12 rifles, 13 hogs and virtuous vs vicious cycles

Link:https://qz.com/1167671/the-100-year-capitalist-experiment-that-keeps-appalachia-poor-sick-and-stuck-on-coal/?utm_source=facebook&utm_medium=qz-archive&fbclid=IwAR30Vs8cPLkiq68C-cE61vC_5VB7hfYw9X7UTPS216a2loeibD7Qz8ESCRg

The 100-year capitalist experiment that keeps Appalachia poor, sick, and stuck on coal
By Gwynn Guilford

The first time Nick Mullins entered Deep Mine 26, a coal mine in southwestern Virginia, the irony hit him hard. Once, his ancestors had owned the coal-seamed cavern that he was now descending into, his trainee miner hard-hat secure.

His people had settled the Clintwood and George’s Fork area, along the Appalachian edge of southern Virginia, in the early 17th century. Around the turn of the 1900s, smooth-talking land agents from back east swept through the area, coaxing mountain people into selling the rights to the ground beneath them for cheap. One of Mullins’ ancestors received 12 rifles and 13 hogs—one apiece for each of his children, plus a hog for himself—in exchange for the rights to land that has since produced billions of dollars worth of coal….
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The curse of weak institutions

Economic complexity illuminates one dimension of central Appalachia’s struggles. Another source of insight comes from research by Daron Acemoglu, an MIT economist. In Why Nations Fail, which he co-wrote with University of Chicago political scientist James A. Robinson, the duo explore why some resource-rich nations are rich while others remain poor. They argue that the fate of a nation is determined in large part by its economic institutions—its financial systems, tax regimes, property rights laws, labor institutions, and markets, among other things.

When economic institutions are inclusive, they level the playing field among businesses, create competitive markets, encourage investment in new technologies, and enable people to acquire skills to pursue their talents, according to Acemoglu and Robinson. The institutions are underpinned by a political system that empowers a broad base of citizens to influence political decisions, preventing a single interest group from holding sway.

Extractive institutions, on the other hand, concentrate power among the few. This structure encourages the elite to warp institutions to enrich themselves and their political allies, which tightens their stranglehold on institutions all the more. “Different patterns of institutions today are deeply rooted in the past because once society gets organized in a particular way, this tends to persist,” Acemoglu and Robinson write. While inclusive institutions drive “virtuous circles” of self-perpetuation, extractive ones fuel “vicious circles.”

Natural resource wealth can amplify these dynamics. Places with weak institutions—Algeria or Nigeria, for instance—typically succumb to the “resource curse.” Those with strong institutions, like the UK or Norway, tend to distribute that wealth more broadly.

The destructiveness of extractive institutions can be hard to discern when times are good. Even though wealth is unequally distributed, the majority of people tend to be buoyed by economic growth. The real trouble arises when growth falters. Instead of letting new sectors emerge to replace the struggling ones, the elite protect the old guard, a key source of their power and wealth. This thwarts creative destruction—the concept pioneered by economist Joseph Schumpeter to describe how the failure of inefficient enterprises frees up resources for more productive firms.

Though central Appalachia isn’t a sovereign state, Acemoglu says that his and Robinson’s framework applies to the region’s long-run problems. He points to research done by economist Robert Tamura, of Clemson University, on the long-lasting effects of slavery on the economic development of the American South, as well as to analysis by Melissa Dell, a Harvard University economist, that shows how areas of Peru and Bolivia subjected to forced mining labor systems in the 16th through 19th centuries currently suffer from lower education levels and investment in public goods and services.

The vicious circles cementing central Appalachia’s extractive institutions don’t go back that far. But they do predate the region’s coal boom by a century.

Land bonanza

Why has the coal industry been permitted so much free rein over central Appalachia, despite the obvious toll it has taken on Appalachian residents? For one thing, the people responsible for devastating the area don’t actually ha