Extracting History
“Why Nations Fail: The Origins of Power, Prosperity, and Poverty” (2012) 7 out of 10: is a non-fiction book by Daron Acemoglu and James A. Robinson. The book aims to explain why some nations are rich and others poor, divided by wealth and poverty, health and sickness, food and famine.
The book begins by exploring the origins of political and economic institutions, and the correlation between these institutions and the success or failure of a nation. It argues that the major difference between failed and successful states comes down to their institutions – political and economic. Successful nations are characterized by inclusive institutions, where a broad cross-section of society has a role in political decision-making, as opposed to extractive institutions, where the political power is concentrated and used to extract resources from the rest of the society.
The authors assert that inclusive economic institutions, which provide fair competition where individuals can exercise their talents and skills without undue interference, and secure their rights to property, breed innovation and foster economic development. In contrast, extractive economic institutions, lacking these characteristics, hinder the economic potential of a society.
They apply this framework to a wide variety of historical and contemporary case studies, ranging from the colonial period in the Americas, the industrial revolution in England, to contemporary China and North Korea. The authors show that the ‘inclusive vs extractive’ concept holds valid in diverse contexts, explaining not just the economic disparity but also the patterns of power, innovation, and social issues that exist in different societies.
The authors propose that the key to understanding and predicting the prosperity or failure of a nation lies not in culture, geography, or knowledge, but primarily in the inclusivity and fairness of its economic and political institutions.
The book’s final sections delve into the implications of this thesis for present-day policy and international aid. They argue that providing aid to poor countries often fails to achieve the intended effect of fostering development because it doesn’t address the root cause of their poverty: extractive institutions. Therefore, the focus should shift to creating and fostering inclusive institutions in these societies.
“Why Nations Fail” is an interesting read that provides a fresh perspective on the causes of poverty and prosperity, offering rational solutions for the future. The implications of the book extend beyond economics, affecting how we think about politics, history, and social development.
The Good
The Good: Do like random bits of history? A story about The Incas here and about Sierra Leone there? Well, you are in for a bit of luck. Why Nations Fail is secretly a history book with much of the boring bits taken out and told by someone with a short attention span. This is not a criticism, mind you. Like I say in my conclusion, I enjoyed my time with Why Nations Fail. I might not be buying what they are selling, but I enjoyed the sales pitch.
The Bad
The Bad: I have a bone to pick and honestly, it is a big one. Authors Daron Acemoglu and James A. Robinson feel they have come across the one answer for everything. Part of their sales pitch is to tell us why the other theories (Guns, Germs, and Steel (1997) seems to be thier primary target.) are wrong.
There are a couple of problems with this approach. First is a “the lady doth protest too much” issue. Large chunks of real estate in the beginning chapters and well as the conclusion are spent tearing down others’ work as if this was some sort of Economics Highlander.
Which leads to the bigger issue. It never seems to occur to the authors that both theories could be correct. If you are trying to lose weight, you are influenced by both the food you consume and your activity level. While one can ignore activity level when dieting and focus entirely on calories consumed, both have an influence on the results. It is the difference between a cause and a contributing factor.
To use a real world example, if you were to state that Janet Reno’s crusade against redlining and racist policies in mortgage lending caused the 2008 housing collapse, you would be labeled a racist. But if you were to say the banks’ reactions, lending changes, and settlements with the Justice Department during the nineties were a contributing factor to the 2008 housing crisis, you would be labeled an economist.
There are a few chapters that highlight the Spanish Conquistadors invasion of Aztec and Mayan lands and compare and contrast it to the English colonization of the Americas. Among the various things pointed out is that the North America’s lack of gold and a scattered native population that was disinclined for slavery created very different circumstances for the English than the Conquistadores who had plenty of gold and took over institutions already engage in forced labor.
