In Review: “Why Nations Fail”

With a title like “Why Nations Fail,” authors Acemoglu and Robinson already set the bar for their work ambitiously high.  Attempting to deal with this question at all is already a tremendous undertaking; as the authors note in the first chapters of the book, this question has been a scope of academic interest for hundreds of years and several theories on the topic are already well entrenched.  This work’s first undertaking is, of course, to refute previous theories that attempt to account for the drastic inequality in wealth distribution across the globe.  The first of these theories is geographic determinism, most popularly championed by Jared Diamond in Guns, Germs, and Steel, the second attempts to relate prosperity to culture, and the third explains away the economic inequality as a function of cultural ignorance.  For such an ambitious undertaking, Acemoglu and Robinson spend very little time dismantling these theories, and because of this their refutations seem very facile.    Given the size of the work, one could argue that the authors decided to spend the majority of the pages supporting their own hypothesis rather than criticizing the work of their peers.   The problem with this argument is that the book spends the vast majority of its time attempting to use examples rather than logic to underpin their ideas.

So instead of culture, geography, or ignorance, the authors argue that differing political institutions, inherited in many cases from colonialism, have resulted in differing levels of prosperity across the globe.   This is as close to a thesis as I was able to discern and is a pretty obvious statement, as far as comparative economics goes.  The authors go on to state that these institutions are either the result of or the cause of (or both) differing financial incentives and political realities that result in an almost inevitable economic structure.  They classify these economic structures and political structures into two main groups, inclusive and extractive, leading to four broad types of societies, inclusive vs extractive politic institutions matched with inclusive or extractive economic institutions – though naturally like tends to be paired with like. However, the authors don’t adequately explain what caused the creation of these financial incentives and political realities.  For example, in a discussion about the African societies of the Lele and Bushong (p. 133-136), the authors comment on the different outcomes between the two societies as the result of political centralization among the Bushong and not the Lele.  However, when raising the question of why one culture experienced the rise of a centralizing authority and the other did not, the authors have no answer.   Using past cultural institutions to explain ensuing cultural institutions results in a circular argument; if you are going to explain the origins of a system, you need to find a variable that is external to the system.  In my opinion, only geography is the variable that could affect the course of human history that is not endemic to human history. 

Acemoglu and Robinson could, however, have made a better argument if they had admitted the value of geographic determinism but then stated that other variables became more important as societies developed.   For example, a theme that can be found in their examples where societies transitioned form inclusive to extractive economic and political systems (and vice versa) is that societies have a natural incentive to move from inclusive to exclusive.  The history of Venice was a good example – an inclusive economic/political system generates attractive amounts of wealth.  Well placed economic or political actors want to maximize their access to this wealth while minimizing others’ access.   If successful, these actors will manage to transform an inclusive system to an extractive system.  The longer an extractive system exists, the more likely it is that the society will go into a long term decline.  Extractive systems, if the wealth disparity between the elites and the population is large enough, can motivate the population to overthrow the elites in order to gain access to the wealth.  At this point the society has the potential to develop new inclusive institutions or for a new class of elites to emerge.  The longer the society was part of an extractive system, the more likely it is for the latter to occur than the former.  This hypothesis fits their ideas and their data and yet it is left to the reader to deduce from the book’s exhaustive list of examples.  This narrative, while not as sweeping as the one they attempted to put forth, would be more coherent and still a valuable contribution to the field.

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