Why economies fail

Published daily by the Lowy Institute. Looking to past examples of state collapse offers a predictive guide to why nations will fail in the future. The same authors also released a new book, The Narrow Corridor , in Why Nations Fail posits that the relative success of nations is due not to geography, culture, or ignorance, but rather is due to how inclusive their political institutions are.

The more inclusive their political institutions, the more inclusive their economic institutions will be. Inclusive economic institutions economic policies that redistribute wealth and democratise the means of attaining wealth result in an empowered body politic. As the barriers to creative destruction are removed and property rights are protected, the invigorated population invents and invests. Common forms are monopolies, slavery, serfdom, and feudalism. As wealth and power is concentrated, the ability of the holders of power to propagate and enforce these institutions increases.

Elites, not accountable to the population, create and protect monopolies and resist any threats, such as creative destruction, to their supremacy.

Policies that are inimical to the prosperity of the state are enacted. This enervates the population away from invention and investment, as the inevitable seizure of assets by the state make such pursuits abortive. Acemoglu and Robinson employ a plethora of historical examples in support of their argument. These examples make up the bulk of pages. In citing the Western European example of why the industrial revolution occurred in England, they argue that the comparative weakness of the English crown, as compared to the Spanish and French crowns, led to the English crown having to cede powers to the parliament through the English civil war and Glorious Revolution.

Parliament, being a more inclusive institution than the alternative of absolutism of the divine right of kings, enacted policies that abolished monopolies, and granted and protected private property rights. The mechanism through which this was assured, the authors argue, is that parliament was accountable to the people, and so people voted for a parliament that benefited the majority.

The population then pursued invention and investments with surety, resulting in the industrial revolution. The first reaction to this argument is to point out the flaws in the theory lack of voting rights for women; only the wealthy, educated elite would vote or could get elected to parliament; susceptibility of people to rhetoric.

However, these flaws are not fatal if cognisant of the alternative, the absolutism of the crown. There are, however, two critiques of Why Nations Fail , and one seemingly unintended consequence that can be deduced from the book. What on Earth is the story of Pocahontus doing in this book? And the part on the ancient Maya is a joke. But one of the big criticism s of the institutionalists is that it's all buzz words, and when things go right credit good institutions, and when things go wrong they blame bad institutions, and they have no concrete understanding of what elements of a nation's institutions matter, or advice for what to do to improve things.

Alternative books that cover some of the same ground: If you're interested in development, I recommend "Poor Economics". I'd like to recommend something on the institutions v. I'd say William Easterly "White Man's Burden" does a little better job at making the thesis relevant, but I'm not a huge fan of him either. And I can't really recommend anyone actually read Jeffrey Sachs.

The first chapter in "Poor Economics" goes over things a little. The key argument of the book is that a country's prosperity is determined by its economic institutions mainly property rights laws, the free market and political institutions free media, free elections.

A country is poor because it does not have institutions to protect property rights and, consequently, people don't have motive to save, invest, or innovate. Economic prosperity requires inclusive political institutions that protect property rights. Inclusive political institutions ensure a pluralistic society with various interests protected by laws and these institutions protect people from extractive practices of a few elites.

The criticism of this institutionalist approach is that it plays down the role of nation building. China is the most frequently cited example by critics. Though the country has a relatively free market, it does not have any political institutions that can be remotely called "inclusive". Despite this, it has had an impressive economic growth in the past 40 years.

In comparison, India--a country that has free market, the rule of law, and free elections has a much slower growth than China. Many people contribute China's success to a strong state that provides a foundation for growth. This argument is made by Francis Fukuyama in his two volumes on political development and political decay, who, in my view, provides a much more convincing argument in his theory of political development.

So, if you have to read one book, read Fukuyama. One of the best book I have read. I plan to listen at least one more time on this book! As has been said - repetitively - by other reviewers, this is a very repetitive book. And not just thematically. It's still quite interesting especially when they zoom in on specific histories, like with Botswana, Uzbekistan and Brazil, about which I knew nothing and I kept going to the end, but the Grand Theory being espoused doesn't seem all that remarkable, unfortunately.

It can be summarised as: If your public institutions are strong enough to stop the gangsters from getting in charge, you're probably going to be okay, if not, you're screwed. So, not bad, but not brilliant either. Did I mention it's repetitive? Breathtaking sweep across time and geography, flying along on the coat-tails of a theory that is so intuitively acceptable that it almost makes you say 'duh'.

