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Why Nations Fail: The Origins of Power, Prosperity, and Poverty Paperback – September 17, 2013
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"Should be required reading for politicians and anyone concerned with economic development." —Jared Diamond, New York Review of Books
"...bracing, garrulous, wildly ambitious and ultimately hopeful. It may, in fact, be a bit of a masterpiece."—Washington Post
“For economics and political-science students, surely, but also for the general reader who will appreciate how gracefully the authors wear their erudition.”—Kirkus Reviews
“Provocative stuff; backed by lots of brain power.”—Library Journal
“This is an intellectually rich book that develops an important thesis with verve. It should be widely read.” —Financial Times
“A probing . . . look at the roots of political and economic success . . . large and ambitious new book.” —The Daily
“Why Nations Fail is a splendid piece of scholarship and a showcase of economic rigor.” —The Wall Street Journal
"Ranging from imperial Rome to modern Botswana, this book will change the way people think about the wealth and poverty of nations...as ambitious as Jared Diamond's Guns, Germs, and Steel."
“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.” —The Observer (UK)
"A brilliant book.” —Bloomberg (Jonathan Alter)
“Why Nations Fail is a wildly ambitious work that hopscotches through history and around the world to answer the very big question of why some countries get rich and others don’t.” —The New York Times (Chrystia Freeland)
"Why Nations Failis a truly awesome book. Acemoglu and Robinson tackle one of the most important problems in the social sciences—a question that has bedeviled leading thinkers for centuries—and offer an answer that is brilliant in its simplicity and power. A wonderfully readable mix of history, political science, and economics, this book will change the way we think about economic development. Why Nations Fail is a must-read book." —Steven Levitt, coauthor of Freakonomics
"You will have three reasons to love this book. It’s about national income differences within the modern world, perhaps the biggest problem facing the world today. It’s peppered with fascinating stories that will make you a spellbinder at cocktail parties—such as why Botswana is prospering and Sierra Leone isn’t. And it’s a great read. Like me, you may succumb to reading it in one go, and then you may come back to it again and again." —Jared Diamond, Pulitzer Prize–winning author of the bestsellers Guns, Germs, and Steel and Collapse
"A compelling and highly readable book. And [the] conclusion is a cheering one: the authoritarian ‘extractive’ institutions like the ones that drive growth in China today are bound to run out of steam. Without the inclusive institutions that first evolved in the West, sustainable growth is impossible, because only a truly free society can foster genuine innovation and the creative destruction that is its corollary." —Niall Ferguson, author of The Ascent of Money
"Some time ago a little-known Scottish philosopher wrote a book on what makes nations succeed and what makes them fail. The Wealth of Nations is still being read today. With the same perspicacity and with the same broad historical perspective, Daron Acemoglu and James Robinson have retackled this same question for our own times. Two centuries from now our great-great- . . . -great grandchildren will be, similarly, reading Why Nations Fail." —George Akerlof, Nobel laureate in economics, 2001
"Why Nations Fail is so good in so many ways that I despair of listing them all. It explains huge swathes of human history. It is equally at home in Asia, Africa and the Americas. It is fair to left and right and every flavor in between. It doesn’t pull punches but doesn’t insult just to gain attention. It illuminates the past as it gives us a new way to think about the present. It is that rare book in economics that convinces the reader that the authors want the best for ordinary people. It will provide scholars with years of argument and ordinary readers with years of did-you-know-that dinner conversation. It has some jokes, which are always welcome. It is an excellent book and should be purchased forthwith, so to encourage the authors to keep working." —Charles C. Mann, author of 1491 and 1493
“Imagine sitting around a table listening to Jared Diamond, Joseph Schumpeter, and James Madison reflect on over two thousand years of political and economic history. Imagine that they weave their ideas into a coherent theoretical framework based on limiting extraction, promoting creative destruction, and creating strong political institutions that share power and you begin to see the contribution of this brilliant and engagingly written book.” —Scott E. Page, University of Michigan and Santa Fre Institute
“This fascinating and readable book centers on the complex joint evolution of political and economic institutions, in good directions and bad. It strikes a delicate balance between the logic of political and economic behavior and the shifts in direction created by contingent historical events, large and small at ‘critical junctures.' Acemoglu and Robinson provide an enormous range of historical examples to show how such shifts can tilt toward favorable institutions, progressive innovation and economic success or toward repressive institutions and eventual decay or stagnation. Somehow they can generate both excitement and reflection.” —Robert Solow, Nobel Laureate in Economics, 1987
“It’s the politics, stupid! That is Acemoglu and Robinson’s simple yet compelling explanation for why so many countries fail to develop. From the absolutism of the Stuarts to the antebellum South, from Sierra Leone to Colombia, this magisterial work shows how powerful elites rig the rules to benefit themselves at the expense of the many. Charting a careful course between the pessimists and optimists, the authors demonstrate history and geography need not be destiny. But they also document how sensible economic ideas and policies often achieve little in the absence of fundamental political change.”—Dani Rodrik, Kennedy School of Government, Harvard University
