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WHY NATIONS FAIL-Book Review

By | on May 8, 2015 | 0 Comment

chinese builders on bamboo scaffoldingWhy Nations Fail Is a remarkable book by Darren Acemoglu and James Robinson on the nature and causes of state failure, a topic which has been getting increasing attention by the students of social sciences particularly of political economy and international relations. Their main thesis is that the states do not fall apart overnight; the seeds of their destruction are sown deep within their political institutions. Their failure is by design as they are ruled by elites who benefit by destroying incentives, discouraging innovations, sapping the talent by creating a tilted playing field and robbing them of opportunities through the help of extractive economic institutions ably supported by the political institutions.  Recently, in an article in the Foreign Policy the authors gave a gist of their findings in the form of set of ten reasons why certain countries fail or fall apart blaming the deeply flawed political institutions and equally flawed “extractive” economic institutions, both captured by a predatory elite which is bent upon squeezing the resources of the country for their own benefit. In their words, “these institutions are not in place by mistake but on purpose. They’re there for the benefit of elites who gain much from the extraction—whether in the form of valuable minerals, forced labor, or protected monopolies—at the expense of society.”

In their above article Acemoglu and Robinson have illustrated their arguments with the help of examples from current and past performance of the different states and have enumerated the following ten reasons for the failure of a nation state to take full benefit of its potential and ultimately fall apart;

  1. Lack of Property Rights which serves as a disincentive for wealth accumulation and hard work in North Korea.
  2. Forced Labour, particularly of students used for cotton plantations in Uzbekistan
  3. Tilted Playing Grounds of South Africa whereby black population gets preferential treatment in the job market and state bounties
  4. Big Men Get Greedy like they did in Egypt where they virtually controlled all the sources of wealth creation
  5. Elites Block New Technology, a very telling example of Austria of 1850s which refused laying of railway lines fearing that it would create conditions like French Revolution. On the other hand UK introduced railways at the same time not only at home but also in her colonies and reaped the benefits
  6. Law and Order, absence of which as witnessed in Somalia results in civil war and deterioration in living standards
  7. Weak Central Government which is unable to control non state actors who create difficulties in provision of civic amenities and promulgation of property legislation-case of Columbia
  8. Bad Public Services witnessed in the Peruvian provinces
  9. Political Exploitation by the Iron law of oligarchy which is in operation in Bolivia
  10. Fighting over Spoils-Sierra Leone, constant struggle for power for getting the spoils

Interestingly while the authors have given examples of ten cities to illustrate their theory of state failure due to the interplay of extractive institutions and predatory elites, they stress for an effective centralized state to have a prosperous economy which is dependent upon law and order, an effective legal framework, a fair disputes resolution mechanism and provision of basic public goods. It is indeed a book worth keeping at your bedside table for frequent reading

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