Why Nations Fail: The Origins of Power, Prosperity, and Poverty is a non-fiction
book by Turkish-American economist Daron Acemoglu from the Massachusetts
Institute of Technology and political scientist James A. Robinson from Harvard
University. The book applies insights from institutional economics,
development economics and economic history to answer why nations develop
differently, with some succeeding in the accumulation of power and prosperity,
while others fail. The authors also maintain a website about the themes of
the book. Structure
The book is structured into fifteen chapters:
0. Preface 1. So Close and Yet So Different - Why
Egyptians filled Tahrir Square to bring down Hosni Mubarak and what it means for
our understanding of the causes of prosperity and poverty
2. Theories That Don't Work - Poor countries are not poor because of their
geographies or cultures, or because their leaders do not know which policies
will enrich their citizens 3. The Making of Prosperity and Poverty
- How prosperity and poverty are determined by the incentives created by
institutions, and how politics determines what institutions a nation
has 4. Small Differences and Critical
Junctures: The Weight of History - How institutions change through political
conflict and how the past shapes the present
5. "I've Seen the Future, and It Works": Growth Under Extractive Institutions -
What Stalin, King Shyaam, the Neolithic Revolution, and the Maya city states had
in common and how this explains why China's current economic growth cannot
last 6. Drifting Apart - How institutions
evolve over time, often slowly drifting apart
7. The Turning Point - How a political revolution in 1688 changed institutions
in England and led to the Industrial Revolution
8. Not On Our Turf: Barriers to Development - Why the politically
powerful in many nations opposed the Industrial Revolution
9. Reversing Development - How European colonialism impoverished large parts of
the world 10. The Diffusion of Prosperity - How
some parts of the world took different paths to prosperity than Britain
11. The Virtuous Circle - How institutions that encourage prosperity
create positive feedback loops that prevent the efforts by elites to
undermine them 12. The Vicious Circle - How
institutions that create poverty generate negative feedback loops and
endure 13. Why Nations Fail Today -
Institutions, institutions, institutions 14. Breaking the Mold - How a few
countries changed their economic trajectory by changing their
institutions 15. Understanding Prosperity and Poverty
- How the world could have been different and how understanding this can
explain why most attempts to combat poverty have failed
Content In 15 chapters, Acemoglu and Robinson
try to examine which factors are responsible for the political and
economical success or failure of states. They argue that the existing
explanations about the emergence of prosperity and poverty, e.g. geography,
climate, culture, religion or economic policies, are either insufficient or
defective. They support their thesis by using countries as case studies, which
are similar in all the mentioned factors but still developed differently in term
of prosperity. The most incisive example is Korea, which was divided into North
and South Korea 60 years ago and both countries’ economies have developed
completely differently since then. Further examples are the border cities
Nogales and Nogales. By reference to border cities, the authors analyze the
impact of the institutional environment on the prosperity of people from the
same geographical area and same culture. The major thesis of Acemoglu and
Robinson is that economic prosperity depends above all on the inclusiveness
of economic and political institutions. Only a functioning democratic and
pluralistic state which guarantees the rule of law is able to exploit the ideas
and talents, which are spread among the whole population of a nation. In
extractive systems however, entrepreneurs and citizens have no
incentives to invest in and work on innovations, which are necessary to
create prosperity, because the ruling elites are afraid of creative
destruction. Creative destruction would fabricate new groups which competed for
power against ruling elites. Hence, elites would lose their exclusive access
to the economic and financial resources of a country. The authors bring in the
emergence of democratic pluralism in Great Britain after the Glorious
Revolution in 1688 as being decisive for the Industrial Revolution as an example
as well as the fall of the Soviet Union. Reception
= Interviews and presentations = Acemoglu was interviewed on the EconTalk
podcast by host Russ Roberts about the book in March 2012.
Robinson presented the main ideas of the book at the RSA.
= Positive reviews = Warren Bass reviewed the book for the
Washington Post, writing: "It’s bracing, garrulous, wildly ambitious and
ultimately hopeful. It may, in fact, be a bit of a masterpiece."
