geography hypothesis why nations fail

The Journal for Student Geographers

A review of ‘Why Nations Fail’

By Fintan Hogan, King Edward VI Camp Hill School for Boys

Acemoglu, Daron., and James A. Robinson. Why Nations Fail : The Origins of Power, Prosperity, and Poverty. London: Profile, 2012.

Hogan, F. (2020) A review of ‘Why Nations Fail’.  Routes  1(2): 251–255.

This piece reviews the 2012 book Why Nations Fail , co-authored by Daron Acemoglu and James A. Robinson (Acemoglu & Robinson, 2012). Their work focuses on the role of institutions in fostering development; specifically economic institutions like secure property rights and political institutions like free and fair elections – structures that commonly develop hand-in-hand. However, throughout the book, the authors write as we would expect geographers to do; frequently contextualising their argument with broader quantitative and qualitative data. Despite an apparent focus on the economic and the political, the social aspects of geography validate their argument throughout.

1. Introduction

Political accountability means the powerful can no longer rob the weak. That’s the basic premise of Why Nations Fail , with a consistent focus on the political and economic rights afforded to people over the last few millennia. The book may more accurately be called ‘Why Nations Succeed’ , since the authors draw policy prescriptions from some of the most advanced economies of each era. Reviewing a book which explicitly rejects geography as an explanation for development may appear counter-intuitive for Routes , but on reflection, the premise put forward by Acemoglu and Robinson is crucial to any understanding of development dynamics seen through a geographical lens. Daron Acemoglu is a Professor of Economics at MIT and James Robinson teaches Economics at the University of Chicago – it makes sense then, that they would see economic institutions as uniquely pivotal throughout. While Chapter 2, entitled ‘Theories That Don’t Work’, rejects ‘The Geography Hypothesis’ (p48), one should not be so quick to believe that the discipline has little to learn from their conclusions. On the contrary, geographers are concerned with the flow of information, expansion of trade and progression of inequality, all of which play pivotal roles in the authors’ premise.

Daron Acemoglu and James A Robinson offer a concise summary of their premise in the very final line of the book: ‘…durable political reform, will depend, as we have seen in many different instances, on the history of economic and political institutions, on many small differences that matter and on the very contingent path of history’ (p462). To use their own terminology, the argument held throughout the book is that development is only sustained through ‘inclusive economic and political institutions’, supported through a ‘virtuous’ positive feedback cycle – illustrated through charting the Neolithic, Industrial and Technological Revolutions. Through this, they reject ‘extractive political and economic institutions’ which facilitate growth for a short amount of time (catch-up) and profit very few people, stalling ‘creative destruction’ and generating ‘vicious’ cycles. As such, low taxes and strong central government are seen as important characteristics of a nation’s success. An example of how this may develop in practice could be citizen assemblies or unions providing some political accountability – through this, the economic security of workers grows, and development follows. In advancing their argument, the authors use a wealth of historical sources in what becomes a compelling and universal argument.

2. A more nuanced view of geography

In fact, what the authors reject in Chapter 2 is physical geography ; the site and situation which people find themselves in. This theory has been termed environmental, or geographical, determinism and has been repopularised by academics like Jared Diamond of Guns, Germs and Steel fame (Diamond, 1999). Prisoners of Geography is another popular text in this vein, emphasising the importance of the physical environment on modern-day geopolitics (Marshall, 2015). These readings are sometimes termed ‘man-land geography’ too, emphasising the interaction between the natural environment and those who rely on it. To a certain extent, Acemoglu & Robinson are correct in their reasoning that broadly similar climates and reliefs can yield vastly different results, and they use colonial and post-colonial Congo to illustrate localised disparities (p58). 

Despite this, they appear to neglect the fact that modern technology still overwhelmingly benefits from a positive location. Geographers from as early as GCSE learn of hydropower and its benefits to Ethiopia, alongside containerisation and how it fails to help landlocked Malawi or mountainous Nepal. Despite this, their argument broadly holds true – on the whole, regions with similar soils, coasts and rainfall can have hugely divergent development pathways. They argue that small changes in institutions are widened into cavernous gaps following ‘critical junctures’ – for example, the decentralised workforce of England led to the Peasants Revolt following the Black Death; this improved working conditions, unlike in much of Eastern Europe (p96). Now you may ask, doesn’t this sound a lot like history? Indeed it does, and this is what continually struck me while reading. The use of the phrase ‘contingent path of history’ to wrap up the entire book shows this clearly and demonstrates how their argument rests on singular people and events, rather than trends or patterns, as indeed does the term ‘critical junctures’.

3. Geography underpins the argument

Well what does Geography offer to this reading? Unquestionably a huge amount. The concept Acemoglu and Robinson revere in particular is participation – using the example of the Glorious Revolution (1688), the authors argue that a broad coalition of interests acts as an effective set of checks and balances within the group, supporting the introduction of equality and representation. What geography shows here is how these groups of people emerge, regardless of individual figures, in a collection of diverse interests. Understanding wealth and its distribution is shared with Economics, but underpinning a geographical perspective is the idea of social capital, inclusivity and community – the authors themselves seem to recognise this with the divergence in the distribution of serfdom across Europe by 1800 (p108). While all European peasants in the early Middle Ages were subjugated to feudalism, by the 19 th century the western European poor had strong social cohesion, fuelled by urbanisation, while those in eastern Europe still remained scattered, facing coerced farm labour. Demography and culture are as important as any purely economic factor – geography highlights the importance of place to this institutional drift.

One needs to look no further than the A Level Changing Places topic to understand how, as geographers, we can understand a community, looking beyond their economic or political standing, in a way which ‘the contingent path of history’ often relies on. It is easy to argue that historical events drive development, because every occurrence can be seen as a direct cause. However, the authors’ historical accounts are frequently contextualised by pieces of relevant data, demonstrating the importance of a wider societal understanding which underpins everything that the book has to offer. Understanding development through a geographical perspective offers the sort of coherent wider picture which the authors rely on throughout.

4. Conclusion

In short, geography is crucial to understanding the conditions which allow for the emergence of institutional reform, rather than attributing change just to single political figures or fateful events. In the modern world, this exposes itself through free trade and the exchange of services, individuals and ideas. The very first example in the book used Nogales, USA and Nogales, Mexico (a city divided by a fence) to highlight extreme inequality (p7). In the 21 st century, we attribute this to policy attitudes towards loans, welfare, property rights and globalisation. While the authors here employ the catch-all term of ‘institutions’, what the readers of this journal will be able to ascertain is far deeper. As geography students and researchers, we can perceive far more from history than what just individuals or economics can tell us. Without this wider view, historians would fail to really understand the preconditions for development (Rostow, 1959), using circular logic to suggest that developed economies must have experienced ‘good development’ and underdeveloped ones ‘bad’. Incorporating the authors’ ideas into academic studies is likely to give students another insight into development factors, and their global exploration contextualises some key areas of GCSE and A Level content. Geography moves beyond a narrow idea of development, complimenting and supporting the entire premise of the text. I would encourage you to perhaps pick up a copy of this 500-page tome – it’s worth a read.

5. References

Acemoglu, D & Robinson, J.A. (2012) Why Nations Fail: The Origins of Power, Prosperity and Poverty , New York: Crown

Diamon, J (1999) Guns, germs and steel: The fates of human societies , New York: WW. Norton & Co.

Marshall, T (2015) Prisoners of Geography: Ten Maps That Tell You Everything You Need to Know About Global Politics , London: Elliott & Thompson

Rostow, W (1959) The Stages of Economic Growth , The Economic History Review, New Series, Vol 12, No. 1, pp1-16

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Why Nations Fail — Acemoglu and Robinson on Power, Prosperity, and Poverty

Author Athenarium  /  Posted on 02/11/2020 24/05/2022

The engines of power, prosperity and poverty

I’ve now twice read Why Nations Fail: The Origins of Power, Prosperity, and Poverty by Daren Acemoglu and James Robinson. Using an institution-centric model, Acemoglu and Robinson tackle the ambitious task of explaining why some countries prosper when others do not.

On my first reading, I had dismissed the book rather hastily. I felt their framework too simple to explain the complex dynamics and histories of nations. I wasn’t alone on this. For example, Bill Gates thought the book was too “vague and simplistic”, “a major disappointment” to him (which also sparked quite the response from the two authors).

But on reflection, some twelve months later, I realised that my conclusion too was oversimplified. Sometimes, it’s the basic principles that best explain the tendencies of complex systems. What Acemoglu and Robinson (A&R) offer is a starting point and framework to think about progress and poverty.

So, I decided to revisit A&R’s book with wider eyes this time. And in this post, we’ll look at some of the key lessons that I took from Why Nations Fail.

Inclusive and extractive institutions

Institutions, innovation and incentives, virtuous and vicious cycles.

• Diamond’s hypothesis

Voyaging to inclusivity

Leaks in the great ship.

Societies construct economic, cultural and political rules to function. And the way we organise ourselves and distribute power has important implications for our trajectory and progress as a whole. A&R’s thesis is that inclusive economic and political institutions tend to lead to economic growth and prosperity, while extractive institutions tend to lead to poverty and stagnation.

Pluralism and centralisation

There are two axes in A&R’s framework of political institutions. First is the authors’ distinction between absolutist political institutions that have “narrow and unconstrained” power, and pluralistic political institutions, where power is distributed broadly. Second is their contrast between decentralised and centralised political institutions, the degree to which the state can “enforce law and order, … provide public services, … and regulate economic activity”.

A&R define inclusive institutions as those that are both pluralistic and centralised, and institutions that are absolutist and/or decentralised as extractive. The authors argue that pluralism and centralisation are necessary for inclusive and effective political institutions. Pluralism minimises the misuse of power, while centralisation enables greater coordination, planning and allocation of resources.

A fair playing field

Inclusive economic institutions are those that give its population the freedom and incentives to participate in economic activity. Common features of inclusive economic institutions include “secure private property, unbiased rule of law, and… a level playing field” (e.g. free entry for new business). This includes governments that are able to maintain law and order, enforce contracts and deliver public goods. By contrast, insecure property rights, expropriation, slavery, serfdom, state-controlled media and monopolies (in which only the elite benefit) are common markers of extractive institutions.

The authors argue that inclusive economic institutions are the “engines of prosperity”, the wellspring in which education, technology and capital markets can flourish. And the more extractive a nation’s institutions are, the less sustainable their progress will be over the long run.

Note that A&R’s framework is not a binary description. Institutions are not inclusive or extractive per say. Rather, their attributes rest on a spectrum. Some nations that are inclusive within their borders may run extractive regimes outside. Likewise, institutions that are inclusive to some subset of the population might remain inaccessible to others.

Innovation is crucial to long-run per capita progress. There are limits to our productive capacity without finding new and better ways to produce. And people are unlikely to learn and innovate if they cannot enjoy the emotional and economic benefit of their work. You cannot coerce innovation and productivity out of people indefinitely.

Unfortunately, this is what extractive institutions tend to do. Controlling elites have incentive to preserve their power. And so political and economic institutions with narrow and unconstrained powers tend to block innovations that they perceive as threats. This often comes at a great direct or opportunity cost for the wider population.

For example, A&R describes how the aristocrats of the Hungarian and Russian empires blocked industrialisation in fear of its consequences. Likewise, the sultans and religious bodies of the Ottoman Empire banned the printing press, fearing its impact on the spread of ideas and their political control (less than 3 percent of their citizens were literate at the time). Their nations lagged behind the rest of industrialised Europe by the 19 th Century.

That’s not to say that extractive economic and political institutions cannot grow. They can, particularly if those in control are effective allocators of labour and capital. But is it reasonable to expect each successive regime to govern with benevolence, restraint and effectiveness? A&R don’t believe that such institutional models are sustainable in the long-run due to the incentives that underpin them.