This is fine, but the chapters would fit comfortably in Guns, Germs, and Steel. The difference between the two was not the nature of whether they were trying for extractive institutions. (Both were). The issue was the reality on the ground. The English made the best with what they had.
Why Nations Fail’s conclusion is that therefore North America is so rich and the former Spanish colonies are so poor seems to be a decent one. But again, it seems to downplay the fact that America was blessed with amazing natural resources and a fertile and underpopulated land.
I like their theory. If I were to run or start a new country, their blueprint for success would be at the top of my reading list. But there is a reason that human civilization as we know it flourished in the Fertile Crescent rather than the Alaskan tundra. And it was not because of the type of institutions involved.
The Ugly
The Ugly: So authors James A. Robinson and Daron Acemoglu set up a website with a blog after the book’s release to “Continue the discussion”. Wikipedia notes the attached blog has been inactive since 2014. The website is more than inactive, however. It was apparently bought by the owners of www.soulmatesketch.com and forwards right to them. So if you are looking for the author’s opinion on the outcome of the Arab Spring or the collapse of Venezuela, you are out of luck. However, if you are in the market for a soulmate, we got you covered.
In Conclusion:
In Conclusion: One advantage of revisiting a book that portends various disasters ten years after it was published is one can easily see how well it has done. Why Nations Fail: The Origins of Power, Prosperity, and Poverty doesn’t do well by this measure. Most glaring is its firm prediction of the rise of Brazil and the continued failure of Columbia, all the while seemingly oblivious to Chavez’s Venezuela sailing straight off a cliff.
Why Nations Fail’s bold prediction that China is headed for the same fate as the Soviet Union has had some green shoots of late. (Demographically, China is facing an aging and depopulation crisis like most of Asia). But in reality the economy is still growing as far as one can tell and disaster hardly seems on the immediate horizon. I am sure someday they will be right. (This is an economist’s disease. No matter the prediction, someday you may be right). See for example all the economists predicting a recession in The United States “in the next six months”. As of this writing, we are nearing the third year of such widespread predictions. The good news is at some point in the future they will be right. China will have a crisis and the United States will have a recession. When is the real question.
There are a lot of great history nuggets in Why Nations Fail. They are easily the most entertaining part of the book. They, of course, are selected to promote the author’s point of view. Which brings up more questions than it answers. For example, much is made of the Glorious Revolution in England but the fact its post colonial economy is more Ottoman Empire than Roman Empire is ignored completely. The decline of England seems to be from other factors than how inclusive its institutions are.
I enjoyed my time with Why Nations Fail and if I were given a choice, I certainly would prefer to live in the type of country they are promoting. I am just not convinced that my wishes and reality are in complete agreement.
The Audible Review.
Why Nations Fail: The Origins of Power, Prosperity, and Poverty (2012) Audible narrated by Dan Woren. Dan Woren is a pro. There are a lot of tough place names in Why Nations Fail and he handles them without hesitation. This is a very competent audiobook of an occasionally long winded non-fiction economics screed. I do recommend 1.2 speed on Why Nations Fail. Nothing to do with Don’s narration. The book does not suffer a bit from the speed increase and it can often take its time to get to the point.
My notes while listening
Chapter one and the introduction set up the idea that the political institutions of the country influence how wealthy it will become and those institutions are related to how the country developed so the conquistador methods in south and central Americas turned out to be very different from the English colonists in North America. (Not that the Americans didn’t try them first but North American indians are at least savvier or got the memo. Plus, they were a lot less of them a square mile, so there were not an exploitable resource on their own.
What we get besides a roadmap of where this is all going is an incredibly entertaining and detailed description of the colonizing of the Americas. Everything from the horrific torture used by the Spanish of the native kings to the exploits of John Smith (Who for a time was a slave in Romanian under the Ottoman Empire, which I find fascinating)
There is a bit about the Arab spring in the very beginning that has aged like milk, but once you get past that, this is so far top notch and fascinating.
