Why Nations Fail Analysis

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In 2012, the average American is about 40 times as prosperous as the average citizen of African countries, such as Sierra Leone and Mali. Two hundred years ago, there was no such gap between rich and poor countries. How can we explain such astonishing disparities? While some of the academics believe that poverty is determined by its geography, others instead point to cultural attributes. Why Nations Fail is a nonfiction book by economist Daron Acemoglu and political scientist James A. Robinson. In this book, Acemoglu and Robinson try to explain world inequality and investigate which factors are responsible for the success or failure of states. Which factor is the destiny of world inequality? Geography? Culture? Religion? Or economic policies?…show more content…
The culture hypothesis emphasises on beliefs, values and ethics, but not solely on religion. In the sense of social norm, the culture hypothesis can sometimes support institutional differences. Just like many people still maintain that Africans are poor as they lack a good ethic and still believe in magic. However, the hypothesis cannot clarify the inequality of the world. Acemoglu and Robinson find out that the cultural factors are tied to particular “national cultures”. Therefore, the differences between two places are outcomes of different institutions and institutions history, but not culture. The ignorance hypothesis is the final popular theory. It states that rulers do not know how to make poor countries rich. Although there are noted examples of leaders mistaken about those disastrous policies’ consequences, ignorance can only explains a small part of world inequality. Some of the poor countries can embark on a path to economic growth are not because of the leaders’ choices, it is because of the switch of economic policies. Therefore, ignorance hypothesis cannot demonstrate world…show more content…
They answer that countries differ in their economic success because of their different institution. An institution is a system of rules, beliefs, norms, and organizations that together generate a regularity of (social) behavior (Greif, 2006). During institutional drift, political and economical institutions are produced. They can be either inclusive or extractive. Inclusive means focus on the well-being of the nation as a whole. For extractive, it means to seize incomes and resources from one subset of society to benefit a different subset. Inclusive economic institutions allow great mass of people participate in economic activities so as to make best use of their talents and skills. This leads to the development of inclusive markets, more equitable distribution of resources and further innovations in technology. On the contrary, extractive economic institutions extract wealth from the rest of the society and accompany extractive political institutions. This kind of political institutions concentrate power in the hands of few elites, without constraints and balance. Political and economical institutions are the choice of society. The provided case studies show that average poor countries have extractive institutions, advocated by extractive political institutions that hinder and block economic growth.
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