Poverty and welfare are complex and multi-layered phenomena. Both have been tackled numerous times from different perspectives, ranging from social to cultural to religious, without ever coming to a definitive conclusion. The book Why Nations Fail by Daron Acemoglu and James A. Robinson aims at researching the reasons behind the discrepancies in the financial and social welfare of different nations by taking the relatively unusual approach: the center of their hypothesis involves the categories of inclusive and extractive economies.
While the book has some minor weak points, the research conducted by the authors is a solid and convincing attempt to analyze the poverty mostly from an economic standpoint with the aid of real-life examples and provide several solutions and directions for further development of events.
The authors build their argument by contrasting the countries with a similar set of prerequisites and conditions, which nevertheless show a big difference in the process of social and economic developments. Such comparison allows the authors to eliminate the popular assumption of difference in cultures, mentality, and geographical layout, primarily by comparing the American Nogales to the Nogales of Mexico, which have many similar prerequisites but are tremendously different in terms of well-being (Acemoglu and Robinson 9).
The hypothesis presented by the authors is a difference in the economies: while the former shows the signs of the inclusive economy, which does not restrict the wealth from being distributed among the population for the sake of the growth of the nation as a whole, the latter concentrates the effort at accumulating the resources and revenue in the hands of the elitist minority, hampering the progress. Such a policy is known as an extractive economy.
Both models are not restricted to the economy and can be seen extending into the political and social fields. Nevertheless, the economic focus is evident and remains a central point of inquiry throughout the book.
The research conducted by the authors can be characterized as qualitative in nature. While they use the information on GNP of countries in question to support their point, this usage is relatively limited. The main point of the book is still the review of the generalized and non-specific level of social welfare, supported by the basic hard evidence in the form of country’s rank among its neighbors or the average daily income of its citizens.
Despite this fact, the book remains persuasive by supplying exhaustive qualitative data in support of its theory. For instance, the authors go into extreme detail by showcasing the downfall of the Mobutu Sese Seko, the ruler of Congo, from 1965 to 1997 (Acemoglu and Robinson 83). The outrageously luxurious lifestyle he and his clique has exhibited throughout his reign aligns perfectly with the extractive economy. The authors then show the consequential character of the events, describing the rulers that preceded Mobutu Sese Seko and exhibiting essentially the same strategies.
This allows the authors to conclude that “nations fail when they have extractive economic institutions, supported by extractive political institutions that impede and even block economic growth.” (Acemoglu and Robinson 83) The example is further strengthened by the equally detailed and thorough analysis of the situation in Botswana, where the clearly inclusive institutions had led to the rapid economic growth since 1966, when the country got its independence, to the current economic situation, when the country has “the highest per capita income in sub-Saharan Africa.” (Acemoglu and Robinson 46) Such growth, authors argue, can only be ascribed to the inclusive economy, as the country did not have any other valuable assets of any kind, with around two dozens university graduates and the almost non-existent infrastructure.
This leads the authors to their final point: the existence of the virtuous and vicious circles. Both are the mechanisms that come into play after an economy has been established. A vicious circle is observed when the extractive institution resists the efforts to distribute wealth among the population. A virtuous circle, on the contrary, helps to sustain the inclusive economy and safeguard it from the disruption by the totalitarian regime. Both notions are again supplied with the historical evidence, like the Black Act of 1723 and the government of Sierra Leone in the first half of the twentieth century.
The authors finish the book with the analysis of several instances of the current state of affairs, most prominently, China. According to them, the Chinese economy has undeniably become more inclusive than before but is still on the extractive side of the spectrum, which means it will not exhibit the rapid growth it has been known for during the last decade (Acemoglu and Robinson 426). In this regard, according to Acemoglu and Robinson, China mirrors the pattern of another extractive institution – the pre-Brezhnev Soviet Union (128).
In all, Why Nations Fail is a comprehensive study of the role of economic models in the process of development of the country as a whole. Some points of the book are susceptible to bias, as the authors mostly make their point by taking the already established facts from the past to support their claims and rarely rely on the current developments that would be much stronger evidence of the validity of their theory. Nevertheless, the argument is generally persuasive and valid.
The book offers valuable insights into the processes behind economic development. Furthermore, anyone interested in researching the ties between the economy and other marginal fields like sociology and politics will benefit from reading it.
Works Cited
Acemoglu, Daron, and James Robinson. Why Nations Fail: The Origins of Power, Prosperity, and Poverty, New York: Crown Publishing Group, 2012. Print.