Rating: 9/10

About The Authors

Daron Acemoglu and James Robinson, two esteemed economists and University professors, are the Authors of Why Nations Fail and The Narrow Corridor. 

Their combined expertise and extensive research have led to this seminal work, underscoring political institutions’ pivotal role in shaping economic outcomes. 

Their research has significantly influenced the discourse on development economics, offering insights into how institutional frameworks impact the success or failure of nations across diverse historical contexts.

Brief Summary

Acemoglu and Robinson posit that economic and political institutions are the key determinants of a nation’s success or failure.

“This book will show that while economic institutions are critical for determining whether a country is poor or prosperous, politics and political institutions determine what economic institutions a country has.”

Acemoglu and robinson, why nations fail

Drawing on fifteen years of research, Acemoglu and Robinson prove their theory of why nations fail by distinguishing between extractive and inclusive institutions and examining how institutions shape a nation’s economic and political path.

They argue that inclusive institutions, which promote innovation, incentives, and creativity, are pivotal for fostering long-term prosperity and societal development. 

“Inclusive economic institutions create the incentives and opportunities necessary to harness the energy, creativity, and entrepreneurship in society. Extractive economic institutions do not.”

In contrast, extractive institutions, which concentrate power and resources on a select few, impede sustainable economic growth and perpetuate inequality. 

“Nations fail economically because of extractive institutions. These institutions keep poor countries poor and prevent them from embarking on a path to economic growth.”

General Thoughts

Since visiting Lebanon earlier this year, I’ve been keen to understand why some countries enjoy economic prosperity while others struggle. 

According to the World Bank, poverty in Lebanon has increased from 12% to 44% over the past decade. Moreover, from 2019 to 2021, the country’s GDP dropped from USD 52 billion to USD 23.1 billion, and the GDP per capita was reduced by 36.5%.

I quickly learned that while several factors contributed to Lebanon’s economic crisis, the most significant was widespread political corruption.

After my trip to Lebanon, I sought to explore why any government would continuously allow their nation’s economy to tank and, consequently, their citizens to become poverty-stricken. 

To learn more, I began reading books on economics, particularly focusing on macroeconomics. 

I first read Poor Economics by Banerjee and Duflo, followed by Economic Facts and Fallacies by Thomas Sowell. 

Eventually, after receiving multiple recommendations, I finally read Why Nations Fail, which (out of all the books read so far) greatly enhanced my understanding of why some countries achieve economic success while others do not.

Reading Poor Economics and Economic Facts and Fallacies before Why Nations Fail made the book more enjoyable.

My prior knowledge enabled me to engage effectively with the book, think more critically, and fully understand the various layers of poverty and prosperity.

In particular, I noticed an interesting contrast between Thomas Sowell’s, Acemoglu’s, and Robinson’s opinions on poverty in the world.

Conflicting Thoughts

In the last chapter of Economic Facts and Fallacies, Sowell argues that poverty in third-world nations can be influenced by geography, cultural characteristics, and a lack of law and order rather than exploitation and colonization.

“What is important is to understand that geography alone is enough to preclude any inherent economic sameness or equality among peoples or nations from being used as a benchmark or general presumption that would lead us to be shocked that there are differences and to look for mysterious or sinister reasons for those differences.”

Thomas Sowell, Economic Facts and Fallacies

Conversely, Acemoglu and Robinson refute Sowell’s arguments in the first chapter of Why Nations Fail, asserting that geography and cultural norms play a minor role in a country’s economic status. 

Furthermore, Acemoglu and Robinson propose that a nation’s financial and political destiny is determined by its institutions. Some are inherited through colonization, as in the case of Zimbabwe, while others are created due to critical junctures, as in the case of England.

“Countries become failed states not because of their geography or culture, but because of the legacy of extractive institutions, which concentrate power and wealth in the hands of those controlling the state, opening the way for unrest, strife, and civil war.”

Acemoglu and Robinson

The debate surrounding the importance of geographical location for a country left me somewhat at a crossroads.

On the one hand, I understand why Acemoglu and Robinson argue against the theory that geographical location isn’t an adequate explanation for impoverished nations.

For instance, the authors compare South and North Korea, which share a similar geography, and South Korea is significantly more progressive and economically better off than North Korea. 

It’s clear that although the two nations are geographically similar, they vastly differ in political and economic institutions. Consequently, the countries have achieved different economic outcomes.

Nonetheless, I’m still not entirely convinced that geography isn’t a viable explanation for a country’s lack of economic output and growth.

For example, countries primarily affected by climate change, like Madagascar and Sudan, are highly prone to climate disasters, which affect infrastructure and agriculture and exacerbate poverty and food insecurity.

Conversely, a country like China, which has one of the largest agriculture sectors in the world, although not entirely exempt from climate disasters, is in a much more geographically privileged position than Madagascar and Sudan.

Unlike Madagascar and Sudan, China has greater access to resources (like iron ore and coal), a better climate to help support agriculture activities, and is strategically located in East Asia, giving it greater access to other nations for trade. 

In contrast, Madagascar and Sudan’s geographical location and other factors impede their ability to sustain an agriculture industry. For example, Madagascar is an isolated island, and Sudan is landlocked, making it costly for both nations to trade.

Furthermore, as stated earlier, Madagascar and Sudan experience unfavorable climates, resulting in frequent floods and droughts. These conditions make it difficult for the agriculture sector to flourish and impede economic success.

While I fully agree that political and economic institutions play a more prominent role in economic output than geography, many third-world countries still face undeniable limitations due to their geographical location. Consequently, these geographical limitations can significantly influence a nation’s economic success or lack thereof.

Conclusion

As someone who loves learning about world history and economics, I thoroughly enjoyed reading Why Nations Fail and recommend it to everyone.

At worst, Why Nations Fail makes for a great history book. 

At best, it evokes readers to think more deeply about the profound impact of embracing creativity, innovation, and inclusivity on a nation’s economy. 

Why Nations Fail provides a fresh perspective on economic and political institutions and challenges your preconceived notions, stimulating a new way of thinking about the forces that shape our future. 

By understanding how different factors can aid or impede a nation’s ability to create sustainable economic growth, we can start working toward helping all nations become inclusive (or at least as inclusive as possible) and begin the journey toward alleviating global poverty and fostering innovation.

If you want to read this book, you can purchase your copy here.