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 - with no end in sight. The differences between the Koreas is due to the politics that created these completely different institutional trajectories.
Based on 15 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:
Why Nations Fail will change the way you look at—and understand—the world.
©2012 Daron Acemoglu (P)2012 Random House
"Why Nations Fail is 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, co-author 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 best sellers 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)
mostly nonfiction listener
I read Why Nations Fail this month while traveling in South Korea. The book was much on my mind as I looked across the DMZ at North Korea on the 38th parallel. South Korea, a country of about 50 million people, enjoys a per capital PPP (purchasing power parity) GDP of around $32,000. (The U.S. is $48,000 by comparison - wealthier but also with a less equally distributed income). In North Korea, the GDP per capita (PPP) is $2,400 - an incredibly low numbers that still probably understates how desperately poor (and hungry) are the people of North Korea.
Why should North Korea be so poor, and South Korea so rich?
The two countries share common cultural roots, geography, and access to natural resources. This is the question Acemoglu and Robinson attempt to answer in Why Nations Fail. They look at examples such as North Korea, as well as other natural experiments of societies that share similar exogenous traits (resources, climate, etc.) - such as the twin Nogales's in Mexico and Arizona.
Acemoglu and Robinson's explanation as to why some nations are poor and others rich has everything to do with the elites. Poor nations are poor because the people who run these countries have made their subjects destitute in service of enriching themselves.
North Korea can best be understood as being run by a criminal family. Mexico is so much poorer than the U.S. because of its history of being run by elites whose main goal was to extract wealth, and who did not need to redistribute economic production as for most of its history the country lacked pluralistic institutions that could check the power of the rulers.
This argument, that some countries are poor because the powerful keep them poor, stands in direct opposition to the arguments that Jared Diamond makes in Guns, Germs and Steel. Diamond believes that the wealth distribution was largely pre-determined by immunity to disease (or lack thereof), access to domesticable livestock, and the raw materials and technologies to make advanced weapons.
I am a huge fan of Diamond's writing, but Why Nations Fail has me thoroughly convinced that more deterministic view of development (as put forward by Diamond and others) is problematic. Why Nations Fail should definitely be on the syllabus in any economic history or development course, and on the bookshelf (physical or virtual) of anyone interested in global inequality, poverty, and why some nations are so much richer than others.
Should you invest the time to read Why Nations Fail? The book is 544 pages, or almost 18 hours by audiobook (my reading choice). Acemoglu and Robinson would have benefited from a strong-willed editor, one who was willing to push them to provide less historical detail (the book has a ton from around the world across numerous societies), and more analysis of the implications of their arguments for countries like China and India.
I came away from Why Nations Fail thinking that if the argument is correct then China's long-term economic prospects might not be as good as we assume, and India's may be better. But having spent time time in South Korea, which developed so rapidly at least partly under a repressive military regime, it is hard to square this conclusion with the recent facts of some of our fastest developing countries.
Perhaps Acemoglu and Robinson next book will take outliers and implications, building on top of the theoretical foundations for development and inequality laid out in Why Nations Fail.
Gen-Xer, software engineer, and lifelong avid reader. Soft spots for sci-fi, fantasy, and history, but I'll read anything good.
Acemoglu and Robinson’s central thesis isn’t hard to understand: countries with inclusive, equitable political and economic institutions tend to prosper, while those with extractive, exclusive institutions geared towards the interests of a small elite tend to languish. The authors minimize geography and culture as significant factors in the equation, pointing to nations where those realities are similar but political systems vary.
The dynamic exists, the authors maintain, because the interests of an exploitative elite and those of regular citizens are usually in conflict, so the elite must actively block democratic movements, workers rights, unions, property rights, innovation, etc. in order to maintain a hold on power. In more inclusive systems, meanwhile, there is a virtuous circle effect, in which opportunity breeds motivation and meaningful choice, while making it hard for anyone to consolidate too much power over others.
It’s a strikingly simple hypothesis -- a little too simple, I think -- but the authors back it up with a wide set of historical cases, ranging from post-Renaissance Europe, to the colonial Americas (noting the different approaches taken by English and Spanish settlers in controlling their territories), to post 17th century Britain, to the United States (monopolies and trusts are discussed), to the Arab world, to the Soviet Union, to modern Africa, to North versus South Korea. Even if you more or less accept the book’s ideas, the details are still informative. If you’re not familiar with the political differences between imperial Spain and England, they cast quite a bit of light on the separate paths taken by the two former world powers -- and their former colonial possessions. Similarly, you don’t appreciate what apartheid meant for South Africa until you’ve contemplated just how the system was structured to impede blacks from becoming more than cheap sources of labor. As was a problem in the US, too.
