Banerjee and Duflo, winners of the Nobel Prize in Economics in 2019, are leaving the United States to begin working in Switzerland. In my field, this is so far the most significant example of the brain drain that the U.S. is already experiencing as a direct consequence of the second Trump administration’s attack on science. This phenomenon is beginning to appear in many other fields as well—and it can only accelerate. The U.S. innovation engine, long powered by its research system, is grinding to a halt, with inevitable negative consequences for productivity and economic welfare.
Over the past year, we have witnessed a lively retrospective debate about the work of the 2024 Nobel laureates in Economics—Acemoglu, Robinson, and Johnson. I strongly recommend reading their three Nobel Prize lectures, as well as the many articles and critiques that have followed.
This year also coincides with Trump’s return to power and the first months of his second administration, marked by an assault on all forms of institutions—institutions we once believed strong—that sustain democracy and innovation. Acemoglu and his co-authors devoted many years to developing a theory of why nations fail (in their book of that title and in numerous articles). Their answer seemed clear: nations fail when they lack inclusive institutions. Yet the apparent clarity of this conclusion masked some ambiguity about what “inclusive” really means. Still, their work left little doubt that countries like the United States and the United Kingdom possessed such inclusive institutions. Unlike much of Latin America, the U.S. was thought to have developed inclusive institutions because its early settlers could establish systems similar to those that would enable the Industrial Revolution in England.
Some critics argued that this theory could not be universal, since the most striking economic success story of recent decades—China—was not built on the kind of inclusive institutions Acemoglu and his co-authors envisioned.
In another book, The Narrow Corridor, they argued that nations thrive when there is a balance between effective government and a vibrant civil society. Again, one might have thought that the United States—with its universities, companies, foundations, and think tanks—was a perfect example of such balance. Checks and balances were meant to protect broad-based property rights, thereby sustaining long-term prosperity.
In their most recent book, Power and Progress, Acemoglu and his co-authors, in my view, come closest to a convincing explanation of how institutions emerge or collapse: it is power struggles that define them. Institutions reflect the interests of powerful groups—especially in times of technological change—and the ability of the working majority to resist those interests determines how democratic and fair institutions become.
In an article in the Financial Times, Acemoglu warned of the possible collapse of the U.S. economy under the Trumpian assault on institutions. Yet his earlier framework could not have predicted that the supposedly resilient American institutional system would crumble under the alliance of a narcissistic, corrupt president and a powerful tech oligarchy.
A combination of moral decay, ignorance, and concentrated economic power can destroy any institutional structure—no matter how strong it once seemed.
