Why Nations Fail Book Summary

Book Summary

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Brief Summary

A strong democratic government is necessary to maintain long term economic development. Weak central governments will lead to fracturing, civil war, and poverty, while authoritarian governments will ultimately stagnate. Pluralist institutions encourage innovation and economic growth, while extractive institutions exploit their citizens, stifle innovation, and lead to underdevelopment. Because underdevelopment is not the result of a lack of funds or knowledge but is caused by extractive institutions and exploitative and corrupt elites, foreign aid and resources will not solve the problems of underdevelopment and poverty until the underlying issues with a nation’s political institutions are fixed.

About the Author

Daron Acemoglu is an economist and author. He is the Elizabeth and James Killian Professor of Economics at MIT, and a Research Associate at the National Bureau of Economic Research. He is also a Senior Fellow at the Canadian Institute for Advanced Research.

Previously, Acemoglu was a lecturer at the London School of Economics. He was the recipient of the John Bates Clark Medal in 2005. Acemoglu earned his MSc and Ph.D. from the London School of Economics. He holds a B.A. from the University of York.

James A. Robinson is an economist and political scientist. He is currently the Professor of Global Conflict Studies and University Professor at the University of Chicago’s Harris School of Public Policy. He is also the Institute Director at The Pearson Institute for the Study and Resolution of Global Conflicts.

Previously, Robinson has taught at Harvard University, the University of California, Berkeley, the University of Southern California, and the University of Melbourne. He holds a master’s degree in Economics from the University of Warwick and earned his Ph.D. in Economics from Yale University. He earned a BSc from the London School of Economics.

Topics

Politics

Why Nations Fail Book Summary Preview

What You’ll Learn

How political institutions, not geography or climate, shape nations’ wealth and prosperity
The ways in which historical coincidences change the course of a nation’s political and economic development
How both weak and authoritarian regimes will struggle to maintain economic growth in the long run
Why foreign aid is not necessarily the answer to poverty

Who Is This For

Economists and policymakers studying the issue of inequality
Academics who want to further research differences in national development and political institutions
Individuals looking to expand their understanding of governments’ role in economic inequality and poverty

Key Insights

The main cause of economic inequality and underdevelopment is political institutions. Economic hardship is not the result of physical factors, like geography, or culture, but is caused when political leaders in underdeveloped nations implement exploitative policies that impoverish their own people. For example, the city of Nogales is half in Mexico and half in the United States. Citizens on the U.S side of the border are wealthier, healthier, and better educated than the people on the Mexican side. One-half of Nogales citizens suffer, not because of its geography, but because of the political differences between the two nations.

The United States is wealthier because it has a history of well-established, democratic pluralist institutions that encourage technological innovation, which in turn makes the whole population wealthier. Mexico, on the other hand, historically has had undemocratic, extractive institutions, which take wealth from the population and give it to the elites. These historical institutions tend to have long-lasting consequences on nations’ development, even after they have been overthrown.

Governments need to provide basic security, education, and property rights before development can happen. However, oftentimes political elites do not want to encourage development, because it will disrupt their own hold on wealth and power and threaten their authority. Therefore, simply giving underdeveloped nations foreign aid will not be enough to solve their problems. Development cannot take place and poverty can not be eradicated until democratic, pluralist institutions take the place of extractive institutions, which exploit their own people and prevent economic growth and development.

Political Institutions, Not Geography And Climate, Are Responsible For Nations’ Development And Prosperity

Over the course of history, many academics have argued that successful societies have arisen as a result of the lack of climate and geography. Moderate climates that have fertile soil will give rise to prosperous societies, while areas that are subject to storms and poor farming conditions will give rise to less successful societies. Some theorists have even argued that it is not only the climate but the innate industriousness and temperament of the people who live in these climates, that leads to successful societies.

However, these claims do not hold up to historical scrutiny. In the tropical Americas, for example, great empires, like the Aztecs, grew and developed into very prosperous cultures. In a more recent example, North and South Korea have the same geography and climate and shared a culture until the middle of the 20th century, but nowadays North Korea is poor and underdeveloped, while South Korea prospers.

In Central America, Costa...