Why nation fails: the origins of power,
prosperity, and poverty
Daron
Acernaglu and James A. Robinson
Publisher: profile books, London, the
UK(2012)
- Based historical and current affairs
- Good institutions build good environment
- centralised politics is bad:
- “ruled by a narrow elite that have organized society for their own benefit at the expense of the vast mass of people” =>lack of competitions
- “as institutions influence behaviour and incentives in real life, they forge the success of failure of nations”
- An institutional framework transform individual talent into a positive form.
- The political institutions ensured stability and continuity
- Geography hypothesis/culture hypothesis /ignorance hypothesis do not explain why poverty takes place.
- inclusive political institutions vs extractive institutions
good bad
(the distribution of political power in
society)
- Powerful groups often stand against economic progress and against the engines of prosperity.
- Inclusive economic institutions also pave the way for the other engines of prosperity: technology and education.
- Inclusive political institutions create sustainable growth.
- Some luck is key,because history always unfolds in a contingent way.
- Inclusive economic institutions that enforce property rights, create a level playing field, and encourage investments on new technologies and skills are more conclusive to economic growth then extractive economic institutions that are structured to extract resources from the many by the few and that fail to protect property rights or provide incentives for economic activity.
- Extractive political institutions: concentrate power in the hands of a few, who will then have incentives to maintain and develop extractive economic institutions for their benefit and use the resources they obtain to cement their hold on political power.
- Major institutional change, the requisite for major economic change, takes place as a result of the interaction between existing institutions and vertical junctures.
- Existing institutional differences among societies themselves are a result of past institutional changes.
- History is key, since it is historical processes that, via institutional drift, create the differences that may become consequential during critical junctures.
- 15th century was a key turning point
- The Europeans turned outwards
- The Chinese turned inwards
- It is hard to predict:
- Vicious and virtuous circles generate a lot of persistence and sluggishness.
- The vicious circles implies that changing institution is much harder than it first appears.
- Chinese growth example:
- A popular alternative to the “Washington consensus” for kick-starting economic growth in many less developed parts of the world.
- Inclusive: creative destruction
- Extractive:
- growth:
- adoption of existing technologies and rapid investment
- not sustainable
- Property rights are not entirely secure
- Chinese development is due to a radical shift away from extractive economic institutions. Such growth will reach the limit and force the institutions, especially political ones, to transform on a inclusive direction
- Cannot engineer prosperity:
- The failure of foreign aid: neither conditional nor unconditional aids work
- Since the development of inclusive economic and political institutions is key, using the existing flows of foreign aid at least in part to fertilitate such development would be useful.
- A free media and new communication technologies can help only at the margins, by providing information and coordinating the demands and actions of these lying for worse inclusive institution. Their help will translate into meaningful change only when a broad segment of society mobilise and organise in order to effect political change. And also as not far sectarian reasons or to take control of extractive institutions, but to transform extractive institutions into more inclusive ones.
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