This book “Why Nations fail” by Daron Acemoglu and James A. Robinson is divided into fifteen chapters in which the authors argue what factors and decisions lead towards the failure of nations. Many argue that demography, culture, and weather patterns are what shape the future of nations, but the authors deny these theories and depict them as “institutions, institutions, institutions” that decide the future progress of a nation. Why are some states poor and others rich despite having the same landscape? The simple answer to this is the inclusive and exclusive nature of the institutions. The economic inequality among the nations due to the institutional drift and the poor decisions of political leaders in some nations doesn’t create a level playing field. As author Daron Acemoglu said, “As we will show, poor countries are poor because those who have power make choices that create poverty.” Poor and rich countries are organized differently, due to which poor countries are poverty-stricken and rich countries are in abundance.
The authors took the comparison between Botswana and the Republic of Congo, two countries in Sub-Saharan Africa, in which Congo is far behind Botswana in economic and political domains. The Republic of Congo was ruled by the oligarchic forerunners, which didn’t create the inclusiveness in institutions to prevail the progress of Congo; rather, they were derived by their power-hungry nature and kept their dominance by driving wealth from taxation and encouraging slave trade. On the other side, Botswana’s leaders focused on the inclusive institutions and empowerment of people that made it one of the prosperous nations in Africa as elections were held and there was the system of democracy, which was in the favor of people and also provided incentives to the masses for growing. Acemoglu and Robinson compare Bill Gates in the US, who became rich by innovations in Microsoft, whereas Carlos Slim gained wealth by acquiring a telecommunications monopoly in Mexico. US and Mexico differ in the structure of their institutions, as in the US there is an inclusive nature of institutions and entrepreneurs are not faced by many barriers. In Mexico, to protect the monopoly of Carlos Slim, barriers are faced by entrepreneurs, such as licensing and political negotiations. These obstacles stifle competition and allow Carlos to maintain his power through legal and political means.
The authors have given three major lessons in the book, which clearly explain why some nations lag behind the others. The first lesson is the difference in their living standards by looking at their institutional differences. South Korea and America have inclusive institutions, which prompted the dramatic rise of both nations. These nations have provided their young people with tons of opportunities so they can play their part in the betterment of society. Political entities are kept pluralistic, and centralism prevails, so the rule of law is followed in the countries, which will equally benefit everybody. On the other side, Latin America and North Korea are strictly adherent to exclusive institutions because of the fear of losing their autonomy. In Latin America, colonialism was on the rise from the start, and if political leaders had made inclusive institutions, it would have been a challenge to their monopolies, and people would start to raise their voices for ending the colonialism and giving them their rights. Similarly, in North Korea, there is a monopoly and institutions are highly kept exclusive, and severe restrictions are put there. This institutional drift is the reason why these countries are different in their progress level.
The second lesson is that a single event at a critical juncture defines a country’s future success. How the world leader’s response to these situations decides the future of their states. In the book, authors have taken different events in this history, including the Glorious Revolution in England in 1688, in which much inclusiveness was brought, which led towards inclusive and pluralistic political institutions and then simultaneously inclusive economic institutions. After this, in the 1860’s the Industrial Revolution came in, which benefited many nations, and the dissemination of industries also gave employment to the people, and economic conditions were getting better in those countries whose leaders didn’t feel challenged by their people and gave them ways to succeed. The divergence of Western and Eastern Europe after the Black Death, in the West, the power of landlords was declined and feudalism was withering away, and in the Eastern part, it was still in practice, due to which a huge difference is seen today in both parts of Europe. Third lesson, breaking the cycle of poverty is possible.
Authors argue that having a level playing field and eliminating corruption and the prohibition of unequal access of resources to different nations can help states to grow and prosper. If there are civil liberties, economic freedom and civic participation, technological development, health services, infrastructure, and public services, then these states in the future will eventually rise up and chains of poverty will be ended from the nations. One of the prime examples authors discussed in the book is of Brazil, which empowered their people. In 2000-2012, Brazil was one of the fastest-growing economies in the world, and then they put an end to the future dictatorship by changing the pattern of their incomes and nature of institutions and broke the loop of poverty.
Growth under extractive institutions is also possible, but it will be temporary, and eventually the state will not be bound to rise further. The authors discussed the case study of China in detail in the book, as China is a country that has exclusive institutions, but still, it is one of the most growing economies in the world. The understanding to this is the USSR; it also had exclusive institutions, and it was also at its peak, but still it was disintegrated. China also works on the same pattern; it has exclusive institutions, but inclusiveness is seen in the country. Critics argue that it will face the same fate as the USSR because growth under exclusiveness cannot persuade over the long run. The struggle between virtuous and vicious cycles, in the former, the institutions encourage prosperity and create positive feedback loops so the elites do not undermine them (as in Britain), whereas in the latter, the institutions create poverty and generate negative feedback loops and endure (as in the US South).
While concluding this, the book focused on giving a clear thesis that inclusive economic and political institutions provide prosperity, economic growth, and sustained development, whereas extractive institutions imply poverty, stagnation, and privation, which extend beyond this century to centuries ahead. Critics also argue that this book narrowly describes the reason why nations fail today and blame it on the institutions, but there are also other factors that gave decline to the nations.
The Author, Aina Tahir is a International Relations student at Air University, Passionate about delving into geopolitical complexities and global affairs.
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