Acemglu, Daron and James Robinson, Why Nations Fail: The Origins of Power,
Prosperity and Poverty (2012), 529p.
In recent years there has been a flurry of books that try to explain in worldhistorical terms why some of the richest regions in the world in 1500 became
“underdeveloped” while Western Europe became rich. The popular answer to this
question in much of the world remains that Western Imperialism impoverished many
parts of the world through economic exploitation and saddled it with institutions and
policies that made economic growth difficult. By contrast, mainstream development and
institutional economists, mainly in developed countries, have proposed social science
theories that seek to explain why some societies become rich and others do not. One of
the best-known scholarly recent social science treatises on this subject is Douglas C.
North, John Wallis and Barry Weingast, Violence and Social Orders: A Conceptual
Framework for Interpreting Recorded Human History (2009). In quite a different vein,
Jared Diamond’s biological and geographical explanations, such as Guns, Germs, and
Steel (1997) and Collapse: How Societies Choose to Fail or Succeed (2005) have been a
popular success. Perhaps inspired by Jared’s success, Acemglu and Robinson, economists
who used sophisticated theoretical tools to explain the impact of colonial rule upon the
contemporary problems of underdeveloped economies, wrote an interesting and
enjoyable grand narrative aimed at the general reader but rooted in the scholarship of
institutional economics.
Unlike some other grand narratives that seek to explain the wealth and poverty of
states that emphasize culture, geography or resources, Acemglu and Robinson focus on
political institutions. The authors use concrete world historical examples, ranging from
the Mayans, the Roman Empire, and the Chinese, who failed to follow up their late
medieval large-scale naval expeditions in the Indian Ocean, as well as more recent
examples to, argue that the right sort of political institutions are crucial for economic
growth, or the lack thereof. Secondly, they insist that the institutions of underdeveloped
economies are as they are because their political elites benefit from them. While many
development economists and advocates tend to assume that the political elites in poor
countries want to pursue policies that benefit most of their people, the authors point out
that the elites of poor and failed countries are more likely to be what economists call ‘rent
seekers.’ They pursue policies and maintain institutions that are in their own interests and
are often contrary to the general economic development of their countries. They argue
that rich and successful economies have institutions that are ‘inclusive,’ i.e. they have
relatively strong and effective central governments that are open to talent, are
participatory, promote education and technological innovation, are governed by a legal
system that secures private property rights and the enforcement of contracts, and governs
with the consent of the people in some fashion, while failed and poor societies are
‘extractive,’ designed to make only a small elite rich, are governed by a very small elite
and do little to educate their people or to encourage education and technological
innovation. Their key argument about economic growth appears to be that it is caused by
innovation. While they concede that ‘extractive’ institutions can also deliver economic
growth, it can only do so for a relatively brief period of time because it is incapable of
sustaining the constant innovation that long-term growth demands. Thus, in terms of
Europe’s economic success, they argue that the chief reason for Britain’s economic
growth, which led to the first industrial revolution, was ultimately dependent upon its
development of a strong and constitutional representative form of government as a
consequence of the Revolution of 1688-89. Few modern British historians would so
confidently ascribe the Industrial Revolution chiefly to its political institutions, although
most cite this as one of the important factors. The book is a pleasure to read and can serve
as a useful introduction to the debate about the role of political institutions and to the
grand narratives that debate the ‘Rise of the West’ and the relative failure of “the rest”
until recent times.