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And yet another why I am right and those geography and animals people are wrong diatribe. Honestly, I have a dislike of books that go all debate club especially early on. It always feels like they are trying a little too hard to sell me something.
Make your best case and let the reader decide where your ideas rest on the pantheon.
I see some cracks. The author seems unsure whether to list China as a rich or poor country and his idea that rule of law and democratic institutions always follow economic liberalization seems to have some pretty glaring exceptions. South Korea, whom he holds up, is only relatively recently what one would recognize as a democracy. Singapore is not quite one either and the actual difference between China and North Korea is competence.
He is now touching lightly on Luddites and the danger of populism and mass hysteria. Locally in the US we have the governor of Florida attacking business and property rights and we have AOC blocking companies from moving into her district because it would bring in high-paying jobs that would displace her uneducated constituents.
In the European Union, we have a panic about AI reminiscent of the threat of the VCR. If the US does not follow suit, it may create an economic have and have nots as the US will have a serious productivity advantage.
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Okay, the author is answering some criticisms I had above, particularly about South Korea. What is interesting is the authors’ idea, albeit unsaid, that China will eventually suffer the same fate as The Soviet Union if it does not reform its political system and its industrial cronyism as it has reformed its agriculture.
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You know I have an issue with the origin of life hypothesis. How did life start on earth? How did life start anywhere? There are plenty of theories that are more than happy to tell you they have found the one true answer. On the surface, they all sound great, but the reality when you look at the science backing them up well it is thin on the ground.
I found our author was using a lot of the same caged language to describe the start of agriculture societies and how it related to his theory.
It is okay to say we don’t definitely know. More to the point, it is okay to say we do not know. When it comes to the origin of life, the reality is we don’t have any idea how it really happened. And some of our ideas today will look like a flat earth riding on the back of a turtle for future generations.
The author really does himself no favors trying to fit his theory in societies where we don’t have all the information. The idea of inclusive economics really may not apply to a farming village of five hundred in Neolithic times.
There is also the question if societies need their own innovation when information and ideas can flow so freely. Hunter-gatherer societies can have cell phones nowadays, for example. I agree with the author that inclusive economic and political societies work better and have less opportunity to self destruct, but that is hardly absolute.
I feel he has an excellent idea and is stretching it beyond credulity. There is still some truth that the Americas and sub-saharan Africa did not have the best luck with beasts of burden. That is simply a fact. Zebras and Deer are not Horses. It is silly to ignore this.
Still decent history lesson on the Mayans, though again we don’t know why the Mayans collapsed. I doubt it was a non progressive tax system. The reality the answer is still we have some ideas but at this point we do not know.
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Well, we have a light review of the early industrial revolution in England. I actually have a passing knowledge of the English Civil war and round heads and various kings of the period. Hell, I even know what the Corn Laws were. I found this background helpful as our author packs in a lot of history, skipping around among the centuries a bit. That people support inclusive institutions when it is in their best interest and do not when it is not is not exactly the eye opener perhaps it is meant to be. The fragile thread of public and elite opinion most institutions live with is an interesting subject that has been covered but seems to conveniently skirted in some ways. Evolution favors mutations that are helpful to the body as a whole. The same does not necessarily apply to economic systems.
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So we are in history class again. Areas I am less knowledgeable about. China, The Habsburgs. 1th century Ethiopia and Somalia. Some great tidbits such as the Ottoman empire banning the printing press for centuries to Imperial Russia banning railroads (Which is a military error so massive it is like the Germans banning tanks or something. It is almost incomprehensible that none of the Czar’s inner circle thought about moving troops.)
What was obvious in the past and still seems obvious today is the majority of the world seems to trend towards repressive regimes. What is also obvious is such regimes can hold on for an extremely long time their people suffering. Even in this century, we have North Korea or Zimbabwe as excellent examples. The book really does not address this quandary.
