Co-authored in 2012 by two U.S.-based academics, Daron Acemoglu, an economist at MIT, and James A. Robinson, a political scientist from Harvard University, “Why Nations Fail” is an ambitious book that seeks to explain why some nations fail and others succeed. The basic premise to their thesis is simple: Inclusive institutions leads to democracy and prosperity while institutions that exclude large segments of society from political and economic inclusion leads to authoritarianism and lack of prosperity for the majority of citizens.
The authors do a masterful job of explaining why inclusive institutions are a necessity for creating free and prosperous societies, but less so in explaining whether considerations such as culture and geography were and continue to be important factors in creating inclusive institutions.
THE IMPORTANCE OF CREATING INCLUSIVE INSTITUTIONS
As the authors correctly point out, inclusive institutions allow competing groups to come together, giving everyone a stake in the nation’s political and economic system. This keeps any one class or interest group from dominating the system at the expense of other groups. Thus in England, to take one example, the Glorious Revolution (1688) meant that the monarchy would be obliged to share power with other segments of society. This did not turn England into full democracy, but the road to liberal democracy was slowly being built. There would be further reforms down the road, especially in the 19th century with the passage of numerous reform bills starting with the Reform Bill of 1832 (extending the right to vote to a greater segment of society).
Inclusive institutions also lead to inclusive economies. And as more groups are brought into the economy, these groups eventually gain political representation. The benefits of building inclusive institutions are numerous. Education is promoted and spread to the masses, the rule of law is developed which means no ruler is above the law, but equally important, the rule of law also creates contractual and property rights for all citizens regardless of class. All this leads to technological and scientific progress as citizens seeking to become the next Thomas Edison or Graham Bell use their ingenuity to make personal fortunes. These inventions in turn serve society as a whole. Think of what electricity did for America or steel for Great Britain. Inclusive institutions also make credit available to everyone through laws creating financial institutions.
Most importantly, the authors point put that in societies with inclusive institutions, the state has a monopoly over violence with regard to its territory. Citizens are not permitted to have private militias as was the case in Lebanon during that country’s long civil war. Citizens are expected to redress personal disputes before the courts and political process. Individuals enjoy living in a safe environment, which in turn permits civil society to develop.
The authors correctly stress the role that a free press plays in promoting inclusive institutions. We see it in the American Revolution where the press played a pivotal role in promoting democratic governance and self-rule, to take but one example. A free press brings to light abuses by the government, not to mention abuses by segments of society pursing self-interest at the expense of the greater good.
Lastly, the book correctly points out that building inclusive institutions takes decades of political development, if not centuries. It took, for example, almost a century to end slavery in the US, while most women in the West were only given the right to vote in the 20th century.
THE NATURE OF EXTRACTIVE INSTITUIONS
The authors explain that extractive institutions are the complete opposite of inclusive institutions. Extractive institutions are about exploiting a nation’s wealth for the benefit of a small group of people: The greatest good for the fewest members of society. The purpose of extractive institutions is to maintain political and economic power in the hands of the few, what we often refer to as elites. These elite groups include Monarchs (Saudi Arabia) and Communist parties (contemporary North Korea and the former USSR), to name just two. Other examples of extractive institutions include Latin America, where European elites excluded indigenous groups and descendants of African slaves from participating in the political and economic process through institutional exclusion. These groups were in effect marginalized and denied basic rights like redress before the courts for brutal injustices committed against them. And of course they were excluded from the political process all together making them second class citizens in their own countries. This unfortunate phenomenon was also true in Africa where European colonizers exploited the continent’s abundance of natural resources while reducing the local populations to near starvation. Sadly and tragically, these European rulers would eventually be replaced by African despots who would go on to behave even more badly than their colonial counterparts. These homemade dictators, many of whom were educated in the West, would continue the exploitation of the many by the few but for their own personal gains, in other words: A “Made in Africa” kind of exploitation. In the end, Africans continue to suffer because of the lack of inclusive institutions that neither tribal nor European colonial rulers failed to develop. But as the authors point out, there were exceptions, Botswana being the most impressive. This country in southern Africa has a tradition of inclusive tribal institutions which explains why Botswana is today one of Africa’s most democratic and prosperous countries. But not only did Botswana have inclusive institutions, it also had brilliant tribal leaders who made a deal with their British. The Brits were basically permitted to build their coveted railway while leaving the local inhabitants a free hand in how they ran their affairs. These inclusive tribal institutions would then be incorporated into a free and independent Botswana once the Europeans were kind enough to leave.
