Book Review: Why Nations Fail- The Origins Of Power, Prosperity & Poverty

Book Title: Why Nations Fail- The Origins Of Power, Prosperity & Poverty

Authors: Daron Acemoglu & James A. Robinson

Publisher: Crown Publishers, New York

Why Nations Fail is a tome encompassing thousands of years of development of the society & how it gave birth to inequality for many & prosperity for the few.  In their quest to answer why some nations fail & others prosper, the authors begin by debunking myths surrounding the success of the nations of the West.  The book reminds us about the theories in vogue that claim to explain the failure of nations like the ideas that “only temperate nations succeed” & others where it’s believed that “nations fail because their leaders are ill-advised thus, better counsel at crucial junctures can change the fate of countries grappling with poverty”.

The book then, tries to decimate such popular theories by proposing an alternate explanation to poverty & prosperity wherein nations fail not because of their geography, culture or ill-advised leaders but, because these societies & nations are mired deep in “extractive” institutions. The institutions of these nations regulating its society, economy & polity are designed such as to maintain the stranglehold of the elites & ensure that the masses toil for the benefit of the few.  Through multiple examples across Africa, Asia & Latin America the authors reinforce the idea that extractive institutions spell doom for any nation, for instance, nations like Sierra Leone, Zimbabwe, Congo & North Korea with their varying geographies & culture failed because of an elaborate set-up of extractive institutions which they either inherited as a result of their colonial past or were imposed on them following wars & revolution.

The book builds on the working of such elaborate extractive set-up where “creative destruction” i.e. innovations that can easily upset the balance of power is frowned upon.  The Ottomans who ruled supreme across modern day Turkey, Mid-East, Balkans & North Africa during the early modern history outlawed the use of printing press throughout their empire for the fear that it’s the source of “subversive” ideas.

Rightly so, printing press invented in the 15th century allowed rapid proliferation of books across Europe. It was probably the first instance in the history of humanity that books were so easily mass produced & were accessible to a larger section of the society. Ideas, experiences & stories originating from disconnected places could easily travel the world. Stories of revolution from England; the Glorious Revolution of 1688 where the English parliament effectively deposed a reigning monarch, James II or later the French revolution of 1790’s that led to the establishment of a republic proscribing the monarchy & decreeing everyone’s equality before the law could easily travel far & wide. The rulers of the Ottoman lands knew well that vivid stories of such revolutions unfolding in Western Europe could someday inspire its own disgruntled subjects & hence, printing press was never allowed.

The Sub-Saharan societies with competing tribes had one of the most egregious versions of extractive institutions where “all the land under the sun belonged to the chiefs”.  The masses toiled on the land only for the benefit of the chiefs. With no provision of “private properties” the people never saw any benefit at innovating new methods of farming or even adopting new techniques introduced to them through centuries of European contact. Simply put, the people knew, any excess produce would be appropriated in the name of the local chief. Hence, there was no incentive at innovating.  With the Atlantic slave trade peaking in the 18th century, the African chiefs started trading slaves for rifles & gunpowder engendering a whole new era of slaving & warring across Western Africa.

There’s a very important pattern here, on one had the extractive institutions of these tribal lords ensured that the masses saw no benefit in innovation & thus, were to always remain a relic of the past. On the contrary the rulers themselves were very open to innovations that could benefit them. Throughout the 18th century the African chiefs thrived on war economy until trans-Atlantic slavery was abolished  in the 19th century.  The chilling regularity of civil-wars & armed revolts across Africa is a legacy of these extractive institutions created by the tribal chiefs, perfected by the colonial regime & finally being put to good use by Mugabes of Africa to this day.

So, how did Western Europe set itself on a path to prosperity?

According to the authors, it was the way institutions devolved across Europe first limiting the arbitrary powers of monarchy slowly inching towards more inclusive representation in form of constitutional monarchy & finally full-fledged republic nation-states that set them apart.

The authors view the Black Death of the 13th century that wiped nearly half of Europe’s population as a defining moment in Europe’s history. The age-old institutions of monarchy, clergy & large landowners who’ve colluded for centuries to engender their own set of extractive institutions that exploited the masses crumbled within years. The affliction opened paths for the peasants to demand higher wages from the landowners in light of extreme shortage of workers. The following decades saw wages of peasant appreciate across Europe.

The discovery of Americas opened a new avenue for mercantilism for Western Europe. The monopoly of Spain, Portugal later France & England in exploiting the Native American states & in trans-Atlantic trade produced extractive institutions across Latin America but, ironically fuelled rapid industrialization & institutional devolution across Western Europe. This is where Western Europe finally diverged from its eastern counterpart. The Black Death did help loosen the stranglehold of landowners over the peasantry for a few decades but, with no further impetus & incentives the progress was soon reversed across Eastern Europe.

It’s worth mentioning, not all revolutions produce benign results for societies. For every French Revolution there’re numerous insurrections across Africa, Latin America & Asia where those who fashioned themselves as revolutionaries later usurped power for themselves. The Bolshevik Revolution in Tsarist Russia in 1917 that ostensibly wished to build a socialist country on the teachings of Marx itself mutated into a society with worse stratification than the one it succeeded.

One of the themes that’s often reiterated by the authors is the concept of “creative destruction” wherein innovation that disrupts the status-quo & allows upward mobility for the wider society is the key to success for nations.  As an example, the Soviet Union that was often seen as an alternate model of development by many crumbled because creative destruction was frowned upon by the Communist Party. Soviets rapidly developed well-until the 60’s as they were forcibly re-allocating resources from farmlands to industries. Once, all the catching-up was done, Soviet Union had no new innovations to sustain the growth.

China although more inclusive than the erstwhile Soviet regime follows the pattern often seen in other extractive nations where large private enterprises exist so long as they obediently submit themselves to the Communist dispensation. The authors presciently predict that China may eventually meet the fate of Soviet Union unless it gives room to creative destruction.

As a whole, Why Nations Fail is a must read for those who wish to understand why a handful of them prospered whereas the others continue to languish through the jargon of the authors; creative destruction, extractive institution, virtuous & vicious cycle to name a few.  Although an engrossing read however, at times you might feel lost in the barrage of historical examples stretching over thousands of years. If you can cope with this, the book would certainly set you on a path to alternate reasoning behind how nations behave.

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