The examinations seemed politically balanced. Communist governments taking a drubbing, and the authors argue that China’s rapid growth as orchestrated by Bejiing is unlikely to be sustainable unless the Party relinquishes more of its grip. But Acemoglu and Robinson also pay attention to how capitalist monopolies undermine democratic ideals, as do weak or corrupt central governments that lack the power to enforce laws and protect individual rights.
The book has its blind spots, though. I simply don’t agree with the authors that geography doesn’t matter. Most wealthy countries, it seems to me, have inclusive systems, but were also blessed in resources, either obtained locally, or extracted from some other region. It’s easy, for example, to see a country like the Netherlands as owing its prosperity to being a liberal democracy, but that’s not the whole story. The Netherlands got started on a path to prosperity because it set up exploitative trading companies during the colonial era and eventually reallocated the wealth into new ventures. I also think that geopolitics is underrepresented as a factor. South Korea and Israel might be successful countries in spite of tough landscapes, but both enjoyed massive military and economic support from the United States, enabling technological economies to flourish. It’s not that a country like Zimbabwe has no chance of becoming a technology center, but it would have to find a way to produce skilled workers who can compete in the global economy, without being tempted to emigrate.
All in all, the ideas that Acemoglu and Robinson promote are important foundational ones, but should be considered with their blind spots taken into account. Readers interested in history for its own sake might enjoy the case studies; if not, the themes are pretty repetitive.
Family father, neuroscientist, and non-fiction addict.
The central tenet of this book is simple. Nations fail when they have extractive institutions and nations prosper when they have inclusive institutions. An extractive institution ‘preys’ on people so that they have no personal incentive to be productive. Power sits with a few or a group of individuals who typically don’t want to share the spoils and suppresses innovation for fear of “creative destruction”.Inclusive institutions, on the other hand is one in which you can build your own reputation, where power is shared and where you can pick the fruits from the tree that you planted (metaphorically speaking).
Acemoglu begins with a portrayal of the city Nogales, located on the Rio Grande. Until 1918 Nogales was one city, with one history, one climate, shared institutions and so on. However, since the city was split into two, the Mexican and the American part of the city have had very different trajectories. Today the GNP per capita in the American part of Nogales is almost twice of that in the Mexican part. More children go through education, life expectancy is higher etcetera etcetera. According to Acemoglu, the cause of this divergence is the difference between the institutions on either side of the border. In Mexico setting up a business you had to get past a lot of bureaucracy and corruption and one could never count on property rights being respected. On the American side on the other hand institutions would help people start a business. Through positive feedback (or the virtuous circle), what was initially a small difference grew larger and larger and eventually grew into the difference we see today.
The same type of differences can be seen on a global scale where countries with extractive institutions, because innovation have been discouraged, are much much poorer than nations where innovation has been encouraged and rewarded. The most significant point in history was probably the industrial revolution. Those countries, such as the UK, that adopted the new methods eventually became prosperous, whereas the countries that saw the revolution more as a threat did not fare so well.
Is the author’s analysis correct? Acemoglu provides many examples to support his thesis, including analysis of the Soviet Union, China, Botswana, South America and the middle east, to mention a few (it is because of all these case studies that the book is so long). However, when it comes to historical analysis such as this, I believe there is always a significant risk of confirmation bias. As Acemoglu notes, some nations with extractive institutions have and do experience significant economic growth. Take for example the soviet union which, for a while, did quite well. Today we have China which Acemoglu also consider to be extractive because most businesses are owned by the state. The author explains that extractive institutions and nations can generate a limited amount of growth but that unless they become inclusive and innovation friendly that growth will wane. He therefore makes the bold prediction that China’s growth, like the soviet union’s, will cease when living standards reach a reasonable level.
I think there is little doubt that inclusive institutions are better than extractive ones and politicians should certainly strive to make the entire world more inclusive. In this the book is quite convincing. Whether Acemoglu’s more controversial conclusions that China’s growth will stop unless they become more inclusive or that foreign aid to countries with extractive institutions will mainly benefit the parasites already in power, are true remains to be seen. Overall this is a good book and the reader will get a comprehensive analysis of history and the implications of various political movements. For me however, the book was a bit too long (like this review maybe), and I experienced a loss of focus in the middle of the book because it felt like just more of the same. I would have given the book 4 stars if it had been a bit more condensed and less repetitive. Then again, other readers might like this.
