book review why nations fail

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Book review: ‘Why Nations Fail,’ by Daron Acemoglu and James A. Robinson

“Why Nations Fail” is a sweeping attempt to explain the gut-wrenching poverty that leaves 1.29 billion people in the developing world struggling to live on less than $1.25 a day. You might expect it to be a bleak, numbing read. It’s not. It’s bracing, garrulous, wildly ambitious and ultimately hopeful. It may, in fact, be a bit of a masterpiece.

Daron Acemoglu and James A. Robinson, two energetic, widely respected development scholars, start with a bit of perspective: Even in today’s glum economic climate, the average American is seven times as prosperous as the average Mexican, 10 times as prosperous as the average Peruvian, about 20 times as prosperous as the average inhabitant of sub-Saharan Africa and about 40 times as prosperous as the average citizen of such particularly desperate African countries as Mali, Ethiopia and Sierra Leone. What explains such stupefying disparities?

The authors’ answer is simple: “institutions, institutions, institutions.” They are impatient with traditional social-science arguments for the persistence of poverty, which variously chalk it up to bad geographic luck, hobbling cultural patterns, or ignorant leaders and technocrats. Instead, “Why Nations Fail” focuses on the historical currents and critical junctures that mold modern polities: the processes of institutional drift that produce political and economic institutions that can be either inclusive — focused on power-sharing, productivity, education, technological advances and the well-being of the nation as a whole; or extractive — bent on grabbing wealth and resources away from one part of society to benefit another.

To understand what extractive institutions look like, consider les Grosses Legumes (the Big Vegetables), the sardonic Congolese nickname for the obscenely pampered clique around Mobutu Sese Seko, the strongman who ruled what is now the Democratic Republic of the Congo from 1965 to 1997. When Mobutu decreed that he wanted a palace built for himself at his birthplace, the authors note, he made sure that the airport had a landing strip big enough to accommodate the Concordes he liked to rent from Air France. Mobutu and the Big Vegetables weren’t interested in developing Congo. They were interested in strip-mining it, sucking out its vast mineral wealth for themselves. They were, at best, vampire capitalists.

But the roots of Congo’s nightmarish poverty and strife go back centuries. Before the arrival of European imperialists, what was then known as the Kingdom of Kongo was ruled by the oligarchic forerunners of the Big Vegetables, who drew their staggering wealth from arbitrary taxation and a busy slave trade. And when the European colonists showed up, they made a dreadful situation even worse — especially under the rapacious rule of King Leopold II of Belgium.

When Congo finally won its independence in 1960, it was a feeble, decentralized state burdened with a predatory political class and exploitative economic institutions — too weak to deliver basic services but just strong enough to keep Mobutu and his cronies on top; too poor to provide for its citizenry but just wealthy enough to give elites something to fight over.

Acemoglu and Robinson argue that when you combine rotten regimes, exploitative elites and self-serving institutions with frail, decentralized states, you have something close to a prescription for poverty, conflict and even outright failure. “Nations fail,” the authors write, “when they have extractive economic institutions, supported by extractive political institutions that impede and even block economic growth.”

But even as vicious cycles such as Congo’s can churn out poverty, virtuous cycles can help bend the long arc of history toward growth and prosperity. Contrast the conflict and misery in Congo with Botswana — which, when it won its independence in 1966, had just 22 university graduates, seven miles of paved roads and glowering white-supremacist regimes on most of its borders. But Botswana today has “the highest per capita income in sub-Saharan Africa” — around the level of such success stories as Hungary and Costa Rica.

How did Botswana pull it off? “By quickly developing inclusive economic and political institutions after independence,” the authors write. Botswana holds regular elections, has never had a civil war and enforces property rights. It benefited, the authors argue, from modest centralization of the state and a tradition of limiting the power of tribal chiefs that had survived colonial rule. When diamonds were discovered, a far-sighted law ensured that the newfound riches were shared for the national good, not elite gain. At the critical juncture of independence, wise Botswanan leaders such as its first president, Seretse Khama, and his Botswana Democratic Party chose democracy over dictatorship and the public interest over private greed.

In other words: It’s the politics, stupid. Khama’s Botswana succeeded at building institutions that could produce prosperity. Mobutu’s Congo and Robert Mugabe’s Zimbabwe didn’t even try. Acemoglu and Robinson argue that the protesters in Egypt’s Tahrir Square had it right: They were being held back by a feckless, corrupt state and a society that wouldn’t let them fully use their talents. Egypt was poor “precisely because it has been ruled by a narrow elite that has organized society for their own benefit at the expense of the vast mass of people.”

Such unhappy nations as North Korea, Sierra Leone, Haiti and Somalia have all left authority concentrated in a few grasping hands, which use whatever resources they can grab to tighten their hold on power. The formula is stark: Inclusive governments and institutions mean prosperity, growth and sustained development; extractive governments and institutions mean poverty, privation and stagnation — even over the centuries. The depressing cycle in which one oligarchy often replaces another has meant that “the lands where the Industrial Revolution originally did not spread remain relatively poor.” Nothing succeeds like success, Acemoglu and Robinson argue, and nothing fails like failure.

So what about China, which is increasingly cited as a new model of “authoritarian growth”? The authors are respectful but ultimately unimpressed. They readily admit that extractive regimes can produce temporary economic growth so long as they’re politically centralized — just consider the pre-Brezhnev Soviet Union, whose economic system once had its own Western admirers. But while “Chinese economic institutions are incomparably more inclusive today than three decades ago,”China is still fundamentally saddled with an extractive regime.

