TCS Daily


Nation-Building or Gene-Splicing?

By Max Borders - June 1, 2006 12:00 AM

With the formation of the new Iraqi government, it's a good time to take stock -- not just of the current situation, but of the very idea of nation building.

Many people who read this publication are familiar with the concept known as spontaneous order. The economist Friedrich Hayek pointed out it's the kind of economic and social order that emerges without central planning. Indeed, such order cannot be planned because it is far too complex. The wealth of nations cannot be planned. Neither can nations themselves.

Such ideas underlie one of the primary critiques of "nation-building" -- that it is impossible because it requires central planning, which almost always fails. For example, of nation-building, political scientist Gus di Zerega writes: "I think it is criminal, immoral, and hideous. Here I take my Hayekianism pretty seriously. Societies cannot be easily molded, the task is too complex, local knowledge is too important."

Negative Spontaneous Orders

But while recognizing the importance of spontaneous order, perhaps it is sometimes forgotten that there are such things as negative spontaneous orders. For any organic network of incentives and interests that arises from agents interacting in complex ways, there may be an evil twin. Although power in illiberal states is often largely consolidated and centralized, organic networks of incentives and interests are still the rule here, too -- except these networks are maintained by a complex system of patronage, payoffs, theft and fear.

Negative spontaneous orders are today found all over the world, particularly in Africa, Central Asia and the Middle East. And these have a way of sticking around, particularly in the humus soil of foreign aid. Dangerous or failed states, with their legions of poor, emerge like an ergot in the garden of human possibility.

Whatever we think about nation building, we should all be able to agree that both positive and negative spontaneous orders can and do emerge. A key question becomes: from what do they emerge? Institutions, where institutions are, roughly speaking, the internal rule-sets by which a country operates. And there are good institutions and bad institutions.

So -- like cancers -- dangerous, corrupt, poor, inhumane, confiscatory, and even homicidal states occupy a great swath of the world. The reason for the persistence of negative spontaneous orders is that endogenous institutional change, such as revolution, is both difficult and rare. In addition they persist because spontaneous orders -- positive and negative -- follow their own logic.

Neither type of order has a telos or end, but each has an interest, metaphorically speaking, in its own furtherance, its own survival. Orders, as organisms in their own right, don't care about rights, democracy, prosperity or liberty. Like the processes of evolution, the order's logic is blind, largely internal, and indifferent to the temporal wishes of human actors. That's because deeply entrenched incentive-structures keep any order in place, and in the negative cases, allow predatory leaders and their cronies to suppress dissent and protect their interests -- interests that extend through an entire system of venality. And this is in large measure why we should be concerned about negative spontaneous orders wherever they fester.

Threats to Extended Order

Many critics of nation-building exercises are virtually silent on the question of what to do about negative orders, except to say "let them alone." After all, as John Quincy Adams's admonished: "[America] goes not abroad, in search of monsters to destroy. She is the well-wisher to the freedom and independence of all. She is the champion and vindicator only of her own."

There may be a kernel of truth in Adams's remark. But it has been distorted by critics of nation-building so as to downplay the global interconnections that hold the potential to turn monsters abroad into monsters at home.

If we accept that negative orders follow their own brutal logic of self-perpetuation, we are left with the difficult, rather imperfect job of determining whether those negative orders threaten our own extended order. This is no easy task. But, as globalization pulls both possibilities and problems to our shores, they are very much ours to reckon with.

Neoconservative thinkers have long urged that we should be concerned with the 'moral fabric' of various regimes. What they may clumsily or vaguely have been pointing to are the orders that extend from bad institutions, formal and informal. Failed states and dangerous regimes, while they may not be prosperous and free, often still have a growth trajectory. Such growth will have ramifications for our extended order, whether we want to admit it or not. So while neoconservative concern for the moral makeup of dangerous and failed states may strike the Hayekian ear as somewhat dissonant, we have good reason to listen to their intonations.

Transplantation Is Possible

So what is to be done?

