Brilliant and engagingly written, Why Nations Fail answers the question that has stumped the experts for centuries: Why are some nations rich and others poor, divided by wealth and poverty, health and sickness, food and famine?
Is it culture, the weather, geography? Perhaps ignorance of what the right policies are?
Simply, no. None of these factors is either definitive or destiny. Otherwise, how to explain why Botswana has become one of the fastest growing countries in the world, while other African nations, such as Zimbabwe, the Congo, and Sierra Leone, are mired in poverty and violence?
Daron Acemoglu and James Robinson conclusively show that it is man-made political and economic institutions that underlie economic success (or lack of it). Korea, to take just one of their fascinating examples, is a remarkably homogeneous nation, yet the people of North Korea are among the poorest on earth while their brothers and sisters in South Korea are among the richest. The south forged a society that created incentives, rewarded innovation, and allowed everyone to participate in economic opportunities. The economic success thus spurred was sustained because the government became accountable and responsive to citizens and the great mass of people. Sadly, the people of the north have endured decades of famine, political repression, and very different economic institutions鈥攚ith no end in sight. The differences between the Koreas is due to the politics that created these completely different institutional trajectories.
Based on fifteen years of original research Acemoglu and Robinson marshall extraordinary historical evidence from the Roman Empire, the Mayan city-states, medieval Venice, the Soviet Union, Latin America, England, Europe, the United States, and Africa to build a new theory of political economy with great relevance for the big questions of today, including:
听听 - China has built an authoritarian growth machine. Will it continue to grow at such high speed and听overwhelm the West? 听听 - Are America鈥檚 best days behind it? Are we moving from a virtuous circle in which efforts by elites to aggrandize power are resisted to a vicious one that enriches and empowers a small minority? 听听 - What is the most effective way to help move billions of people from the rut of poverty to prosperity? More philanthropy from the wealthy nations of the West? Or learning the hard-won lessons of Acemoglu and Robinson鈥檚 breakthrough ideas on the interplay between inclusive political and economic institutions?
Why Nations Fail will change the way you look at鈥攁nd understand鈥攖he world.
Daron Acemoglu is the Elizabeth and James Killian Professor of Economics at the Massachusetts Institute of Technology. In 2005 he won the prestigious John Bates Clark medal, awarded to the best economist under 40.
The book Why Nations Fail by Daron Acemoglu and James A. Robinson comes with book-jacket praise from the usual suspects: Steven Levitt of Freakonomics fame, Jared Diamond of Collapse fame, Nobel Prize 鈥渓aureate鈥� George Akerlof, and Niall Ferguson, champion of imperialism. Thomas Freidman dashed off a quick review in his New York Times column for April 1, 2012. Freidman, the giddy fan of globalization, was ecstatic, although he admitted that he was 鈥渞eading鈥� the book, but not that he had 鈥渞ead鈥� it. Freidman points out one of the authors鈥� main points: 鈥淚nclusive economic institutions that enforce property rights, create a level playing field, and encourage investments in new technologies and skills are more conducive to economic growth than extractive institutions that are structured to extract resources from the many by the few.鈥� And this is perhaps their main point, albeit one which they share with most neoliberal development economists. Acemoglu and Robinson are professors at MIT and Harvard Universities; Acemoglu is a winner of the John Bates Clark Medal in the Economics department at MIT and Robinson an area specialist in the department of Government (Political Science)at Harvard. The book seems to be aimed at a wider audience than academia, however.
While the authors mine an enormous literature on development to populate their book with dozens of interesting stories of developmental failure and success, at the end of the day, their book devolves into the something similar to most of the neo-liberal thinking of which we see so much from the 鈥渟cience鈥� of economics. Diamond, who is quoted on the book jacket as saying 鈥淟ike me, you may succumb to reading it in one go, and then you may come back to it again and again鈥� is more critical in a review in the New York Review of Books (7 June 2012). There he points out that after presenting a map of Africa that clearly shows the tropical countries of the interior of the continent at the lowest end of the income scale they insist that geographic factors are 鈥淭heories That Don鈥檛 Work鈥� compared to their preferred 鈥渋nstitutional鈥� explanation. Diamond鈥檚 reaction: 鈥淲hile institutions are undoubtedly part of the explanation, they leave much unexplained: some of those richer temperate countries are notorious for their histories of bad institutions (think of Algeria, Argentina, Egypt, and Libya), while some of the tropical countries (e.g., Costa Rica and Tanzania) have had relatively more honest governments. What are the economic disadvantages of a tropical location?鈥� He concludes, 鈥淚n their narrow focus on inclusive institutions, however, the authors ignore or dismiss other factors. I mentioned earlier the effects of an area鈥檚 being landlocked or of environmental damage, factors that they don鈥檛 discuss. Even within the focus on institutions, the concentration specifically on inclusive institutions causes the authors to give inadequate accounts of the ways that natural resources can be a curse.鈥� After describing Acemoglu and Robinson鈥檚 botched job in their explanation of the rise of agriculture 鈥渢o assert, in the complete absence of evidence, that . . . hunter/gatherers had become sedentary because, for unknown reasons, they happened to develop innovative institutions through a hypothesized political revolution鈥� he concludes that 鈥淎cemoglu and Robinson do themselves a disservice by misstating these findings.鈥�
The book has a few points to recommend it in this reviewer鈥檚 mind: 1) Its insistence on uncertainty in the course of human affairs, 2) Its appreciation for the importance of centralized political structure on economic success, 3) Its recognition of the wasted resources that come with gross inequality. But it has glaring blind spots that should cause a critical reader pause.
In the first chapter the authors quote from Fra Bartolome de Las Casas鈥檚 book, A Short Account of the Destruction of the Indies. Las Casas is presented by the authors as a hero, who defended the rights of the indigenous people enslaved in the New World by the conquistadores. They seem positively unaware, however, of the irony that motivated Jorge Luis Borges to mention Las Casas in the very first chapter of HIS book, A Universal History of Infamy. For Las Casas鈥檚 answer to the enslavement of the indigenous people of the New World was to import Africans to work in the Antillean gold mines. Thus Borges sees Las Casas not just as the savior of the indigenas of the New World (in which effort he was unsuccessful in any case) but as the father of 鈥淲.C. Handy鈥檚 blues; . . . the mythological dimensions of Abraham Lincoln; the five hundred thousand dead of the Civil War and its three hundred millions spent in military pensions; the entrance of the word 鈥渢o lynch鈥� into the thirteenth edition of the Spanish Academy . .鈥� etc. This kind of irony is well over the heads of our authors.
They take the 鈥渇ailure鈥� of the Mayan civilization to be the result of their favorite themes of 鈥渃reation of extractive political institutions鈥� and lack of 鈥渃reative destruction.鈥� They recognize that 鈥渢he coalescence of these institutions created the basis for an impressive economic expansion鈥� but see its collapse in the ninth century AD to be the result of the overthrow of the political system that had produced this expansion. They recognize that 鈥渆xisting archeological evidence does not allow us to reach a definitive conclusion about why the k鈥檜bul ajaw and elites surrounding him were overthrown鈥� but they take this collapse as evidence nonetheless for their theory that 鈥渆xtractive institutions鈥� were the cause of that collapse. And concerning their diagnosis of 鈥渃ollapse鈥�, should a Mayan society that apparently thrived for close to one thousand years be considered a failure? There is no discussion of the possibility that laterite formation in tropical soils had anything to do with this 鈥渃ollapse.鈥� The story of the Mayans just becomes another example of their pet theory.
I have mentioned 鈥渃reative destruction鈥�. Although there is only one direct mention of the 鈥済reat economist Joseph Schumpeter鈥� in the book, there are references aplenty to Schumpeter鈥檚 most memorable phrase. Creative destruction was explained by Schumpeter as follows: 鈥淭he opening up of new markets, foreign or domestic, and the organizational development from the craft shop and factory to such concerns as U.S. Steel illustrate the same process of industrial mutation 鈥� if I may use that biological term 鈥� that incessantly revolutionizes the economic structure from within, incessantly destroying the old one, incessantly creating the new one. This process of Creative Destruction is the essential fact about capitalism.鈥� (Capitalism, Socialism, and Democracy, page 83.) Schumpeter was convinced that the entrepreneur is the driving force for development in a capitalistic society. Keynes was not so sure, remarking 鈥渨e are damned if we know鈥� why capitalists invest.
