A detailed book titled “Why Nations Fail?” presents an outlook on why some nations are wealthier than others and provides a solid explanation for global economic inequality. “Daron Acemoglu” and “James A. Robinson” authored the book during the period coinciding with Arab Springs. Acemoglu has contributed to the global economy by writing a number of papers, several of which he co-wrote with James A. Robinson and Simon Johnson. Robinson is a British economist and political scientist who has published widely on political and economic development, as well as the linkages between political power, institutions, and wealth. Through relevant examples from real-life situations, the book successfully explains the underlying causes of a state’s wealth or poverty.
This book “Why Nations Fail?” , divided into fifteen parts, begins with a contrast of European development to Egypt’s and other countries’ backwardness, such as Zimbabwe. According to the authors, despite several attempts to explain global disparity, the underlying cause of poverty is political and economic exploitation by the elites. We compare Nogales, Arizona, and Nogales, Sonora, with the former being part of the United States and the latter being part of Mexico. Because of the differences in the institutions that exist, the lifestyle and basic facilities for people in Nogales Arizona are many times better than in the other. The author contends that US institutions are more inclusive and provide incentives for development to their population. Mexican institutions, on the other hand, are extractive, and the concept of democracy is relatively new to them.
The author of “Why Nations Fail?” afterward discusses the historical distinctions between Latin America and North America. The Spanish colonized Latin America, the most suitable region for colonization, and exploited the native population to extract wealth and reduce their wages to subsistence levels. North America, on the other hand, was comparably less desirable due to a lack of resources and was “leftover” to England. Because of the differences in conditions, Europe adopted a different and later more inclusive structure in order to strengthen itself. Furthermore, have discussed the constitutional evolution of the United States. To accommodate divergent interests, the gradual process of development was based on various compromises and separation of powers. In contrast, the Mexican political class resisted such changes in order to consolidate their control, and they were hesitant to give up their own privileges, resulting in the state’s relative poverty.
The roots of European development lie in the Industrial Revolution, and these states positively adapted to technological developments. Politically inclusive institutions emerged before economic inclusiveness and incentives. These countries provided development incentives to their citizens. The author used the case study of Bill Gates to demonstrate how state institutions aided his success. While revolutions swept across Mexico and other Latin American countries, they always replaced extractive institutions with similar ones. Elites shaped the political and economic structures of such regimes, where the law varied for different sectors of society. The elites constantly resist reforms that have even the slightest risk of undermining their existing power and authority.
On the basis of solid arguments and examples, the author rejects various explanations, including geography and ignorant notions, as the cause of poverty in certain states in comparison to others.
The author of “Why Nations Fail?” is convinced that the economic demise of societies is not the product of a specific geography or political leaders’ ignorance. Instead, the elite is usually aware of the repercussions of their policies, but they continue to implement them in order to achieve short-term goals or gain political support. The distinction between South and North Korea has explained the repercussions of institutional differences. There is a significant difference between these two regions in terms of living standards, which are far higher in the south than in the north. This disparity stems from institutions in North Korea that exploit the populace in order to extract wealth and power, whereas situations in South Korea are diametrically opposed.
Several states, such as Russia after World War II, typically prospered for a period of time under extractive systems but then followed a backward trajectory. The author concludes that while these institutions may assist a state in achieving quick growth, this progress is never stable. The reason for this short-term development is that it is not dependent on technological advancements, which can trigger changes in the market economy. Because the displacement of human labor diminishes political support, the political class is frequently resistant to such change. Instead, traditional methods are typically employed, and innovation is restrained in order to preserve the monopoly of political and economic elites.
The author of “Why Nations Fail?” takes “historical perspective” into account in order to explain how history plays a role in the current situations of a particular state. Throughout history, the states have faced one or more critical junctures, defined as the turning points in history by the author. Now, the element that each state prospers or further becomes exploitative depends on how these states respond to such critical junctures.
The Industrial Revolution, preceded by the Black Death, was one such turning point in history. Europe responded to it positively which had already gone through a gradual political transformation while regions like Latin America further went through deterioration. The book concludes with the assertion that inclusive political institutions lead to inclusive economic institutions, which change a state’s fate and set it on a path of progress. States where a few elites retain a monopoly never become rich until such regimes are destroyed by a more politically and economically inclusive leadership.