A&R discuss how the ‘choice’ of organisation can exhibit its own inertia and feedback loop. There are vituous cycles. This refers to the tendency of inclusive institutions to become even more inclusive over time. For example, the authors detail how the rule of law and free press can promote a fairer playing field, and dampen extractive activity. This in turn allows other engines of progress, like business ventures and capital markets, to flourish.

Then there are vicious cycles, or the tendency for extractive institutions to become even more extractive. Extractive institutions can incite infighting, revolutions and civil wars. And this unrest can further destabilise its institutions, fuelling the cycle even further. Here, the authors cite Robert Michel’s iron law of oligarchy and the tendency for nations to replace one extractive institution with another. The fall of ancient Rome is a classic case study on this.

Critical junctures

Related to feedback loops is the idea of critical junctures. These are important events, from disease to revolutions, that test or transform the foundations of institutions. Some junctures may rest power away from the narrow elite and allow institutions to transition towards inclusivity. Other junctures may destabilise the foundations, leading to degeneration in the nation’s inclusiveness. Critical junctures may amplify, dampen or reverse the feedback loops in virtuous and vicious cycles.

Path deterministic

It’s difficult to predict the consequences of a critical juncture. While the institutions that exist beforehand will influence a nation’s response to critical junctures, contingency will play a major role. The diversity we see in social and ecological systems over time are clear examples of this. A&R warns readers about the dangers of intepreting history as inevitable. Like winning the lottery, just because something happened doesn’t make it the most likely thing to have happened.

“Small differences and contingency are not just part of our theory; they are part of the shape of history”. Daren Acemoglu and James Robinson Why Nations Fail, 2012.

Institutional drift

Starting conditions and small differences matter because their results compound over time. This can lead to large divergences between nations, which A&R refer to as an institutional drift. The idea shares some parallels with that of evolutionary and ecological processes. That is, how cumulative selection can lead to complexity, diversity and divergences over time. (Although we should be careful not to draw too literally from such analogies)

Diamond’s hypothesis

A&R believe that other common explanations, like geography and cultural factors, are inadequate in describing the rise and fall of nations, especially after the Industrial Revolution (1760-1840). For example, they describe how Jared Diamond’s geographic hypothesis is unable to explain the diffusion of technologies and distribution of incomes in regions such as the two halves of Nogales, or South and North Korea today. 

Here, I disagree somewhat with A&R. For every example that show that geography and initial endowments don’t have explanatory power, we can find examples where they do (as with Jared Diamond’s work). On the idea of culture, I also find it interesting that A&R say that “there is little relationship between religion and economic success”. One might argue that religions of the past were quasi-political institutions. It’s another model for social organisation; constructs to organise attitudes, incentives, and hierarchies. Some of its ideas and values remain seeded in the political and legal institutions of today.

So, I prefer to take a broader view on the explanatory variables of progress. And to recognise the role of geography, contingency and pre-history when they matter. Disease, climate, soil productivity and scarce resources have impacted different nations in different ways. And while our institutions shape us today, they’re also the product of happenstance, history and nature itself. We might have a more fruitful model if we mix and match the ideas of Acemoglu, Robinson, Diamond, and so on. Each one offers a different starting point to think about our world. It’s a mighty endeavour to understand the complex web of interactions. No single explanatory variable or framework is likely to suffice.

Another important idea in Why Nations Fail , although not explicit , is the consequence of neighbour interactions. Here, I mean neighbours in a geographic, economic and/or cultural sense. We can find examples across history where neighbours become stabilisers or destabilisers of institutions. The Spanish colonial conquests in the Americas, or two millennia of geopolitics in the Middle East, have had trajectory altering consequences for those regions. History shows how competition and cooperation can alter the incentives and choices of institutions. So, geopolitics and international relations complicates our narrative quite a bit. It’s also a key tenet in Jared Diamond’s Collapse: How Societies Choose to Fail or Succeed.

Some nations do transition towards inclusive institutions over time, often through the immense struggles, sacrifice and contingency. For example, A&R traces the history of the United States, describing how they overcame elite-controlled power to distribute political rights more broadly; and established a centralised government that was more responsive and accountable to their citizens. But the socioeconomic challenges of today, both in the United States and across the world, reveal the spectrum of progress and the long winding road to inclusivity.

Empowering a broad coalition

So how do nations transition from extractive to inclusive institutions? Here, A&R doesn’t have a clear answer. And fairly so. If the science of organisation was obvious, we wouldn’t have domestic or international problems in the first place.

But the authors offer some common themes from history. For example, they attribute the progress in England following the Glorious Revolution, and France following the French Revolution, to the: (1) arrival of merchants with incentives to innovate; (2) formation of a broad governing coalition, which reduced the incentive for and strength of narrow political control; (3) prior regimes that were conducive to inclusivity (i.e. England’s Magna Carta and France’s Assembly of Notables); and (4) luck.

Amongst the many ingredients of progress, we also shouldn’t understate the importance of psychological empowerment, both of the people and the coalitions that represent them. A&R describe how it can help a population to resist extractive pressures. Economic and political pluralism, and psychological empowerment, go hand in hand.

The virtuous cycle means that pluralistic institutions, once established, make it more difficult for the narrow ‘elites’ to usurp control. I’m reminded of the Pentagon Papers and Watergate, and the role of the Supreme Court and Washington Post during these critical junctures. Nations require checks and balances to withstand the pressures of extractive forces. When one domain begins to falter, then the others are drawn upon to restore integrity and inclusiveness.

Growth and prosperity are not guaranteed geometric processes in time. A&R described how Argentina, Russia and parts of South East Asia enjoyed periods of rapid economic growth prior to stagnation or reversal. The rise and fall of the Roman Empire is another important example. These are stark warnings for the United States and China today. The model we select for organisation, incentives, redistribution and sustainability is central to our long run progress. So, we must continue to scrutinise the utility and inclusiveness of our institutions.

Finally, I’m reminded of Niall Ferguson’s metaphor in The Great Degeneration , in which he likens lawmaking and institutional development to a slow-moving landscape. That is, a historical process that each generation will get to terraform. It’s a reminder that our economic and political institutions today are more fragile than we’d like to think. They can erode over time, and are not yet inclusive or accessible for everyone either. As Benjamin Franklin once said, “a small leak will sink a great ship”. Complacency breeds degeneration. There’s a lot more progress for us to make.

Further reading

• This Time is Different – Reinhart and Rogoff on financial crises
• The Great Degeneration – Niall Ferguson on how institutions decay and economies die
• How democracies die – Steven Levitsky and Daniel Ziblatt on norms, legitimacy and stability
• Population growth and technological change — One Million B.C. to 1990 — Michael Kremer
• Acemoglu, D., & Robinson, J. (2012). Why Nations Fail: The Origins of Power, Prosperity and Poverty.
• Ferguson, N. (2012). The Great Degeneration: How Institutions Decay and Economies Die.
• Diamond, J. (2005). Collapse: How Societies Choose to Fail or Succeed

Faculty  Research

Why nations fail: the origins of power, prosperity, and poverty.

Translated into 40 languages since its publication, and based on fifteen years of original research,  Why Nations Fail , coauthored by Daron Acemoglu and James A. Robinson, 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? Acemoglu and Robinson conclusively show that it is man-made political and economic institutions that underlie economic success (or lack of it).

The University of Chicago

Why Nations Fail Summary and Review | Daron Acemoglu and James A. Robinson

Life gets busy. Has Why Nations Fail  been gathering dust on your bookshelf? Instead, pick up the key ideas now.

We’re scratching the surface here. If you don’t already have the book, order the  book  or get the  audiobook for free  on Amazon to learn the juicy details.

About Daron Acemoglu

Daron Acemoglu and James A. Robinson co-wrote Why Nations Fail: The Origins of Power, Prosperity, and Poverty. Here’s what you need to know about these authors.

Daron Acemoglu is a renowned economics professor. He currently teaches at MIT.

During his nearly 30-year tenure, he has authored  dozens of research papers . His papers cover everything from online misinformation (i.e., “fake news”) to supply chain disruptions.

Acemoglu holds the prestigious Elizabeth and James Killian Professor of Economics title. In 2019, MIT also named him Institute Professor. This title is the highest honor a professor can receive at MIT.

James A. Robinson is also a professor of economics and political science. He teaches at the University of Chicago’s Harris School of Public Policy. He holds a Ph.D. in economics from Yale.

Robinson also formerly taught at Harvard, UC Berkeley, and USC.

Robinson specializes in foreign relations. He studies countries’ differences through the lens of economic institutions.

You can check out his other books if you’re looking for more reading. He also authored The Narrow Corridor and Economic Origins of Dictatorship and Democracy.

Introduction

Why are some countries poor while other nations prosper? This question is the central drive of Why Nations Fail’s narrative.

And it’s an important one to answer. Why? In the US alone, economic inequality has led to  only 20% of US families  making over 50% of the national income.

The wealth gap is even more significant when looking at the country-by-country stats. So, Acemoglu and Robinson take up the question of why there’s so much variation in wealth worldwide.

We’ll discuss their argument in our Why Nations Fail analysis below.

StoryShot #1: Geography, Culture, and Ignorance Aren’t Enough to Explain Why Nations Fail

Acemoglu and Robinson open Why Nations Fail with an interesting example. Nogales is a city that splits the border of Arizona and Sonora, Mexico. Despite their proximity, Nogales, Arizona is a much wealthier city than Nogales, Sonora. What’s the disconnect?

There are three theories that try to explain the differences in standards of living. These theories should show why some nations are more prosperous than others. The theories are:

• The Geography Hypothesis
• The Culture Hypothesis
• The Ignorance Hypothesis

Below, we’ll discuss what each of these theories means. Plus, we’ll provide real-world examples from the book. These examples help show why each theory doesn’t work.

Geography, Culture, and Ignorance Hypotheses Explained

The Geography Hypothesis claims that people in warmer countries are lazy. Meanwhile, workers in nations with more temperature climates are more productive.

Today, this theory has expanded to include factors like diseases. Many diseases ravage warmer-climate countries far more than temperate ones.

But Nogales directly disproves this theory. Inhabitants of both cities experience the same climate and the same diseases. So, why are the standards of living still so different?

Another prevailing theory is the Culture Hypothesis. This theory suggests that religion, specifically Protestant religions, confers a better work ethic.

Protestantism is more common in industrialized countries. Supposedly, this fact helps prove the culture theory.

Acemoglu and Robinson use Korea to argue against the Culture Hypothesis. Until the Korean War, these countries existed as one. They shared the same religion and culture.

But why then is South Korea thriving while North Korea’s economy is in the dumps?

The final theory put forward in this book is the Ignorance Hypothesis. The Ignorance Hypothesis claims that developing countries lack knowledge. Namely, they don’t know which policies would stimulate their economies.

Unfortunately, this theory doesn’t account for places like Africa and the Middle East. Western thought leaders have brought information to these regions. Yet, that knowledge has done little to improve their economies.

StoryShot #2: Political Institutions Explain Why Some Nations Are Rich and Others Poor

None of the prevailing theories on why some nations fail work. So, Acemoglu and Robinson put forward a fourth theory. They think there’s a more straightforward explanation.

The difference between rich and poor countries is their economic and political institutions.

Countries’ economic and political policies can generally fall into one of two camps:

Extractive policies tend to exploit the income of one group. This group tends to be the lower class.

That income then gets redistributed to another group. This second group is usually a wealthy elite.

Contrast this with inclusive governments. Inclusive policies encourage widespread participation in the economy.

An example of a country with inclusive policies is the US. In the United States, most people work for a living and get to take home their wages as income. This participation then stimulates the economy.