Acemoglu and Robinson seem to take as gospel that creative destruction is necessary for societal advance and always works toward the public good. Someone like Polanyi would no doubt not agree. Schumpeter鈥檚 young Harvard colleague Paul Sweezy certainly did not agree when he participated with Schumpeter in their famous debate at the Harvard Graduate Student鈥檚 Economics Club in the winter of 1946-47 (See 鈥渙n the laws of capitalism, Insights from the Sweezy-Schumpeter Debate鈥� in Monthly Review, May, 2011.) Sweezy鈥檚 notes for the debate say that 鈥淭here is no reason to deny Schumpeter鈥檚 entrepreneurial type, but its significance is quite differently evaluated. For him the entrepreneur occupies the center of the stage; the accumulation process is derivative. For me the accumulation process is primary; the entrepreneur falls in with it and plays a part in it.鈥� Sweezy was, of course, one of the most prominent American Marxist economists of the twentieth century. For him the historical process of evolution of society was crucial, as it was for Marx. And Schumpeter, even as an Austrian economist, had a profound appreciation for this. It is not fair to Acemoglu and Robinson to say that they are oblivious to history; their book is full of historical anecdotes. But this reader gets the sense that for them if a society would just get with the program and encourage capitalists, everything would come out all right.
They rail against the monopolies and resistance to enclosure by the Tudor and Stuart kings in England. This is a typical response of the neo-liberal. The problem is not market economies, they say, but those that interfere with the 鈥渇ree鈥� motion of these economies in society. They attribute the rise of the Industrial Revolution in England to an overcoming of the absolutism of the Tudors and Stuarts by the rise of 鈥渋nclusive institutions鈥� embodied in the Glorious Revolution by the rise of Parliament. But the destruction part of the rise of the entrepreneurial class gets little appreciation. For that we have to read Polanyi and Marx. And they are oblivious to the fact that without Tudor protectionism, the wool-spinning industry in England may never have gotten of the ground. To learn about this we would have to read the Marxist historians or Ha-Joon Chang's Bad Samaritans.
This book contains almost no reference to socialist or even non-free trade capitalist critique of the development policies which the authors prefer. This, of course, is typical of the environment of American academic departments of economics and political science, where our authors reside. In spite of their re-telling of many stories about the corruption and distortion imposed upon the people of the South by European imperialism in the nineteenth century, there is no mention of Lenin鈥檚 Imperialism, Highest Form of Capitalism. No mention of Polanyi. The only significant mention of Marx is in a passage where they say 鈥淟enin and his Communist Party were inspired by Marx, but the practice could not have been more different than the theory. The Bolshevik Revolution of 1917 was a bloody affair, and there was no humane aspect to it.鈥� In fact, the Russian Revolution was remarkably bloodless, since the army went wholly over to the Revolution very early in the process. There is no question that much blood was spilled during the Civil War and that enormous suffering was caused by the Stalinist purges and forced collectivization of agriculture in Russia, but that the authors would assume uncritically that this meant that the Revolution itself was 鈥渁 bloody affair鈥� is a telling indicator of biases that shield them from facts that don鈥檛 fit their view of reality. In a book that is so filled with facts, this ignorance seems systematic; as if they were searching out only the facts that fit their theory.
The authors make an off-hand reference to current day Iraq (on page 444) with amazing lack of empathy for the impact of the 鈥渟hock and awe鈥� imposed on that country by the Bush/Cheney/Rumsfeld regime and the UN Sanctions that preceded it. They use Iraq鈥檚 recent history to argue against the 鈥渢heory of modernization鈥� that they say 鈥渕aintains that all societies, as they grow, are headed toward a more modern, developed, and civilized existence, and in particular toward democracy.鈥� They mention the 鈥渄isastrous economic performance under Saddam Hussein鈥檚 regime鈥� without mentioning the years of pain imposed by continuing NATO-enforced sanctions and bombardment. For a more realistic estimate of that impact the reader is directed to Iraq Under Siege, The Deadly Impact of Sanctions and War, published in 2000, three years before 鈥渟hock and awe.鈥� There the reader will find another reason behind that 鈥渄isastrous economic performance鈥� of the previous decade. Anthony Arnove in the introduction to Iraq under Siege quotes from a Wall Street Journal article in 1999 citing unnamed US officials saying, 鈥淎fter eight years of enforcing a 鈥榥o-fly zone鈥� in northern [and sourthern] Iraq, few military targets remain. . . . We are down to the last outhouse.鈥� Acemoglu and Robinson say that hopes for 鈥減luralism鈥� were 鈥渄ashed as chaos and civil war descended upon Iraqi society.鈥� This implies that the 鈥渃haos and civil war鈥� were the result of some internal dynamic in Iraq without considering that what had descended onto Iraqi society was not just the 鈥渆xtractive institutions鈥� of Saddam Hussein but also the wrath of the American Empire, imposed over a decade of economic sanctions and bombardment since the end of the first Iraq war, 鈥淒esert Storm鈥�. They fail to mention the possibility that 6,000 sorties and 1,800 bombs as part of the 鈥渓ongest sustained US air operation since the Vietnam War鈥� had anything to do with the dissolution of Iraqi society that followed the second US land invasion by Bush, the younger. Iraq had long since been 鈥渂ombed back to the stone age鈥� to quote an earlier American general talking about that earlier war. Acemoglu and Robinson make no mention of this.
One of the interesting facts that the authors dredge up from the large anthropological and historical literature upon which they report is a story from the history of Dutch colonialism in the East Indies. They tell the story of the Banda Islands which had established trading relations with English, Portuguese, Indian, and Chinese merchants for mace and nutmeg, which were indigenous to their islands. In 1621 the Dutch governor of Batavia (now Jakarta in Indonesia) Jan Pieterszoon Coen 鈥渟ailed to Banda with a fleet and proceeded to massacre almost the entire population of the islands, probably about fifteen thousand people.鈥� He set up a plantation system in place of the thriving economic activity of the local Banda people and 鈥渄ivided the islands into sixty-eight plantations, awarded to sixty-eight Dutchmen, mostly former and current employees of the Dutch East India Company.鈥� They use this to support their major thesis, that 鈥淓uropean expansion . . . sowed the seeds of underdevelopment in many diverse corners of the world by imposing, or further strengthening existing, extractive institutions.鈥� But their emphasis is on the 鈥渆xtractive institutions鈥� and not on the fact that European imperialism imposed this reality by genocidal force of arms. This is a very strange emphasis to place on these facts.
Diamond鈥檚 critique in his NYRB article provides a good summary of this book. There he points to 鈥渢he authors鈥� resort to assertion unsupported or contradicted by facts.鈥� This book presents what is really a banal conclusion: that authoritarian institutions that impose the will of a small group of elites onto a population is the primary cause of 鈥渦nderdevelopment鈥�. This is not a new theory. It is a re-statement of Aristotle鈥檚 Politics. The real questions are why these authoritarian institutions succeed in taking over power in so many societies and how societies with apparently 鈥渋nclusive鈥� institutions like those in current day United States have evolved into such unequal societies. This book leaves us no closer to an answer to these questions.
The real problem that I have with this book is that it uncritically takes for granted the underlying assumptions from the neoclassical economist鈥檚 tool box. They point out the obvious: 鈥淓uropeans themselves stamped out the possibility of economic growth in many parts of the world that they conquered; . . . the lands where Industrial Revolution originally did not spread remain relatively poor; . . . . the Industrial Revolution and other new technologies are unlikely to spread to places around the world today where a minimum degree of centralization of the state hasn鈥檛 been achieved.鈥� These conclusions are delivered with a tone of great solemnity, but no one but the most dogmatic libertarians or European chauvinists would seriously disagree. The real question is how to change this. Their prescription of more 鈥渋nclusion鈥� the like of which we have in the United States may satisfy some, but it does not satisfy this reviewer.