In fairly short order, such authoritarian economies start to wheeze: By throttling the incentives for technological progress, creativity and innovation, they choke off sustained, long-term growth and prosperity. (“You cannot force people to think and have good ideas by threatening to shoot them,” the authors note dryly.) Chinese growth, they argue, “is based on the adoption of existing technologies and rapid investment,” not the anxiety-inducing process of creative destruction that produces lasting innovation and growth. By importing foreign technologies and exporting low-end products, China is playing a spirited game of catch-up — but that’s not how races are won.

So how can the United States help the developing world? Certainly not by cutting foreign aid or conditioning it; as the authors note, you’d hardly expect someone like Mobutu to suddenly chuck out the exploitative institutions that underpin his power “just for a little more foreign aid,” and even a bit of relief for the truly desperate, even if inefficiently administered, is a lot better than nothing. But ultimately, instead of trying to cajole leaders opposed to their people’s interests, the authors suggest we’d be better off structuring foreign aid so that it seeks to bring in marginalized and excluded groups and leaders, and empowers broader sections of the population. For Acemoglu and Robinson, it is not enough to simply swap one set of oligarchs for another.

" Why Nations Fail " isn't perfect. The basic taxonomy of inclusive vs. extractive starts to get repetitive. After chapters of brio, the authors seem almost sheepish about the vagueness of their concluding policy advice. And their scope and enthusiasm engender both chuckles of admiration — one fairly representative chapter whizzes from Soviet five-year plans to the Neolithic Revolution and the ancient Mayan city states — and the occasional cluck of caution.

It would take several battalions of regional specialists to double-check their history and analysis, and while the overall picture is detailed and convincing, the authors would have to have a truly superhuman batting average to get every nuance right. Their treatment of the Middle East, for instance, is largely persuasive, but they are a little harsh on the Ottoman Empire, which they basically write off as “highly absolutist” without noting its striking diversity and relatively inclusive sociopolitical arrangements, which often gave minority communities considerably more running room (and space for entrepreneurship) than their European co-religionists.

Acemoglu and Robinson have run the risks of ambition, and cheerfully so. For a book about the dismal science and some dismal plights, “Why Nations Fail” is a surprisingly captivating read. This is, in every sense, a big book. Readers will hope that it makes a big difference.

is a senior political scientist at the RAND Corporation and a former adviser to U.S. ambassador to the United Nations Susan Rice.

WHY NATIONS FAIL

The Origins of Power, Prosperity, and Poverty

By Daron Acemoglu and James A. Robinson

Crown. 529 pp. $30

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Studies in Philosophy, Politics and Economics

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Book Reviews

Book review: why nations fail.

• Efe Erciyaz
• Marianne Hii
• Katrina Zhang
• Economic Development
• Institutions
• Political Economy

1. Introduction

In Why Nations Fail , Acemoglu and Robinson argue that economic development and the prosperity or poverty of nations can be traced back solely to “institutions, institutions, institutions” (Acemoglu & Robinson 2012: 368). It is not geography, culture, or the ignorance of policymakers that explains the vast income disparities across nations, but it is the fact that some countries were able to introduce and maintain inclusive economic and political institutions, while others still operated under extractive systems benefitting only narrow groups of elites. The argument of the book is meticulously well-researched and supported by historical evidence spanning a vast range of epochs and continents. Furthermore, Acemoglu and Robinson could hardly have chosen a more appropriate time than 2012 to publish their book. At the time of publishing, the Middle East was still reeling from the revolutionary Arab Spring that many hoped would mark the turn of the Arab world to greater political and economic inclusiveness, Acemoglu’s country of origin Turkey was sliding evermore into the authoritarian, extractive wrath of Recep Tayyip Erdogan, and with the Great Financial Crisis of 2008 having exposed an ever-growing income gap between rich and poor states.

Whilst credit must be given to Acemoglu and Robinson for re-injecting the importance of institutions into the discourse on economic development, we will argue that there are two major shortcomings of the book. First, the authors continuously operate through a constrained lens of institutions within a single country and subsequently do not sufficiently consider the interplay of institutions across borders. For instance, the book leaves unaddressed to what extent we can attribute the past economic development of colonising countries to the extractive institutions imposed on their colonies rather than to their inclusive institutions domestically. A greater focus on this international aspect of institutional arrangements would have been of great interest given the current pertinence of tied aid and structural adjustment programs through which harsh institutional reforms are often imposed on developing nations. Second, Acemoglu and Robinson’s argument that only institutions matter for development is overly simplistic and dismisses other explanations such as culture, geography, or policy mistakes unfairly out of hand.