A society's institutions, extractive bad or inclusive good explain the wealth of the society and the health and happiness of the common man and, if you are really lucky, woman. I hated history at school because it didn't explain: just one damn thing after another. This does, right up to the end where they use their theory to predict the future success of current societies.

It explains why 'state building' e. The UK a pioneer in modern state building got properly started on the process in , brought in universal education in about and gave women the vote in Mind expanding book. Daron Acemoglu and James Robinson may well have done for political economy what Facastaro, Louis Pasteur and others who proposed and proved the germ theory did for medicine.

Before them there was confusion, after their work was accepted medicine made rapid progress in delivering real and effective treatments and winning the battle against disease. Acemoglu and Robinson's theory of inclusive political institutions as being the key difference between the wealth and poverty of nations not only rings true, but their trip around the world repeating history through the lens of the theory makes a compelling case.

My main criticism is that the authors, like most academics and politicians went some way to critique the work of Jarred Diamond, David Lownes and others. My knowledge of the world is that whilst there are often dominant factors, there are seldom exclusive factors in explaining outcomes in complex systems. And whilst the theory is effective at explaining much of the variation in wealth in the modern world e.

Why the US is richer than Brazil it does not explain everything e. Just as germs don't cause every type of sickness. Despite this it is an outstanding book, compelling read and must reading for politicians, economists, charities and others who shape national policy. Interesting only as a history book. The assumptions of the writers are in most cases based on an one sided interpretation of historical events and they are missing some very obvious points.

The reflexion is weak and unconvincing, thus the authors resort to an aggressive and patronizing rhetoric to dismiss other theories regarding the disparity between nations. Although they would have us believe that we are responsible for our own misery or prosperity because of the institutions we live by, they then admit that there is no reason for one set of institutions to appear in one place rather than another, their explanation being a parallel between their theory and evolution, small institutional differences brought forward by crisis.

Whatever argument worth mentioning could have been said in a few paragraphs the fact that the authors are so pleased with themselves render the all experience rather unbearable. The scope and depth of the book are immense.

The points are made using dozens of different detailed examples from history. It is also an in depth study of corruption.

I would strongly recommend this book. This is a very informative and well written book. It's long because it incorporates many actual histories and examples to illustrate its points.

It is a little dated in parts because time moves on , for example, it holds Brazil up as an example of a society which has transitioned from an extractive to inclusive regime but we know now this is not, in fact, the case. Overall though, it is a good read. If you could sum up Why Nations Fail in three words, what would they be?

The core idea is brilliant. The examples from world history are fascinating. The discussion of past theories on the subject are thought provoking. What was one of the most memorable moments of Why Nations Fail? When in the UK the elites were whigs and Tories, they actually decided to live by the rule 'of' law. This was because of the history in regard of the the fact that the ECW and glorious revolution were revolutions against absolutism, as opposed to just another elite.

It was also because of the fact that there were now many more paws in government, so it was harder for the Whigs not to just become another set of elites. Which character — as performed by Dan Woren — was your favourite?

Was this a book you wanted to listen to all in one sitting? Any additional comments? It might help if the reader knew the basics of English history. Why Nations Fail is one of the most thought provoking books I've ever listened to. This book explains in detail the reasons why we see the world as it is today. British, and in particular English creativity and entrepreneurism are at the heart of the story and describes how the actions of those people who wrestled power away from English elite society in the 17th century changed the face of the world for ever.

Well worth a read if you want to know why the USA succeeded to become the most powerful country in the world and didn't end up as just another failed state. Compares states as if only one factor is affecting their failure or success. Does not go deep into the issues of each state. So I'm half way through and I'm a bit torn about this book. While I mostly find myself agreeing with the author's premise, the book itself is pretty myopic andas a result, boring.

The book can basically be summed up as 'free-market, liberal democracy is the best, it keeps elites in check and creates all the advantages of the West'. That's fine but the author doesn't set out to uncover the evidence for this, how it works, how it developed etc. Alternative explanations for broad historical trends are brutally straw-manned or dismissed with shameless fallacies in a totally unnecessary exercise at the start of the book in order to make the author's thesis appear to be the singular grand explanation for everything.