This could be written in one chapter or a long magazine piece. Has an interesting theory, but it just goes on for too long and not worth spending the time.
This economic history is, as far as it goes, excellent. The main thesis is ultra simple: nations must develop inclusive economic and political institutions if they are to achieve prosperity. Such political institutions include fair and free elections, an independent judiciary, uncorrupt legislative and executive branches etc etc. Inclusive economic institutions include financial controls such as (in the U.S.) the Fed, the SEC, trust breaking litigation, and so forth. The authors say all of these things are mutually reinforcing. In the U.S., for instance, all three main governmental institutions at the federal level hold each other in check. This is also more or less true in Canada, Western Europe, Japan, Australia, New Zealand, and Botswana. Yes, that Botswana. The stories of Botswana -- and the rest of post-colonial Africa -- are ones I have not come across elsewhere and for which I am especially grateful.
Nations with inclusive economic and political institutions allow something called "creative destruction." This is what happens when new technologies appear and cause a redistribution of wealth. Perhaps the most recent example of creative destruction has been the impact of computers and the internet. So many industries have been upset by these new technologies: publishing, the music industry, retail stores, manufacturing, etc etc. Nations which do not have inclusive economic and political institutions are called "extractive." An extractive nation is one in which an elite prospers from the misfortune of the rest of the population. One example of this is the post-colonial African nation of Sierra Leone. When the British left Sierra Leone, and it was thought that the extractive mechanisms they had put in place would be abolished, just the opposite happened. Local strong men came along and upped the ante. This had the effect of disincentivizing entrepreneurs. After all, why work hard if 90% of one's output will be seized by the junta? Moreover, such extractive nations will not permit creative destruction because it threatens to undermine the power of the governing elite. So the extractive states tend to be backward because they shun new technologies. Though examples from antiquity are adduced -- Rome, Mayan civilization, for instance, both extractive -- the authors are mostly concerned with what happened starting with the Industrial Revolution on. They show how the English Civil War and subsequent Glorious Revolution set the stage for the growth of inclusive political and economic institutions in England and how these became mutually reinforcing over time.
The book is compelling. I hope people living in these extractive nations will get a translation because it is so eye-opening. But that's unlikely, isnt it? Since a major feature of extractive nations is suppression of the media, which is transparency.
This is a view of history, on the other hand, that does not question its foundations. It's a great cheering section for capitalism generally. But there's a huge problem with this economic-growth-at-all-costs mentality. It may have been fine for a century or so but now it's no longer tenable. In fact, it's killing us: climate change, loss of biodiversity, global deforestation; our oceans are covered, by one recent estimate, with 480 billion cubic tons of plastic. GDP is the wrong measure of our "progress" now. We need new sustainable economic models. So the book, while being a captivating history of how capitalism has worked historically, offers no solutions for how it might change. New models are badly needed. If, that is, we haven't already passed the ecological tipping point.
The central idea of the book is that states fail because of their political institutions, namely because of their extractive nature. This thesis is, in my opinion, extremely simplistic.
Economic processes are never this one-dimensional. The authors argue that the three theories of poverty (nations are poor because of their unfortunate geographic location, their culture does not facilitate growth and the West simply does not know how to transform poor countries into rich ones) are completely irrelevant which I disagree with (as in, I think that there are probably multiple causes as to why some nations are rich and some poor). The assumption that only politics and political institutions determine whether a country is 'poor or prosperous' is simply too one-sided. The authors do back their ideas up with countless examples from history but these sometimes tend to be irrelevant and random. For example:
They state that disease is not the reason why Africa is poor, it is rather the consequence of Africa already being poor. A possible solution: African governments should invest in health care just like England did in the 19th century. Firstly, the leader of the Industrial Revolution was by no means a poor country. They had the means and resources to do lots of things that contemporary Africa can only dream of. Therefore, this solution is not really much of a solution. Assuming that the political elite in some of the poorest nations in Africa have the resources to build up a new system of health care (this would also mean that the government should provide education for the public which in turn would mean that the mostly agricultural nature of the society would have to change because the country would need educated professionals) is not feasible. That is not to say that African nations are not capable of achieving success, in fact quite a few of them have already done so in various fields but in general, building a country essentially from scratch is not that simple.
The authors also argue that growth under extractive institutions is possible. However, the Caribbean islands were extremely wealthy in the 17th and 18th centuries despite their extractive institutions. They were not poor and definitely not 'failed'. The authors then argue elsewhere that several countries in the Middle East only thrive because of oil, should oil prices fall, they would quickly lose some of their wealth. This is probably true but we cannot ignore the fact that those states are wealthy even though they operate under extractive institutions, just like those of 17-18th century Caribbean. And calling the Ottoman Empire and the Mayans failed is simply incorrect. If a civilization manages to thrive for hundreds and hundreds of years, it is definitely not failed.
There is obviously merit in the authors' argument and I do agree that political and economic institutions have a lot to do with how prosperous and successful a state becomes. History obviously matters but what really annoyed me was the way the book drones on it. The authors constantly repeat themselves and it made me feel as if someone was hitting me in the head with a hammer, making sure that I understand that "Nations fail because of extractive institutions." Okay, I get it already.
To sum up, colonialism and authoritarian governments do indeed stagnate the economy as a whole and create distrust among people. Evil institutions never do too much to help the general public. But they're not the only reason why some countries are poor and some rich.
Such an insightful and shocking book! The examples are very well-explained, and I truly enjoyed thinking and discussing the points raised in this book. Only if more people would read this book and understand that it is not for the lack of aid to poor countries, but the very political and economical structure of the country that makes it poor.
The whole inclusive and extractive political-economical standpoint is very interesting.
The only nitpick I would comment on: the book suffers from excessive repetition. Only if the writers of this book would take some lessons from Jonathan Haidt on how to structure a (non-fiction) book properly.
This is an excellent book about the reasons why some nations are prosperous, while others are steeped in poverty. The authors contend that some nations have "inclusive" economic and political policies. These policies give a political voice to a large segment of the population, rather than only to a small elite. As a result, a set of checks and balances tends toward a positive feedback, sometimes called a "virtuous cycle". This virtuous cycle helps to accelerate the tendencies toward inclusiveness, and to suppress occasional lapses toward power-grabbing.
The other side of the coin are nations with "extractive" economic and political policies. A single person, or a small elite, finds it in their personal interests to grab power and extract as many of the nation's resources for their personal gain. They reject technological innovation, and try their best to maintain the status quo. These nations may temporarily improve their economical conditions, but in the long run their improvements cannot be sustained. Interestingly, the authors claim that China, despite economic improvements in recent decades, is going to be a short-lived phenomenon. At its roots, the political system is still extractive, because it does not allow dissension, does not protect private property, and does not extend the rule of law to everyone.
The authors go into considerable detail, explaining why Western Europe, especially Great Britain, became more economically successful than Eastern Europe. They extend their understanding to North vs. South America. They describe the histories of many other countries as well, to understand why inclusive or extractive policies have helped or hindered progress.
The book tends to be rather repetitive, sometimes too repetitive for my taste. Also, sometimes the sentence constructions are a bit awkward. Nevertheless, the book gives some fascinating insights into political science, and why nations become progressive, or tend toward failure.
I worked for an international affairs journal when this book was first released. I remember the considerable energy the authors seemed to be putting into its marketing 鈥撎齮he articles, the interviews, the debates, the blog, the proliferation of review copies. It seemed like there was a concerted effort to get Why Nations Fail added to that canon of suspect, generalist readings of geopolitics 鈥� your Clash of Civilizations, your Tragedy of Great Power Politics, your End of History and the Last Man 鈥� that worm their way into the lexicons of all first-year IR students alongside the terms 鈥渞ealism,鈥� 鈥渃onstructivism,鈥� and 鈥渘eoliberal institutionalism.鈥� I must confess that at the time I was put off by the baby blue cover (everyone knows that all serious works of poli-sci keep their color schemes to the austere blacks and whites). But it was about time to give it a go.