2. Part I: Summary

Why Nations Fail opens with the thought-provoking natural experiment between Nogales, Arizona and Nogales, Mexico (Acemoglu & Robinson: 7-9). Despite the two regions either side of the US-Mexico border sharing almost identical cultures, climate and natural resources, Nogales, Arizona has three times the GDP per capita of its Mexican counterpart. It follows, according to the authors, that institutions must lie behind this vast difference in economic development. Anecdotal evidence such as the above is used throughout the book by Acemoglu and Robinson to demonstrate their thesis that only inclusive political and economic institutions make sustainable development possible. The authors define institutions vaguely as rules and norms directing the actions and incentives of agents operating within the state and partition between the economic sphere and the political sphere (Acemoglu & Robinson: 42). Ultimately, the bridge between a country’s institutions and development outcomes is spanned by incentive structures. Inclusive economic and political institutions—those that are pluralistic, accountable, and share economic and political power and opportunity widely in society—support sustained economic development through generating incentives for investment, risk-taking, and innovation. For instance, only when there is secure private property are citizens and enterprises confident in their ability to generate profits commensurate to their efforts and risk-taking and hence become willing to engage in innovation (Acemoglu & Robinson: 75). Conversely, their extractive counterparts that concentrate power in the hands of a narrow elites and primarily facilitate rent extraction stifle development as elites frequently use their concentrated power to put down Schumpeterian ‘creative destruction’ and as elite infighting over extraction frequently flares up (Acemoglu & Robinson: 132). To be exact, Acemoglu and Robinson do not claim that development is impossible in extractive institutional frameworks but only that due to lacking innovation incentives and frequent elite infighting, this development is ultimately short-lived (Acemoglu & Robinson: 124).

Furthermore, Acemoglu and Robinson further develop two self-perpetuating cycles according to which economic and political institutions develop over time. In vicious cycles, extractive political institutions feed on extractive economic institutions, which subsequently further increases economic extraction (Acemoglu & Robinson: 365). Conversely in virtuous cycles, more inclusive political institutions tend to create more inclusive economic arrangements, which through increased economic prosperity for the masses enhances their political power and hence supports political inclusion (Acemoglu & Robinson: 332-334). Nonetheless, despite these cycles, Acemoglu and Robinson do not posit historical determinism in the realm of institutions, as institutional drift—minor differences in institutions across countries—in combination with so-called critical junctures—major historical events such as the Black Plague—can lead a country to make the difficult switch from extractive to inclusive institutions or vice versa (Acemoglu & Robinson: 432). 

The core argument of Why Nations Fail is clear, well-researched, and intuitively appealing. Institutions do matter for economic development and the impressive array of historical examples provided by the author give strong backing to their hypothesis. At the same time, however, the book’s clarity is also its main weakness: its thesis that only institutions determine development, and not alternative factors such as geography, culture, or policymaking, misses the multi-faceted nature of economic development. Even so, Acemoglu and Robinson can be forgiven to an extent: Why Nations Fail was targeted at the general reader interested in economics and politics, and for this specific audience the brashness of the book’s argument was crucial in highlighting the importance of institutions. Hence, whilst for a more academic audience the lack of nuance in the book is troubling, the clarity and boldness of the authors’ institutional thesis, as well as its systematic analysis only within the boundaries of the nation-state, might have been necessary to jumpstart public discourse on institutions in development.

3. Part II: International interplay between inclusive and extractive institutions

The first shortcoming is the lack of focus on how extractive and inclusive institutions interact across international borders. Firstly, there is insufficient appreciation that inclusive domestic institutions can be supported by extractive ones abroad. Whilst Acemoglu and Robinson do extensively discuss the prominent role of extractive colonial institutions in obstructing the colonies’ development, they do not really consider the other side of this bilateral relationship pertaining to colonising countries, where they instead focus more on the importance of domestic inclusive institutions for economic development. Acemoglu and Robinson detail extensively the developing inclusive political and economic institutions in England during the Industrial Revolution, such as strong property rights and the ability to lobby Parliament (Acemoglu & Robinson: 103-104). They pinpoint the relationship between the English Crown and merchants profiting from colonisation in the 17th century as a crucial reason why inclusive political institutions later emerged (Acemoglu & Robinson: 105-106). Indeed, Acemoglu and Robinson emphasise the importance of initially small institutional differences during a critical juncture like the expansion of the Atlantic trade leading to diverging paths for different countries.

However, whilst the authors argue colonising countries benefitted post-critical junctures whilst colonised countries were left incapable of taking advantage of technological innovations (Acemoglu & Robinson: 114), they do not extensively explore the implications of this. It is intuitive that colonists enjoyed economic benefits from colonies, as exemplified by James Watt being partly motivated by economic opportunities from demand in English overseas colonies and domestic markets (Acemoglu & Robinson: 104). However, they do not further expand on this mention of overseas colonies in explaining England’s inclusive institutions. They also do not explicate possible causal mechanisms wherein extractive institutions abroad could support the growth of inclusive institutions domestically, in England, such as through revenue streams funding institutional transition or co-optation of domestic elites. The developmental narrative of England, whilst accounting for international affairs, such as military conflicts with the Spanish and colonisation abroad, therefore lacks an explicit explanation on a potential supportive role of extractive institutions. The authors do engage in such analysis regarding South Africa, where white elites created a dual economy to benefit from cheap labour costs and reduced competition (Acemoglu & Robinson: 259-260). It would be rewarding to see similar analysis with England and its colonies, given the attention the authors pay to them.