Further, inclusive countries are pluralistic. Pluralism refers to an institution where every interest gets representation. This pluralism results in sharing of power, which prevents the concentration of wealth.

Conversely, North Korea is an extractive institution in action. The Kim dynasty has ruled North Korea for decades.

Experts define their political rule through the exploitation of the general public. And these governments exploit to benefit a small group of elite and wealthy families.

According to the book, this is the only theory that can explain global wealth inequality. The rest of the book lays out the argument for why this has to be the case.

StoryShot #3: Critical Junctures Lead to Institutional Drift

Acemoglu and Robinson lay out their points in the next section. But first, they explain how two similar countries can have such disparate institutions. This phenomenon hinges on critical junctures.

Critical junctures are events that cause two countries with similar institutions to diverge. For instance, the Black Death was a critical juncture in European history.

On the one hand, Western European peasants fought for better rights. They had the leverage to do so since the Black Death caused a decrease in labor supply. Ultimately, this even led to a more pluralistic political institution.

Eastern European peasants didn’t fare so well, though. Landowning nobles preyed on the situation. They demanded more taxes from the working class.

This situation led to an increase in feudalism. And Eastern European countries can still feel the effects of feudalism today.

So, why are critical junctures so crucial? You can see the answer from the above examples. These events can cause two similar nations to become politically and economically divided.

Economists call this institutional drift.

As more and more critical junctions occur, institutional drift increases. Eastern and Western Europe have two completely different political and economic ideologies today. And institutional drift can help explain why.

StoryShot #4: Inclusive Politics Breed Economic Growth

You may be wondering: why do critical junctures impact countries so differently? In other words, why did the Black Death lead to the end of feudalism in the West but not in the East?

Why Nations Fail has an answer for this question, too. The more inclusive a country is historically, the more likely it is to profit in the future.

Let’s use an example. The Black Death occurred in the 14th Century. A century before, in England, the Magna Carta went into effect.

This document was the first-ever checks-and-balances approach to government. It specified that English law didn’t just apply to regular citizens. The law applied to the King and his wealthy nobles, too.

The Magna Carta also put in place the first vestiges of the English Parliament. Elected members of Parliament made for a more pluralistic political institution.

So, Acemoglu and Robinson posit that the Black Death created more inclusive institutions. This occurred in Western Europe generally and England specifically.

Over the next six hundred years, England experienced a cascade of critical junctures. These events include the Revolution of 1688 and the establishment of the Bank of England. Tax reform and infrastructure improvements also contributed.

All these events paved the way for industrialization. Rapid industrialization further made way for capitalism. And capitalism is arguably the single most important driver of economic growth today.

Another point made in this section is that inclusive policies breed inclusive economies. Inclusive economies, in turn, create room for more inclusive policies.

In other words, putting inclusive institutions in place increases inclusive politics and economics. And this effect can last ad infinitum.

The Essential Qualities of Inclusive Institutions

Let’s discuss one thing before we move on to the next section. It’s essential to understand the characteristics of inclusive institutions.

First, inclusive institutions are pluralistic. Society as a whole must hold political power rather than a select, wealthy elite. The following also characterize inclusive institutions:

• The government incentivizes private individuals to invest and innovate
• There are laws protecting people’s rights to invest and innovate
• There is education and infrastructure in place to help people invest and innovate
• The government is pluralistic in nature
• Laws benefit all citizens, not just a wealthy elite
• The government upholds a monopoly on violence (i.e., they have the legal right to use force)

Now, let’s discuss the countries and institutions that don’t share the above qualities.

StoryShot #5: Uninclusive Politics Breed Economic Stagnation

Inclusive politics lead to economic growth. Uninclusive or, as the authors call them, extractive institutions lead to the opposite. Institutions that exploit groups for their own gain tend to have stagnant economies.

The example used in Why Nations Fail is that of former colonies. First, colonizing countries exploited the local labor and resources for their own gain. Then, they left.

Today, you can see the legacy of these uninclusive policies in former colonies. Countries that used to exist under a faraway country’s rule still struggle to get their economies on track.

Why does this happen? After all, to the ordinary person, a prosperous country is a good thing.

But things change when you’re the sole member of a country’s ruling elite. What’s suitable for the people may go against your own interests.

The reverse is also true, though. What’s good for the ruling elite isn’t necessarily good for the economy. The same goes for the workers who keep the economy churning.

Here’s an example. When the printing press came about in 1445, the Ottoman Empire banned it. They continued to ban this invention up until the 18th Century.

Why? Because they feared it threatened their authority. In other words, they worried this invention would lead to more inclusive institutions.

Instead, the Ottoman Empire hurt itself. Its population fell behind other parts of Europe’s education. And this was all because they banned the printing press.

According to the book, only 3% of Ottomans were literate. Compare that to 40%–60% of Englishmen who were literate.

In sum, extractive policies can impact progress. And without economic advancement, countries’ wealth can suffer.

StoryShot #6: Uninclusive Politics Create an Economic Domino Effect

One uninclusive policy in a vacuum isn’t necessarily harmful. Yet, Acemoglu and Robinson argue that extractive policies cause a waterfall effect. So, an uninclusive country almost always becomes more extractive.

This phenomenon can have a major impact on the economy. First, remember that the ruling elite enforces uninclusive policies. They do so to keep themselves rich and powerful.

The effect is that their countries’ wealth suffers. Eventually, someone may have the opportunity to rise up. They may even be able to overthrow the extractive institution.

But these new regimes are also typically extractive.

Here, the example presented in the book is of American slavery. Americans invented slavery to extract labor from members of the African diaspora. Yet, this institution eventually led to more uninclusive policies.

Slavery ended in 1865 with the end of the Civil War. But unfortunately, the 13th Amendment didn’t actually end the exclusion of black Americans. People often ignored the Amendment’s provisions in favor of discluding black Americans from paid work.

Sharecropping and, ultimately, Jim Crow laws further reinforced the exclusion of black Americans. This group made some progress with the civil rights movement. But black Americans still face lingering uninclusive policies to this day.

StoryShot #7: Economies That Succeed Under Uninclusive Institutions Aren’t Sustainable

The next section of Why Nations Fail focuses on the exception to this rule. In other words, the book discusses extractive institutions with decent economies. China is exemplary of this idea.

China has a recent history of extreme authoritarian rule. Yet, China also has the  fastest-growing economy in the world . Since 1978, China’s gross domestic production (GDP) has grown at an average rate of 10% per year.

Yet, there’s something special about the year 1978. This was the year that China began its “opening-up” policy. This policy allowed 800 million Chinese citizens to come out of poverty.

China seems to refute Acemoglu and Robinson’s argument. China historically has had uninclusive institutions. Yet, they eventually gave rise to more inclusive policies.

And all this happened after only one critical junction: the opening-up policy.

That’s all true until you consider the state of China’s economy today. China’s economy grew so much because it could manufacture and export goods very cheaply. It can do so because of the low wages companies pay workers.

Despite progress, China still employs extractive economic practices. And over the past couple of years, these practices have started to add up.

Labor force growth and productivity have declined. Meanwhile, investments are seeing diminishing returns. Experts believe this is due to a lack of participation from private investors.

Experts believe that China’s economy will eventually collapse.

Why? Because the uninclusive institutions still linger in China. And these institutions have created an unsustainable level of economic development.

China will eventually have to address its extractive institutions. If it doesn’t, Acemoglu and Robinson project that the country will ultimately fail. They believe China will follow in the Soviet Union’s footsteps.

Why Isn’t Growth Under Extractive Institutions Sustainable?

The book also speculates why countries with extractive policies can’t grow forever. They give two primary reasons:

• Sustainable growth requires innovation
• Innovation requires creative destruction

Creative destruction is another phrase for “out with the old; in with the new.” This process destroys old policies and frameworks. And this destruction must occur for innovation to take place.

Small groups of elites tend to head up extractive countries. It is in their best interests to keep the extractive institutions in place. So, they fear creative destruction and avoid innovation to maintain their power.

StoryShot #8: Uninclusive Institutions Can Become Inclusive With Time and Effort

The great thing about this book is that it does relay a lot of gloom and doom. But the final section offers a silver lining. Acemoglu and Robinson describe how a developing country can become rich.

First, the country must chip away at its extractive institutions. This requires critical junctures. And these critical junctures must push the government to create more inclusive policies.

One way to help countries do this is to give pressed individuals the means to fight back. Brazil is an example of this idea in action. Social unrest throughout the country led to a revolution in the 1980s.

Since the impoverished overthrew their dictators, the country’s economy has flourished.

And Brazil has continued to encourage more inclusive policies. This is especially true over the last few decades. These changes resulted in Brazil’s economy becoming one of the fastest-growing  until 2012 .

It’s important to note that, since the writing of Why Nations Fail, Brazil’s economy has taken a tumble. As a result, the country experienced a recession in 2014.

Experts believe the cause of the recession was a lack of private investment. Sound familiar? It should since this was one of the reasons China’s economy began to slow down.

Brazil has since started recovering from its recession. And the reason why should be no surprise to you now that you’ve read our Why Nations Fail summary.

Brazil has again started investing in more inclusive economic policies. This strategy has helped to increase productivity, private investment, and, thus, wealth.

Foreign Aid Doesn’t Help

Another word of advice Acemoglu and Robinson give is about foreign aid. The US, in particular, has a firm foreign aid policy. Yet, this aid usually does no good.

Why? Because as long as extractive institutions are still in place, the aid will benefit the elite, not the general public.

Countries must undergo a critical juncture to become more inclusive. Barring this kind of change, neither neoliberal nor micro-economic foreign aid will be beneficial. At least, that’s what the book argues.

Final Summary and Review of Why Nations Fail

Why Nations Fail is a great read for anyone interested in politics, economics, or foreign relations. This book lays out an argument that poor countries suffer from extractive institutions. And without overthrowing these intuitions, their economies will always lack growth.

It’s also an easy read. You won’t find much academic jargon, and the examples are straightforward and intriguing.

But before reading, you might want some background knowledge in economics. That’s because the authors don’t define some terms (e.g., monopolies on violence).

Before you go, here are the Why Nations Fail key takeaways you need to remember:

• Geography, Culture, and Knowledge Aren’t Enough to Explain Why Nations Fail
• Political Institutions Explain Why Some Nations Are Rich and Others Poor
• Critical Junctures Lead to Institutional Drift
• Inclusive Politics Breed Economic Growth
• Uninclusive Politics Breed Economic Stagnation
• Uninclusive Politics Create an Economic Domino Effect
• Economies That Succeed Under Uninclusive Institutions Aren’t Sustainable
• Uninclusive Institutions Can Become Inclusive With Time and Effort

Deep dive into the details by ordering the  book  or get the audiobook for  free .

New to StoryShots? Get the audio and animated versions of this summary as well as hundreds of other bestselling nonfiction books in our  free top-ranking app.  It’s been featured #1 by Apple, The UN, and The Guardian.

Got feedback? Comment below or tweet to us  @storyshots .

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The synopsis is brief and to the point. However, it leaves a feeling that major portion of the book is left uncovered. Only one aspect, i.e., institutional strength is discussed. A shot should be able to give overall perspective of the book. Also, it’d be nice if the details of publisher and date of publication are added.

Thanks for the thoughtful comment. We’ll look into improving it.

The details of the publisher and date of publication are available on Amazon and elsewhere. Why do you think it’s important that we add them here as well? What problem does it solve for you?

