by: Nabila Rhapsodios
According to the book Why Nations Fail: The Origins of Power, Prosperity, and Poverty, the reason some countries are richer than others is not related to their geography, ignorance, culture, or natural resources, but rather to their political and economic systems. People are more likely to invest and have faith in the government and financial system when inclusive institutions are in place, which leads to national prosperity, in contrast to extractive institutions. Inclusive institutions that generate a virtuous capital formation cycle produce innovation, growth, and amicability.
Nations that are politically and economically inclusive allow for "creative destruction." Redistribution of wealth happens when new technology leads to it. Countries that do not have inclusive political and economic systems are called "extractive." Any nation that allows a select few to reap the advantages at the expense of the others is engaging in extractivism. A post-colonial African nation that exemplifies this is Sierra Leone. Another reason these extractive nations won't let creative destruction happen is that it may lead to the downfall of their ruling class. Extractive governments are often behind in technology because they refuse to adopt new technology.
Interestingly enough, the book explains the theory using a wide variety of historical examples spanning over two centuries, including not only the United States vs. developing nations in Africa and traditional Western Europe but also Asia, South America, and Eastern Europe. It gets more interesting as the writers delve into the causes of inequality and poverty and their roots in colonialism and feudalism.
Historically, a limited group of affluent and influential individuals has had the motivation to maintain the status quo. They achieve this by maintaining a misinformed populace (e.g., media manipulation), promoting conservatism ("preserve the existing state"), and deliberately circumventing creative destruction, which is essential for enduring advancement but poses a threat to the status quo and political stability. In these nations, there are no incentives for innovation, as any novel ideas will be appropriated, and in certain instances, may even lead to legal repercussions (e.g., the Dai Guofang case in China, among others).
The stagnation and corruption contribute to increased warfare and create greater incentives for instability and military coups, as authoritarian regimes offer more opportunities for power acquisition. The sole avenue for escape lies in establishing pluralistic institutions through forming a comprehensive alliance during pivotal moments, a fortunate occurrence for Britain just before the Industrial Revolution.
I picked Why Nations Fail: The Origins of Power, Prosperity, and Poverty because it linked to my frustration over my country's government's direction, and it covered several subjects that I was interested in, mainly history and culture. It is a compelling book and has notable strengths worth considering, so here is a positive breakdown I can offer to you, dear readers:
(+)
a. Some economists will treasure this book because its content offers a reasonable basis for discussion and, hopefully, change.
b. I'm an economist layman, but I love the author's text. The text is unambiguous and understandable. The words chosen are easy, easily relatable real-life examples, where, again, as an economist layman, I feel inspired to think about what the future might look like.
c. This book makes strong arguments and provides plentiful insights into the world's inequality and poverty by taking me through the history of each society and culture. I also learned that efficacies of a nation and how inequality that run parallel with it proclines to screw everything. I also learn about how the world has developed countries and third-world countries. Nations' leaders are the ultimate enablers of those situations.
d. The ideas presented inside are worth contemplating since my nation is at a tipping point, with wealth and power flowing increasingly into the hands of the elites. The authors claim this is a recipe for national collapse. The authors contend that the key to development is to have "inclusive" economic and political policies. These policies give a political voice to a large population segment, rather than only to a small elite. As a result, a set of checks and balances tends toward a positive feedback, sometimes called a "virtuous cycle". This virtuous cycle helps to accelerate the tendencies toward inclusiveness and to suppress occasional lapses toward power-grabbing.
Here is a simple negative review of this book based on my observations:
(-)
a. It is a fascinating book, but also overly repetitious, making it a slog to read. It's impossible to absorb any information in this book without reading each paragraph at least twice or more.
b. The authors have done a splendid job of extensive historical research and have spent enough time emphasizing the need for pluralism and openness. Still, they don't mention the effects of external powers that may affect one nation over its own political and economic issues.
c. The authors are too heavily biased toward the economic development of the United States and England and ignore a variety of non-US and British economies.
d. The print is of very low quality.
e. The quality of the paper is inferior, and it's fuzzy at the edges of the pages.
This book certainly has impressive theory, and the authors amass lots of material to justify it. It is well worth reading, even for me, who is not an expert in Economics but enjoys historical anecdotes. However, I wish this book had been trimmed better and some repetition removed. I give this book 8.6 out of 10.
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