WHY NATIONS FAIL BY DARON ACEMOGLU AND JAMES A.ROBINSON

ABOUT THE BOOK

“Why Nations Fail” answers the question of why some countries are rich and why some countries are poor. It is about the huge differences between incomes and standards of living that separate rich countries from the poor.

He starts off with a comparison between 2 countries and talks about how the geographic location of any country is not the reason for its failure. Nogales, Arizona and Nogales, Sonora are a few feet away from each other. Yet Nogales, Sonora are not as successful as Nogales, Arizona. Nogales, Arizona has access to many services like medicare, education, electricity telephones, law and order etc. which the people of Sonora do not have access to.

He talks about various theories put forward by many scholars like the geography hypothesis, culture hypothesis and ignorance hypothesis. Poor countries are not poor because of their location or climate, culture or because their leaders don’t know what are the right policies. Poor countries are poor only because of their institutions.

Countries differ in economic prosperity because of different institutions; the rules that influence the working of an economy and incentives for people. He talks about the differences between North Korea and South Korea. He the highlights the significance of extractive and inclusive economic institutions. An inclusive economic institution is one that is more centralized and pluralistic, whereas, an extractive economic institution is more narrow and absolute. To grow and develop a state needs to be inclusive which means it must be chosen by the citizens and should work for their benefit. He talks about how education is one of the most crucial engine of prosperity which promotes innovation and technological advancements.

The authors then talk about a vicious circle that starts off with extractive institutions that are established by colonial power, which, on leaving becomes more extractive under corrupt post-colonial rulers. This in turn leads to a civil war for control over these institutions and hence chaos. The most common reason why nations fail today is because of extractive institutions. The authors use the example of Zimbabwe to explain the consequences of extractive institutions. These institutions fail to create incentives to save, invest and innovate which leads to the failure of nations. The only solution to this is to transform to inclusive institutions. The authors use 3 case studies to explain how this has helped in economic development – Botswana, The South of America and China.

The authors end the book by justifying the power of their theory. Countries like America and Europe are likely to get more richer whereas countries like Somalia and Afghanistan are unlikely to witness any development.

MY THOUGHTS ON THE BOOK

According to me the author does make some relevant statements about why nations fail. The geographic location of a country doesn’t explain why it is poor, neither the culture nor ignorance. The book clearly recognizes how extractive and inclusive economic institutions lead to the failure or growth of countries respectively. It outlines the legacy of extractive institutions in various countries and how it has all lead to disasters. I do think, to some extent, that nations need to become more inclusive to grow and develop. They need to provide the citizens with better services, especially education, to promote economic growth. However it is not always that countries who transform to an inclusive institutions achieve success. India has been an inclusive institution for years and are still way behind. Also, it is more of a general overview and not purely economic; as such there can be many variations to their ideas. The book also goes way back in time and does not apply to the current world scenarios. Other than that, the book was fascinating and it has a lot of case studies about the history of various countries. It contains a lot of visuals that also aid the reader in better understanding.