Author takes the biased approach to explain the unsustainable growth of China. Even the American economy is looming at the brink of default and has faced economic depressions many times

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Best of The New York Review, plus books, events, and other items of interest

September 19, 2024

Current Issue

‘Why Nations Fail’

August 16, 2012 issue

Submit a letter:

Email us [email protected]

In response to:

What Makes Countries Rich or Poor? from the June 7, 2012 issue

To the Editors :

Jared Diamond provides an engaging review of our book Why Nations Fail [ NYR , June 7]. Though Diamond accepts the importance of institutions and their political roots—the main focus of our book—and asserts that “perhaps they provide 50 percent of the explanation for national differences in prosperity,” his review is mostly concerned with defending an alternative perspective, which we have called the geography hypothesis. There is no surprise in this as Diamond is the most erudite and original proponent of this hypothesis, and our book dismisses it.

Diamond adds to his original thesis about the timing of the Neolithic Revolution shaping the patterns of intercontinental inequality claims that have more recently been articulated by economist Jeffrey Sachs on how tropical areas are condemned to poverty because of their greater disease burden and their poor soil quality, and how topography and natural resources are crucial determinants of prosperity. He also criticizes our book for not sufficiently grounding institutional dynamics within the geographic context—not explaining which types of natural resources are a curse and not linking institutional variation to geographic factors. Finally, he is critical of our discussion of the Neolithic Revolution. However, in each of these cases, Diamond does not do justice to our argument.

First, contrary to Diamond’s claim, there is nothing that contradicts tropical medicine and agricultural science in claiming that these are not major factors shaping differences in national prosperity. That these geographic factors cannot by themselves account for prosperity is illustrated by an empirical pattern we discuss—the “reversal of fortune.” Among the countries colonized by Europeans, those that were more prosperous before colonization ended up as relatively less prosperous today. This is prima facie evidence that, at least in the sample that makes up almost half of the countries in the world, geographic factors cannot account—while institutional ones can—for differences in prosperity as these factors haven’t changed, while fortunes have. Academic research also shows that once the effect of institutions is properly controlled for, there is no evidence that geographic factors have a significant impact on prosperity today.

Similarly, major improvements in health technology starting in the 1940s have made significant headway against diseases and have led to unparalleled increases in life expectancy in many parts of the world. But they have not led to faster growth in these areas over the last sixty years in contrast to what would have been expected if the disease burden were a crucial determinant of prosperity.

Second, though Diamond criticizes us for not explaining “which resources especially lend themselves to the curse,” it is not characteristics of a natural resource but the institutions that determine whether it is a curse or a blessing—diamonds are a curse for Sierra Leone and Angola, and a blessing for Botswana.

Third, Diamond claims that our revisionist take on the Neolithic Revolution, based on the idea that sedentary life and social complexity came before farming, suffers from a “complete absence of evidence” when in fact it is now the conventional wisdom amongst archaeologists. He also claims that the Fertile Crescent was the “only area in which local agriculture could have arisen” because of the presence of various species of wheat, even though agriculture originated in many places, for example in China, based not on wheat but rice. More importantly, however, our point was that once one examines the distribution of domesticable plants and animals more broadly, Diamond’s theory predicts that the Neolithic Revolution would happen first in Eurasia, but cannot account for differences in prosperity today, which are huge within Eurasia and not explained by the timing of the Neolithic Revolution (as recent research by Ola Olsson and Christopher Paik shows).

Fourth, Diamond suggests that, by eschewing geographic determinism, our theory is as if institutions appeared “randomly.” This is not a fair characterization. Though at times the process of institutional development has been influenced by geography or disease ecology (as our own academic research joint with Simon Johnson has documented), these are not the major factors shaping institutional variation today. But this does not mean that institutional dynamics are simply random; our book explains how institutional variation today is largely a systematic outcome of historical processes, and how these processes can be studied, revealing, for example, why Europe, the United States, and Australia are richer than the Middle East, Africa, and Latin America.

Daron Acemoglu James A. Robinson Cambridge, Massachusetts

Jared Diamond replies :

My review praised Daron Acemoglu and James Robinson for writing a wonderful book about the role of institutions in shaping why countries are rich or poor. The book’s limitations, repeated now in their letter, are that they dismiss the roles of all other factors, especially geographic factors. That’s because of their oversimplified view of geography’s effects; their criticizing the straw man that geography explains everything (it doesn’t, and it’s not an alternative perspective but an additional perspective); and their failure to explain the origins of good institutions themselves.

The first point of their four-point letter is that tropical medicine and agricultural science aren’t major factors shaping national differences in prosperity. But the reasons why those are indeed major factors are obvious and well known. Tropical diseases cause a skilled worker, who completes professional training by age thirty, to look forward to, on the average, just ten years of economic productivity in Zambia before dying at an average life span of around forty, but to be economically productive for thirty-five years until retiring at age sixty-five in the US, Europe, and Japan (average life span around eighty). Even while they are still alive, workers in the tropics are often sick and unable to work. Women in the tropics face big obstacles in entering the workforce, because of having to care for their sick babies, or being pregnant with or nursing babies to replace previous babies likely to die or already dead. That’s why economists other than Acemoglu and Robinson do find a significant effect of geographic factors on prosperity today, after properly controlling for the effect of institutions.

Second, Acemoglu and Robinson deny that characteristics of a natural resource determine whether it’s a curse or a blessing. But characteristics of diamonds and oil notoriously promote corruption and civil wars more than do characteristics of iron and timber.

Third, geography has had a big effect on modern prosperity through permitting local ancient origins of agriculture, in turn permitting sedentary life and social complexity. While sedentary life and social complexity did develop before farming in a few exceptional cases, Acemoglu and Robinson’s assertion that as a generalization it is conventional wisdom among archaeologists will be news to archaeologists. Acemoglu and Robinson misquote me in saying that I claim the Fertile Crescent to have been the only area where local agriculture could have arisen. Of course not: instead, I cited agricultural historians who showed that the Fertile Crescent was the only such area in western Eurasia; my book Guns, Germs, and Steel discussed at length how local agriculture also arose in at least eight areas outside western Eurasia. Acemoglu and Robinson are correct that the timing of the Neolithic Revolution doesn’t account for prosperity differences within Eurasia today; it “merely” accounts for about half of prosperity differences today around the world as a whole.

Finally, as readers may quickly confirm for themselves, it is indeed a fair characterization of Acemoglu and Robinson’s book to say that their theory is as if institutions appeared at random. Although their letter describes institutional variation today as a systematic outcome of historical processes, much of their book is actually devoted to relating story after story purportedly explaining how institutional variation developed unsystematically and at random, as a result of particular events happening in particular places at critical junctures.

To summarize, I agree with Acemoglu and Robinson that institutions are important. If they had said that, they would have written a completely wonderful book in which I would have found nothing to criticize. Unfortunately, they overstated their case and dismissed the roles of factors other than institutions. I continue to recommend their book as a sparkling account of the role of institutions. I hope that their next book will be an equally sparkling one, about the roles of those other factors.

August 16, 2012

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Book Reviews

Book review: why nations fail.

• Efe Erciyaz
• Marianne Hii
• Katrina Zhang
• Economic Development
• Institutions
• Political Economy

1. Introduction

In Why Nations Fail , Acemoglu and Robinson argue that economic development and the prosperity or poverty of nations can be traced back solely to “institutions, institutions, institutions” (Acemoglu & Robinson 2012: 368). It is not geography, culture, or the ignorance of policymakers that explains the vast income disparities across nations, but it is the fact that some countries were able to introduce and maintain inclusive economic and political institutions, while others still operated under extractive systems benefitting only narrow groups of elites. The argument of the book is meticulously well-researched and supported by historical evidence spanning a vast range of epochs and continents. Furthermore, Acemoglu and Robinson could hardly have chosen a more appropriate time than 2012 to publish their book. At the time of publishing, the Middle East was still reeling from the revolutionary Arab Spring that many hoped would mark the turn of the Arab world to greater political and economic inclusiveness, Acemoglu’s country of origin Turkey was sliding evermore into the authoritarian, extractive wrath of Recep Tayyip Erdogan, and with the Great Financial Crisis of 2008 having exposed an ever-growing income gap between rich and poor states.

Whilst credit must be given to Acemoglu and Robinson for re-injecting the importance of institutions into the discourse on economic development, we will argue that there are two major shortcomings of the book. First, the authors continuously operate through a constrained lens of institutions within a single country and subsequently do not sufficiently consider the interplay of institutions across borders. For instance, the book leaves unaddressed to what extent we can attribute the past economic development of colonising countries to the extractive institutions imposed on their colonies rather than to their inclusive institutions domestically. A greater focus on this international aspect of institutional arrangements would have been of great interest given the current pertinence of tied aid and structural adjustment programs through which harsh institutional reforms are often imposed on developing nations. Second, Acemoglu and Robinson’s argument that only institutions matter for development is overly simplistic and dismisses other explanations such as culture, geography, or policy mistakes unfairly out of hand.

2. Part I: Summary

Why Nations Fail opens with the thought-provoking natural experiment between Nogales, Arizona and Nogales, Mexico (Acemoglu & Robinson: 7-9). Despite the two regions either side of the US-Mexico border sharing almost identical cultures, climate and natural resources, Nogales, Arizona has three times the GDP per capita of its Mexican counterpart. It follows, according to the authors, that institutions must lie behind this vast difference in economic development. Anecdotal evidence such as the above is used throughout the book by Acemoglu and Robinson to demonstrate their thesis that only inclusive political and economic institutions make sustainable development possible. The authors define institutions vaguely as rules and norms directing the actions and incentives of agents operating within the state and partition between the economic sphere and the political sphere (Acemoglu & Robinson: 42). Ultimately, the bridge between a country’s institutions and development outcomes is spanned by incentive structures. Inclusive economic and political institutions—those that are pluralistic, accountable, and share economic and political power and opportunity widely in society—support sustained economic development through generating incentives for investment, risk-taking, and innovation. For instance, only when there is secure private property are citizens and enterprises confident in their ability to generate profits commensurate to their efforts and risk-taking and hence become willing to engage in innovation (Acemoglu & Robinson: 75). Conversely, their extractive counterparts that concentrate power in the hands of a narrow elites and primarily facilitate rent extraction stifle development as elites frequently use their concentrated power to put down Schumpeterian ‘creative destruction’ and as elite infighting over extraction frequently flares up (Acemoglu & Robinson: 132). To be exact, Acemoglu and Robinson do not claim that development is impossible in extractive institutional frameworks but only that due to lacking innovation incentives and frequent elite infighting, this development is ultimately short-lived (Acemoglu & Robinson: 124).

Furthermore, Acemoglu and Robinson further develop two self-perpetuating cycles according to which economic and political institutions develop over time. In vicious cycles, extractive political institutions feed on extractive economic institutions, which subsequently further increases economic extraction (Acemoglu & Robinson: 365). Conversely in virtuous cycles, more inclusive political institutions tend to create more inclusive economic arrangements, which through increased economic prosperity for the masses enhances their political power and hence supports political inclusion (Acemoglu & Robinson: 332-334). Nonetheless, despite these cycles, Acemoglu and Robinson do not posit historical determinism in the realm of institutions, as institutional drift—minor differences in institutions across countries—in combination with so-called critical junctures—major historical events such as the Black Plague—can lead a country to make the difficult switch from extractive to inclusive institutions or vice versa (Acemoglu & Robinson: 432). 

The core argument of Why Nations Fail is clear, well-researched, and intuitively appealing. Institutions do matter for economic development and the impressive array of historical examples provided by the author give strong backing to their hypothesis. At the same time, however, the book’s clarity is also its main weakness: its thesis that only institutions determine development, and not alternative factors such as geography, culture, or policymaking, misses the multi-faceted nature of economic development. Even so, Acemoglu and Robinson can be forgiven to an extent: Why Nations Fail was targeted at the general reader interested in economics and politics, and for this specific audience the brashness of the book’s argument was crucial in highlighting the importance of institutions. Hence, whilst for a more academic audience the lack of nuance in the book is troubling, the clarity and boldness of the authors’ institutional thesis, as well as its systematic analysis only within the boundaries of the nation-state, might have been necessary to jumpstart public discourse on institutions in development.