Besides this, readers are not equipped with a complete toolkit allowing them to fully understand implications of modern international policy such as tied aid and structural adjustment programmes on developing countries. Extending their exploration of the interaction of institutions across borders would provide such a toolkit. Acemoglu and Robinson do discuss the impact of aid, particularly the failure of foreign aid to Afghanistan in promoting development (Acemoglu & Robinson: 451). They note that development aid has often been wasted due to corruption, various costs, and appropriation by dictators overseeing extractive institutions (Acemoglu & Robinson: 452). Moreover, they discuss the ineffectiveness of conditional aid by arguing it does not provide strong incentives to meet the aid’s conditions or overhaul extractive institutions in these countries (Acemoglu & Robinson: 453-454). Here, the implication is that conditional aid would assist development if conditions were strictly followed and that it fails because it is ineffective in incentivizing compliance. However, Acemoglu and Robinson do not explicitly consider a potential parallel relationship with colonialism, wherein conditions of tied aid benefit the aiding country, potentially at the expense of the country receiving aid. For instance, companies from rich countries still receive around two-thirds of aid contracts that are officially untied (Provost 2011).

Furthermore, readers are then not fully equipped to understand the role of international pressure on developing countries more generally. Acemoglu and Robinson could have further considered the presence of foreign pressure even today in either their support or disapproval of extractive regimes. Indeed, the authors detail why Egypt today remains a state of extractive institutions, noting that international financial institutions promoted economic reforms in the 1990s such as privatising state-owned assets. They highlight that privatisation built private monopolies, supplementing the riches of wealthy, politically connected businessmen even further (Acemoglu & Robinson: 396). However, they do not explicitly specify how conditional aid and foreign pressure can inhibit development to the benefit of developed nations. For instance, when Egypt allied with the West, it received conditional US aid which required Egypt to implement economic liberalization, subsequently decreasing Egypt’s state revenue whilst shifting the economy away from industry and agriculture (Kandil 2012: 208). Indeed, Egypt’s alliance with the US required it to open up the economy to foreign investment (Kandil: 204). Significantly, Western business contacts of Egyptian business elites mitigated democratising pressure on Egypt’s regime (Kandil: 209). It would have been relevant for Acemoglu and Robinson to explore how, though inclusive economic and political institutions encourage domestic development in Western countries, Western connections can support further extraction in developing nations. Even prior to the 1990s, American investors helped construct and ultimately benefit from Sadat’s open-door policy, Intifah , with the aim of facilitating business (Kandil: 204-205). Acemoglu and Robinson note that when the private sector developed, markets were extractive and controlled by businessmen politically allied with Sadat (Acemoglu & Robinson: 395). Nevertheless, they do not explicitly discuss any American allies that supported the growth of this extractive regime. As such, they do not address explicitly and completely the question of to what extent international relations can directly shape another country’s institutions today.

4. Part III: Unfair dismissal of other causal theories?

While the thesis of the book is single-minded in recommending that institutions are the chief important factor for development outcomes, readers picking up Why Nations Fail may approach the book having some familiarity with other theories of development. The authors none but anticipate this. Thus, next to emphasising the importance of institutions, Acemoglu and Robinson, in Chapter 2 of the book labelled ‘Theories That Don’t Work’, also make a negative argument—using carefully hand-picked examples—against three alternative explanations of economic development: geography, culture, and ignorance. Their institutional thesis is hence stronger than the summary above in fact sets forth.

Looking at the three alternative theories the authors refute: observers of trends in development might note that rich countries cluster away from tropical climates, so could it be that tropical countries, due to a certain lethargy they induce in their inhabitants, disincentivise work that drives development? Or, finding that predominantly Protestant countries tend to be rich while Islamic countries often suffer instability and poverty, could religion and culture determine developmental outcomes? Otherwise, since richer countries clearly possess better technology and knowledge, could it be the ignorance of policymakers in poor countries that hinders development in these cases?

Even as the authors do their best (and correctly) dispel these conjectures, this does not mean that factors of geography, culture, or ignorance do not matter in economic development. To this, the authors intermittently admit throughout the book. A particular geography or a certain culture can make the probability of inclusive institutions less or more likely.

Firstly, geographic factors remain salient. In the extensive discussion of different colonies in the book, one comparison is stark. Natural resource wealth, in the form of gold and silver or diamonds, respectively, is abundant in South America and Africa—where extractive colonies were set up—while absent in North America and Australasia—where inclusive settler colonies were set up. The authors describe the rationale of the differences in colony structure in Chapter 1; extractive colonies could not be set up when the British landed in North America, as they were in the South, exactly because colonists needed other ways to support themselves given the hapless barrenness of the land. Natural resource wealth, due to the set-up costs needed for their extraction, calls for capture by local or foreign elites. Conversely, geographies which give rise to economic opportunity for large swathes of the population promise a better likelihood of inclusive institutions being set up; so, the long coastlines connecting Hong Kong or Singapore to other ports speak for themselves. Geographic arguments are implicitly supported in the book.

Second, on culture, the authors suggest in Chapter 14 that the tribal culture of Bechuanaland, where civil rights are not based on heredity alone, helped its chieftains make inclusive decisions leading to the economic success of the country—today known as Botswana. Tribal leaders took advantage of two critical junctures: the first with the institutional drift of the Bechuanaland tribes towards inclusive political processes and the second with the construction of subsoil mineral rights which channelled the country’s diamond revenues into investment for public services. In this case, elements of an inclusive culture allowed for the emergence of institutional drift towards robust institutions, allowing the opportune ramping of Botswana onto the path of becoming the African economic miracle it is today.

Lastly, it is clear that ignorance of the outcomes of economic policy derail development. During the Great Leap Forward in China, an example the authors consider, the backyard steel mills which were a nascent China’s attempts at industrialization led the country into a three-year famine in the Chinese countryside. Clearly, disastrous economic policy exacerbates the damage due to a country’s institutional flaws.

