Why Nations Fail takes an in depth look into why some countries flourish and become rich powerful nations while other countries are left in or reduced to poverty. Throughout this book review I will discuss major arguments and theories used by the authors and how they directly impact international development, keeping in mind that nations are only as strong as their political and economical systems.
Extractive institutions are used throughout this book to explain that the upper class extracts resources and goods from the lower class. They don’t allow growth or competition, but rather they just exploit the rest of society into doing their labour. It’s used to please a few, rather than the majority, and can still be seen in most places in the world. Whereas, inclusive institutions are the ideal way nations should be run, allowing for fair economical systems, property ownership, educational facilities and allowing all citizens to participate in the growth of the economy. Acemoglu and Robinson argue that this is the main factor in distinguishing the rich countries from the poor and, moreover, how they treat their citizens. This system is relatively used in North America and Western Europe.
"The richly divergent patterns of economic development around the world hinge on the interplay of critical junctures and institutional drift. Existing political and economic institutions - sometimes shaped by a long process of institutional drift and sometimes resulting from divergent responses to prior critical junctures-create the anvil upon which future change will be forged."(109-110) Institutional drift is introduced as an instrument to further explain institutional evolution; used to explain the process of economical change.
Growth can be brought out with extractive institutions and differs from growth with inclusive institutions. "Extractive institutions are so common in history because they have a powerful logic” (149). There are many different elements that come with extractive institutions; there exist people that do work and help the society in some way.
The essence of institutional drift is a key factor of the 6th chapter. Countries such as Venice and Ancient Rome are used to describe why so many nations fail, due of the extractiveness of their governments. There was a short time when these countries had an inclusive system that was working and helping them grow. But the elite became greedy and power hungry, which set them on a downward hill to failure. Whereas, in England the opposite was happening where there was a demand for property rights and change. The elite were too afraid of losing their power to not agree and it is precisely why England is still one of the most powerful countries in the world.
Extractive institutions play a huge role in encouraging the elite to dismiss up incoming technological advances that would work towards modernization and industrialization. "World inequality today exists because during the...