Why Nations Fail

The book Why Nations Fail by Daron Acemoglu and James A Robinson (2012; Profile Books), offers an interesting theory for why nations fail, drawing on many examples over four centuries of civilization.

The book's main argument is that nations fail because of extractive political and economic institutions. The authors describe extractive political institutions as those that concentrate power in the hands of a narrow elite and place few constraints on the exercise of this power. They indicate that economic institutions are then often structured by this elite to extract resources from the rest of the society. Extractive economic institutions naturally accompany extractive political institutions and inherently depend on extractive political institutions for their survival.

Acemoglu and Robinson state that extractive institutions keep poor countries poor and prevent them from embarking on a path to economic growth. While the countries that have fallen prey to these institutions have very different histories, languages and cultures, they all share extractive institutions that have been designed by an elite in order to enrich themselves and perpetuate their power at the expense of the vast majority in society.

The authors contrast extractive institutions with pluralistic political systems, which are the ones that distribute power broadly in the society and subject it to constraints. Instead of being vested in a narrow group, political power rests with a broad coalition or a plurality of groups. So, inclusive economic institutions are those that allow and encourage participation by the great mass of people in economic activities that make the best use of their talents and skills, and that enable individuals to make the choices they wish.

Acemoglu and Robinson argue that inclusive institutions create avenues for innovation, economic expansion and more widely distributed wealth. It is clear from this book, however, that the authors (an MIT professor of economics and a Harvard professor of government) do not believe that inclusive economic institutions can survive under extractive political systems/institutions because these institutions reduce the benefits the ruling elite can enjoy from presiding over extractive political institutions.

Overall, it is a very thought-provoking book that provides some useful insights for us in Saint Lucia.

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