“Two of the world’s best and most erudite economists turn to the hardest issue of all: why are some nations poor and others rich? Written with a deep knowledge of economics and political history, this is perhaps the most powerful statement made to date that ‘institutions matter.’ A provocative, instructive, yet thoroughly enthralling book.” —Joel Mokyr, Robert H. Strotz Professor of Arts and Sciences and Professor of Economics and History, Northwestern University
“A brilliant and uplifting book—yet also a deeply disturbing wake-up call. Acemoglu and Robinson lay out a convincing theory of almost everything to do with economic development. Countries rise when they put in place the right pro-growth political institutions and they fail—often spectacularly—when those institutions ossify or fail to adapt. Powerful people always and everywhere seek to grab complete control over government, undermining broader social progress for their own greed. Keep those people in check with effective democracy or watch your nation fail.” —Simon Johnson, co-author of 13 Bankers and professor at MIT Sloan
“This important and insightful book, packed with historical examples, makes the case that inclusive political institutions in support of inclusive economic institutions is key to sustained prosperity. The book reviews how some good regimes got launched and then had a virtuous spiral, while bad regimes remain in a vicious spiral. This is important analysis not to be missed.” —Peter Diamond, Nobel Laureate in Economics
“Acemoglu and Robinson have made an important contribution to the debate as to why similar-looking nations differ so greatly in their economic and political development. Through a broad multiplicity of historical examples, they show how institutional developments, sometimes based on very accidental circumstances, have had enormous consequences. The openness of a society, its willingness to permit creative destruction, and the rule of appear to be decisive for economic development.” —Kenneth Arrow, Professor Emeritus, Stanford University, Nobel Laureate in Economics, 1972
“Acemoglu and Robinson—two of the world's leading experts on development—reveal why it is not geography, disease, or culture which explains 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 Man and The Origins of Political Order
“Some time ago a little known Scottish philosopher wrote a book on what makes nations succeed and what makes them fail. The Wealth of Nations is still being read today. With the same perspicacity and with the same broad historical perspective, Daron Acemoglu and James Robinson have re-tackled this same question for our own times. Two centuries from now our great-great-…-great grandchildren will be, similarly, reading Why Nations Fail.” —George Akerlof, Nobel Laureate in Economics, 2001
“In this stunningly wide ranging book Acemoglu and Robinson ask a simple but vital question, why do some nations become rich and others remain poor? Their answer is also simple—because some polities develop more inclusive political institutions. What is remarkable about the book is the crispness and clarity of the writing, the elegance of the argument, and the remarkable richness of historical detail. This book is a must read at a moment where governments right across the western world must come up with the political will to deal with a debt crisis of unusual proportions.” —Steve Pincus, Bradford Durfee Professor of History and International and Area Studies, Yale University
“The authors convincingly show that countries escape poverty only when they have appropriate economic institutions, especially private property and competition. More originally, they argue countries are more likely to develop the right institutions when they have an open pluralistic political system with competition for political office, a widespread electorate, and openness to new political leaders. This intimate connection between political and economic institutions is the heart of their major contribution, and has resulted in a study of great vitality on one of the crucial questions in economics and political economy.” — Gary S. Becker, Nobel Laureate in Economics, 1992
“This not only a fascinating and interesting book: it is a really important one. The highly original research that Professors Acemoglu and Robinson have done, and continue to do, on how economic forces, politics and policy choices evolve together and constrain each other, and how institutions affect that evolution, is essential to understanding the successes and failures of societies and nations. And here, in this book, these insights come in a highly accessible, indeed riveting form. Those who pick this book up and start reading will have trouble putting it down.” ¯Michael Spence, Nobel Laureate in Economics, 2001
"In this delightfully readable romp through 400 years of history, two of the giants of contemporary social science bring us an inspiring and important message: it is freedom that makes the world rich. Let tyrants everywhere tremble!" —Ian Morris, Stanford University, author of Why the West Rules – For Now
“Acemoglu and Robinson pose the fundamental question concerning the development of the bottom billion. Their answers are profound, lucid, and convincing.” ―Paul Collier, Professor of Economics, Oxford University, and author of The Bottom Billion
About the Author
DARON ACEMOGLU is the Killian Professor of Economics at MIT. In 2005 he received the John Bates Clark Medal awarded to economists under forty judged to have made the most significant contribution to economic thought and knowledge.
