Book Review: Why Nations Fail

If one wants to read a different viewpoint on issues relating to gaps in development, prosperity and poverty between countries one should read the theory proposed by Political Scientist James A. Robinson & Economist Daron Acemoglu in their book Why Nations Fail: The Origins of Power, Prosperity and Poverty. The unique approach followed & the reasoning given through subtle examples instigate the reader's mind to see a different part of development debate that goes around today, a part that the reader sees through the eyes of an academician who has spent his time on research and analysis of innumerable cases from the past by which he developed a theory explaining the reason of differences in nations development statistics.

We often read in news wherein the global leaders both from rich and poor nations urge rich countries and corporate tycoons across the globe to lend/help the poor countries in terms of monetary aid in order to uplift the people from the shackles of extreme poverty. These people deserve a comfortable standard of living just as people in developed countries enjoy but vicious circle of corruption, poverty, lack of opportunities to develop have kept people in the poor countries on the lowest strata of the human species. Amid all the calls asking for aid for poor countries we have neglected to ask a few fundamental questions like, Why are these nations so poor? What is the reason that prosperity has eluded these nations since centuries? What is it that has happened in the past to these nations that they are nowhere in the race as compared to the developed nations of the world? Is it the past which haunts these nations or something in present is also contributing to the subdued growth of the poor nations?

There have been different theories which try to explain the reason for development difference between countries.These theories mainly differentiate nations on the basis of geographies, culture and the type of mindset of rulers of poor countries. All these pre-existing theories have been a constant topic of debate among the academicians.

The central basis of the books revolves around the idea that a country is operated under a system of political and economic institutions. The development of a nation is dependent on the fact that how good or bad the institutions of that nation are. To put the above in concrete terms the book emphasizes that the reason for underdevelopment of a country is the presence of extractive political and economic institutions. The word extractive means sucking out every possible penny of money that would go for the welfare of the citizens of the country. Who extracts this money? These are the people who govern the extractive political and economic institutions. These rulers/regulators are at the top of hierarchy in the institutional corruption and welfare of people doesn't figure out on their list. This extractive group is called the Elites.

Satellite image of South Korea and North Korea at night. Extractive institutions in
N. Korea have made life of people miserable in the country

One fact can't be ignored that for a country to be effectively governed the people of the country have to choose a leader or a group of leaders who will represent all the population. Self-rule is an option which is as good as anarchy. Effective management of a country is possible only when power is given in the hands of few. But what is needed is an absolute limit to the powers available to these fortunate few because without limits on power extractive tendencies will overcome the main motive of welfare of people. Filling up of personal coffers would take clear priority over giving the citizens basic necessities to live and flourish in such a scenario.

The book establishes strong linkages between extractive political institutions and extractive economic institutions. The reason for it is quite simple. Extractive political institutions are governed by elite rulers who aim to increase the tenure of their rule as long as possible and to mint as much money as possible at the expense of the poor. Corruption is widespread in these economies. So, if political institutions are corrupt in nature the leaders/elite will also try to control the economic institutions since these institutions are the ones through which money is channeled. Hence, extractive political and economic institutions co-exist.

The authors talk about the ways and means by which the countries can come out of the web of extractive rulers and institutions. It is presumed that corrupt regimes are there to stay forever but at the end of every tunnel their is light and in similar way corrupt regimes see their day end. In fact during 18th and 19th centuries almost all European countries were governed by highly extractive political and economic institutions but certain events forced these countries to shift to inclusive political institutions paving the way for inclusive economic institutions. These events are the critical junctures in the history of a nation. These critical junctures symbolize any event that changed the course of the country in terms of development and prosperity. Events like the Glorious Revolution and Industrial Revolution in Europe, independence of Bostwana, etc. are examples of critical junctures. Critical junctures are mainly responsible for change from extractive to inclusive institutions.

The interplay between inclusive and extractive/exclusive institutions

Why Nations Fail is full of elaborate case studies which try to attack the existing theories on developmental gaps between nations. Secondly, the case studies tell us about the effects that extractive and inclusive institutions have on the life of the people. Some examples very precisely show the change of a nation from extractive to inclusive institutions and the visible growth path once critical juncture is reached. Be it Mexico where extractive institutions have made the life of people miserable when compared with neighboring and prosperous USA or be it Bostwana where after the critical junctures of independence leaders thrived to bring in more inclusive institutions making the country an outlier in the third world countries, the book is full of examples from all corners of the world. The reader gets a fair idea about the existing income disparities between nations around the world. The content of the book is devoid of complex statistics as all the reasoning is based on past history and the governance of the country thus making it an ideal read even for layman.

Having a set of political and economic institutions whether extractive or inclusive isn't a natural concept but is dependent on the rulers and the people of the nation. For a nation to turn it's fortune the elite have to cede control and power and devote energies of all the institutions for the citizens for whom these institutions have been created. Only then the world can think of erasing disparities between the rich and poor nations. Rest assured, the book will fascinate you with case studies from past & present and allow you to correlate the development theory provided in the book with the institutions of your own country and community.