The authors are right that it is not necessarily the Protestant ethic, as proposed by German sociologist Max Weber, that led England and the Netherlands to the first economic success in early-modern Europe (they claim that France, a predominantly Catholic country, was quickly able to catch on (Acemoglu & Robinson: 60)) or that religion is the reason Islamic countries are poor today (it was rather the history of Ottoman rule that adversely affected the way poorer Middle-Eastern countries developed (Acemoglu & Robinson: 61)). Progress remains contingent based on a country’s broader political and economic institutions—none of these factors are deterministic.

Perhaps a point of disappointment in the book is that a detailed account is missing of how factors of geography, culture, or policy-making expertise interact with changing institutions as the machinery of development. For example, how might the global social media culture, at the heart of the Arab Spring’s unfolding, give birth to periods of institutional drift? Given that globalization has internationalised policy-making and new technologies can now mitigate starkly different geographies, speaking to the reality of a convergence of economic and political processes between areas as different as San Francisco and Bangalore, it now becomes more important to consider regional differences for the biodiversity of ideas flowing into bodies concerned with policymaking. As the authors show that when periods of institutional drift are lost as opportunities for change, the cogs of economic policy cannot work to turn out inclusive institutions. Where entrenched elite or foreign interests subject a region to extraction and prevent local institutions from building on its region-specific elements of geography, culture, and expertise, inclusive institutions remain only on the horizon. However, when critical junctures emerge, good economic policy must be informed by an intersection of knowledge from geography to anthropology. The authors remind us that discriminatory theories will hinder development by a denial of peoples’ potential, yet it is implied by the book that interdisciplinary knowledge to address specific regional circumstances will be integral for its success.

5. Conclusion

To summarise, Why Nations Fail is a compelling and well-written read on the crucial role of institutions in economic development. Acemoglu and Robinson carefully construct a framework around extractive/inclusive institutions, critical junctures, and institutional drift to explain the development paths taken by nations and support it with exceptionally well-researched historiography. Nonetheless, the book is also incomplete in two important dimensions: it lacks an appropriate focus on the international dimension of institutions and too rashly dismisses alternative explanations outside the institutional thesis, instead of considering complementarity between different approaches. These shortcomings would have been more than acceptable if the thesis of Acemoglu and Robinson had not been the absolute claim that only institutions matter for development. However, with the stark claim the authors make, these shortcomings act as a thorn in the side for the reader. Nonetheless, with these limitations in mind, we still wholeheartedly recommend the book for anyone interested in learning about the role of institutions in economic development.

Acknowledgements

We would like to thank our classmates and our instructor Liam K. Bright for their thoughts and encouraging feedback in the reading group sessions leading to this book review.

Acemoglu, D. and J.A. Robinson . 2012. Why Nations Fail: The origins of power, prosperity, and poverty. London: Profile. URL: https://ebookcentral.proquest.com/lib/londonschoolecons/detail.action?docID=1743163

Kandil, H. 2012. Why did the Egyptian middle class march to Tahrir Square? Mediterranean Politics (Frank Cass & Co.), 17: 197-215. DOI: 10.1080/13629395.2012.694044

Provost, C. 2011, September. Aid still benefits companies from donor countries. The Guardian. URL: https://www.theguardian.com/global-development/2011/sep/07/aid-benefits-donor-countries-companies

The Journal for Student Geographers

A review of ‘Why Nations Fail’

By Fintan Hogan, King Edward VI Camp Hill School for Boys

Acemoglu, Daron., and James A. Robinson. Why Nations Fail : The Origins of Power, Prosperity, and Poverty. London: Profile, 2012.

Hogan, F. (2020) A review of ‘Why Nations Fail’.  Routes  1(2): 251–255.

This piece reviews the 2012 book Why Nations Fail , co-authored by Daron Acemoglu and James A. Robinson (Acemoglu & Robinson, 2012). Their work focuses on the role of institutions in fostering development; specifically economic institutions like secure property rights and political institutions like free and fair elections – structures that commonly develop hand-in-hand. However, throughout the book, the authors write as we would expect geographers to do; frequently contextualising their argument with broader quantitative and qualitative data. Despite an apparent focus on the economic and the political, the social aspects of geography validate their argument throughout.

1. Introduction

Political accountability means the powerful can no longer rob the weak. That’s the basic premise of Why Nations Fail , with a consistent focus on the political and economic rights afforded to people over the last few millennia. The book may more accurately be called ‘Why Nations Succeed’ , since the authors draw policy prescriptions from some of the most advanced economies of each era. Reviewing a book which explicitly rejects geography as an explanation for development may appear counter-intuitive for Routes , but on reflection, the premise put forward by Acemoglu and Robinson is crucial to any understanding of development dynamics seen through a geographical lens. Daron Acemoglu is a Professor of Economics at MIT and James Robinson teaches Economics at the University of Chicago – it makes sense then, that they would see economic institutions as uniquely pivotal throughout. While Chapter 2, entitled ‘Theories That Don’t Work’, rejects ‘The Geography Hypothesis’ (p48), one should not be so quick to believe that the discipline has little to learn from their conclusions. On the contrary, geographers are concerned with the flow of information, expansion of trade and progression of inequality, all of which play pivotal roles in the authors’ premise.

