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)
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.
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.
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.
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.
'Inclusive political institutions" is a phrase we are already beginning to hear from analysts in the media. We will hear it more. This work manages to weave a historical analysis of major and minor nations into a coherent explanation of economic success and failure. It might just lend new insight into our problems here and now. It has changed my own opinion in important ways.
What struck me was that this book seemed balanced. No doubt many will say that the author has some kind of agenda but I did not get that impression. Yes he is a commited capitalist with liberatian views, but he kept them checked. This is a fresh look at why nations fail, recommended.
Dispelled so many conventional theories about why certain peoples live in national failure and poverty while others enjoy freedom and the luxury of goods and services. Their explanations of the nuances that create these differences are founded in extensive and responsible research.
Civilization by Niall Ferguson.
The comparisons and contrasts on North and South America, and what led to these differences, is original work. They do the same to certain areas of Africa with amazing insight.
It is a very long book, but it didn't feel so. Every morning, I was eager to get out of the bed and traffic jam didn't annoy me at all until I finished listening to the book.
This book confirms my believe that success or failure of nations and organisations has nothing to do with geography. It has to do with the systems that you setup.
I think the title is more negative than the book itself. In trying to explain failure of nations, it provides so many positive examples of nations that have succeeded.I think the most appropriate title is:Why Nations Fail or Succeed.
It focuses mainly on nations, but I find the lessons applicable to businesses as well. The challenge for me as an entrepreneur is to setup businesses that are not "extractive" in nature.
I have to come back to the details and cases that the book provides. It provides an extraordinary historical review and proving cases.
I do not think that the book can be compared to any other I have read in this area.
A simple and straightforward historical review and success/failure that can describe nations success.
This book should be an amazing documentary which should be mandatory of viewing by each US Senator and Representative to understand how their decision making can impact the future of our country.
I would recommend the book, but not as an audio book. Why is it that readers assume we want a book read like a bad PBS skit just because it is a history book? Why nations fail is a well researched, interesting piece of work. Dan Woren reads it like a Mass in Latin, boring, monotone, painful. Please, please, please, find someone to read it that will not put me to sleep while I drive!
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