Here's where global strategist and author Thomas P.M. Barnett says it best: we don't have time to sit around and let failed states fester. The United States, for better or worse, is in a position to reverse negative spontaneous orderings through the application of military and other forces. We have a "Leviathan" force that is unequaled on the earth. And we have a deep knowledge of the vital institutions that foster peace and prosperity.

Where I disagree with Barnett is on the question of what comes after a regime change. In a recent article about his book, I emphasized institution-building over nation-building. Barnett responded by saying institution- and nation-building are merely a difference of degree, not of kind, asking: "what is a nation but a collection of institutions?" His response suggests I failed to give enough definition to my intended sense of institutions. Barnett challenged me to tackle the "'how' answers, not just the 'how not' summaries of past experience." And he's right. It's critical not just to clarify what institutions are, but to determine whether or not they can be transplanted.

On the point of clarification, formal institutions are socio-economic arrangements that bring down the costs of transacting, cooperating, and exchanging. These institutions enable people to interact more freely for mutual benefit and mutual gain, are necessary for prosperity, and ensure checks on the growth of both government and interest groups. Examples are: property rights, individual rights, separation of powers, third-party dispute resolution, suffrage, the common law, contract enforcement, finance/banking, and security.

Enthusiasts of economic history can go back through the literature and see which societies flourished and which did not according to the de facto rule-sets of a relevant era. Most of the time, institutions evolved through time. In some instances, however, they have been transplanted.

While Barnett comes from the 'send in the technocrats' side of the debate, TCS Daily's Arnold Kling comes from the 'don't send in anybody' side. Kling recently wrote: "But [...] institutions are not pre-requisites for modernization. They are results."

Kling then encouraged those engaged in the debates over institutions and nation-building to engage the arguments he fleshed out in an article titled "Group Power." The crux of Kling's position in "Group Power" is that institutions themselves are the result of endogenous evolution, not exogenous force. Thus, institution-building in Iraq won't work. What comes out of this and similar points is a general critique of nation-building based on the theoretical inability to create democracy by force and fiat.

But does this critique get it exactly right?

Consider this passage about Hong Kong by the Cato Institute's James Dorn:

Hong Kong's institutions -- its set of formal and informal rules -- ultimately are shaped by the ethos of society. Hong Kong's ethos of liberty has created a dynamic spontaneous order. Free trade and limited government have provided the opportunities for millions of individuals to use their natural talents to produce a better life for themselves and their families.

Now, here's the paradox: our admiration of Hong Kong must terminate in our admiration of an empire. Without Britannia -- with it's free-trade policies and its Common Law legal institutions -- Hong Kong might have remained a rather desolate rock. The "ethos" to which Dorn refers coevolved with institutions after a sudden rule-change. In other words, it took the forceful British territorial annexation of Hong Kong after the First Opium War in the mid-1800s to create a major center of commercial activity by 1900, and one of the world's most prosperous cities by 1997, when it was returned to the Chinese. Institutions are shaped by the ethos, yes -- but the reverse is also true.

Societal DNA

So history suggests institutional transplantation is possible -- albeit very difficult. What is it about institutions that makes transplantation possible?

Institutions are like the DNA of a society. Healthy DNA, when expressed, serves as the blueprint for a healthy organism. Likewise, healthy institutions, when in place, allow millions of individual actors to engage in cooperative, mutually beneficial behaviors, the stuff of peace and prosperity. But mutant DNA can create cancer cells. Saddam's Iraq, Mugabe's Zimbabwe and Stalin's Russia have (or had) mutant institutions. And pathologies can threaten to spread.

What's more, while institutions can and usually do develop or evolve over time -- much in the same way that DNA evolved from auto-catalytic processes and from simpler amino acids, and these from yet simpler molecules -- once genes are understood and isolated, they can be transplanted, or "spliced."

This genetic analogy suggests the presence of a rule-set[1], and actors in a given situation will find it beneficial to play by a rule-set or not. They are more likely to comply with new rules if there are positive, self-reinforcing incentives to do so (as well as harsh consequences of non-compliance). The more Iraqis come to understand the incentives generated by positive rule-sets, the more likely positive orders will emerge. But this may require a period of adjustment.

