Why Nations Fail: The Origins of Power, Prosperity, and Poverty

Why Nations Fail: The Origins of Power, Prosperity, and Poverty by Daron Acemoglu and James A. Robinson

Nations succeed when they adopt inclusive government. They fail when the leaders adopt extractive policies. The rest of this book provides examples to prove this thesis and poke holes at other theories of prosperity. Leaders can enrich themselves by extracting all they can for themselves. (One example had Mugabe even winning the lottery in Zimbabwe.) The extraction comes at the expense of general prosperity of a country. Strong institutions can help prevent rulers from extracting too much for themselves. However, they must be strong enough to prevent leaders from changing them even when a leader has popular support. Spanish colonization was built on extraction. Colonies that are built on extraction (such as Spanish or slave colonies) often continue this mindset well after the colonizers have left. Inclusive governments are often democracies, but all democracies are not fully inclusive. There are plenty of democratically elected rules that seek to extract value for themselves. (Is the United States moving more towards that direction?) China has been able to pivot to prosperity by opening up enough while still maintaining communist control. Many poor countries receive huge amounts of aid, yet fail to achieve prosperity. Much of the aid is consumed in overhead and waste, with much of the remaining aid used to enrich the ruling party (either directly or indirectly). Moving to inclusion is the key to maintaining prosperity, but it is hard to do.