Daily Times

Daron Acemoglu is the Killian Professor of Economics at the Massachusetts Institute of Technology (MIT). In 2005, he received the John Bates Clark Medal, which is awarded to economists judged to have made the most significant contribution to economic thought and knowledge. James Robinson is a political scientist and an economist and is the David Florence Professor of Government at Harvard University. He is a world-renowned expert on Latin America and Africa. Their previous collaboration, Economic Origins of Dictatorship and Democracy, was an examination of factors that influence democracy to take root, persist, or collapse. Why Nations Fail, 15 years of original research, is a masterpiece that answers this pertinent question. In addition, it addresses the issue of why the nations are divided on the parameters of wealth and poverty, health and sickness and food and famine. Can it be culture, geography, weather, policies, or a mix of all these that shapes the destiny of a nation? More importantly, to make this world a better place to live, we need to dig deeper into the issue to first ascertain the factors that are responsible for the downfall of nations and then move forward to ensure that those mistakes are not repeated.

To illustrate their point that it is manmade political and economic institutions that cause economic success or otherwise, the authors have used diverse examples from world history. It goes from the Mayan city states of 250–900 CE, ancient Rome, the Tsars, the Bolshevik-governed USSR, the Qing dynasty, Mao’s rule in China, General Franco’s reign in Spain, the present day Botswana, through Venice, the Glorious Revolution of 1688, Latin America, the Soviet Union, Africa, and finally the Egyptian uprising filling Tahrir Square to bring down Hosni Mubarak’s government in 2011 owing to their erecting barriers by creating imbalances between prosperity and poverty. Through a careful analysis of successful and unsuccessful civilisations over the past three millennia, the book offers a thoughtful solution to one of the major conundrums of our times.

Poor countries are poor not because of their geographies or cultures. It has more to do with how prosperity and poverty are determined by the incentives created by institutions and how this politics determines what institutions a nation has. Institutionalised corruption and manipulation of the poor masses for gaining monetary dominance is one such factor that is pushing the people further down the dark alley of subjugation and misery. The writers investigate how the institutions change through political conflict and how the past shapes the present. As is said, “The past is always present.”

The politically powerful forces in many nations oppose revolutions to maintain the status quo; European colonialism for years impoverishing large parts of the world is one such example. Institutions evolve over time, one example being of a political revolution in 1688, which changed the shape of institutions in England, leading towards the Industrial Revolution. The institutions that encourage prosperity create a positive feedback loop. On the contrary, institutions that create poverty backed by the politics of the ruling elite generate negative feedback loops. The underdeveloped world is a prime example of this oppression and in many countries it is added to by the developed nations, having their own political and financial interests.

The book distinguishes between extractive (structured to extract resources from the many by the few) and inclusive (which creates a level playing field and encourages investments in new technologies and skills) political and economic institutions by establishing how the extractive institutions are fatally toxic. However, the assumption made by the authors that China is unlikely to generate sustained growth unless it moves toward inclusive political institutions does not sound convincing. Looking at the Chinese economic growth and its technological advances in almost every sphere of life, it has proved to be a major threat to the western world, which in many ways is making policies and efforts to stop these advances by Chinese companies.

Why Nations Fail changes the way we look at today’s world, where nations are seen failing because of their greedy and selfish leadership. It gives an insight into the few countries that changed their economic trajectory by changing their institutions. More importantly, it gives an insight into the ways the world we live in could have been different if we look at it from a different perspective, thus guiding us towards combating poverty. The book is full of provocative stuff backed by lots of brainpower.

The reviewer is a social activist and blogs at http://drirfanzafar.com. He can be reached at drirfanzafar@gmail.com