3. Part II: International interplay between inclusive and extractive institutions

The first shortcoming is the lack of focus on how extractive and inclusive institutions interact across international borders. Firstly, there is insufficient appreciation that inclusive domestic institutions can be supported by extractive ones abroad. Whilst Acemoglu and Robinson do extensively discuss the prominent role of extractive colonial institutions in obstructing the colonies’ development, they do not really consider the other side of this bilateral relationship pertaining to colonising countries, where they instead focus more on the importance of domestic inclusive institutions for economic development. Acemoglu and Robinson detail extensively the developing inclusive political and economic institutions in England during the Industrial Revolution, such as strong property rights and the ability to lobby Parliament (Acemoglu & Robinson: 103-104). They pinpoint the relationship between the English Crown and merchants profiting from colonisation in the 17th century as a crucial reason why inclusive political institutions later emerged (Acemoglu & Robinson: 105-106). Indeed, Acemoglu and Robinson emphasise the importance of initially small institutional differences during a critical juncture like the expansion of the Atlantic trade leading to diverging paths for different countries.

However, whilst the authors argue colonising countries benefitted post-critical junctures whilst colonised countries were left incapable of taking advantage of technological innovations (Acemoglu & Robinson: 114), they do not extensively explore the implications of this. It is intuitive that colonists enjoyed economic benefits from colonies, as exemplified by James Watt being partly motivated by economic opportunities from demand in English overseas colonies and domestic markets (Acemoglu & Robinson: 104). However, they do not further expand on this mention of overseas colonies in explaining England’s inclusive institutions. They also do not explicate possible causal mechanisms wherein extractive institutions abroad could support the growth of inclusive institutions domestically, in England, such as through revenue streams funding institutional transition or co-optation of domestic elites. The developmental narrative of England, whilst accounting for international affairs, such as military conflicts with the Spanish and colonisation abroad, therefore lacks an explicit explanation on a potential supportive role of extractive institutions. The authors do engage in such analysis regarding South Africa, where white elites created a dual economy to benefit from cheap labour costs and reduced competition (Acemoglu & Robinson: 259-260). It would be rewarding to see similar analysis with England and its colonies, given the attention the authors pay to them.

Besides this, readers are not equipped with a complete toolkit allowing them to fully understand implications of modern international policy such as tied aid and structural adjustment programmes on developing countries. Extending their exploration of the interaction of institutions across borders would provide such a toolkit. Acemoglu and Robinson do discuss the impact of aid, particularly the failure of foreign aid to Afghanistan in promoting development (Acemoglu & Robinson: 451). They note that development aid has often been wasted due to corruption, various costs, and appropriation by dictators overseeing extractive institutions (Acemoglu & Robinson: 452). Moreover, they discuss the ineffectiveness of conditional aid by arguing it does not provide strong incentives to meet the aid’s conditions or overhaul extractive institutions in these countries (Acemoglu & Robinson: 453-454). Here, the implication is that conditional aid would assist development if conditions were strictly followed and that it fails because it is ineffective in incentivizing compliance. However, Acemoglu and Robinson do not explicitly consider a potential parallel relationship with colonialism, wherein conditions of tied aid benefit the aiding country, potentially at the expense of the country receiving aid. For instance, companies from rich countries still receive around two-thirds of aid contracts that are officially untied (Provost 2011).

Furthermore, readers are then not fully equipped to understand the role of international pressure on developing countries more generally. Acemoglu and Robinson could have further considered the presence of foreign pressure even today in either their support or disapproval of extractive regimes. Indeed, the authors detail why Egypt today remains a state of extractive institutions, noting that international financial institutions promoted economic reforms in the 1990s such as privatising state-owned assets. They highlight that privatisation built private monopolies, supplementing the riches of wealthy, politically connected businessmen even further (Acemoglu & Robinson: 396). However, they do not explicitly specify how conditional aid and foreign pressure can inhibit development to the benefit of developed nations. For instance, when Egypt allied with the West, it received conditional US aid which required Egypt to implement economic liberalization, subsequently decreasing Egypt’s state revenue whilst shifting the economy away from industry and agriculture (Kandil 2012: 208). Indeed, Egypt’s alliance with the US required it to open up the economy to foreign investment (Kandil: 204). Significantly, Western business contacts of Egyptian business elites mitigated democratising pressure on Egypt’s regime (Kandil: 209). It would have been relevant for Acemoglu and Robinson to explore how, though inclusive economic and political institutions encourage domestic development in Western countries, Western connections can support further extraction in developing nations. Even prior to the 1990s, American investors helped construct and ultimately benefit from Sadat’s open-door policy, Intifah , with the aim of facilitating business (Kandil: 204-205). Acemoglu and Robinson note that when the private sector developed, markets were extractive and controlled by businessmen politically allied with Sadat (Acemoglu & Robinson: 395). Nevertheless, they do not explicitly discuss any American allies that supported the growth of this extractive regime. As such, they do not address explicitly and completely the question of to what extent international relations can directly shape another country’s institutions today.

4. Part III: Unfair dismissal of other causal theories?

While the thesis of the book is single-minded in recommending that institutions are the chief important factor for development outcomes, readers picking up Why Nations Fail may approach the book having some familiarity with other theories of development. The authors none but anticipate this. Thus, next to emphasising the importance of institutions, Acemoglu and Robinson, in Chapter 2 of the book labelled ‘Theories That Don’t Work’, also make a negative argument—using carefully hand-picked examples—against three alternative explanations of economic development: geography, culture, and ignorance. Their institutional thesis is hence stronger than the summary above in fact sets forth.

Looking at the three alternative theories the authors refute: observers of trends in development might note that rich countries cluster away from tropical climates, so could it be that tropical countries, due to a certain lethargy they induce in their inhabitants, disincentivise work that drives development? Or, finding that predominantly Protestant countries tend to be rich while Islamic countries often suffer instability and poverty, could religion and culture determine developmental outcomes? Otherwise, since richer countries clearly possess better technology and knowledge, could it be the ignorance of policymakers in poor countries that hinders development in these cases?

Even as the authors do their best (and correctly) dispel these conjectures, this does not mean that factors of geography, culture, or ignorance do not matter in economic development. To this, the authors intermittently admit throughout the book. A particular geography or a certain culture can make the probability of inclusive institutions less or more likely.

Firstly, geographic factors remain salient. In the extensive discussion of different colonies in the book, one comparison is stark. Natural resource wealth, in the form of gold and silver or diamonds, respectively, is abundant in South America and Africa—where extractive colonies were set up—while absent in North America and Australasia—where inclusive settler colonies were set up. The authors describe the rationale of the differences in colony structure in Chapter 1; extractive colonies could not be set up when the British landed in North America, as they were in the South, exactly because colonists needed other ways to support themselves given the hapless barrenness of the land. Natural resource wealth, due to the set-up costs needed for their extraction, calls for capture by local or foreign elites. Conversely, geographies which give rise to economic opportunity for large swathes of the population promise a better likelihood of inclusive institutions being set up; so, the long coastlines connecting Hong Kong or Singapore to other ports speak for themselves. Geographic arguments are implicitly supported in the book.

Second, on culture, the authors suggest in Chapter 14 that the tribal culture of Bechuanaland, where civil rights are not based on heredity alone, helped its chieftains make inclusive decisions leading to the economic success of the country—today known as Botswana. Tribal leaders took advantage of two critical junctures: the first with the institutional drift of the Bechuanaland tribes towards inclusive political processes and the second with the construction of subsoil mineral rights which channelled the country’s diamond revenues into investment for public services. In this case, elements of an inclusive culture allowed for the emergence of institutional drift towards robust institutions, allowing the opportune ramping of Botswana onto the path of becoming the African economic miracle it is today.

Lastly, it is clear that ignorance of the outcomes of economic policy derail development. During the Great Leap Forward in China, an example the authors consider, the backyard steel mills which were a nascent China’s attempts at industrialization led the country into a three-year famine in the Chinese countryside. Clearly, disastrous economic policy exacerbates the damage due to a country’s institutional flaws.

The authors are right that it is not necessarily the Protestant ethic, as proposed by German sociologist Max Weber, that led England and the Netherlands to the first economic success in early-modern Europe (they claim that France, a predominantly Catholic country, was quickly able to catch on (Acemoglu & Robinson: 60)) or that religion is the reason Islamic countries are poor today (it was rather the history of Ottoman rule that adversely affected the way poorer Middle-Eastern countries developed (Acemoglu & Robinson: 61)). Progress remains contingent based on a country’s broader political and economic institutions—none of these factors are deterministic.

Perhaps a point of disappointment in the book is that a detailed account is missing of how factors of geography, culture, or policy-making expertise interact with changing institutions as the machinery of development. For example, how might the global social media culture, at the heart of the Arab Spring’s unfolding, give birth to periods of institutional drift? Given that globalization has internationalised policy-making and new technologies can now mitigate starkly different geographies, speaking to the reality of a convergence of economic and political processes between areas as different as San Francisco and Bangalore, it now becomes more important to consider regional differences for the biodiversity of ideas flowing into bodies concerned with policymaking. As the authors show that when periods of institutional drift are lost as opportunities for change, the cogs of economic policy cannot work to turn out inclusive institutions. Where entrenched elite or foreign interests subject a region to extraction and prevent local institutions from building on its region-specific elements of geography, culture, and expertise, inclusive institutions remain only on the horizon. However, when critical junctures emerge, good economic policy must be informed by an intersection of knowledge from geography to anthropology. The authors remind us that discriminatory theories will hinder development by a denial of peoples’ potential, yet it is implied by the book that interdisciplinary knowledge to address specific regional circumstances will be integral for its success.

5. Conclusion

To summarise, Why Nations Fail is a compelling and well-written read on the crucial role of institutions in economic development. Acemoglu and Robinson carefully construct a framework around extractive/inclusive institutions, critical junctures, and institutional drift to explain the development paths taken by nations and support it with exceptionally well-researched historiography. Nonetheless, the book is also incomplete in two important dimensions: it lacks an appropriate focus on the international dimension of institutions and too rashly dismisses alternative explanations outside the institutional thesis, instead of considering complementarity between different approaches. These shortcomings would have been more than acceptable if the thesis of Acemoglu and Robinson had not been the absolute claim that only institutions matter for development. However, with the stark claim the authors make, these shortcomings act as a thorn in the side for the reader. Nonetheless, with these limitations in mind, we still wholeheartedly recommend the book for anyone interested in learning about the role of institutions in economic development.

Acknowledgements

We would like to thank our classmates and our instructor Liam K. Bright for their thoughts and encouraging feedback in the reading group sessions leading to this book review.