On top of all this, the narrator is really boring. It covers the same ground and actually reaches broadly the same conclusions but does it in a much more comprehensive, informative and honest way. The book does contain a lot of good material though. I'm pretty much concentrating on the downsides here, it's probably worth a read maybe as an introduction to this kind of subject, but it shouldn't be mistaken for a history book, it's an agenda driven exercise in support of a particular set of ideas.

This is an academic book with a serious treatment of its subject, but the explanations are clear and well presented. The authors use examples from countries around the world and through history to show consistent patterns in success and failure. The encyclopedic examples bring the book alive. As you follow the developing argument, you also develop political and economic understanding of countries you are familiar with.

The authors' predictions about the future of the Chinese economic miracle are particularly challenging. It's a long audio book, but never tedious. Dan Woren's voice is pleasant, and he sounds like he knows what he is talking about.

If I had bought this on paper, it would probably still be on my bookshelf with a bookmark in chapter 1. As an audio book on my phone, it fits my busy life. If you want to learn about what real democracy is and when it succeeds and fails read this book.

The best book I have read Listened to twice and i guess i will do so again What we can learn from history! A very well researched and thorough undertaking of the subject. Perhaps a little long as it took me a long time to get through it.

Worth the perseverance. Amazing insight into economic histories from countries around the world and how they shaped our current nations. Not always an easy read, and the key points at times seem laboured, but this is a compelling theory of the causes of sustainable national prosperity. In my opinion far more convincing than what has been proposed by other authors on the topic, including Diamond, Bernstein and Landes. I learnt a lot in this book. I didn't know much about why some countries were more successful than others, but this book makes a very strong case that I don't think I could refute, and I'd love to hear someone try.

I really enjoyed this book which looked deep into the root causes of poverty and failure of nations to develop. Well researched and reasoned and its clear that corruption and extractive institutions destroy countries. Great book, very informative, fabulous theories. I loved listening to it, finished in less than a month. Add to Cart failed.

Please try again later. Add to Wish List failed. Remove from wishlist failed. Adding to library failed. Please try again. Follow podcast failed. Unfollow podcast failed. Stream or download thousands of included titles. Narrated by: Dan Woren. No default payment method selected. Add payment method. Switch payment method. We are sorry. We are not allowed to sell this product with the selected payment method.

And we are doomed to keep learning these lessons over and over again? To me, it's not it's not really a matter of knowledge. You know, if you ask me about why did ancient Athens boom economically? I think the emphasis in the book is very much on persistence.

We start the book by talking about this famous prediction when the Berlin Wall fell down that all the world was going to converge to liberal democracy by Francis Fukuyama.

But our view is that no, actually, the pattern in history is not convergence, it's divergence. China has been where it's been for to over two thousand years, Yemen, we actually know quite a lot about Yemen going back a thousand years, and it looked pretty like it does now a thousand years ago.

So this is not this is not something…nobody's bouncing about. You're kind of stuck in these very different steady states. You know, these very different types of leviathan. And our story about the history of Europe or how Europe develop these types of shackled leviathan, that's also deeply historically rooted, you know, has to do with the collapse of the Western Roman Empire and the way that these Germanic tribes, which had very participatory political institutions, merged with late Roman state institutions, administrative institutions, legal institutions, fiscal institutions to kind of bring this balance between state and society together.

That's the roots of this thing. That's a long time ago. So actually, there's a lot of what social scientists call path dependence in this process. James Robinson: That once you get a particular constellation of institutions in a society, that does tend to reproduce itself. So that's why you have this divergence, not convergence. Now, of course, it's also true that societies do go out to the corridor. So particularly we talk about the German case.

So I'd mentioned the Germanic tribes. So you might think, okay Germany, Germany should be in the corridor and it is in the long run. But also, if you think about German history, there's clear moments where they went outside to the corridor, think about the Nazi state.

You know, for 15 years, there's a bottom up push out of the state. You know, that's an interesting example of disillusionment with institutions, the inability of institutions to resolve conflicts, to resolve economic problems, the crisis of the depression and the hyperinflation.

What I find super interesting is that you get these very unstable dynamics that can throw a society out of the corridor. But when they crash. You get back into the corridor. Germans after had a a kind of common understanding of how things were going to work and how institutions ought to be structured.