Development economist Paul Collier reviewed the book for The Guardian. He
concluded his review by writing: "A thesis can be summarised, albeit
crudely, in a short review. Yet the main strength of this book is beyond the
power of summary: it is packed, from beginning to end, with historical
vignettes that are both erudite and fascinating. As Jared Diamond says on
the cover: 'It will make you a spellbinder at parties.' But it will
also make you think." Thomas Friedman reviewed the book for
the New York Times, concluding his review by writing: "We can only be a
force multiplier. Where you have grass-roots movements that want to build
inclusive institutions, we can enhance them. But we can’t create or substitute
for them. Worse, in Afghanistan and many Arab states, our policies have often
discouraged grass-roots from emerging by our siding with convenient strongmen. So
there’s nothing to multiply. If you multiply zero by 100, you still get
zero. [...] Acemoglu worries that our huge growth in economic inequality is
undermining the inclusiveness of America’s institutions, too. [...] When
one person can write a check to finance your whole campaign, how inclusive will
you be as an elected official to listen to competing voices?"
Peter Forbes reviewed the book for The Independent, writing: "This book, by two
US economists, comes garlanded with praise by its obvious forebears – Jared
Diamond, Ian Morris, Niall Ferguson, Charles C. Mann – and succeeds in making
great sense of the history of the modern era, from the voyages of discovery to
the present day." = Mixed and negative reviews =
The negative reviews of the book focused on the following lines of criticism:
The authors didn’t present more rigorous, statistics-based evidence to
support their theories. This critique appeared in a mixed review of the book
by William Easterly in the Wall Street Journal, that was generally supportive
of the plausibility of the book's thesis but critiqued the book's failure to cite
evidence to show that their historical case studies demonstrated their claims,
even though some evidence did exist in the scholarly literature.
The authors focused almost exclusively on institutions as an explanation, and
even within institutions, they focused on a relatively narrow subtype. Jared
Diamond wrote that "In their narrow focus on inclusive institutions,
however, the authors ignore or dismiss other factors. I mentioned earlier the
effects of an area’s being landlocked or of environmental damage, factors that
they don’t 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. Diamond's
review was excerpted by economist Tyler Cowen on Marginal Revolution.
Jeffrey Sachs objects that other factors that can also affect growth are ignored.
David R. Henderson wrote a generally positive review in Regulation, but
included the criticism that the authors failed to consider one example of
extractive institutions: "A government of elitists that, claiming to speak for
the large less-wealthy majority, extracts wealth from a small wealthy
minority." A professional Book Review in charge of
Maximiliano E Korstanje exerts a radical criticism on Why Nations Fail. Far from
being objective, the argument of this book is ethnocentric. Authors fail to
recognize that there are many other nations that are free to choose to live
in another way; there is no imperative stating that all nations should be
democratic in order to enjoy the “benefits” of modern life and a
capitalist economy. Indeed, paradoxically, envisaging democracy as a
“universal value” is a betrayal to the self determination of others the very
cornerstone of democracy itself. By defining a nation’s success as a
function of its degree of wealth or per capita income, corresponds directly to
an “ethnocentric” mechanism within the discipline, aimed at creating a need in
non-Western societies, namely, the “need” to be “developed” and “modern”.
There is no genuine attempt to discuss critically the role of international
financial corporations as World Bank in issuing an unlimited number of loans to
the world. Lastly, Acemoglu and Robinson are not treating the problem of
inequality with accuracy and detail. The GINI coefficient list shows how some
Latin American countries as Uruguay are more egalitarian than United States.
In a blog post primarily devoted to Paul Collier's book Exodus, Nathan Smith
built on some of the preceding critiques and added a further criticism: "A naïve
view of the beneficence of democracy has long since been ripped apart by public
choice economics, yet Acemoglu and Robinson revive it in the crudest form.
People good, elites bad. [...] Honest empirical work on the democracy =>
growth causal link suggests that the effect is basically nil. But Acemoglu
and Robinson's tendentiously fact-packed and conceptually confusing tome has
given development economists a pretext for taking a more politically correct
view." The critique was publicized by economist Bryan Caplan on EconLog, who
begged readers for their own thoughts on Smith's assessment.
Awards and honours 2012 Paddy Power And Total Politics
Political Book Award 2012 Financial Times and Goldman Sachs
Business Book of the Year Award, Shortlist
2013 Lionel Gelber Prize, Longlist 2013 Arthur Ross Book Award, Honorable
Mention Related work by others
The Wealth of Nations by Adam Smith Guns, Germs, and Steel by Jared Diamond
Collapse: How Societies Choose to Fail or Succeed also by Jared Diamond
The Elusive Quest for Growth by William Easterly
The Wealth and Poverty of Nations by David Landes
IQ and the Wealth of Nations by Richard Lynn and Tatu Vanhanen
Violence and Social Orders by Douglass North, John Wallis, and Barry Weingast
The Modern World-System, vols. 1-4 by Immanuel Wallerstein
The God of the Machine by Isabel Paterson
References