The book鈥檚 central thesis is very simple. 鈥淓xtractive institutions鈥� limit 鈥渃reative destruction鈥� (borrowing Joseph Schumpeter鈥檚 famous term) as a society run by a 鈥渘arrow elite鈥� with entrenched power fear a disruption of the status quo. This 鈥渋ron law of oligarchy鈥� limits long-term market success. The answer lies in 鈥渋nclusive鈥� economic and political structures that foster a 鈥渧irtuous circle鈥� of innovation and sustainable growth. These phrases are repeated ad nauseam. They season the cherry-picked case studies that span the vast breadth of human history and take up the meat of the read.
If all that seems rather obvious, I don鈥檛 think you鈥檙e alone. Who among those with access to this text remain unconvinced that graft, monopolism, despotism yield limited prosperity for society at large? Vladimir Putin? Viktor Orban? Donald Trump? I鈥檓 sure their motivations stem from very different sources of inspiration than those the authors have in mind. As for the Western academic tradition 鈥� it seems rather conclusive on this matter. Why Nations Fail doesn鈥檛 deal much in nuance. It commits to a definition for neither 鈥渘ationhood鈥� (surely something a bit different than Benedict Anderson鈥檚 imagined communities) nor 鈥渇ailure鈥� (are we talking a runaway Gini coefficient 鈥撎齦arge-scale income inequality? Scarcity? Barbarians at the gates?). So, what are we left with? Almost a tautology. Nations are sets of state-run institutions. They fail when those state-run institutions break down. Naturally.
I鈥檓 going to coin a term here. As a disclaimer: I鈥檝e never studied classics so it鈥檚 probably less-than apt, but here goes. Historrhea (from Ancient Greek 峒毕兿勎肯佄� 丑颈蝉迟辞谤铆补 鈥渉istory鈥� and 峥ノ� rheo 鈥渢o flow鈥�) | noun | hist藱or藱rhea. Historrhea is characterized by excessive and sometimes incoherent tellings of societal events. I find there鈥檚 a lot of historrhea in these sorts of books that attempt to prescribe some grand narrative to human civilization. That seems to be what鈥檚 going on here and I鈥檓 not a huge fan for a few reasons: (1) It comes across as tendentious. I鈥檝e witnessed enough anthropology professors dealing body blows to Guns, Germs, and Steel, the misguided goodwill of Jeffrey Sachs, and the latest Tom Friedman mixed-metaphor to know that things are rarely that simple. A lot of people have lived on planet earth. And collectively they have done a lot of stuff. You can bend the past to fit a linear argument in pretty much any way you want if you try hard enough. That doesn鈥檛 mean you鈥檝e stumbled upon some harmonious truth to the universe, especially if鈥� (2) There is almost no reliance on data/statistical modeling. This was a huge disappointment. I understand that Why Nations Fail was written as a work of pop-history, but Drs. Acemoglu and Robinson are respected economists. Why not play to your strengths and craft a more compelling, rigorous argument in the process? As it stands鈥� (3) The results are not very educational. I read non-fiction to learn. It is very difficult to internalize information 鈥� for me at least 鈥� when the text skips haphazardly throughout time and space, dealing in surface-level treatments of complex issues like a disorganized AP World History study guide. The analysis of events never makes it past the Wikipedia page. I know enough to be suspicious of this.
Drs. Acemoglu and Robinson reject the 鈥渉istorical determinism鈥� of other hypotheses for state success and state failure, but to me that鈥檚 kind of like a proponent of the Cartesian theater rejecting neurological determinism. Sure, you鈥檝e liberated the mind from its fated ends, but how, then, do you do the same for the homunculus you鈥檝e created? Here too, we manage a claim that nations may determine their own fate through the institutions they establish, but where do these institutions come from? Wherein lies the will to will? Really you鈥檙e not getting anywhere at all.
The theories proffered by Why Nations Fail are purely descriptive in nature. Drs. Acemoglu and Robinson acknowledge this lack of predictive power, but I鈥檓 not sure that makes it better. I think the most damning indictment of this sort of work comes at the authors鈥� own hands. As the book concludes, Drs. Acemoglu and Robinson can鈥檛 resist making some tame prognostications based on their thesis. The year is 2012. China is bound for a crash, they write; its authoritarian regime can鈥檛 hold on. Conversely, Brazil鈥檚 future is looking bright as the party of Lula rights the ship. In 2017 we know a bit of how things play out. Xi Jinping consolidates power as the Chinese economy continues its implacable advance. The reports of its demise have been greatly exaggerated. Meanwhile, Brazil remains mired in its worst recession on record while the government is wracked with corruption scandal after corruption scandal. Of course, there is always time for things to turn around. Even those in the Chinese politburo 鈥撎齬iding high 鈥� must know this. The empire,听long divided,听must unite;听long united,听must divide. Thus it has ever been. Perhaps a window will open up in which the authors can claim vindication 鈥� that they were right in the long run. Of course, another famous quotation comes to mind in response.
Overall: very very interesting and very important topic. I would give it 5 stars except it is very long, detailed, and not an easy read. However well worth it.
Thesis in brief: some countries are properous, and others are not. What causes the difference? Some are right next to each other and the difference in prosperity can not be explained by geography, climate, or even culture. Instead it is the system, and what is it about the system that explains the difference. They elaborate a theory that there are "inclusive" political and economic systems, and there are "extractive" political and economic system. A precondition to either of these is a minimal level of centralized political control.
To distill this to a very simplified level: a region needs to develop a minimal amount of centralized control. At that point it is possible to create a system that is inclusive, where power is somewhat distributed, and economic gains are shared, which helps make the economy grow in a sustained way. At some point it is possible to switch to an extractive system where the people in power manipulate the system to enrich themselves and to stay in power, and at that point sustained growth becomes impossible. The rest of the world passes it up, or in some cases the country descends into ruin.
The bulk of the book is a scholarly and encyclopedic study of different cultures, testing and demonstrating the theory.
Mexico vs. USA: neighboring countries and the difference in climate does not explain the extensive difference in the properity. Surprisingly, 500 years ago Mexico was far more prosperous than the land north of the border. Mexico had 500 times as many people per sq. mile than Virginia, it had an advanced civilization, and tremendous wealth by any measure. How did it come that today USA is so prosperous compared to Mexico? When the Europeans got to mexico, they immediately set up an extractive system to enrich themselves, while in Virginia the Jamestown settlers came close to extinction, and had to set up an inclusive system in order to survive. Once the pattern is set, it is very hard to change, and echos of these patterns survive today.
Chapter 2 addresses all of the common folk theories of why rich countries and poor countries are different: geography, culture, & ignorance. Evidence against is presented. The conclusion: "poor countries are poor because those that have power make choices that create poverty"
Chapter 3 explains extractive and inclusive using the example of South and North Korea which were identical before the border was drawn at the 38th parallel. "Nations fail when they have extractive economic institutions supported by extractive political institutions that impede and even block economic growth." Economic growth requires that 'creative destruction' that Adam Smith referred to, and in an extractive system, those in power oppose change because they fear it will dilute their power and wealth. They actively oppose change. However, without change you can't have growth. Congo and Soviet Union are given as examples of extractive systems that achieved limited growth because the elite actively directed the resources to this end ... but it does not last.
Chapter 4 talks about systems that change from one form to another at a critical juncture. The black death. The Glorious Revolution. Japan in transition from Edo to Meiji.
Chapter 5 is a wide ranging survey of countries (and periods of their history) with extractive systems.
Chapter 6 covers rise and fall scenarios: Venice, Rome, others.
Chapter 7 stands on its own and presents the answer to the question: "Why did the industrial revolution happen in England?" After all, England was not that different from the rest of Europe, but those small differences, and a critical juncture, pushed it in just the right way to be ready for the technological advances of the industrial revolution.
Chapter 8 gives many example (e.g. Somalia) of how the people in power of some countries avoided any advantage from the industrial revolution .. and were left economically behind because of it.
Chapter 9 gives some example (most notably the Spice Islands) where invaders managed actually to destroy inclusive cultures in order to line their own pockets.
Chapter 10 discusses the diffusion of prosperity and how that enabled key countries to benefit from the industrial revolution.
Chapter 11 explains the virtuous circle and how when a country manages to get inclusive economic and political institutions, it tends to stay that way in a stable configuration.