I am absolutely shocked at the positive reviews this book has gotten, both from people on this site and from professional economists. At its core, this book is nothing but a hodgepodge of just-so stories: every nation that succeeds had something right in its institutions, and every one that failed had something wrong. While there's undoubtedly some truth to this, the authors give very little criteria for determining just what good institutions are, or advice for how they can be fostered. Oftentimes, when economists invade and colonize other disciplines, great things can happen (think education theory); but in this case it's clear to me that two economists (not even economic historians) tried to take on what is really straight-up history, and did a rather terrible job of it. (What on Earth is the story of Pocahontus doing in this book? And the part on the ancient Maya is a joke.) Again, I think there's undoubtedly some truth to the broad *institutionalist* school of development theory. But (one of) the big criticism(s) of the institutionalists is that it's all buzz words, and when things go right credit good institutions, and when things go wrong they blame bad institutions, and they have no concrete understanding of what elements of a nation's institutions matter, or advice for what to do to improve things. A&R do nothing to dispel these criticisms.
Alternative books that cover some of the same ground: If you're interested in development, I recommend "Poor Economics". If you want *big history*, I recommend "Why the West Rules for Now". If you just want cool stories about the colonial period, which is a lot of what A&R spend their 18-hour book on, check out Landes' "The Wealth and Poverty of Nations", strangely not available in audio. I'd like to recommend something on the institutions v. geography, etc. debates that have eaten up development economics, but honestly I don't think there's a good intellectual history out there, and this is definitely not it. I'd say William Easterly ("White Man's Burden") does a little better job at making the thesis relevant, but I'm not a huge fan of him either. And I can't really recommend anyone actually read Jeffrey Sachs. The first chapter in "Poor Economics" goes over things a little.
Book repeats itself again & again. Authors need an editor to trim all that verbiage & trash those unnecessary sentences. A reader's digest condensed version should make this book readable.
Learn to write more pithily.
Came highly recommended but quite disappointing. Beats each point to death. Redundant reiteration of summary point to ad nauseam.
No wonder this book is recommended by the US State Department to prospective foreign service officers
Detailed examples that are simple to follow. Great comparison on competing theories.
Good job of referencing prior examples and themes to put all into context. It's a lot of material and nice to have reminders of the key theories that were introduced several chapters back.
i live in Argentina, ij one of the extractive economies the authors mention in the book. Thus, I have actually recommended it to my friends a hundred times over.
'Why nations fail' is one of the best books I read so far, in terms of the compelling arguments and astonishingly simple reasoning to explain the inequality that persists in the world today.
Almost all the economies in the world in the context of their political institutions and polices are presented in a chronological order starting from as much as BC. The insights presented are thought provoking, eccentric and highly exemplified with historic events dotted along the course of time.
Must read book for anyone who likes to know why certain countries like USA, South Korea, Japan, UK etc., are rich while others are not. The reason for it is rather simple and obvious at a second look.
At the top of the non-fiction genre.
This theory, along with those of Diamond and others who look at the end of various nations, go far to explain why an inclusive economy -- one that works for the vast majority -- is the best for preserving a nation over the long haul. I always thought law and order came first in growing a nation's economy, but Acemoglu & Robinson site security of private property as the basic incentive for personal productivity. If you have a stake in how your property is used for income, you have incentive to preserve it for your children. I think this means over paying CEOs and under paying the producers of product/service is bad for the overall economy. Diamond sites environmental devastation as the major downfall of nations. I see environmental abuse as just another way the CEOs and huge companies take value from the system and leave devastation in their wake. These companies look for huge profit now for a small group of top executives and investors instead of long-term economic growth and sustainability for all the employees and their families. If America’s economy fails, it will be on the backs of the leaders of huge corporations and of the political leaders who enabled them.
Authors lay out many examples of what keeps a country from moving up the economic ladder. The examples are well described, from older to more recent periods, and from near and far. A few key themes that helps the reader better understand what drives short term vs. continuous growth. Solid narration too.
