Why Nations Fail by Daron Acemoglu and James A. Robinson has been laying miserably on my shelf for quite some time. I wasn’t sure I would enjoy it and more so being voluminous. It came with a jacket of praise because it appeared on Mark Zuckerberg 2015 reading list and that’s how it found its way in my hands. Having pursued Economics in my undergraduate, I could absolutely relate to it as soon as I raved about it, such an insightful and terrific book!
The main thesis is ultra-simple: there is a strong link between political/social institutions and the economic success or failure of a nation. Sustained prosperity arises where there is pluralistic government under the rule of law. To the extent a society approaches this structure, authors refer to it as ‘inclusive’ policies, it develops open economic institutions, where no elite can obstruct progress. These policies give a political voice to a large segment of the population rather than a small elite. As a result there’s a virtuous cycle which helps accelerate the tendencies towards inclusiveness and to suppress occasional lapses towards power grabbing. This is contrasted with ‘extractive’ economies, stultified by political elites who repress the creative destruction. A single person or a small elite, finds it in their personal interest to grab power and extract as many of the national resources for their personal gain.
Sadly for most developing countries there isn’t any political will to give absolute power, and allow inclusive political institutions to arise. These countries may depend on their natural resources to help support economies, buy loyalty, and keep their peoples under control, but these natural resources won’t last forever. One day, the chickens will come back home to roost.
It is an excellent book about the reasons why some nations are prosperous, while others are steeped in poverty. The book begins in Nogale, a city divided by fence along the border of Mexico and Arizona and ends 450 pages later in China with a story of a promising entrepreneur arrested for setting up a large steel plant that threatened the state owned companies. ‘Countries such as Great Britain and the United States became rich because their citizens overthrew the elites who controlled power and created a society where political rights were much more broadly distributed, where government was accountable and responsive to citizens, and where the great mass of people could take advantage of economic opportunities. ‘It further compares South Korea, which was poor ,and is now a regional master, to North Korea ,where the huddled skeletal masses pluck corn kernels from ordure to survive while Kim gorged on cognac.
The authors also refer to Schumpeter’s phrase ‘creative destruction’. This is when a new economic or technological phenomenon threatens to unseat or unravel the established economic order in order to create new one. If those who stand to lose from this new order are also in positions of influence and power, then naturally they will prevent it. Consider the reluctance of Habsburgs or the Russians to allow factory building or railroads or the Ottomans to allow printed books entirely. Not even going far, in Kenya we have leaders who opposed the use of bio metric technology and insisted on the manual methodology during our elections.
Take a look at this! Understand that you can’t engineer a successful society from the top to bottom. Inclusive political and economic institutions are mandatory. Humans, all of them, need to be represented before the state entities they comprise can be successful. Does that vividly explain why a recently released wealth report stated that ‘Some 8500 super wealthy individuals now control more than two thirds of Kenya’s SH6.2trillion economy revealing a widening gap between the rich and the poor.‘ Sadly for most developing countries there isn’t any political will to give absolute power, and allow inclusive political institutions to arise. These countries may depend on their natural resources to help support economies, buy loyalty, and keep their peoples under control, but these natural resources won’t last forever. One day, the chickens will come back home to roost. All is not lost, failing nations cannot reverse the course overnight, but it does offer hope. Brazil and South Africa have managed to break out of this loop, and make great strides towards maintaining a stable democracy and developing an increasingly prosperous economy.
A very thought provoking book on causes of poverty and wealth among nations and unique especially on unsustainable Chinese economic model. It is a must read for 3rd world countries and it has changed my view of History and Democracy. Anyone who writes such a book that explains everything sets himself up like an elk in a wolf pack, a model of clarity by comparison. If I was to rate it, I would give it four stars, long, detailed and not an easy read. All in all, worth my time.