But extractive institutions did not just develop in Africa and Latin America. The United States had their own extractive institutions throughout much of its history and right up right up till the mid-20th century. Starting with slavery, blacks were excluded from America’s political and economic systems whether as slaves or free citizens. This exclusion continued right up till the passage of the Voting Rights Act in 1965, something for which the Johnson administration should be forever remembered and praised for. Slavery, meanwhile, was abolished with the passage of the 13th amendment in 1865, but the southern states that made up the old Confederacy would subsequently pass what came to be known as the “Jim Crow” laws. These laws effectively denied blacks basic human rights in both the political and social spheres, in effect excluding them from participation in civil society. Call it American Apartheid as opposed to American Beauty. This situation would only start to change in the 1960s once the US Supreme Court finally rendered decisions effectively outlawing discrimination. This legal development coupled with the Federal Government’s courageous (LBJ again) decision to enforce the Supreme Court’s cases on expanding civil rights meant that blacks would finally be included in America’s democracy as equal citizens.
THE ROLE OF CULTURE AND GEOGRAPHY
Let’s first look at the issue of culture. The authors essentially maintain that culture is unimportant in determining whether societies become democratic and prosperous. They point out that societies that were once authoritarian and poor are today increasingly becoming prosperous and democratic. Brazil is one example. This book has a feel good element to it by de-emphasizing any role that culture might have. There’s a certain egalitarian spirit to this work. But unfortunately the issue of culture is not a topic that the authors spend much time on. This does not mean however that they’re wrong. It’s very possible that culture plays a minor role. But the authors could have provided more examples to prove their point. Perhaps this could be done in a 2nd edition or in a new title all together. Wanting to believe something is not the same as actual evidence.
The issue of culture raises many questions. Why for example is northern Europe so much more prosperous than southern Europe? Of course one can’t talk about culture without bringing up the thorny issue of religion. Why for example are Middle Eastern societies lagging behind in political and economic development in comparison to their Asian counterparts? Is it because of sectarian divisions, especially between Shias and Sunnis? Or is it because of a lack of political leadership? Are Buddhist societies more prone to developing inclusive institutions? The Cultural Revolution in China led to mass starvation and slaughter of millions. But China changed, at least economically. And countries like South Korea and Taiwan have gone from authoritarian systems to free and democratic ones that are among the most prosperous in the world. Why were these two states able to build inclusive institutions compared to their counterparts in the Middle East?
Another sensitive issue not touched upon by the authors is the question of ethnic homogeneity. Is it easier for states with homogeneous populations to build inclusive institutions? South Korea, Japan, and Taiwan all have relatively homogeneous populations, and all three have experienced economic and political development on a scale that makes them among the wealthiest nations in the world. A counter argument could be made, however, if we look at other homogeneous nations like Albania and North Korea. All two of these states are relatively poor despite being ethnically homogeneous.
Let’s now talk about geography. Are countries blessed with natural resources actually cursed? One has only to only think of states like Nigeria, Saudi Arabia, Venezuela, and Russia, where economic dependence on commodities has led to neither democracy nor prosperity for the many. In fact, successful states like Singapore, Taiwan, Japan, and South Korea are all lacking in natural resources. Did this mean that the rulers of these different countries had to develop their respective societies’ human resources instead? The authors don’t discuss the issue of natural resources and what role it plays in the development of inclusive institutions. Didn’t blood diamonds in Africa allow African dictators to enrich themselves at the expense of creating inclusive institutions?