Chapter 12 explains the vicious circle, the pattern where extractive systems tend to reinforce themselves and become stable, even as the country sinks into ruin.
Chapter 13 brings us back to the present day, Zimbabwe, Sierra Leon, Argentina, Korea, and the US south (slave states).
Chapter 14: some positive stories of countries that made a narrow escape: Botswana started very poor, but has grown more than any of its neighbors into a country with the highest per-capta income in sub-saharan Africa. How the south escaped slavery, how those institutions persisted for a hundred years, but finally made it out.
Chapter 15: with all that groundwork behind you, you are finally prepared to fully understand properity, poverty, and their causes. They reject the idea that natural growth will bring prosperity once the country is educated enough. Foreign aid will never work in a country that has extractive institutions -- what has to happen is a change to inclusive, and there is nothing natural or easy about this change.
The book yeilds a lot of insight on the ways that countries can evolve, and indeed patterns that are sure to cause failure. I can't stop wishing that the authors could offer a sure fire way to solve the problem, to turn a country from extractive to inclusive, but alas this is not included in book. It is clear that no simple solutions exist. It would seem that each country to be "saved" would probably need a solution unique to it.
In poor countries they found extractive institutions; in rich countries inclusive institutions; however the cause and effect is not completely clear. We don't really know what causes the form encountered, nor what might cause a change of form. Thus is might simply be that a particular country just happens to be poor and extractive -- it is hard to say whether change to an inclusive structure is even possible. Maybe you have to growing to have inclusive systems. What is the chicken, and what is the egg?
This does not diminish the book in any way. Their 15 years of research are brought to expose patterns that I expect to enhance my way of viewing world politics, economics, and culture, for many years to come.
I think the premise of this book is fantastic, and the first 50 pages were terrific. Beyond that, I was pretty disappointed by the execution.
The book is built upon the theory that it is not economic policies, but rather "institutions" (such as good governance, social norms and a strong legal system) that play the fundamental role in economic growth and development. I find this to be a compelling theory and I think it is an extremely useful framework from which to view economic and political development. Like most "big theory" books, this book is spent explaining how this theory explains the world. I think the main problem with this approach is that these are economists (and not economic historians) trying to write about history, and their history is awfully simplistic. The economic history of institutions would be fascinating, if done in a comprehensive way, but this reads more like a superficially researched college history paper than a comprehensive history of institutions and their role in economic history. Judging from Acemoglu and Robinson's version of history, institutions explain all major political developments of the past 5 millennia, and there are no counter-examples that contradict their explanations. These are unrealistic positions.
This is the type of book where they take a word (Extractive) and use it to mean something different from what it usually means and then repeat it 3,000 times and act like that explains things. The authors' overall argument is that nations work better after people revolt against oligarchs, except for all the times when that didn't work.
The lack of arguments and statements like: "Unlike in Mexico, in the United States the citizens could keep politicians in check and get rid of ones who would use their offices to enrich themselves or create monopolies for their cronies." (In the 19th century? Really?) or 鈥淛ust as the United States in the nineteenth century was more democratic politically than almost any other nation in the world at the time, it was also more democratic than others when it came to innovation.鈥� do not make any sense. I am not going to finish this book.
Francis Fukuyama 1989 y谋l谋nda "Tarihin Sonu mu?" ba艧l谋kl谋 bir makale yazm谋艧, 1992 y谋l谋nda bu makaleyi geni艧leterek kitap haline getirmi艧ti.
Fukuyama'ya g枚re o y谋llarda sadece so臒uk sava艧谋n de臒il, tarihin de sonu gelmi艧, insanl谋臒谋n ideolojik evrimi nihayet tamamlanm谋艧 ve Bat谋 tarz谋 liberal demokrasi, insan uygarl谋臒谋n谋n nihai y枚netim tarz谋 haline gelmi艧ti.
Bu kadar iddial谋 ve iddial谋 oldu臒u 枚l莽眉de fos 莽谋kan bir makale ancak 莽ok uzun s眉rm眉艧 bir d枚nemin en sonunda yaz谋labilirdi. 脰yle de oldu.
1990 y谋l谋nda Japon borsas谋n谋n 莽枚k眉艧眉 ile uzun bir deflasyon d枚nemi ba艧lad谋. 90'lar biterken Uzak Asya kaplanlar谋 莽枚kt眉. Bir ka莽 sene sonra kriz Brezilya, Arjantin ve T眉rkiye'ye s谋莽rad谋. 2000'lerin ba艧谋nda 枚nce teknoloji balonu patlad谋, ard谋ndan 2001 y谋l谋nda ABD'nin ikiz kuleleri vuruldu. 2002 y谋l谋nda Bush-Cheney-Rumsfeld rejimi "艧er cephesine kar艧谋 枚nleyici sava艧" stratejisini devreye soktu. 2007 y谋l谋nda yeni bir kriz dalgas谋 daha geldi: ABD'de e艧ik-alt谋 mortgage piyasas谋 莽枚kt眉; banka ve 艧irket iflaslar谋 birbirini izledi. Piyasan谋n "g枚r眉nmez elinin" i艧leri d眉zeltemeyece臒i anla艧谋l谋nca bankalar谋n toksik varl谋klar谋 kamuya devredildi, banka/艧irket kurtarmalar谋na, kendi ayaklar谋 眉zerinde duramayan piyasalara kredi pompalanmaya ba艧land谋. 2010 y谋l谋nda Arap Bahar谋 olarak isimlendirilen isyan dalgas谋nda rejimler birer birer 莽枚kmeye ba艧lad谋. Ayn谋 y谋l Avrupa bor莽 krizi patlad谋. 陌flas etme s谋ras谋 devletlere gelmi艧ti. Batman谋n e艧i臒ine gelen Yunanistan'da devlet bor莽lar谋 silindi, 陌talya, 陌spanya oksijen 莽ad谋r谋na al谋nd谋. 陌flas eden devletlerin kurtar谋lmas谋na kar艧谋 Avrupa'n谋n zengin kuzeyinden itirazlar y眉kseldi. 2014 y谋l谋na gelindi臒inde Avrupa Parlamentosu'ndaki sandalyelerin 眉莽te biri a艧谋r谋 sa臒c谋/谋rk莽谋/g枚莽men ve AB kar艧谋t谋 partilerin eline ge莽mi艧ti. Ayn谋 g眉nlerde Irak'谋n en b眉y眉k kentleri birer birer kur艧un bile atmadan I艦陌D'in eline ge莽iyordu.
Fukuyama'n谋n fos 莽谋kan 枚ng枚r眉s眉, bug眉n g眉l眉mseme ve alayla an谋l谋yor.
Fukuyama'n谋n, Tarihin Sonu'nu yazd谋臒谋 1990 y谋l谋ndan g眉n眉m眉ze pek 莽ok kitap yay谋nland谋. Uygarl谋klar neden 莽枚ker? Son 眉莽 y眉zy谋ld谋r d眉nyaya ni莽in Bat谋 h眉kmediyor? Acaba bu d枚nemin de sonuna m谋 gelindi? Bat谋 Uygarl谋臒谋 bir 莽枚k眉艧眉n e艧i臒inde mi? gibi sorular sorulmaya, Edward Gibbon'谋n Roma'n谋n Gerileyi艧 ve 脟枚k眉艧 Tarihi kitab谋 yeniden okunmaya ba艧land谋.
Why Nations Fail, Fukuyama'n谋n "tarihin sonu geldi" kitab谋 ile ba艧layan "hmm acaba hen眉z gelmedi mi? bir 艧eyler de ters gidiyor ama..." olarak devam eden serinin, "yok, yok biz do臒ru yolday谋z" anafikirli son kitab谋.
Bu kitab谋n uluslarla da bir ilgisi yok. (Ulusun tan谋m谋, olu艧umu, tarihte modern uluslar谋n ortaya 莽谋k谋艧谋 ve geli艧imi ile ilgili geni艧 bir k眉lliyat var. O kitaplar谋n okunmas谋n谋 tavsiye ederim.) San谋r谋m kitab谋n yazarlar谋 Adam Smith'in Uluslar谋n Zenginli臒i'ne g枚nderme yapmak istemi艧. Bu kitapta uluslar de臒il, ekonomik-siyasal sistemler konu ediliyor. Dahas谋, "uluslar谋n" ni莽in de臒il, nas谋l d眉艧t眉臒眉 anlat谋l谋yor. Ni莽in d眉艧t眉kleri sorusuna yazarlar谋n cevab谋 ise ayr谋ca sorunlu.