JAMES A. ROBINSON, a political scientist and an economist, is the David Florence Professor of Government at Harvard University. A world-renowned expert on Latin America and Africa, he has worked in Botswana, Mauritius, Sierra Leone, and South Africa.
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However the book can be a bit of a maddening slog in order to find some enjoyable nuggets of information and/or wisdom. For sure, if one establishes a situation in which individuals have incentives to produce they will work harder. So, why is this concept not universally embraced, by corporations and countries? I once set up a “profit-sharing” program for workers in my company; it seemed to change attitudes, improved the operating efficiency and reduce waste. After I left, the owner immediately eliminated it, though he would pontificate on the needs for economic incentives for himself! His outlook was rigid: if he was “sharing” the profits with the workers, he was a loser, and the thought that he might have a slightly smaller percentage of a much bigger pie never entered his mind. The authors confirmed my personal experience time and time again, and expressed it in terms of “The Iron Law of Oligarchy.” An elite would be deposed by “revolutionary forces,” only to see those forces turn into a new elite who acted much the same as the old. Among others, the authors cite Ethiopia as an example, where “the Derg” deposed Haile Selassie in 1974, and within four years Mengistu was using the same throne Selassie did. The authors could also have cited George Orwell’s Animal Farm. I also found the authors description of how Venice turned into a “museum” to be one of their most concrete examples, in terms of identifying the steps taken by the elites to protect their interests, and eliminate the “profit sharing” with the masses. Likewise, as a counterpoint, there was a good description on how Botswana became the most prosperous country in sub-Sahara Africa.
For sure, I believe the “differential diagnosis” to be essential, and therefore comparisons of one historical situation to another can be most useful. But the authors seem to have taken this concept to the extreme, juxtaposing wildly disparate situations, and providing no “connective tissue.” For example, chapter 6 contained 10th-12th Century Venice, the Roman Empire, and Axum, in Ethiopia, without any meaningful comparisons. Over and over again the details of the history of a country were included, generally correctly, but for no apparent reason in terms of supporting their thesis. Thus, we are treated to a catalog of Napoleon’s military successes, the number of tons of gunpowder the British sold between 1750 and 1807, and Roosevelt’s efforts to pack the Supreme Court. And I dare say that if the redundancies were eliminated by a good editor, a hundred pages would be shaved off the book. For example, three times in 50 pages there is the same list of African countries that had descended into civil war; the Battle of Adowa is mentioned at least twice, and there is the relentless mantra of using “extractive” to mean anything bad that is occurring in a country, and “inclusive” for positive developments. There are also the outright errors of Bill Gates’ education (p.43) (Gates dropped out of Harvard in his freshman year), and the circulation of the French “Old Franc” until 1992 (p. 388).
And then there were the sins of omission. Several readily sprung to mind: all of Scandinavia, Singapore, Malaysia, Dubai, and Canada. Examination of these would have provided some useful counterpoints to one of the author’s concluding propositions: “You can’t engineer prosperity.” And where is the rise of “extractive” institutions in the United States over the past 30 years? Totally omitted. Reviewing the extensive bibliography/references was also instructive. There was Kapuscinski’s classic account of the fall of Haile Selassie, The Emperor: Downfall of an Autocrat but I was astonished to find missing Gunnar Myrdal’s equally classic inquiry into the poverty of nations Asian Drama, An Inquiry Into The Poverty OF Nations Volumes I, II and III (Volumes I, II and III)It is a rich book, which covers a vast swath of human history. But it lacks the “connective tissue” that supports the author’s thesis, and thus remains light-years away from any sort of “unified field theory” of development. 3-stars.
[Note: Originally posted on February 13, 2012 via the Vine program; reposted on August 18, 2017]
The authors begin by comparing life in Nogales, Arizona with life in Nogales, Sonora, which is only a few feet away across the Mexican border. Residents north of the border are healthier, live longer, have three times more household income, and enjoy much better government services, including law and order, with much less corruption than residents south of the border. Due to the proximity and shared background of the two cities, these striking differences cannot be explained by the usual references to geography, culture, ignorance, or the protestant work ethic. Instead, the cause is major differences of political and economic institutions between the US and Mexico. These differences have evolved because of the way the societies were formed in the early colonial period.
