Olson, an economist, was known for seminal work on the conditions under which groups would, and would not, cooperate. Here, he turned it into a theory for why nations often stagnate amid affluence and thrive in the aftermath of chaos.
His key insight is that it’s not easy for groups capable of collective action to emerge. But once they do emerge, they tend to stick around. And so, Olson suggests, “if organizations and collusions for collective action usually emerge only in favorable circumstances and develop strength over time, a stable society will see more organization for collective action as time passes.”
The more organized groups you have, Olson thinks, the more fights over distribution you’ll have, the more lobbying and complex regulation you’ll have, the more intergroup bargaining and negotiation you’ll have, the more complexity you’ll have. Or as he puts it, “special-interest organizations and collusions reduce efficiency and aggregate income in the societies in which they operate and make political life more divisive.”
“The Rise and Decline of Nations” is a classic economics text, but that’s not to say it’s correct. Japan, for instance, has gone from economic poster child to growth laggard. Olson’s argument would seem to imply that the United States, with its geographic protection against invasion and its long history of continuity, would be far more sclerotic than Germany, but that’s not the case. And Olson has no real answer for why so few countries that fall into crisis subsequently grow into affluence.
But Olson’s biggest miss, in my view, is his assumption that groups organize around redistribution. Olson almost completely missed the post-materialist turn in the politics of affluent countries. Some groups organize to get more of the pie, but many others organize to protect the environment, or to increase safety standards, or to preserve the feel of their communities, or to express their values. And much of this is good. It’s a gift of affluence, not a disease of affluence.
But Olson, who died in 1998, is right when he tells us that this gift comes with costs. And those costs concentrate in the areas of the economy in which the number of groups that have to be consulted mount. From this perspective, the productivity woes in the construction industry don’t seem so puzzling. It’s relatively easy to build things that exist only in computer code. It’s harder, but manageable, to manipulate matter within the four walls of a factory. When you construct a new building or subway tunnel or highway, you have to navigate neighbors and communities and existing roads and emergency access vehicles and politicians and beloved views of the park and the possibility of earthquakes and on and on. Construction may well be the industry with the most exposure to Olson’s thesis. And since Olson’s thesis is about affluent countries generally, it fits the international data, too.
I ran this argument by Zarenski. As I finished, he told me that I couldn’t see it over the phone, but he was nodding his head up and down enthusiastically. “There are so many people who want to have some say over a project,” he said. “You have to meet so many parking spaces, per unit. It needs to be this far back from the sight lines. You have to use this much reclaimed water. You didn’t have 30 people sitting in an hearing room for the approval of a permit 40 years ago.”