Acemoglu, D. and J.A. Robinson . 2012. Why Nations Fail: The origins of power, prosperity, and poverty. London: Profile. URL: https://ebookcentral.proquest.com/lib/londonschoolecons/detail.action?docID=1743163

Kandil, H. 2012. Why did the Egyptian middle class march to Tahrir Square? Mediterranean Politics (Frank Cass & Co.), 17: 197-215. DOI: 10.1080/13629395.2012.694044

Provost, C. 2011, September. Aid still benefits companies from donor countries. The Guardian. URL: https://www.theguardian.com/global-development/2011/sep/07/aid-benefits-donor-countries-companies

By Daron Acemoglu, James A. Robinson tells us why popular hypotheses don’t work and why institutions are the true difference makers. Read on for key insights from . The bottom 30 nations have a pattern of their own: other than a few scattered nations like Haiti and Afghanistan, the vast majority are sub-Saharan African countries. If you went back 50, 100, or even 150 years, you would find that the top and bottom lists have changed very little. This raises questions of why Western Europe and their settlements full of Europeans grew at a rapid and mostly uninterrupted pace. Why has much of Africa and the Americas and Central Asia been rife with poverty, inequality, and failed to achieve the levels of economic success seen in Western Europe? Why have China, Japan and the Asian Tigers—Hong Kong, Singapore, South Korea, and Taiwan—begun experiencing remarkable economic upturn? With such stark and consistent contrasts, it is surprising that researchers haven’t managed to construct a convincing theory that explains the reasons why nations fail. Modern variations of the geography argument point to the prevalence of tropical diseases and nutrient-deficient soils. Both of these explanations are unsatisfactory. Tropical disease is not a cause of poverty but an effect of it. It shows that governments either lack the funds or refuse to allocate them for dealing with the diseases. And the main determinant of productivity has far less to do with the soil than the system of incentives and constraints that governments put in place for farmers and landowners. The geography argument also doesn’t make sense of cases like North and South Korea or East and West Germany during the Soviet era. The climates and locations were one and the same, but the economic outcomes have been very different in such cases. Geography also fails to make sense of why countries like China and Japan face lengthy periods of stagnation followed by bursts of rapid growth. There is halting and surging within the same countries. Those who see values as the factor that makes or breaks nations look at Africa and Latin America as cases in point. Latin America, for example, exhibits a attitude to work and obligations that leads to mediocre results at best. If they were future-oriented and hardworking, the outcomes would likely be more favorable. While social norms are ingrained and can perpetuate harmful institutions, the common values that culture proponents cite do little to help us understand how particular nations ended up in poverty or why their poverty continues. Cases like those of North and South Korea are problematic, too, as these cultures are wildly divergent, but it was not culture that gave rise to the differing trajectories—it was the very different political institutions put in place that have led to different outcomes. The Protestant work ethic doesn’t make sense of the prosperity that Catholic France enjoyed shortly after Protestant England and Holland by mimicking their approach. The Weber hypothesis has a hard time explaining the economic success in the East, where Buddhism and Confucianism—not Protestantism—form the prevalent ethical frameworks. There are just too many exceptions to accept the culture hypothesis. Those who favor the ignorance explanation typically begin with the assumption that without a robust market economy, which allows for the buying and selling of goods and services without interference, there will be market failures. Market failures are far more common in poor countries, and they deal poorly with such failures. By contrast, the wealthy countries are wealthy because they have adopted the economist-approved strategies for rectifying market failures. But if ignorance were the issue, wouldn’t rulers of these failing nations quickly realize it and adjust policies? In an increasingly globalized world, it is now hard to claim ignorance. Furthermore, this theory attempts to explain why world prosperity and inequality persists, but it cannot tell us where these things come from. Unlike the geography and culture hypotheses, the ignorance hypothesis puts forward a ready solution: an enlightened group to advise a nation about the most strategic policies. Unfortunately, prosperity is not simply a matter of engineering, as many economists seem to believe. Even if a ruler has an excellent grasp of political economy and a desire to enact policies that would benefit his nation, he will still have to navigate his country’s specific political and economic institutions, which take time to transform and will meet with significant resistance if the politician is serious about confronting systemic problems. For nations to prosper, economic and political institutions must be inclusive. When even the common man can have skin in the game, virtuous cycles can be established. The virtuous cycle will persist only if several basic pieces are in place in a society. For one, political institutions must be pluralistic and able to resist takeover bids by the power-hungry and well-intentioned. When FDR was president, he sought to establish new norms that would have exceeded his powers as commander-in-chief. To grant FDR the dissolution of key checks and balances would have meant the consolidation of power rather than keeping power diffuse. Keeping power divided rather than concentrated is the foundation of the pluralistic institutions, and an institution’s ability to withstand and guard against breaches is a good measure of its robustness. It’s not enough for political institutions to be inclusive, however. Economic institutions must also be inclusive. Inclusive economic institutions must do away with slavery and serfdom and limit the power of monopolies. The third piece that is essential for the maintenance of virtuous cycles is a media that can disseminate information freely and galvanize opposition when threats to inclusive institutions crop up. Virtuous cycles lead to more equitable distribution of income and power in a society. The more positive feedback these political and economic institutions receive, the more solidified they become. However, they are never immune to decay or collapse. Elites running extractive political institutions have few constraints on their power. This enables them to control industries and production, thus making economic institutions extractive, too. Inequality abounds under these conditions because there are no checks or balances to keep power and wealth evenly distributed. These cycles can become entrenched, but, like the virtuous cycles, they are not invincible. Under conditions of upheaval and instability for elites, new structures can be ushered in. Nations fail when political and economic institutions are not inclusive. In Latin America, Colombia and Argentina are very poor nations. In Africa, Sierra Leone and Zimbabwe are. In Asia, North Korea and Uzbekistan are poverty-stricken. These countries span a wide range of climates, cultures, colonial legacies, languages, and histories, but each has extractive political and economic institutions. In each of these countries, there is a small elite that shapes economic institutions in a way that benefits them to the exclusion of each country’s majority. The particular economic and political arrangements may differ, but the result is the same in each country: political power and wealth in the hands of a few and grinding poverty for just about everyone else. If the problem is extractive political and economic institutions, then the solution—and the very real challenge—is for nations to develop more inclusive institutions. Despite extractive political institutions at state level, an alliance began to develop between blacks and the inclusive federal-level institutions. This bond limited the influence of the Southern elite that wanted to maintain the status quo. Elites began to lose influence over key economic institutions as well. Manual handpicking of crops became less and less essential to the agricultural process that was becoming increasingly mechanized by the 1950s. This development undercut the elite’s arguments that blacks were still needed for plantation labor.   Taken together, these kinds of political and economic changes formed a critical juncture in which change was possible. The time was right to challenge faltering extractive systems and get support from alliances with inclusive institutions. The Civil Rights Movement put pressure on the institutions, insisting on more equitable policies. Supreme Court rulings like and federal legislation like Voting Rights Act of 1957 and the Civil Rights Act of 1967 were critical in the reshaping of institutions in the South. It was a long and arduous, but as political and economic systems granted greater opportunity to blacks, blacks gained more political power. In some Southern states, black voting turnout was as low as 5 percent in 1960, but rose to 50 percent a decade later. A larger proportion of blacks became gainfully employed in textile mills and other industries. As the South rejected discriminatory systems in favor of more inclusive ones, historically lagging regions of the United States began to catch up with the economic pace of the rest of the country. By the 1990s, the South had completely bridged the gap. , a smart reading app for the busy-but-curious. For full access to hundreds of titles — including audio — go premium and download the app today. . Want to advertise with us? Click . 311 W Indiantown Rd, Suite 200, Jupiter, FL 33458 Key Insights from Bestsellers Supply your email below to read a title for free! You'll also be signed up for our newsletter to read even more titles for free. Academia.edu no longer supports Internet Explorer. To browse Academia.edu and the wider internet faster and more securely, please take a few seconds to  upgrade your browser . Enter the email address you signed up with and we'll email you a reset link. We're Hiring! Help Center Review: Why Nations Fail: The Origins of Power, Prosperity and Poverty, by Daron Acemoglu and James Robinson 2012, South African Journal of International Affairs As the global economy heads for a ‘perfect storm’, there is no better time to grapple with the fundamental ingredients of Why Nations Fail. The good news, according to Acemoglu and Robinson, is that they don't fail because of financial crises but rather as a long-run consequence of the interaction between critical historical junctures and institutional drift, which determine the formation of political and economic institutions. The central thesis of the book is that economic growth and prosperity are associated with inclusive economic and political institutions while extractive institutions typically lead to stagnation and poverty. The point of departure for the reviewer is in the title; the authors offer a theoretical explanation for the question that haunts all economists at some point or another. In a tornado-like race through history, they examine the development of just about every country in the world to test whether their theoretical explanation stands firm. A culmination of 15 years’ worth of research, the book is not light reading. Yet it is understandable, accessible, rigorous and therefore thoroughly enjoyable for the enquiring mind. Quite simply, it is the most important book yet written on global economic development. Related Papers The Pakistan Development Review Adnan Akram International Review of Social History Elise Van Nederveen Meerkerk Giorgi Dvalishvili Putri Ayu Agita This paper is a paper from the perspective of a group to understand the book "Why Nation Fail". However, not only the paper, but readers will be presented with a discussion of material or understanding vocabulary that seems difficult to understand. Central Bank Review Bayu Prakasa Ensayos de Economía D'meca Putri Juneva Paper ini merupakan suatu risensi dari perpsektif suatu kelompok untuk memahami perbab buku "Why Nation Fail". Namun tidak hanya risensi melainkan pembaca akan disuguhkan dengan bedah materi atau memahami kosakata yanh terasa sulit dipahami. Philippine Political Science Journal Jenina Joy Chavez Tijdschrift voor Sociale en Economische Geschiedenis/ The Low Countries Journal of Social and Economic History Loading Preview Sorry, preview is currently unavailable. You can download the paper by clicking the button above. RELATED PAPERS Erik Martins European Journal of Political Economy colin jennings Das Scriber Interdisciplinary Research and Development Alexis Cabauatan ASEAN Economic Bulletin Himanshu Jha Tigran Grigoryan Rafał Matera , Joanna Dzionek Kozlowska Power Shifts and Global Governance: … David Mayer-Foulkes Andrew Brooks ABCDE Conference Europe, Oslo Mushtaq Khan WHY NATION FAIL (BOOK REVIEW) - Bajon Daa Useni Bajon Daa Useni odibei John Patsy Kraeger Nadia von Jacobi Shani Moore Jessica Wallack Neelesh Marik Journal of Institutional and Theoretical Economics Pranab Bardhan Petros Chingozho RELATED TOPICS   We're Hiring!   