In Why Nations Fail, authors Daron Acemoglu and James A. Robinson, who recently received the Nobel Prize in economics, explore the root causes behind global inequalities in wealth and development of countries. Through a comparative analysis of divided regions such as Nogales on the US-Mexico border and the two Koreas, to refute arguments that culture, geography, or ignorance determine the prosperity of nations. Their central point lies in the institutions.
The book expands on the idea that there are two types of institutions: inclusive and extractive. Inclusive institutions promote prosperity by empowering citizens to participate in economic activities. Extractive institutions, on the other hand, concentrate power and wealth in the hands of a few, leading to society’s stagnation.
One interesting theme is the role of historical events in shaping those institutions, the impact of political and economic institutions on a nation’s development, and the concept of critical junctures, where some critical moments of history play an important role in how a particular region might change. Examples like the Magna Carta and the Industrial Revolution illustrate the role of increasingly inclusive institutions in nurturing the environment for prosperity. Most pages of the book reference examples across the globe to either corroborate or refute the book’s central thesis.
While Why Nations Fail offers many examples to support its argument, I think it downplays a little the influence of geography, as others have pointed out. I won’t argue why I think that’s the case because I’m not an expert on economics. Still, after reading Prisoners of Geography and The Power of Geography, both by Tim Marshall, it’s clear that location and the scarcity or availability of natural resources determine how institutions are shaped.
All in all, the book remains a great read. While a more profound analysis with more data could improve the book’s arguments, I recognize that the authors have more deeply addressed these topics in their academic writings. The book serves as an accessible introduction that allows a broader audience, including myself, to engage with and reflect on the examples presented. I highly recommend it to anyone eager to understand how institutions can explain, to some extent, the inequality we see in our world.
