There is a debate inside the economics profession about the importance of institutions, broadly defined. One side of the battle holds that institutions are everything. Countries can institute all sorts of bad policies and still prosper over the long run if they have “good” institutions — France is a common example. A subset of this group likes to argue that a particular set of legal institutions is very important. You can sum their argument up as “Common law good, civil law bad.”
The “institutions as epiphenomena” side of the debate has mostly given up, with the valiant exception of Greg Clark. That said, strong opposition still exists in the form of two arguments: “institutions aren't everything” and its subset, “legal origin theory is total b@ll$#/t.”
One obvious experimental laboratory is the British West Indies. Not a whole lot of good came out of the collapse of the West Indian Federation, but one bit of lemonade coming out of that lemon was that it left us with a collection of independent and quasi-independent states with a similar institutional background. Now come two authors with a comparative paper on Barbados and Jamaica, arguing that it is macroeconomic policy, not the legacy of history, that explains the different paths of the two nations since independence.
Are their arguments convincing? More below the fold.
The authors argue that the two islands have three things in common and one difference. First, they were both islands populated mostly by slaves taken from Africa. Second, they have both been parliamentary democracies with the full panoply of civil rights since independence. Third, they both constitutionally protect private property. The difference, they argue, is that Barbados managed the macroeconomy well while subsequent Jamaican governments cocked it up.
The problem is that Jamaica and Barbados are not that similar. First, Barbados had a parliamentary democracy (with way limited franchise, but still) from 1639 onward. Jamaica, on the other hand, suspended its parliament in 1866, after the Morant Bay Rebellion. It wasn't re-established until 1944. Barbados and Jamaica both received universal male suffrage around the same time (in fact, Barbados didn't institute it until 1951), but one country had a long history of self-government and the other did not.
Second, Jamaica had a long history of slave and popular revolt, and a long history of having British rulers use the free population to violently suppress them. As a result, the writ of the state never ran as deep as it did on Barbados: the free colonies of the interior, for example, never really came under the rule of law.
Finally, Jamaica lacked a middle class as prominent as Barbados's. This was for two reasons. First, Jamaica had a smaller white population. Given that sad fact in all the Anglo countries of this hemisphere that white people enjoyed far greater opportunities to accumulate human capital than black people, this meant that Jamaica's middle class was proportionately smaller and less skilled. Second, the construction of the Panama Canal catalyzed a small but very prominent black middle class in Barbados. This difference had real effects in the two countries. For example, in 1960 real primary school teacher salaries in Barbados were 31% higher than in Jamaica, educational spending as a % of GDP was 52% higher, and real per student primary school spending was 2.3 times higher.
I don't know which, if any, of these differences played a role in the subsequent divergence between the two islands' economic performance, but I suspect that they mean that the two places do not make as good a controlled experiment as the authors of the paper might hope.