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I am not an economist but I found this book hard to put down. The ideas make a lot of sense and the examples certainly support the thesis but I have insufficient deep knowledge to tell if this is only due to cherry picking.
The thesis of the book is that nations that fail have extractive economies and/or extractive politics – essentially these are institutions that exist to line their own pockets or those of their cronies. Using historical and recent examples it shows how countries and areas of countries that are extractive are poorer than those where the institutions are run for the good of the people. Extractivism destroys incentives as your success only results in more being stolen from you and blocks innovation in case it should take power away from those who are currently benefiting.
The idea of success being geographical is debunked using examples like Nogales (a city spanning the US/Mexican border), Botswana (successful whist the countries around it are not) and others. Attitude of the people ideas, for example that people from Southern Europe are inherently more lazy than those from the North are also refuted with example,s as are ideas that success is culturally based.
The reasons the industrial revolution started in Britain are traced back via the Glorious Revolution, Black Death and Magna Carta. The contribution made in Eurpoe by the French Revolution and particularly by Napoleon destroying the extractive system in the countries he invaded is also shown to contribute to the success of many current nations. The authors are very clear that very minor differences in situation can end up having massive consequences so that, for example, when the Spanish colonized South America the large indigenous population allowed them to develop a slave based extractive economy whereas the British planned the same but could not do it in what became the USA due to the very low indigenous population density and therefore had to give rights to the workers to give them incentives to produce. Today we can see the result of these approaches in the relative success of the nations.
Of the current failed nations many are shown to be long term effects of colonization by the Spanish (South America), British (Africa) and Dutch (Asia) who put in place extractive institutions which by the “Iron law of the oligarch” are almost impossible to remove and have simply been taken over by new generations of rulers so they remain extractive. Countries who are successful can fail if they revert to being extractive so, for example, the Mayans were a very rich people but South America is now generally poor.
The apparent success of some extractive states, for example Communist China and Communist Russia, is explained as simply the result of better deployment of labor from agriculture to low efficiency manufacturing and that in the long run it will run out of steam as it did in Russia causing it to collapse and as it is possibly starting to do in China. An example of the conversion from extractive to an inclusive state is given as Brazil due to Lula and his workers party but now we know that actually his party was taking money out of, for example, Petrobras so it remains to be seen if the country will fall back to being an extractive failure or will surge forward into being a successful inclusive state.
Finally, the authors suggest that aid is never going to do much for failed nations unless they can be made to reform from extractive to inclusive and if we really want to help the aid should be targeted on things that will help this.
Why Nations Fail Epub
Brilliant and engagingly written, Why Nations Fail answers the question that has stumped the experts for centuries: Why are some nations rich and others poor, divided by wealth and poverty, health and sickness, food and famine?
Is it culture, the weather, geography? Perhaps ignorance of what the right policies are?
Simply, no. None of these factors is either definitive or destiny. Otherwise, how to explain why Botswana has become one of the fastest growing countries in the world, while other African nations, such as Zimbabwe, the Congo, and Sierra Leone, are mired in poverty and violence?
Daron Acemoglu and James Robinson conclusively show that it is man-made political and economic institutions that underlie economic success (or lack of it). Korea, to take just one of their fascinating examples, is a remarkably homogeneous nation, yet the people of North Korea are among the poorest on earth while their brothers and sisters in South Korea are among the richest. The south forged a society that created incentives, rewarded innovation, and allowed everyone to participate in economic opportunities.
The economic success thus spurred was sustained because the government became accountable and responsive to citizens and the great mass of people. Sadly, the people of the north have endured decades of famine, political repression, and very different economic institutions—with no end in sight. The differences between the Koreas is due to the politics that created these completely different institutional trajectories.
Based on fifteen years of original research Acemoglu and Robinson marshall extraordinary historical evidence from the Roman Empire, the Mayan city-states, medieval Venice, the Soviet Union, Latin America, England, Europe, the United States, and Africa to build a new theory of political economy with great relevance for the big questions of today, including:
– China has built an authoritarian growth machine. Will it continue to grow at such high speed and overwhelm the West?
– Are America’s best days behind it? Are we moving from a virtuous circle in which efforts by elites to aggrandize power are resisted to a vicious one that enriches and empowers a small minority?
– What is the most effective way to help move billions of people from the rut of poverty to prosperity? More philanthropy from the wealthy nations of the West? Or learning the hard-won lessons of Acemoglu and Robinson’s breakthrough ideas on the interplay between inclusive political and economic institutions?
Why Nations Fail will change the way you look at—and understand—the world.
About the Author
Daron Acemoglu is the Killian Professor of Economics at MIT. In 2005 he received the John Bates Clark Medal awarded to economists under forty judged to have made the most significant contribution to economic thought and knowledge. He is also the co-author of The Narrow Corridor: States, Societies, and the Fate of Liberty.Get eBook Info Here