In his excellent book called “Guns, Germs, and Steel”, UCLA anthropologist Jared Diamond presents the argument that a people’s location on a map has major importance for how it developed. Some states are lucky. They’re created in parts of the world that have rich soils, forests, and an abundance of fresh water. But what happens to societies that developed in semi-arid parts of the world, whether in Australia with regard to the aboriginals or in regard to sub-Sahara Africa? This is something that the authors fail to discuss in any significant manner. Isn’t it possible that societies cursed with bad soils and climate faced an even bigger challenge when trying to build inclusive institutions? Does the presence of bad soils and lack of water still continue to hamper the creation of inclusive institutions?
The other issue completely ignored by the authors is any consideration of location. Is it possible that where a country is located influences whether it develops inclusive or extractive institutions? Does being next door to Russia explain why Ukraine has not become as prosperous and democratic as Poland, a country that borders the EU? And is it possible for a state like Lebanon to develop inclusive institutions when it’s next door to a failing and disintegrating state like Syria?
SOME CONCLUDING THOUGHTS
The authors point out that while China has successfully used extractive institutions these past 4 decades to develop its economy and lift millions out of poverty, prosperity cannot continue without the Communist Party relinquishing some of its power by developing inclusive institutions. In other words, the Communist leadership needs to introduce democratic reforms as we experience them here in the West. Is it possible however that there exists a different model? The Singapore model is what the respected US journalist Robert D. Kaplan calls soft authoritarianism. This model of governance is based on the principle that all ethnic groups have a place in a nation’s economic and political development. Singapore is today one of the wealthiest states in the world. The three major ethnic groups all share in the nation’s prosperity and participate in the nation’s political system. Kaplan even believes that this soft authoritarianism as he calls it may eventually lead to liberal democracy. Is this not quite possibly the model that China might end up following? Or are the authors simply too biased by western values to even consider this? In any event, Singapore is not even discussed by the authors in any significant manner. As the authors correctly point out, African societies (Botswana) with a tradition of inclusive institutions are currently experiencing democracy and economic prosperity. Is it possible that the Singaporean model is an example of inclusive institutions indigenous to Asia that developing countries can or should borrow from?
Another issue the authors should raise in any sequel is to what degree societies with inclusive institutions experience decay. The United States Congress immediately comes to mind. Once known as the people’s house, the majority of its members are today millionaires supported and harassed by legions of well financed lobbyists representing the interests of special interest groups. Or should we call them elites? Another example is the near financial meltdown almost experienced in the first decade of the 21st century. How was it that the media was oblivious to the events leading up to this crisis? The authors stress the importance of a free and independent media in building inclusive institutions while failing to recognize that today’s media has become both sterile and clueless.
The authors no doubt hope this book can serve as a roadmap for nations seeking to become more prosperous and democratic. They rightfully point out that building inclusive institutions takes time. Perhaps a page or two should have been dedicated to the last US invasion of Iraq and the chaos that ensued and that only seems to be getting worse. Iraq seems to be disintegrating because the nation is divided along sectarian lines that make building inclusive institutions extremely difficult. In other words, it’s difficult to export inclusive institutions though not necessarily impossible.
This book should be read by policymakers, politicians, and citizens interested in understanding how societies either prosper or decay, but only if readers consider all the questions left unanswered by the authors. At well over 500 pages, this book is a long read and at times repetitive. The authors will hopefully produce a sequel that will attempt to answer some of the questions that remain unanswered. In particular, the following three questions needs to be addressed. Firstly, were geography and culture historically responsible for preventing societies from developing inclusive institutions? Secondly, assuming the answer to the first question is in the affirmative, do geography and culture still matter in the 21st century what with the advent of science and technology? And lastly, what does it take to develop inclusive institutions in societies divided by ethnicity, religion, and tribalism?