Help Center Find new research papers in: Health Sciences Earth Sciences Cognitive Science Mathematics Computer Science Academia ©2024 Ask LitCharts AI Discussion Question Generator Essay Prompt Generator Quiz Question Generator Literature Guides Poetry Guides Shakespeare Translations Literary Terms Why Nations Fail Daron acemoglu and james a. robinson. Ask LitCharts AI: The answer to your questions Summary & Analysis Quizzes, saving guides, requests, plus so much more. Sectors Finance Politics Business Energy Technology Resources Arts & Culture Press Releases Partner Hub African Banker New African Magazine Magazine de l'Afrique Lorem, ipsum dolor sit amet consectetur adipisicing elit. Nisi autem molestiae quasi itaque sunt saepe optio maxime. iste repellendus quos necessitatibus fuga in nam placeat. Sign in to access your account, subscription and more. Create an account Create a new account to access your subscription. Daron Acemoglu & James A. Robinson: Why Nations Fail Just why some countries prosper why others languish in poverty is a question that has been, and is, asked continually by both economists and social scientists. For Daron Acemoglu and James A. Robinson, the joint authors of this compelling new book, the answer is clear. Taking as a case study the twin communities of Nogales […] June 22nd, 2012 African Business Just why some countries prosper why others languish in poverty is a question that has been, and is, asked continually by both economists and social scientists. For Daron Acemoglu and James A. Robinson, the joint authors of this compelling new book, the answer is clear. Taking as a case study the twin communities of Nogales – the one located in Arizona, US, the other located in Sonora, Mexico – Acemoglu and Robinson compare and contrast the two sides of a city that straddles an international border. While the inhabitants, in general, share a common culture, a common climate, a common geography and a common prevalence of infectious diseases, the peoples lead very different lives. This, Acemoglu and Robinson argue, is because north of the border there exist the economic and political institutions of the US that foster positive social development. South of the border, those institutions are lacking and, therefore, the entrepreneurial spirit is absent as is business investment. To underpin their argument, the authors take alternative theories that might explain Nogales’ disparities and tease out explanations that counter these conjectures. Clearly, in the case of Nogales, geography cannot be said to provide a valid argument for the differences – but the idea that the modern world’s inequalities are created by where a country is located, whether temperate or tropical, is still popular in certain quarters. This school of thinking, first formulated by the French political philosopher Montesquieu and more recently advocated by the development economist Jeffrey Sachs, does not really stand up to scrutiny, the authors state. It is contradicted, Acemoglu and Robinson write, by “the recent rapid economic advance of countries such as Malaysia, Singapore and Botswana”. And an associated hypothesis, put forward by the evolutionary biologist Jared Diamond, that argues that the origins of intercontinental inequality lay in the differences in endowment of various flora and fauna is also worth exploring. Diamond contends that where there existed large numbers of animals that could be domesticated by man, the shift from hunter-gatherer to farmer was much more attractive. And, the argument follows, where farming dominated, technological innovation was a lot more rapid which, in turn, stimulated prosperity. In fact, Acemoglu and Robinson appear to have some sympathy for Diamond’s thesis of earlier human development, but still they believe that it cannot make a valid argument for modern world inequality. As they point out, both China and India had many animals and plants and yet many of the world’s poor are in these two countries. So might the rich/poor differences be explained not so much by geography but by culture? “The culture hypothesis, just like the geography hypothesis, has a distinguished lineage, going back to the great German sociologist Max Weber,” write the authors. They accept that it is not politically correct to articulate in public, but nevertheless posit the commonly held view that Latin Americans suffer from a mañana (tomorrow) culture or that Africans are poor because they are not prepared to work (this echoes Weber’s idea that the Protestant work ethic spurred the rise of the modern industrial society and prosperity in Western Europe). But they comprehensively demolish this thinking by pointing out that at one time it was thought that Chinese culture and Confucian values were inimical to economic growth, “now the importance of the Chinese work ethic as the engine of growth in China, Hong Kong and Singapore is trumpeted”. The authors further explain their own hypothesis, that it is the establishment of economic institutions that determine whether a country becomes prosperous or poor (and it is political institutions that determine what economic institutions are created), by taking an historical example from pre-colonial Africa. The Kongo example They examine the reasons that technologies were not developed in many parts of Africa (surely another politically incorrect observation) by investigating the Kingdom of the Kongo, at the mouth of the River Congo in the modern DR Congo. Having come into contact with the early Portuguese explorers and learned of the wheel and the plough, under King Nzinga a Nkuwu, who later converted to Catholicism and changed his name to King Joao I, the Kongolese resisted adopting these technologies. It was not that the Kongolese were averse to European technology – indeed, they very quickly adopted the use of the musket – it is just that they had no incentives to take up other European technologies such as the wheel or the plough. The fact is that Kongolese elites were utterly predatory – taxing and expropriating property at will and fully prepared to profit from the trade in African slaves. So it made no sense for the ordinary people to run the risk of developing enterprises that, if successful, ran the risk of being seized by the king, and the king had no use for the plough to increase agricultural output because, with European guns to aid him, he made so much more capturing and trading slaves. Somewhat controversially, Acemoglu and Robinson write: “It might be true today that Africans trust each other less than people in other parts of the world. But this is an outcome of a long history of institutions that have undermined human and property rights in Africa. The potential to be captured and sold as a slave no doubt influenced the extent that Africans trusted each other historically.” It would seem that the authors are here suggesting that it is historical events, rather than cultural factors (in this instance the influence of Europeans) that predetermine a country’s economic trajectory. “Just like the geographical hypothesis,” the authors write, “the culture hypothesis is also unhelpful for explaining the lay of the land around us today.” Later in the book, Acemoglu and Robinson comment, “the contrast of North and South Korea, and the US and Latin America, illustrates a general principle. Inclusive economic institutions foster economic activity, productivity growth and economic prosperity. Secure property rights are central, since only those with such rights will be willing to invest and increase productivity.” In one chapter, Acemoglu and Robinson look at the opposite of inclusive economic institutions – extractive economic institutions. Once again they turn to Africa, to Zimbabwe in particular, to explain their viewpoint. It is clear that they are less than sympathetic towards the country’s president, Robert Mugabe, but they still retain the objectivity to explain that the roots of the shortcomings of many economic and political institutions in Zimbabwe, as is the case for much of sub-Saharan Africa, can be traced back to the colonial era. “Upon independence in 1980,” Acemoglu and Robinson observe, “Mugabe [then newly independent Zimbabwe’s prime minister] took over a set of extractive economic institutions created by the white regime.” The difference was, as Acemoglu and Robinson write with barely disguised contempt, that while the complexion of the extractive economic institutions changed (from white to black) the real difference was that instead of Ian Smith and the whites doing the extracting, it was Mugabe and the political elites filling their pockets. “Nations today fail because extractive economic institutions do not create the incentives needed for people to save, invest and innovate,” Acemoglu and Robinson reiterate. Indeed, they write that extractive institutions that expropriate and impoverish the peoples and block economic development are quite common in Africa, Asia and South America. Furthermore, the phenomenon of extractive economic institutions, they believe, is also likely to lead to civil war and a collapse of the state. They cite the examples of Angola, Côte d’Ivoire, DR Congo, Mozambique, Republic of the Congo, Somalia, Sudan and Uganda. “So another reason why nations fail today,” they continue, “is that their states fail. This, in turn, is a consequence of decades of rule under extractive economic and political institutions.” They illustrate that it was possible to avoid the post-colonial extractive economic institution trap, drawing attention to Bechuanaland, later to become independent Botswana. At independence in 1966, the country was one of the poorest countries in the world, surrounded by hostile white-ruled territories – but within 45 years it became one of the world’s fastest growing economies. And how was this miracle achieved? Obviously, its diamond wealth, developed in the 1970s, helped hugely, but in the view of these authors, what was pivotal was that independent Botswana rapidly developed inclusive economic and political institutions. In their words: “Botswana would succeed in taking a path towards inclusive institutions, whereas much of the rest of sub-Saharan Africa did not even try, or failed outright.” Want to continue reading? Subscribe today. You've read all your free articles for this month! Subscribe now to enjoy full access to our content. Digital Monthly £8.00 / month Receive full unlimited access to our articles, opinions, podcasts and more. Digital Yearly £70.00 / year Our best value offer - save £26 and gain access to all of our digital content for an entire year! Keep reading August 20th, 2024 Nigeria and Russia – a history of broken promises By Dr. Edgar Githua. Ph.D. August 19th, 2024 Zambia is back in business By Albert Halwampa July 30th, 2024 Green financing opens fresh opportunities for African banks By Neil Ford June 17th, 2024 Navigating geopolitical tides: Africa’s path to trade resilience and growth By Yemi Kale January 6th, 2021 Developing sustainable agriculture in Africa African Business in partnership with OCP Group will be sharing stories, innovations, and new ideas to strengthen the Agriculture ecosystem in Africa. Stories, initiatives, new ideas and solutions to drive sustainable agriculture in partnership with OCP. Words & Dirt Review: daron acemoglu and james robinson’s “why nations fail”, by miles raymer. Why Nations Fail   has been weighing down my bookshelf for a few years now, but the recent election of Donald Trump sent me scurrying to dust it off. First published in 2012 by Daron Acemoglu and James Robinson, this treatise on the differences between successful and unsuccessful nations feels newly relevant and frighteningly intimate. Looking abroad is a fine way to uncover examples of sclerotic and corrupt government institutions, but increasingly the same scrutiny must be applied here at home. The main argument of Why Nations Fail  puts the structure of political institutions front and center: This book will show that while economic institutions are critical for determining whether a country is poor or prosperous, it is politics and political institutions that determine what economic institutions a country has…Our theory for world inequality shows how political and economic institutions interact in causing poverty or prosperity, and how different parts of the world ended up with such different sets of institutions. (43-4) This approach reminded me of Robert Reich’s  Saving Capitalism ,  which I recommend to anyone looking for a more concise but less eclectic version of this institutional theory. Like Reich, Acemoglu and Robinson see politics as the determinant of economics, and not the other way around. Political institutions decide what can be bought, sold, and taxed, and also create innumerable other rules that define lawful economic behavior. This interpretation runs contrary to prevailing neoliberal theories , in which the invisible hand of market forces is considered the ultimate determinant of economic fluctuations and boundaries. Acemoglu and Robinson compare their theory of political institutions to three other hypotheses that might explain why nations fail: the ignorance hypothesis (failing countries just don’t know how to make themselves successful), the culture hypothesis (certain cultures are more inclined to failure than others), and the geography hypothesis (nations fail because of geographical hindrances). They dispatch the first two theories with little trouble, but are less successful with the geography hypothesis. In a world where geopolitical problems have expanded and persisted despite globalization and technological advances, Acemoglu and Robinson don’t give geopolitics a fair hearing. I recommend Tim Marshall’s Prisoners of Geography   for that side of our global story. After establishing the primacy of their institutional theory, Acemoglu and Robinson fill it out by defining the difference beween inclusive political institutions and extractive ones: We will refer to political institutions that are sufficiently centralized and pluralistic as inclusive political institutions. When either of these conditions fails, we will refer to the institutions as extractive political institutions. There is a strong synergy between economic and political institutions. Extractive political institutions concentrate power in the hands of a narrow elite and place few constraints on the exercise of this power. Economic institutions are then often structured by this elite to extract resources from the rest of the society. Extractive economic institutions thus naturally accompany extractive political institutions. In fact, they must inherently depend on extractive political institutions for their survival. Inclusive political institutions, vesting power broadly, would tend to uproot economic institutions that expropriate the resources of the many, erect entry barriers, and suppress the functioning of markets so that only a few benefit. (81) The authors go on to argue that healthy, inclusive political institutions are the surest road to inclusive economic institutions, which are the bedrock of sustained prosperity in the modern world. The character of a country’s political institutions, therefore, is the critical factor that determines whether it will succeed or fail. Acemoglu and Robinson support their claims with numerous, wide-ranging examples from all over the world and across the centuries. They give special attention to the emergence of inclusive political institutions in Britain and the United States, and foil those examples by describing the origins of extractive political institutions in Africa and Latin America. Despite how that might look at first glance, this is not a theory that sings the praises of western pluralist societies while deriding nonwestern cultures for not being more like us. Neither is it a diatribe that seeks to blame all the world’s problems on western colonialism. Each nation has its own detailed story that results in either inclusive or extractive politics, and the consequences that follow always echo other cases but never duplicate them entirely. Acemoglu and Robinson prove adept at teasing out the nuances in each national tale and contextualizing the results using their institutional theory. For those Americans anxiously watching the opening weeks of the Trump Administration, Acemoglu and Robinson’s examination of extractive political institutions will be chillingly enlightening. They point out that while inclusive political institutions are resilient, they are also not always robust enough to resist turning into extractive institutions if the wrong kind of leadership and/or set of historical circumstances comes along. Progress is neither guaranteed nor permanent. The extractive dynamics that keep many failing