Spain’s and Portugal’s conquests of Mexico, Central America, and South America were complete. Hence, they were able to replace the already exploitative institutions of the indigenous peoples with similar noninclusive, extractive institutions of their own. The new European aristocracy established a system of absolutist rule with forced labor to extract the wealth and resources of indigenous peoples for themselves, Spain, and Portugal. Once established, this system persisted for centuries, including within many new countries formed after independence from Spain and Portugal. Infighting of elites over the spoils led to political instability with an endless succession of coups and dysfunctional governments. Dispossession and political exclusion of the general population led to slow economic growth from lack of incentives for innovation and entrepreneurship and from inability to counter the excesses of elites.
English colonization of the New World did not begin until after the defeat of the Spanish Armada in 1588 and hence was limited to the then less desirable portion that remained in North America. The English intended to establish exactly the same kind of noninclusive, extractive colonies as the Spanish and Portuguese. However, due to differing circumstances, their initial colony at Jamestown failed to subjugate the indigenous peoples, then failed to confiscate sufficient output from their own colonists. Consequently, the English were forced to introduce economic incentives and increased political participation to develop and retain more productive colonists. These changes persisted and evolved into the institutions of the US today that are much more inclusive and much less extractive than those of Latin America. It is the cumulative effects of these extractive institutions designed to take incomes and wealth from one subset of society to benefit a different subset that explain the differences in prosperity between Nogales, Arizona, and Nogales, Sonora. The authors then report that similar institutional factors in other countries and eras provide the best explanation for most differences in national prosperity for the rest of the world.
Alternative possible primary sources for differences in prosperity are discussed and dismissed. For geography and culture, this is done by comparing many adjacent regions with differing outcomes, such as Nogales, North and South Korea, West and East Germany, and adjacent sides of the Kasai River in the Congo. For religion, it is noted that recent Asian successes occurred without benefit of the Protestant work ethic and that Middle Eastern dysfunction is much more strongly related to successive extractive colonization by the Ottoman Empire and European powers than to the Islamic religion. For ignorance, it is noted that the leaders of underperforming countries are well aware of the problems of their extractive policies but choose them on purpose since they benefit at the expense of everyone else. Also, it is noted that many economists seem to favor the ignorance hypothesis because it implies more value for the advice they provide.
For much of world history, economic growth has been slow due to mostly noninclusive and extractive political and economic institutions, although with some variability. In ancient Rome, expansion and some economic growth occurred during the years of the Republic (510-28 B.C.) due to somewhat more inclusive (though still restrictive) political and economic institutions. Toward the end of the Republic and during the years of the Empire (28 B.C.-476 A.D), increasingly absolutist political rule, increased economic extraction by elites, markedly increased inequality, and eventually extreme political instability with endless civil wars resulted in complete collapse. In Medieval times, the Venetian Republic flourished from its onset in 810 A.D. due to relatively inclusive institutions and a favorable location for Mediterranean trade. However, the adoption of noninclusive institutions beginning in the 14th Century led to its decline to be the museum it is today. Many more historic examples are discussed.
Although noninclusive societies sometimes manage to achieve limited growth, it is usually unsustainable. The classic Maya civilization of 400-1200 A.D. (after the earlier 500 B.C.-100 A.D. cities) initially expanded due to centralized government and occupational specialization, but then declined due to political instability from elites fighting over the spoils of extraction. From 1928 to 1960, the Soviet Union achieved 6% annual growth of income by reallocating resources from agriculture to industry, but then declined and collapsed when this reallocation was complete. Thus, growth in extractive societies is unsustainable because technologic progress does not occur when most people in the economy lack the necessary incentives and security for innovation and the necessary political participation to limit extraction by elites. Indeed, political and economic elites who benefit
from the status quo often resist conditions that favor growth because they fear the creative destruction of a healthy economy.
World inequality dramatically increased with the British Industrial Revolution because only some parts of the world had the necessary inclusive institutions to adopt the spectacular changes of its innovations and new technology. These changes started in Briton and soon spread to Europe, the British “Settler Colonies” (US, Canada, Australia, and New Zealand), and Japan, then to South Korea, Taiwan, and China after World War II. They failed to spread to Sub-Saharan Africa, much of Latin America, the Middle East, and much of Asia due to the absence of favorable institutions. This failure was the legacy of centuries of institutions with absolutist political repression and economic extraction (including the slave trade), mostly from colonization by European countries, then from new countries’ own elites after independence in the 20th Century.