And they were able to recreate this shackled leviathan. They had a blueprint for creating this shackled leviathan. Understanding how you did that from the past, which you know, which nobody in Haiti or Sierra Leone has. And you mentioned that there are certainly some evolutions that are going on and some things that President Trump identified that that arguably got exploited.

James Robinson: I don't think so, because I think the history of the U. People have to make compromises, they have to make new deals, they have to make coalitions. And I think that's what has to happen in the U. And I think the past suggests there's some reason to be optimistic that that will happen.

You know, I think Democratic politicians are probably woken up at this point and realize there are a lot of problems that they weren't very aware of. And I'm you know, I'm even in the Brexit context, for example. I mean, I'm English, you know, and in the Brexit context, I always think, people say, oh, what a terrible thing this referendum was and how David Cameron was so crazy. But actually, I think the opposite is true. You know, what the referendum showed is that there is deep seeded kind of animosities, you know, all those deep seeded discontent about the way many things work that the political elites were not aware of.

Paul Rand: And it is you think about it and we've talked about that. You do travel the world and you lecture. You consult. You speak. Are people looking at you and saying, I want to figure out in my country what I should be learning from? And we bring in economists. We bring in politicians. We bring in scientists. Are you finding that you're consulted and saying, help me understand as I am looking to evolve my society?

James Robinson: Yeah, I do not consult, actually. In the sense of, you know, governments pay me to come and tell them what to do. I had one experience of that and I didn't enjoy it. James Robinson: Because I felt everybody was over promising. You know, my view of the world is if you want to understand how to improve economic performance in Colombia, for example, we have these general ideas about institutions, inclusive institutions.

You have to make institutions more inclusive. But as soon as you're in the business of trying to give policy advice, then all the details become extremely significant. So what you have to do in Colombia is going to be extremely different from what you have to do in Sierra Leone or what you have to do in Argentina.

And then you need a lot of, you know, thick knowledge of those societies. And so I think this business of running around the world telling, Kazakhstan what to do is a fool's game. And I felt extremely uncomfortable personally to be involved in that.

And I've never done it ever since. Actually going and telling people about my ideas and talking to them…. James Robinson: Yes. And for me, I find that incredibly interesting. You know, I want to I think these general concepts are useful, but I always tell them, you know, OK, if you want to think about how to make institutions more inclusive, then you need to start thinking about all these details and trying to identify what's extractive or what works and what doesn't work and what's the politics around that.

And how do you solve these problems. Paul Rand: Well, let me ask you, this is not a consulting assignment, but if you're with students and the question came up with all the knowledge that you have and the question was, well, how do you develop if you're going to start with a clean sheet of paper and design, the perfect society? How would you think about doing that? James Robinson: You know, one of the things that I personally find very enjoyable is all the sort of diversity in the world.

What impresses me about the history of humanity is the incredible diversity of the types of societies that humans have created. I think there's fundamental political and economic problems that people have to solve in these societies, and they solve them in different ways.

You know, because humans are creative and they're innovative and it's interesting if you think about like Homo-sapiens, Homo-sapiens spread all over the world without speciating. They populated Greenland, but there wasn't like a Homo-Greenland-ious or whatever.

You know, well how did they do that? How did they adapt to such a totally different environment without speciating? You know, they invented igloos and ice fishing. So that seems like kind of a wacky example but I think it tells you a lot about why social science is interesting. You know, all those different ways you can do things, cultures and everything, you can still have prosperity. You know, you can still have public goods.

You can still have investments. So all of that variation is consistent with having basic inclusive societies. You know, for us, that's the story. That's the big story is human innovation and creativity. And humans create these very different types of societies and some of them diffuse and spread and others don't. So I think, look, what we would like to do is probably write a book where we could convince people that this was the right way to think about things.

I think we've done bits and pieces of that in these two books, but I don't think we're quite there yet. We don't have quite the right way of doing that yet. Hopefully your new one will follow suit. As you write these books, why do you think that they get the attention they do. What do you. What is it that you were hoping for? How do you think that's happening? Where's the attraction? You know, the language is impenetrable?

The methods are impenetrable. But often, you know, the ideas can be said in quite a simple way. And I think Darren and I, we sort of read everything. We've always been inspired by political science, by anthropology, by reading history, by social, you know, by all sorts of things.