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Okay, we have some terrible actors here. I think that the Dutch East India companies’ genocide of the Spice Islands takes the cake (Why were the Dutch and Belgians so much worse than the British or other European colonies? Of course, we have South Africa, which is a fiasco, and we learn the economic disaster of suppressing your Jews. There are still unanswered questions, but the bit on Japan (The Last Samurai really romanticized the bad guys didn’t it?) shows the reality that economic advancements work hand in hand with military advancements.
One last thing the book is pro French Revolution and Napoleon, which is an understandable point of view considering its theme and premise. Still, I think it backpedals (Is that the right word?) on the horrors of the Terror and the Napoleonic wars.
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So we go a bit in depth about Sierra Leone and Guatamala. The children of the conquistadors use forced labor and purposeful underdevelopment to control the native population and get rich (first through trade in dyes then coffee plantations) In Sierra Leone the new government disbands the army ups the secret police and turns up colonial extraction to 11. No cheerful stories here.
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Some talk about the American South and the Marxist revolution in Ethiopia in the early 1970’s. How both ended up taking over the previous institutions. How the same land-owning families that lost the Civil War instituted Jim Crow to keep their power over the now free blacks and poor whites as well. How laws stating families had a deferment from the draft for every twenty slaves they owned kept the rich sons of landowners out of the fight.
What is ironic is that the families in reality shot themselves in the foot. By keeping the south poor and the institutions extractive, they may have enriched themselves but were forced to live among many in poverty with poor cities and little infrastructure. Also, by keeping they south poor, they also kept the value of thier farmland low and kept their families trapped in such areas for generations.
The Ethiopian Marxists are the more familiar story where the Marxists take over and one is more cruel and ruthless than the others, eliminating his competition and suddenly everyone in the leadership likes designer clothes, fancy parties, and palaces once again.
Also interesting that the Ethiopian leadership used famine as a political tool very early in the seventies, creating a crueler regime than the emperor they had overthrown.
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Modern extractive economies and why they collapse. The highlight is Uzbekistan, who is controlled by one family since the collapse of the USSR. They use schoolchildren to pick cotton in the fall (and till the fields in the spring.) Now, while this may bring nostalgia to Americans thinking of school children picking potatoes in rural Maine during the fall, do not be mistaken. This would be the equivalent of bussing schoolkids from New York city to pick potatoes by force and proving them no food or shelter. That Islam Karimov became leader of the state simply because he held the top job at the time of the collapse of the Soviet Union adds credence to the accidental nature of history.
Nations does miss the mark a bit on thier South American tour focusing on Columbia and the Asociación Campesina de Ganaderos y Agricultores del Magdalena Medio (ACDEGAM). Both missing the fact that these groups were there to put a happy face on counter insurgency by American organizations such as the CIA and a way to codify the large paramilitary groups run by the cocaine traffickers at the time.
All that said, Nations also downplays the need for such organizations with the Marxists FARC terrorizing the countryside and killing and kidnapping farmers. We have seen a similar rise of such groups in Mexico to fight the Drug Cartels in many areas. While they can and often will be responsible for even greater atrocities than the groups they are fighting, they often remain politically popular with the public. (At least initially) They are a sign, however, of a weak central government. Nations nails that cause-and-effect right there.
Where Nations does a swing and a miss however (With the advantage of hindsight) is its concentration on Columbia and Argentina while barely mentioning Chavez’s Venezuela which turned out to be one the greatest examples of the kind of collapse the chapter and book are focused on.
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Real interesting chapter focusing on nations that used a turning point to get more inclusive governments and economies. Focusing on the American south during the civil rights movement. Botswana and China after the death of Mao. the feature on Deng Xiaoping and Botswana were extremely interesting to me. Deng Xiaoping’s tenacity and patience are a thing of legend.
I may not agree with the outcomes or conclusions the author always has. He agrees the tides of history have too many. If only this thing happened, then that to be at all predictive. Still excellent lessons all.