Yakla艧谋k 500 sayfal谋k kitap 15 b枚l眉mden olu艧uyor. Bu 15 b枚l眉m眉n 14'眉 atlanarak, sadece 15. b枚l眉m okunabilir ve yazarlar谋n ne demek istedi臒i kolayca anla艧谋labilir. Yazarlar谋n bu kitaba kendilerinden katt谋klar谋 tek unsur, "extractive and inclusive economic, political inclusions" (T眉rk莽e'ye nas谋l 莽evrildi bilmiyorum, T眉rk莽e'de bu kavramlar谋 tam kar艧谋layan s枚zc眉kler yok. Belki "d谋艧lay谋c谋/s枚m眉r眉c眉 ve kapsay谋c谋/kapsaml谋 ekonomik, siyasi kurumlar" olarak 莽evrilebilir.) Yazarlar okuyucuyu b谋kt谋rma pahas谋na, her bir ka莽 sayfada bir bu kavramlar谋 tekrarl谋yorlar. Zaten bu tekrarlar haricindeki t眉m paragraflar, tarihsel bilgilerden ibaret.
Hangi kurumlar谋n "extractive", hangi kurumlar谋n "inclusive" oldu臒u tarif edilmemi艧. B枚ylece belirsiz kalan kavramlar谋n etraf谋nda, tarihin o d枚neminden bu d枚nemine atlayarak neyin extractive, neyin inclusive oldu臒unu (daha do臒rusu yazarlar谋n bu tan谋mlar谋 neye g枚re yapt谋臒谋n谋) okuyorsunuz. Tabi b眉t眉n bu tarihsel atlamalar i莽inde 18. y眉zy谋l 陌ngiltere'si ile 19. y眉zy谋l Kongo'sunu, 15. y眉zy谋l 陌nka imparatorlu臒u ile 20. y眉zy谋l Amerika's谋n谋 kar艧谋la艧t谋ran yazarlar谋n hangi metodolojiyi izlediklerini bir t眉rl眉 kavrayam谋yorsunuz. Extractive ekonomik kurumlar谋n her zaman extractive siyasi kurumlar yaratt谋臒谋n谋 (ama bazen de yaratmad谋臒谋n谋), inclusive ekonomik kurumlar谋n ise inclusive politik kurumlar yaratt谋臒谋n谋 (ama bunun her zaman b枚yle olmad谋臒谋n谋, zaten bu konuda bir tarihsel zorunluluk da bulunmad谋臒谋n谋) okuyor, her seferinde kafan谋z kar谋艧m谋艧 bir halde bir sonraki b枚l眉me ge莽iyorsunuz.
Kitapta yazarlar谋n titizlikle dile getirmekten ka莽谋nd谋klar谋 baz谋 kavramlar var: S谋n谋f, devrim, emperyalizm.
S谋n谋flar yerine s眉rekli elitlere vurgu yap谋l谋yor. Yazarlar sizi, tarihin asl谋nda elitler aras谋ndaki 莽eki艧me/uzla艧ma dinami臒i ile olu艧tu臒una ikna etmeye 莽al谋艧谋yorlar. Elitler birbirlerini tepelemeye kalkarsa extractive, a莽g枚zl眉l眉klerini s谋n谋rlay谋p i艧birli臒i yaparlarsa inclusive yap谋lar olu艧uyor. Kitab谋n alt ba艧l谋臒谋nda vurgulanan refah谋n ve yoksullu臒un gerisinde elitler aras谋ndaki bu 莽eki艧me/uzla艧ma dinami臒i oldu臒unu 枚臒reniyorsunuz. Elbette s谋n谋flar olmay谋nca, Marx ve Weber'i anmaya da gerek kalm谋yor.
Devrim s枚zc眉臒眉 ise mecbur kal谋nmad谋k莽a hi莽 telaffuz edilmiyor. Yazarlar Frans谋z Devrimi'ne ba艧ka bir isim bulamad谋klar谋 i莽in mecburen "Frans谋z devriminden" bahsediyorlar. Bol艧evik Devrimi d枚rt yerde an谋l谋rken, 陌ngiltere'deki Glorius Revolution (Muhte艧em Devrim) her 5-6 sayfada bir kar艧谋n谋za 莽谋k谋yor. Tarihte bunlar谋n d谋艧谋nda devrim yok! Peki ne var? A莽谋k莽a ifade edilmese de Sosyal Darwinizm var: Birbirinden izole olmu艧 genlerin mutasyona u臒rayarak farkl谋 evrim 莽izgileri izlemesi gibi, benzer iki toplum da farkl谋 kurumlar geli艧tirerek farkl谋 yollardan evriliyor. (S. 431) Sonu莽ta birinin yolu yoksullu臒a, di臒erinin yolu refaha 莽谋k谋yor!
S枚m眉rgecilikten s谋k莽a bahsediliyor. Emperyalizmin ise ad谋 bile an谋lm谋yor. B枚ylece s枚m眉rgecili臒in ortadan kalkmaya ba艧lad谋臒谋 19. y眉zy谋ldan itibaren "uluslar谋n" e艧it bir 艧ekilde yar谋艧t谋臒谋 gibi bir izlenime kap谋l谋yorsunuz.
S谋k莽a g枚nderme yap谋lan kavramlardan biri de Creative Destruction (yarat谋c谋 y谋k谋c谋l谋k). S谋k莽a g枚nderme yap谋lmas谋na ra臒men, bu kavram谋n kitapta do臒ru kullan谋ld谋臒谋ndan emin de臒ilim. Sanki bu kavrama bamba艧ka anlamlar y眉klenmi艧 gibi.
Kitapta g枚nderme yap谋lan bir ba艧ka kavram Iron Law of Oligarchy (Oligar艧inin Demir Kanunu). Kongo'da, Rodezya'da, G眉ney Afrika'da bu kanunun nas谋l i艧ledi臒ini okuyorsunuz. G眉n眉m眉zde mesela AB troykas谋nda, ABD pl眉tokrasisinde, 艧ok doktrini ile terbiye edilmi艧 "emerging market" 眉lkelerinde nas谋l i艧ledi臒ini merak ediyorsan谋z ba艧ka kitaplar okuman谋z gerekiyor.
Extractive kurumlar谋 olan toplumlar谋n bulu艧 yapamayaca臒谋n谋 okurken, Nazi Almanya's谋nda ve Sovyet Rusya's谋nda bunca bilim insan谋n谋n nas谋l 莽谋kt谋臒谋n谋, g眉n眉m眉z teknolojisinin alt yap谋s谋n谋 olu艧turan pek 莽ok bulu艧un bu toplumlarda nas谋l yap谋ld谋臒谋n谋 sormadan edemiyorsunuz.
Irak'谋n ve Afganistan'谋n neo-con sald谋rganl谋臒谋 ile de臒il kendi ba艧ar谋s谋zl谋klar谋 ile yoksulla艧t谋臒谋n谋, K眉ba ve Chavez Venezuela's谋n谋n ba艧ar谋s谋z toplumlar oldu臒unu ve bu kafayla sonsuza kadar da ba艧ar谋s谋z kalacaklar谋n谋, yoksulluk ve a莽l谋kla bo臒u艧an 眉lkelerle dayan谋艧man谋n (kitapta yard谋m olarak zikrediliyor) yarars谋zl谋臒谋n谋, 脟in'in b眉y眉mesinin s眉rd眉r眉lemez oldu臒unu (tersinden okursan谋z inclusive kurumlar谋 oldu臒u i莽in ABD, 陌ngiltere, Avustralya, Kanada gibi 眉lkelerin ise sonsuza kadar b眉y眉yece臒ini) 枚臒reniyorsunuz.