Absolutist rulers who feared economic change leading to political change actually blocked or delayed spread of the Industrial Revolution in the Ottoman Empire, Spain, Austria-Hungary, Russia, and China. Absolutism was not the only barrier to developing inclusive institutions. Some parts of the world, particularly in Africa, lacked a centralized state that could even provide the minimal law and order necessary for those institutions. European colonization even reversed some favorable institutional development, such as with the Portuguese and Dutch conquest of the Asian spice economy and with the expansion of the Atlantic slave trade for the sugar plantations and other colonies in the Americas.
The Industrial Revolution started and made its biggest strides in England because of her uniquely inclusive political and economic institutions. The emergence of constitutional rule and political pluralism made possible centralized government that could strengthen property rights, improve markets, undermine state-sanctioned monopolies, remove trade barriers, extend taxation to elites, and limit extraction by elites to increase incentives for innovators and entrepreneurs. Highlights in the evolution of this system included the Magna Carta of 1215, the Peasant’s Revolt of 1381, political centralization beginning after 1485 by the Tudors and continuing with the Glorious Revolution of 1688, the shift of authority from the monarch to Parliament after 1688, and subsequently numerous acts of Parliament that encouraged the countless innovations in textiles, other manufacturing, transportation, and trade occurring at the time.
Why did these inclusive changes vital to economic development occur first in England rather than somewhere else? According to the authors, the divergence of institutional characteristics between nations is largely the consequence of slow accumulation of small historical differences, the acts of individuals, or just random factors. This institutional drift is then amplified by critical junctures that lead to more rapid divergence, as in the following instances. The Black Death of 1346 led to labor shortages and land surpluses in Europe that ended feudalism in the West, where peasants had more bargaining power, but strengthened it in the East. The expansion of world trade after 1600 weakened the absolute rule of Elizabeth I of England who was unable to establish monopolies but strengthened it for the monarchs in France and Spain who were able to do so. The French Revolution led to inclusive institutions that converged with those of England in Western Europe but not in Eastern Europe.
Once established, these institutional differences are remarkably persistent due to virtuous and vicious cycles. They remain the core cause of inequality between and within nations today, although details vary from nation to nation. North Korea has one-party rule without elections, while Zimbabwe has one-party rule with the façade of elections. Argentina and Columbia have elections, but authority does not reach the periphery in Columbia. In Egypt and Uzbekistan elites took over extractive institutions of socialist governments and transformed them to crony capitalism. Centralized government is lacking in Somalia and Afghanistan because of failure to achieve it and in Haiti and Sierra Leone because of collapse of the state.
The solution to the economic and political failure of nations today is the difficult task of transforming extractive institutions toward inclusive ones. To do so, requires some degree of centralized order, some preexisting political inclusiveness, and transformative media, which are often attacked or captured by extractive regimes. Three examples of success are given. In Botswana, the chiefs seized the critical juncture of postcolonial independence to introduce inclusive institutions that achieved the highest per-capita income in sub-Saharan Africa at a level equal to that of Hungary. In the US South, replacement of the highly extractive institutions of slavery and Jim Crow in the 1960s contributed to the elimination of the 50% per-capita income gap between the South and the North. In China, the replacement by Deng Xiaoping of Mao’s extractive economic institutions in 1980 led to decades of rapid economic growth. However, questions remain about sustainability in China because this was said to be catch-up growth under noninclusive political institutions, rather than growth from innovation and creative destruction.
Multiple alternative solutions to reverse economic failures of nations are examined and rejected. The irresistible charm of authoritarian growth, such as in China, is rejected because China’s institutions are extractive, and its growth is said to be likely to end as soon as it reaches the level of a middle income country. The modernization theory that societies may pass through an authoritarian stage during rapid growth before becoming democratic as they mature is rejected because no authoritarian society has done so in the last one hundred years. The the prospect of engineering prosperity by providing the right advice is rejected because it fails to recognize the primary role of political institutions that undermine meaningful change. A primary role for foreign aid to extractive governments is rejected, since most of it is plundered and fails to reach its target.
I enjoyed reading this - it's a valuable take on development patterns and offers a wealth of interesting case studies. It's a bit long-winded and repetitive maybe but the enthusiastic approach to the topic softens that.
I felt it needs more work though. It does a good job of disproving the easy genetic ethnic theories of development, but really just ignores geographical geopolitical and cultural issues that may explain some of the divergence in how countries develop. There was a little too much unintentional cherry-picking of examples and I was sad that they seemed to overlook the importance of income distribution within societies (mean averages are used instead of medians) and the role of the modern media in leading or stifling change
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Level - Moderate, you'll need some basic familiarity with economics, politics, and history; Long (462 pages before acknowledgements, notes,...Read more