"History made science"
Breathtaking sweep across time and geography, flying along on the coat-tails of a theory that is so intuitively acceptable that it almost makes you say 'duh'. A society's institutions, extractive (bad) or inclusive (good) explain the wealth of the society and the health and happiness of the common man (and, if you are really lucky, woman). I hated history at school because it didn't explain: just one damn thing after another. This does, right up to the end where they use their theory to predict the future success of current societies. It explains why 'state building' (e.g. in Afgahanistan) is such a challenge. The UK (a pioneer in modern state building) got properly started on the process in 1215, brought in universal education in about 1890 and gave women the vote in 1928. Mind expanding book.
"Brillianr explanation of the World we see today!"
Why Nations Fail is one of the most thought provoking books I've ever listened to.
This book explains in detail the reasons why we see the world as it is today. British, and in particular English creativity and entrepreneurism are at the heart of the story and describes how the actions of those people who wrestled power away from English elite society in the 17th century changed the face of the world for ever.
Well worth a read if you want to know why the USA succeeded to become the most powerful country in the world and didn't end up as just another failed state.
"Interesting only as a history book"
Interesting only as a history book. The assumptions of the writers are in most cases based on an one sided interpretation of historical events and they are missing some very obvious points.
"Repetitive, but interesting."
As has been said - repetitively - by other reviewers, this is a very repetitive book. And not just thematically. If you removed the words "inclusive", "extractive", "institutions", "glorious revolution of 1688" and ”creative destruction" the book would be about 9 hours shorter. It's still quite interesting (especially when they zoom in on specific histories, like with Botswana, Uzbekistan and Brazil, about which I knew nothing) and I kept going to the end, but the Grand Theory being espoused doesn't seem all that remarkable, unfortunately. (It can be summarised as: If your public institutions are strong enough to stop the gangsters from getting in charge, you're probably going to be okay, if not, you're screwed.) So, not bad, but not brilliant either. (Did I mention it's repetitive?")
the authors repeat the same argument over and over, stretching vast amounts of historical examples to fit it's frame.
The reflexion is weak and unconvincing, thus the authors resort to an aggressive and patronizing rhetoric to dismiss other theories regarding the disparity between nations. They seem particularly threatened by Jared Diamonds Gun, Germ and Steal, and rightly so.
Although they would have us believe that we are responsible for our own misery or prosperity because of the institutions we live by, they then admit that there is no reason for one set of institutions to appear in one place rather than another, their explanation being a parallel between their theory and evolution, small institutional differences brought forward by crisis.
there is no proper causal description, at best a messy pile of historical examples correlated with economic development. Whatever argument worth mentioning could have been said in a few paragraphs
the fact that the authors are so pleased with themselves render the all experience rather unbearable.
"Brilliant! Revolutionise politics and economics"
Daron Acemoglu and James Robinson may well have done for political economy what Facastaro, Louis Pasteur and others who proposed and proved the germ theory did for medicine.
Before them there was confusion, after their work was accepted medicine made rapid progress in delivering real and effective treatments and winning the battle against disease.
Acemoglu and Robinson's theory of inclusive political institutions as being the key difference between the wealth and poverty of nations not only rings true, but their trip around the world repeating history through the lens of the theory makes a compelling case.
My main criticism is that the authors, like most academics (and politicians) went some way to critique the work of Jarred Diamond, David Lownes and others. My knowledge of the world is that whilst there are often dominant factors, there are seldom exclusive factors in explaining outcomes in complex systems. And whilst the theory is effective at explaining much of the variation in wealth in the modern world (e.g. Why the US is richer than Brazil) it does not explain everything (e.g. Why agriculture was discovered only once in Eurasia but twice and much later in Sub Saharan Africa, or even the difference between Canada and the USA). Just as germs don't cause every type of sickness.
Despite this it is an outstanding book, compelling read and must reading for politicians, economists, charities and others who shape national policy.
"Great companion to Diamond's work"
This is a fantastic contrast to Jared Diamond's work on the origins of poverty. This should be required reading for anyone interested in the real sources of inequality. There is a slight danger in the book where anything that happens which is not consistent with the overall thesis becomes a 'contingency' of history. That said, the arguments are convincing and beautifully told.
"Repetitive and unconvincing even if true"
Shorter and succinct.
Ardennes 1944 by Anthony Beevor
no change as it wouldn't improve things
Not that kind of book
"Repetitive, but interesting."
Annoyingly repetitive, but I'd still consider it a good read. The book discusses the factors that influence economic growth and compares a large amount of historical events and developments to understand and undermine its main hypothesis: inclusive institutions are key.
"Theory meh, history top notch."
While the idea that any other system than America's is doomed to failure is oddly presented rather than argued, the tour of world history is detailed and varied and very well presented.
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