脰臒rendikleriniz bunlardan m谋 ibaret? Elbette hay谋r, mesela ben Zimbabwe'de d眉zenlenen bir piyango 莽ekili艧inde b眉y眉k ikramiyenin devlet ba艧kan谋 Mugambe'ye isabet etti臒ini bilmiyordum. Hani derler ya: "Zimbabwe'de bile olmaz". Me臒erse olurmu艧. (Se莽imlere hile kar谋艧t谋rmak extractive kurumlara sahip 眉lkelere 枚zg眉 ise, George W. Bush 2004, Donald Trump 2016 se莽imlerini nas谋l kazand谋 diye sormadan edemedim.)
"Unlike in Mexico, in the United States the citizens could keep politicians in check and get rid of ones who would use their offices to enrich themselves or create monopolies for their cronies."
The importance of institutions and a broad base of people profiting from prosperity is detailed in great, diverse detail in this book. Small initial differences in societal structure compound over time in vicious and virtuous circles, with richest and poorest countries remarkably stable over 50, 100 and even 150 year timespans Hence it arises that there is no one who takes are of the land he enjoys. There is not even anyone to plant a tree, because he knows that he who plants it very rarely gathers the fruit. For the king however, it is useful that they should be so dependent on him.
Very thought provoking and thorough, while still being eminently readable. 2024 Nobel laureates in Economics and examine history to formulate a broad theory why some nations are rich and some are poor, despite similar climates, resources, culture and exposure to technology. Their thesis is that pluralistic political institutions (while having a centralised state that is capable of providing basic public services and maintaining the monopoly on violence) and inclusive economic institutions, that act as a broad-based engine for societal advancement and an avenue for social mobility, are the most determining factor influencing different economic outcomes. While serendipitous influences from natural disasters, foreign intervention and brilliant individuals also shape history, thus making the faith of countries non-deterministic, the theory of is both elegant and compelling. More thoughts and specific examples as contained in the book to follow!
Despite the hutzpah of a title like WHY NATIONS FAIL, there's nothing in the text itself that I found disagreeable, and I've read a lot of different economic and political theories of wealth over the years.
Of course, there have been a lot of armchair historians and armchair economists and armchair politicians, so who knows if 20/20 vision is really accurate? They could all be riffing on one fundamental theory or another and making a messy conclusion. Right?
The beauty of this one is pretty simple in effect if not in the supporting particulars. Tons of examples are given from all kinds of nations and economic policies and politics all throughout history and including a very refreshing survey of modern nations. They first break down the prevailing bad theories that revolve around geography, culture, bad luck, or even the big modern one we see all the time: Ignorance. *laugh* You know, the one that says, "If only you had our experts, you too can have all the wealth we have."
The fundamental difference in this book, fascinatingly so, can be summed up quite easily. And it's kinda obvious, too.
Extractor policies and inclusive policies.
You can translate that into government/economic policies that loot in order to grow or those that give a share of all the profits and incentives to all the people working in the system. Vicious cycles and Happy cycles.
Dictators that keep on taking can keep it up for a long time and even if there are revolutions, the revolutions keep putting the same damn policy in place. Any kind of authoritarian government can work to that same tune. Short term growth, sharp declines.
The politics and the economics of it are perfectly entwined. You can't have one without the other.
On the other hand, there's the other side. If everyone, not just the elite, has a stake in the game, then everyone works harder and with more intelligence to accomplish whatever they have to accomplish.
Use guns, coercion, theft. Or use honest cooperation.
It's pretty obvious that BOTH can be a basis for any nation. As can a wide, wide continuum mixing both elements in any. And that's also the point. Any nation can succeed or fail. No nation is exempt.
But it still requires a rather huge change of heart and it must be truly enacted in both the economics side and the political side. One without the other will perpetuate the same looting cycle.
For fans of other authors and big theories that nail this same idea, look to Ayn Rand's Atlas Shrugged. Or Game Theory.
You will have all types of individuals either working toward a collaborative whole or those who will short the whole damn thing down. The institutions with enough checks and balances DO seem to edge toward the more prosperous equations. Those who dismantle those checks and balances or work together to loot other subsets will take from the total potential benefits of wealth until it is all used up.
It's quite complicated in practice, of course, but for a cohesive underlying theory, it works a lot better than saying Communism! or Capitalism! or Socialism!
All those can be filled with thieves or genuinely cooperative individuals. The difference is in the institutions and economic models that might favor the thieves or the genuinely cooperative.
The real joy of reading this book is the myriads of examples. :)
A fascinating (albeit difficult to grasp) study on why some nations succeed whilst others fail. The amount of information in this book is astounding, seeing as it is the result of 15 years of research on the topic. This is definitely a book I will re-read, because with a first read you just get the basic argument, but with the second one you get all the subtleties.
I recommend this to anyone with an interest in why our world is the way it is.
I read this as part of the Mark Zuckerberg book club :) Why are some nations rich and some poor? Is it geographical? Cultural? This book argues that, to a first order approximation, it is the economic and political institutions that influence this property, based on whether they are inclusive and pluralistic, or extractive, where a small elite rules over the population. The book goes over many examples of countries/regions throughout history, e.g. Maya, Rome, Venice, France/Spain/Britain/New World, and in modern days the focus is around South America, North vs. South America, Subsaharan Africa, and China. In each case, the authors point to the institutions as the source of the divide. In short, throughout history, small number of rich and powerful people have incentives to keep it that way. They do this by keeping the population misinformed (e.g. media control), conservative ("keep everything as is"), and by explicitly avoiding creative destruction that is core to sustained progress, but which threatens the status quo and political stability. In these countries there are no incentives for anyone to innovate, since anything you come up with will be extracted anyway, and in some cases might even get you in trouble (e.g. Dai Guofang example in China, along many others). In addition to all the stagnation and corruption, this also leads to more wars, and provides more incentives for unrest and military coups since there is more power to be gained in an authoritarian regime. The only escape are the development of pluralistic institutions with the formation of a broad coalition during critical junctures, which Britain was lucky to experience just before the Industrial Revolution. And yay Democracy and Capitalism. I also found interesting the doubt the book casts on foreign aid near the end, at least in presence of extractive institutions.
I think I learned quite a bit while reading this book, but I wish the book was slightly less repetitive, that it flowed better, and that the authors were more specific and comprehensive on exactly how extractive institutions work since this is at the core of their argument. The discussion could have been more grounded when normally I felt it was slightly too high level, and could have used more stories. I say that not because I want fluffy stories, but because I think we remember them more easily - it makes for a better, less dry, and more memorable exposition. Lastly, I couldn't get rid of the feeling throughout the book that past events were highlighted in retrospect to neatly fit the core thesis, and the authors did not seem genuine enough to discuss other possibilities, or common theories that do not agree with theirs. Instead, they quickly and forcefully reject them. Hence, the book comes across as a possibly cherry-picked, one-sided argument that insists on being right without acknowledging its own faults or weak points.
Daron Acemoglu and James Robinson's Why Nations Fail examines the impact our human-created institutions have on our economies and creation of a "good life" for the many. They do this with a lot of detail. Many of their observations both apparent and useful. Despite this, the book has a number of flaws that seem, to this reviewer at least, critical.
Let's start with the good: the author's central thesis seems sound. Governments and the institutions they create do matter. For instance, consider North and South Korea. Both have similar histories (until 1950, that is). Face the same environmental conditions, and arise from the same core Korean culture. And yet the countries are quite the opposite.
In the north, a military regime strips wealth from the regular people and places it in the hands of a few. The state does not incentivize people for trying new things. Instead, the state is organized militarily, the state's sole aim in perpetuating the lives of its ruling class -- specifically the bloodline of the "emperor" Kim Jong-un.
The authors call this an Extractive State. These leaders create institutions that extract wealth and focus it in the hands of the few.
In South Korea, things are different. Less militarily oriented, their government has created institutions that help economic development thrive: a sound currency, a legal system to enforce contracts, and a tax and property structure that rewards individual initiative.
The authors call states like this Inclusive States. They create an ever-increasing standard of living for all and not just the oligarchs.
The results produced by the two Koreas are, of course, 180 degrees apart. South Korea is a thriving, First-World industrial economy. The North impoverished, stifled by the military's inept command-and-control oligarchic dictatorship.