The Iraq Experiment

Iraq, then, may not turn out as we hope. If what the US military and its postwar reconstruction partners hope to achieve is institutional transplantation, then we will have to expect that, sometimes, a host will reject the transplant. With a respectful nod to Arnold Kling's view, informal institutions (culture, religion, believes, mores, etc.) may not be at a stage in which the populace is ready to accept a new system of formal rules.

In the case of Iraq, however, it appears the vast majority of citizens are ready to embrace their new institutions. One need only look at the successful democratic elections and public opinion polls of Iraqis to see they are ready for change. (Only a small minority of terrorists and disaffected ba'athists is making it difficult and they will have to be captured, killed or reabsorbed via positive incentives.)

This transplantation effort requires both patience and vigilance as we wait for the right kinds of orders to emerge from societal DNA sufficient for a healthy society. If Iraq is conceived as a pity party that requires more resources, more shiny new schools and more dependency, the effort will fail and its new leaders will be corrupted. But if Iraq focuses on incorporating simple systems like security, titled property, and dispute resolution, among others, then they may yet have the ingredients for success.

Nevertheless, a postwar reconstruction effort need not involve massive infusions of resources, manpower, or technical assistance -- particularly if these will make the country dependent. Instead, institutional transplantation requires finding those positive incentive structures that allow for the alignment of interests and a commitment to security. By and large, this is what the US seems to be going after in Iraq.

On the questions of nation-building, we must look for answers in both theory and practice. In practice, it looks like the Iraq adventure has, if nothing else, shaken up the status quo. Of course, the status quo for Iraq was changed abruptly at the hands of a powerful force. Now it looks like a proto-democracy has taken form, and the Iraqi people seem keen to enter into the modern world. But ripple-effects for the wider Middle East are noticeable, as well. So while democracy may not be possible through simply invading and making pronouncements, it may be possible to unleash new ordering forces via temporary social disruption and institutional transplantation.

The degree to which the shakeup brings an adjustment period of chaos and disunity may actually relate directly to the speed with which a population can adapt to the new rules, as well as the speed with which the people's sentiments (Dorn's "ethos")[2] align with the adaptation. In the case of Iraq, the understanding of democracy and freedom is starting to converge with the process of adapting to the new institutions. On the timescale of history, this has happened pretty quickly.

Success or failure in Iraq cannot be predicted by a priori theories of evolved institutions and spontaneous order alone. Rather, we must learn from our mistakes, tally up our gains, and maintain a level of cautious optimism in the face of a protracted struggle for real institutional change in the region. The rest depends on the mysterious forces deep in the hearts of Iraqis, a place unreachable by pundits of any stripe.

Max Borders is Managing Editor of TCSDaily.com.


[1] A particularly good book on rules and rulesets is The Reason of Rules by Geoffrey Brennan and James Buchanan.

[2] New Institutional Economists' informal institutions.

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11 Comments

Once broken, never mended
This article is wrong on so many levels it's hard to know where to begin. When we came to Iraq we had a choice. Either we could decapitate the government and remove the upper echelon from power, or we could destroy every vestige of government, down to the department of public works and the DMV. We chose to do the latter.

As a result, Iraq was profoundly and systematically broken. It remains in that state today. Having initially pulled the cops off the beat three years ago, we created a condition of lawlessness that seized the country and plunged it into chaos. Today it is in a condition of chaos three years old. This is not the environment in which institutions "spontaneously arise".

The only sense in which we have ventured into "nation building" is that we have forced on them a constitution alien to their understanding. Formerly Iraq was a socialist country, where both its natural resources and its industries were held in trust in the name of the people. Now everything in the country is forcibly up for grabs to foreign investors. Until this constitutional problem is resolved, they have no sound basis for a government.

Since the state ran everything, destroying the Iraq state had the effect of destroying all industry, thus destroying the basis for the economy and the employment base. Reconstruction was scrupulously given to foreign contractors from the allies and from neighboring states, as opposed to Iraqi companies.