Daron Acemoglu and James A Robinson offer a concise summary of their premise in the very final line of the book: ‘…durable political reform, will depend, as we have seen in many different instances, on the history of economic and political institutions, on many small differences that matter and on the very contingent path of history’ (p462). To use their own terminology, the argument held throughout the book is that development is only sustained through ‘inclusive economic and political institutions’, supported through a ‘virtuous’ positive feedback cycle – illustrated through charting the Neolithic, Industrial and Technological Revolutions. Through this, they reject ‘extractive political and economic institutions’ which facilitate growth for a short amount of time (catch-up) and profit very few people, stalling ‘creative destruction’ and generating ‘vicious’ cycles. As such, low taxes and strong central government are seen as important characteristics of a nation’s success. An example of how this may develop in practice could be citizen assemblies or unions providing some political accountability – through this, the economic security of workers grows, and development follows. In advancing their argument, the authors use a wealth of historical sources in what becomes a compelling and universal argument.

2. A more nuanced view of geography

In fact, what the authors reject in Chapter 2 is physical geography ; the site and situation which people find themselves in. This theory has been termed environmental, or geographical, determinism and has been repopularised by academics like Jared Diamond of Guns, Germs and Steel fame (Diamond, 1999). Prisoners of Geography is another popular text in this vein, emphasising the importance of the physical environment on modern-day geopolitics (Marshall, 2015). These readings are sometimes termed ‘man-land geography’ too, emphasising the interaction between the natural environment and those who rely on it. To a certain extent, Acemoglu & Robinson are correct in their reasoning that broadly similar climates and reliefs can yield vastly different results, and they use colonial and post-colonial Congo to illustrate localised disparities (p58). 

Despite this, they appear to neglect the fact that modern technology still overwhelmingly benefits from a positive location. Geographers from as early as GCSE learn of hydropower and its benefits to Ethiopia, alongside containerisation and how it fails to help landlocked Malawi or mountainous Nepal. Despite this, their argument broadly holds true – on the whole, regions with similar soils, coasts and rainfall can have hugely divergent development pathways. They argue that small changes in institutions are widened into cavernous gaps following ‘critical junctures’ – for example, the decentralised workforce of England led to the Peasants Revolt following the Black Death; this improved working conditions, unlike in much of Eastern Europe (p96). Now you may ask, doesn’t this sound a lot like history? Indeed it does, and this is what continually struck me while reading. The use of the phrase ‘contingent path of history’ to wrap up the entire book shows this clearly and demonstrates how their argument rests on singular people and events, rather than trends or patterns, as indeed does the term ‘critical junctures’.

3. Geography underpins the argument

Well what does Geography offer to this reading? Unquestionably a huge amount. The concept Acemoglu and Robinson revere in particular is participation – using the example of the Glorious Revolution (1688), the authors argue that a broad coalition of interests acts as an effective set of checks and balances within the group, supporting the introduction of equality and representation. What geography shows here is how these groups of people emerge, regardless of individual figures, in a collection of diverse interests. Understanding wealth and its distribution is shared with Economics, but underpinning a geographical perspective is the idea of social capital, inclusivity and community – the authors themselves seem to recognise this with the divergence in the distribution of serfdom across Europe by 1800 (p108). While all European peasants in the early Middle Ages were subjugated to feudalism, by the 19 th century the western European poor had strong social cohesion, fuelled by urbanisation, while those in eastern Europe still remained scattered, facing coerced farm labour. Demography and culture are as important as any purely economic factor – geography highlights the importance of place to this institutional drift.

One needs to look no further than the A Level Changing Places topic to understand how, as geographers, we can understand a community, looking beyond their economic or political standing, in a way which ‘the contingent path of history’ often relies on. It is easy to argue that historical events drive development, because every occurrence can be seen as a direct cause. However, the authors’ historical accounts are frequently contextualised by pieces of relevant data, demonstrating the importance of a wider societal understanding which underpins everything that the book has to offer. Understanding development through a geographical perspective offers the sort of coherent wider picture which the authors rely on throughout.

4. Conclusion

In short, geography is crucial to understanding the conditions which allow for the emergence of institutional reform, rather than attributing change just to single political figures or fateful events. In the modern world, this exposes itself through free trade and the exchange of services, individuals and ideas. The very first example in the book used Nogales, USA and Nogales, Mexico (a city divided by a fence) to highlight extreme inequality (p7). In the 21 st century, we attribute this to policy attitudes towards loans, welfare, property rights and globalisation. While the authors here employ the catch-all term of ‘institutions’, what the readers of this journal will be able to ascertain is far deeper. As geography students and researchers, we can perceive far more from history than what just individuals or economics can tell us. Without this wider view, historians would fail to really understand the preconditions for development (Rostow, 1959), using circular logic to suggest that developed economies must have experienced ‘good development’ and underdeveloped ones ‘bad’. Incorporating the authors’ ideas into academic studies is likely to give students another insight into development factors, and their global exploration contextualises some key areas of GCSE and A Level content. Geography moves beyond a narrow idea of development, complimenting and supporting the entire premise of the text. I would encourage you to perhaps pick up a copy of this 500-page tome – it’s worth a read.

5. References

Acemoglu, D & Robinson, J.A. (2012) Why Nations Fail: The Origins of Power, Prosperity and Poverty , New York: Crown

Diamon, J (1999) Guns, germs and steel: The fates of human societies , New York: WW. Norton & Co.