So far, so good. It is a great premise that is beyond reproach. Though often a bit of a pain, there is no doubt that a strong central authority is needed to keep a state intact. And after reading Steven Pinker's The Better Angels of our Nature, I am pretty well convinced that humans in strong states -- even a bad one -- are better off than those in a weak state. Pinker shows, using a remarkably diverse selection of historical data, that fewer people die of war or murder in a centralized state. And that, while we need to watch our leaders lest they lead us astray, Rousseau's "Noble Savage" is a literary construct that does not hold up to closer inspection. And Acemoglu and Robinson's main argument bears this out.
The authors take a step forward and do an excellent job delineating that some of those centralized states are better than others. And they wonder why -- which is again the proper move. My problem with their answer is that it tends to over-emphasize Free-Market dogmatism are the "real reason" these countries thrive. And this is often not the case.
Let us consider the USA. To begin with, the United States was initially a slave nation, with the southern half of the nation shipping raw cotton to British ports -- making the US an extactive state by the author's definitions.
And yet we have risen above this. How?
Acemoglu and Robinson's answer would likely be "by creating institutions that encouraged Creative Destruction of the inefficient industries and encouraging Free Market Capitalism."
This is, of course, a fairy tale told to children by Free Market cheerleaders. The US did not rise to dominance by applying Free Market principles. Instead, through the 19th and into the 20th Century, the US had very high tariffs to protect its fledgling industries.
Acemoglu and Robinson ignore this. Or perhaps their belief in their core argument blinded them to the fact. Whatever the reason, the miss looms, huge.
The authors also gloss over other exceptions to Free Market dogmatism. For instance, South Korea has a very Confucian-style command economy. It created its contemporary industries -- steel, auto, etc. -- by imposing huge tariffs and supplying capital infusions to firms in key industries. Once they were established. the government kicked out the financial supports and lowered the tariffs -- albeit gradually. But the point is that it was not a Free Market that South Korea pursued. It was very Command-and-Control. And yet South Korea succeeded.
Japan is another example of a tightly integrated public/ private economy. A very tight group of elites created and maintain an excellent, stable society that benefits everyone, and not just the privileged few. This is ignored.
Worse is the lack of respect offered to China. Despite its defeats in the late 19th and early 20th Centuries, China has a long history of wealth creation, stability, and high standards of living. They have more experience than the West does in feeding billions utilizing a strongly centralized state. While there is little doubt that Mao's "Great Leap Forward" was a disaster, Chinese history stretches back to the Xia Dynasty in 2070 BC -- or over 4,000 years. To focus on Mao's biggest error seems weak. It ignores the Chinese people's historical ability to create stabilizing bureaucracies to administer their large and complex culture.
Even worse for the authors' thesis: China's administrative apparatus included many state-granted monopolies -- in salt, for instance. And yet, until the 1700s, China was the wealthiest nation on the earth.
Acemoglu and Robinson ignore this. As they do with many facts that contradict their Free Market "solution." And the facts they ignore are not "tiny" factoids, but gaping mounds of readily available historical data. Instead, they present only facts that square with their Anglo-American, Free-Market worldview.
The work has other weaknesses as well. My biggest criticism is the refusal to see that there are some real ecological and geographical constraints on growth. All one needs to do is drive west in the United States to notice this.
Where resource-light 17th-century style shipping was easy -- the Atlantic coast, Great Lakes and Mississippi basin -- development is high. People live in closely grouped clusters. You see this development replicated along the Pacific coast. But consider the emptiness in between -- most of Colorado, Utah, Arizona, the Dakotas, Wyoming, Montana, New Mexico, western Kansas, western Nebraska, and Nevada. large population centers there, like Denver and Phoenix. would be unthinkable without modern transportation. And even then, the sparse development bespeaks an inability of the region -- due to the area's inherent dryness -- to sustain populations. And these cities exist for a single reason: mineral mining.
These ecological tendencies limits grow more pronounced as you move into the tropics, however -- especially aboriginals in isolated jungle areas. For instance, consider a rain forest pygmy living in Central Africa. The rivers are unnavigable rivers, the forest, and undergrowth thick and tough to journey through. They are cut off, thousands of miles from the ocean. This limits the connections a person is subject to. And not only in trade, but it limits the tribe's access to information.
How could you compare this part of Africa to an island like Japan or the coast-rich USA? Again, this is ignored.
Worse is how the authors dismiss well-regarded views that are at odds with their Extractive/ Inclusive, Oligarchy/ Free-Market ideas. For instance, Acemoglu and Robinson try to dismiss Jared Diamond's wonderful look at the impact of biology and geography on history, Guns, Germs and Steel, ignoring what the book actually says. Diamond presents a birds-eye view of what factors led to advanced culture arising in the West 10,000 years ago. Diamond is tracing long-long-long-term trends. His is a work of anthropology and ancient history. Acemoglu and Robinson ignore this and write it off as unfounded. How? They point to the US/ Mexico border and North/ South Korea. Ignoring that Diamond is referring to events that occurred before written history.
So while I agree with Acemoglu and Robinson's basic premise -- government and institutions can make a difference -- they try too hard to make this observation fit into the Anglo/ American model.
I wanted so bad to rate this book higher. It addresses an important topic: "How do we make societies that work for everyone?" And I was impressed with the level of detail they employed. But the problem I have is their conclusions.
Sure, institutions matter. But I doubt that Free Market Capitalism is the only way to get there. Witness the tight public/private integration in Japan. Or Germany, where all stakeholders -- shareholders, workers, local governments, environmental groups, etc., are given a seat at the table. And there is the example of a resurgent China. Will it continue prospering? Who knows? I suspect they will, at least based on their storied history.
Because of these weaknesses, I cannot give the book over three-stars. The book's topic is meaningful. And this is a necessary first salvo in addressing these questions seriously.
I recommend it to all policy wonks and social science fans.
When it comes to explaining why some nations are rich and others poor, you can hear a lot of theories, some possible, others crackpot. People love to point their fingers at geography or climate, at culture or religion (especially if it's not THEIR religion), or at pure ignorance. Other, more thoughtful theorists have developed extensive arguments for `modernization' or at least the need to tinker with existing institutions or to tolerate dictatorships which may lead to eventual reforms. The USA and other developed nations have spent untold billions since 1945 in trying to lift the nations of the so-called Third World out of poverty. Aid to countries where corrupt elites siphon it off or where organization is weak is mostly, if not completely, lost.
If you undertake to read WHY NATIONS FAIL you will get a very coherent argument as to why aid is often useless and why some nations fail while others get rich. Why did the Industrial Revolution take off in England first ? Why did Russia stagnate after 1970 ? What was the economic result of desegregation in the US South ? Why has Somalia fallen apart ? To follow the arguments you will have to remember a few (very few) terms that are used by the authors to put across their ideas. Two are "inclusive economic and political institutions" and "extractive economic and political institutions". That is, some political institutions include a large number of groups and a broad spectrum of people and some economic institutions work to raise the welfare of large numbers of people in a particular country. Others are run by a small, elite group in their own interests and only a small number (the same people) benefit. "Creative destruction" means that while technological progress may put some people out of business (think slide rule or carbon paper manufacturers), the new technology benefits an even wider section of the population, thus being `creative'. "Critical juncture" is their most jargonistic term, meaning a moment in history when things change and could go in several, different ways. Armed with these terms, you'll be able to read this most ably-written and interesting book. What I liked most about the book is its incredibly wide number of historical portraits drawn from all parts of the world, from the USA, Mexico, and Guatemala to Russia, China, Ethiopia, Somalia, Botswana and Sierra Leone, not forgetting Australia. This is only a partial listing of examples. The maps are also very useful. What I liked least about the book is that the authors hammer you with the same set of ideas over and over. I felt like shouting, "OK, OK, I get it !" The length could have been cut with that in mind. Whether or not Acemoglu and Robinson are totally correct, I can't say, not being so widely-versed in such theories. In some ways it feels a bit reductive. However, I guarantee that if you finish this book, you'll never look at foreign aid in the same way. You may wind up with a number of questions about US foreign policy too. And that's not bad.