For example, all construction in Iraq was cement-- so naturally the state cement works was a major employer. So it was shut down, sending all employees out into the streets jobless, where they had no options but crime or destitution. Then cement contracts were filled by purchasing the world's most expensive cement and shipping it halfway around the world. Why the most expensive? Because they were filling a cost-plus contract, and don't make any money supplying cheap cement.

How many of those furloughed cement workers do you suppose ended up joining the resistance? I would think more than a few. How many became stickup artists, competing with the cashiered army, who were all sent home with their rifles?

Someone devising a way to wreck a country such that it would take a generation before it could begin to come back together could not have proceeded any more deliberately than what we did. Borders seems to think everyone will just wake up one morning, forget the death squads, the factional fighting and the civil war raging across the country, and just go back to being a viable nation. On every level, this is just not to be. For one thing, their instincts are to return to socialism, while we will remain there to prevent it.

More than usual, our author has his head up his hind parts on this one.

Socialism and Tyranny
For most of its history Iraq was ruled by tyranny (assets held/managed by the few for the few) and not socialism (assets held/managed by the few for the many). The Iraqi constitution is a far more socialist document than the US constitution. Since creeping socialism is the long term trend in US governance (in opposition to constitutional intent of minimalist government), there is every reason to be confident that Iraq (like the US and Europe) will follow the worldwide trend of socialist governance. To the degree that the Cold War was engaged in containing the spread of socialism…the socialists won. And due to the slippery slope from socialism to tyranny, Iraq may yet return to its traditional form of government.

Blowing smoke
This essay is Rumsfeld planning described with Greenspan clarity. What the heck is Borders actually saying? That Iraq spontaneously will morph into Hong Kong? He says "we must learn from our mistakes" without saying what those mistakes were. Maintaining "cautious optimism" is not a policy. Providing personal safety is a policy. Supporting the local economy in Marshall plan style (as Roy Bean points out) is a policy.

Borders ("If Iraq is conceived as a pity party that requires more resources...the effort will fail..") seems to support the Rumsfeld line that we don't have to spend money (sacrifice), but that Iraq will rebuild itself in our image.

Creeping socialism? Here?
I get the feeling we're coming at history from opposite directions. If you think the long term thrust of American political life is moving toward the socialist direction, it must be moving on a scale of centuries. In my lifetime the direction has been moving opposite, away from the maintenance of social programs and toward the dismantling of protections in favor of a laissez faire market system.

As for Iraq, I think its history prior to Sykes-Picot (1922 or so) is irrelevant. They were part of the Ottoman Empire, with a totally different political dynamic based on rights only being awarded by the Sultan at his royal whim.

Since then, Iraq has largely had a socialist cast of government, with the wealth of the nation officially jointly owned by its people. Certainly the responsibilities of the government toward its people were carefully defined in its old constitution.

Naturally a government's writ is only as good as its leaders. And under Baath party rule it had gone all the way into the hopper, with the wealth of the nation squandered in death spiralling adventures.

I would agree with you that there is a link between state control and the possibility of tyranny. But I don't think this danger is the exclusive province of socialist governments. Fascist governments obey the same law-- that control begets more control.

And I would challenge you to find a government on the cusp of greater control than this country, with its newfound philosophic basis in the Imperial Presidency. Checks and balances are falling by the wayside, and the public is complacent. What better stage upon which the foot of the Tyrant might soon tread?

No Subject
"Checks and balances are falling by the wayside, and the public is complacent. What better stage upon which the foot of the Tyrant might soon tread?"

The solution is to "right-size" all levels of government based on the "minimalist government" principles enumerated by our Founders.

The Solution: Minimalist Government
"Checks and balances are falling by the wayside, and the public is complacent. What better stage upon which the foot of the Tyrant might soon tread?"

The solution is to "right-size" all levels of government based on the "minimalist government" principles enumerated by our Founders.

Wait: I thought we were sure of all this stuff back in 2003
When we went into Iraq, we were assured that everything would come together quickly, almost magically, as the invisible hand of the free market, freed by the American army from Saddam Hussein, would turn Iraq into a beacon of prosperity and democratic values.

