Ms CHARISHMA KALIYANDA (Liverpool) (17:09): We often speak proudly of Australia as a melting pot of people from all over the world who have been attracted by a variety of factors. I prefer the metaphor of a fruit salad that I once heard used by Federal Minister for Education Jason Clare to describe the way our diverse community groups maintain connection to culture and heritage but come together to form an enhanced society. Liverpool is a perfect example of this fruit salad, a community that wears its diversity proudly and uses curiosity and empathy to learn more about colleagues, neighbours and friends. It is worth reflecting on this important, special source of our harmonious and exemplary multicultural and multi‑faith country in the context of the research that just won the Nobel Prize for economics.

The 2024 prize was awarded to three United States based economists who examined the advantages of democracy and rule of law, and why they are strong in some countries and not in others. Daron Acemoglu and Simon Johnson of MIT and James Robinson of the University of Chicago were awarded the prize for their influential work on how institutions shape economic development. Their work incorporates politics and sociology as much as economics. As we live in a time when democracy appears to be losing support, the Nobel Committee has rewarded work that demonstrates that, on average, democratic countries governed by the rule of law have wealthier citizens.

Acemoglu, Johnson and Robinson's work divides institutions into two categories: inclusive and extractive. According to the laureates, inclusive institutions such as those that enforce property rights, protect democracy and limit corruption will foster economic development. In contrast, extractive institutions, which give rise to a high concentration of power and limited political freedom, seek to concentrate resources in the hands of a small elite and thus stifle economic development. The laureates claim that the introduction of inclusive institutions has had a positive long-term effect on prosperity. Indeed, those institutions are today found primarily in high‑income countries mainly in the West. The richest 20 per cent of the world's countries are around 30 times richer than the poorest 20 per cent.

Moreover, the income gap is persistent. Although the poorest countries have become richer, they are not catching up with the most prosperous. The award winners have connected this to differences in institutions and found it derives from differences in the behaviour of European colonisers in different parts of the world many centuries ago. An Indigenous population of higher density could be expected to give greater resistance, hence fewer European settlers moved there. On the other hand, a large Indigenous population, once defeated, offered opportunities for cheap labour in those times. That meant the institutions focused on benefiting a small elite at the expense of the wider population. There were no elections and limited political rights. In the places that were more sparsely populated, the more colonisers settled and established inclusive institutions that incentivised hard work and led to demands for political rights.

Paradoxically, this means parts of the world that were more prosperous around 500 years ago are now relatively poor. Prosperity was greater in Mexico under the Aztecs than it was at the same time in the parts of North America now called Canada and the United States. More so than in previous years, this year's winners have written for the public as well as the profession. The writers have long explored the link between progress, institutions and technology. In May this year Acemoglu wrote about artificial intelligence, putting forward the controversial position that its effects on productivity would be non‑trivial but modest—another way of saying they would be small—and that its effect on wellbeing might be even smaller and was unlikely to reduce inequality.

As we navigate future challenges and counter threats to democracy and the rule of law, we must also acknowledge the importance of social cohesion and community harmony to our relative prosperity and quality of life. As we seek to respond to those challenges, it is important that in the current cost‑of‑living crisis, when many of our community members are doing it quite tough, we must not seek to further threaten democracy and weaken the rule of law. Instead, we must seek to put down the threats that divide our diverse community and strengthen Australia's social fabric by enhancing social cohesion.