nations down are the same ones that can bring an already-inclusive society to its knees. Most failing nations are ruled by a firebrand leader and an oligopoly of rich cronies that dominate industry and trade while quashing the emergence of healthy, competitive markets. Acemoglu and Robinson urge us to be especially skeptical of “extractive growth,” wherein an extractive political regime manages to grow the economy in a significant but ultimately unsustainable fashion: The growth generated by extractive institutions is very different in nature from the growth created under inclusive institutions…Most important, it is not sustainable. By their very nature, extractive institutions do not foster creative destruction and generate at best only a limited amount of technological progress. The growth they engender thus last for only so long. (150) People anywhere must be critical of leaders who claim to produce growth for the betterment of society when such growth is actually an indicator that wealth is being siphoned upward into the hands of elites. In America, this process was already well under way before Trump took office, and there is little reason to assume it will abate during his presidency if those opposed to extractive growth do not take swift and decisive action. Putting aside the political moment, Acemoglu and Robinson offer a host of useful ideas with which we can analyze any society, modern or otherwise: Over time, all societies undergo “institutional drift,” which explains how different nations can arise under similar political circumstances but end up in very different places. This concept is based on “genetic drift” from the field of biology (108). Centralization of power is always a double-edged sword. A state is that not centralized enough will be unable to produce inclusive political institutions, but a state that is too centralized becomes vulnerable to takeover by absolutists/dictators (186, 216-7). Transforming an extractive political institution into an inclusive one is possible, but very difficult and historically rare. Such a change almost always requires a broad coalition of interests, with at least a fraction of the empowered class siding with disenfranchised groups (427). Participation in global economic growth and free trade doesn’t necessarily cause nations to become more inclusive, democratic, or pluralistic, as many assumed in the latter decades of the 20th century (443). In many ways,  Why Nations Fail has everything I look for in a great piece of nonfiction. However, this book does have two interrelated weaknesses that make it a bit difficult to endorse. The text is painfully repetitive, coming back to the same points over and over again (much like some parts of this review!). This nearly 500-page book could have been much shorter, even without excising any of the historical examples. Additionally, Acemoglu and Robinson’s institutional theory, while legitimate, also feels too reductive. Making my way through the latter chapters, I became increasingly incredulous that such a broad range of historical events should be understood primarily in terms of inclusive and extractive institutions. Fortunately, the authors are observant enough to acknowledge the limitations of their approach: Any complex social phenomenon, such as the origins of the different economic and political trajectories of hundreds of polities around the world, likely has a multitude of causes, making most social scientists shun monocausal, simple, and broadly applicable theories and instead seek different explanations for seemingly similar outcomes emerging in different times and areas. Instead we’ve offered a simple theory and used it to explain the main contours of economic and political development around the world since the Neolithic Revolution. Our choice was motivated not by a naïve belief that such a theory could explain everything, but by the belief that a theory should enable us to focus on the parallels, sometimes at the expense of abstracting from many interesting details. A successful theory, then, does not faithfully reproduce details, but provides a useful and empirically well-grounded explanation for a range of processes while also clarifying the main forces at work. (429) It’s hard to argue with that reasoning, but it’s also impossible to ignore the reality that a lot is left out when we focus so narrowly on history––a field that always outstrips our best attempts at comprehensive analysis. Even so, Acemoglu and Robinson have done right by their chosen project, and provided the world with a valuable frame with which to understand past and present events. Rating: 7/10 2 Responses to “Review: Daron Acemoglu and James Robinson’s “Why Nations Fail”” this was quite a review. i think you’ve surpassed anyone’s intellectual legacy you wanted to inherit. yikes. [...] Countries differ in their economic successes because of their different institutions, the rules influencing how the economy works and the incentives that motivate people. Political and economic institutions can either encourage economic growth or become obstacles to it as political institutions determine economic development. [...] Current day month ye@r * Leave this field empty * © words and dirt Why Nations Fail : In Spite of Many Flaws a Liberating Book for Economists Book Review Published: 31 July 2012 Volume 24 , pages 663–664, ( 2012 ) Cite this article Sergei Soares 1   102 Accesses Explore all metrics This is a preview of subscription content, log in via an institution to check access. Access this article Subscribe and save. Get 10 units per month Download Article/Chapter or eBook 1 Unit = 1 Article or 1 Chapter Cancel anytime Price includes VAT (Russian Federation) Instant access to the full article PDF. Rent this article via DeepDyve Institutional subscriptions Author information Authors and affiliations. Instituto de Pesquisa Econômica Aplicada, Brazil Sergei Soares You can also search for this author in PubMed   Google Scholar Rights and permissions Reprints and permissions About this article Soares, S. Why Nations Fail : In Spite of Many Flaws a Liberating Book for Economists. Eur J Dev Res 24 , 663–664 (2012). https://doi.org/10.1057/ejdr.2012.20 Download citation Published : 31 July 2012 Issue Date : 01 September 2012 DOI : https://doi.org/10.1057/ejdr.2012.20 Share this article Anyone you share the following link with will be able to read this content: Sorry, a shareable link is not currently available for this article. Provided by the Springer Nature SharedIt content-sharing initiative Find a journal Publish with us Track your research 392 COMMENTS Why Nations Fail: Chapter 2 Summary & Analysis Acemoglu and Robinson show why their theory of institutions and economic growth is groundbreaking. It's the first hypothesis that can truly explain all the variation in growth, wealth, and development across the world. In short, the more extractive a country's institutions, the poorer it tends to be. PDF Why Nations Fail: The Origins of Power, Prosperity, and Poverty development—reveal why it is not geography, disease, or culture that explain why some nations are rich and some poor, but rather a matter of institutions and politics. This highly accessible book provides welcome insight to specialists and general readers alike." —Francis Fukuyama, author of The End of History and the Last A review of 'Why Nations Fail' That's the basic premise of Why Nations Fail, ... While Chapter 2, entitled 'Theories That Don't Work', rejects 'The Geography Hypothesis' (p48), one should not be so quick to believe that the discipline has little to learn from their conclusions. On the contrary, geographers are concerned with the flow of information, expansion of ... Government , Geography , Growth The broad hypothesis of Why Nations Fail is that governments that protect property rights and repre- sent their people preside over economic development, whereas those that do not ... Government , Geography , Growth it to explain the main contours of eco- nomic and political development around Why Nations Fail In Why Nations Fail, Daren Acemoglu and James Robinson discuss the origins and engines of power, prosperity & poverty. ... Diamond's hypothesis. A&R believe that other common explanations, like geography and cultural factors, are inadequate in describing the rise and fall of nations, especially after the Industrial Revolution (1760-1840). ... Why Nations Fail Why Nations Fail: The Origins of Power, Prosperity, and Poverty, first published in 2012, is a book by economists Daron Acemoglu and James A. Robinson.The book applies insights from institutional economics, development economics, and economic history to understand why nations develop differently, with some succeeding in the accumulation of power and prosperity and others failing, according to ... Why Nations Fail? Why Nations Fail? Daron Acemoglu First of all, it is a great pleasure to be here. Thank you for inviting me. Given that ... often is on things like geography and it is very common both among economists and other social scientists, and even physical scientists, to see things like climate topography, ... hypothesis, which is that policies are ... Why Nations Fail: The Origins of Power, Prosperity, and Poverty James A. Robinson, Daron Acemoglu. Why Nations Fail: The Origins of Power, Prosperity, and Poverty. Translated into 40 languages since its publication, and based on fifteen years of original research, Why Nations Fail, coauthored by Daron Acemoglu and James A. Robinson, answers the question that has stumped the experts for centuries: Why are ... Why Nations Fail by Daron Acemoglu and James A. Robinson 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. PDF Why Nations fail Why nations fail is a compelling contribution to the classic question of why some countries are poor and ... geography, culture, the ignorance hypothesis, and later in the book, variants of the modernization theory. In addition, they acknowledge the central roles of colonialism, slavery, racism, critical junctures (such as The ... Why Nations Fail Summary and Review Has Why Nations Fail been gathering dust on your bookshelf? Instead, pick up the key ideas now. ... The Geography Hypothesis claims that people in warmer countries are lazy. Meanwhile, workers in nations with more temperature climates are more productive. Today, this theory has expanded to include factors like diseases. Many diseases ravage ... Why Nations Fail: Chapter 5 Summary & Analysis Diamond's explanation fits with his belief in the geography hypothesis: he thinks the climate caused people to farm, which caused them to settle down. While Acemoglu and Robinson agree that the climate might have influenced the Natufians' path, they don't view it as the sole cause behind their decision to build a sedentary society. 'Why Nations Fail' Jared Diamond provides an engaging review of our book Why Nations Fail [ NYR, June 7]. Though Diamond accepts the importance of institutions and their political roots—the main focus of our book—and asserts that "perhaps they provide 50 percent of the explanation for national differences in prosperity," his review is mostly concerned ... Book Review: Why Nations Fail 1. Introduction. In Why Nations Fail, Acemoglu and Robinson argue that economic development and the prosperity or poverty of nations can be traced back solely to "institutions, institutions, institutions" (Acemoglu & Robinson 2012: 368).It is not geography, culture, or the ignorance of policymakers that explains the vast income disparities across nations, but it is the fact that some ... Why Nations Fail: The Origins of Power, Prosperity, and Poverty Most hypotheses that social scientists have proposed for the origins of poverty and prosperity just don't work and fail to convincingly explain the lay of the land. THE GEOGRAPHY HYPOTHESIS. ... The final popular theory for why some nations are poor and some are rich is the ignorance hypothesis, which asserts that world inequality exists ... Why Nations Fail: The Origins of Power, Prosperity, and Poverty Why Nations Fail tells us why popular hypotheses don't work and why institutions are the true difference makers. ... The geography hypothesis maintains that people groups in temperate climates tend to be more prosperous than peoples of tropical regions. The French philosopher Montesquieu was an early proponent of this view. (PDF) Review: Why Nations Fail: The Origins of Power, Prosperity and Dia o d s review of Why Nations Fail contends that the authors are guilty of oversimplifying the geography hypothesis and that even within the focus on institutions, the concentration specifically on inclusive institutions causes the authors to give inadequate a ou ts of the a s that atu al esou es a e a u se... Why Nations Fail: Chapter 15 Summary & Analysis Why Nations Fail: Chapter 15 Summary & Analysis. In the section "Historical Origins," Acemoglu and Robinson reiterate that global living standards have become deeply unequal since the 1800s. This isn't because of geography, culture, or ethnicity. It also wasn't inevitable—this inequality could have been avoided. Daron Acemoglu & James A. Robinson: Why Nations Fail Daron Acemoglu & James A. Robinson: Why Nations Fail. Just why some countries prosper why others languish in poverty is a question that has been, and is, asked continually by both economists and social scientists. ... "The culture hypothesis, just like the geography hypothesis, has a distinguished lineage, going back to the great German ... The Ignorance Hypothesis: Reading Reflection from "Why Nations Fail In the book "The Origins of Power, Prosperity, and Poverty: Why Nations Fail", which I am currently reading, it conveyed three common yet only true at glance theories that had tried to explain the prosperity and poverty and a great disparity of such among nations.The three theories discussed are Geography, Culture, and Ignorance Hypothesis. What struck me to realizations is the Ignorance ... Review: Daron Acemoglu and James Robinson's "Why Nations Fail" The text is painfully repetitive, coming back to the same points over and over again (much like some parts of this review!). This nearly 500-page book could have been much shorter, even without excising any of the historical examples. Additionally, Acemoglu and Robinson's institutional theory, while legitimate, also feels too reductive. Why Nations Fail: In Spite of Many Flaws a Liberating Book for To an economist like me, reading Why Nations Fail, by Daron Acemoglu and James Robinson, was a liberating experience.The book is one of the latest contributions to a line of inquiry that began with Adam Smith's Wealth of Nations: Why are most people in some countries so poor and in others so rich?Much of this literature has been quite accessible to non-economists and one of the book's main ... "Why Nations Fail" by Daron Acemoglu and James A. Robinson Abstract. Daron Acemoglu and James A. Robinson attempt to explain why significant income disparity exists in today's world among nations in their recent book called Why Nations Fail. Acemoglu ... essay homework paper phd project resume review study thesis