Marshall, T (2015) Prisoners of Geography: Ten Maps That Tell You Everything You Need to Know About Global Politics , London: Elliott & Thompson

Rostow, W (1959) The Stages of Economic Growth , The Economic History Review, New Series, Vol 12, No. 1, pp1-16

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August 21st, 2012

Book review: why nations fail: the origins of power, prosperity, and poverty by daron acemoglu & james a robinson.

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Why Nations Fail: the Origins of Power, Prosperity, and Poverty. Daron Acemoglu & James A Robinson. Crown Business. March 2012.

The scholarly work of Daron Acemoglu and James Robinson is already widely known among economic historians, economists and political scientists. In Why Nations Fail Acemoglu and Robinson seek to convey to a much broader audience the results of many years’ path-breaking research on the historical role of institutions – defined as “the rules influencing how the economy works, and the incentives that motivate people” – and their impact (p .73). The result is a highly readable work of enormous geographical and chronological range that addresses one of the most pressing issues of the contemporary world. With much of its content consisting of good, old-fashioned historical narrative – something I did not quite expect – this book will without doubt appeal to a broad readership.

The basic case that the authors seek to make in the book is a simple one, namely that nations with extractive political and economic institutions are likely to be poor, whereas those with inclusive institutions are likely to be rich. Politics is paramount: the existence of centralised and pluralistic political institutions is the key to the sustained existence of inclusive economic institutions. While a degree of economic growth may be possible under extractive institutions, such growth is not sustainable, as shown by the cases of, for example, the later Roman Empire or the Soviet Union. Once a nation has started to move towards inclusive institutions a positive feedback loop may help to keep them in place, but extractive institutions are also sustained by path dependence, with those in power fearful of the “creative destruction” generated by change, producing a vicious circle. The argument put forward is not, however, one of institutional determinism. Small institutional differences, and what the authors refer to as “institutional drift” over time can interact with “critical junctures” and historical contingency to produce a change in path. By analysing such institutional evolution in its historical setting, Acemoglu and Robinson argue that we can better understand why some countries are rich and others poor, how that pattern may have changed over time, and even how the problem of global inequality might be addressed in the future.

Striking historical examples are used to demonstrate the key importance of institutions, and to reject the explanatory power of geography and culture. The two Koreas, united until the late 1940s, and sharing a common geography and culture, have since diverged dramatically in institutional and wealth terms. Exploitative Spanish imperialists in search of plunder put Latin America on a path of extractive and unproductive institutions, while the same institutions failed to work in North America, allowing the appearance of democracy and institutions more conducive to growth. Case proved? Well, up to a point. It is certainly hard to dispute the claim that “institutions matter”, and the authors themselves have played a major role in demonstrating the significance of colonial institutions, for example, in shaping the economic development of colonised countries, and in the primacy of political institutions in shaping economic ones. Few academic readers will take issue with the basic message of this important book. What many readers will be less comfortable with, perhaps, is the oversimplification inevitably associated with almost any monocausal explanation, and the wholesale rejection of other competing explanations of historical development. To be fair, the authors in the conclusion acknowledge the limitations of their approach, but their exaggerated depiction of the determinism associated with geographical or cultural explanations, for example, prevents them from acknowledging the subtle historical interplay between geographical factors, culture (however that might be defined) and institutions, whether extractive or inclusive. For example, the authors’ own account shows that a major reason why the extractive institutions of the Spanish could not be copied in North America was the very absence of riches (gold and silver) that could be plundered. Acemoglu and Robinson have also in the past been criticised for “compressing” history, and their theory raises major questions about what time periods matter in institutional terms. The extractive Mayan Empire, for example, continued to generate wealth over more than six centuries.

Acemoglu and Robinson are careful to emphasize the importance of historical contingency in their interpretation; institutional dynamics respond to critical junctures and new opportunities. In that context one of the things that comes out of their account is the recurrent importance of chance and luck, and also the importance of individual actors, somewhat reminiscent of the ‘great men’ interpretations of history so popular in the 19 th and early 20 th centuries. Botswana, for example, was profoundly fortunate to have as its leader Seretse Khama, who sustained the move towards more inclusive institutions, unlike Robert Mugabe in Zimbabwe or Mobutu in the Congo. Their historical account is thus populated with a rich cast of heroes and villains of all shades. Not surprisingly for those familiar with their work, imperialism is one of the main culprits, but far from the only one. These, and other somewhat black and white depictions, will do much to sell Why Nations Fail , but they will also contribute to the book’s arousing strong views, particularly in its absence of nuancing. There is therefore much to commend about this book, and much to take issue with, but even its critics will concede that it is based on serious scholarship, will do much to stimulate debate, and is a very good read.

———————————————————————-

Janet Hunter is Saji Professor of Economic History at LSE. She teaches comparative and global economic history, and has published extensively on the economic development of modern Japan, with special reference to the development of the female labour market, the history of communications, and the evolution of Anglo-Japanese economic relations. She is currently working on the economic impact of disasters in 20 th century Japan. Read more reviews by Janet.

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Review: Why Nations Fail

To forgo reading Why Nations Fail – a weighty but intensely engaging investigation of the determinants of economic prosperity – is, it seems, to risk being left out of the conversation of the day on political economy. Widely discussed in recent weeks, the book, the work of MIT’s Daron Acemoglu and Harvard’s James A. Robinson, takes as its sizable task a compelling account of what makes for a successful nation. The answer emerges over the course of the book’s 500 pages through a series of historical case studies designed to hammer in a central point: economic success is the product of particular political institutions, and the political institutions that breed success are “inclusive” as opposed to “extractive.” Pluralism begets prosperity; by the same token, autocracy begets decline.