Surely those wise people -- most of them still in their administration jobs -- couldn't have been wrong...

nation-building
The article reminds me of a discussion of how the British tried several tactics in India that included trying to do things from the top and trying to build up from below. I think Mills and his father may have been involved. It also reminds me of the moralists' distinction between individual sin and structural evil. Conservatives emphasize the first; liberals emphasize the second (e.g., with their emphasis on racism, sexism, classism). In a subtle way, the author underlines the importance of both, while recognizing the limits of both. His ideas also bear resemblance to Jesuit Bernard Lonergan's distinction between an authentic and an inauthentic society (cf. his Harvard papers specifically on economics also): in the latter society, people are encouraged or even forced to do evil because that is what is taught and required. The Mafia is a clear example. At the same time, authenticity ultimately dwells in the human person and the human person acting in community when they pay attention to the data, make intelligent interpretations, make reasonable judgments, and make responsible decisions. For this to occur or for an inauthentic society to be overcome, emotional, intellectual, and religious conversion is required. For instance, Islamofascists and support of Islamofascism must be undermined, abandoned, replaced--not to mention Bathist dictatorship, as in Iraq, something that the author suggests is beginning to occur.
RLA Schaefer Dubuque Iowa

polygamy and nation-building
Stanley Kurtz's article in The Weekly Standard on the imcompatibility between polygamy and democracy has relevance to the nation-building discussion. 1) He shows that polygamy, polyamory, open marriage, gay marriage, etc. are ultimately antithetical to democracy--they produce inauthentic societies and promote inauthentic human choices that do not respect the dignity of the human person, e.g., because of paternalistic depotism clearly in the case of polygamy. 2)He also shows that American history required some external "gene-splicing," that is, Mormons had to be forced by the courts, by the requirements for statehood, and by strong enforcement of the law to convert to monogamy. 3) He argues that proposed evil changes to our marriage laws would mean that our social structures would become more inauthentic and so would individual persons and our society.
RLA Schaefer Dubuque Iowa

Perhaps more like gardening than gene-splicing...
I spent most of last year in Iraq serving with the Army in the northern half of the Sunni triangle. Our objective was (and likely remains) fostering an environment in which Iraqi institutions can develop and evolve -- which is not the same thing as giving Iraqis US institutions to which they must adapt. And we have seen tremendous success in achieving that objective -- the millions of Iraqis, including the vast majority of Sunnis, who participate in elections, who volunteer for police and military forces; the thousands who serve in local and provincial government; the dedication they all show to developing native institutions that adhere to modern world standards for public service, integrity and efficiency; all being done in the midst of a vicious gang war ("insurgency" is too formal a label), so it is a wonder that things are going so well (and, believe me, they are going a lot better than most people think).

Negative opinions on Iraq seem to be built around the violence reported in the US media -- but every war is quite violent right until its end, so that is not a viable proxy for success. But the real battlefield is in the structure of Iraqi society, whether the people accept, support and work with the new institutions of Iraqi government. The fact is that they have lived in a Mafia state for generations, the institutions of state lacking any legitimacy and surviving only on the vicarious support provided by the thugs of Sadam's Baathist party. To build institutions where people lack experience with them is a real challenge, but that challenge has been taken on and success has been growing for at least two full years now.

I would suggest that this makes our role more that of gardeners than gene-splicers -- we don't make the plants, we just plant the seeds; we don't make them grow, we can only help them along. Maybe like a working a tree farm -- we have to keep the weeds down long enough for the seedlings to grow large enough to grow in spite of the weeds, and eventually to smother them with their own strong roots and in the darkness created by their own dense foilage.

Not exactly the rhetoric of war (I got my fill of incoming mortars, rockets and small arms fire last year), but probably a more accurate picture of what we're doing, why we're doing it, and what we aim to achieve...

Year Zero for Iraq
It was never about helping the people of Iraq. They were just the least units in some macroeconomic analysis. It was about creating a testing ground for pure globalization, where an entire country could be terraformed into a compliant showcase for the power of unimpeded money.

They started by killing every job in the country. Great premise for a rebulding, huh? Year Zeros don't generally resound to the benefit of the public, whether they are undertaken by a Stalin, a Pol Pot or a Paul Bremer.

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