, institutions—a term referring to standing rules and traditions that govern a society—and their comparative differences have been used in developmental and comparative studies to explain differences in prosperity, culture, and wealth. Certain institutions, such as established and reliable property rights, have been heralded as “good” economic institutions, while others have been deemed as hostile to economic growth. Why Nations Fail, for instance, makes the argument that extractive institutions—those designed to isolate decision-making power—are less conducive to economic growth than inclusive ones—those that attempt to broaden power.

That being said, the extent to which institutions impact or foster economic development has been debated; while Acemoglu and Robinson argue that institutions form the primary reason for economic differences, Professor Collin Constantine of Kingston University argues that institutions matter little compared to economic systems, and still others find that differences in political institutions matter only in developing democracies while playing little to no role in consolidated ones. With any position, however, the traditionally Eurocentric focus of developmental and institutional economics—one that primarily considers developmental economics with European economics, politics, and history as a baseline—must be considered and avoided if possible.

A heavy focus on Europe as a baseline may negatively impact economic model design and thus undermine the results and policy suggestions of studies and theories. Certain theories, especially those founded on empirical evidence, are logically unlikely to be heavily impacted by preconceived biases, but they may still exist. For instance, economic models might help to abstract away detail to focus on specific variables of interest, but viewing a collectivist society through the lens of an individualistic society can skew the results of a study. Not all studies operating with this framework may produce invalid or biased data and results, but some might, and an understanding of these differences may allow for less skeptical acceptance of the policies that follow.

Furthermore, studying developmental economics and institutions depends on an understanding of the region of interest. If, for instance, students analyze the economic institutions of a country through traditional European institutions without a historical or cultural understanding of the other region, they might ignore important institutions relevant to economic development in the region. As noted by the World Bank, culture does in fact play a role in economic development. A field experiment in India, for instance, demonstrated that children performed roughly the same on tasks when caste was not revealed, whereas children of lower castes performed worse when caste was revealed. Such a phenomenon, taken to a larger scale, holds direct implications for economic development.

On a similar note, if institutions do play a large role in economic development, the notion that only one set of institutions—especially those typically associated with Western nations like the U.K. and the U.S. —is conducive to development is not necessarily correct. Additionally, certain institutions that are associated with economic growth and success in one nation are not necessarily associated with economic growth and success in another. Thus, as argued by Professor John Brohman, when understandings from developmental economics are applied, a more efficient and potentially more effective strategy is to adapt existing institutions to development, rather than attempting to replace existing institutions with European ones. For instance, if sole focus is placed on effective economic development, the "Tiger Cub" economies — Indonesia, Malaysia, the Philippines, Thailand, and Vietnam—have been able to industrialize relatively quickly and effectively not by following the lead of wealthy European nations, but rather by following the example of wealthier Asian countries like South Korea and Singapore ("Tigers"). Although these nations differ greatly in their histories and cultures, they are still more similar to one another than to western countries like the U.K. and the U.S.

Developmental economics is a continuously evolving field with insights that explain how nations and regions succeeded or failed at economic growth, as well as how current-day nations and regions can continue or return to economic growth. Yet, as students and researchers continue to analyze these regions and apply theory to practice, it is necessary to consider the ramifications of Eurocentric views of economic institutions—and in doing so, continue to further the goal of ethical, effective economic growth.