The book opens with the case of the bisected town of Nogales, whose split halves lie in Arizona and Mexico respectively. The town represents, from the perspective of the authors’ hypothesis, a beautiful natural experiment, one that is returned to repeatedly and joined later in the book by other borderland examples: two populations separated neither by space nor by culture, but instead by their governing institutions. In that regard, the great disparity in wealth and health between the two sides of Nogales makes for a powerful opening salvo, the first of a number to come. The town is then used to open a historical sketch of the contrasting colonial experiences of North and South America as an introduction to the work’s thesis, which hybridizes economic and political concerns through a discussion of institutional structures that either work to spread opportunity and incentivize economic activity or to concentrate wealth and influence in the hands of a fortunate few. Acemoglu and Robinson summarize the large-scale structure of their argument at the end of this introductory jaunt through the history of the Americas:

It is about the effects of institutions on the success and failure of nations – thus the economics of poverty and prosperity; it is also about how institutions are determined and change over time, and how they fail to change even when they create poverty and misery for millions – thus the politics of poverty and prosperity.

Over the course of the book, the authors largely execute this program as promised. Leaping from continent to continent, the authors build a substantial catalogue of examples to bolster their case. From Botswana to Uzbekistan, the same arguments hold sway: extractive political institutions dedicated to the wellbeing of the elite breed similarly extractive, and counter-productive, economic institutions, while the same holds for the transmissible benefits of inclusive political institutions that meaningfully guarantee property and political rights.

The implications of Acemoglu and Robinson’s thesis are at times hopeful, at others unsettling, and overall distinctly controversial. First, the unsettling: the authors argue that the reciprocal relationships between political and economic structures produce vicious and virtuous circles in the cases of extractive and inclusive institutions respectively. On a global scale, then, when it rains it pours; the rich getting richer while the poor fall deeper into poverty. Growth, while achievable under extractive institutions, isn’t sustainable under the same circumstances, the authors argue, an observation that hardly offers reassurance to those concerned about growing inequality worldwide. At the same time, there is a ray of hope: as Acemoglu and Robinson note, “neither the vicious nor the virtuous circle is absolute.” It is possible, in the pair’s view, to effect meaningful change to extractive institutions on the heels of particularly disruptive or revolutionary events, what the two label “critical junctures,” like the Black Death or the Industrial Revolution. Most contentious of the authors’ findings, perhaps, is their assertion that China’s growth will not only slow from the breakneck pace that has characterized its development over the past several decades but will gradually stall out unless accompanied by political reform. All of their findings though, whatever their character, are of tremendous import for the conversation on international economics, and Why Nations Fail is a valuable book to pick up not just for exposure to hot topics in development but for a more serious engagement with one particularly powerful vision of the mechanisms behind them.

The work’s strong points aside, there are nits to be picked, some small, some larger. For one, in addressing itself to a lay audience the book necessarily handicaps itself; the statistical analyses undergirding many of the authors’ claims are consigned to references in the book’s length bibliographic essay. That isn’t to say that the book doesn’t make its argument well; it does, but it does so rhetorically, by way of anecdote. Also problematic is the sometime slipperiness of what the Acemoglu and Robinson mean by inclusive and extractive institutions, particularly given the work’s broad time frame; institutions that were inclusive in the context of the Glorious Revolution are, in relative terms, extractive as compared to modern Western democratic structures. Although the authors likely intended that inclusive and extractive be considered in gradations, their use of the terms as quasi-absolute adjectives sometimes makes their examples seem like anachronistic judgments. Finally, there is China, something of a fly in the ointment for the pair at a theoretical level. As mentioned above, Acemoglu and Robinson characterize China’s extraordinary growth as founded on fundamentally extractive institutions, and therefore as unsustainable; at the same time, their account doesn’t fully explain how exactly those extractive institutions worked to produce such atypical growth. As to whether China’s growth will eventually collapse, the verdict will likely be out for some time. Until then, perhaps the weight and force of the authors’ remarkable argument ought to spare them that criticism.

Finishing Why Nations Fail is satisfyingly final; the book is as exhausting as it is exhaustive. Were the authors’ arguments less thorough, it would be tempting to convict Acemoglu and Robinson of grandiosity in their case for a “Theory of Everything” of global inequality. It does, after all, take gumption to dedicate just 25 pages to “Theories That Don’t Work,” as one of the book’s chapter heading labels them. Some reviews have taken such a tack, albeit mildly; judgments on the work range, for the most part, from “great” to “very good, but let’s not get too excited here.” Audacity notwithstanding, Acemoglu and Robinson’s ambition here is entirely welcome, an encouragingly bold attempt to get right to the heart of the thorny questions that wreath discussions of global inequality. That Guns, Germs, and Steel author Jared Diamond, whose geographic account of wealth differences is heavily criticized in the book as exactly one of those errant theories, was willing to provide a nonetheless glowing blurb for Why Nations Fail is testament to just how convincingly the authors make their case for their perspective on political economy. The ideas catch and resonate remarkably, and ought to inform any casual discussion of international inequality. At length and in depth, Why Nations Fail is a book worth reading.

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